Corporate Social Responsability

FIN 3403 – Corporate FinanceCorporate Social ResponsibilityEssayRequirementsSelect a domestic (U.S.) company listed in the Standard & Poor 500 index and explain its Corporate Social Responsibility (CSR) policy.InstructionsIndividual assignment.Word format.APA style is mandatory (student paper): https://apastyle.apa.orgOrder of pages: title page, text (body) according to requirements, references (according to in-text citations).References must list authoritative sources only, including at least four (4) references from the Library and Information Resources Network (LIRN).Please keep in mind the FNU policy on plagiarism.Total pages: 5-7 pages length document, including all order of pages.No late submission. If you have any question regarding your grade in this assignment, please contact me no later than 48 hours after receiving your grade. Abstract
This qualitative research utilized grounded theory methodology to generate a theory for
understanding why companies have incorporated corporate social responsibility (CSR)
practices and to identify the impact of CSR on organizations that have implemented the
practices. The focus was on understanding the perspective of employees who work
directly in CSR departments for employers who practice CSR. A central factor in the
research was to discover how employees dealt with the reality of why companies
incorporated CSR and the impacts on the organization. The employees’ experience
demonstrated employers often utilized CSR to generate new business, maintain existing
business, present positive images to general public, enrich workplace culture and sustain
environmental compliance.
This study used semi-structured one-on-one interviews with employees who worked in
CSR departments for employers who practiced CSR. Interview participants were
recruited through both opportunity and snowball sampling. Opportunity sampling
occurred by posting the “posting to participate” on the researcher’s LinkedIn profile and
other social media groups and networks related to CSR. Snowball sampling occurred
through the request in the “posting to participate” that asked viewers to forward the
invitation to those they believed would be interested in taking part in the study.
KEY WORDS: corporate social responsibility (CSR), grounded theory, internal CSR,
external CSR, doing right, employees, business intent, business driven, need, donate,
giving back, society, responsibility
Corporate Social Responsibility:
Understanding the Strategy and Impact of CSR Implementation
by
Warren Forney
Dissertation Submitted in Partial Fulfillment
of the Requirements for the Degree of
Doctor of Philosophy
in
Management
Sullivan University
March 9, 2018





ProQuest Number: 10788718



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Dedication
To the God of Abraham, Isaac, and Jacob that I serve unapologetically, to whom I
give all reverence, glory, credit, and honor to my Master, Lord, and my Savior Jesus
Christ, and the Holy Spirit, Amen.
Acknowledgements
I am compelled to thank God for leading, guiding, providing, keeping, and
blessing me to maintain focus throughout the entirety of this dissertation journey.
Additionally, I must acknowledge each research participant, Grandma, Ada MeeksForney, Grandma, Margaree Hipp-Hamilton, Grandpa, William Roland Hamilton, all my
family, friends, past and present religious’ leaders. Also, Gary Wade, Joe Greene, Dr.
Becky Megerian, Marcia A. Daniel, business leaders, and my wife, Tamla Oates-Forney,
daughter, Annia Forney, son, Camden Forney, mother, Margie Forney, father, Dennis
Forney, my oldest brother, Phillip L. Forney, my brother, Stanley F. Forney, and my
sister, Sandra Marshall. Additionally, William Edward Twitty, Sr., Dr. Linda Higgins,
Corey Blakey, John I. Williams, Karen Ash, Jamie Meyer, Robert Spencer Hamilton,
Louis A. Solomon, Bashon Johnson, James E. Sims, Mike L. Baber, Al Richards, Pierre
“Greedy” Wilson, Marc Nyarko, Coach, Jack Huss, Sr., Coach, Mike Mabry, Coach, Sam
Metcalf, Coach, Phil Luckadoo, and my uncle, Richard Hill for their unwavering support.
Finally, I would like to express appreciation to my dissertation committee chair, Dr.
Heather Merrifield. I could not have asked for a better advisor, mentor, and friend. I am
grateful for her knowledge, wisdom, and insight. Also, I would like to express gratitude
for the remaining committee members, Dr. LaVena Wilkin and Dr. Joan Combs Durso.
Table of Contents
Chapter 1: Introduction to the Study……………………………………………………………………….. 1
Background …………………………………………………………………………………………………… 2
Problem Statement…………………………………………………………………………………… 4
Purpose of Study……………………………………………………………………………………… 4
Rationale ………………………………………………………………………………………………… 4
Research Question …………………………………………………………………………………… 5
Conceptual Framework ……………………………………………………………………………. 6
Delimitations ………………………………………………………………………………………….. 6
Limitations ……………………………………………………………………………………………… 6
Definition of Terms …………………………………………………………………………………. 6
Summary ………………………………………………………………………………………………………. 7
Chapter 2: Literature Review …………………………………………………………………………………. 8
The Genesis of Corporate Social Responsibility ………………………………………………… 8
The Basics of Corporate Social Responsibility ………………………………………………….. 9
The Expansion of Corporate Social Responsibility …………………………………………… 10
Business Ethics ……………………………………………………………………………………………. 14
The Value of Business Ethics ………………………………………………………………………… 16
Correlation of Globalization and Business Ethics …………………………………………….. 17
Accountability for Ethical Activities ………………………………………………………………. 18
Defining Nongovernmental Organizations ………………………………………………………. 19
Nongovernmental Organizations and Companies …………………………………………….. 23
Impact of Religion in Business Ethics …………………………………………………………….. 24
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Human Rights ……………………………………………………………………………………………… 25
Ethical and Moral Leadership ………………………………………………………………………… 26
Personal Responsibility ………………………………………………………………………………… 27
Fair Trade……………………………………………………………………………………………………. 28
Fair Trade Network ……………………………………………………………………………….. 32
History of Fair Trade ……………………………………………………………………………… 33
Sustainability and Business Ethics …………………………………………………………………. 34
Environmental Sustainability ………………………………………………………………….. 35
Responsible Reporting……………………………………………………………………………. 37
Dow Jones Sustainability Indices …………………………………………………………….. 38
Global Reporting Initiative ……………………………………………………………………… 39
Carbon Disclosure Project ………………………………………………………………………. 40
United Nations Global Compact ……………………………………………………………… 42
The Role of Capitalism …………………………………………………………………………………. 43
Social Capitalism …………………………………………………………………………………………. 45
Corporate Social Responsibility in the European Union, Asia, South America, and
Sub-Saharan Africa ………………………………………………………………………………………. 46
Corporate Citizenship …………………………………………………………………………………… 52
Behind the Veil of Corporate Social Responsibility………………………………………….. 54
Summary …………………………………………………………………………………………………….. 57
Chapter 3: Research Methodology………………………………………………………………………… 58
Introduction…………………………………………………………………………………………………. 58
Research Questions ……………………………………………………………………………….. 58
ii
Rationale for Qualitative Research and Using Grounded Theory Method …….. 58
History of Grounded Theory Method ……………………………………………………….. 60
Participants …………………………………………………………………………………………… 61
Data Collection ……………………………………………………………………………………… 61
Informed Consent and Security ……………………………………………………………….. 62
Instrumentation ……………………………………………………………………………………… 63
Confidentiality ………………………………………………………………………………………. 63
Ethical Considerations ……………………………………………………………………………. 63
Validity ………………………………………………………………………………………………… 64
Data Analysis………………………………………………………………………………………… 64
Reducing Coding Problems …………………………………………………………………….. 66
Summary …………………………………………………………………………………………………….. 67
Chapter 4: Data Analysis …………………………………………………………………………………….. 68
Introduction…………………………………………………………………………………………………. 68
Open and Axial Coding ………………………………………………………………………………… 70
Analysis of Categories ………………………………………………………………………………….. 72
Causal Condition for Why Organization Decided to Implement CSR Programs and
the Impact …………………………………………………………………………………………………… 72
Reason Employers Practice CSR ……………………………………………………………………. 73
