Social Accountability - Literature review Example

? Social Accountability Social Accountability Introduction Since the emergence of economic crisis, the concept of Corporate Social Responsibility (CSR) and social accountability has emerged as an important consideration amongst the corporate member and regulators around the world. Corporate Social Responsibility (CSR) is “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis” (ECCJ 2006). This paper aims at providing an overview of the theoretical and conceptual developments in relation to the increased emphasis on social accountability of those who are responsible for managing businesses and Corporate Social Responsibility, which in turn assists the businesses to establish corporate policies and practices which are meant to pose a positive impact on the social environment. In the modern business world of today, each industry and business plays the role of bringing stability by satisfying the needs of the customers. As the businesses all around the world are growing and developing, every interested individual or organization, whether he is a consumer or investor is asking corporations to conduct their operations in a more efficient and accountable way, which conforms to the ethical requirements. This emerging demand from the elements within the society has forced the organizations to adopt a modern concept named CSR. This paper generally focuses on the theoretical framework related to CSR and developments related to CSR in the world so as to analyze the businesses and their operations on these identified parameters. What is Corporate Social Responsibility A socially accountable organization would consider the emerging social concerns and priorities of individuals living in different societies, as its major responsibility. Moreover, the interests of internal and external stakeholders including community, employees, governmental and non-governmental bodies, the management of the organization and owners of the organization, should also be considered as organization’s own interests. These social concerns should be reflected in the organization’s actions and commitments to comply with the employment policies, health and hygiene of the employees and respect for civil and human rights. Additionally, the organization should also strive for improving the community and the surrounding environment (Malena, Forster and Singh 2004). The idea of Corporate social responsibility suggests that businesses are committed to protecting and improving the environment in which they are operating and also the interests of individuals who are directly or indirectly affected by their business activities. It underlines the approach that companies must adapt to ensure that the living standards of the individuals and their wellbeing are protected. It also entails considerations for the use of the resources where businesses are located to ensure that these resources do not deplete and the products that are produced by the companies are actually made as per the safety standards to have minimum negative impact on the environment. To achieve all aspects of the broader dynamics of corporate responsibility it is important for businesses to establish and promote a corporate culture within in their organizations that understands the importance of corporate impact on environment and its members play an active role in fulfilling organization’s corporate social responsibilities. Thus, it can be stated that the concept of corporate social responsibility is related to safer business operations, which have minimum effects on the environment in which the business is placed (Kotler and Lee 2005). It has been noted that in the past few years, major business entities have received negative reviews and criticisms for not giving back enough to the society in which they are active. Particularly, their lack of consideration for the protection of environment has been blamed for depleting resources and overall negative effects on the environment. Creation of larger multinational companies and their relentless abuse of the resources their businesses depend upon have been the major factors for greater emphasis by regulators and members of society on corporate social responsibility by companies. Companies in pursue of higher revenues and particularly those operating in such countries where they have been able to exert greater influence on the policy makers are found to neglect their responsibilities to the wellbeing of the individuals and environment they draw their resources (Noked 2011). Corporate Governance by Socially Accountable Business Activities The discussion now moves on to consider what corporate social responsibility means to the corporate sector (Chen 2005). There are three different levels at which CSR can be discussed when evaluating the approach of corporate sector towards CSR. These three areas are as follows: Corporate world’s approach towards CSR CSR and its dynamics have been interpreted and followed differently by businesses that are operating in different market segments. This is affected by the corporate culture that exists within the organization and the values that are shared between the top management and the lower staff. These factors contribute to the overall view of the organizations towards the external environment and stakeholders who are relying on managers for securing their interests in the business. Based on the understanding of CSR companies tend to formulate their policies and procedural guidelines to ensure that the concept of CSR is fulfilled and business activities are managed in such a way that companies can play a constructive role and fulfill the requirements and expectations of the society (Chen 2005). CSR related Activities To develop and follow a policy, which is aimed at promoting