The Models of Corporate Social Responsibility - Essay Example

CORPORATE SOCIAL RESPONSIBILITY THE CASE OF BP Introduction Corporate social responsibility comprises sustenance of depleting environmental resources, emergence of effective workplace practices and narrowing the gulf between the rich and the poor. The good old concept of corporate social responsibility though is taking new dimensions with more and more companies encouraging and involving their employees in the numerous social activities and ventures being undertaken in collaboration with NGO groups and voluntary organizations. With a large percentage of the workforce being young and enthusiastic they are volunteering with utmost dedication and concern and not as a mere obligation. Even in the absence of any legal binding the concept is catching on worldwide. Where did this concept emerge Really speaking this concept is neither the brainchild of a single person nor of a single organization. There has always been an ethical perspective to the business strategies practiced all over. There are several moral edicts organizations have been following for several decades. One such ethical perspective is the desire to offer help, being conscious of the fragility of the environment we are living in. However, one tends to wonder how genuine is the concept of corporate social responsibility There's widespread skepticism about the commercialization and publicizing of this responsibility and the authenticity of the triple-bottom line reporting. A section of the media considers these initiatives as brand building tactics echoed merely in the closed doors of executive boardrooms. In reality, most companies have special departments to document the best practices of corporate social responsibility and integrate them into the organizational fabric. They are investing huge amounts in creating special foundations for the implementation of these practices with a view to making a huge difference to the people around them. They are also drafting special policies to ensure better working conditions and promote the family welfare of their workforce. Traditionally CSR (corporate social responsibility) has been defined in United States in terms of a philanthropic model. They donate a certain share of the profits to charitable causes. It could be said as tainting the act for the company to receive any benefit from the giving. Whereas, in model social responsibility becomes an integral part of the wealth creation process - which if managed properly it is believed to enhance the competitiveness of business and maximise the value of wealth creation to society. Different perceptions are seen from different societies across the world like in Africa CSR is about capacity building for sustainable livelihoods. It respects cultural differences and finds the business opportunities in building the skills of employees, the community and the government though CSR is about giving business back to society; what is understood in South East Asia. The World Business Council for Sustainable Development in its publication "Making Good Business Sense" by Lord Holme and Richard Watts, used the following definition; "Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large" So you label it a philanthropic exercise or a responsible society oriented business strategy one thing that is for sure; the pressure on business to play a role in social issues will continue to grow. Over the last ten years, those institutions which have grown in power and influence have been those which can operate effectively within a global sphere of operations. Those institutions which are predominantly tied to the nation state have been finding themselves increasingly frustrated at their lack of ability to shape and manage events. These include national governments, police, judiciary and others. And believe it or not this is all because of proper image building and appropriate employment of tools of CSR; many leading organizations have stood against the cutting edge allegations against them. For instance, Nike has become one of those global companies targeted by a broad range of campaigning NGOs and journalists as a symbolic representation of the business in society. In Nike's case, the issues are those of human rights and conditions for workers in factories in developing countries. In the face of constant accusations, Nike has developed a considered response, supported by corporate website reporting. The criticism continues, however, unabated. Similarly, BP is one of the largest companies in the world - with a turnover dwarfing that of some nation states. As an oil company, it is directly linked with the use of fossil fuels linked with major environmental challenges on a global scale. No company has achieved a higher profile in its stated determination to completely re-orientate the business to adapt to the needs of a more sustainable society. With its major - and controversial - rebranding and commitment to becoming a sustainable energy company rather than simply an oil company - BP has established itself as one of the most thoughtful business firm taking a lead in corporate social responsibility. Critical analysis CSR is entwined in the strategic planning process of many multinational organizations. The reasons or drive behind social responsibility towards human and environmental responsibility whether driven by ulterior motives, enlightened self-interest, or interests beyond the enterprise, is subject to much debate and criticism. Some critics argue that corporations are fundamentally entities responsible for generating a product and/or service to gain profits to satisfy shareholders. Milton Friedman and others argue that there is no place for social responsibility as a business function. These critics point to the rule of corporate law that prohibits a corporation's