Relationship ………………………………………………………………………………………….. 73
Employee Engagement …………………………………………………………………………… 76
Business Strategy…………………………………………………………………………………… 77
Environmental Sustainability ………………………………………………………………….. 78
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CSR Impacts ……………………………………………………………………………………………….. 80
Positive Morale in Workplace …………………………………………………………………. 80
Performance ………………………………………………………………………………………….. 81
Exposure ………………………………………………………………………………………………. 81
Phenomenon of How Organizations Experienced CSR …………………………………….. 81
The Basics of Corporate Social Responsibility ………………………………………………… 82
Accountability ………………………………………………………………………………………. 82
Responsibility ……………………………………………………………………………………….. 83
Service …………………………………………………………………………………………………. 83
Sustainable Efforts…………………………………………………………………………………. 83
Organizational Context of CSR Implementation ………………………………………………. 84
Purpose of Employers Performing Business Ethics Aligned with CSR…………. 86
Altruistic Efforts of Employers Practicing CSR ………………………………………… 86
Self-Centeredness of Employers Practicing CSR……………………………………….. 87
Intervening Condition that Influenced Organizational Approach of Managing CSR
Strategies and Conflicts ………………………………………………………………………………… 88
Governance …………………………………………………………………………………………… 89
Monitoring CSR Initiatives …………………………………………………………………….. 89
Develop CSR Vision and Purpose ……………………………………………………………. 89
Stakeholder …………………………………………………………………………………………… 90
Employee Self-Responsibility …………………………………………………………………. 91
Actions and Interactional Strategies for Addressing Identified Organizational CSR
Conflicts ……………………………………………………………………………………………………… 92
iv
Reporting – Internalize ……………………………………………………………………………. 92
Reporting – Challenging Leadership ………………………………………………………… 93
Consequences of Organizations Managing and Evaluating CSR Strategies …………. 94
Positive – CSR Purpose ………………………………………………………………………….. 96
Positive – Engage Employee ……………………………………………………………………. 96
Positive- Enhanced Brand Image …………………………………………………………….. 96
Negative – Retention Risk ………………………………………………………………………. 96
Negative – Erosion of Trust …………………………………………………………………….. 97
Negative – Stakeholder Scrutiny ………………………………………………………………. 98
Selective Coding ………………………………………………………………………………….. 100
Summary …………………………………………………………………………………………………… 102
Chapter 5: Discussions, Limitations, Future Research, and Conclusion …………………… 104
Introduction……………………………………………………………………………………………….. 104
Discussion …………………………………………………………………………………………………. 104
Substantive Theory ………………………………………………………………………………. 110
Emergence ………………………………………………………………………………………….. 111
Comparative Data ………………………………………………………………………………………. 112
Causal Conditions ………………………………………………………………………………… 113
Phenomenon of How Organizations Experienced CSR …………………………….. 117
Organizational Context of CSR Implementation …………………………………………….. 120
Intervening Conditions that Influenced Organizational Approach of Managing CSR
Strategies and Conflicts ………………………………………………………………………………. 123
Managing CSR Strategy ……………………………………………………………………….. 124
v
Actions and Interactional Strategies for Addressing Identified Organizational CSR
Conflicts ……………………………………………………………………………………………………. 126
Internalize …………………………………………………………………………………………… 126
Challenge Leadership …………………………………………………………………………… 127
CSR Activities …………………………………………………………………………………….. 128
Consequences of Organizations Managing and Evaluating CSR Strategies ……….. 128
Positive ………………………………………………………………………………………………. 128
Negative ……………………………………………………………………………………………… 129
Conclusions……………………………………………………………………………………………….. 132
Recommendation for Employers ……………………………………………………………. 134
Limitations ………………………………………………………………………………………….. 134
Future Research …………………………………………………………………………………… 135
References ……………………………………………………………………………………………………….. 136
Appendix A: Invitation to Participate ………………………………………………………………….. 157
Appendix B: Participant Interview Guide…………………………………………………………….. 159
Appendix C: Informed Consent ………………………………………………………………………….. 160
Appendix D: Curriculum Vitae …………………………………………………………………………… 164
Appendix E: Open Codes…………………………………………………………………………………… 165
Appendix F: Axial Coding …………………………………………………………………………………. 173
vi
List of Tables
Table 1 Axial Coding ………………………………………………………………………………………….. 71
List of Figures
Figure 1. Theoretical Model of Corporate Social Responsibility: Understanding
Companies’ Approaches to Implementation of CSR Practices ……………………………….. 100
Figure 2. Visual depiction of substantive theory. ………………………………………………….. 134
vii
1
Chapter 1: Introduction to the Study
Corporate social responsibility (CSR) has become common among global businesses
across sectors. CSR has long been a debated concept and in the last decade, it has gained
prominence due to increasing reporting capabilities, global governance, sustainability
organizations, print media, social media, nongovernmental organizations, and the efforts of
prominent business firms (Husted, 2015). Firm profitability and tangible CSR practices that
positively impact communities (i.e., monetary donations) are important performance indicators,
and when these factors are not quantifiable, criticism surfaces (Mishra & Modi, 2016). Equally
important to a company’s longevity is that all stakeholders understand why their company has
CSR initiatives and the impact of implementing such initiatives. Many organizations are
continuing to refine their CSR practices, and CSR-leading companies have those principles
actively embedded in their core business models (Ayadi, Kusy, Minyoung, & Trabelsi, 2015).
CSR practices continue to be the norm for businesses globally (Walker-Said & Kelly,
2015). Because no single definition of CSR exists, this study will use the definition established
by the World Business Council for Sustainable Development (WBCSD, 2015), which describes
CSR as an organization’s “commitment to contribute to sustainable economic development,
working with employees, their families, the local community, and society at large to improve
their quality of life” (para. 4). The WBCSD has created a network that, in 2015, consisted of 20
major industry sectors, 50 global business councils, 30 countries, and 200 international
corporations; this network aims to assist organizations in sustainable development, best global
practices, and outreach programs in developing and industrialized nations (Visser, Matten, Pohl,
& Tolhurst, 2010).
2
Corporations across industry sectors actively engage in CSR, from pharmaceutical firms
such as Pfizer to energy companies such as Exxon Mobile and General Electric. The United
States (U.S.) business sector includes many of these companies, some of which use CSR as a
factor that influences their products or services. Following organizational reflection, CVS
Caremark discontinued selling all tobacco products, as this practice conflicted with its mission of
healthcare delivery (Japsen, 2014). Ben & Jerry’s, an ice cream company, uses only fair-trade
ingredients and sources all dairy products from sustainable dairy farm programs in its home state
of Vermont (Fallon, 2015).
CSR studies have historically focused solely on the reasons companies have incorporated
CSR practices, without providing context as to why these practices matter (Gupta & Sharma,
2016). McPherson (2012) explains that “more and more companies are making long term
commitments to CSR” (para.1). This research study explores why CSR integration has become
an initiative that is important to companies, as well as the impact of CSR implementation
practices.
Background
CSR attracted both domestic and global attention beginning in the early 2000s (Frederick,
2006). PR Newswire reported that a poll conducted by both Echo and Cone Communications
demonstrated that when price and quality are similar, 87% of domestic consumers are more
likely to select a product associated with a socially responsible cause, which provides a motive
for businesses to embrace CSR (PR, 2013). Additionally, 77 percent of job seekers consider a
company’s commitment to social causes when considering employment (Bhattacharya, Sen, &
Korschun, 2011). While it continues to evolve in management practices, CSR appears to be
applicable to multiple organizations even though there is not a universally accepted definition.
