Amsterdam, 1 August, 2016
Business as
Unusual
The United Nations Sustainable
Development Goals: A Corporate
Social Responsibility?
Anouk van Dooren | Master thesis Euroculture | Amsterdam, 1 augustus 2016 Supervisor University of Groningen: dr. Pieter Boele Van Hensbroek
Supervisor Uppsala University: dr. Benjamin Martin
Student number: 2014858 Telephone: 0683162183
Declaration
I, Anouk van Dooren hereby declare that this thesis, entitled “Business as Unusual: The United
Nations Sustainable Development Goals: a Corporate Social Responsibility?” submitted as partial
requirement for the MA Programme Euroculture, is my own original work and expressed in my own words. Any use made within this text of works of other authors in any form (e.g. ideas, figures, texts, tables, etc.) are properly acknowledged in the text as well as in the bibliography.
I hereby also acknowledge that I was informed about the regulations pertaining to the assessment of the MA thesis Euroculture and about the general completion rules for the Master of Arts Programme Euroculture.
Signed
Acknowledgements
The writing of this thesis has been an interesting yet tumultuous process, which has known both ebbs and flows. After being present at the Summit for Sustainable Development in New York, I knew I wanted to write about the United Nations’ Sustainable Development Goals. My internship at the Dutch Permanent Mission to the United Nations inspired me and made me more aware of the urgency and importance of a global approach against poverty, inequality and pressing environmental challenges. As the 2030 Agenda for Sustainable Development reads:
The future of humanity and of our planet lies in our hands. It lies also in the hands of today’s younger generation who will pass the torch to future generations. We have mapped the road to sustainable development; it will be for all of us to ensure that the journey is successful and its gains irreversible.
The positive and hopeful message embedded in the 2030 Agenda is one I embrace and one I will try my best to positively contribute to. This thesis allowed me to combine and dive deeper into topics that have my sincere interest: multilateral politics, international (sustainable) development and ultimately, business.
I would like to thank several people that have in some way been a part of my writing process. My friends and housemates in Amsterdam, who were there whenever I needed to blow off some steam during the long weekends in the University Library; my fellow interns at the Mission in New York who motivated me, drank coffee with me during these library sessions back in Amsterdam; my colleagues at Fruitful Office, who were flexible with my working hours at times when I was experiencing high levels of stress; and my parents, for whom I think the finishing of this thesis and thus the completion of my student life will be as great of a relief as it will ultimately be for me. Last, but certainly not least, I would like to sincerely thank Professor Pieter Boele van Hensbroek and Professor Benjamin Martin for their willingness to be my supervisors. They have provided me with useful comments and insightful questions – even well before deciding on a definite research question. They stood ready to proof-read long texts – even when on holidays or during the weekends, for which I am very grateful.
List of Abbreviations
AAAA Addis Ababa Action Agenda CSR Corporate Social Responsibility
EU European Union
EURODAD European Network on Debt And Development FfD Financing for Development
FMCG Fast-Moving Consumer Goods
G77 Loose coalition of developing countries during UN negotiations
GHG Greenhouse gas
GRI Global Reporting Initiative H&M Hennes & Mauritz
HoS Head of State
ILO International Labour Organization KPI Key Performance Indicator
LDC Least-Developed Country
LLDC Land-Locked Developing Country MNE Multinational Enterprise
OWG Open Working Group
PLM Product Lifecycle Management PPP People, Profit, Planet
PPP Public-Private Partnership PSAG Private Sector Advisory Group R&D Research and Development SD Sustainable Development SDG Sustainable Development Goal SIDS Small-Island Developing States
SPC Sustainable Production and Consumption SME Small and Medium Enterprise
UK United Kingdom of Great Britain and Northern Ireland
UN United Nations
UN-DESA United Nations Department of Economic And Social Affairs UNDP United Nations Development Programme
UNEP United Nations Environment Programme UNGA United Nations General Assembly UNMS United Nations Member States UNICEF United Nations Children’s Fund UNSC United Nations Security Council US United States of America
Content
Declaration ... 1 Acknowledgements ... 2 List of Abbreviations ... 3 Introduction ... 6 Problem Statement ... 7 Thesis Outline... 7 Relevance... 9Chapter 1. Corporate Social Responsibility ... 11
1.1Concept Definition ... 11
1.2 The Business of Business: Should Companies be Socially Responsible? ... 13
1.2.1 The Function of Business ...14
1.2.2 Academic Debate on CSR Theories ... 17
1.2.3 The Purpose Economy ... 19
1.3 The Profitability of Corporate Social Responsibility ... 20
1.3.1 Strategy ... 20
1.3.2 Defence ... 22
1.3.3 Altruism/Ethics ... 22
1.3.4 Risks of CSR ... 23
1.4 Conclusion ... 25
Chapter 2. The Sustainable Development Goals ... 29
2.1 Transforming our world: Introduction to the 2030 Agenda ... 29
2.1.1 Sustainable Development ... 29
2.1.2 Millennium Development Goals ... 31
2.2 The Sustainable Development Goals ... 32
2.2.1 Questioning the 2030 Agenda for Sustainable Development ... 33
2.3 Shaping the 2030 Agenda for Sustainable Development ... 34
2.3.1 ‘A Million Voices’: Drafting the SDGs ... 35
2.4 Reasons for private sector engagement in 2030 Agenda ... 36
2.4.1 Why does the UN need businesses to help achieve the SDGs? ... 36
2.4.2 Value SDGs to Business ... 39
2.4.3 Mobilizing business ...41
2.5 A Framework for Action: Achieving the SDGs ... 42
2.5.2 SDG-related initiatives and the formation of public-private partnerships ... 47
2.6 Conclusion ... 50
Chapter 3. CSR Considerations and the Global Goals ... 53
3.1 Likelihood of Businesses implementing the SDGs ... 53
3.1.1 Problems with the 2030 Agenda and the Nature of Business ... 55
3.2 Desirability of Businesses implementing the SDGs ... 57
3.2.1 Corporatizing the Sustainable Development Goals ... 58
3.3 Conclusion ... 60
Conclusion ... 62
Discussion ... 63
Bibliography ... 65
Websites: ...69
Introduction
On 25 September 2015, the General Assembly of the United Nations adopted the 2030 Agenda for Sustainable Development. Unanimously, the 193 Member States pledged to follow up to these global ambitions in their national capacity and to cooperate to meet the targets set in this Agenda. The 2030 Agenda forms an inspiring and inclusive vision for the future: a world free from poverty, injustice and discrimination and a healthy planet for present and future generations. This utopian world is to be realized through the completion of the seventeen Sustainable Development Goals that form the core of the 2030 Agenda. According to the United Nations Member States, the Goals will be achieved through a global partnership of nations and peoples – from the poorest communities to the richest countries – requiring revolutionary changes in both thinking and behaviour worldwide. In this extensive plan of action substantial contributions from both the public and private sectors are expected. There is a widespread understanding that the Sustainable Development Goals cannot be achieved by government and aid agencies alone. It has been recognized universally that the SDGs apply to everyone and need to be implemented in every region, all countries and all sectors. This is a clear distinction from the former Millennium Development Goals, which inaugurated in 2001 and terminated in 2015, which specifically aimed at developing countries. This new realization of how to reach global sustainable development has also created a renewed awareness across the United Nations and its Member States on the potential and possibilities of partnering up with (responsible) businesses to deliver sustainable development ‘on the ground’.
