Corporate Social Responsibility and Related Terms

PART I Corporate Social Responsibility and Related Terms

Corporate Social Responsibility

Strategic Corporate Social Responsibility

Strategic Philanthropy

Corporate Citizenship

Sustainability

Corporate Accountability

Corporate Moral Agency

Social Entrepreneurship

1 PART I: Corporate Social Responsibility and Related Terms J. M. Clark’s included Chester Barnard’s 1938publication, during the1930sand1940s. References from this earlier period worth noting that references to a concern for SR appeared earlier than this, and especially ory, research, and practice. Using thisasageneral guideline, it should benoted 50 years because so much has occurred during that time that has shaped the begin discussing the concept of CSR. A goodcase could be madeforabout strongly supportingtheidea. years, thecontinent of Europehasbeencaptivated with CSRandhasbeen United States, where a sizable body of literature has accumulated. In recent mostly indeveloped countries, formal writings havebeenmost evident in the sible toseefootprintsofCSRthoughtandpractice throughout theworld, of the20thcentury, especially the past50years.Inaddition,thoughitispos writings onCSR,orsocial responsibility (SR), however, are largely a product dences of the business community’s concern for society for centuries. Formal The concept of CSR has a long and varied history. It is possible to trace evi DEVELOPMENT OF THE CSRCONCEPT as manyhaveobserved,withpowercomesresponsibility. organizations because theytendtobemorevisible and havemorepower. And, applies to organizations of all sizes, butdiscussionstend to focusonlarge munity at large, government, and the natural environment. The CSR concept other societal stakeholders typically include consumers, employees, the com responsibility, of course, is to make money or profits for the owners. These society that extends beyond the stockholders or investorsin the firm. That T A significantchallenge is todecidehowfarbackintimeweshould goto belief heldbymanythatmodernbusinesseshavearesponsibilityto he conceptofcorporatesocialresponsibility (CSR) referstothegeneral RESPONSIBILITY (CSR) Social Control of Business CORPORATE SOCIAL 2 from 1939, and Theodore Kreps’s The FunctionsoftheExecutive, - - - -

Responsibility (CSR) Corporate Social

Measurement of the Social Performance of Business from 1940, just to mention a few. From a more practical point of view, it should be noted that as far back as 1946 business executives (the literature called them businessmen in those days) were polled by Fortune magazine asking them about their social responsibilities. In the early writings on CSR, the concept was referred to more often as just SR rather than CSR. This may have been because the age of the modern corporation’s prominence and dominance in the business sector had not yet occurred or been noted. The 1953 publication by Howard R. Bowen of his landmark book Social Responsibilities of the Businessman is argued by many to mark the beginnings of the modern period of CSR. As the title of Bowen’s book suggests, there apparently were no businesswomen during this period, or at least they were not acknowledged in formal writings. Bowen’s work proceeded from the belief that the several hundred largest businesses at that time were vital centers of power and decision making and that the actions of these firms touched the lives of citizens at many points. Among the many questions raised by Bowen, one is of special note here. Bowen asked, what responsibilities to society may businessmen reasonably be expected to assume? This question drove much subsequent thought and is still relevant today. Bowen’s answer to the question was that businesspeople should assume the responsibility that is desirable in terms of the objectives and values of society. In other words, he was arguing that it is society’s expectations that drive the idea of SR. Bowen went on to argue that CSR or the “social consciousness” of managers implied that businesspeople were responsible for the consequences of their actions in a sphere somewhat wider than that covered by their profit-and- loss statements. It is fascinating to note that when Bowen referenced the Fortune article cited earlier, it reported that 93.5% of the businessmen agreed with this idea of a wider SR. Because of his early and seminal work, Bowen might be called the “father of corporate social responsibility.” If there was scant evidence of CSR definitions in the literature in the 1950s and before, the decade of the 1960s marked a significant growth in attempts to formalize or more accurately state what CSR means. One of the first and most prominent writers in this period to define CSR was Keith Davis, then a professor at Arizona State University, who later extensively wrote about the topic in his business and society textbook, later revisions, and articles. Davis argued that SR refers to the decisions and actions that businesspeople

3 PART I: Corporate Social Responsibility and Related Terms take forreasonsthatareatleastpartially beyond thedirecteconomicortechni taken during thisearly period by OpinionResearch Corporation found that expectations of the public, which are always changing. Public opinion polls be adirectresultofhoweffectively managements of businessesrespondtothe business, asan institution, exists to serve society, the future of businesswill and that this roleismore thanjustprovidinggoodsandservices.Notingthat CED notedthatbusinessassumesaroleincontributing to thequalityoflife assume broaderresponsibilitiestosocietythaneverbefore. Furthermore,the in substantial and important ways. It noted that business isbeing asked to CED notedthatthesocialcontract between businessandsociety waschanging serve constructively the needs ofsociety to the satisfaction of society. The observing thatbusinessfunctions bypublicconsent,anditsbasicpurposeisto Responsibilities of Business Corporations. for Economic Development (CED) inits 1971publication accepted and hascontinued to grow. spite ofFriedman’s classicopposition,theCSRconcepthascontinuedtobe years since and continuing today, Friedman has maintained his position. In ”The SocialResponsibilityofBusinessIstoIncreaseItsProfits.”Formany York Times Magazine, Milton Friedmancameoutagainsttheconcept.Ina1970article forthe during the 1970s. Onereasonforthis is because the respected economist Bowen forthe“father of CSR”designation. CSR weresosignificant that hecouldwellbeargued tobetherunner-up to mensurate with their social power. Davis’s contributions to early definitions of which heldthat the social responsibilities of businesspeopleneededtobecom and business power. He set forth his now-famous monly accepted in thelate 1970s and1980s. the enlightened self-interest justification for CSR. This viewbecame com it backforitssociallyresponsibleoutlook. This hasoftenbeenreferredtoas ing agoodchance of bringinglong-runeconomic gain tothefirm,thuspaying decisions canbejustified by along,complicated process ofreasoningashav rial context. Furthermore, he asserted that some socially responsible business cal interest of thefirm. A landmarkcontribution to theconcept of CSRcame from theCommittee The CSRconcept became a favorite topic in management discussions Davis became well known forhisviewson the relationship between SR Davis argued thatSRisanebulous ideathat needs tobeseeninamanage Friedman summarized his position well with its title— 4 The CED got into this topic by Iron Law of Responsibility, Social New - - - - -

Responsibility (CSR) Corporate Social about two thirds of the respondents thought business had a moral obligation with respect to achieving social progress in society, even at the possible expense of profitability.

The CED went on to articulate a three-concentric-circles definition of SR that included an inner, an intermediate, and an outer circle. The inner circle focused on the basic responsibility business had for its economic function— that is, providing products, services, jobs, and economic growth. The intermediate circle focused on responsibilities business had to exercise its economic activities in a sensitive way by always being alert to society’s changing social values and priorities. Some early arenas in which this sensitivity were to be expressed included environmental conservation; relationships with employees; and meeting the expectations of consumers for information, fair treatment, and protection from harm. The CED’s outer circle referred to newly emerging and still ambiguous responsibilities that business should be involved in to help address problems in society, such as urban blight and poverty. What made the CED’s views on CSR especially noteworthy was that the CED was composed of businesspeople and educators and, thus, reflected an important practitioner view of the changing social contract between business and society and businesses’ newly emerging social responsibilities. It is helpful to note that the CED may have been responding to the times in that the late 1960s and early 1970s was a period during which social movements with respect to the environment, worker safety, consumers, and employees were poised to transition from special interest status to government regulation. In the early 1970s, we saw the creation of the Environmental Protection Agency, the Consumer Product Safety Commission, and the Equal Employment Opportunity Commission. Thus, it can be seen that the major initiatives of government social regulation grew out of the changing climate with respect to CSR. Another significant contributor to the development of CSR in the 1970s was George Steiner, then a professor at UCLA. In 1971, in the first edition of his textbook, Business and Society, Steiner wrote extensively on the subject. Steiner continued to emphasize that business is fundamentally an economic institution in society but that it does have responsibilities to help society achieve its basic goals. Thus, SR goes beyond just profit making. Steiner also noted that as companies became larger their social responsibilities grew as well. Steiner thought the assumption of social responsibilities was more of an attitude, of the way a manager approaches his or her decision-making task, than a great shift in the economics of decision making. He held that CSR was

5 PART I: Corporate Social Responsibility and Related Terms a philosophythatlooksat the social interest and the enlightened self-interest nature. The topics they used were usually subheads to sections in the annual topics that represented CSR asopposedtothosethat were strictly business in they illustratedWhile notprovidingaformal definitionofCSR,thekinds of linesdevoted toSRinthe annual reports ofthecompanies theystudied. discussing, the researchers chose to measure CSR bycounting the proportion in CSR. Though they never really defined CSR inthe sense wehave been understand CSRandtoascertain theextent to whichcompanies wereengaging 1970s. First, in 1975, Bowman and Haire conducted a survey striving to is implied. of corporate behavior tosocialneeds. Thus, anticipatory and preventive action in Sethi’s modelsocialresponsiveness.Heregardedthisasthe was obligation is proscriptive innature,SRisprescriptive in nature. The thirdstage values, and expectations of society. Sethi went on to say that while social congruent withtheprevailingsocialnorms, behavior uptoalevelwhereitis went beyondsocialobligation.Hearguedimplied bringingcorporate thatSR constraints. The criteria here were economic and legal only. SR,incontrast, social obligation wascorporate behavior in response to market forces or legal be called social obligation, SR, orsocial responsiveness. InSethi’s schema, CSP and,intheprocess,distinguishedbetweencorporatebehaviorthatmight Sethi. Inaclassic1975article, Sethi identified what hecalleddimensionsof as wellCSR.Onemajorwritertomakethisdistinction was S.Prakash the social order. CSR movement is concerned with business’s roleinsupportingandimproving mits business tosurviveandfunction effectively in afreesociety andthat the interest of the business firm. They believed that CSR wasa concept that per the needsandgoalsofsocietythattheseextendbeyondeconomic evolved. Eels and Walton continued to argue that CSR ismore concerned with se, butrather took abroaderperspective on whatCSRmeant and howit rate socialresponsibilities. Like Steiner, theydidnotfocusondefinitions,per in 1974.Inthisbooktheydedicated awholechaptertorecenttrendsincorpo elaborated on theconcept at length intheir third edition, which waspublished the firstedition of theirbook short-run self-interest of thepast. of businessoverthelong-runratherthanjustoldnarrow, unrestrained Some of the earliest empirical research on CSRwaspublished in the mid- In the1970s,weinitially found mention increasingly being madetoCSP Though RichardEells and Clarence Walton addressed theCSRconcept in Conceptual Foundations ofBusiness 6 (1961),they adaptation - -

Responsibility (CSR) Corporate Social report. Some of these subheads were as follows: corporate responsibility, SR, social action, public service, corporate citizenship, public responsibility, and social responsiveness. A review of their topical approach indicates that they had a good idea of what CSR generally meant, given the kinds of definitions we saw developing in the 1970s. Another research study in the mid-1970s was conducted by Sandra Holmes in which she sought to determine executive perceptions of CSR. Like Bowman and Haire, Holmes had no clear definition of CSR. Rather, she chose to present executives with a set of statements about CSR, seeking to find out how many of them agreed or disagreed with the statements. Like the Bowman and Haire list of “topics,” Holmes’s statements addressed the issues that were generally believed to be what CSR was all about during this time period. For example, she sought executive opinions on businesses’ responsibilities for making a profit, abiding by regulations, helping to solve social problems, and the short-run and long-run impacts on profits of such activities. Holmes further added to the body of knowledge about CSR by identifying the outcomes that executives expected from their firms’ social involvement and the factors executives used in selecting areas of social involvement. In 1979, Archie B. Carroll proposed a four-part definition of CSR, which was embedded in a conceptual model of CSP. Like Sethi’s earlier article, Carroll sought to differentiate between CSR and CSP. His basic argument was that for managers or firms to engage in CSP they needed to have (1) a basic definition of CSR, (2) an understanding/enumeration of the issues for which a SR existed (or, in modern terms, stakeholders to whom the firm had a responsibility, relationship, or dependency), and (3) a specification of the philosophy or pattern of responsiveness to the issues. At that time, Carroll noted that previous definitions had alluded to businesses’ responsibility to make a profit, obey the law, and to go beyond these activities. Also, he observed that, to be complete, the concept of CSR had to embrace a full range of responsibilities of business to society. In addition, some clarification was needed regarding that component of CSR that extended beyond making a profit and obeying the law. Therefore, Carroll proposed that the SR of business encompassed the economic, legal, ethical, and discretionary expectations that society had of organizations at a given point in time. A brief elaboration of this definition is useful. First, and foremost, Carroll argued that business has a responsibility that is economic in nature or kind. Before anything else, the business institution is the basic economic unit in society. As such it has a responsibility to produce goods and services that society

7 PART I: Corporate Social Responsibility and Related Terms wants andtosellthemataprofit. All otherbusinessrolesarepredicatedonthis many todaystillthinkofthe economiccomponentaswhatthebusiness to helpsocietyalongwithits owninterests. best examplesofitwerecharitable, humanistic activities undertook business Later, Carrollbegancalling this fourthcategory tionary activities wereanalogous to the CED’s third circle (helping society). unemployed, orprovidingdaycarecentersforworkingmothers. These discre butions, conducting in-house programs for drug abusers, training the hard-core during the time in which it was written, included making philanthropic contri were becomingincreasingly strategic. Examplesofthesevoluntaryactivities, required bylaw, andnotexpected ofbusinesses inanethical sense, butwhich guided by businesses’ desire to engage in social roles not mandated, not This expectation was drivenbysocialnorms. The specificactivities were nature, the expectation that business performthesewasstill held bysociety. fore, theywerereferredtoasdiscretionary. Regardlessoftheir voluntary are lefttoindividual managers’ andcorporations’ judgmentandchoice; there not provideasclearcutanexpectation as intheethical responsibility. These voluntary rolesandpractices that businessassumesbutforwhichsocietydoes nevertheless existasexpectationsoverandbeyondlegalrequirements. what isrequiredbythelaw. Though theyseemtobe alwaysexpanding,they responsibilities extendedtoactions,decisions,andpracticesthatarebeyond and ethicalnormsthatsocietyexpectedbusinesstofollow. These ethical law. The nature orcharacteroftheresponsibilitiesthatextendedbeyondobedienceto bility is thesecondpartofCarroll’s definition. requirements set forthbythesociety’s legal system. Thus, the expects businesstofulfill its economicmissionwithintheframeworkoflegal basic rules of the game by which business isexpected to function. Society ness toobeythelaw. The law, initsmostrudimentary form, represents the incentive and reward) for its efficiency and effectiveness, society expects busi profit. This ishowthecapitalistic economicsystemisdesignedandfunctions. that society fundamental assumption. The economiccomponentofthedefinitionsuggests Though Carroll’s 1979definition included aneconomic responsibility, Finally, heargued thereare The nexttworesponsibilitiesrepresentedCarroll’s attempttospecifythe He alsonotedthatjustassociety expectsbusinesstomakeaprofit(asan ethical expects responsibility was claimedtorepresent the kinds of behaviors business to produce goods and services and sell them at a businesstoproducegoodsandservicessellthemata discretionary 8 responsibilities. These represent philanthropic, legal becausethe responsi - - - - -

Responsibility (CSR) Corporate Social firm does for itself and the legal, ethical, and discretionary (or philanthropic) components as what business does for others. While this distinction represents the more commonly held view of CSR, Carroll continued to argue that economic performance is something business does for society as well, though society seldom looks at it in this way.

EXAMPLES OF CSR IN PRACTICE

There are many ways in which companies may manifest their CSR in their communities and abroad. Most of these initiatives would fall in the category of discretionary, or philanthropic, activities, but some border on improving some ethical situation for the stakeholders with whom they come into contact. Common types of CSR initiatives include corporate contributions (or philanthropy), employee volunteerism, community relations, becoming an outstanding employer for specific employee groups (such as women, older workers, or minorities), making environmental improvements that exceed what is required by law, and so on. Among the 100 Best Corporate Citizens identified in 2005 by Business Ethics magazine, a number of illuminating examples of CSR in practice are provided. Cummins, Inc., of Columbus, Indiana, has reduced diesel engine emissions by 90% and expects that within 10 years the company will be at zero or close to zero emissions. In addition, the engine maker underwrites the development of schools in China, is purchasing biodiverse forest land in Mexico, and funds great architecture in its local community. Cummins also publishes a sustainability report that is available to the public. Xerox Corporation, Stamford, Connecticut, is a multinational corporation that places high value on its communities. One of its most well-known community development traditions has been its Social Service Leave Program. Employees selected for the program may take a year off with full pay and work for a community nonprofit organization of their choice. The program was begun in 1971, and by 2005, more than 460 employees had been granted leave, translating into about half a million volunteer service hours for the program. Green Mountain Coffee Roasters, Waterbury, Vermont, was a pioneer in an innovative program designed to help struggling coffee growers by paying them “fair trade” prices, which exceed regular market prices. The company has also been recognized for offering microloans to coffee-growing families and underwriting business ventures that diversify agricultural economies.