3
Crane, Matten, and Spence (2014) discovered that companies face pressure to implement
CSR practices that extend beyond the marketplace because of stakeholder expectations. Such
pressures have led companies to create reporting systems that measure their social and
environmental performances (Horrigan, 2010, p. 371). Organizations align with professional
reporting agencies in an effort to obtain ratings and validation for their efforts in CSR
engagement. The United Nations Global Compact was established in 1999 after former U.N.
Secretary-General Kofi Annan brought attention to the issue (Williams, 2014). In an address to
the World Economic Forum, Mr. Annan stated that a new global compact needed to be
developed to serve as a guide for the ethical behaviors, business practices, and environmental
policies to which the firms engaging in globalization efforts would need to be held accountable
(Williams, 2014). Davies (2013) identified four globally recognized CSR reporting organizations
that gather and assess data and assign ratings to other organizations on a voluntary basis: The
Carbon Disclosure Project, the United Nations Global Compact, the Global Reporting Initiative,
and the Dow Jones Sustainability Indices. The composite ratings these firms assign have the
potential to drive the CSR efforts of organizations (Davies, 2013).
Although much of the existing CSR research literature is foundational, it has focused
only on the relationship between CSR and financial performance (Schwartz, 2011). In fact,
Margolis and Walsh (2001) estimated that 100 studies have researched this relationship over
several years, and a majority of their findings indicated a positive relationship between CSR and
financial performance; however, a gap exists in the literature regarding the factors that influence
the establishment of CSR practices. This gap presents an opportunity for further research to
explore how CSR influences organizations. This study helped to fill that gap by examining
factors that influence companies to implement CSR practices.
4
Problem Statement
This study identifies factors considered when deciding whether to implement CSR
initiatives and how the integration of CSR practices has affected business outcomes. This
information is attained through data gathered from employees who work directly in CSR
departments, which are business units within organizations that manage CSR program creation
and development, provide assistance in implementation, and monitor practices as well as
measure effectiveness. CSR inherently compels business organizations to engage in initiatives
that hold them accountable to a code of morals and ethics and philanthropic considerations.
However, research indicates that those stakeholders who are employees, shareholders,
government officials, and the general public, have multiple perspectives on CSR expectations
and contributions (Crane et al., 2014).
Purpose of Study
The purpose of this qualitative study is to understand the factors that have influenced
companies to implement CSR practices by gaining a better understanding of those factors
through the perspectives of employees who work directly in CSR departments for employers
who practice CSR. Additionally, for those businesses that have implemented CSR, this study
sought to determine how CSR efforts impact these organizations.
Rationale
U.S. citizens are demanding a more socially responsible corporate America, and this
reality shapes the perspective of stakeholders who are calling for tangible actions (Blodgett,
Hoitash, & Markelevich, 2014). Additionally, understanding the concrete value organizations
place on CSR is necessary when examining CSR’s external influence on society. Companies use
5
CSR to leverage and protect themselves against negative press, attract and retain top talent, and
maintain social awareness, which all impact a company’s value (Hur, Kim, & Woo, 2014).
Previous research has focused on determining the value of CSR by assessing stakeholder
expectations, environmental impacts, legalities, and return on investment. While those studies
were valuable, this research examines CSR holistically, drawing conclusions about its value in
broad strokes. This study contributes to the body of knowledge by offering a better
understanding of why companies have made the effort to implement CSR practices and the
importance of the impact on organizational outcomes from the viewpoint of employees who
work directly in CSR departments. The conclusions generated by this study provide insights
useful for both the academic discipline of management science and general business
practitioners.
Research Question
This study uses a qualitative, grounded theory method to address its core questions.
Researchers historically have inquired whether entities that engage in CSR practices are more
financially successful than those that do not, inspiring considerable debate (Horrigan, 2010).
This study explores why companies have incorporated CSR practices and the impact of
implementation of initiatives through the following research questions:
1. Why have companies incorporated CSR practices?
2. What has the impact of CSR been for organizations that have implemented the
practices?
6
Conceptual Framework
This study uses the grounded theory method of qualitative design. Data collection
methods such as telephone and face-to-face interviews were the primary instruments used for
collecting the perspectives of participants. Through the grounded theory method, the researcher
has the ability to refine formal theory, while data collection enables the researcher to generate
new theory (Charmaz, 2014, p. 10).
Delimitations
This study includes three delimitations. First, the study is limited to interviewing
employees who work directly in CSR departments who have a range of CSR experience. Second,
participants all work for employers who have a CSR program. Third, the research sample only
includes professionals employed in the business sector with a minimum company size of fifty
employees.
Limitations
This study was limited in several ways. First, participants were not necessarily equally
adept at contextualizing and articulating their thoughts in response to the interview questions.
Second, the researcher’s presence in face-to-face interviews may have influenced responses.
Third, technological interruptions may have affected the quality of interview sessions. Fourth,
participant availability may have created challenges in scheduling.
Definition of Terms
Business Sector. A part of an economy that consists of companies that exclude general
government, residential households, and non-profit firms (Lee, 2016).
7
Code of Hammurabi. The Code encompasses laws including land tenure, rent, women’s
rights, marriage, divorce, inheritance, contracts, public governance, administration of justice,
wages, and labor conditions (Schwartz, 2011, p. 20).
Corporate Social Responsibility (CSR). “The commitment to contribute to sustainable
economic development and work with employees, their families, the local community, and
society at large to improve quality of life” (WBCSD, 2015, para 4).
Grounded Theory Method. A qualitative research design in which the researcher
generates an explanation of a process, an action, or an interaction shaped by the views of a large
number of participants (Creswell, 2013).
Summary
This research study examined why companies have incorporated CSR practices and the
impact of implementing that practice from the perspective of employees who work directly in
CSR departments. The participants’ viewpoints contribute to this research effort by adding a vital
perspective to the existing body of knowledge while serving as providing insight for both
academics and practitioners.
8
Chapter 2: Literature Review
Corporate social responsibility (CSR) has become a worldwide trend, providing
companies with a means of comprehending their responsibilities beyond making profits
(Freeman & Velamuri, 2008; Skilton, & Purdy, 2017). Its global growth has created
opportunities for researchers to better understand how that initiative fits within individual
businesses and whole societies. This literature review will explore what CSR encompasses,
provide examples of CSR activities, and identify the gaps that exist in CSR strategic
management literature.
The Genesis of Corporate Social Responsibility
Modern-day CSR originated in the pre-World War II era (CEBC, 2010; Heald, 1970;
Spector, 2008;). Husted (2015) explained that CSR was a common practice among nineteenthcentury businesses, when it was referred to as “service,” “civic mindedness,” and “trusteeship.”
Scholars have dated CSR provisions to as early as the time of Code of Hammurabi, which
instituted protections for innkeepers, builders, general laborers, and innocent bystanders 4,000
years ago (Schwartz, 2011; Husted, 2015). As the foundation of CSR, the Code of Hammurabi
served as a commitment to enhancing the welfare of the Babylonian community by engaging in
social initiatives and business practices.
CSR developed into a more refined concept in the 1950s, when Frank Abrams of
Standard Oil Company articulated that as businesses and their management matured
professionally, companies needed to begin thinking beyond profits and understand how they
could contribute to the well-being of their employees, customers, and society (Carroll &
Shabana, 2010). Carroll and Shabana (2010) discussed how CSR contributed to several social
movements in the 1960s, including civil rights, women’s rights, environmental preservation, and
9
consumer rights. Managers in U.S. domestic companies existed as trustees of their local business
communities, and corporate philanthropy began to impact society more significantly.