directors from any activity that would reduce profits. Other critics argue that the practice cherry-picks the good activities a company is involved with and ignores the others, thus 'greenwashing' their image as a socially or environmentally responsible company. Still other critics argue that it inhibits free markets or seeks to pre-empt the role of governments in controlling the socially or environmentally damaging effects of corporations' pursuit of self-interest. Disputed business motives Some critics believe that CSR programmes are often undertaken in an effort to distract the public from the ethical questions posed by their core operations. Examples of companies that have been accused of this motivation include British American Tobacco which produces major CSR reports, and the petroleum giant BP, which is well-known for its high-profile advertising campaigns on environmental aspects of its operations. Self-interest Some CSR critics argue that the only reason corporations put in place social projects is for the commercial benefit they see in raising their reputation with the public or with government. They suggest a number of reasons why self-interested corporations, solely seeking to maximise profits, are unable to advance the interests of society as a whole. They point to examples where companies have spent a lot of time promoting CSR policies and commitment to Sustainable Development on the one hand, whilst damaging revelations about business practices emerge on the other. For example, the McDonald's Corporation has been criticized by CSR campaigners for unethical business practices and was the subject of a decision by Justice Roger Bell in the McLibel case which upheld claims regarding mistreatment of workers, misleading advertising, and unnecessary cruelty to animals. Similarly Shell has a much-publicised CSR policy and was a pioneer in triple bottom line reporting, but was involved in 2004 in a scandal over the misreporting of its oil reserves which seriously damaged its reputation and led to charges of hypocrisy. Since this has happened, the Shell Foundation has become involved in many projects across the world, including a partnership with Marks and Spencer (UK) in three flower and fruit growing communities across Africa. These critics generally suggest that stronger government and international regulation, rather than voluntary measures, are necessary to ensure that companies behave in a socially responsible manner. Other views from this perspective include: Corporations really care little for the welfare of workers or the environment, and given the opportunity will move production to sweatshops in less well-regulated countries. Companies do not pay the full costs of their impact. For example, the costs of cleaning pollution often fall on society in general. As a result profits of corporations are enhanced at the expense of social or ecological welfare. Hindrance of free trade These critics are generally supporters of Milton Friedman, who argued that a corporation's principal purpose is to maximize returns to its shareholders, while obeying the laws of the countries within which it works. Friedman argued that only people can have responsibilities.Because of this, moderate critics suggest that CSR activity is most effective in achieving social or environmental outcomes when there is a direct link to profit. This approach to CSR requires that the resources applied to CSR activities must have at least as good a return as that that these resources could generate if applied anywhere else. This analysis drastically narrows the possible scope of CSR activities. Critics who believe that CSR runs against capitalism would go further and say that improvements in health, longevity or infant mortality have been created by economic growth attributed to free enterprise. Investment in less developed countries contributes to the welfare of those societies, notwithstanding that these countries have fewer protections in place for workers. Failure to invest in these countries decreases the opportunity to increase social welfare. The Role of Companies in Society The business of business is business. The fundamental purpose is to create maximum shareholder value. While simple, it is a statement that makes complex demands. Energy companies are long-term enterprises, and it is to be ensured that the business that is done is sustainable. At the same time, energy companies know that we cannot exist in isolation. We have a deep interest in the economic health and prosperity of the countries and communities in which we work. We seek legitimate, effective government and a proper framework of law. In other words, a sustainable operating environment. Energy companies must, therefore, recognize and manage the impact of their business and its contribution to society. They must operate at all times and in all circumstances on the basis of long-term mutual advantage. This means developing a strategy that will give companies a competitive advantage and create value. It also requires building companies that will endure. In other words, a sustainable company operating in a sustainable world. The strategy defines the destination - shareholder value - and the test of sustainability provides the reference by which we judge everything we do. In practical terms, companies do this by defining core values, enshrining them in policies with real meaning, and then applying them through specific management processes and standards throughout the company. All carried out within a well-defined system of governance. Together, this represents a new paradigm in corporate social responsibility: responsible operations and responsible development. More importantly, it moves the paradigm beyond Corporate Social Responsibility to what we call "Sustainability". BP and Corporate Social Responsibility BP counts