Problem Statement
Meanwhile, Corporate Social Responsibility is regarded with mixed feelings. In the scope of varying disciplines, academics discuss this concept and ask themselves whether businesses should attempt to solve societal ills, or whether they should merely focus on maximizing shareholder wealth. In any case, the United Nations 2030 Agenda is partly built on participation and commitment from the private sector; and thus, Corporate Social Responsibility becomes apparent when the UN wants to achieve the Sustainable Development Goals. In this thesis, the reliance of the UN on the private sector engagement in sustainable development is called into question. To what extent is the 2030 Agenda built on CSR and to what extent is this role of the private sector in this Agenda realistic and/or desirable? Given the ongoing discussion about CSR, is the private sector likely to play a pivotal role in the global quest for sustainable development?
The big question in fifteen years will be what the means of implementation of the ambitious Agenda for Sustainable Development have been and what the actual results were. How can the SDGs become a success? Governments are given the primary responsibility and are expected to take ownership in the achievement of all seventeen Goals. National policies, programmes and resource mobilization attributed to the SDG framework will need to guide the global commitments of each of the UN Member States. Additionally, all other stakeholders will need to play an active role and contribute to this ‘global partnership’ as well. But, like the majority of resolutions adopted by the UN General Assembly, the SDGs are not legally binding1, which means
that the signatories (the UN Member States) cannot be held accountable for their SDG progress or, more importantly, the lack thereof. Likewise, while representatives of the private sector have been involved in the Post-2015 negotiations and provided the UN with input from a business perspective, they could never have spoken on behalf of all businesses. Because of this and several other reasons, from (at least) a legal perspective, businesses can even less be held accountable for their actions, or lack thereof, attributed to the Sustainable Development Goals. Thus, the research goal of this thesis is to analyse and evaluate the role of the private sector in the implementation of the United Nations 2030 Agenda for Sustainable Development, while taking note of the academic discussion on Corporate Social Responsibility.
Thesis Outline
In order to reach the research goal, two main questions need to be answered. First, the main approaches in the analyses of corporate social responsibility need to be indicated. What are the prevailing arguments in the debate on the desirability of the private sector adopting socially
1 T.G. Weiss and S. Daws, The Oxford Handbook on the United Nations (Oxford: Oxford
responsible policies and what are the benefits and risks for society when MNEs fulfil more than their traditional, economic roles? Secondly, the expected role of the private sector in the realization of the SDGs needs to be researched and defined. To what extent is the 2030 Agenda dependent on CSR? What is the private sector ought to contribute to the delivery of the 2030 Agenda, and why?
Because both Corporate Social Responsibility and the 2030 Agenda for Sustainable Development are extensive topics, the research needs to be narrowed down. In the first chapter, the definition of CSR will be defined and explained. The academic debate on CSR will be mapped through an analysis of secondary and tertiary literature, dealing with the main lines of thought in this debate. Relevant and important aspects of the theoretical discussions on CSR include the existential question of what the role of business in society is (or should be) and what (according to economics, philosophers et cetera) the benefits and risks of CSR policies are for both society and businesses. Even though the SDGs have been formulated in a general sense, are multi-interpretable and are applicable to all sorts of businesses, active in varying sectors and in various sizes, the main focus will be on Multinational Enterprises. Although the Agenda also includes Micro-, Small- and Medium-sized Enterprises (SMEs), it is difficult to generalize the private sector as a whole, as the differences between a small, family-owned shop in a rural area and a large, industrial corporate are just too immense. The impact of MNEs that undertake SDG-directed actions will be better visible on a global scale and are better comparable. Although there are still enormous differences between the impacts of Fast-Moving Consumer Goods (FMCG)-enterprises, corporate financial institutions and energy companies on society, no clear distinction between these sectors will be made. This thesis aims to contribute to a greater, general discussion on the topic of sustainable development and Corporate Social Responsibility and thus will not aim to provide detailed insights in specific sectors or certain business practices. Thus, while specific examples may be used throughout this thesis to clarify certain practices or approaches, the main focus will be on the SDGs and business as a whole.
The second chapter will analyse the expected contribution of the private sector in the implementation of the 2030 Agenda for Sustainable Development. Firstly, sustainable development will be defined. What understanding does the UN have of it and why is this an urgent issue? Why is a global approach required in order to achieve sustainable development? Then, I will analyse the contents and scope of the SDGs, as well as the envisioned plan of action to achieve the Goals by 2030. There are so many different, but interrelated, goals, targets and indicators in this Agenda, that the Agenda will be analysed as a whole2, while focusing on the role that has been
2 While there are SDGs that might have a clearer relation to the private sector than others, the
laid out for the private sector. It is also relevant to reflect on the negotiation process of the SDGs, in order to understand the pledges made by certain institutions involved in the determination of the Goals. How was the 2030 Agenda created and agreed upon (among others based on input provided by involved business leaders) and what does the agenda contain, in terms of private sector engagement and public-private partnerships? Why is there a need for private sector engagement and what is the incentive for businesses to contribute to the SDGs? How is the private sector supposed to contribute?
The third chapter will weigh and evaluate the dependency of the UN on business participation in the ‘global partnership’. What are the chances of the 2030 Agenda to succeed, given its reliance on the private sector? What are considerations that should be taken into account when implementing non-legally binding frameworks aimed at stimulating corporate sustainable development? Is it desirable and/or sensible for the UN to rely on the private sector when it comes to tackling global challenges through the means of Corporate Social Responsibility and SDG implementation of the private sector? What are possible implications of engaging the private sector in dealing with these societal, environmental and economic issues? These questions aim to give a deeper meaning to the first two chapters, as they will build on the research and knowledge initially provided.