Kotler and Lee (2005) found that as companies embraced CSR, they not only contributed
to society significantly, but also increased their market shares and profitability. Multinational
corporations such as American Express, Dell, Ford Motor Company, Kellogg, Hewlett-Packard,
McDonald’s, and Nike are just a few of the U.S.-based companies making a global impact in
reference to CSR (Lougee & Wallace, 2008).
Bhattacharya, Korschun, and Sen (2012) discussed how CSR has benefitted society while
simultaneously driving business results. Joyner and Payne (2002) explained the historical aspects
and evolution of CSR, providing a detailed account of what it encompasses. The term was not
common until 1970, when CSR was first embraced by businesses in the U.S. and around the
globe. Rivoli and Waddock (2011) stated that the definition of CSR is continuing to evolve.
Also, Stanisavljevic (2017) explained that some employers formulated and used CSR with the
intent to differentiate by the influence of Carroll’s (1991) pyramid of CSR, which consists of
CSR dimensions (i.e., economic, legal, ethical, and philanthropic). The aforementioned literature
established a foundational understanding of CSR; from there, the literature branches into many
subcategories.
The Basics of Corporate Social Responsibility
Ahen and Zettinig (2015) stated that CSR is an emerging practice that companies are
defining individually, due to the state of conceptual evolution. Reich (1998) wrote that basic
CSR can be categorized in two types: traditional and contemporary. Traditional CSR involves
organizations generating profits to meet shareholder expectations and customer demands (Reich,
1998). This model aligns classically with agency theory, in which the role of the agent is to meet
10
the expectations of the principal (McWilliams, Siegel, & Wright, 2006). Ite (2004) explained that
traditional corporations monitor risk, protect their image, possess a reactive mentality toward
society, embrace conservatism, and view CSR as a means of benefitting the organization.
Sheehy (2012) stated that corporations that adhere to values beyond generating profit
and act in an accountable manner practice contemporary CSR. Boele, Fabig, and Wheeler (2001)
clarified that business entities align CSR with business intents strategically, viewing the initiative
as value creation. This type of CSR recognizes multiple stakeholders, and it is important to
understand all interest and expectations so that business solutions can be addressed along with
the possibility of societal needs (Drucker, 1984; Reich, 1998).
Van Marrewijk (2003) addressed the need for a consistent and impartial definition of
CSR to drive legitimacy, reduce stakeholder cynicism, and establish credibility that enhances
reputation. Lougee and Wallace (2008) explained that corporate motives and lack of
accountability are the primary concerns about CSR’s role within organizations; however, their
findings also revealed that companies are investing money to build stronger CSR programs. CSR
entails business leaders embracing policies that align with the objectives of civil society while
meeting business intents. Carroll (1999) believed that companies must earn profits and adhere to
the law in all aspects in order to embody ideal corporate citizens.
The Expansion of Corporate Social Responsibility
Fredrick (2006) discussed that in the 1950s, CSR focused on managers acting in the
capacity of public trustees, balancing the business necessities of daily operations along with
corporate resources and provision for virtuous social causes. Fredrick described how businesses
acted as instruments of society, supporting the logic that mangers were considered distinguished
as trustees who achieved beyond the scope of their job responsibilities and sought ways to
11
support societal needs. The Community Chest, which launched in the 1920s and is currently
known as the United Way, is considered the first collective corporate outreach organization in
the U.S. philanthropic perspective (Fredrick, 2006). Organizations such as the YMCA, founded
in the mid-1930s and fostering support for education, the arts, and social welfare, soon followed
(Fredrick, 2006). Attig and Brockman (2017) explained that companies with significant presence
in a community most often will engage in CSR activities creating pro-social behaviors.
According to Fredrick (2006), the scholar Howard Bowen in 1953, developed formal
initiatives, which later become known as CSR. Later Bowen wrote The Social Responsibilities
of the Businessman. His work embraced the concept of CSR as a branch of business responsibile
for the support of education, community relations, positive human interaction within the
workplace, positive relations with government, economic stability, proper environmental
resource management, and the mitigation of competition in business (Fredrick, 2006). Fredrick
explained that Bowen went on to make significant contributions to the field of business
management in academia by contextualizing CSR.
Fredrick (2006) claimed that CSR continued the momentum from the 1960s due in part to
Christian ethics, which established the value base and responsibility of businesses. Fredrick
(2006) also pointed toward the efforts of General Electric’s Richard Eells in the mid-1960s,
when he coined the phrase the “well-tempered corporation,” which involved business leaders
being cognizant of their employees’ needs and dignity; their customers’ expectations of quality
product offerings and fair pricing; supplier integrity; effective employee morale; and good
corporate citizenship. By the late 1960s, CSR awareness had created an expectation for business
professionals to operate ethically and live as principled persons.
12
Lee (2008) described the 1970s as ushering reflection of social measures such as the
Black rights movement, the ecological environmental movement, the women’s liberation
movement, the youth movement, the consumer movement, and the anti-war movement. Each of
these causes challenged the business community to act in a socially responsible manner. Carroll
and Shabana (2010) believe companies should embrace CSR and are confident that the embrace
can positively impact the bottom-line. Also, they noted that businesses were able to influence
social change through corporate philanthropic approaches, straightforward social action, and
business and government partnerships, all while acting in the public interest. Fredrick (2006)
claimed that corporations possess global power that influences societies and national
governments, which control wealth distribution. Companies do have the ability to change the
broader spectrum of humanity through social justice.
In the 1970s and 1980s, CSR focused on responsiveness. The Committee for Economic
Development (CED), founded in 1942 by leaders in the U.S. with the interest of the nation’s
economy, served as a means of channeling responsiveness toward fellow citizens. Objectively,
CED has taken on social causes of education, health, maintaining safe working conditions
aligned to corporate governance, upholding environmental standards, and engaging in fair
trading (Frederick, 2006; Rippey & Subhash, 2013). The CED – a distinguished organization
with 119 declarations of preferred policy – has addressed issues such as economic growth,
recession, inflation, government operations, crime and justice, aid to low-income countries,
public and private education, housing, agriculture programs, transportation, energy problems,
and economic concerns. Frederick (2006) believed the CED represented a standard of action
joined with CSR.
13
Wood (1991) discussed CSR’s ability to foster social legitimacy, public responsibility,
values, social control, manager discretion, and global ethics between the 1980s and 1990s based
on a firm’s ability to focus on impact and outcomes for stakeholders, which include society and
the business itself. In addition, Carroll (1991) emphasized that companies should strive to
maximize the value of the enterprise, be in compliance with the law, and be socially responsible.
Swanson (1995) stated that business leaders in the mid-1990s should have developed more
expertise in the area of CSR to drive more value in the sense of accountability, motivation, and
performance in the effort to present good corporate citizenship. Frederick (2006) maintained that
the 1990s and 2000s marked the era of global corporate partnership. The Economist magazine
assessed the broadness of CSR and questioned its legitimacy, arguing that some organizations
use CSR as a means of driving their own enterprise intents without embracing CSR principles
(Economist, 2005). Regarding companies operating with intentions absent of the full spectrum of
CSR, the WorldCom, Enron, and Arthur Anderson scandals exemplify the need for accurate
reporting and the creation and passing of the Sarbanes-Oxley Act (SOX). In these scandals,
auditors were able to perform consulting work for clients they had audited, creating a conflict of
interest; the SOX has prohibited that behavior. Additionally, by adhering to the SOX, which
ensures accurate financial reporting, while fundamentally addressing issues such as
environmental protection, human resource management, safety, and health at work, companies
can enhance relations with local communities significantly (Branco & Rodrigues, 2006). Porter
and Kramer (2006) identified the links between CSR and society, and according to Carroll and
Shabana (2010), the CSR rationale benefits businesses bottom line. Also, Leonidou and
Skarmeas (2017) posit that their research findings reveal there is high consumer interest in
companies’ CSR history, product quality, and motives toward enviromental actions.