9 PART I: Corporate Social Responsibility and Related Terms hensive, strategic response. made clear that CSR/CSP is now a global expectation that requires a compre stakeholders thatnewbehaviors willoutlastgoodintentions.Finally, itwas doing therightthing. This “doingwellbydoinggood”approachwillreassure shareholders, and demonstrate that the company can be more profitable by share the benefits of company activities with key stakeholders, aswell as actions; fully insulate society from the negative impacts of company actions; to society’svalues onsocial,environmental, andeconomicgoalsthrough their nies wouldbeexpected to doall thefollowing:demonstrate their commitment now thought CSR really was. The poll found that in the 21st century, compa continents. The resultsofthepollrevealed how important citizens oftheworld the ConferenceBoard. This pollincluded 1,000 persons in23countriesonsix by Environics, International, the Prince of Wales Business Leaders Forum, and useful to review the results of the millennium poll on CSR that was sponsored As wethinkabouttheimportance of CSR/CSP inthenewmillennium, itis CSR IN THE NEWMILLENNIUM ral environment. respect tocommunities,employees,consumers,competitors,andthenatu companies havemanifestedtheircorporatesocialresponsibilitieswith nities in need. can helppeopleas oneoftheimportantwaysbywhichbusinessandcommu Biloxi, Gulfport, andtheentire Gulf Coast. These CSRefforts havebeennoted made significant contributions to the victims and to the cities of New Orleans, worst and most expensive ever in terms of destruction, hundreds of companies 1985. Chick-fil-A hasalsosponsoredmajor charity golf tournaments. sponsors a summer camp, and has hosted more than 21,000 children since Chick-fil-A, the company operates fosterhomesformorethan120children, and communities. Through the WinShape CentreFoundation,fundedby outstanding reputation as abusinessmandeeply concerned with hisemployees chain based in Atlanta, Georgia. FounderandCEO Truett Cathy hasearnedan Another exampleofCSRinpracticeistheChick-fil-A restaurant As seenintheexamplespresented,thereareamultitudeofwaysthat In theimmediate aftermath of Hurricane Katrina in 2005,judgedtobethe 10 —Archie B.Carroll - - - -

Responsibility (CSR) Corporate Social

Further Readings

Gourville, J. T., & Kasturi Rangan, V. (2004). Valuing the cause marketing relationship. Harvard Business Review, 47(1), 38–57. Lantos, G. P. (2001). The boundaries of strategic corporate social responsibility. Journal of Consumer Marketing, 18(7), 595–630. Phillips, R. (2000). The corporate community builders: Using corporate strategic philanthropy for economic development. Economic Development Review, Summer, 7–11.

14 Strategic Philanthropy

- - - - of social model economic model economic 15 emerged. Society’s expectations of business expectations Society’s emerged. legal model

STRATEGIC PHILANTHROPY STRATEGIC giving and other philanthropic endeavors of a firm are designed in such are of a firm endeavors other philanthropic and giving trategic philanthropy is an approach by which corporate or business philanthropy is an approach by which trategic

Years later, when laws began to be passed constraining business practices, passed constraining when laws began to be later, Years changed from being strictly economic in nature to encompassing issues that to encompassing in nature economic changed from being strictly a Over time, discretion. business’s at had been previously is embrace both the What this social model did, in effect, the firm emerged. duced, it did not fare as well in ensuring that business always acted generously, that business always acted generously, duced, it did not fare as well in ensuring many social problems and created In addition, business ethically. and fairly, for these social business had some responsibility that the view was developing and services. beyond just producing goods extended problems that it might be said that a of the firm thought of the marketplace as the primary determinant of what determinant as the primary marketplace thought of the of the firm corpo of The pattern and in society. business firms did in their communities its world paralleled Western in Europe and other parts of the philanthropy rate did though the marketplace Unfortunately, States. in the United development pro be should services goods and what deciding in job good reasonably a The concept of philanthropy evolved through business history even before the before even history business through evolved philanthropy of concept The con The shape. taken had movement responsibility social corporate broader in the United States during most ofcept of business responsibility that prevailed or classical, traditional, the after fashioned was history its model 1900s, the economic 1800s and early late in the of the firm. Dominant is not solely altruistic. To understand how strategic philanthropy has become has philanthropy how strategic understand To altruistic. solely not is as it has unfolded in useful to trace this concept it is an everyday practice, business history. PHILANTHROPY BEGINNINGS OF CORPORATE a way that it best fits with the firm’s overall mission, goals, and values. This This values. and goals, mission, overall firm’s the with fits best it way that a and that it under strategy implies that the business articulated has a carefully strategy in actual with this initiatives its philanthropic stands how to integrate is that the motivation philanthropy of strategic major characteristic A practice. S PART I: Corporate Social Responsibility and Related Terms economic and legal emphases and addyet another layer of expectations by citizens. fulfill their social responsibilities andcome to beregarded as goodcorporate thropy isconsideredtobeone oftheforemostmeansbywhichcompanies tions, andothernational and international groups. Today, corporate philan businesses couldaidcommunities, thegrowingnumberofnonprofitorganiza the late 20th century had become one ofthe institutionalized ways bywhich communities. of thiswasCarnegie’s fundingand building of more than 2,500libraries for the bestwaysinwhichfirmscouldbenefitcommunity. A primeexample used forthebenefitofcommunity. Philanthropyturnedouttobeoneof that businessmustpursueprofitsbutwealth shouldalsobe Andrew Carnegie’s 1889essay“TheGospelof Wealth.” Carnegie asserted its impetus from business. the CommunityChestmovement,whichreceived visible exampleofthiswas community service had become much moreimportant for business. The most power,responsibility begantoberaised. Bythe1920s, questionsofbusiness by small,powerlesscompaniestolarge corporationswithmoreconcentrated of thefirminsociety. the economytransitioned As away fromonedominated role inhasteningthemovement away fromthestrictclassical economic model because theybenefited both thecommunities and therailroads. hindsight, cannowbeseenasearlyexamplesofstrategicphilanthropy, community services inareasaffected by therailroads. These initiatives, in Young Men’s Christian Association immediately after the Civil War toprovide example of thiswasthecooperative efforts betweentherailroads and the improve, beautify, andupliftthecommunity were evident. One veryearly were dominated by thetraditional economic view. Voluntary activities to contributions tocharityandotherworthycauses—evenduringtheperiodsthat practices. It isevident that businesspeople did engage in philanthropy— through philanthropy,community needs giving, andpaternalistic orbusiness ness tocontribute to thecommunity were localized efforts towardmeeting and issuesthat had arisen. society thatbusinesswouldassumesomeroleinaddressingsocialproblems Corporate philanthropy continued to growinto the 20th century and by One exampleofearlyprogressivebusinessideologywasreflectedin The emergence of large corporations during the late 1800s played a major In thelate1800sandearly1900s,initial indications of business’s willing 16 - - -

Strategic Philanthropy - - - - - has philanthropy seems to imply some altruistic expres altruistic some imply to seems 17 philanthropy By the first decade of the 2000s, philanthropic initiatives include corpo include initiatives of the 2000s, philanthropic By the first decade Conceptually, today, philanthropy may be seen as a part of companies’ seen as a part of companies’ philanthropy may be today, Conceptually, kind of community involvement on the part of the organization and its and organization the of part the on involvement community of kind are in response to ongoing needs in initiatives These philanthropic employees. arts, health/human and the culture such as education, in areas community the problems business has engendered. given contributions match companies which in programs matching giving, rate volunteerism, employee donations, and service product employees, by their and any other and other organizations, governments partnerships with local sense. Philanthropy is “desired/expected” in most societies. The public has an has public The societies. most in “desired/expected” is Philanthropy sense. has it because part in philanthropy, in engage business will that expectation believe many because part in and business tradition of part a so much become especially between business and society, it is part of the social contract business should Others believe between business and the local community. some of the social harm or social offset partially to engage in philanthropy corporate social responsibility or corporate citizenship initiatives. Archie initiatives. citizenship or corporate responsibility social corporate respon discretionary that philanthropy fulfills businesses’ Carroll has argued vol are activities philanthropic These citizens. good corporate be to sibilities are that activities social in engage to desire businesses’ by only guided untary, in an ethical expected and not generally by law, not required not mandated, have been supportive of philanthropic efforts on the part of companies and on efforts have been supportive of philanthropic and tax through tax incentives these efforts and have supported individuals term the Though breaks. today the concept more nearly refers to the of humankind,” sion, as in “love of others. giving of resources for the benefit philosophically disagree with the concept of philanthropy, throughout history disagree with the concept of philanthropy, philosophically of concept a as it to objected example, for Nietzsche, Friedrich have. some living parasitically weak the represented it thought he because good universal view. similar a held who philosopher major another is Rand Ayn strong. the off governments Most present. been also have views on philanthropy Political Before developing the concept of strategic philanthropy further, it is useful it further, philanthropy of strategic concept the developing Before word The itself. of philanthropy concept the examine first to of humankind. Philanthropy for or love as a concern defined been generally human for fondness or concern this to demonstrate to efforts has been linked not would Though most people gifts, aid, or donations. kind through charitable PHILANTHROPY DEFINED PHILANTHROPY PART I: Corporate Social Responsibility and Related Terms services, andcivic and community activities. In addition, special needsarise its own interest orstrategy atthesametime. its own The children andtheirfamilies is abletogenerouslycontribute to children and their families, thus enhancing McDonald’s, which haslongviewedchildren as oneofitstarget markets, thus child’streatment and48roomswithin hospitalsforthesamepurpose. world wherefamilies can staytogether for freewhentraveling forasick House Charities maintains more than200housesin44countries around the may be receiving longer-term treatment at the hospital. The Ronald McDonald children’s hospitalstohelpfamilies who wanttobeclosetheirchildren burger chain. The RonaldMcDonaldHousesarefacilities usually built near by McDonald’ssponsored lanthropy istheRonaldMcDonaldHouses ham objectives, programs, orproducts/services. A classic example of strategic phi issues that are consistent with or aligned with the firm’s overall mission, any legitimate need inthe community but rather focuses onthoseneedsor itself aswell.Strategic philanthropy ismorefocused.Itdoesnotjustaddress achieve goals for the community or recipient of the giving and for the business profitability and accountability toward the bottom line. been born andcultivated in abusinessclimate that has been more driven by direct benefits to the company, andthus,the idea of strategic philanthropy has has cometoviewthegivingfunction as onethat should deliver more specific, ized, and as it has been turned over to professional managers, top management the same time, corporate giving has become institutionalized and professional thought iswhathasproducedthemodernstrategic philanthropy emphasis. At can notonlyhelpothersbutitself at thesametime, and thisgermof impacts philanthropic efforts mighthave.Ithasbecome evident that business corporate executives have begun looking more carefully at the kinds of that havecharacterized the businesscommunity in thepastseveraldecades, With the passageoftime and the heightened competition and costpressures nature—more focused onanexclusive consideration of theneedsothers. that had ariseninthecommunity and so philanthropy was morealtruistic in business giving.Earlyon,corporategivingwasmorefocusedontheneeds The concept of strategic philanthropy hasevolved out oftraditional forms of STRATEGIC PHILANTHROPY TAKES SHAPE AND EVOLVES Hurricanes KatrinaandRita in theUnitedStates2005. due toemergencies suchasthetsunamiinSoutheast Asia in2004and Strategic philanthropyisanapproachtobusinessgivingthatseeks 18 - - - Strategic Philanthropy

- - - - - strate 19 has begun to be used to explain virtually any type of charitable has begun to be used to explain virtually Strategic management expert Michael Porter has argued that the term has argued Strategic management expert Michael Porter In using strategic philanthropy, companies strive to align their corporate their strive to align companies philanthropy, In using strategic CAUSE-RELATED MARKETING CAUSE-RELATED on is that has taken philanthropy strategic that shapes or variations One of the is this that claim critics Many marketing. or cause marketing, of cause-related but others have held that it is an extreme than philanthropy, more marketing nomic goals in such a way so as to produce legitimate social impact in the com nomic goals in such a way so as to produce to include any corporate Of course, his criticisms may be broadened munity. citizenship initiatives on the part of business, not just philanthropy. been critical of strategic philanthropy, arguing that the link between the compa arguing been critical of strategic philanthropy, or semantic. He suspects that mostnies and the charities are often weak, tenuous, at all to do with corporate strategyof these initiatives really do not have anything or goodwill for the companies andbut are aimed at achieving positive publicity for strategic philanthropy to morale. His belief is that for improving employees’ integrate social and eco to effectively be viewed as genuine or valid, it needs up for volunteer service. Both parties benefit. Both parties service. up for volunteer gic philanthropy focus, or approach that builds bridgesgiving that has some definable theme, Porter has and needs in the community. between the businesses that are giving The first is Novartis’ creation of its nonprofit, Novartis Research Institute for Institute Novartis Research of its nonprofit, creation first is Novartis’ The focus on the discovery allows it to The nonprofit Institute Diseases. Tropical the and benefits company The diseases. neglected of new drugs for treating On Demand Community benefit. Second is IBM’s diseases victims of neglected around the world to share the This program permits IBM employees Program. sign they where agencies the with other resources and technology company’s giving or community relations initiatives with their own goals, objectives, with their own initiatives relations giving or community on the impact positive is to have a double impact—a The idea or markets. busi on the impact and some kind of positive philanthropy of the recipients are worthy of mention. other examples Two or strategies. lines bottom nesses’ McDonald’s, as a company, initiated and sponsors the Ronald McDonald McDonald Ronald the sponsors and initiated company, a as McDonald’s, In the charity. to also contribute companies other but many House Charities, contributions. In a sense, then, on individual also relies addition, each chapter gets high of strategic philanthropy in that McDonald’s this is an ideal example is the company though even charity, for the publicity and recognition name supporters of the charity. just one of the many win and McDonald’s as a corporation wins. It should be clarified that that should be clarified wins. It a corporation as McDonald’s win and PART I: Corporate Social Responsibility and Related Terms form ofstrategic philanthropy in that the linkbetweenbusinesses’ interest believed tobebenefitedby the philanthropy. Oneoftheleadingbusiness the philanthropic endeavors. It is the explication of reasons why business is the argument or rationale as to how the business isspecifically benefiting from continue, the “business case” for it has to be established. The business case is expectation by CEOs andtopechelonexecutives that for corporate giving to The impetus behind the movement toward strategic philanthropy hasbeen the THE BUSINESSCASEFORSTRATEGIC PHILANTHROPY genuine social andeconomic values arecreated. effectively combines purephilanthropy withpurebusinessinsuchawaythat his view, the best waytomaximize philanthropy’s value is tofollowapath that community and, thus,fail as authentic efforts towardstrategic philanthropy. In geted towardimprovingthecompanies’ reputations than doinggoodinthe been critical of cause-related marketing. He thinkstheseefforts aremore tar charitable cause. products orservicestotheamounttheywouldthendonatesomeworthy use theircards. Today, manydifferent companieshavelinkedusingtheir development when American ExpressCommunityBusinessCardcustomers three national nonprofit organizations specializing in community economic businesses. So the company now gives a portion of credit card charges to ers acquireaccesstothecreditandresourcestheyneedstartorgrowtheir program andcause-related-marketingcampaigntohelpsmallbusinessown dinates itsphilanthropicandmarketingefforts withitscommunitybusiness increase intheuseofcompany’s cards. Today, American Expresscoor $1.7 millionfortherestorationofhistoricalmonumentandasubstantial one ofitscreditcardswasusedtomakeapurchase. This initiativegenerated would contribute1centtotherestorationofStatueLibertyeachtime 1980s when American ExpressCompanyintroducedaprogramwherebyit referred toas“quidproquophilanthropy.” the company to the charity. Thus, cause marketing has sometimes been each time a consumerusesservice or buysaproduct,donation isgivenby and somesocialorpubliccauseistightly tied together. Incausemarketing, Just asPorterhasbeen critical of strategic philanthropy, hehasespecially One oftheearliestexamplescause-relatedmarketingwasinearly 20 - - -

Strategic Philanthropy

- - - - - —Archie B. Carroll 21 strengthen employee loyalty and productivity, loyalty employee strengthen and reputation, corporate enhance markets. expand into emerging increase customer loyalty and enhance brand image, and enhance loyalty customer increase • • • • Since strategic philanthropy is a part of corporate social responsibility Since strategic philanthropy is a part An interesting aspect of strategic philanthropy is that two firms in the firms in two is that philanthropy strategic of aspect An interesting • • • bot the companies’ business advantages that strengthen In short, specific • ness case for corporate philanthropy, especially strategic philanthropy. strategic especially philanthropy, ness case for corporate and research that supports the idea that (a) corporate philanthropy can generate and research that supports philanthropy the idea that (a) corporate (b) this moral among stakeholders and communities, positive moral capital for a firm’s protection can provide business owners with insurance-like capital to contributes protection this (c) assets, and intangible relationship-based busi he has added to the and research, Thus, through logic wealth. shareholder reputation. Also, due to these efforts. accrue benefits same these that follows it initiatives, not phi most of these reasons are business related, be seen that can readily it it is worth Finally, the business case is strengthened. Thus, related. lanthropy and presented an analysis of literature noting that Paul Godfrey has developed impact grants, and volunteerism, while Lowe’s, its major competitor, supports competitor, major its Lowe’s, while volunteerism, and grants, impact and relief, Red Cross disaster American sponsorship of for Humanity, Habitat in these two firms made strategic scholarships. Executives college community similar doubtless with but philanthropies different engage to choices and profitability on the company’s impact in terms of strategic objectives tom lines are achievable through carefully designed philanthropic initiatives. designed philanthropic carefully through tom lines are achievable projects and ini philanthropic same industry may decide to pursue divergent as to the company benefits on the bottom-line while both are focusing tiatives industry, In the home improvement/products well as helping the community. community sustainable forestry, The Home Depot supports for example, Responsibility (BSR), a nonprofit association of firms and executives who executives and firms of association nonprofit a (BSR), Responsibility objec economic its with role social business’s integrating of idea the support through their companies, that indicates that research tives. BSR has assembled giving, may philanthropic groups supporting the idea of strategic philanthropy is Business for Social Business for Social philanthropy is strategic the idea of groups supporting PART I: Corporate Social Responsibility and Related Terms Further Readings Smith, C. (1996). The new corporate philanthropy. Saiia, D. H.,Carroll, A. B.,&Buchholtz, A. K.(2003).Philanthropy as strategy: When Porter, M.E., & Kramer, M.R.(2002). The competitive advantage of corporate philan Reiner,Logsdon, J., M.,&Burke,L.(1990).Corporatephilanthropy: Strategic Godfrey, P. C.(2005). The relationship between corporate philanthropy andshare Epstein, K.(2005).Philanthropy, Inc.:Howtoday’s corporate donors wanttheirgifts Carroll, A. B.,& Buchholtz, A. K.(2006).Businessand community stakeholders. In Business forSocial Responsibility. (2005). Burlingame, D. F., & Young, D.R.(Eds).(1996). 105–115. corporate charity begins athome. thropy. 19 to thefirm’sresponses stakeholders. 30 holder wealth: A riskmanagement perspective. to helpthebottom line. Mason, OH:South-Western. Business and society: Ethics and stakeholder management www.bsr.org roads. (2), 93–109. (4), 777–798. Bloomington: Indiana University Press. Harvard BusinessReview, December, Stanford Social Innovation Review, Business andSociety, 42 22 Nonprofit andVoluntary SectorQuarterly, Issue brief:Philanthropy. Corporate philanthropy atthecross 57–68. Academy of Management Review, Harvard BusinessReview, (6th ed., pp. 471–504). (2), 169–201.