Relevance
The relevance of this thesis can be divided in an academic contribution and a social one. The academic relevance concerns the contribution of this research to the already existing theoretical discourse about corporate social responsibility and existing social constructions with regards to political and economic powers, functions and influence. The thesis aims to add something to the current state of knowledge on the role of the private sector in society, as well as the process and follow-up on SDG implementation through the means of an ‘all-encompassing’ public-private partnership aimed at sustainable development in all its forms. As the Goals have been adopted quite recently, little research has been done on the meaning of the Goals and their possible impact. The global aspirations for the future are often regarded as a beacon of hope, and thus the publications on the 2030 Agenda are usually written in a tone of sheer positivity. Especially when it comes to corporations taking a stance with regards to the UN Sustainable Development Goals, critical voices are not often heard. This is probably the case because most of the enterprises that are well aware of the SDGs, are usually positive towards the UN and its standards. While CSR has been dealt with extensively from diverse academic disciplines, this thesis will use a multidisciplinary approach, taking in considerations offered from these various perspectives. In order to narrow down the theoretical framework, only the most established3 scientists and
3 Acknowledged researchers and publications and professors linked to universities such as
theorists will be used in this thesis. Applying their theories to an actual, practical example in the form of the 2030 Agenda will provide new knowledge, which could ultimately be used for further research. This combination of theory and data will occur through extensive analysis of primary sources such as official documents like UN resolutions, secondary sources such as books, interviews and articles on topics related to CSR and the use of Public-Private Partnerships and tertiary sources analysing the academic discourse on CSR. To conclude, the specific addition of this thesis to the already existing literature is the multidisciplinary mapping of the CSR discourse, the assessment of the corporate role in the 2030 Agenda and ultimately, the connection that will be made between the CSR-debate and the envisioned role of business in the 2030 Agenda. What can the academic debate on CSR tell us about the possibilities and implications of SDG implementation by the private sector?
With regards to the social relevance, it is often understood that research should potentially affect people; people should be able to evaluate the implications of the research and thus should thus be able to better understand the problem; and, if possible, the research should lead to practical advice or solutions.4 Being present at the official adoption of the 2030 Agenda in New York, the relevance
of the Sustainable Development Goals became very clear to me. However, in order for the Goals to succeed, global awareness must be raised. Attention must be paid to social, environmental and economic challenges ahead, whereas unsustainable practices must be eradicated on a global scale. The added value of this thesis is to contribute to the academic knowledge about the 2030 Agenda and its relation to CSR. Moreover, if this thesis could contribute in any possible way to spreading awareness of the importance of the Goals, the role of business in Sustainable Development, I will be satisfied. I also hope to provide some food for thought for its readers – concerning conscious consumption patterns and responsible behaviour, but also to encourage to do research on certain businesses, their current impact and potential role in global issues. Moreover, this thesis aims to provide insightful realizations on the role(s) of business in society, and what the effects of this position could be. How much and what kind of power do we want multinational corporations to have? This thesis aims to provide a better understanding on these important matters.
4 M. Lehnert, B. Miller and A. Wonka, “Increasing the Relevance of Research Questions”, in:
Research Design in Political Science: How to Practice What They Preach, Oxford: Oxford
Chapter 1. Corporate Social Responsibility
In this chapter it will be investigated what the main arguments on this often discussed concept are. The concept of CSR generates all kinds of emotions: from scepticism and criticism to hopefulness and optimism. Some see it as a clever marketing trick, only used to attract more customers, whereas others view it as the future solution for society’s problems, where innovative and transformative ideas could generate unprecedented growth. The debate about CSR does not focus on a single issue. Questions that are being asked are for instance what defines CSR, whether and why companies should be socially responsible, how they should enact CSR and what the impacts of such policies are, both for the businesses as well as the societies in which their operation chain is active. What are the most important and apparent perspectives that are identifiable within the academic discourse on CSR?
1.1 Concept Definition
In the past century, the concept of Corporate Social Responsibility has been defined in many different ways, ranging from performing standard ethical practices, as a type of business model to the general idea of a company supporting the welfare of society. In the 1960s, it became a popular term and has never left the public and academic discourse since then. Definitions vary, periodically, thematically but also geographically. In China, a socially responsible company is usually seen as a company that ensures the production of safe and high-quality products and/or services. In contrast, the German perception of CSR is usually a company which is dedicated to provide secure employment for the German population.5 Meanwhile, in Africa, the focus of a
corporation aiming to be socially responsible is often on the provision of social needs such as health care and education.6 These various meanings suggest that CSR is quite a heterogeneous
concept and can be applied in a broad sense and on a wide variation of themes such as employment, environment or social impact.
Many general descriptions of CSR usually come down to ‘a management strategy that surpasses legal requirements and that aims to integrate social and environmental concerns into a business strategy’.7 According to Andrew Crane’s Oxford Handbook of Corporate Social Responsibility, a CSR
5 Maverlinn and Vermander, B, Corporate Social Responsibility in China: A Vision, an Assessment
and a Blueprint, World Scientific (2013)
6 K.T. Saether, and R. V. Aguilera, "Corporate Social Responsibility in a Comparative
Perspective", in: Crane, A.; et al. The Oxford Handbook of Corporate Social Responsibility, Oxford: Oxford University Press, pag. 20-45
7 K. Davis, “The case for and against business assumption of social responsibilities”, in: Academy
of Management Journal, number 16 (1972), 312-322
policy can be a short-term action plan or a long-term strategy and the approach can vary per company or sector. A business unit responsible for strategy development on sustainability or the audit and monitoring of CSR policies can be based in various departments of a company, such as human resources, public relations or business development, but can also make up an entirely separate department within a company, dedicated solely to this end. Strategies can aim at specific sections of the company, such as supply chain, Research and Development (R&D), production and/or logistics, but can also consist of a holistic approach to encompass the complete sphere of influence of the company. According to Crane, the most common CSR approaches include: - Environmental sustainability, where one can think of proper waste management, greenhouse emission reductions, recycling, water management, the use of renewable energy, greener supply chains;8
- Philanthropic activities, such as financial investments or donations in national or local charities, providing labour on a pro-bono basis, community involvement such as the employment of local workers or engaging in fair trade practices in order to support local growth;
- Ethical employee and consumer policy adoption, this could for instance be the fair treatment of employees by applying stricter labour regulations than legally mandatory and providing good secondary benefits such as education for children.9 Consumer policy could aim at ethical
marketing, such as explicitly not manipulate or falsely advertise to potential consumers – basically respecting them and regarding them as people, not potential gold mines (which is something the bigger, lobbyist corporations are sometimes accused of).
