- What is CSR?, The Significance of CSR, Status and the Challenges of the CSR Approach -
College of POLICY SCIENCE, Ritsumeikan University
CSR stands for Corporate Social Responsibility. CSR is the idea that a corporation does not only pursue profits and pay a dividend to shareholders, but also has corporate citizenship for individuals (stakeholders) related to corporate activities, such as employees, domestic and international business partners, consumers, local communities and international communities.
In the late 1990s, attention was drawn to CSR because there were frequent corporate scandals, such as deceptive labeling of product origins and misleading representation of food, massive flow of personal information and failing to report recalls. Consequently, consumers and society came to pay close attention to companies. That is, there was a growing emphasis on a company’s contribution to local communities and employment responsibilities, such as legal compliance, higher corporate ethics, handicapped person and senior citizen employment, gender equality and development of employees’ skills.
The other background that was investigated is globalization of economic activities. Not only multinational corporations, but also many small and medium-size enterprises came to establish factories and business establishments abroad. Consequently, developing nations and persons related to NGOs (nongovernmental organizations) started to become concerned with forcing bad working conditions on workers of developing nations with different culture and conventional wisdom, infringing on the human rights of children concerning child labor. They are concerned that expanding gaps between the rich and the poor results in environmental destruction, as well. Also, environmental problems, such as air, soil and water pollution, were widespread and global warming caused by mass consumption of energy became a global problem, so that business activities that were considered environmentally friendly were demanded from every company.
The United Nations and among international organizations like the OECD (Organization for Economic Co-operation and Development), there is a move toward the recommendation and issue of standards on CSR. At the United Nations, the Global Compact, which the United Nations' secretary general, Kofi Annan, advocated in 2000, was formally established. The Global Compact supports 10 general rules globally established in three fields - human rights, labor and the environment and demands their implementation from participating business companies. At the end of June of 2004, ISO decided to work on the formulation of guidelines on CSR. In ISO/WD3rev2 26000, the following seven items are described as central issues: organization control, human rights, the environment, fair business conventions, consumer issues and development of a local community. ISO 26000 is still under way and is planned to be issued in 2009.
John Elkington of Sustainability Limited, founded in 1987 in the UK, advocated the triple bottom line (economy, environment and society). The aspects of economy include share prices and rate of return, the size of employment and the amount of tax. Likewise, the aspects of society indicate if acompany’s work for the good of a society through business activities and contribution, and the environmental aspect does if a company conducts business activities with environmental consideration.
As stated above, the definition of CSR is still being discussed. The following definition is thought to be valid: “to incorporate social fairness and environmental consideration in the process of business activities and to accomplish the accountability for stakeholders, such as shareholders, employees, customers, environment and community as a result of the improvements of economic, social and environmental performances”.
Also, CSR is regarded as one of criteria for the valuation of enterprise. Seen from the point of view of the standard of business activities, in the case of investment, there is SRI (Social Responsibility Investment) that is a criterion for the environment and social responsibility, in addition to the financing situation of the company. A movement that ranks a company based on how much it works on CSR is active mainly in Europe and America. Thus, with respect to reports concerning a company’s own approach to the environment, companies that expand their report range to include “CSR report” and “sustainability report” are on the rise. These include a company’s social responsibilities, such as social contribution, conditions of legal compliance and employment responsibility.
Social responsibility is not accomplished if it has negative and formal correspondences. By positively incorporating it in corporate management strategies and fulfilling a company's social responsibility, it is thought that the company can morph into the good corporate citizen based on a long-term perspective.