Summer, Retrieved from 21–27.

72 (3), - - -

Corporate Citizenship - - - 23

CORPORATE CITIZENSHIP CORPORATE be defined as the ways in which a company’s strategies and operating strategies as the ways in which a company’s be defined orporate citizenship, sometimes called corporate responsibility, can corporate responsibility, called sometimes orporate citizenship,

While CSR has historically referred to a company’s economic, legal, economic, referred to a company’s CSR has historically While tion of the Center for Corporate Citizenship at Boston College requires that a at Boston Citizenship tion of the Center for Corporate business everyday with values social basic integrate citizen good corporate decision daily influence values these so that policies and operations, practices, example, the United Nations’ definition states that corporate citizenship is the corporate citizenship definition states that example, the United Nations’ and business policies concerns into of social and environmental integration defines it Responsibility Business for Social The U.S. association operations. ethical, legal, the or exceeds meets that a business in a manner as operating The defini has of business. society that expectations and public commercial, ethical, and discretionary responsibilities, corporate citizenship emphasizes citizenship corporate responsibilities, and discretionary ethical, and practices. strategies to a company’s attendant responsibilities integral the generally are they but citizenship, corporate of definitions other are There and stakeholder ecological, social, of integrating theme with the consistent For and practices. business strategies companies’ the into responsibilities stakeholders and the natural environment. Corporate citizenship is also associ is also citizenship Corporate environment. stakeholders and the natural ated the rights and responsibilities granted to a company or organization with operates; just as individual citizenshipby governments where the enterprise companies have considerably more carries rights and responsibilities, however, and do not have the right to vote. resources and power than do most individuals some way, but is also directly linked to the company’s business model in that business model in that linked to the company’s but is also directly some way, to all their impacts on stakeholders, it requires companies to pay attention integrally is, in this definition, Corporate citizenship nature, and society. impacts that derive and economic political, linked to the social, ecological, does business actually how the company business model; from the company’s to handles its responsibilities and how it where it operates; in the societies practices affect its stakeholders, the natural environment, and the societies and the environment, natural the stakeholders, its affect practices encom citizenship corporate operates. In this definition, where the business involves (CSR), which responsibility social of corporate concept passes the in society improve to efforts discretionary mainly and explicit companies’ C PART I: Corporate Social Responsibility and Related Terms making acrossallaspectsofthebusinessandtakesintoaccountitsimpacton the definitions given aboveindicate. definition related to overall corporate responsibilities is widelyaccepted, as rowly onsocialgoodactivities of companies, the morebusiness-model-based ness. Although some definitions ofcorporate citizenship do focus more nar and nature-related impacts thatderivefromthewaycompanydoesbusi operates; thatis,itsfundamental business model,andthestakeholder, societal, dominant conception ofcorporatecitizenship applies to thewaysacompany volunteer activities, in-kind giving, andcommunity relations. In contrast, the conception accepted here. and centers in academic environments have developed the more broad-based constitute corporate citizenship initiatives, most of the business associations tionary activities onthepart of companies to deliberately improve societies citizenship more narrowlythanthedefinitions above, believing thatdiscre panies. Although somescholarsandpracticing managers dodefinecorporate mainly through philanthropy and is considered voluntary on thepart of com from theconceptofCSR,whichconnotesdoingexplicit good forsociety minology evolved from earlier conceptions of businessin society, particularly Union inthemid-1990sbuthasbeenuseatleast since the1950s. The ter tices, strategies,andimpactsbecame popular particularly in theEuropean The term BACKGROUND and financial obligations to shareholdersand stakeholders. nity inwhichthebusinessseeksalicensetooperateandrecognizeseconomic business’s social,cultural, and environmental responsibilities to thecommu Corporate Citizenship Research claims that corporate citizenship recognizes and responsiblesupplychainmanagement. Australia’s DeakinUniversity’s social and environmental reporting, social auditing, stakeholder consultation, ment, human rights, corporate governance, environmental policy andpractice, involves the study ofabroadrange of issues,including community invest University of Warwick Business School indicates that corporate citizenship the natural environment. all stakeholders, including employees, customers, communities, suppliers,and Typical manifestations of CSRoccurthroughphilanthropic programs, The definition of theCorporateCitizenship Unit atGreatBritain’s corporate citizenship asapplied to companies’ corebusinessprac 24 ------Corporate Citizenship ------25 Corporate leaders began paying significant attention to issues of corporate attention Corporate leaders began paying significant The reach, scope, and size of many large companies have created signifi created have companies large many of size and scope, reach, The In the 1960s, U.S. legal scholar Dow Votaw noted that companies needed needed companies noted that Votaw scholar Dow U.S. legal In the 1960s, fueled the ability of activists and other critics to question corporate activities corporate to question critics and other of activists the ability fueled and account transparency, and create increasing demands for responsibility, by companies. ability climate change and other serious environmental problems said to be at least serious environmental change and other climate some activism by businesses; and the rise of anticorporate created partially of powerful at policies and sometimes companies at specific directed times Bank, and World the Organization, Trade World global institutions such as the technologies Advanced communication Monetary Fund. the International practices of outsourcing key functions to developing nations to reduce costs; reduce to nations developing to functions key of outsourcing practices and corporate influence on governments, and accounting scandals; ethical and whole societies. communities, waves of antiglo 2000s, following early 1990s and late during the citizenship fears about of corporate outsourcing practices; protests; critiques balization and greater attention to the ethical values that underpin it. These pressures are These pressures it. underpin that values ethical the to attention greater and economies were largest by 2002, 51 of the world’s by the fact that, highlighted and size spectacular this is it part, In companies. but countries be to not said to corporate citizen created much of the attention power that have attendant management impacts; about globalization’s further by concerns ship, fueled With legitimacy comes a set of rights and also responsibilities. Corporate citi comes a set of rights and also responsibilities. legitimacy With apply, arenas in which those responsibilities zenship highlights the specific the natural on and impacts with stakeholders relationships encompassing and societies. environment better corporate citizenship groups in society for cant pressures from different about the legitimacy of firms in society and how they are to be made account of firms in society and how about the legitimacy interests; and how able to broader societal companies could be sanctioned notion of corporate in the deeply embedded Thus, when wrongdoing occurs. social through a form of is the idea that companies gain legitimacy citizenship papers. incorporation of form the in typically societies by granted contract to be understood not just as economic actors in society but also as political as also but society in actors economic as just not understood be to corporate citi to a company’s issues related focused on specific Votaw actors. and vast size of the in light particularly today, currency retain that zenship issues that The corporations. multinational large of many clout economic derived are which power, and influence companies’ included Votaw concerned other resources; questions and and control of economic size from a company’s PART I: Corporate Social Responsibility and Related Terms from internationally agreed declarations and treaties. The Global Compact, Global Compact’s setof10(originally nine) principles, which weredrawn the mostprominent, although notwithoutitscritics, was theUnitedNations’ ing frominternationally agreed documents or core ethical standards. Among number ofcodesemerged thatweredevelopedby multisector coalitions work articulated in thecodes. names to protect, began demanding that their suppliers live up tothe standards oped, manycompanies,particularly large multinational firms withbrand basic principles could be putintopractice in companies. As thecodesdevel flurry of development of codes of conduct that attempted to codify how such standards, aswelltheimpact ofglobalization. This activism generated a were subjectedtoabusiveconditions,ecological deterioration, and poorlabor involved contracting withmanufacturersindevelopingnationswhoseworkers against certain corporate practices suchasoutsourcing,whichfrequently in whichdecisionsaremade. is ethically problematic, respect forlocaltraditions, andrespectforthecontext human values that determine a floor of practice and behavior below which it citizenship. They arebuilt on threeprinciples, including the respectforcore as afoundationforallhumanvaluesandalsobasisgoodcorporate good citizenship, and,similarly, fundamental values. Such hypernormsserve and Dunfee include basics such asrespect for human dignity, basic rights, controversial as towhether they exist, hypernorms identified by Donaldson have labeled such foundational values hypernorms. Although still somewhat zenship. Prominentbusinessethicists Thomas Donaldsonand Thomas Dunfee line orfloorofethical conduct thatservesasthefoundationofcorporateciti emerged. These codesrepresentwhattheirdevelopersconsidertobeabase representatives, activists, and nongovernmental organizations also (NGOs), generated by multisector coalitions that included companies, governmental addition to internal codes, a number of codes and sets of supply chainpartnerstoimplement thecodesintheiroperations aswell.In codes ofconductduringthe1990s.Somethesecompaniesalsoaskedtheir tices, many multinational corporations developed and implemented internal 2000s. At least partially in responsetovocal activism about supplychain prac to highlight good corporate citizenship emerged during the 1990s and early On the business side, numerousnewactivities the businessandorganizationsOn designed Many companies developed their own codes ofconduct;inaddition,a Many companiesdevelopedtheirown During the1990sandinto2000s,therewasagreatdealofactivism 26 principles, frequently - - - - - Corporate Citizenship

- - - - ment and ment orate Behavior and orate p ransnational Corporations and ransnational T 27 niversal Declaration of Human Rights, the of Human Rights, Declaration niversal U There are other important codes and principles aimed at putting corporate putting at aimed codes and principles important other are There The Global Compact’s 10 principles focus on core or foundational prin foundational or on core focus principles 10 Compact’s Global The (Coalition for Environmentally Responsible Economies) Principles, the Clean the Principles, Economies) Responsible for Environmentally (Coalition Fair of the Conduct of Code Workplace the code, model Campaign Clothes Charter for Good Cor Association, the Keidanren Labor Guidelines for Sustainable Fishing, the Natural Step’s Sustainability Principles, Sustainability Fishing, the Natural Step’s Guidelines for Sustainable of on the Responsibilities Norms the UN’s Other Enterprises with regard to Human Rights, the Equator Principles (for the Principles, the Caux Forestry services industry), the Sustainable financial CERES the Bribery, Countering for Business Principles the Principles, including bribery and extortion. including These codes include and strategies. practices into operating efforts citizenship for Economic Enterprises of the Organisation for Multinational the Guidelines of Corporate Principles Sullivan Global the and Development, Co-operation and Principles Council’s Stewardship Marine the Responsibility, Social The three environmental principles require companies to support a precaution principles The three environmental to promote initiatives undertake challenges, to environmental ary approach develop the encourage and responsibility, environmental greater principle, corruption The technologies. friendly of environmentally diffusion work added in 2004, requires companies to all forms of corruption, against principles require companies to support and respect the protection of interna protection the to support and respect require companies principles in human rights and make sure that they are not complicit proclaimed tionally require companies to The four labor standards any human rights abuses. of the right to recognition the effective uphold the freedom of association and all forms of forced and compulsory labor, eliminate bargaining, collective in employment. discrimination and eliminate labor, child abolish effectively been signed by most of the countries of the world. Documents from which the from which Documents world. of the countries by most of the signed been the are drawn include principles on Fundamental Principles Declaration Labour Organization’s International and Development, on Environment the Rio Declaration Work, and Rights at rights human two The Corruption. Against Convention Nations United the and Secretary-General Kofi Annan to “initiate a global compact of shared values of shared compact global a Annan to “initiate Kofi Secretary-General market.” In signing face to the global will give a human which and principles, princi to uphold 10 fundamental agree companies Compact, Global onto the and anticorruption. labor rights, environment, ples on human rights, have that documents and UN declarations major drawn from are and ciples which had nearly 2,000 members by 2005, was established in 1999 by UN in 2005, was established by nearly 2,000 members which had PART I: Corporate Social Responsibility and Related Terms the Keidanren Environment Charter, the Canadian Business for Social financial markets beginninginthe1980sandcontinuing to thepresenthave flames of attention to corporate citizenship. further fanned the desire for better corporate citizenship and also fanned the that created huge oligopolies and evennearmonopolies in manyindustries, early 2000s, andawave ofconsolidations through mergers andacquisitions estimated to beonthe order of450times that of the average worker inthe ship orwhat some believed to be lack thereof. Chief executive compensation, regimes in certain countries, these scandalsdrewattention to corporate citizen the political affairs ofnations, and participation by companies in abusive elsewhere. Accompanied byaccusations ofcorruptionandundueinfluence in uncovered intheUnitedStatesearly2000s,aswell asinEuropeand of ethical scandals, accounting misrepresentations, and frauds that were different groups ofstakeholders. nations created a public focus onthe implications of this type of practice for facilities combined withlowwagesandpoorconditionsinsomedeveloping about domestic job loss forcommunities where the outsourcing company had which shiftedfromthedevelopednationstodevelopingnations.Concerns port centers,programming,andothertechnologically sophisticated services, practice of outsourcing continued into the 2000s andexpanded to call and sup poor safety standards, or employing weak environmental management. The sweatshop workingconditions,abusingthehumanrightsofworkers,having facilities in thedeveloping nations wereexposedinmedia reports ashaving drew attention to thecompanies’ corporate citizenship because many ofthe companies startinginthe1990sandcontinuingtopresent. This practice services tolow-wagedeveloping nationsbecame very popularamonglarge ing operationsincludingmanufacturing and productionofmanygoods about corporatepracticesandimpacts.Forexample,thepractice of outsourc similar, despite differences inwordingandspecific focus. although certainly not all, of the core issues embedded in these codes are 400 suchprinciples and codes including individual company codes. Many, Labour Organization, a division of the United Nations, counted more than Industry ModelCode,andnumerousothers.OneobserverattheInternational Responsibi Pressures forever-increasing short-term financial performance from Other factors fueling attention to corporate citizenship include the array These codes and principles evolved, in part, because of societal concerns lity Guidelines, the World Federation of the Sporting Goods 28 - - -