Archie Carroll, professor in Business Management at the University of Georgia tried to sum up these approaches in her often cited definition of CSR: “The social responsibility of business encompasses the economic, legal, ethical and discretionary expectations that society has of organizations at a given point in time”.10 While it is a popular definition, it only covers the
expectations of society and does not include a business’ perspective or willingness in its meaning. Therefore, the Commission of European Communities upholds a more detailed definition:
“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
8 Tegan Jones, "Talent Management”, in: The Business Value of Virtue: Corporate Social
Responsibility and Employee Engagement (2007)
9 A. Crane et. al. The Oxford Handbook of Corporate Social Responsibility, (Oxford: 2008), 10 Archie Carroll, “A Three-Dimensional Conceptual Model of Corporate Performance” in:
basis. It is about enterprises deciding to go beyond minimal legal requirements and obligations stemming from collective agreements in order to address societal needs.”11
Throughout this thesis, the definition of the European Commission of CSR will be used. This way, all interpretations given as to what falls within the scope of CSR can be included, without giving preference to geographical notions or industry-related meanings of the concept. With the 2030 Agenda being a collective agreement without legal requirements or obligations, this definition seems to fit well. The central idea of the Agenda is that all nations agreed that there are seventeen main issues (societal, environmental and economic needs) that need to be addressed or solved before 2030. While this could happen through the implementation and execution of governmental policies and strategies aimed at sustainable development (on an international, national or even local level), the UN believes that corporate behaviour is a decisive factor in the achievement of the SDGs, without the necessity of setting legal standards.12
1.2 The Business of Business: Should Companies be Socially Responsible?
The difficulty with assessing CSR in the academic debate is that the concept is being analysed in many different academic fields and studies – and even within varying schools of thought within those diverse disciplines. Among the sciences that discuss CSR are economics and business administration, anthropology, philosophy, globalization studies and political science. Most of the existing theories deal with one or more dimensions that are related to the private sector and its motivations to adopt CSR policies, such as business ethics, political performance, profit generation and/or social demands.13 These aspects are often mentioned in academic analyses of CSR, but arecomplicating the debate, as discussants sometimes seem to not really be talking about the same thing. 14 However, two important questions can be untangled from this messy discourse, that are
relevant to this thesis. The first is whether companies should embrace socially responsible business models (dealing with the existential question what the core function of business really is and what its duty to society is - and what not) and the second is whether CSR brings desirable results or not (identifying what the (dis)advantages of CSR are, both for society and businesses). To assess whether the reliance on the private sector in the 2030 Agenda for Sustainable Development is sensible and whether the achievement of the SDGs is realistic, the nature of business and its role
11 Commission of the European Communities, Implementing the partnership for growth and jobs:
Making Europe a pole of excellence on corporate social responsibility (2006), 2
12 J. Graafland and C. Mazereeuw-Van der Duijn Schouten, “Motives for Corporate Social
Responsibility”, in: The Economist (New York: 2012), 378
13 Crane, et al. Oxford Handbook
14 Elisabet Garriga and Domènec Melé, Corporate Social Responsibility Theories: Mapping the
in society, the profitability and urgency of CSR and developments in the global, national and even regional political spheres are all related and relevant issues of discussion.
The next section will discuss the existential question on the nature of business. According to the academic discourse, can a company have social responsibilities, and if they do, to what extent? How did theorists discussing this question argue their theories? Did the perception of the nature of business change over time?
1.2.1 The Function of Business
The first time this question was addressed in court was in 1919. During the Dodge versus Ford Motor Company case, the core responsibility of business was put to official ruling. In this time, the public opinion was more sceptic towards Corporate Social Responsibility than it is nowadays. This specific case focused on the use of shareholder funds and what should be the core business objective of the executive management. Henry Ford strongly aspired to provide all Americans with a Ford vehicle. To achieve this, he planned to reduce the price of his cars with eighty United States (US) dollar. However, shareholders disagreed to the lowering of the price and claimed that this action would prove to be damaging to the company and thus its shareholders. They stated that the primary responsibility of Ford Motor Company was to provide shareholders with maximum profit – and not providing cars to all citizens. The jury ruled that indeed,
(…) a business corporation is organized and carried on primarily for the profit of the stockholders. The power of the directors is to be employed solely to that end. The discretion of the management is to be exercised in the choice of means to attain that end and does not extend to a change in the end itself, to the reduction of profits or to the non-distribution of profits among stockholders in order to devote them to other purposes.15
This judgment was very similar to the popular opinion concerning the role of business in society; which was that business were created to maximize profits and thus increase (shareholder) wealth, not redistribute it or otherwise. Still, this line of thought remains prevalent in opponents of CSR who often support the Shareholder Theory. This theory is built on the traditional view that the sole responsibility of a business is to provide for its shareholders. The Shareholder Theory opposes the Stakeholder Theory, that will be explained later in this chapter.
In many economic theories, the homo economicus is a term that portrays humans as rational and solely self-interested actors. According to this concept, a person will generally pursue goals that will optimize one’s (economic) position: to maximize the highest possible utility as a consumer and to maximize the amount of profit as a producer or manager.16 The human desire to possess
15 Dodge v. Ford Motor Co., 170 N.W. 668 (Michigan: 1919) attained on April 11, 2016 via:
https://www.law.illinois.edu/aviram/Dodge.pdf
16 John Stuart Mill, “On the Definition of Political Economy, and on the Method of Investigation
wealth is thus regarded as a key influence on human behaviour: individuals will always want to achieve these predetermined goals to the greatest extent with the least possible cost and/or minimal effort. While this natural human egoism and the supposed traditional nature of the for-profit sector have often been contradicted, it remains a useful point of departure when discussing the Shareholder Theory or the intentions behind Corporate Social Responsibility. Adam Smith’s famous ‘invisible hand’ also considered corporate greed, as he argued that acting out of self-interest (or that of the company) would ultimately promote social welfare and benefits society.17
Economist Sergio Caruso points out that when the homo economicus-concept is being debated, a distinction should be made between a purely “methodological” version and an “anthropological” version. The former is primarily usable in a practical manner such as economic predictions and quantitative models, whereas the latter is more appropriate for ideological discussions on human nature or behaviour in general.18 It can be difficult to make a clear-cut distinction between an
anthropological and methodological version in the discussions on CSR, as societal ideological thought and ethical values are intertwined with economic rationale and profit maximization. In any case, the discussion about the responsibilities of business has some structure: it can roughly be divided in the supporters of the Stakeholder Theory and the supporters of the Shareholder Theory.