itself among the world's innovative and progressive companies. They have long believed thattheir long-term future depends on their world-class environmental and social performance, and excellence in all operations. BP constantly strives to be a force for good and a force for human advancement in every country they operate. A responsible global citizen, earning the confidence and support of its employees and partners; its customers and suppliers; as well as its shareholders and stakeholders. At the same time, and in parallel, BP actively pursues excellence in all operations. Excellence is founded on responsibility, and starts with responsible operations that promote safety and integrity; minimize the impacts to the environment; and provide a healthy and safe work environment for its employees. Moreover, BP has set the corporate standard on many important issues. Energy-related issues such as the Global Gas Flaring Partnership; the US/UK Voluntary Principles on Security and Human Rights; the Energy and Biodiversity Initiative. Global initiatives on climate change and on transparency in the extractive sector. Industry issues such as HSE Corporate governance issues such as the UN Global Compact, the 2002 Global Reporting Initiative, as well as progressive positions on what we call "code of conduct" that governs our approach to among others our values, ethics, transparency, and diversity and inclusion Acting as a good corporate citizen and taking a progressive position are often not enough. It is not easy as we must live it everyday. In a sustainable way. Over the long term for the mutual advantage of all parties. In this regard, BP, in its activities in more than 100 countries around the world, constantly strives to operate responsibly. In particular, with respect and support for human rights; aversion to corruption; while supporting and advocating transparency. Equally importantly, BP pursues responsible development in its social and environmental engagement in the communities where they operate, investing its resources in its core competencies. Notably - minimizing environmental impact, encouraging enterprise and skills through capacity building and education, and supplying energy. This combination - operating responsibly in our core business and operating responsibility in the areas where they operate - represents a powerful multiplier effect that will generate enormous benefits for communities and society, both in those areas in their sphere of control and, in their sphere of influence. This represents the way they do business. Responsible operations and responsible development. For the long-term mutual advantage of all parties. BP in Algeria - a Responsible Approach Like anything else in Algeria, however, what they do and how they do it have enormous benefits not only for the company but also for the local communities in the remote Saharan desert communities where we work. Sustainability - Responsible Operations In Algeria, they pursue three multi-billion dollar joint development, world-class oil and gas projects with our partner, Sonatrach. Two are the largest joint development gas projects -- In Salah and In Amenas. The third is the innovative joint oil production project at Rhourde el Baguel. As they pursue these world-class projects, they remain very aware of the significant impact on their operations on the fragile socio-economic environment in those remote desert communities near In Salah, In Amenas, and REB. At the same time, their work as a global energy company and the largest foreign investor in Algeria brings them into contact with some of the most challenging issues facing society today. How do they reconcile economic growth and sustainability with environmental responsibility How can they contribute to establishing secure supplies of energy in an unpredictable world What role should BP play in Algeria These are questions that are confronted by the management every day in their work - and there are no easy answers. They represent different dimensions of a key paradox - the paradox in which the energy that provides society with heat, light and mobility, fuelling economic growth and development, simultaneously presents them with serious environmental and social challenges. To do this, they must pursue a comprehensive responsible approach. They seek to be a good Algerian citizen by contributing to Algeria's long-term growth and by engaging responsibly throughout the entire range of their activities that demonstrate their continuing commitment to Algeria. In keeping with their pursuit on sustainability, their three major joint development projects with their partner Sonatrach and their new partner, Statoil, incorporate the latest technology, innovative management techniques, and world-class safety standards that respect and protect Algeria's fragile environment. These projects also bring new and exciting opportunities to many Algerians, enabling them to improve their quality of life and the quality of their communities. Sustainability - Responsible Development Most prominently, BP's commitment to responsible development features their voluntary social investment programme. This landmark programme seeks to bring benefits directly to the Algerians who reside in the desert communities near their projects areas. It is an innovative and unique programme that has gained noteworthy mention. For example, the Algerian Minister of Energy and Mines, HE Chakib Khelil, cited BP's social investment programme as the model for all companies operating in Algeria. This landmark programme puts into place their values and brand, their approach to sustainability - responsible operations and responsible development. At its central core, BP's social investment programme brings tangible benefits to Saharan communities located near their operations where they live and work while