Corporate Social Responsibility and Law - Assignment Example

?Corporate Social Responsibility and Law The adoption and practice of CSR by business is not solely a voluntary action although it was primarily driven by reaction to market pressure and reputation management. CSR is now accompanied by legal pressure and enforcement albeit not conventionally; through state pressure and application of private law. As a result, legal aspects of CSR have emerged as businesses strive to achieve legal compliance, with efforts being made to ensure that compliance is out of spirit and not solely pegged on the law. This study explores the relevance of the law aspects of CSR in the business world, the conceptual frameworks put forth regarding CSR and law, the quantitative and qualitative approaches into CSR and law and finally, the opportunities for further inquiry into the subject. Relevance of Legal Context of CSR in the Business World The importance of the issue of legal aspects on CSR cannot be lost on business especially with debate raging on firms’ fiduciary duty to maximise profits for shareholders versus sacrificing part of the profits to benefit individuals. Although firms have found a business case to CSR initiatives, the legal aspect of CSR is a reality that they have to consider. It is important to state that businesses operate within states that are governed by the law. This is true since even internationally there are laws such as International Labour Regulations (Clavet et al. 2008, pp. 41-42). Impacts of the law on a firm’s CSR initiatives have been felt, for instance, in Denmark where there is a law requiring corporations to report on their CSR initiatives (DCCA 2010). The very concept of CSR involves undertaking more than the law requires; hence a legal element in corporate ventures is what CSR is built upon. Bantekas (2004, pp. 327-334) states that the core principles of CSR are human rights, labour rights and environmental rights which are subject to human rights, labour and environmental national and international laws; hence their pursuit is directly influenced by the law. Law Subjects related to CSR One of the most important considerations is the issue of CSR being ‘outside the law’ or ‘meeting the law’. In the ‘outside the law’ argument, an issue that transnational corporations can attest to is the lack of a standard framework of CSR to operate on as national laws and management may fail to provide the required standards. Besides, CSR is an enterprise-driven venture by firms beyond what they are legally required to undertake. In terms of the ‘meeting’ aspect, it is a consensus that CSR cannot be defined without taking the law into account. The concept of CSR involves voluntary initiatives and activities that are considered to exceed legal compliance. Thus, CSR is deeply rooted in the premise that hard law has to be met first with CSR initiatives then following on from this (Clavet et al. 2008, pp. 41-46). This aspect is a manifestation of the relationship between legal standards compliance and CSR. International law and the closely related international labour laws are other sets of legal aspects in action in a firm’s CSR initiatives. International legal instruments affecting transnational corporations are expressed through binding treaties with national entities concerned with rights and obligations and through ‘soft laws’ such as by the many International Labour Organisation conventions. Although ‘soft laws’ are heavily criticised for being indicative of transnational corporations’ ability to influence government policy, they are still a testimony of the inseparability of CSR initiatives by such firms and the law. Conceptual Frameworks Theoretical frameworks have been established to explain the interaction between CSR and law and its impacts. The mainstream conceptual framework is positivism, which is adapted from natural science and explains observable phenomena through general laws and the special conditions of the situation. Positivist CSR research seeks to provide a distinctive view of a firm’s overall efforts in the satisfaction of its obligations to society. There are three issues that emerge in this model-the society’s expectations of firms, the avenues followed by firms to fulfill these expectations and the (measurable) outcomes of this undertaking. These results in the Corporate Social Performance model that seek to explain the social efforts exerted by companies. In the positivist approach, CSR shares a framework with mainstream management as it is concerned with the causal relationship between Corporate Social Performance and the explaining variables (Scherer and Palazzo 2004, pp. 7-9). To bring in the legal aspect, it is important to state the relationship between the positivist framework and the business case for CSR; where pursuit of CSR is undertaken due to the business profits that accompany it. Yeo, Young and Park (2009, p. 9) discuss the Carroll CSR framework where there is the development of a motive for CSR through four stages; economic, legal, ethical and philanthropic. Here, the first and second stages involve pursuing the economic