In line with Adam Smith’s invisible hand, Milton Friedman (1912-2006) wrote an influential essay on this issue in The New York Times Magazine in which he questioned social responsibilities of business in a free-enterprise system. He was an important American economist who asserted that only persons can have responsibilities and therefore corporate responsibility cannot exist. Moreover, he stated that a company engaging in CSR would lead to a conflict between its shareholders and managers. Friedman thinks that the use of CSR by managers is just a means of increasing their power – by pursuing their own
social, political and career agendas.19 He therefore argues that resources devoted to CSR would be
J. Persky, "Retrospectives: The Ethology of Homo Economicus" in: The Journal of Economic
Perspectives, Vol. 9, No. 2 (Spring, 1995), pp. 221-231
17 Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (1776)
18 S. Caruso, Homo Oeconomicus: Paradigma, Critiche, Revisioni, Florence: Firenze University
Press, 2012
19 Millton Friedman, Corporate Social Responsibility
more wisely spent if they would be invested in increasing firm efficiency.20 This way, not only the
shareholders would benefit, but ultimately also the general public. This idea has been picked up as part of a bigger debate on corporate governance, part of which is the Agency Theory.
The Agency Theory describes the situation where directors and managers are in control of a company while shareholders are the owners of the same company – meaning the executives might have different objectives than the shareholders best interests. This theory, explained by the overview depicted on the right, forms a problem that is ever more applicable to our modern global economy model. Historically, companies were owned and managed by the same people. Nowadays it is not unusual to have MNEs that are owned by thousands of stockholders from all over the world, who each own less than one percent of the company. Meanwhile, the MNEs in question are managed by Chief Executive Officers (CEOs) who sometimes do not even own a share in the company they run. The Agency Theory is
influential in discussions on CSR – more specifically in critiques of the concept. The potentially competing interests resulting from these new types of business management structures complicate the traditional economic way of thinking of historical figures such as Adam Smith. On the other side of the debate is the Stakeholder Theory. In his book Strategic Management: A
Stakeholder Approach, R. Edward Freeman introduced this theory, in which he reflects on the
morals and values that come with the management of a company.21 In this new perspective on
business ethics, it is thought that corporations should consider the effects of their operations upon all stakeholders of the company. In addition,
supporters reason that if a company successfully provides for the needs of its stakeholders, they will ultimately ensure its continued success.22 The
exact determination of what a stakeholder is, remains highly debated, but they usually include parties as depicted in the figure on the right. The extremer version of the Stakeholder Theory is the
20 A. McWilliams and D. Siegel, “Corporate Social Responsibility: a Theory of the Firm
Perspective”, in: The Academy of Management Review, vol. 26, number 1 (2001), 117 and 118
21 R. Edward Freeman, Strategic Management: A Stakeholder Approach 22 Zachary Cheers, The Corporate Social Responsibility Debate, 8
4. Examples of a company’s internal and external
stakeholders © BY-SA 3.0
3. Agency theory and corporate governance problem. © Kaplan
Legitimacy Theory, which holds that a company has ‘implicit contracts’ with its stakeholders to provide for the company’s long-term needs (also referred to as the ‘social licence to operate’)23. In
this theory, it is argued that stakeholder relationships legitimize the existence of the company. Because society provides the necessities that allow companies to exist, companies have to engage in social endeavours in return.24 Finally, it is reasoned that larger enterprises have a greater
responsibility than smaller ones: not only do they have more resources they could attribute to CSR, they also take away more resources from society.25
1.2.2 Academic Debate on CSR Theories
One argument used to defend the Stakeholder Theory is that the private sector should conduct CSR practices and help solve society’s illnesses because other institutions ‘clearly’ have failed.26
Proponents of CSR state that the increasing power of MNEs in society can be explained by the Iron Law of Responsibility which reads that ultimately, society will act to reduce the power of “those who have not used it responsibly”27. Withdrawing from this law, the Legitimacy Theory holds that
the social authority of powerful for-profit organizations is consolidated and legitimized by meeting the needs of society. Nevertheless, theories emphasizing the potential of the private sector as the solution for social and environmental problems are often accused to be oversimplifying complex societal issues. Chances are high that these issues would have been remedied long ago by firms specifically focused on benefiting society.28 Also, it is not very likely
that (unspecialized) businesses would be better in solving such social issues than elected political institutions (that perhaps do possess the needed power, knowledge and resources).
In practice, the theoretical responsibilities of companies to society may not be convincing, as theorizing about stakeholder relations and “implicit contracts” with society has little effect on their actual daily business operations. The traditional economic perspective on CSR as well as the Shareholder Theory may carry more weight when it comes to adopting CSR policies or investing in SDG implementation, as it focuses on the practical benefits like net profit or effective management, instead of mostly philosophical, theoretical considerations. In addition, there are
23 J. Morrison, “Business and Society: Defining the ‘Social License’,” in: The Guardian, 29
September 2014, on: http://www.theguardian.com/sustainable-business/2014/sep/29/social-licence-operate-shell-bp-business-leaders
24 Z. Cheers, The Corporate Social Responsibility Debate, (Virginia: Liberty University, 2011), 22 25 J. Guthrie and L. Parker. “Corporate Social Reporting: A rebuttal of Legitimacy Theory”. In:
Accounting and Business Research, Volume 19, Issue 76, 1989.
26 K. Davis, “The case for and against business assumption of social responsibilities” in: The
Academy of Management Journal, number 16, 1972, 303
27 Davis, 2001, p 314
28 Karnani, A. The Case Against Corporate Social Responsibility. Michigan: University Press, 2010,
some other practical arguments against the Stakeholder Theory and Corporate Social Responsibility in general. For instance, it would be impossible for a company to serve the interest of each of its stakeholder groups, as these interests are often conflicting: consumers want quality products, good service and low prices, employees desire high wages and good working conditions and shareholders usually want the highest return on their investments made. Moreover, in practice, if managers would pursue CSR strategies that would clearly hamper profits, they would soon be out of their jobs.
On the other hand, there are some (practical) problems with the Shareholder Theory as well. It is often assumed that all shareholders unanimously support the sole pursuit of profit, following the reasoning of Adam Smith and Milton Friedman. The most extreme version of this theory states that using shareholder money in unprofitable ways is wrong and inappropriate and thus, that CSR should be abandoned altogether.29 However, in the current mode of global awareness of business
ethics, this idea is no longer viable. Not only is the vast number of shareholders of many MNEs practically never unanimous, not engaging in CSR at all would probably result in massive negative publicity that could ultimately destroy the success of a company. Furthermore, whereas maximizing returns to shareholders used to be business as usual, more and more business models nowadays focus on long-term results, while reinvesting profits and shareholders’ initial investments in the company, instead of returning profits.