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Business Ethics
Crane and Matten (2010) defined business ethics as the study of business situations,
activities, and decisions in which issues of morality are addressed. According to Sims (2003),
business ethics are practiced in many professional disciplines, including commercial businesses,
government entities, not-for-profit organizational businesses, and charities. Practicing business
ethics involves managing personnel appropriately and conducting operations in a responsible and
accountable manner.
From Carroll and Buchholtz’s (2011) perspective, business ethics are important to
maintain due to the perceived influence large corporations have over the government, as well as
the actual impact businesses have on the daily lives of employees and society through financial
means. In addition, according to Illies (2012), improper business ethics can harm both
individuals and the larger society, including the ecological environment. Studying business
ethics allows industries to address critical business practices as well as avoid possible societal
troubles (Ilies, 2012).
In business ethics, the individuals representing the firm who are designated as
management, manage the conduct and behavior of the collective organization. However, this
dynamic may shift geographically, based on business culture. For instance, Crane and Matten
(2010) explained that in Asia, top management is responsible for ethical business conduct,
whereas in Europe, social control is used as a means of collective responsibility for ethical
behavior in business. In the U.S., individuals maintain accountability for their own behavior
(Crane & Matten, 2010). However, Gift, Gift, and Zhenge (2013) explained in their study
involving participants from both the U.S. and China that cross-cultural perceptions, which
15
include stereotypes and biases, can influence business decisions and ethics behavior, which in
turn may impact the reputation of business leaders as a group.
Additionally, Stevens (2013) explained that since the 2008 financial crisis, the American
public’s perception of business executives has been at an all-time low. Because the U.S. is highly
diverse, this response may vary according to individuals and cultural groups. Based on their
research, Birkvad Bernth, Houmøller Mortensen, Calles, Wind, and Saalfeldt (2013) stated that
regardless of who is held responsible for conduct, business ethics is a cornerstone of CSR.
Business ethics and CSR involve strongly aligned stances on morality and accountability.
CSR viewed through the business ethics lens requires companies to act with social
responsiveness and react to social pressures (Illieş, 2012). Organizations must develop societal
awareness, which fosters strategic alignment of business objectives with societal frameworks.
These measures can lead to successful partnerships that enhance business as well as persons in
the general public (Illies, 2012).
Okoro (2012) explained the importance of global citizens maintaining awareness of
businesses’ ethical decision-making and their treatment of all stakeholders. The communication
businesses disseminate to the public must be authentic and credible. Frederiksen (2010) wrote
that CSR established the framework of morality and consciousness for society. These studies
support the idea that CSR must align with morals, values, and ethics to generate positive societal
outcomes.
As business scandals became public in the early 2000s, Ilies (2012) determined that such
violations of integrity impacted organizations’ commitment to society. Stevens (2013) wrote
that:
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The Enron, Worldcom and Tyco scandals caused harm to American investors and loss of
confidence in American businesses, but the harm was limited to certain groups of
investors and employees. The 2008 financial crisis was different in that it was felt by
nearly everyone and was widespread. Four years later, the U.S. economy is stagnant,
housing prices have fallen, and few people are buying houses due to pricing uncertainties;
home mortgages are difficult to obtain. (p. 368)
Verick and Islam (2010) analyzed some of these events in The Great Recession of 2008-2009:
Causes, Consequences, and Policy Responses. Their research revealed the impact that businesses
have on society and the imperativeness of compliant business ethics practices. Ilies (2012)
further explained that these societal impacts extend into other areas that include the fight for
human rights, cleaner environments, and the balance of economic power. Additionally, Ilies
(2012) stated that ethical misconduct debacles represent costly consequences to the stability of
the business.
Chandler (2005) also addressed the reality that businesses that violate integrity can face
billions of dollars in lawsuits, fines, and recovery costs; clients’ and employees’ loss of faith;
injury to brand esteem; reputation damage; decreased sales; and the possibility of senior
members of management receiving jail time. No company is exempt from the threats posed by
challenges in integrity. Chandler (2005) concluded that judicious business managers can prevent
integrity violations by assessing vulnerability to ethical exposure, taking proactive measures, and
preparing their organizations to mitigate and endure the challenges of scandals surfacing.
The Value of Business Ethics
Business ethics have been increasingly emphasized due to reported corporate scandals
and their financial impact on the global economy. The global community may desire to make
17
buying decisions based on their knowledge of organizations (Azmat & Ha, 2013; Bhattacharya,
2016). Many organizations have responded to this expectation by changing the format of their
business practices and managing more responsibly and transparently (Chan, Watson, &
Woodliff, 2014). This shift echoes the intersection of business ethics and CSR strategies
companies are implementing to reflect moral agendas and engage employees, consumers,
suppliers, and the public (Frederiken, 2010). Business organizations confront ethical issues in
every realm, and strategically preparing an approach to address these matters is of critical
importance due to brand reputation, potential legal matters, loss of market share, negative
impacts to talent acquisition, and faulty stances of business principles.
Because corporations have the ability to influence government and society, and because
they must maintain a pulse on business developments, business ethics are crucial in corporate
practice (Rienzi, 2013). Organizations have an obligation to serve society by producing quality
goods, hiring fairly, paying taxes, and contributing to the health of the economy (Hess, 2014).
Developing an appreciation for business ethics enables people to understand the roles and
responsibilities of a business organization. Although ethical issues will continue to surface, they
provide opportunities to review management practices and create stronger, more transparent
methods of ethical management (Rienzi, 2013). Also, certain CSR activities have the ability to
establish trust with stakeholders, reduce negative perceptions from persons within the general
public, and support the ethical motives of an employer (Jong & Meer, 2017).
Correlation of Globalization and Business Ethics
In order to succeed, business ethics must work in tandem with globalization – the
standardization of world governments and multinational companies. Globalization has fostered
the ability of organizations to function in a uniform way that promotes profit generation within
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the world economy (Knorringa & Nadvi, 2016). Business ethics and CSR ensure fair product
pricing and fair trade, while multinational companies engage in sustainable development (Sims,
2003). Multinational companies have historically engaged in negotiations with developing
countries in an effort to garner the most profitable operating conditions (e.g., low taxes, relaxed
environmental regulations, and moderate labor rights) by offering foreign direct investment to
those countries that can meet their requests (Sims, 2003). Socially responsible and highly ethical
multinational companies will not engage in such activities (McKie & Van de Walle, 2010).
Due to the nature of trade, globalization is a highly debated topic. Among some business
leaders, globalization is synonymous with the westernization of developing countries (Docquier
& Rapopirt, 2012; Garfolo & L’Huillier, 2014), which is also known as “colonialism.” From this
perspective, globalization can be traced back several centuries. Modern globalization, however,
is taking place through global Internet communication; brand proliferation through product
procurement in both developing and developed countries; and the global banking system
(Frederiksen, 2010). Many multinational companies have made significant contributions to the
spread and impact of globalization. Western approaches to business ethics in reference to
globalization warrant scrutiny because there may be limitations to the replication of Western
approaches in developing nations. Laws and governance differ among these countries, and
understanding these differences can aid in the development of strategic policies to support ethical
work efforts.
Accountability for Ethical Activities
In the area of ethics, companies often adopt codes of conduct as a means to establish the
integrity of practicing CSR to ensure a structure of governance, accountability, and commitment.