aspects, complying with the law and taking responsibility at the very basic minimum, while the other two stages in the pyramid model involves helping neighbours which leads to achievement of the status of a good corporate citizen. The positivist framework for CSR has been criticized from various angles. Scherer (2011 p. 6) argues that it leads to a merely instrumental interpretation of CSR fitting into the economic theory of the firm. It also translates to opportunist corporations since it aims at responding to certain stakeholders instead of being built on moral principles. It also appears rigid as one cannot move from the actual situation to what the situation should be. Besides, business research cannot entirely follow a positivist approach as it is also based on philosophical reasoning and thus requires the inclusion of normative approaches. As a result, other conceptual frameworks have been advanced including virtue ethics, deontology, social contract theory and Habermasian critical theory all aiming at explaining how firms should or should not act. In CSR, these approaches are referred to as post-positivist. Of these, post-positivist monological approaches in CSR justify business obligations or ethical actions in terms of principles, golden rules and virtues. Discursive approaches on the other hand suggest that legitimacy of business actions results from joint communication among the parties involved. The post-modern approach holds that there is no ultimate/absolute/universal knowledge/theory to be used as the solid truth, and has been faulted since it focuses on what not to do rather than how to act. The other main counter-positivist approach is the critical strategy research, which places emphasis on the determination of the social demands and interests to be taken into consideration when establishing the firm’s policy. It considers the interests of all reference groups/stakeholders of a firm when developing a socially responsible strategy in an unbiased way- without granting one or another of the group systematic priority because of its potential to sanction as happens in the CSP model, and hence has been muted as a better framework for CSR than positivism. Methods and Methodologies Data involving CSR research from which the legal aspects can be derived is available from across the world, and consists of qualitative, quantitative and mixed approaches. This study will focus on the quantitative approaches before then reviewing the qualitative ones. The Danish Commerce and Company Agency (DCCA 2010) studied the impact of implementation of the legal requirement for reporting on CSR by Danish firms. A quantitative approach was used where data was sourced from surveys and interviews to provide information on CSR reporting practices with focus placed on compliance with the law. 89% were observed to comply with the law. 69% of this accounted for having CSR policies, 60% accounted for practice of set policy while 37% report on achievements from CSR. This quantitative study thus effectively investigates the issue of compliance with legal standards in terms of CSR. Another example of a quantitative approach is a Canadian study by the Hassanein et al (2007) which sought to examine CSR initiatives in the Canadian international extractive sector. Results indicated that 77% utilised a legal team in drafting their CSR policies and reported overwhelmingly on following these policies. This is indicative of the Outside/Meeting issue where it is discernible that CSR has to involve legal perspectives. However, as the researchers point out, overwhelming adherence to internal CSR policies raises the question of extensiveness and credibility hence such firms still have to meet/comply with international standards. Sriramesh et al. (2007) undertook a quantitative study into the perceptions and practices of CSR in Singapore. The methodologies utilised were web-based questionnaires sent to company executives in Singapore large and small firms. The results were indicative of knowledge of the range of responsibilities covering legal, ethical and philanthropic aspects (as discussed in Carroll’s CSR pyramid model). However, a controversial issue emerged regarding the undertaking that was primary; profits or social responsibility. Many of the executives were of the opinion that CSR should come after the firm achieves profitability. Chahoud et al. (2007) explored the issue of CSR in India in relation to international perspectives in terms of the UN Global Compact role where the view of CSR is largely supposed to consider multi-stakeholders rather than being solely based on self-regulation. The quantitative study sought views from stakeholders and from public companies, revealing that 62% of the stakeholders felt that the business case was the primary driver of CSR initiatives with global pressure and philanthropy coming second and third. However, public companies did not mention the business case and viewed CSR initiatives from the philanthropy and legal compliance perspective thus indicating that the legal aspect is an important determinant of CSR policies in such firms. Such