Corporate Citizenship ------29 Shareholder advocates focus on changing corporate practices by submit comparable. changing at aimed are resolutions Shareholder resolutions. shareholder ting tive practices, including poor supply chain management practices such as child practices management poor supply chain including practices, tive or harmful practices, poor environmental labor or abusive working conditions, Some inves which some investors wish to avoid. products such as cigarettes, Returns for invest encourage. wish to they that practices tors look for positive roughly funds are traditional with funds as compared screened in ments called socially responsible investing. The Social Investment Forum in the Forum in the Investment The Social responsible investing. socially called of one than or more trillion $2.16 some that 2003 in estimated States United in dollars in the United States was invested investment every nine equity investment responsible main three one of the least at employed assets that and community shareholder advocacy, investments, strategies—screening nega particular to attention paying means investments Screening investment. example, has faced significant problems in some communities because of the because in some communities problems significant has faced example, districts, low wages, and discrimination on local shopping impact company’s responsi about corporate are also concerned women. Some investors against basis the on part in least at investments their choose and or citizenship bility through what is corporate citizenship of how they perceive the company’s CRITICISMS OF CORPORATE CITIZENSHIP AND RESPONSES CITIZENSHIP CRITICISMS OF CORPORATE can come from many sources, citizenship corporate of a company’s Criticism by company activi affected local communities the media, including activists, that set up websites Some activists nations. and sometimes customers, ties, for Wal-Mart, boycott. such as a company, a against action to foster attempt cerns about their size, short-term decision-making orientation, their power their orientation, decision-making short-term size, their cerns about posi and other resources, and not always through control of financial accrued environment. natural and the societies, on stakeholders, impacts tive attention to share price caused some observers and critics to believe that com that believe to and critics observers some caused share price to attention that is, to other stakeholders, attention to pay sufficient failing panies were citi Corporate activities. company’s the affect by and able to those affected effort in part as a voluntary during the 1990s and 2000s zenship thus evolved well as corporations transnational visible, highly therefore and large, many by con their goodwill in the face of ones, to demonstrate as numerous smaller focused many corporate leaders’ attention on short-term share prices. The prices. share short-term on attention leaders’ corporate many focused PART I: Corporate Social Responsibility and Related Terms matters ofconcerntoactivist investors andaredirected to theboardofdirec lens of sustainable development. For example, many transnational firms with line—economic growth, ecological balance, and social progress through the pillars of corporate citizenship that have come to becalled the triple bottom need tomanagetheirresponsibilities explicitly. The WBCSD focusesonthree (WBCSD), andsimilar organizations butalsoinagrowingacceptance of the Global Compact, the World Business Council for Sustainable Development zenship canbefoundnotonlyintheirjoiningorganizations such astheUN and practices, implementation, and transparency. corporate citizenship meanstoacompany, integration into corporate strategies sizes keyelements of managing responsibility: leadership that defines what responsibility, andcorporatesocialresponsibility. The statement alsoempha activities: triple bottom line or sustainable development, ethics, corporate points out the array of terminology used to signify corporate citizenship by the CEOs and boards of directors of those companies. This statement also and externally; and theneedforleadership on issuesofcorporate citizenship key stakeholders,whicharefundamental to thecompany’s successinternally that theyoperate their businesses;therelationships that companies have with companies’ commitment to being global corporate citizens as part of the way elements that help flesh outwhatcorporate citizenship means in practice: the companies’ CEOsin2002. This frameworkforactionfocusesonthreekey Economic Forum created a frameworkfor action signed by40multinational philanthropy, andparticipation inthepublicpolicy process, the World ety throughthecombination of corebusinessactivities, social investment and investors arewilling to make that trade-off whennecessary. carry asomewhatlowerrateofreturnthantraditional investments, butsocial housing developments, retail establishments, and similarprojects. They may ects that areaimed specifically at helping to improve communities, suchas meeting process. Community investors sometimes put their money into proj resolutions being withdrawn, while others come to a vote during the annual dialogue with theshareholderactivists and promisechanges,resulting in the pensation, to name a fewareas of criticism. Some chief executives engage in tices, labor standards, wages,harmful products, andexcessive executive com a widerangeofissuesconcern,including environmental policies andprac tors throughthe annual meeting process. Shareholder resolutions can focus on Evidence of growing interest on thepartofcompanies in corporate citi Defining corporate citizenship as thecontributions of businessestosoci 30 ------Corporate Citizenship - - - - 31 Some companies have actively begun to manage their supply chain rela chain supply their manage to begun actively have companies Some treated as if it were a stakeholder; hence, environmental management and management environmental hence, stakeholder; a were it as if treated of concepts to linked tightly are sustainability issues of ecological related citizenship. corporate interested in the company’s activities, among numerous others. Sometimes numerous among activities, company’s the in interested as when stakeholders, primary considered be can or communities governments serves a industry or when its business directly a company is in a regulated is not a person but because all companies The environment given community. it is frequently resources, on its depend civilization of human all indeed and without whom the company cannot exist and typically are said to include own are said to include and typically without whom the company cannot exist in com and suppliers, particularly customers, employees, ers or shareholders, stakeholders are those affected panies with extended supply chain. Secondary but who are not essen and strategies, practices the company’s by or can affect governments, include Secondary stakeholders typically to its existence. tial activists and and operations, has facilities where the company communities environment links corporate citizenship integrally to the relationships that relationships the to integrally citizenship links corporate environment by offered In the classic definition companies develop with their stakeholders. by or to be those who are affected R. Edward Freeman, stakeholders are said Stakeholders can be classified into two categories— a company. who can affect Primary stakeholders are those groups and individuals primary and secondary. STAKEHOLDERS AND CORPORATE CITIZENSHIP AND CORPORATE STAKEHOLDERS of impacts the with do to having as citizenship corporate of definition The the natural and on stakeholders, nature, and strategies practices corporate own operations are managed responsibly. Such responsibility management Such responsibility responsibly. managed are own operations for good at helping companies protect their reputations approaches are aimed supply chain. their standards throughout global by establishing citizenship at aimed framework institutional by an emerging They are supplemented met. are actually responsibilities corporate stated and implicit assuring that in supply chain companies, which may not actually belong to the multinational to the multinational belong may not actually chain companies, which in supply conditions, and working with poor labor standards, are problematic, company, standards. environmental own code of suppliers to live up to the multinational’s tionships by asking ensuring that conditions in their as well as of practice, conduct and standards long supply chains have been exposed to criticisms by activists that practices practices that by activists criticisms to exposed been chains have supply long PART I: Corporate Social Responsibility and Related Terms ity ofhumancivilizationinnature havebecomemorecommon.Manylarge ments ofgoodcorporatecitizenship asworriesaboutthelong-termsustainabil working throughlobbyiststo influence legislation. to theextent permissible locally, including contributing to campaigns and also participate in the political processes ofcountrieswheretheyarelocated significant public affairs functions todealwithgovernmental relations. They are important stakeholders, too,andmostlarge companies have developed bor ofchoice and sustain whatiscalled their license to operate. Governments community-based events intended toenhancetheirlocal reputation asaneigh tions programs, including philanthropic programs, volunteer initiatives, and selves asgoodcorporatecitizens have extensive corporate community rela permits, and thelike that companies need. Manycompanies that viewthem structure, such assewers, communications connections, roadways, building company anditssupplydistributionchain. nal observersfailtodifferentiate betweenthecorporatecitizenshipofmain tionships withsuppliersanddistributorswell,particularlybecausemanyexter degraded reputation.Hence,itisimportantforcompaniestomanagetheirrela or poorlaborstandards,thecompanypurchasingitsproductswillsuffer froma the factthatifsupplieritselfusesproblematicpractices,suchassweatshops nies relatingtoproductquality, delivery, andcustomerservice,nottomention and services.Problemswithsupplierscanresultinnumerousissuesforcompa respect tocustomers,therefore,involvesthecreationofvalue-addingproducts they aredesignedandaddappropriatevalue.Goodcorporatecitizenshipwith the productsorservicesthattheypurchasewillservepurposesforwhich and thecompanywillbenefitfinanciallyinotherways.Customerstrustthat are representativeofgoodcorporatecitizenship,theirproductivitywillbebetter ees are treated well by a company through progressive employee practices that and wages. A significantbodyofresearchexiststhatsuggestswhenemploy training anddevelopingemployees.Employeesarerepaidthroughtheirsalaries and frequently also some of their emotions in the firm, and the firm invests in their knowledge,physicalstrengthandabilities,skills,intellectualresources, shares andrightfullyexpectafairreturnonthatinvestment.Employeesinvest Shareholders orowners,forexample,investtheirmoneyinthecompany’s emotional, reputational,orothermeansintothecompany’s performance. company, makesaninvestmentofsomesortinit,oristiedthrough Each stakeholder group either takes some sort of risk with respect to the Each stakeholdergroupeithertakessomesortofriskwithrespecttothe Environmental managementand sustainabilityhavebecomeimportantele Communities are important to companies because they create local infra 32 ------Corporate Citizenship

------33 In response to criticisms about their negative impacts on society, stake society, on impacts negative their about criticisms response to In In most large companies today there is still no one particular job title or title job particular one no still is there today companies large most In Responsibility management and reporting in the early 2000s consisted of vol and reporting in the early management Responsibility about some of on the part of companies to be more transparent untary efforts were able to report how, Because companies and impacts. their practices critics still found problems many when, and what they wanted to, however, tarily began to issue social, ecological, or so-called triple-bottom-line reports, triple-bottom-line or so-called ecological, began to issue social, tarily at eco aimed citizenship, of corporate three elements all which encompass impacts. and ecological social, nomic, Responsibility Management holders, and nature, and questions about the credibility of their corporate of their credibility the questions about and holders, and nature, state citizenship corporate developed have companies many large citizenship, with positions to managers appointed even have some strategies; and ments or corpo social responsibility, corporate such as corporate citizenship, titles volun corporations large 2000s, many early By the officer. responsibility rate corporate community relations officers have assumed a great many of these many great a assumed have officers relations community corporate to positions with few companies have appointed individuals A responsibilities. of corporate vice president officer, responsibility such as corporate social titles are These jobs, however, or director of corporate citizenship. responsibility, as of 2005. far from common still ship, these boundary-spanning functions, which include position titles such as ship, these boundary-spanning functions, relations, shareholder affairs, public relations, community relations, employee important. are increasingly relations, and customer supplier relations, reside, though some activities function in which all the corporate citizenship RESPONSIBILITY MANAGEMENT AND ASSURANCE deal with have developed specific functions to corporations today Most large func boundary-spanning called what are in groups stakeholder different these and its a company between relationship of the quality the tions. Because corporate citizen of the company’s manifestation stakeholders is an important they attempt to monitor and control the ways in which environmental resources environmental the ways in which to monitor and control they attempt resource that encompass through programs that they are not wasted are used so to focus onfew progressive firms have begun A recycling. reduction, reuse, and ecological sustainability as well. issues of long-term companies have implemented environmental management programs in which management environmental have implemented companies PART I: Corporate Social Responsibility and Related Terms with their corporate citizenship. In response, what can be called a responsibil approaches, duringtheearly2000s somelarge multinational companies began result, inadditiontointernal andvoluntaryresponsibilitymanagement ments aboutcorporate citizenship made by companies are accurate. As a need reassurance that stated standards are actually being met and that state nies and small and medium-sized enterprises to their own devices. Suchcritics concerned about their reputation, leaving most business-to-businesscompa since suchapproacheswerestillmostlyinusebylarge brandedcompanies with voluntary internal responsibility management approaches, particularly stakeholder, societal, and ecological responsibilities well and were unsatisfied Skeptical stakeholders need reassurance that companies actually manage their Responsibility Assurance triple-bottom-line reports. ecological, and economic performance. Such reportshavecometobecalled ship explicitly publish some sort of report that focuses on their social, ment is that of transparency, asmanycompanies managing corporate citizen feedback system sothat improvements can bemade as necessary. A final ele ments toquality management, is developing anappropriatemeasurement and aspect of responsibility management, which canbecompared in itsmajor ele culture, and strategic decisions that constitute the firm. Another important human resourcepracticesandthearrayofmanagement systems, corporate the operatingpracticesandstrategiesoffirm,typically by focusingon rate citizenship agenda, italsofocusesonintegrating the visionandvaluesinto a company adopts a responsibility management approach as part of its corpo nies that is increasingly being accepted by leaders of global enterprises. When represents amoreintegrated approach tothebroadresponsibilities of compa focuses ondiscretionary activities, corporate citizenship in itsbroadestsense and external stakeholders and make appropriate changes. Unlike CSR,which which helpscompaniestodetermine theconcernsandinterestsofbothinternal begin withvisionandvaluesarereinforcedbystakeholderengagement, vision andunderpinnedbyitsvalues.Responsibilitymanagement approaches the early 2000s. ples werebeingmet, and consistent reporting mechanisms began toevolve in monitoring, verification, and certification systems toensurethatthoseprinci ity assurance system,consistingofprinciples and codesofconduct, credible A given company’s corporate citizenship is guided by the company’s 34 ------Corporate Citizenship ------35 facturing in developing nations and the customer company that was purchasing facturing in developing nations and the customer company that was purchasing but the multination for the use of child labor, those goods—both were blamed the of brunt the bore so they target, familiar more and nearer the were als less been tainted when activists have uncovered problems in the suppliers’ suppliers’ the in problems uncovered have activists when tainted been less working safety, environment, rights, and labor human to related operations to standards or failure by local even poor pay involve abuses that conditions, pay overtime, and related problems. Child labor is another serious concern for gen the ultimately and activists, media, the that out turned It activists. some manu company supplying the between distinction a make not did public eral increases in long global supply chains, where companies outsource manufac outsource where companies supply chains, in long global increases nations; in developing low-skill work to facilities and related turing, assembly, owned by the not actually to suppliers who are work is granted outsourced the actually not are facilities supplier the Although company. sourcing or customer have nonethe reputations some multinationals’ part of the sourcing company, The second aspect of responsibility assurance encompasses credible monitor credible encompasses assurance of responsibility aspect second The approaches. Because there is a great deal of and verification ing, certification, many crit practice, citizenship actual corporate skepticism about companies’ ensuring are they that state they when companies believe to unwilling are ics This skepticism implemented. being actually are of conduct codes their that lar codes of conduct as discussed above. They provide guidance to companies to guidance provide They as discussed above. codes of conduct lar and go to problematic morally is it which below practice of floor a about noted above, internationally as or, principles rest on core ethical typically and treaties. agreed documents Approaches Verification and Certification, Monitoring, Credible ship and responsibility activities. ship and responsibility Values Principles and Foundation UN as the such documents found in be values can foundation and Principles and simi Corporations, for Multinational OECD Guidelines Compact, Global tem. Responsibility assurance attempted to provide some external credibility external to provide some attempted assurance tem. Responsibility citizen corporate their manage to internally doing were companies what to and principles elements: major assurance involves three ship. Responsibility sys certification and verification, monitoring, values; credible foundational and values; stated its up to is living a company that ensure help that tems citizen on corporate reporting standards for transparently accepted globally participating in an emerging and still voluntary responsibility assurance sys assurance responsibility voluntary still and emerging an in participating PART I: Corporate Social Responsibility and Related Terms blame. Even whenthemultinationals implemented their codesofconduct and wish to employ socialauditorsandverifiers,includingcostreduction byusing wish tion processes. BSR also suggests several positive reasons whycompanies corruption, and related systemic problems will be moreeffective than verifica by corporate headquarters; and opinionsthat other meansofreducingpoverty, actually uncovering abuses; lack ofresolutionissuesuncoveredinreports Responsibility (BSR), rangefromissuesabouttheeffectiveness ofmonitorsin or responsibility audit, according tothe U.S. association Business forSocial larger ones are international in scope. Concerns about this type of monitoring in scope and use local parties to actually conduct the monitoring, while the Some arelocal and humanrights,othersarebackedbyreligiousgroups. In addition, somerepresent women’s rightsgroups,somearefocused onlabor organizationswhile somesocialauditorsarefor-profit areNGOs, enterprises. Rights Consortium.Manyoftheseindependent monitoring andverification Initiative, Verité, theFairwearFoundationofNetherlands,and Worker the Worldwide Responsible Apparel Productionprogram,theEthical Trading a setofstandardscalled AA 1000.Othersinclude the CleanClothesCampaign, of standardscalled SA 8000;andthe British firm AccountAbility, whichoffers process aretheFairLabor International, Association; SAIwhichoffers aset management systems. external verifiers in addition to having their own codes of conduct and internal employ have beenspotlightedinthepast,now and numerousotherswho companies such asNike,Reebok,Levi Strauss, The Gap,Disney, andMattel, the external world thatconditionsarewhatthecompanysaystheyare.Major standards, andhealth,safety, andenvironmental standards; andcertification to sourcing firmarebeingmet;monitoringofworkingconditions,pay, labor ing companies,wherevertheyarefound:verification that thestandardsof ecological monitoring. The verifiersperformthreemainfunctions insupply times accounting firmsattempting to develop an expertise in social, labor, and verifiers are mostlyindependent agents; they includeandsome both NGOs those companies andensurethatstandardswereactually being met. These implement a code of conduct but began hiring external verifiers togointo by activists for poorsourcing practices, not only asked their suppliers to tionals andsomelarge retailers, who wereamongthefirstcompaniestargeted asked their suppliers tolive up tothosecodes,problemspersisted. Among the many organizations involved in the verification or social audit As aresult, some footwear, clothing, toy, and sports equipment multina 36 - - - - Corporate Citizenship - - - - - 37 There are a number of initiatives aimed at developing globally accepted globally at developing aimed are a number of initiatives There Although many companies issue triple- or multiple-bottom-line reports or multiple-bottom-line Although many companies issue triple- ized format. Perhaps the most prominent of the initiatives around standardized initiatives of the most prominent Perhaps the format. ized is that reporting sustainability, called sometimes reporting, triple-bottom-line or GRI. Initiative of the Global Reporting the ISO organization, which sets quality and environmental standards, began and environmental which sets quality the ISO organization, in 2004, which will be standards responsibility to develop a set of corporate One Report helps called company A once completed. for companies voluntary on issues related to sus gather and report and other companies multinationals elements, in a standard and ecological which include both social tainability, Restoring public trust in corporate citizenship ultimately will require standard require will ultimately citizenship corporate in trust public Restoring all that requirements some legal potentially reports and even of social ization issue such reports. companies a including transparency, and ecological ensure social standards that reporting CSR reporting. Indeed, Union to standardize by the European major initiative that focus not only on economic and financial matters but also on social and social but also on matters and financial focus not only on economic that that procedure reporting accepted no fully is still ones, there environmental to be are of performance aspects and when different what, how, details performance of one As the social or ecological a result, comparing reported. be problematic. can industry same the of others even within with that company corporate financial performance. Such standardization is important so that inves corporate financial performance. Such standardization in the same industry performance against others tors can compare one company’s the same cannot be said for corporate industries. Currently, or across different yet there are increasing demandsreporting about social and ecological matters, their practices and impacts. on companies for greater transparency about The third important element of responsibility assurance is having globally element of responsibility assurance The third important about cor exists transparency real reporting standards that ensure that accepted made to financial impacts. Here, the analogy needs to be porate practices and at least within each and accounting industry, The auditing auditing and reporting. criteria for reporting standard practices, formats, and nation, has long established globally distributed, benefits to corporate reputation, better compliance both compliance better reputation, corporate to benefits distributed, globally and quality productivity enhanced requirements, legal code and with the transparency and working conditions, and greater brought about by better with the public. credibility related Accepted Reporting Standards Globally local monitors rather than in-house monitors especially when facilities are facilities when especially monitors in-house than rather monitors local PART I: Corporate Social Responsibility and Related Terms of rights that relate to membership in a political entity, typically a nation-state, that that of rightsthatrelatetomembership inapoliticalentity, typically anation-state, the fact that citizenship is anindividual responsibilityinvolving a corresponding set triple-bottom-line audits followingtheproceduresofGRI. about 350, manyof which had joined the Global Compact, had completed Global Compact,while as of2005,about2,000companieshadjoinedtheUN in explicitly forwarding themselvesasgoodcorporatecitizens.example, For only a few highlyvisible, mostly brand-name companies are actively engaged national corporations in the world with hundreds ofthousandssubsidiaries, while theUnitedNationsestimatesthatthereareapproximately 70,000 multi society, critics believe that it does notgodeep enough. Otherspoint out that treated as discretionary or voluntary activities designed to improve aspects of tive change within the corporation. Particularly when corporate citizenship is on thepartofcompanies to create a positive public image rather thansubstan Some observersbelieve that corporate citizenship merely represents aneffort CRITICISMS OFCORPORATE CITIZENSHIP dardized triple-bottom-line or sustainability reporting. complexity, theGRIrepresentsmostrecognized approach todateofstan cific standards related to the company’s industry. Sometimes criticized for its systems standards,accounting for intangibles, assurance standards,andspe conduct, international conventions and performance standards, management butes related to their corporate citizenship. These include their code of ing industry-specific standards. characteristics of what needs to be reported, the GRI also has begun develop their own reports. In addition, because industries differ dramatically in the report andhow, andcontent indicators that guide organizations in developing has developed specific reporting guidelines, principles for determining what to ferent businesses.LinkedcooperativelyGlobalCompact, with theUNGRI standards are comprehensive, correct, and appropriate to the situation of dif ronmental, research, human rights, and labor organizations to ensure that its regularly gets input from businesses, accounting firms, and investment, envi sustainability reporting. Formedbyamultistakeholder coalition, theGRI pendent in2002.Itsmissionistodevelopgloballystandardized guidelinesfor The GRI began in 1997 asan initiative of the CERES and became inde Another criticismoftheconcept ofcorporatecitizenshipfocuseson The GRIattempts tohelpcompaniesintegrate a numberofcomplexattri 38 ------