However, Preuss, Barkemeyer, and Glavas (2016) explain that CSR practice does not always
19
align with a company’s expressed values, which, in turn, can erode the trustworthiness of an
organization’s ethics. Acting ethically reflects the indoctrination of the mindset and practices of
an organization, which may hold different meaning in the larger context of varying cultures. In
Asian countries, those holding leadership titles bear the burden of responsibility, while in Africa,
with the historical coherence of tribalism, ethical conduct is perceived as a collective
responsibility (Mbeki, 2009). Europeans socialize the conduct of ethical responsibility, while in
the U.S., individuals are accountable for their own behavior (Nash, 2003). Different cultures
adopt varying approaches that reflect their respective values. Among businesses around the
world, however, ethical dilemmas may compromise these values.
These dilemmas can arise in the context of employee rights, compensation, whistle
blowing, civil society demands, health, and safety (Sims, 2003). From a globalization
perspective, corporate governance and accountability management address some of these issues.
Developing countries are expected to act in a more deliberate manner by paying a living wage
and ensuring that product pricing is commensurate with country-specific economic environment
(Sims, 2003). In addition, multinational companies conducting business in developing countries
face an intense expectation to administer local development, provide healthcare delivery
services, and support systemic actions toward education that align with CSR (Frederiksen, 2010).
To assist with managing these expectations, nongovernmental agencies often serve as platforms
for corporate and official government entities.
Defining Nongovernmental Organizations
A nongovernmental organization is operated absent of affiliation with any governmental
influence and is legally established by an individual or group for the purpose of being socially
responsible (Visser et al., 2010). Some nongovernmental organizations may be equipped
20
financially by governmental agencies to some degree, and they preserve their nongovernmental
status by compliantly disallowing any person or persons with governmental affiliation to merge
with their organizations (Visser et al., 2010). Although some nongovernmental organizations
have an objective to engage in collective societal causes that often couple with political facets,
they are not partisan (Baur, 2011; Dupuy & Vierucci, 2008). However, nongovernmental
organizations often collaborate with B Corporations, which are for-profit as defined by B Lab, a
nonprofit that represents the movement to harness the power of business for beneficial causes
(Grant, 2013; Neubauer, 2016). B Lab assesses organizations according to social, environmental,
performance, accountability, and transparency standards (Hickman, Byrd, & Hickman, 2014;
Polk, 2014).
Unlike governments, business organizations, and cooperatives, nongovernmental
organizations do not aim to develop and deliver on social contracts. Cooperatives – organizations
owned by their members – share similarities with nongovernmental organizations, as both
operate independently from the government (Downes & Goodman, 2014). Additionally, they
produce goods, manufacture products, and generate monetary profits along with serving to
accomplish social justice, uphold ethical standards, and compose fair, free, and honest political
opinions (Baur, 2011).
Nongovernmental organizations manage objectives, bring awareness of distinct human
matters, communicate with society, begin dialogues with government, and collaborate with
business organizations in a manner that represents the interest of the people for positive societal
change and sustainable development. Following the Cold War era, the government
administration invested directly in emerging markets (Christine & Ernest, 2011). The increase in
technological advancements such as the Internet led to a broad decentralization of information,
21
narrowing the knowledge gap for nongovernmental organizations (Christine & Ernest, 2011).
This environment has allowed nongovernmental organizations to grow, taking on a commanding
presence even as governments have relinquished some of their influence. The presence of nongovernmental organizations at the global level is significant: Their momentum stems from their
passion for embracing solidarity, social justice for all, responsibility, and values for the people,
regardless of their differences.
Many nongovernmental organizations work within developing regions of the world, such
as India, South America, and Africa. In most instances, these regions’ national governments are
underfunded, and in some, they are corrupt and lacking in legal guidance for ethical decisionmaking (Christine & Ernest, 2011). Under these circumstances, nongovernmental organization
will consider coordination of ethical actions and collaborate with businesses to leverage the best
results possible in project management (Baur, 2011).
Nongovernmental organizations earn their classification according to the contextual
factors of orientation, degree of cooperation, and operation. They are categorized into the
following orientation assemblies: charitable orientation, service orientation, participatory
orientation, and empowering orientation (Visser et al., 2010). Nongovernmental organizations
also are distinctly identified through their levels of cooperation: community-based organization,
citywide organization, national nongovernmental organization, and international
nongovernmental organization (Visser et al., 2010). Additionally, they configure wide-ranging
assemblages that perform in diverse spheres with a varied capacity of work. Other
nongovernmental terms used globally include: private voluntary organizations, civil society,
independent sector, self-help organizations, grass-roots organizations, volunteer sector,
transnational social movement organizations, and non-state actors (Visser et al., 2010).
22
Nongovernmental organizations may function in many capacities, but they always are
nonpublic, voluntary organizations. They foster social causes on behalf of donors and funders,
and seek to advocate for human rights and the improvement of life for those who are
underserved, ill, disabled, undereducated, displaced, or marginalized (Shivji, 2007).
Nongovernmental organizations often have strong reputations that encompass international
acclaim for social transformation. Many nongovernmental organizations sustain themselves with
funding from donors, agreeing to grant oversight to an entity exterior to their organization with
non-affiliation or through self-driven actions of fundraising (Visser et al., 2010).
Nongovernmental organizations have budgetary needs due to administrative costs and
may obtain funding from membership dues, grants, donors, fundraisers, and governmental
contributions (Visser et al., 2010). Many hire professional staff and may engage volunteer staff,
depending on their specific needs. In many international situations, donors providing monetary
support require nongovernmental organizations in developing countries to hire expatriates to
provide exposure and expertise, infusing insights from an industrialized country (Christine &
Ernest, 2011). Some question this practice because expatriates often are expensive to employ and
relocate, and they may lack cultural knowledge and networking capabilities within the
developing area.
While overhead expenditures within a budget can appear detrimental to donors and rating
agencies, both must understand that nongovernmental organizations must maintain operating
costs, including salaries, banking, and accounting. Designating 80% of the budget to programs
and services is a respectable objective. Nongovernmental organizations that attribute less than
20% of their budgets to administrative costs could be placing their operations in jeopardy and
should assess the effectiveness of programs and budgets, and infuse procurement measures that
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create transparency and qualitative context explaining overall use and management of monetary
funds.
Nongovernmental organizations engage in a variety of civil society endeavors, including
social welfare, emergency relief, and environmental developments, that often align with CSR.
Nongovernmental organizations may also manage projects that address issues such as emergency
aid and environmental affairs for business organizations to help them make social contributions
while sustaining monetary independence themselves (Visser et al., 2010). Currently,
nongovernmental organizations are not limited in the number of projects – and the associated
monetary funds – they can accept. However, in the future, government regulators could curtail
NGOs unregulated activity both in the U.S. and abroad.
Nongovernmental Organizations and Companies
Nongovernmental organizations leverage partnerships with multinational corporations to
deliver results. For example, Magadi Soda, a soft drink beverage company operating in subSaharan Africa, coordinated with a nongovernmental organization to develop public welfare
programs that benefit the communities in which the company is operating (Muthuri, Chapple, &
Moon, 2009). Coca-Cola adopted a water delivery project that encompassed Angola,
Mozambique, Nigeria, Ethiopia, and Rwanda (Reilly & Babbitt, 2005), engaging with
nongovernmental organizations to ensure that the projects materialized; it is documented as one
of Coca-Cola’s most successful international projects, which were balanced in benefiting the
general public and the business operations of the company.
CSR is a broad-spectrum belief that organizational businesses have a societal
responsibility that reaches beyond their obligations to investors and stockholders.