quantitative studies are indicative of use of research to study legal aspects in CSR especially on an international level including the ‘outside or meeting’ aspect, international law, corporate law and legal standards. Qualitative approaches have also been used to investigate legal aspects of CSR among other aspects. For instance, Snider, Hill and Martin (2003) studied CSR communication by the most successful US firms of the period in terms of commitment to socially responsible behaviours. The method involved studying the firms’ CSR messages for legal, moral and ethical themes while comparing these with those of international firms. Among other results, it was established that US firms explicitly focus on safeguarding their workforce from injury at work more than international firms, which is indicative of striving to fulfil legal obligations in their CSR policies and communication. Pedersen et al. (2011) followed a qualitative approach to determine the conformance or deviance of Danish firms to the legal coercion on CSR reporting. The methodologies involved conducting interviews and studying best practice examples of various Danish firms. The study indicated that there was a very significant effect of legal coercion to report on CSR initiatives in Danish firms. For example, it provided some firms with opportunities to start CSR initiatives. Other firms increased their focus on CSR while more were able to better their existing CSR initiatives translating to the legislation helping development of CSR frameworks in such firms. Such qualitative inquiry indicates the importance of the legal aspect in a firm’s CSR initiatives. Opportunities for Future Research The recommendations generated for future research are informed by a number of considerations. First, most of the studies have followed the mainstream positivist approach. Basing on this, there are opportunities for future inquiry using the other (normative) conceptual frameworks to undertake studies on the areas that have been tackled through quantitative studies. Such areas may include compliance with legal coercion of CSR, comparisons of internal, national and international CSR initiatives on the basis of legal, business case or philanthropy purposes, self-evaluation versus external/legal evaluation and perceptions of top management/executives on the legal aspects of CSR. Other opportunities that are present for research include studies into the synergies or dynamics of various legal aspects in CSR; for example, international law and corporate law or meeting legal standards and labour laws in relation to CSR. Conclusion Law considerations are a relevant aspect of CSR that the business world has to take into consideration since it impacts their CSR initiatives. For instance, through legal requirements on reporting and international law considerations, the law’s impact on CSR can be seen in action. The conceptual frameworks that govern research into CSR include the mainstream positivist approach and post-positivist ones such as monological and discursive approaches. Quantitative and qualitative methods are utilised in inquiry into CSR including the legal aspects such as compliance, legal standards and perception of various stakeholders on issues involving CSR. Post-positivist inquiry into areas studied through positivist approaches provides opportunities for future research. References Bantekas, I 2004, Corporate social responsibility in international law, Boston University International Law Journal, vol. 22, no. 309, pp. 309-345. Chahoud, T et al. 2007, Corporate social and environmental responsibility in India: Assessing the UN global compact’s role, GDI, viewed 14 November 2011, Clavet et al. 2008, Governance, international law & corporate social responsibility, ILO, Switzerland. DCCA, 2010, Corporate social responsibility and reporting in Denmark: Impact of the legal requirement for reporting on CSR in the Danish Financial Statements Act, CBS, Denmark. Hassanein, A 2007, Corporate social responsibility & the Canadian international extractive sector: A survey, CCSRC, Canada. Pedersen, JT, Wencke, J, Gwozdz, W & Neergaard, P 2011, Conformance and deviance: Company responses to coercive pressures for CSR reporting, CBS, Denmark. Scherer, AG & Palazzo, G 2004, Towards a political conception of corporate responsibility: Business and society seen from a Habermasian perspective, Academy of Management Annual Conference. Scherer, AG 2011, Towards a political conception of corporate social responsibility: Business & society and the contribution of recent Habermasian political philosophy, Zurich, viewed 14 November 2011, Snider, J, Hill, RP, & Martin, D 2003, Corporate social responsibility in the 21st Century: A view from the world’s most successful firms, Journal of Business Ethics, vol. 48, pp. 175–187. Sriramesh, K, et al., 2007, Corporate social responsibility and public relations: Perceptions and practices in Singapore, 14th International Public Relations Symposium, Bled, Slovenia. Yeo, HD, Young, HK & Park, SP 2009, Perspectives about social responsibility from business community, viewed 14 November 2011, Read More