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- (2nd ed.). (1/2), 109–121. 45

(1), 9–26. 166–179. —Sandra Waddock Corporate citizenship: 29, 105

London: Financial Times/Pitman. London: Financial 5–42. 109, Perspectives on corporate citizenship. corporate on Perspectives

39 Ties that bind: A social contracts approach to approach contracts social A bind: that Ties Journal of Business Ethics, Various articles, published 2001 to present. Sheffield,present. to 2001 published articles, Various Business and Society Review, Business and Society Academy of Management Review, Leading corporate citizens: Vision, values, value added values, Leading corporate citizens: Vision, Boston: Harvard Business School Press. The civil corporation: The new economy of corporate citizenship. The civil Business and Society Review, Business and Society citizenship. McGraw-Hill. New York: London: Earthscan. cal conceptualization. cal citizenship. of corporate true face business ethics. UK: Greenleaf. solution to sustainability? Sheffield, UK: Greenleaf. Sheffield, Successful strategies for responsible companies. Successful strategies for responsible Waddock, S. (2006). Waddock, Zadek, S. (2001). Matten, D., & Crane, A. (2004). Corporate citizenship: Towards an extended theoreti an extended Towards citizenship: Corporate A. (2004). Crane, D., & Matten, the mask: Revealing the June). Behind (2003, W. A., & Chapple, D., Crane, Matten, progress of corporate and the academics, March). Companies, S. (2004, Waddock, Donaldson, T., & Dunfee, T. W. (1999). W. & T. Dunfee, Donaldson, T., Citizenship. Corporate of Journal of the business: Part of big citizenship new corporate The Marsden, C. (2000, Spring). Further Readings (2001). M. (Eds.). McIntosh, J., & Andriof, are not people. Companies, however, do bear responsibilities for their societaltheir for responsibilities bear do however, Companies, people. not are resourcesmore significantly command they because impacts, ecological and policy process because they can influence the public than do most individuals, theor society civil in participate they when because and nations, many in citizens. carry more weight than do most individual political process, they involve civil, social, and political rights and responsibilities, while companies while responsibilities, and rights political and social, civil, involve McIntosh, M., Leipziger, D., Jones, K., & Coleman, G. (1998). D., Jones, K., & Coleman, G. (1998). McIntosh, M., Leipziger, PART I: Corporate Social Responsibility and Related Terms S that leaders considertheimpact oftheirdecisionsontheseventhgeneration (also knownasthe Iroquois) hadtheir “Great Law,” which, inpart, requires ability, itishelpful toconsiderthatmorethan400yearsagotheHaudenosaunee World TradeOrganization. in organizations suchastheUnitedNationsbutalsoat World Bankandthe has provided a source of motivation to address sustainability issues not only resource, trade,andpolicydisputes. and fuels This typeofeconomicunrest between therichandpoorisaprovendriverofenvironmental degradation species toward extinction. Abject poverty that attends the growing gaps and create social unrest in the future, while at the same time drive numerous Among the consequence of ecosystem damage and lossarethat itcan threaten biodiversity, shared ecosystem resources are being depleted or damaged. complex climate change,tohabitatdestruction,whichresultsindecreased radiation, to accelerating greenhouse gasemissions,whichcontribute to ozone depletion, whichleadstoprogressivelyhigherlevelsoflife-damaging tion ofsustainability is beingconsideredaroundtheworld.Fromadvancing mising theability to meet those offuture generations. seeking to meet the needs and aspirations of present society without compro published a report in 1987 in which that end, the Brundtland Commission, created through the United Nations, step foraddressingasetofglobalchallenges embodied by sustainability. To sustainable development. tainability is oftenconflated with the approach needed to attain the goal— with allrelated man-made and naturally occurring systems. The goalofsus as anintegrated understanding of the interconnectedness of human activity prosperity intotheforeseeable future. Therefore, to guide actions within present society to ensure continued existence and As oursocietywrestleswith the meaningandactionsimplied by sustain Because of profound changes to our shared ecological systems, the ques grating society, economy, and ecology. This concept has been advanced ustainability isanevolvingconceptthatexpressesholistic thinking inte SUSTAINABILITY Understanding these two termsisan essential first 40 sustainable development sustainability canbedefined is defined as - - - - -

Sustainability ------41 A few business organizations have viewed increased emphasis on sustain on emphasis increased viewed have few business organizations A Sustainability explores how we collectively and individually move into and individually we collectively explores how Sustainability neously. Sustainability, when pursued by businesses and with creativity Sustainability, neously. objectives in an social, and environmental financial, purpose, can achieve manner. reinforcing and positively integrated these new standards were opposed by industry, but a few innovators not only but a few innovators opposed by industry, new standards were these fuel less 33% used and them exceeded but standards new the meet to able were once effort, motors. In this case, a sustainability more efficient with their com a with companies compliant the provided companies, these by embraced simulta objective and environmental a social and achieved advantage petitive additional performance metrics, then those firms that comply early and set comply then those firms that metrics, performance additional advantage. For a basis for competitive new standards may be able to create Agency found that Protection instance, when the California Environmental in lawn mowers and gas-powered two-stroke engines (the type often used of air pollution, it began amount large gardening equipment) were causing a At first, machines. emissions standards for these stringent more to demand tributors; thus, they create what might be called a “corporate ecology” and, ecology” “corporate a called be what might create thus, they tributors; working and attainable any to central solutions business-oriented therefore, of sustainability. definition as costs are included social and If environmental as an opportunity. ability consequences be? How fast will they manifest? What can be done to mitigate be done to can What manifest? they How fast will be? consequences done? already some of the damage services under ecosystem understand how global to the future while learning are Business organizations planet. on the activity economic and social the pin concentrators, transformers, and dis resource most efficient human society’s ferent today is the accumulating metrics and resulting data that confirm the confirm that data resulting and metrics accumulating the is today ferent cycles, as water such services, ecosystem on global activity of human impact scientists Climate resource renewal cycles to name a few. carbon cycles, and of product is the and it is real, warming global that agreement in general are the How bad will as follows: questions now are main The activity. human sustainability from the past that very clearly define our collective responsibil collective clearly define our the past that very from sustainability this of recurrence the Understanding future. the for plan and protect to ity of sustainability. centrality the understand us to helps human society in theme same is not the sustainability thinking about to note that It is also instructive have risen only to Many civilizations outcome. a sustainable as achieving What is very dif the Haudenosaunee being among them. prove unsustainable, following that decision. There are other such examples of statements regarding regarding statements of examples such other are There decision. that following PART I: Corporate Social Responsibility and Related Terms create acomprehensivesetof standardsdesignedtoaddressthemostpressing the 1992RioSummiton Environment was the creation of ISO14000 to quality standards have become increasingly important. One ofthe outcomes of Trade. As the World Trade Organization pursues agreements on globaltrade, tal organization that hasgrownoutoftheGeneral Agreement on Tariffs and stands fortheInternational ISO Standards ISO14000 approaches willbediscussedbriefly. eco-effectiveness (cradle-to-cradle model). In the following sections, these Zero EmissionsResearchInitiative (ZERI), ecological footprinting, and strategic management, naturalcapitalism, the naturalstep,industrialecology, ISO14000, triple-bottom-line accounting, the balanced scorecard approachto contributions to oursocietal goal of sustainability. Some of these include have beensuggestedforbusinessorganizations that couldmakeimportant ship, andcorporate ecology. A numberofmanagement efficiency approaches discussed insuchtopicsascorporate social responsibility, corporate citizen primary importance. This central role of businessin modern society is also modern society, howbusinessapproachestheconceptofsustainability is of society with veryconflicted and ambiguous trade-offs. complex and far-reaching as sustainability will always present business and this damage has real costs nowthat will grow in the future. A concept as that greenhouse gasdamage to ecosystems services maybeirreversible and on “greenhouse gas” reduction. Some climate scientists and ecologists argue Bush administration’s refusal to become a signatory nation to that agreement economy adisproportionateamount. These arguments werecentraltothe ity initiatives such astheKyoto Treaty on Climate Change wouldcosttheU.S. has alsobeenargued that the costoftaking action to comply with sustainabil resources that is already well addressedby thecurrent free marketpolicy. It restatement of acommonsensepositiontakingcareone’s ownproductive opment is a dubious solution in search of a problem or that it is simply a activity produces. The CatoInstitute in 2002concluded that sustainable devel people willsolvewhateverenvironmental or socialproblemsfurtherhuman scholars, such as Julian Simon, feel that the combined mental power of more The concept of sustainability is notwithoutitsdetractors. Some notable Because businessorganizations areuniquelytransformative institutions in 42 O rganization. It isanongovernmen - - - -

Sustainability

- - 43 Cannibals with Forks: Triple Bottom Line of 21st Century Business. Century 21st of Line Bottom Triple Forks: with Cannibals BALANCED SCORECARD was developed in the approach to enterprise management This systematic early 1990s, by Robert Kaplan and David Norton, as a way to remove some of advance our understanding of sustainability. But there are many scholars and there But of sustainability. our understanding advance that it confuses the who oppose this type of approach, arguing practitioners and uncompetitive. division of labor and would make firms inefficient society for various corporate actions. According to Elkington, the price of a According to Elkington, society for various corporate actions. the in consumed services ecological cost of the the should include product product. the of disposal and use the in embodied and product the of production have capital in social and research economics strides in ecological Great approach triple-bottom-line The gaps. these in fill to metrics create helped and may operate on how organizations impact would have a substantial environmental and social costs as well as financial costs. Some scholars argue as costs. Some scholars argue and social costs as financial environmental well must performance, social or corporate responsibility, social corporate that of the corpora performance and economic environmental, the social, measure to good to these commitments tion for a firm to be consistent in its approach associated with assessing There are obvious problems the costs to practice. TRIPLE-BOTTOM-LINE ACCOUNTING TRIPLE-BOTTOM-LINE John Elkington’s of publication the with originated approach and term This book 1998 include to expanded be should practice accounting that argues Elkington it, In with globally accepted standards on environmental health and safety. safety. and health environmental on standards accepted globally with and reporting to standardized the ISO approach Depending on the application, or to follow an to improvements a company lead can measures efficiency practice. of acceptable denominator common industry to the lowest stands, these standards are voluntary for organizations to abide by. However, However, by. abide to for organizations voluntary are standards stands, these stan health and safety the ISO14000 on up-to-date environmental is building to our contributions significant standards and make These are important dards. the ISO does not make specific However, understanding of sustainability. best of focus the application and states as its primary mention of sustainability compliance into come organizations helping toward geared are that practices environmental issues for organizations in a global market. As it currently As it currently market. in a global for organizations issues environmental PART I: Corporate Social Responsibility and Related Terms the vagueness out of strategic management. This approach was not developed what ittakestobeasustainable society, (2)creatingbaselinedatathatdetail key decision makers and stakeholders around a common understanding of refining and promoting its four-phase program. These phases are (1) aligning namics and natural cycles. Since 1989, the Natural Step Foundation has been Rob, who established principles forsustainable society based on thermody This approach is the outcome of a series of studies initiated by Karl-Henrik THE NATURAL STEP what sustainable business practice might look like. not only an explicit plan for the concept of sustainability but also a vision of businesses will be incentivized to invest in itsmaintenance. This approach is (4) recognize that natural capital is thesourceoffutureprosperity, thusthat zero waste inindustry; (3) sell services in place of selling products; and (1) radically increase resource productivity; (2) adoptclosed-loop systemsand interlinked principlestounlockandultimatelyrestorenaturalcapital: more with less will prosper. The advocates of natural capitalism propose four preneurs recognizeenvironmental resourcelimitations. Those that can do around the idea that business opportunities become more abundant as entre trial revolution will be driven by corporations. Natural capitalism is built argue thatthelivingsystemsofearth are indecline and that the nextindus book proposingtheredesignofindustrybasedonbiological models. They In 1999,PaulHawkins, Amory Lovins,andL.HunterLovinspublisheda NATURAL CAPITALISM and external data collection and aninherent acceptance of asystemsapproach. is based. The application for sustainability comes fromthereliance oninternal to usemeasurements to providemanagers with data on whichdecision making focused, andoneloopisstrategic outcome focused. Bothloopsareintended been referredtoasadouble-loop feedback:Oneloopisbusinessprocess tems perspective into organizational management. This system uses what has ment look beyondfinancial measurement; it incorporates a moreholistic sys the triplebottomline,balanced scorecard approachrequiresthatmanage specifically as atool to achieve sustainability, butit has promise as such.Like 44 - - - - -

Sustainability

------45 Nations University in Japan. The ZERI network has more than 50 projects Nations University in Japan. biodiver the ZERI sustainability ideas regarding worldwide that are applying design. ZERI is similar to the and efficient waste elimination, creativity, sity, and helps eliminate waste and pollution. waste and helps eliminate (ZERI) ZERO EMISSIONS RESEARCH INITIATIVE ZERI is a concept and a network started by Pauli and deSouza at the United cate caution regarding industrial ecology and suggest that technological fixes technological that and suggest ecology industrial regarding caution cate of resources, whether help human populations extend their overconsumption all would agree that indus However, they are renewable or fixed in quantity. provides the engi it because of the solution, part ecology will be at least trial consumption less with more much do us to teach can solutions that neering no waste product in nature; the end of one process is the beginning of another. the end of one process is the beginning of another. no waste product in nature; of sustainability. science as the ecology industrial defined Some scholars have weakness of is the on science this overreliance that argue would others Yet of sustain It has been said that the answer to the question ecology. industrial society must come to an understanding of the will not be engineered; ability writers advo These limitations. systems and their of natural interdependence INDUSTRIAL ECOLOGY which has grown rapidly over the past decade, The idea of industrial ecology, was Frosch, and a book by this title by Robert in a 1989 publication originated is ecology industrial simply, Very Allenby in 1994. and by Graedel published is There ecosystem. an like system should function industrial an that idea the essence of the approach to sustainability is on systems thinking, confronting confronting systems thinking, is on to sustainability essence of the approach the support to strategies creating and dependence, cycles resource and natural of these processes. continuation and health vision-driven strategic plan based on the data gathered through the study of the of study the through gathered data the on based plan strategic vision-driven depends on step-by- that success (4) recognizing system, and organizational this approach is compre While and continued support. step implementation this approach seems of implementation an organization’s hensive and holistic, because and may be self-limiting Step Foundation on the Natural dependent and the emphasis capitalism, access. Here again, as in natural of restrictive the resources necessary for an organization to be sustainable, (3) creating a (3) creating to be sustainable, organization necessary for an the resources PART I: Corporate Social Responsibility and Related Terms Natural Step in that it employs systems thinking to address business, production, Natural Step in that it employs systemsthinkingto address business, production, where theendofaproduct use cycle is thebeginning of thenextnutrient capitalism, this approachenvisionsthenextindustrial revolutionasone that mimic metabolic systemsbothbiological and mechanical. Like natural industry asanaturalsystem, thisconcept seeks to designbusinessprocesses no wasteandtosupportratherthandisruptnaturalsystems. Bystudyingthe systemically appropriate. Such products and services are designed to produce doing morewithlessbutdesigningproductsandservices in waysthat are William McDonough in 1995. The idea of eco-effectiveness is not simply approach ofnaturalcapitalism. It wasdevelopedbyMichael Braungart and This is amanagement consulting andsustainability model that is similar to the ECO-EFFECTIVENESS (CRADLE-TO-CRADLE MODEL) be able to measurechange when action is taken. cal foot printing are important for people to mapourcurrent trajectory and to for atime butnotwithout damage and notindefinitely. Tools suchasecologi print overshoots ecosystem capacity by almost 20%, which can be absorbed meaning and application of sustainability. Ourcurrent global ecological foot ecological services. This isanimportantplacetostartwhenconsideringthe viduals and organizations get a sense ofwhattheir actions cost interms of other approaches presented here, the footprint concept is a tool that helps indi and communities toadoptmoresustainablebehaviors.Unlikemostofthe demands, the Global Footprint Network seekstoget business, government, consistently in excessoftheplanet’s ability to sustainably provide forthese the planet’s ability to meet those demands. By showing that these demands are William Rees to help quantify human demand on natural systems relative to Ecological Footprint is a tool created in 1993 byMathis Wackernagel and ECOLOGICAL FOOTPRINT human organizations basedon ourunderstandingofnaturallyoccurringsystems. holistic, systems-based approach to sustainability—one thatseeks to model that alleviatepovertyandreduceenvironmentaldegradation.ZERIisanother pants tocreatealternativeorganizations thatproducegoodsandservicesinways and consumptionproblems.ZERIseekstocreateaglobalnetworkofpartici 46 - - - -

Sustainability - - - - - . Business (3), 241–256 —David H. Saiia Sheffield, UK: Greenleaf. Sheffield, Upper Saddle River, NJ: Wharton Wharton NJ: Upper Saddle River, Natural capitalism: Creating the next Natural capitalism: Creating Princeton, NJ: Princeton University Press. University NJ: Princeton Princeton, 47 Southern Communication Journal, 69 New York: Little, Brown. Little, York: New Cannibals with forks: The triple bottom line of 21st century busi Cannibals with forks: The triple bottom line Leading change toward sustainability: A change-management A sustainability: toward change Leading The ultimate resource 2. resource The ultimate (4), 358–390. Capitalism at the crossroads: The unlimited business opportunities in business opportunities The unlimited Capitalism at the crossroads: Gabriola Island, British Columbia, Canada: New Society. Canada: Gabriola Island, British Columbia, B. (2003). B.