focusing on self-sustaining activities, targeted to local needs, and implemented by local ownership. Responsible Development - What It Is Not In contrast to others, BP's social investment programme goes beyond philanthropy and charity; beyond unfocused contributions that fail to meet local needs and that burden local communities with unsustainable infrastructure. Instead, it is fully aligned with their business and fully integrated in their strategic business operations. Responsible Development - Objectives This social investment programme has three objectives: Improve the quality of life of the residents in the communities where they operate Help create opportunities Help connect these local communities to the outside world It is also firmly rooted in their core competencies: energy (water and solar), enterprise or capacity-building, and education. Responsible Development - Programme and Activities Water Desalination Project at In Salah: The first is their clean water project in the city of In Salah, near the major joint gas development project of In Salah. Over the past few years, they installed four water treatment stations that provide, for the very first time, potable water to the 35,000 residents of In Salah. At the same time, they created a micro-enterprise - "Saharan Water Company - to run and manage the project, providing jobs and invaluable skills for local residents. The company sells the water at a nominal cost, using the revenue to pay wages, rent of the buildings, maintenance, and access to city water Solar Energy Electrification Project at Hassi Ghanem: The second is a solar energy project in the agricultural village of Hassi Ghanem, near one of the operational hubs of their In Salah project. They supplied and installed solar panels for the town that provided electricity, for the first time, to entire village. At the same time, they trained the local residents in maintenance and care for the panels. Today, the residents of Hassi Ghanem not only have electricity but also the local authorities established teams that clean, maintain, and ensure the proper functioning of the solar energy system Clean Water at Hassi Ghanem: The third was just inaugurated three weeks ago. It is a clean water project for the village of Hassi Ghanem. It features the installation of a 3.5 kilometers water pipeline from the source of the town's water source and the construction of seven water distribution stations around the town. For the first time, the town not only has its own source of electricity but also its own source of clean water Illizi Home: The fourth, and perhaps the most innovative and clearly unique, is Illizi Home. This project entails the production and marketing of Algerian products that are specifically designed and targeted for the UK consumer market. In particular, with the assistance of design teams, the scores of Algerian artisans - most of whom live in the desert south - craft and build products and then shipped to several high-end UK shops. Moreover, Illizi Home also features an e-business marketing channel through which you can purchase these products on-line. Products include furniture, carpets, baskets, ceramics, etc. English Language Training: Lastly, and equally importantly, they are establishing English language resource centres in several Saharan desert communities. In collaboration with King's College in London, they have trained 250 English language instructors from several Algerian communities and also acquired requisite instructional materials. As part of a collaborative effort, local communities have provided the infrastructure and other centres resources. Other projects Solar Energy Project at Iherir: Partnering with the Wali of Illizi and the local community near our In Amenas gas project, BP will soon begin an ambitious tri-lateral solar energy project for the 3000 residents of town of Iherir. The project will provide electricity for homes, offices, shops, community centres, and even street lights. For the very first time, the town will have its own source of electricity, and is one of the region's most important development priorities Community Resource Centre at In Salah: As an extension of our clean water project, they have partnered with the Mayor and local residents in the city of In Salah to establish and kit-out a community resource centre in InSalah. The centre will feature a cyber caf, library, business resource centre, and community centre. The Mayor will provide the facility and maintenance; BP will provide the resources and train a local group to provide on-site training and assistance, and centre our English language training there as well These activities directly satisfy their three objectives of social investment and are firmly based on their unique core competencies. Their Social Investment programme is not the only sustainable activity in Algeria. Earlier, they also seek to be good Algerian citizens. In particular, they reacted quickly and comprehensively in response to two natural disasters -- the floods of Bab el Oued in November 20001 that killed more than 1,000 persons and, most recently, the massive Boumerds earthquake in May 2003 that killed nearly 3,000. On each occasion, BP demonstrated its commitment to Algeria as an Algerian citizen in a responsible way, contributing directly to those left homeless by unimaginable devastation and destruction. This is their unique, responsible approach. It also represents their commitment to responsible operations and responsible development. Recent years have witnessed increasing importance on corporate social responsibility, especially as concerns about climate change are becoming mainstream. There have been criticisms of corporate social responsibility from ardent free trade capitalists and anti globalization activists/environmentalists alike. The former often feels that