However, in the end these arguments are effectively denounced by the milder version of the Shareholder Theory which holds that a strategy that is ultimately the best for the company is the right one and should always be pursued, regardless if it is aimed at CSR or not. If it is a strategy that includes a CSR policy, it is usually referred to as the ‘business case for CSR’, that argues that investments made on employee or consumer satisfaction, environmental sustainability et cetera are decided upon precisely because they will help the company thrive. It is a different approach than the ‘normative case for CSR’, which proponents based on the Stakeholder Theory.30 In this
case, it is argued that CSR policies should be implemented because it is good to do so (and not just because it is in the direct interest of the business, as the Shareholder view on CSR argues). In the entrepreneurial sector, this way of thinking resulted in new, innovative and conscientious business models, whereas in academic circles, this new economic model seems to gain more and more support.
29 Freeman, R.E. and Liedtka, J. “Corporate Social Responsibility: A Critical Approach”, in:
Business Horizons, 34(4), 1991, 65
1.2.3 The Purpose Economy
“We do not hire people to bake brownies, we bake brownies to hire people”.31 This statement from
the mission-driven Greystone Bakery is explanatory for the upcoming kind of business: in order to solve a social problem, a business has been invented. The core idea is not to make profit, but to solve a particular issue. It is a different kind of supply-and-demand model, adjusted to a presumed new economic system: the purpose economy. According to a PwC research that was presented at the World Economic Forum, CEOs are predicting a new economic era by 2020.32 In this era,
demand for purpose in the consumer marketplace will increase by three hundred percent, putting less emphasis on cost, convenience and function than ever before.33 Aaron Hurst states that we
are entering the ‘fourth economy’34 in history, which will unlock a new era in today’s society. After
experiencing a time of maximized efficiency, scale and unprecedented growth, where information, industrialization and consumption spread out fast, the effects of this capitalist, consumer society became painfully clear. According to Hurst, “we lived longer and got faster, bigger and smarter, but lost connection to our humanity. We became a society organized and optimized around systems and institutions, but not around (other) people.”35 He states that the world is entering a
new stage, where purpose will become the main driver of innovation and growth. In practice, this idea seems indeed to be winning ground36, as many (start-up) businesses originate from the idea
to solve a specific social or environmental problem and find a way to generate profit from that. Examples are fast-growing businesses like The Ocean Cleanup, billion dollar company Etsy and American supermarket chain Wholefoods.
Regarding the question what the role of business in society is: the idea that the private sector is operating solely to generate maximum economic value in the easiest and shortest manners seems to be slightly outdated. The current value creation is not only taking place in the economic dimensions, but in the three spheres which is nowadays often referred to as the Triple Bottom
31 F. Wiering,(director), W. Bruijn, (research) and J. Borger, (production), VPRO Tegenlicht
Rendement van Geluk. broadcasted April 3rd, 2016.
32 PricewaterhouseCoopers. 2016 US CEO Survey Top Findings. New York, 2015. On:
http://www.pwc.com/us/en/ceo-survey/top-findings.html
33 A. Hurst, “CEO’s: 2020 Tipping Point for Purpose Economy”, in: Psychology Today, 25 January
2016, on; https://www.psychologytoday.com/blog/the-purpose-economy/201601/ceos-2020-tipping-point-purpose-economy
34 The first economy being the Agrarian economy, which evolved in the industrial economy
(second economy, which lead to a radical transformation of society in a period of about hundred years), followed by the information economy (third economy, which arose about 75 years ago). Source: the Purpose Economy, Aaron Hurst, 2014
35 A. Hurst, “Etsy is Proof that our Economy is Experiencing a Biological Event” in: The Guardian,
16 June 2014, on: http://www.theguardian.com/sustainable-business/etsy-economy-biological-event-purpose
36 http://www.theguardian.com/sustainable-business/series/values-business, PWC onderzoek,
line: People, Profit and Planet (PPP). Whereas profit remains central to a viable business model (it is obviously still necessary in order to exist), executives are increasingly challenged to integrate the social and ecological dimension in the strategy of the company.37 Accordingly, N. C. Smith,
former professor at Harvard Business School, argued that “(…) the impression created overall is that the debate about CSR has shifted: it is no longer about whether to make substantial commitments to CSR, but how”.38
If businesses benefit from implementing CSR policies and helping to solve social issues, this could be regarded as the ultimate win-win situation. But what is there exactly to win for companies implementing CSR policies? The next section will analyse some of the often-heard benefits of CSR and thereafter, some of the risks and disadvantages related to the implementation of CSR policies.
1.3 The Profitability of Corporate Social Responsibility
Nowadays, CSR seems to be everywhere. While there are still academics, executives and others criticizing the idea and its actual value, the flaunted benefits of CSR seem to outweigh the critical voices. Browsing through the websites of the twenty largest listed companies of the world39, it is
noticeable that there is not one MNE that has not published a CSR policy or sustainability section. Moreover, of the world’s 250 largest corporations, 93% report on their sustainability performance.40 What is the incentive for companies to include those strategies? In order to be able
to grasp the current discussion and various perspectives on CSR, it is relevant to create a better understanding of CSR itself. Why would corporations even consider engaging in social or environmental efforts on a voluntary basis? There are many reasons for companies to implement CSR policies, which can roughly be divided in three groups: strategy, defence and altruism.41
1.3.1 Strategy
Innovation is one of the first named benefits of CSR. Companies thinking of improving their production process by making it more sustainable, may invent solutions that will revolutionize the line or type of products and production process. For instance, Unilever has innovated its care products by using less water in the production of hair products such as shampoo. Without its drive to facilitate sustainable development, the Research and Development-department (R&D) would
37 Graafland, 379 38 N. Craig Smith, 2003 39 www.forbes.com/global200
possibly not have come up with this successful new type of product.42 The urge to be sustainable
can thus be seen as an important driver for change: which has led to important innovations. Closely related, CSR is said to lead ultimately to cost savings. For example, reducing the usage of energy or packaging materials is both helping the environment, and will simultaneously save the company costs.
In addition, especially in the light of the current sustainability hype, brand differentiation may prove to be an important element of a business strategy. CSR can help build customer loyalty based on distinctive ethical values.43 Living up to costumer expectations by brand differentiation
was one of the primary reasons companies embraced CSR. In addition, brands such as The Body Shop, Tony Chocolonely and American Apparel became well-known to the public primarily because of their sustainability views and widely advertised social conscience.44 Media coverage is
thus a direct benefit of CSR. Likewise, not engaging in CSR can lead to negative publicity, as has been the case for large chains and enterprises such as Primark, Shell and Nestlé. Naming and shaming of unsustainable or unconscious brands is an important risk that in the highly communicative and globalizing society can severely damage a business’ reputation and ultimately, sales figures and the market position.