socially responsible business processes, organizations undergo several checks and balance systems and identify how it can play socially responsible role in respective areas of life. There are four vital areas where the implication of CSR measures can be observed: The business entity and its operations, The business sector or the industrial environment to which the business entity belong, The social and communal grounds on which the business entity operate, and The macro and micro environmental factors. These are the places where the organizations strives to implement its socially responsible and accountable measures by utilizing different mechanisms and performing different activities which educate human resource for working as a catalyst in the process of bring stabilization among the societies. There are several examples of socially responsible measures that can be taken by any organization, such as educating society about efficient utilization of resources, charity for humanity, welfare projects for the community, helping out the deprived and minorities within a society, working for the welfare of workers by financial and moral means, and to work along with other organizations to make society a better place to live etc. Business entities, in general keep the hold of these socially responsible activities and these organizations also develop systems that regularly monitors these activities and their consequences (Chen 2005). Organizational Structure and CSR To ensure that environment is protected and the community is safe from the adverse impact of business activities conducted by a business entity, there has been reports that a number of organizations has established their owned departments for monitoring and supervising socially responsible activities of different departments within the organization (Chen 2005). Theoretical Grounds for Corporate Social Responsibility In this section, theoretical grounds for supporting the evidences that relate socially responsible measures of an organization and the corporate level performance of the organizations are provided. For this purpose, Theory of Stakeholder by Edward Freeman and Agency Theory proposed by Jensen and Meckling. An overview of both these theories and their relationship with CSR has been presented as under: Theory of Stakeholder Management According to Edward R Freeman, stakeholder management theory entails that the businesses should be organized and manage in such a manner, that it follows the ethical values and considerations of the society in which; the business is established and run. Freeman identified ways by which those charged with governance of a business enterprise could discharge their obligations related to different groups found within the organization and the environment in which the entity operates, i.e. the stakeholders of the business. Now the question is who are the individuals who are the stakeholders of a business? Stakeholders are investors, consumers, creditors, suppliers and workers of an entity and are regarded as the ultimate beneficiaries of the business and its activities. Freeman not only focused on explaining the importance of investors, vendors, workers and customers being the stakeholder of the business, but also pressed the importance of other stakeholders to the company such as groups and organizations which are governmental institutions, political parties, employee unions, associates and the general public. The major proposition of the theory is the recognition and determination of ethical and ideological principles developed in order to manage and run a business concern (Donaldson and Preston 1995). This proposition promotes the underlying idea of CSR which refers to establish a methodology which ensures effective and efficient discharge of legal, social and ethical obligations. Agency Theory Hensen and Meckling presented famous agency theory, which tries on to building a relationship between the shareholders of a business and the management of that business. Jensen and Meckling defined management as being the agent to the shareholders, and shareholders as the principal entity to be served by the agent. These two scholars persist that the businesses should possess a good corporate governance structure which urges them to conduct socially accountable business practices as it is helpful in positively influencing the overall operations of the business and facilitates in meeting up the expectations reserved by the investors and customers of the business. The concept of Corporate Social Responsibility is nowadays often seen to be associated with agency theory. The relationship is dependent on the idea that implementing policies related to CSR enables a company to earn higher profits as the corporate image of improves in the eyes of the customers and investors (Frey and Cruz 2009). How Socially Accountable Strategies are implemented When an organization decides to introduce socially responsible and accountable activities in its operations, there is a range of strategies that can be utilized by the business. These instruments or strategies help organizations in understanding and determining the core responsibilities of each business unit and department that signifies the impact of socially responsible activities on the overall business performance. These strategies or instruments create a distinction between the role of corporate social responsibility in three different areas, i.e. the management, consumption and investments. In the upcoming lines, the author has described these three areas in separate sections (John 1984). Responsible Management For creating a socially accountable management style, organization focuses on developing a code of conduct and work related ethical values within the organization. These codes of conducts compel the