Industrial Revolution. ness. 37 & Society, problems. most difficult solving the world’s School Press. course of corporate ecology. ecology. course of corporate society. guide of business, government and civil As this brief survey of approaches for addressing sustainability illustrates, sustainability for addressing As approaches this brief survey of Simon, J. (1996). Frederick, W. C. (1998). Creatures, corporations, communities, chaos, complexity. chaos, complexity. C. (1998). Creatures, corporations, communities, W. Frederick, Hart, S. (2005). A., & Lovins, L. H. (1999). Lovins, Hawkins, P., Cyphert, D., & Saiia, D. (2004). In search of the corporate citizen: The emerging dis The emerging citizen: D. (2004). In search of the corporate Cyphert, D., & Saiia, Doppelt, Elkington, J. (1998). standing that a sustainable world cannot support irresponsible and inequitable support irresponsible world cannot sustainable a that standing resource use. Further Readings tainability requires some fundamental changes in how organizations work on work in how organizations changes fundamental some requires tainability are These coordination. to international action individual from the levels, all in the profound difficulty captures alone This fact changes. not insignificant meanings will have different even defining sustainability—sustainability the under they must all contain of analysis; ultimately depending on the level ity and competitive advantage. ity and competitive the about insight and urgency expressed have practitioners and scholars many not will to sustainability approach successful A for sustainability. need global not on its products will more efficient better, Simply building be engineered. use of resources, sus efficient the with Along future. a sustainable own yield cycle—where waste equals food and ecological intelligence drives profitabil drives intelligence ecological and food equals waste cycle—where PART I: Corporate Social Responsibility and Related Terms C balance sheet, theincome statement, and thestatement of cashflows. report toshareholders.Itincludes threeimportant financial statements: the The singlemostimportant component ofcorporate accountability isthe annual REPORTSHAREHOLDERS TOTHE ANNUAL and credos,variousformsofcorporate communications. shareholders, corporate governance, government regulations, corporate codes to stakeholders. These well-knownmechanisms include the annualreportto internal to thecorporation, designedtoenhanceandstrengthenaccountability ever, iscontingentontheexistenceofstrongaccountabilitymechanisms. activities that promote the interests of the business. This economic freedom,how enjoy ahighdegreeofeconomicfreedomchoiceandareexpectedtoengagein ing inasystemofdemocraticcapitalism.Insuchsystem,businessenterprises accountability underpins thelegitimacyofcorporateautonomy and decisionmak sary foundationforthesystemoffreeenterprise. The appropriatelevelofcorporate informed politicaldiscourseanddeliberations,corporateaccountabilityisaneces ingful waytothesocietyinwhichitoperates.Inademocraticdependenton explain itsactions(past,present,andfuture)inanaccessible,reasonable,mean toward thosepartieswhoareaffected by corporate activities and effects. porate accountability is primarily aformofethical communication directed actions, and outputsto various stakeholders. of information and reasonsdesignedtojustifyanorganization’s decisions, ability. It is defined as the continuous, systematic, and public communication of the most basicofall corporate social responsibilities is corporate account ethical norms, anddiscretionary socialwelfare contributions.Inaddition,one include economic duties, legal and regulatory compliance, responsiveness to CORPORATE ACCOUNTABILITY There are various traditional institutional mechanisms, both external and Corporate accountabilityrepresentsacorporation’s socialresponsibilityto bility. Corporate social responsibilities, at the most general level, orporate accountability is afoundationofcorporatesocialresponsi 48

According to this definition, cor ------Corporate Accountability ------49 The statement of cash flows provides informa The statement The income statement provides detailed information about information detailed provides statement income The over a period of time. over a period of time. Sarbanes-Oxley contains several important features relevant to corporate features relevant Sarbanes-Oxley contains several important The balance sheet provides a detailed list of corporate resources (assets) resources list of corporate a detailed provides sheet The balance legislation in the United States and across the world. legislation Accounting Oversight Public Company It established the accountability. In 2002, the U.S. Congress overwhelmingly passed one of the most significant In 2002, the U.S. Congress overwhelmingly Act. One of the Sarbanes-Oxley in U.S. history, legislation of securities pieces reestablish was to legislation Sarbanes-Oxley purposes of passing the main the account corporate by strengthening markets financial of the credibility the and state This purpose is in line with the goals of previous federal ability. such, corporate governance is a fundamental component to corporate account such, corporate governance is a fundamental a strong institutional forum forability as defined above because it provides representatives. shareholders’ communication between managers and REGULATIONS CORPORATE Corporate governance is essential to corporate accountability and without whichand without accountability corporate to essential is governance Corporate that corporations are to be managedno corporation can exist. State laws demand as a surrogate for the share This board acts and directed by a board of directors. per role is to oversee management’s holders of the corporation and its primary As and meeting social responsibilities. formance in terms of increasing profits assessing the amounts, timing, and uncertainty of future cash flows; and about and uncertainty assessing the amounts, timing, to those resources, and the changes in them. resources, the claims economic GOVERNANCE CORPORATE ing, investing, and financing. The financial statements gain credibility because credibility gain statements The financial and financing. ing, investing, Financial the to According accountants. public by certified audited are they account of financial objectives main three the Board, Standards Accounting and those making investment that is useful to ing are to provide information investors and creditors in to present and potential credit decisions; helpful and claims to those resources (liabilities and equity). It can be compared with be compared It can equity). and resources (liabilities to those and claims a at entity business of a condition financial the summarizes that photograph a in time. point fixed what in that it explains gains, and losses. It is like a movie revenues, expenses, happened operat categories: cash. It consists of three sources and uses of the about tion PART I: Corporate Social Responsibility and Related Terms Board tooverseetheaccountingprofession,thusradically limiting the profes broadened conception of corporate accountability. social responsibility, havealtered expectations surrounding theneedfora changes inethical values, especially an expandedconceptionofcorporate power ofinstitutional investors havealsocontributedtothischange.Finally, effect, theincreasedinterconnection oftheworld economy, andthe rising for moreandbetteraccountability. Globalization, the Internet,greenhouse U.S. and global corporations have also contributed to the increased demand ethics and audit failures such asthoseat Enron, WorldCom, and many other spill of 1989andthe Union Carbide and the Bhopal, India, tragedy. Corporate power andbycorporate environmental disasters suchasthe matically. This demand has been spurred bythe sheer growthofcorporate In recentyears,thedemandforcorporateaccountability has increaseddra INCREASING DEMANDFORCORPORATE ACCOUNTABILITY corporation. This credoisoftencited as anexemplar. credo, for example, establishes customers as the primary stakeholder of the ing thecredibility of corporatemanagement.&Johnson’sJohnson corporate vide both outsidersandinsidersspecific and clear statements to useinevaluat many corporate credos andethical codes, these kindsofdocuments oftenpro held andjudged. While critics are quicktonote the self-servingnature of corporation can helpfully communicate the criteria by which it wants to be corporate accountability. By carefully defining its own ethical aspirations, a Credos andcodescanpotentially serve animportant role instrengthening CORPORATE CREDOS AND CODESOFCONDUCT audit boards. tor independence. It alsorequirescorporate boards toestablish independent sheet financing. Sarbanes-Oxley contains several provisions to enhance audi while demanding enhanced corporate disclosures concerning off-balance- responsibility to thoseexecutives whoknowinglymake a falsecertification financial officers tocertify all financial statements and assignscriminal sion’s traditional autonomy. It requires chief executive officers and chief 50 Exxon Valdez oil - - - - - Corporate Accountability

- - - -

51 Corporate governance has also come under intense scrutiny in recent Corporate governance has also come There is now convincing statistical evidence that earnings management is that earnings management evidence statistical There is now convincing First, many items are omitted from the balance sheet. These include intan include These sheet. balance from the omitted are items First, many limited ability of traditional solutions to the meet this need, the scope of cor the meet solutions to of traditional ability limited ways. has broadened considerably in at least four distinct porate accountability ethics failures, including earnings management, at Enron and Andersen. at Enron and earnings management, failures, including ethics ACCOUNTABILITY SCOPE OF CORPORATE THE BROADENING and the In response to the increasing demand for corporate accountability otherwise would have. These manipulations occur despite the requirement that the requirement occur despite These manipulations otherwise would have. of Each accountants. public certified by audited are statements financial all an as statements financial usefulness of the the diminishes limitations these mechanism. accountability governance reached a climax in the wake of of corporate This criticism years. accounting manipulations such as earnings management, a process whereby such as earnings management, manipulations accounting investors’ of revenues and expenses to change the timing alter managers perceptions. it than look better company a make used to technique management frequent a question the use of historical cost as the predominant method of valuing assets. of valuing method cost as the predominant question the use of historical such report annual the in information of forward-looking lack a is there Third, annual traditional the Fourth, share. per earnings of forecast management’s as of corporations and performance on the financial report focuses exclusively Finally, and social performance. excludes information about environmental are subject to questionable income statements, annual reports, especially years. There are several limitations associated with the traditional financial traditional the with associated limitations are several There years. statements. such as pen of human resources, and many liabilities gible assets, the value investors and other interested parties Second, care obligations. sion and health AS AN ACCOUNTABILITY MECHANISM AS AN ACCOUNTABILITY the useful has increased, for accountability the demand that At the same time financial While is being questioned. statements financial ness of traditional information and relevant source of reliable remain as an important statements in recent scrutiny intense under come have they activities, corporate about LIMITATIONS OF THE FINANCIAL STATEMENTS OF LIMITATIONS PART I: Corporate Social Responsibility and Related Terms Backward-Looking Information VersusInformation Backward-Looking in areasonablemanner. These companiesargued thatassigningadollarvalue that there is simply no knownand noncontroversial way tovalue these options just oneimportant example. Many companies argued withsome justification development projects,advertisingcampaigns,andmanyother items. anticipated layoffs, plannedcapitalexpenditures,jointventures,researchand making. Softdataincludedescriptionsofnewproducts, emerging markets, quantified inapreciseandexactwaybutnonethelessisimportant fordecision increasing demandforsoftdata;thatis,informationcannot neces by outsideaccountants. This istheharddata.But,atsametime,therean to thefirst. There isanever-increasing flow offinancialdatacarefullyaudited The second change in broadening the scope of corporate accountability is related Hard Versus SoftData anticipated ably justify tions arebeingaskedbyregulators andotherstakeholdersnotonlytoreason about past decisions but alsoaboutfuture events and trends.Inshort,corpora These reports, ashasbeen documented, contain valuable information not only publish a management discussion and analysis section in their annual reports. a majorstepforwardinthisareabyrequiringpubliclytradedcompaniesto information (such aslastyear’s earningpershare). such asmanagers’ forecast of future earnings per share than backward-looking predict future performance are moreinterested in forward-lookinginformation scores much lower in terms of relevance. Investors and creditors trying to confidence and certainty. torical cost can be documented and verified by auditors with a high degree of cost. The primary justification for thishasbeenreliability. Simplyput,his liabilities, equities, revenues,andexpenses isthroughtheuseofhistorical tion basis. Ithaslong been argued that the best wayto measure assets, ciple, which states that the original cost ofanasset isthe most reliable valua At theheart of thetraditional accounting model was thehistorical cost prin Forward-Looking Information Consider therecent controversy overthedisclosure ofstockoptionsas In theUnited States, the Securities and Exchange Commission hastaken Although historical cost accounting scores high in terms of reliability, it future past actions, but they must now also disclose and explain actions. 52

sarily be sarily be - - - - - Corporate Accountability - - 53 While just a few years ago the phrase multiple bottom line was more was line bottom the phrase multiple just a few years ago While Perhaps the most important of the changes that we have documented so we have documented of the changes that Perhaps the most important Although at one time it was possible for companies to legitimately meet legitimately to for companies was possible it time one at Although Among these companies are 3M, AT&T, General Motors, Ford, Shell, AT&T, Among these companies are 3M, Ericsson, Electrolux, Canon, Nike, Dow Chemical, Dupont, McDonald’s, as well. companies and some other smaller Telecom, France the Coalition for Environmentally Responsible Economies and the United for Environmentally the Coalition a set of guide In June 2000, GRI published Program. Nations Environment reporting. and social lines to help companies improve on their environmental companies now were revised in 2002. One thousand global These guidelines guidelines— GRI with line in accounting of triple-bottom-line form some use and outcomes. behaviors social and environmental, on economic, reporting bottom line. Today, there are multiple bottom lines. In a sense, there are as bottom lines. In a sense, there are multiple Today, bottom line. are stakeholders. lines as there many bottom Global The metaphor. than reality more it is today reality, than metaphor (GRI) Reporting Initiative was as a joint venture between established in 1997 far is the increasing recognition that corporate accountability now requires that corporate accountability recognition far is the increasing but also environmental outcomes purely financial to justify not only managers stake legitimate of list the change, this to Connected outcomes. social and and global customers, local holders has also expanded to include employees, there is no longer such a thing as the This means and others. communities, outcomes can be summarized and evaluated through net income? Although Although through net income? outcomes can be summarized and evaluated investors continue to act as if the some companies and many short-term other companies have now learned answer to both these questions is yes, once true, it is certainly no longer through experience that even if it was the case. descriptions as well. descriptions Lines Multiple Bottom Versus The Bottom Line number? Is it performance be measured with a single Third, can corporate thousands of decisions, actions, and of a corporation’s conceivable that all shareholders and creditors. Despite these arguments, however, the demand for demand the however, these arguments, and creditors. Despite shareholders is unabated. stock options concerning disclosure additional with by publishing a set of numbers of corporate accountability the obligation no is this today statements, financial the accompanying description no almost disclosures and verbal now requires accurate longer the case. Justification to stock options would provide misleading and unreliable information to information and unreliable misleading options would provide to stock PART I: Corporate Social Responsibility and Related Terms Monologue Versus Dialogue Monologue Versus role insocietywillgainimportance. its broadens, the financial markets, but as the concept of corporate accountability and accountants.Corporateaccountability hasalwaysplayedanimportantrolein crucialtaskforboards ofdirectors,corporatemanagement,businessconsultants, a credence across the globe, corporate accountability is increasingly viewed as wide economic system. As thenotionofcorporate social responsibility gains tion spreads, corporate accountability is becoming the linchpin of the world on whichthe future growth andlegitimacy of businessdepends. As globaliza of game. Rather, it is aformofethical communication among human beings rate transparency. maintain a policy ofsecrecy. Itmakesgoodbusinesssensetoenhance corpo a strongcompetitive sensible waymaypossessadvantage over rivalswho communication, those corporations that can justifytheir actions inaclear and own self-interest toenhance corporate accountability. Inaworldofinstant Those managerscommitted to thecapitalistic system realize that itisintheir CONCLUSION organizations are embedded in society and relyonitforlegitimacy. their responsibilityfordecisionmaking.Butitdoesimplyarecognition that innovative aspects. Dialoguedoesnotimplythatorganizations are abdicating porate accountability. Dialogue isemerging asoneofitscentral and most recognize thatcorporateaccountabilityisanevolvingandcontestedconcept. well asrespondingtothem.Italsomeansthatmanycompaniesnowopenly porate accountabilityrequireslisteningtoacompany’s diversestakeholdersas corporations andtheirshareholderstobepublishedonline. This meansthatcor U.K. companylawreformproposalthatwouldrequirethedialoguebetween AccountAbility 1000’s AA1000—Principles andMeasurementStandardsa and notasamonologueonthepart of management.Forexample, see especially described bymanyasadialoguebetweenthecorporationanditsstakeholders tion’s decisions and actions, corporate accountability is now viewed and demonstrates themostradicalchangeofall. To legitimatelyjustifyanorganiza Finally, carefulexaminationofasetrecentlyissuedsustainabilityreports Corporate accountability, however, shouldnotbeconceived of asakind There is agrowingawarenessofdialogue as aformal component of cor 54 —Moses L.Pava ------Corporate Accountability