Related to this marketing strategy is customer engagement which proves to be beneficial to companies. By being socially responsible and having environmentalism as a key business trait, it opens up the opportunity of engaging in a conversation with (potential) customers. By spreading the message that using specific services or products is a way of ‘doing good’, it can potentially persuade customers. Engaging customers in stating that ‘they can contribute’ fuels the dialogue with potential buyers and users. This is for instance an often used tool in business-to-business relations. Supplier firms can increase their attractiveness because there is added value in having sustainable partners as well.
Along similar lines, employee engagement can also strengthen a company. If employees are actively stimulated by their management to help improving the business strategy by driving sustainable development forward, employee solidarity can increase. Moreover, CSR can be an aid
42 Orlitzky, Marc; Frank L. Schmidt; Sara L. Rynes (2003). "Corporate Social and Financial
Performance: A Meta-analysis" (PDF). Organization Studies (London: SAGE Publications)
43 Paluszek, John. "Ethics and Brand Value: Strategic Differentiation" in: Business and
Organizational Ethics Partnership Meeting. Markkula Center for Applied Ethics, Santa Clara
University, 2005
44 James Epstein-Reeves, “Six Reasons Companies Should Embrace CSR” in: Forbes Magazine,
to recruitment and retention.45 The attractiveness of a company as an employer will increase, as
potential recruits often consider a firm’s CSR policy.46 Finally, employee satisfaction levels can
increase by creating a positive workplace environment through the use of CSR, for instance through involvement in payroll giving, fundraising activities or community volunteering.47
1.3.2 Defence
CSR is also used as a defensive strategy. In the hope of gaining public support for a business’ presence in global markets, it is important to live up to customer expectations raised by direct competitors. In order to prevent competitors from gaining an advantage, companies need to embrace similar approaches to CSR in order to not get left behind. An example of this is the sustainability race (also referred to as the “Cola Wars”) of soda producers Pepsi and Coca-Cola. Both were looking to expand their market shares by pursuing strategies of zero net water usage and sustainable packaging materials, while widely disseminating their results to the eyeing public. Moreover, CSR policies can sometimes lead to a reduction in governmental scrutiny. The private sector is usually keen to avoid governmental interference in its business through regulations or taxation measures. CSR policies can sometimes persuade governments that businesses are taking environmental, social and cultural issues seriously, which could reduce the chance of being closely monitored by the authorities.
Over the last twenty-five years, much research has been done to Corporate Social Responsibility, and the arguments stated above usually serve as the main driver for corporations to adopt such a policy: CSR has shown to raise long-term profitability48 and thus the main motive would be
extrinsic. However, there is also the other side of the debate, which is the idea that there are also intrinsic motives (a.k.a. the normative case) that serve as a motivation for CSR.
1.3.3 Altruism/Ethics
CSR investments and policies can possibly be deducted from two types of (intrinsic) motivations: CSR as a moral duty and CSR as an expression of altruism.49 A distinction can be made between
whether a person feels obliged to do something because it is right, not because one finds it enjoyable (to be socially responsible) and whether a person enjoys helping others and thus wants
45 Bhattacharya, C.B.; Sen, Sankar; Korschun, Daniel (2008). "Using Corporate Social
Responsibility to Win the War for Talent" 49 (2). MIT Sloan Management Review: 37–44
46 Hurst, A. “Etsy is Proof that our Economy is Experiencing a Biological Event” in: The Guardian,
16 June 2014, on: http://www.theguardian.com/sustainable-business/etsy-economy-biological-event-purpose
47 The Good Company". The Economist. 2005-01-20. Retrieved 2008-03-07. 48 Olitzky e al., 2003 and Van Beurden and Gössling, 2008
to contribute to the common good – motivated by a genuine concern of the well-being of others. The adaptation of a business strategy (even more so for Small and Medium Enterprises) could thus be stimulated by a manager’s personal values and beliefs. 50 An example of this in a MNE is CEO
Paul Polman from Unilever, a fervent proponent of sustainability and good governance.51
However, there are not only positive voices when discussing CSR. In order to remain objective, it is important to include critical notes and concerns related to CSR as well.
1.3.4 Risks of CSR
Consumers are currently becoming more conscious of fair trade practices, whereas a decade ago, organic products saw a steep growth. However, some state that social welfare is not the driving force behind these trends. Critics state that healthier foods and hybrid vehicles, for instance, only became common because they became profitable for their makers.52 That would mean that these
sustainable developments in the private sector still only rely on whether they are enhancing shareholder wealth. This makes the conscientious movement unstable and unreliable, because once the private sector invents more profitable, but also more unsustainable, products and services, the sustainability-hype might slowly fade away and make room for more harmful practices. Moreover, like with other trends, people could gradually lose interest in sustainable development or become less motivated to contribute to the reduction of future environmental and social risks, which will lead to a decrease in the popular demand for sustainability. The same can be applied to intrinsically motivated CEOs that are currently taking the lead in corporate sustainable development. While they may be sustainability influencers now, it is not a given fact that this is a continuous situation. Taking into account the Principle-Agent theory, it is important to mention here that a CEO might not be in charge to see the results of a policy he or she helped to implement, as a typical term does not surpass fifteen years – which might not be motivating to adopt long-term strategies. Directly increasing financial results (from investments not made in CSR) might benefit the CEO personally: annual bonuses are hard to base on the gradual sustainable development of an enterprise.53 In the CSR discourse, this argument is referred to as
the ‘lack of accountability’54, stating that responsibility and accountability should always go
50 Bronn and Vidaver-Cohen, 2009
51 G. Ruddick, “Unilever CEO Paul Polman – the Optimistic Pessimist” in: The Guardian, 25
January 2016, on: http://www.theguardian.com/business/2016/jan/25/unilever-ceo-paul-polman-the-optimistic-pessimist
52 Karnani, 2010
53 This means that the incentives or extrinsic financial motivations for CSR could also be opposed
by the direct personal interest of an executive. But, as mentioned in the Agency Theory, the side note has to be included that the will of a manager is not always decisive in the determination of business strategies.
together. Because business have no real accountability in the areas of environmental, economic and/or social sustainability and stability, they should not be given responsibility for it either. There is another often described risk when it comes to CSR. Many businesses have picked up on the trend that having a socially responsible reputation is a great way to attract and bind consumers, employees and investors. However, an obvious risk here is phony marketing (in environmental issues often called ‘greenwashing’) where CSR policies are not actually implemented, at least not as promised. In this case, corporations are not pursuing CSR to benefit society, but to take advantage of stakeholders that are sold out to the concept of CSR.55 ‘Organic’
farms with cage-free poultry, falsified reports on greenhouse emissions and fair-trade clothing fabricated in sweatshops; scandals of this kind are happening round the clock.56 How can
stakeholders be certain or assured by CSR policies? Distinguishing brands from being real or fake when it comes to sustainable development can be quite confusing to consumers, as with every scandal, “green”, “natural” and “fair” claims lose their credibility and legitimacy little by little. Also, the legitimacy of CSR policies is questioned when they are proclaimed by enterprises that are considered to be harmful to the environment or society solely by existing.57 Can oil magnates such
as Shell ever really be sustainable? Enterprises that are considered as harmful to the environment or society, are not often convincing when they proclaim their efforts to achieve sustainable development.