management of the organization to carry out operational activities and other business strategies in a transparent manner. It also urges the organization for building up relationships with the stakeholders of the company and practicing business in a way that it does not become harmful for the environment. Responsible management styles also urges the organization to formulate policies that safe guards the interest of the work force. Beside codes, management systems are also regarded as the instruments of CSR. These systems are generally referred to a collection of processes, procedures and guidelines, which are used by management to administer certain activities (William 2003). Consuming the Resources Responsibly Organizations all around the world are accountable for consuming the resources in the most efficient manner to produce goods and services. It is quintessential for the businesses to declare on the packaging of the product that it has obliged to certain rules and regulations while producing, marketing or delivering the products and services to the target market (Noked 2011). Investing Responsibly Business are now more aware of responsible investment into new ventures and revitalizing the existing ventures, let it be a business within national borders or a multinational business at different geographic locations. This is the reason that Socially Responsible Investment Framework is getting strength day by day. Organizations are now implementing SRIF into their finance departments in order to take every possible measure to avoid failed investments. The investors nowadays are inclined to prefer to invest in those companies, which uphold the ethics and morality of the business by following certain standards. This approach of the organizations allows them to achieve sustainable development, which is the major benefit of embracing CSR (Miles and Munilla 2004). Working Conditions An organization who is socially accountable for its policies and actions should also strive to develop human resource policies which respect employees’ freedom and dignity. Child Labor Issues Organization should address child labor issues in its operational activities and the annual reports. It should not hire underage or juvenile work force and develop awareness among business circles and the society that children should be educated instead of forced to work to provide financial assistance to their families. In addition, organizations should also be keen in taking measures, which help children to seek education (Miles and Munilla 2004). Forced Labor Issues Organizations should also forbid the hiring of coerced workforce. Coerced work force is one, which is asked to work for an organization under certain pressure or force. Policies should be adapted which forbids the hiring of individuals against their will or utilizing the services of an individual as a punishment (William 2003). Health and Safety Issues Organizations should provide guarantees to their work force that there health and safety will be ensured by any means and at any cost. It is the moral obligation on organization to develop and sound production facility, more specifically focused on assessment and management of the risks involved. Business entities should also implement crisis control centers and emergency response units within the organization in order to avoid worst situations (William 2003). Financial Remuneration and Job Timings A business entity, which is following a social accountability framework, is also obliged to provide the basic right of appropriate financial remuneration and suitable working hours to the work force. The working hours should not to exceed the time indicated in the labor contracts (John 1984). Social Accountability Management Considering the importance of social accountability for the success of business, Council on Economic Priority Accreditation Agency (CEPPA) came up with SA 8000, which is an international standard for social accountability of the corporations. SA 8000 was mainly important because of its motives, which urge organizations to ensure ethical sourcing of goods and services. SA 8000 was designed in such a manner that it act like a voluntary standard and organizations, no matter how big or small it is, implemented the framework on their business activities. SA 8000 is helping organizations to efficiently implement policies and strategies regarding their social accountability measures and set basic standards for all factors involved in an organization’s business related activities. Basic standards for hiring underage workforce, coerced labor, health and safety issues, employees’ freedom, discrimination in hiring of employees, disciplinary practices, length of job timings and financial compensation for the services rendered by the employees (Ellipson 2000). Requirements of SA 8000 SA 8000 ensures that the organizations are abiding by the framework which outlines a set of requirements that each practicing organization must adhere. The requirements present in the framework are mainly based on the agreements and recommendations as given by the International Labor Organization (ILO). The Social Accountability standard (SA 8000) includes various requirements which are also recommended by ILO, these requirements include the minimum age requirements and related recommendations, safety at work and other health related recommendations, convention related to forced labor, the right to associate with each other within the organization, justified and equal remuneration, extinguishing of the forced labor convention, convention related to discrimination on job, convention related to the representatives of workers, convention related to rehabilitation and vocational facilities for the employees and others (Ellipson 2000). Apart from these requirements, i.e. conventions