CR

• How can we conceptualise these issues?

  “Wicked problems are large scale social (and environmental) challenges caught in causal webs of interlinking variables spanning national boundaries that complicate both their diagnosis and prognosis”
• What sets these issues apart?

  Unconnected to, an indirect consequence of, or directly caused by business activities in and around global value chains.
• Different types of issues, directly or indirectly caused by businesses

  • Ecological: e.g., emissions, scarcity of raw materials, biodiversity
  • Human rights: e.g., discrimination, child labor, forced labor
  • Working practice & quality: e.g., safety & health, diversity
  • Governance: e.g., corruption, compliance, tax evasion
  • Product responsibility: e.g., consumer safety, advertisement
• Three crucial questions (without clear answers)

  • How far does the responsibility of businesses go? When does an issue lie within the sphere of a business responsibility/when is an issue or directly or indirectly connected to a business?
  • Why do such problem exist?
  • Who is responsible for these problems?
• Ultimately, businesses operate in a competitive system that incentivizes them to “race to the bottom”
• Philosophical underpinnings of who is to blame

  Individual ethics (Ulrich & Thielemann, 1992)

  • Greedy and ruthless manager could stop ethical issues, but simply don't want to.
  • Convince/educate managers that morals are more important than profit and that they should contribute to providing ethics because this is morally right.
• Philosophical underpinnings of who is to blame

  Institutional ethics (Homann, 1992)

  • Result of competitive pressure and market failure, rather than of ill intentions on the part of the company or the manager. 
  • Resolving ethical problems in business is a matter of ability rather than will.
• Narrow view on corporate responsibility

  → It´s the role of the government to regulate businesses!
• Broad view on corporate responsibility

  → It’s the role of businesses to regulate themselves!
• New form of “regulation”

  Given the importance to regulate the economic system, new forms of voluntary regulation have evolved, to fill in the legislative gaps left by national governments (and lacking supranational instructions). 

  → On one side, global governance,

  → On the other hand, self-regulation, by business: They take on more and more responsibility for their actions, in form of “Corporate Responsibility”.
• Corporate Responsibility: What is it?

  These terms are often used interchangeably, but their meaning may not always be the same - emphasis is being put on different aspects.
• Three concepts, three ambitions

  • C(S)R: Corporate (Social) Responsibility integrates social and environmental concerns in business operations and interactions with stakeholders. 
  • Sustainability: Refers generally to the capacity for Earth´s biosphere and human civilization to co-exist. 
  • ESG: Environmental, Social and Governance is a broad rating of a company's commitment to sustainability and other values. 
• The core idea of “Corporate Responsibility”

  • CR is a heterogeneous field: There is a broad range of interrelated concepts (CR, CSR, CC, CSP etc.), which place different emphases on the phenomenon.
  • Core idea: Companies should “do more” than just business, they should “go beyond” and engage with society in some way or another. Become better in some way.
• Two different views on CR

  Main issue: Businesses interact in an un- and under-regulated economic system in a globalised world!

  → Narrow view on CR: It´s the role of the government to regulate business. 

  → Broad view on CR: It´s the role of businesses to regulate themselves. 
• Limited/narrow view = “Strategic-instrumental”

  • “Cosmetic” engagement in CR → Companies should focus on profit maximization and shareholder value.
  • State actors determine the framework conditions → Companies adhere to existing laws and moral expectations.
• Narrow view, Milton Friedman:

  “In a free-enterprise, private-property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to their basic rules of the society, both those embodied in law and those embodied in ethical custom.”
• Premisses of the strategic-instrumental view

  1. Clear separation of business and politics
  2. Profit maximization and fiduciary responsibilities of managers vis-à-vis shareholders
  3. Societal responsibilities only assumed, if they advance the long-term value of the firm – importance of “business case for CR”
• Shareholder value argument

  • Basic idea: Corporate objective is to increase the value of the company for the owners to earn an appropriate return on the capital they have invested
  • Assumption 1: “... social welfare is maximized when all firms in an economy maximize total firm value”
  • Assumption 2: Capital markets as perfect markets – they reflect the true value of the company.
• What drives what 

  Institutional level

  • Stakeholder influence and issue salience → CR actions and policies
  • Institutional forces (standards certifiers, etc.) → extent and type of CR: however, they often lead to symbolic rather than genuine CR
  • CR actions and policies → corporate reputation and customer loyalty
• What drives what?

  Organizational level

  • Firms engage in CR primarily for instrumental reasons (financial outcome), but also for normative reasons (doing the right thing)
  • CR → financial outcomes (small effect) and non-financial outcomes
• What drives what?

  Individual level

  • CR → employee performance, behavior, and attitudes (e.g., engagement, identification), plus attractiveness for future employees