Nongovernmental organizations are driven by a common purpose of serving civil societies
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without government influence. The business organizations they collaborate with provide
monetary and human capital support, committing time, volunteers, and focus to driving results
because they cannot afford the poor reputation that results from having a damaging impact on the
environment, questionable labor practices, and an unwillingness to engage in sustainable
developments that address societal challenges (Horrigan, 2010). Nongovernmental organizations
contribute to these partnerships by using their expertise to vet strategic endeavors and
communicate with outside parties while managing projects end-to-end.
Impact of Religion in Business Ethics
Spirituality has profoundly influenced the design and practice of business ethics.
Buddhism, Hinduism, and Confucianism created a flexible, relational, and sensible mentality
among Asian business cultures (Cook & Houser, 2009). In the U.S., Calvinist and Protestant
disciplines gave rise to capitalism, shaping a network of dynamic economic structures in which
individuals shoulder responsibility for ethical practices. The Europeans took the Lutheran and
Catholic approaches, embracing a collective economic methodology (Walker, Smither, &
DeBode, 2012). Both Americans and Europeans support capitalism and embrace the spirituality
that encompasses stewardship and the spirit of service reflected in their currencies and on sacred
documents like the Constitution. Acting in a morally conscious manner correlates with the
religious perspectives that are rooted in the foundational makeup of business ethics. While not
universally accepted, individuals have long acted according to an unwavering commitment to
perform moral duties, a principle influenced by monotheistic religions such as Judaism,
Christianity, and Islam (Walker, Smither, & DeBode, 2012), and many are mindful of eternal
accountability.
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Human Rights
Human rights are fundamental privileges afforded to every global citizen (Cragg, Arnold,
& Muchlinski, 2012). These universal rights exist in both a legal and natural context (Cragg et
al., 2012) and include the rights to life, liberty, justice, education, employment, decent living
standards, health-care, and fair trials, as well as the freedoms of belief, association, worship, and
expression. In international law, human rights comprise the basis of global public policy (Cragg
et al., 2012). The human rights of the twentieth century were established in response to the
German war crimes of World War II, particularly the Holocaust.
The atrocities of the Holocaust motivated many elected leaders to take a global stance on
ethics, composing the 1948 Universal Declaration of Human Rights (Malik et al., 1948). This
formal document serves as the foundation of international human rights laws and the
International Bill of Rights. It focuses on dignity, equality for all human beings, justice, peace,
right to life, and right to security (Malik et al., 1948). Under articles 23, 24, 25, and 26, every
global citizen has the right to work, education, an adequate standard of living, protection against
unemployment, and favorable work conditions, including reasonable working hours (Malik et al.,
1948). Article 29 specifies that every person has a duty to serve his or her community and to
contribute to its personality (Malik et al., 1948).
The majority of the United Nations member nations have adopted the Universal
Declaration of Human Rights, incorporating it into their political and business declarations and
resolutions. Their objective is to demonstrate commitment to addressing issues of social justice,
inequality, racial discrimination, torture, rights of women, rights of children, and overall
protection of global humanity (Malik et al., 1948; Singh, 2016). The ideals of and commitments
to human rights have resulted in the United Nations Global Compact (UNGC) program, which
26
engages business organizations to commit to using human rights governance as the standard for
ethical business practices and sustainable development (Badger, 2008).
The UNGC program consists of principles that relate to human rights, labor, the
environment, and anticorruption (Badger, 2008). Web-based programs educate company
employees on human rights and business connections (Badger, 2008). Thirteen international
companies have actively committed to the program, including General Electric; Gap, Inc.;
Hewlett-Packard Company; and Coca-Cola Company (Badger, 2008). Each multinational
corporation assesses its efforts and practices according to the Universal Declaration of Human
Rights to ensure compliance (Bagder, 2008). This commitment has enabled business entities to
strengthen collaboration with the United Nations (Badger, 2008).
Global citizenship demonstrates the link between business and human rights: It is focused
on the collective efforts of governments, companies, and civil society in managing issues of the
human coalition, with the highest level of CSR in action (Badger, 2008). Human rights and
business partnerships combine to address global development concerns, and the efforts already in
motion are netting results through CSR endeavors producing sustainable development (Igbanugo
& Gwenigale, 2011).
Ethical and Moral Leadership
Ethical and moral leadership involves respecting the rights and privileges of others (Sims,
2003). Leaders of business or civic organization, and even individual leaders among
communities, take on social power and must serve and support a cause of higher purpose while
embracing the support of others (Daft & Lengel, 2000). Social power equates to the ability to
influence, which is an important trait in any leader, especially those addressing civil society
concerns (Daft & Lengel, 2000). No aspect of a CSR strategy can materialize absent of a leader
27
who can model trust, integrity, and a vision that supports the ability of followers to embrace and
actively become part of the CSR effort. Inspiring concern for others is an ability that strong
leaders possess – they not only make followers aware of an injustice, such as corruption or
poverty, but urge them to act.
Ethical and moral leadership is the behavioral trait of seeking to accomplish the change
required to shape sustainable global development (Abrhiem, 2012). Schrempf-Stirling, Palazzo,
and Phillips describe corporations as moral actors with the responsibility of upholding their
legitimacy by being proper, appropriate, and desirable while sustaining their values, beliefs, and
behaviors as responsible entities (2016). This description encapsulates the promise made by the
global human rights movement after World War II.
Personal Responsibility
As individual global citizens, all are responsible for their own actions and intents.
National governments and businesses, both large and small, must embrace the challenge to be
accountable to their internal and external CSR and civil society. Internal CSR consist of the
actions of the employer that are geared toward the employees of the organization while external
CSR focuses on outside entities such as the general public and other external stakeholders
(Farooq, Rupp, & Farooq, 2017). Requiring governments and business organizations to act
compliantly with respect to all aspects of CSR is fair only because they hold a responsibility to
operate ethically. Under the Universal Declaration of Human Rights, everyone shares the right
and responsibility to uphold all 30 articles of the Declaration (Malik et al., 1948); thus, the onus
is on individuals to live the meaning of being socially responsible.
Global governments and the global business community cannot be held accountable
when individuals within civil societies are not. Everyone must understand that CSR is founded in
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taking moral action, regardless of other factors (Devalia, 2001). If every individual lives
responsibly, the world will progress collectively. Living responsibly involves developing a
mentality that supports sustainable living, developing awareness of social needs within local
communities, participating in companies’ CSR projects, and measuring and tracking one’s
personal carbon footprint and its impact on the environment. Living a sustainable life is the only
way to curtail the negative impact that humanity has on the world (Devalia, 2001).
According to Collier (2007), another positive impact strategy is to support fair trade,
green products, and companies that operate sustainably. Knowing the supply chain management
of the products allows individuals to understand the products they consume and whether the
companies that produce them are compliant with global labor standards, environmental
standards, and sustainable development in the developing countries in which they are conducting
business. Finally, in maintaining personal responsibility, individual efforts cannot be
underestimated, and effort is required to live a socially responsible life as it potentially can
contribute to the environment and the welfare of global citizens.
Fair Trade
“Fair trade” is a business strategy designed to address poverty by actively practicing
sustainability principles (Visser et al., 2010). Fair trade has served as a global strategic business
discipline and vocal platform with the objective of educating, encouraging, and equipping
underserved citizens who produce items for sale in developing regions of the world (Visser et al.,
2010). The goal is to link these producers with markets that buy their products to create longterm, fair, and equitable partnerships, empowering those residing in developing countries to
become players in the global trade network and to sustain themselves and their families. Fair
trade is measured by the following factors: anti-child labor, environmentally sustainable business
29
operations, antislavery, ethical relationships with producers from developing regions, global
buyers, fair wages, safe and healthy work environments, proper and equitable wage scales for
women, and sustainable development for civil society that is tangible and sustainable (Baradaran
& Barclay, 2011).