anything getting in the way of profits is not a good idea, and that self-interest and pursuit of profit will ultimately lead to the market making these improvements anyway (the "hidden hand"). The latter often feels that companies are using this to repair tarnished images or otherwise paint a rosier picture of their practices while not addressing fundamental issues. Many from these and other perspectives, however, are trying to make corporate behavior more responsible when it comes to ethics, working conditions, environmental sustainability, etc. A common criticism is that advanced economies have often moved their more dirty industries to other parts of the world where there are less stringent environmental and social standards. As a result, other countries may be polluting on their behalf, and these indexes do not factor those in. This "Pollution Haven Hypothesis" has been raised as one reason the US does not want to participate in Kyoto because China and India will be exempt from emission caps and some domestic industries will head there. (Though this has been a concern way before, too.) Furthermore, China and others have also argued that their centrality in manufacturing for many around the world does not factor this in. The above report acknowledges the concern of this hypothesis, and notes the following: For example, a recent study showed that up to 40% of air pollutants in the Pearl River Delta in low-scoring China are directly linked to exports to high-scoring importers across Europe and North America. Unfortunately, at this stage there is inadequate systematic data across their large country sample to test this hypothesis within the main RCI. The data [looked at so far] remains at this stage too weak to test the hypothesis with any confidence. They are committed to doing more work on this issue in future editions. This hints at the challenge that globalization has on nation states when it comes to breaking down such figures: some trade is international by scope conducted by multinational corporations, or companies in a global supply chain, yet it is nations that are held to account even while businesses and other entities want to reduce national barriers to trade. Should Corporations Only Aim for Profit Ardent supporters of free markets, such as Milton Friedman, have long argued that companies should not be diverted from their pursuit of profit; it ultimately harms a free society if entities such as companies try to act for a wider good other than its own self-interest, because it is hard to know what the wider good is, and damages the primary goal of companies: responsibility to shareholders. In his book, Capitalism and Freedom, Friedman argues that "there is one and only one social responsibility of business-to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud" His theories are appealing, though unfortunately in the real world, many companies, larger ones in particular are often involved in exploitative practices of some sort, knowingly or unknowingly (through sub-contractors, for example). Furthermore, with their increasing financial muscle comes increasing financial power in the political arena to influence policies in their favor. This is not necessarily engaging in open and free competition (some lobbying is often to actively prevent competition, for example). Given the immense impact businesses can have on people's lives, and their increasing power, environmental, human-rights, and social justice activists have tried different ways to get businesses to be more accountable for their actions. They have tried to go through their government (that is supposed to be representative of their people, in a democracy), and even to businesses and shareholders themselves to urge better responsibility. Conclusion: Corporate social responsibility claims to offer manifold benefits both internally and externally to the corporate giants involved in various projects. Externally, it creates a positive image amongst the people for its company and earns a special respect amongst its peers. Internally, it cultivates a sense of loyalty and trust amongst the employees in the organizational ethics. More importantly, it serves as a soothing diversion from the mundane workplace routine and gives one a feeling of satisfaction and a meaning to their lives. There has been a revolutionary change in the attitude of the corporate sector towards the community they are operating in. Corporate social responsibility emphasizes the responsibility of companies towards the stakeholders as against their earlier focus on profit-making alone. Fears of global warming, the constant exhaustion of natural resources etc is urging the corporate world to take social initiative with a new perspective. References: 1) http://www.bp.com/genericarticle.docategoryId=98&contentId=2018495#top 2) www.chowk.com/articles/11195 - 26k 3) Simon Zadek, Alex MacGillivray, Editors, The State of Responsible Competitiveness 2007: making sustainable development count in global markets 4) Bansal, P. Roth, R. 2000. "Why Companies Go Green: A model of Ecological Responsiveness". The Academy of Management Journal, Vol.43, No.4, pp.717-736. 5) Bulkeley, H. 2001. "Governing Climate Change: The Politics and Risk Society". Transactions of the Institute of British Geographers, New Series, Vol.26, No.4, pp.430-447. 6) Brand Strategy. 2007. "10 key things to know about CSR". London. pg.47. 7) Catalyst Consortium. 2002. "What is Corporate Social Responsibility" 8) CSR Network. "What is CSR" 9) Fialka. J. 2006. "Politics & Economics: Big Businesses Have New Take on Warming; Some Companies Move From Opposition to Offering Proposals on Limiting Emissions". Wall Street Journal. pg.A.4. 10) Fields, S. 2002. "Sustainable Business Makes Dollars and Cents". Environmental Health Perspectives, Vol.110, No.3, pp.A142-A145. Read More