- - Journal Academy (pp. 3–14). (4), 365–384. 313–327. 50,

The accountable corpora The accountable Statement of financial account of financial Statement New York: Palgrave. York: New Accounting Horizons, 14 Accounting The accountable corporation 55 Journal of Business Ethics, (4), 497–505. 51–53. Corporate social responsibility. 175,

45–72). Westport, CT: Praeger Perspectives. CT: Westport, 45–72). (pp. make corporate citizenship real. citizenship corporate make In M. J. Epstein & K. O. Hanson (Eds.), Praeger Perspectives. CT: Westport, of Accountancy, Allouche (Ed.), P. ing concepts no. 1: Objectives of financial reporting by business enterprises. by reporting financial of no. 1: Objectives concepts ing Norwalk, Author. CT: for standard setting. and its implications United States. In M. J. Epstein & K. O. Hanson (Eds.), & Epstein In M. J. States. United tion 4 of Management Review, Waddock, S. (2004). Creating corporate accountability: Foundational principles to principles Foundational accountability: corporate S. (2004). Creating Waddock, Pava, M. L., & Epstein, M. (1993). How good is MD&A as an investment tool? as an investment is MD&A Pava, M. L., & Epstein, M. (1993). How good In accountability. of corporate scope broadening The J. (2006). Krausz, & L., M. Pava, Financial Accounting Standard Board (FASB). (1978). Board (FASB). Standard Accounting Financial literature management earnings of the review A J. M. (1999). Whalen, M., & P. Healy, 2000. Reporting Sustainability of Corporate KPMG Survey International or both. corporate governance: Rules, principles, perspective on A Millstein, I. (2006). Bradley, M., & Wallenstein, S. M. (2006). The history of corporate governance in the the in governance of corporate history The M. (2006). S. Wallenstein, M., & Bradley, performance. of corporate model three-dimensional A A. B. (1979). Carroll, Further Readings PART I: Corporate Social Responsibility and Related Terms I years. Inparticular, critics have argued that French’s position is illegitimately accorded to moral persons. This claim received sustained criticism over the have the privileges, rights, and duties that are, in the normal course ofaffairs, As aresult,heconcluded that corporations arefull-fledged moral personsand corporations are capable of altering their intentions and patterns of behavior. tions arecapable of exhibiting rationality regarding their intentions. Third, main conclusions.First,corporationsexhibitintentionality. Second,corpora early work onthe metaphysical status of corporations, French reached three because of their distinct rules of governance and hierarchical structure. In his particular interest incomparisontoothersortsofcollectives or organizations the metaphysical status of corporations. Corporations, as Frenchnoted, are of theory of corporate personhood remains the single most influential account of of that view inaseriesofbooksandessays.Despiteitsmany critics, French’s metaphysical status of the corporation. He has subsequently defended the core A quarter-century ago, Peter French published an influential essay on the FRENCH’S VIEW moral agents isaseparate matter. that, fromametaphysical standpoint,corporationsareproperlyunderstoodas of corporate law. The question of whether or not there are grounds for thinking rations onpragmatic grounds, findingthisausefulconventionforthepurposes human beings such ascorporations. The courts attribute personhood to corpo moral agents. In U.S.law, the class “persons”includes entities other than agents andtheclassofpersonsisproperlyunderstoodassubset for the actions they impose on the world. Personsare prototypical examples of this sortofintentional capacity, theyareproperlycharacterized as responsible shape the world byimposing those ends onthe world. Because agents have be regardedasmoralagents. Agents reflectively endorse specificendsand nsofar astheyarecapableofexhibitingintentional action, corporationsmay CORPORATE MORALAGENCY 56 - - Corporate Moral Agency

------57 Central to the claim that corporations are moral agents is the claim that corporations are moral agents is the claim that to the claim Central orate belief and so as a corporate intention. Critics seized on French’s use Critics seized on French’s orate belief and so as a corporate intention. p Bratman’s planning theory of intentionality. This allows him to avoid criti avoid to him allows This of intentionality. theory planning Bratman’s theory of intentions. with the belief-desire cisms associated response to such criticism, French has modified his view of the metaphysical French has modified response to such criticism, ways. First, French has abandoned status of the corporation in two significant the idea of corporate “persons” in favor of a defense of corporate “actors” or his view is ille that criticism This move allows French to avoid the agents. belief-desire anthropomorphic. Second, French now rejects the gitimately in favor of Michael that he had previously embraced theory of intentionality may be properly understood as intentional. inten attribute routinely judges and Prosecutors intentions. have corporations corpora to intentions of attribution the Nonetheless, to corporations. tionality in Partly hypothesis. as an untenable theorists many by tions has been rejected mental states. He denies the possibility of such an argument because he stipu because of such an argument possibility He denies the states. mental those to identical states as mental understood be must intentions that lates way of only the is not this However, minds. human individual in present of understanding intentions way One alternative intentionality. understanding of intentions action. Such a characterization to future is as commitments beings other than conscious biological entities leaves open the possibility that cor distinctly wrongly attributed he since that, arguing theory, belief-desire of the intentionality corporate or his defense to corporations, intentionality human of intentions that all attributions argues Velasquez failed. For example, Manuel since they are not literal metaphorical to corporations must be understood as INTENTIONALITY arguments his grounded French personhood, corporate defense of his early In corporate the when that He argued of intentionality. theory belief-desire the in is it then policy, corporate of established with an instantiation is consistent act by a corporate desire coupled with a proper to describe it as having been done human beings, corporations are not ends in themselves. Other critics have have Other critics in themselves. are not ends beings, corporations human emo have the same persons corporate to suggest that that it is absurd argued corporations that argued have others persons. Still as human status tional has a soul. all persons have a soul and no corporation cannot be persons, since anthropomorphic. For example, Richard De George has argued that, unlike that, argued has Richard De George For anthropomorphic. example, PART I: Corporate Social Responsibility and Related Terms CORPORATE INTENTIONS ment ofinnovativetechnology, regardforstakeholders. andrespectful ees areinterwoven to formcorporate intentions. on whichtheattitudes ofboardmembers,executives, managers, andemploy decision structure of theorganization. The CIDstructure serves astheframe attitudes of the class ofagents comprising the corporation and the internal Corporate intentions are statesofaffairs consisting ofboththeintersecting consistent with the CID structure they instantiate corporate intentions. of thecorporation how they ought tobehave. When employees act in amanner cies. A CIDstructureperformsanormative function, thatis,ittellsmembers lines oforganizational responsibility, rulesof feature ofFrench’s accountofcorporatemoralagencyincludeshierarchical a corporateinternal decision (CID)structure. This well-knownandessential made inaccordance with thestructurepreviouslycharacterized by Frenchas tions isalsocharacteristic of corporations. Typically, corporate decisionsare Denis Arnold. He argues that the state of affairs characteristic of shared inten analysis ofsharedintentionshasrecentlybeenextendedtocorporationsby not developedasustainedargument forthatconclusion.However, Bratman’s vide anadequate basis foratheoryofcorporate intentionality, yetFrenchhas Shared intentions are not,then,meremental states. state of affairs that consists ofawebattitudes of the individual participants. allow forthecoordination of activities. On thisaccount, shared intention is a shared intentions structurerelevant bargaining. Third, theirsharedintentions their sharedintention allows forthecoordination of planning.Second,their together. What rolesdotheirsharedintentiontotakeatriptogether play?First, engage inajointactivity.plan totakeatrip Considertwoindividualswho certain type—namely, the intentions sharedbytwoindividuals who plan to extended hisanalysisoftheintentionsindividualstoshareda time. Second, plans typically have a hierarchical structure. Bratman has First, plansare typically partial or incomplete. They need to be filled in over ning. The planscharacteristic of humanagentshavetwoessentialfeatures. from deliberation and reflection prior to the time of action, that is, from plan rational agents with complex goals mostofourintentional actions will stem his account,intentions are typically elements of plans.Bratman argues thatas Bratman’s accountofintentions emphasizestheirfuture-directed nature.On Praiseworthy corporate intentions include value creation, the develop French hassuggestedthat Bratman’s account of intentionality will pro 58 procedure, andcorporate poli ------Corporate Moral Agency ------—Denis G. Arnold 59 conclude that corporations cannot be under tions that are capable of evaluating past decisions and existing plans, past decisions of evaluating tions that are capable Defenders of the view that corporations are properly understood as moral understood properly are corporations view that Defenders of the Arnold argues that since corporations are properly understood to have to understood properly are corporations since that Arnold argues praiseworthy behavior as a result of corporate intentions are justifiably are intentions of corporate result as a behavior praiseworthy personnel. of corporate rewarded independently tors, executives, managers, and workers of a corporation at a particular time. at a particular and workers of a corporation managers, tors, executives, is thereby personnel, and not just corporate corporation, of the Punishment In cases where objectionable. are morally intentions when corporate justified inten pernicious as a result of corporate corporation actions are especially of the corpo punishment in the form of the dissolution tions, corporate capital ration may be justified. So too, corporations that exhibit consistently sonably be attributed to organizations. sonably be attributed moral regarding implications important has view this that out point agents understood as a moral is properly if a corporation For example, responsibility. and not just the direc corporations praise or blame then it is possible to agent, unpersuasive to many theorists. First, some critics maintain that all agents that maintain some critics unpersuasive to many theorists. First, soul a to attribute is implausible it souls. Since understood as having must be to a corporation, some theorists reflectively of are capable corporations that stood as agents. Second, the idea that argue They as implausible. theorists some strikes intentions endorsing rea cannot that one persons and of human quality is a endorsement reflective moral agents. moral CONCLUSION understood as moral agents remains The idea that corporations are properly Corporations must be capable of reflectively endorsing corporate intentions. endorsing corporate intentions. of reflectively be capable Corporations must Corpora place, or whether in ought to remain whether those intentions of determining are intentions alternative of favor in eliminated or modified be should they as understood properly are and endorsement reflective requisite the of capable dumping of toxic chemicals into pristine natural environments, and theft from and theft environments, natural pristine into chemicals of toxic dumping shareholders. are properly under is a basis for thinking that corporations intentions, there be properly he points out that for corporations to stood as agents. However, be satisfied. must also condition further agents, a regarded as moral Blameworthy corporate intentions include deceptive marketing, systematic systematic marketing, include deceptive corporate intentions Blameworthy PART I: Corporate Social Responsibility and Related Terms Further Readings Velasquez, M. G. (2003). Debunking corporate responsibility. May, L. (1987). French, P. T. (1996).Integrity, intentions, andcorporations. French, P. T. (1995). French, P. T. (1992). French, P. T. (1984). French, P. T. (1979). The corporation as amoral person. Donaldson, T. (1986). Personalizing corporateontology: The Frenchway. InH.Curtler De George, R.(1986).Corporations and morality. InH.Curtler (Ed.), Bratman, M. (1999). Bratman, M. (1987). Arnold, D.G.(2006).Corporatemoralagency. Quarterly, and corporaterights. Journal, University Press. Quarterly, (Ed.), sibility and thecorporation Cambridge, UK: Cambridge University Press. University Press. 279–291. Shame, responsibility andthecorporation

34,

13 16, The morality of groups: Collective responsibility, group-based harm, 141–155. (4), 531–562. 207–215. Corporate ethics. Responsibility matters. Intention, plans, andpractical reason. Collective and corporateresponsibility. Faces ofintention:Selected essays onintention andagency. SouthBend,IN:UniversityofNotreDamePress. (pp.57–75).New York: Haven. New York: HarcourtBrace. 60 Lawrence: University PressofKansas. Midwest StudiesinPhilosophy, XXX, (pp.99–112). New York: Haven. Cambridge, MA: Harvard American Philosophical American BusinessLaw New York: Columbia Business Ethics Shame, respon -

Social Entrepreneurship ------value social 61

neurship model. Social entrepreneurship relates to many business many to relates entrepreneurship Social model. neurship ocial entrepreneurs create social value through the use of the entrepre social value create entrepreneurs ocial

SOCIAL ENTREPRENEURSHIP SOCIAL Social entrepreneurship can often be confused with other business models other with confused be often can entrepreneurship Social While the entrepreneurial skill set is very similar between the traditional the between similar very is set skill entrepreneurial the While To engage in social entrepreneurship, the organization is typically driven is typically organization the entrepreneurship, social in engage To social entrepreneurship. social within the to society accountability are designed to create that or practices experienced some sort of transformative experience during their life, which experience transformative some sort of experienced entre Most social values. core their of front the to improvement pushes social begin lives, their throughout sector social the in active very also are preneurs with their is then combined This social activism ning at an early age. social missions through them to pursue their skill set to enable entrepreneurial stakeholders affected and for the outcomes as a result of the mission. The as a result of the mission. and for the outcomes stakeholders affected is that they create distinguishing factor for social entrepreneurs value. economic to create through the use of this model regarding difference there is a large entrepreneur, and the social entrepreneur have to likely more are entrepreneurs Social orientation. value individual their with the traditional entrepreneur. These shared skills are identified as design shared skills are identified These entrepreneur. with the traditional pursuing new and sustain value; create ing a mission with the core purpose to adapta innovation, in continuous mission; engaging to serve the opportunities by the resources cur boldly without being limited acting tion, and learning; to the accountability of heightened a level and exhibiting available; rently achieve their goals. The key to understanding social entrepreneurship lies in social entrepreneurship The key to understanding their goals. achieve business model boundaries and traditional that it transcends acknowledging or not-for- for-profit as in the private can occur in any sector of business, such profit sector or in the public sector. skills similar many shares entrepreneur social The entrepreneur. social a by forms but fundamentally exists as a model that organizations are able to use in to able are organizations that model as a exists fundamentally forms but for the society within which toward building value pursuit of goals directed the with closely follow model on this built Organizations embedded. are they opportunities to pursuing perceived path of entrepreneurship, traditional S PART I: Corporate Social Responsibility and Related Terms business sector.business Two otherterms thataresometimesmisused Individuals such as these, along with countless social advocacy groups and goals. These social entrepreneurs paved new pathstopursuetheseideas. scious individuals bytheentrepreneurial methods usedtopursuetheir social improvement. These actsaredistinguished from thoseofothersocially con societies around them throughcreativity, leadership, and avisionofsocial after World War IIandestablishedmethodstointegrate Europe economically. tion of thefirstschool for nurses.JeanMonnetled the reconstruction of France society. Florence Nightingale revolutionized health care through the founda low-caste Hindusandviewedas“polluted” and separated from therestof 7,000,000 acres of land to the landless untouchables, individuals who were Land Giftmovement in India,allowingtheredistribution of morethan network designed to serve environmental issues. Vinoba Bhave founded the the SierraClub’sBrower was first executive directorandbuiltitintoaglobal Florence Nightingale (the United Kingdom), and Jean Monnet (France). David from thepastincludeDavidBrower(theUnitedStates), Vinoba Bhave(India), by individuals throughout the historyofbusiness enterprises. Some examples demic andprofessionalattention, thefundamental concept hasbeeninpractice Although social entrepreneurship hasonly recently received significant aca A BRIEFHISTORY different concepts withinthesametheoretical sphere ofsocialawareness. a social enterprise, to practice social responsibility or sustainability, theyare responsibility, differentiated from termssuchas comes ofsocialentrepreneurship. Socialentrepreneurship must alsobe of financing,bothsocialventuresandenterprisesaretwopossibleout one that secured its financing through other means. Regardless of the methods typically associated notwithanorganization built onventurecapital but with the resultofsocialventurecapital. The term are theresultofaventurecapital investment, but withsocial ventures thisis prise. Most frequently, the term legal entities that are created as anendresultofsocial entrepreneurship. tures These individuals pursuedtheir missionsand extensively influenced the It isalsousefultodistinguishbetween a social venture and asocial enter and social enterprises. and business ethics.business Bothsocial ventures andsocial enterprises are the venture While itispossibleforasocialventure,or sustainable enterprises, 62 is used to describe organizations that enterprise, ontheotherhand,is