Another argument in the academic debate on CSR is one referred to as the “dilution of business’s primary purpose”. The idea here is that CSR would only distract firms from their economic role, “divide the interests of its leaders, and weaken the position of these involved businesses in the marketplace”.58 As a result, businesses would ultimately perform poorly in both its economic role
and in its social role. 59 Accordingly, it can be concluded that the successful functioning of our
society thus depends on the role specialization of institutions.60 In line with Adam Smith’s
‘invisible hand’, it is considered to be best for society if business would focus on its own best interest and thus do what it is best at: generating profit.
Along similar lines, another important argument against CSR is the destruction of pluralism.61
Friedman and Levitt strongly believed in the separation of power, as they found that “(…) a
55 Cheers, 13
56 Hawthorne, F. The Reasons and Risks Behind Corporate Social Responsibility, 14 January 2014,
government’s job is not business, and business’s job is not government”. They stated that unless these functions are absolutely separated in all respects, they are eventually combined in every respect. With MNEs that are expanding globally, so does their political and cultural influence, which strengthens their powers. If they take up tasks such as education and (food) security, they might decrease the governmental role in societies where they are active. It is often argued that this is an undemocratic and worrisome development, as CEOs or managers have not been elected, and often lack the experience and knowledge that most governments do have.62 If businesses
increasingly determine certain cultural, political and economic standards, this could have far-reaching and harmful effects. Practical examples of this situation include the weapon industry in the US and the food industry in (Western-) Europe that are considered to be powerful lobbyists with deep-rooted connections in the political spectrum. Their influence in the governing spheres is not said to be beneficial to society, as they promote potential aggressive and unhealthy behaviour. 63 Other arguments against this privatization or the outsourcing of traditional
governmental tasks are for instance the protection of public interests (which means that with tasks such as health care or education, priority should be given to values such as patient care, not profit), the risk of corruption and the provision of essential services in all regions (whether they are profitable or not).64 The role of business in society and the desirability of CSR is therefore still
debated – and ever more actual and relevant. The third chapter of this thesis will discuss this dimension of the CSR debate once more.
1.4 Conclusion
In this chapter, two major aspects of the discussion around CSR have been discussed. First, the question whether companies should be socially responsible and should thus implement CSR policies has been addressed. As time evolved and society changed, so did the academic thinking on both this question and the core function of business. Whereas in the beginning of the twentieth century, academics were highly sceptical and suspicious of Corporate Social Responsibility, it nowadays seems to be an established part of a mainstream business model in all kinds of sectors and regions. Roughly, the theoretical debate can be divided in proponents of the Stakeholder Theory versus the supporters of the Shareholder Theory. Whereas the former think that businesses should consider the desires and expectations of all their stakeholders, the latter hold that a company’s sole responsibility is to their owners -and thus to generate wealth on their behalf.
62 The corporate social responsibility and the Theory of the Firm.
https://www.ecu.edu.au/__data/assets/pdf_file/0020/40736/wp0505ik.pdf
63 Marion Nestle, Food Politics and
http://www.economist.com/news/united-states/21647627-prevent-gun-deaths-politicians-offermore-guns-why-gun-lobby-winning
64 "Winners and Losers: Assessing the Distributional Impact of Privatisation, CGD Working
However, in practice, it does not seem to be so black-and-white, as the ways of doing business and generate wealth have changed over time as well. Globalization, growing transparency, increasing pressure from competitors, stricter regulations and the growing (popular) demand for sustainable production and consumption have contributed to a solid presence of CSR in the private sector. As a result, more and more multinationals have embraced (or claim to have embraced) their responsibility towards society, the economy and the environment. Simultaneously, small start-ups and mission-driven firms are winning territory by filling the gap that resulted from a tumultuous information economy that left deep marks on the global economy, environment and society.65
However, the emerging idea of the Purpose Economy might be too idealistic: while the footprint of a product lifecycle66 might become more important, the price and quality will remain decisive
factors in the purchase of a product or service.67 The same logic applies to companies: executives
will only implement (or be allowed to implement) new policies as long as the advantages outweigh the disadvantages, in which costs and benefits remain an important, if not decisive, factor. To conclude, the first question what the core function of business in society really is, and thus what its duty to society involves (and what not) is twofold. In theory, both the Shareholder- and Stakeholder theory are arguable, but in practice, a combination of both is the most realistic and viable. Shareholder wealth will not be maximized if stakeholder relations are not thoughtfully considered. So, regardless if a company has a social responsibility or not, in today’s society CSR has become embedded in the majority of business models worldwide – as not having one could pose a serious threat to a company’s profitability.
In the second part of this chapter, the pros and cons of CSR have been weighed and analysed. While CSR benefits are sometimes difficult to quantify - as many policies contain long-term strategies that are hard to express in terms of money – not engaging in the world of sustainable development could turn out to be a much costlier option. Therefore, many businesses worldwide increasingly consider their long-term impact and role in society. In their quest to achieve promising financial and social results in ten years’ time or longer, many companies pursue their mission of securing a sustainable and continuous future for their business. Their motives to adopt CSR policies can roughly be categorized under strategy, defence or altruism.
However, there are also a couple concerns that have been raised in the discussion on the desirability of CSR, with implications for both the (civil) society and the public and private sectors.
65 A. Hurst, The Purpose Economy: How Your Desire for Impact, Personal Growth and Community
is Changing the World. Idaho: Elevate, 2014.
66 Product Lifecycle Management (PLM) is the process of managing the entire lifecycle of a
product from inception, through engineering design and manufacture, to service and disposal of manufactured products. Source:
http://www.industryweek.com/companies-amp-executives/plm-revolution
67 Khosla, Swati (2010). "Consumer psychology: The essence of Marketing". International Journal