and recommendations, the social accountability standard also includes requirements for business enterprises, which relate to the Universal Declaration of Human Rights and the conventions initiated by the United Nations Organizations relating to the children rights. The requirements set in the social accountability standard are given in order to take into consideration the global aspects of the corporate social accountability and are aimed at setting a standard in relation to social accountability at a global level. Apart from adhering to the requirements laid down in the given standard, the organizations are also required to show compliance with the laws and regulations developed locally in the regions where the organization operates and in addition to these laws and regulations, the business entities are also required to continue their adherence towards the rules and regulations to which such business entities have already subscribed (Ellipson 2000). The social accountability standards also present a social management system by which organizations can be assured of effective corporate social accountability. The standard requires the social management system (SMS) to have several main elements, which include social policy, which requires the consideration of matters related to social accountability and labor related issues; management representative, according to the standard’s requirements a top level manager is required to be appointed as a representative of the organization who is charged with the responsibility of giving assurance as to the adherence to the social accountability standard; planning, an organization is required to ensure that the requirements of the standard are understood in a proper manner and as a result the plans made by the organization for implementing the social management system is effective and efficient; implementation, this requires continuous monitoring and evaluation of the social accountability process; checking and corrective actions, these actions are meant to ensure that all the requirements of the standard are met by the organizations; management review, this review is required to ensure that the organization the social management system and its requirements are properly adhered and applied by the organization; communication, this requires the organization to establish appropriate communication channels so that outsiders have access to inquire about organization’s policies and procedures in relation to the social accountability and records, these are required to facilitate the verification and signifying the conformity of the requirements and rules as laid down by the system (Ellipson 2000). Conclusion Corporate Social Accountability is no longer a myth and it has gained importance over the years primarily due to the benefits associated with it. The review of theories and studies relating to social accountability of the organizations has revealed the importance of the concept in attaining sustainable development and progress. There have been major developments regarding CSR in the last ten years. Apart from this, the corporate sector has responded well to this idea and has formulated its own ways of practicing CSR in the absence of legally binding requirements. Moreover, the organizations working on CSR use different tools or instruments, which include the following of different codes and management systems, involving stakeholders, self-innovated standards and guidelines, labels and sustainable investment techniques. In order to build a sustained corporate image, fulfilling corporate social responsibilities and escaping incidents in customer service delivery, organizations are needed to be concerned about the perception of their local communities. The effectiveness of educating local communities can never be denied. Counseling and exhibiting how following a social accountable strategies and policies can be beneficial to stakeholders both internally and externally to the organization. Also, it is crucial for businesses to ensure that their customers and employees can have the and to communicate to the customers and employees that the organization is concerned about them and trying to fulfill its moral and corporate responsibility. List of References Chen, M.C., 2005. Action and Communication: Analyzing CSR in the European Banking Sector. Research. Hague: The Hague School of European Stuudies. Donaldson, T. and Preston, L.E., 1995. The Stakeholder Theory of the Corporation: Concepts, Evidence and Implications. Academy of Management. The European Coalition for Corporate Justice (ECCJ), 2006. Corporate Social Responsibility at EU level. Proposals and recommendations to the European Commission and the European Parliament”. Berlin: The European Coalition for Corporate Justice (ECCJ). Ellipson, 2000. SA8000: Corporate Social Accountability Management. Research Report. Geneva: Ellipson. Frey, W. and Cruz, J.A., 2009. Three Views of CSR (Corporate Social Responsibility). [Online] Available at: [Accessed 3 February 2012]. John, S., 1984. Social accountability and selfhood. NY: Blackwell. Kotler, P. and Lee, N., 2005. Corporate social responsibility: doing the most good for your company and your cause. NJ: John Wiley & Sons, Inc. Malena, C., Forster, R. and Singh, J., 2004. Social accountability: an introduction to the concept and emerging practice. NY: World Bank. Miles, M.P. and Munilla, L.S., 2004. The Potential Impact of Social Accountability Certification on Marketing: A Short Note. Journal of Business Ethics, 50(1), pp.1-11. Noked, N., 2011. Investing in Corporate Social Responsibility to Enhance Customer Value. [Online] Available at: [Accessed 3 February 2012]. William, L.S., 2003. Social Accountability and Corporate Greenwashing. Journal of Business Ethics, 43(3), pp.253-61. Read More