corporate social social ven ------

Social Entrepreneurship - - - - - 63 By maintaining the for-profit business model, it is easier for these organi the for-profit By maintaining With the increase in practical applications of social entrepreneurship, it entrepreneurship, of social applications practical in increase the With Social entrepreneurship began to gain visibility and definition through the through and definition to gain visibility began Social entrepreneurship zations to achieve long-term financial sustainability. This occurs because the because occurs This sustainability. financial long-term achieve to zations streams. revenue sustainable obtaining successful at more often is organization understands organization the because stable more streams are revenue These ity to society and act on those responsibilities but still identify their primary their identify still but responsibilities on those act and to society ity the entrepreneur, social for-profit For the profit. of generating as that objective to gener organization is to design a process that allows the objective ultimate as opposed to gener society, to of its improvements profit as a by-product ate value as a by-product of profit. social ating that are legally defined as existing to generate profit, while the organization organization the while profit, generate to existing as defined legally are that or devel improvement social in grounded as one its primary mission defines it is important not to organizations, When considering these for-profit opment. The of stewardship. with the act entrepreneurship of social confuse the act responsibil their acknowledge that stewardship model describes organizations making it useful to examine the distinctions between each. the distinctions it useful to examine making THE FOR-PROFIT SECTOR organizations sector references within the for-profit entrepreneurship Social Social entrepreneurship is often categorized as a cross-sector model, in which as a cross-sector model, categorized is often entrepreneurship Social of the in the middle somewhere lie often model the applying organizations the sector and not-for-profit for-profit runs between the private that continuum blurring the boundaries of these traditional business sector, and the public the as blurred as these boundaries may become, business sectors. However, in each of these sectors still exists, organizations between legal distinctions functional and practical business theory. As social entrepreneurship continues continues entrepreneurship As social theory. business and practical functional of topic popular an increasing is becoming it and validity, prominence to gain discussion. academic business sectors. of the any within model viable is a it that clear has become identity of social entrepreneurship has been derived. entrepreneurship of social identity the Ashoka became Ashoka in 1980. work of of Bill Drayton and his founding providing funding venture capital,” of “social the concept first to pioneer into through innovation. change in pursuit of social individuals for entrepreneurial as a beginning of social entrepreneurship Ashoka the marked The founding of community initiatives, have all set the foundation from which the current which the current from foundation set the all have initiatives, community PART I: Corporate Social Responsibility and Related Terms that its productsmustnotonlybesocially beneficial but alsojustasattractive combat Vermont dairy farmers’ losses during a period of volatile prices in the ice cream indirectly benefiting rainforest preservation efforts; and to help duced Rainforest Crunch ice cream through its scoop shops, with sales of the based onconcernaboutitsadverse economicimpact on familyfarming;intro known as“1%forPeace”; they cameoutagainstbovinegrowthhormone, with itsice-cream waste; thecompany helped establish a nonprofitinitiative the local wastewater treatment facility, Ben & Jerry’s began feeding a pig farm many otherinitiatives, inasuccessfuleffort todivert itsice-cream wastefrom social benefits from the ongoing operation of their primary business. Among At everydecisionpoint,theleadership ofBen&Jerry’s hassought to provide relegated its social and environmental action to itsfundingoftheFoundation. donation of7.5%thecompany’s annualpretaxprofits. The companyhasnot mental issues byestablishing theBen&Jerry’s Foundation,funded through Jerry institutionalized their long-standing commitment to social and environ neurship undergirding Ben&Jerry’s. In1985,companyfoundersBenand Unilever, an Anglo-Dutch corporation, in early 2000. over interest. The rumors wereconfirmed as Ben&Jerry’s wasacquired by by theyear2000,amidrumorsofBen&Jerry’s becoming the target oftake shop. Explosivegrowthnetted Ben &Jerry’s salesofmorethan$155million Ben Cohen and Jerry Greenfield, Ben & Jerry’s began with a single ice cream organizations such asNewman’s OwnorBen&Jerry’s. Foundedin1978by when theorganization is backedbyasecurerevenuestream. neurship are more successful because the risk offinancial failure is smaller efforts through the preexisting organization. Thus, often the efforts ofintrapre One ofthe attractive features of intrapreneurship is the ability to fund these creating extensions ofthe same business orexpanding into new businesses. neurship isthatintrapreneurship occurswithinpreexistingorganizations, often decade. The distinguishing characteristic of entrepreneurship and intrapre ship, social intrapreneurship has become increasingly popular over the last the for-profit sector—social intrapreneurship. Similar to social entrepreneur about thesocial mission behindthecompany. social standards. This is the result of consumers who may not know, or care, as acompetitor’s product, even if the competitor isn’t driven bythe same Nothing intheforegoingoverviewcapturesspiritofsocialentrepre Excellent examples offor-profit socialentrepreneurshipcanbefoundin Another variation ofsocial entrepreneurship also occursfrequently within 64 ------Social Entrepreneurship - - - 65 However, with the expansion of revenue streams for these organizations, for these organizations, with the expansion of revenue streams However, The social entrepreneurship model is often mistakenly associated with model is often mistakenly The social entrepreneurship Within the not-for-profit sector, three primary types of organizations types of organizations primary three sector, not-for-profit the Within an issue arises with the allocation of these subsidizing revenues. Within the Within revenues. subsidizing these of allocation the with arises issue an generates that is not substantially United States, any income a not-for-profit This is the becomes taxable. related to the social purpose of the organization and more as a method of offsetting their costs or expanding their programs. their expanding costs or their of offsetting method as a more and counterparts, as their for-profit independent they are not as financially While creative in more to engage organizations these expenses do allow offset the and donations alone. may not be possible through grants that opportunities changes external to the business environment. The distinguishing factor in factor The distinguishing environment. to the business changes external goals social pursue their organizations these is that entrepreneurship social act Organizations activities. market-driven in engaging simultaneously while independent than those in the less financially ing in this sector are typically through gains fiscal the organizations, not-for-profit With sector. for-profit and sustainability generation of profit method less as a act entrepreneurship possible for social entrepreneurship to exist in each of these types. to exist in each entrepreneurship possible for social are the two concepts sector; however, social activism within the not- for-profit pursue a social goal as their main mis Social activists different. fundamentally pursue these they because entrepreneurs social from distinguished are sion but exist—public benefit, mutual benefit, and religious. The most common use of benefit, and religious. benefit, mutual exist—public public for designated those within is sector this within entrepreneurship social not-for- benefit public a models; of the nature of the because is This benefit. mutual benefit and religious not-for- profit exists to benefit the public. Both and are more social improvement profits are less focused on widespread it is still However, audience. specific focused on providing services for a very generate profit, a direct inverse to for-profit organizations. However, within within However, organizations. profit, a direct inverse to for-profit generate typically would what in engaging are organizations these of many model, this their within sustainability business practices to attain be classified as for-profit business model. lars to the family farmers who supply the milk for Ben & Jerry’s ice cream. ice for Ben & Jerry’s the milk farmers who supply family lars to the SECTOR THE NOT-FOR-PROFIT that by organizations is represented entrepreneurship social Not-for-profit to than purpose other some for as existing themselves defined legally have dairy industry, Ben & Jerry’s paid a dairy premium totaling half a million dol million a half totaling premium dairy a paid Jerry’s & Ben industry, dairy PART I: Corporate Social Responsibility and Related Terms result ofthecompetitionforconsumer’s purchasingpower. Manyfor-profit programs tootherorganizations that canderive benefit from them. or productsbutarealsoable to generate extra revenue by expandingtheir the programs orentities they were designed to support throughtheir services regulatory constraints. These organizations are then able to notonlysupport outside of the public sector where it is able to function beyond the typical tions created specifically to coordinate specific tasks forthegovernment ship occurswhentasksareoutsourcedfromlocal governments toorganiza occurs much more frequently than intrapreneurship. Typically, entrepreneur down onbythepublicandgovernmentofficials, socialentrepreneurship often a waytocounteracttheperceivedinefficiencies ofgovernmentprograms. combination ofaneedforincreasedresourcestofundspecific programsandfor mission. The drivingforceforentrepreneurshipinthepublicsectorhasbeena beyond their previous constraints, thereby increasing the effect and reach of their social entrepreneurship,suchefforts haveenabledtheinstitutionstoexpand and legislation.However, wherethepublicsectorhassucceededinengaging organization isalsoheldtooftenmorestringentpreestablishedrules,regulations, with donorsandgrantswhohavepredefinedgoalsfortheorganization, thepublic istrative constraints. Whereas thenot-for-profit organization canbeburdened engage insocialentrepreneurship,oftenbecauseofinherentpoliticalandadmin Outside ofentrepreneurshipintheprivatesector, itbecomesmoredifficult to THE PUBLICSECTOR such asgiftshopsandthriftassociatedwithchurchesmuseums. social entrepreneurshiphasbeenaroundforcenturiesintheformofenterprises nomic developmentandemploymentopportunities.Itshouldbenotedthat ate strongbusinessesamongyouthandlow-incomefolksbyprovidingeco standard franchisefeesandprovidesadditionalsupporttohelpnonprofitsoper operated bycommunity-basednonprofitorganizations. Ben&Jerry’s waivesthe PartnerShop program,aseriesofscoopshopsthatareindependentlyownedand notable forayintosocialentrepreneurshiphasbeentheestablishmentof neurial andseekingnewrevenuestreamsmaynotbeaseffective ashoped. tion. Formanynot-for-profit organizations, this means that becoming entrepre organizations feel that without the taxanarenais created for unfair competi Given thatentrepreneurial activities such asrisktakingareoftenlooked Ben &Jerry’s isagaininstructiveonthispoint. Perhapsthecompany’s most 66 ------Social Entrepreneurship

- - - 67 An important issue in building social venture capital has been designing capital An important issue in building social venture There exist numerous examples of social entrepreneurship within the the within of social entrepreneurship numerous examples There exist organizations that have been created to provide social venture capital such as capital venture social provide to created been have that organizations the Foundation, Capital Venture Social Partners, the Venture Ashoka, Social Schwab Foundation, and others. invested in to know whether their investment has been successful or if the or if successful has been investment their know whether to in invested should be. In the typical venture, this can is not doing as well as it organization as the organiza analysis and benchmarking financial be done through simple more much this is investment, venture social a With evolves. and develops tion success with The impact. social measuring of difficulty the of because difficult through the rising number of tools is evident these social feedback developing As such, social venture capital is often focused within the for-profit sector of is often focused within the for-profit capital venture As such, social be invested to capital venture social for possible is it inhowever, social venturing; as well. sector ventures not-for-profit they have from the organizations feedback a way for investors to receive Similar to profit-oriented entrepreneurship, social entrepreneurship is often a often is entrepreneurship social entrepreneurship, profit-oriented to Similar who have a vision and are pursuing that by individuals process undertaken come from grants, donations, or what vision. Funding for these ventures can first defined by Social venture capital, capital. social venture has been called of the interests the securing funding to advance process of Ashoka, is the the organization. in stake a have who wish to through investors organization maintenance through revenue-generating alliances with private business alliances with private business maintenance through revenue-generating enterprises. SECURING FUNDING FOR SOCIAL ENTREPRENEURS technology needs of the elected officials and staff of San Diego. Product of San Diego. Product and staff the elected officials technology needs of customized street “city stores,” which sell items such as endorsements and national levels, increasingly common; at the state and signs, are becoming to by governmental agencies represent efforts adopt-a-highway programs of road the high cost that serves to offset engage in social entrepreneurship public sector. Following years of developing customized information tech customized information years of developing Following public sector. its outsourced Diego San the City of use, in-house for applications nology the entity, function to a stand-alone not-for-profit information technology of this initiative Corporation. One principal goal San Diego Data Processing applica market government-specific technology has been to successfully the continuing to meet the while all other California municipalities, to tions PART I: Corporate Social Responsibility and Related Terms MEASUREMENT TOOLS FORSOCIALENTREPRENEURSHIP viduals. By calculating the amount of money they were saving the government viduals. Bycalculatingtheamount ofmoneytheyweresavingthegovernment made byemployingpeoplewith disabilitiesandeconomicallychallengedindi Landscape Servicesusedthis methodtoanalyzetheimpacttheirorganization Fund), isusedtodevelopacost-benefit analysisofasocialproject.Rubicon method, designedbyREDF (formerly theRobertsEnterpriseDevelopment money invested and the socialreturn. impact and isthemost effective in demonstrating a directcorrelation between Monetization analysis allowsthefirmtoplacedollarvaluesitssocial ing theopportunitycostsoforganizations’ operationalprocesses. next bestalternative for theirresources,amethodthatisequivalent tomeasur analyze the effect these outputs have on society and compare them with the of theiroutputswith social goals. Impact analysis allowsorganizations to monetization. Process analysisallowsorganizations to measurethecorrelation impact measurement inthreekeyareasofanalysis—processes,impact, and identifying and measuringsocialimpact. Their efforts haveidentified social uted tothisresearch. They haveidentified and analyzedseveralmethodsfor Research Initiative forSocialEnterprise(RISE)isonegroupthathascontrib initiatives similarly to that of a financial initiative. Columbia University’s sured. This enables the organization to track the successorfailure of itssocial signed in a way that allows the impact on society to be quantitatively mea defined areasandmeasuringtheeffectiveness of that impact in eacharea. attempt to achieve thesamegoalofdividing theorganization’s impact into DBL isthe more often cited tool within social entrepreneurship, butboth and financial. DBL divides the goals into two sectors—social and financial. divides the goals ofan organization into three sectors—social, environmental, called double-bottom-line (DBL) ortriple-bottom-line (TBL) analysis. TBL organizations to measurebothfinancial and socialimpact. This isfrequently The needformeasurement has ledtothedevelopment of toolsthatallow it islesseffective atmeasuring the actual level of impact that it hasonsociety. research hasbeenabletodefinetheareasthatsocialentrepreneurship affects, history has relied on qualitative, case-based research. While this type of preneurship hasonitsstakeholders.Muchofthemeasurement throughout its increasingly important todesignmethodsmeasuretheimpact social entre Regardless ofthesectorsocialentrepreneurship occurs in,ithasbecome One exampleofmonetizationanalysisissocialreturnoninvestment. This To measurethegoalsofanorganization using DBL,theyare oftenrede 68 ------Social Entrepreneurship ------69 Social entrepreneurs have found that this stance is inadequate for serving is inadequate this stance found that have entrepreneurs Social All three measurement methods enable the social entrepreneur to gauge entrepreneur the social enable methods measurement All three Along with the growing number of social investment and analysis organiza and investment of social growing number the Along with uni with popular increasingly become also has entrepreneurship social tions, Many business schools have not institutions. and other educational versities ence on its stakeholders. Thus, although many critics believe that social believe many critics Thus, although on its stakeholders. ence entrepreneurs have social responsibility, to economic is counter responsibility in parallel. allows the two to act that found a method EDUCATION the needs of the community. Entities beyond the private for-profit sector have sector for-profit private beyond the Entities community. needs of the the entre Social community. needs of the of the many to provide for been unable gap in service as a viable business opportunity. this preneurs have identified eco between link positive a have opportunities these on businesses built The influ its and in organization, the within both returns, social and returns nomic decisions and that business leaders are solely responsible for acting in a man are solely responsible for acting decisions and that business leaders This stance is who have employed them. the individuals ner that benefits inherently are returns social and returns economic that theory the in grounded or elimi to reduce pursuit of one return causing the another, one odds with at the other. nate CRITICISM OF SOCIAL ENTREPRENEURSHIP believe and corporate social responsibility, Critics of social entrepreneurship, leav of stockholders, interests is to serve the purpose of business activity the These sector. for-profit existing beyond the private ing social action to entities are ill equipped to make informed social that business leaders critics argue available measurement tools, which provide a way for social venture capital measurement tools, which provide a available as well as a way for organiza of their investment, impact ists to measure the grow. as they adjustments own success and make tions to gauge their through their employment, they were able to measure the impact this programthis impact the able to measure were they employment, their through dollar amount. with a precise had on society most effective the in resources organization’s using the success at his or her many RISE project, to the mission. In addition social to support the manner and publicly own private their developing also begun have organizations other in social service costs and the amount of additional tax revenue generated tax revenue amount of additional service costs and the in social PART I: Corporate Social Responsibility and Related Terms only introduced social entrepreneurship into their MBA curriculum butsome Dees, J. G. (2001,May). Dees, J. Clark, C., Rosenzweig, W., Long, D., & Olsen, S. (2005,November). Double bottom Barendsen, L., & Gardner, M.(2004).Isthe social entrepreneur a new type of leader? Further Readings tinues tocall for moresocially conscious and accountable organizations. will continue to expand as a viable business model as the global society con larity due toitsincreased presence in the business andacademic realms and entrepreneurship has been given the opportunity to grow in impact and popu ing it to generate revenue while still serving its primary social goal. Social feasible business modelsthat provide innovative products andservices,allow Social entrepreneurs are able to do this through recognizing and pursuing eficial traits that have been previously available only to the for-profit sector. selves on socially conscious missions and goals while still retaining the ben model. Itallowsfororganizations in allsectorsofbusinesstogroundthem Social entrepreneurshiphasbecomeanincreasingly influential business CONCLUSION socially cognizant of their impact on society. reward competitors within traditional business plan competitions forbeing at theUniversityofCalifornia, Berkeley. Universitieshavealsobegunto within these universities, such asthe Global Social Venture Competition held In addition,competitionshavecomeuptopromotesocialentrepreneurship Enterprise, and OxfordUniversity’s SkollCentreforSocialEntrepreneurship. Social Entrepreneurship, ColumbiaUniversity’s Research Initiative for Social ship. Examples include Duke University’s Center for the Advancement of have also begun to build centers focused specifically on social entrepreneur .fuqua.duke.edu/centers/case/documents/dees_sedef.pdf Center for the Advancement of Social Entrepreneurship. Retrieved from www from www.riseproject.org/DBL_Methods_ Catalog.pdf Research Initiative on Social Entrepreneurship line project report: Assessing social impact in double bottom line ventures. Leader toLeader,

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