For decades, developing countries have suffered inequality, and fair trade serves as an
actionable measure to address that reality. Providing members of the developing world with
opportunities to earn a living is ethical. Fair trade includes laborers and farmers around the
world, and creating a way for the less fortunate to rise above poverty is being socially responsive
and responsible at the same time. Fair trade has been at the forefront of ensuring fair prices for
goods and for compliance with safe working conditions (Visser et al., 2010). In particular, fair
trade and the leadership within the global discipline have created access to credit (Baradaran &
Barclay, 2011). Producers in developing regions of the world do not always have access to
capital to create or expand their business. One of the benefits of fair trade is advanced payments
from buyers and access to create positive options for producers.
With access to credit and other monetary resources, producers can strategically support
their businesses, address family needs, and support their local communities (Harvey, 2011). In
developing regions, such as those within sub-Saharan Africa, microcredit companies are
sustaining positive impacts for local communities by creating opportunities to establish
businesses (Harvey, 2011). Large, medium, and small businesses have gotten their start in the
developing world through this method, strengthening the global community.
Education also plays a role in strengthening the global community. Fair trade has created
a learning environment for retailers and producers to exchange information (Hopkins, 2009). In
these exchanges, producers learn about consumer trends and can tailor their production efforts to
30
products that align with these trends, diversifying offerings and sustaining economic activity. In
addition to information exchanges, producers often are introduced to business practices that
enable them to become more efficient and to think more strategically about growing their
businesses in ways that create longevity and, in some cases, discovering a niche market
(Hopkins, 2009).
In developing regions of the world, especially in sub-Saharan Africa, communities often
function as one large family (Hopkins, 2009), motivating producers who have established their
businesses to make improvement of local communities a primary business objective (Hopkins,
2009). Many fair-trade companies support and engage in community development projects that
include (a) building projects, (b) health insurance, (c) installation of solar panels for sustainable
electric power, (d) financial support for children in need, (e) monetary support for mentally and
physically challenged children, and (f) educational grants for trade schools (Visser et al., 2010).
In addition, certifications represent a small number of human improvement measures used to
encourage people and to place them in better circumstances (Visser et al., 2010). Fair trade also
has opened doors for the inclusion of women and persons of color by establishing environments
of equality, respect, and unorthodox buying and selling systems (Kepe, 2009).
Fair trade and globalization have evolved global regions through technological
advancements, economic knowledge, telecommunication network advancement, media coverage,
and social media (Hopkins, 2009). When coupled with fair trade, globalization is a subject that
has taken on the form of world politics, the global economy, and how wealth is to be distributed
in an equal and fair approach. While globalization has benefitted developed nations, including
the U.S., Canada, China, Japan, and large portions of Europe (Hopkins, 2009), developing
regions usually are absent from the conversation. However, some of these countries, including
31
Kenya, Nigeria, South Africa, Angola, Uganda, and other sub-Saharan countries, are so naturally
rich in minerals that they are being mentioned in the global economy exchange, and fair trade
serves as an equalizer for them as they engage with developed world powers (Yates, 2012).
Additionally, Maconachie and Hilson (2016) speak about the stakeholder interactions between
local communities, the government, non-government organizations, and companies, when it
comes to mining oil and gas in developing areas of the world like the Sub-Saharan in regard to
corporate controlled development and who benefits; often, it is not the local people who benefit
from such enterprises.
Many developing countries are unaware of the potential business opportunities that
multinational companies possess. As a result, those companies maintain the advantage in
negotiations with developing nations. They could establish business agreements that may not
position developing countries in the best circumstances, including declining to pay adequate
taxes, paying low worker wages, and creating unideal employment opportunities. Developing
countries often have relaxed labor laws, allowing multinational companies to overwork
employees without proper financial compensation (Baradaran & Barclay, 2011).
According to Radelet (2010), the average citizens of developing nations lack knowledge
of general business, their rights as employees, and their rights under the 1948 Declaration of
Human Rights. Therefore, fair trade acts as an equalizer that educates both the developing and
developed worlds (Baradaran & Barclay, 2011). Fair trade combines the efforts of people from
both the developed and developing worlds to advance economic distribution and to benefit
citizens of developing nations through globalized business transactions (Baradaran & Barclay,
2011). Fair trade also fosters self-sustaining development and self-reliance by addressing
32
poverty; creating positivity among people; and providing education, access to healthcare, and the
humanitarian perspective for the global citizen.
Fair Trade Network
Fair trade encompasses producers, brokers, and consumers (Visser et al., 2010). These
three parties are interdependent, creating a sustainable, unbreakable chain. This bond exists
successfully only through honesty, active ethics, and a moral code that respects all three parties.
Producer. Producers are farmers, fishermen, or manufacturers who produce products that
are tradable commodities, which retailers then use for sales transactions to generate financial
gain (Visser et al., 2010). Producers expect to be paid fair wages designated by contractual
agreements set forth and composed under the influence of fair trade (Visser et al., 2010).
Partnerships between producers and retailers form due to the business trade transactions of
goods. In some partnerships, retailers will educate producers about market trends and, in some
circumstances, international trade developments (Visser et al., 2010). Financial payment
arrangements may include monetary advances and financing from an isolated business entity in
the form of microcredit. All parties encounter common business risks, but the partnership
between producers and brokers acts as an agent of experience and wisdom, facilitating practical
and prudent business decisions.
Broker. Brokers are relationship professionals who collaborate with both producers and
consumers (Visser et al., 2010). Consumers often ask questions that reflect their socially
responsible and environmentally sustainable values, including about the origin of products,
production methods, and work conditions of employees. Brokers address these requests while
driving the best business value. They also keep producers abreast of market demands, shifts, and
specificity in product expectations while validating that the producer is socially and
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environmentally responsible (Visser et al., 2010). For a business to develop and flourish in a
sustainable manner, the broker must drive the relationship between the three parties. By
establishing trust and fair pricing, and being responsible in all areas, the broker creates loyalty on
both ends (Visser et al., 2010).
Consumer. Consumers are the end users of products, which affords them great leverage.
Today, many demand to know where, when, and how the goods they are procuring have been
developed, and how the employees who produced those goods are treated (Visser et al., 2010).
Being socially and environmentally responsible begins with developing a responsive mentality,
and inquiring about the production cycle of a product and efforts that producers and brokers
share with respect to their goods. Without companies honestly qualifying the socially responsible
and sustainable efforts that go into producing a product, consumers will terminate the
consumption of the good, often using social media to share insights about their experiences,
which could compromise the reputation of the broker and producer (Visser et al., 2010). All
parties are important in the network, but a diligent consumer can be powerfully influential.
History of Fair Trade
Fair trade initially developed in the twentieth century (Moore, 2004). Europeans
contributed to the initial development in the 1960s through the slogan “trade not aid” (Rice,
2001). Forwarding ethics and morals reflected CSR intents, meriting media coverage. The
United Nations began incorporating trade in their operations, campaigning for developed
countries to support the movement by trading with developing nations (Groos, 1999).
In its initial stages, the trade was not significantly lucrative, and it was not until the 1980s
that nongovernmental agencies implemented a labeling process that proved successful (Visser et
al., 2010). They differentiated between time-honored trade and fair trade. Time-honored, or
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traditional trade, aims to gain profit and maximize a business organization’s value through cost
reduction measures, such as low labor options. In many cases people are exploited (Visser et al.,
2010). In fair trade, humanity is prioritized over profits: The relationship of the producer, broker,
and consumer is highly valued, and the education of all parties demonstrates regard and
trustworthiness (Hopkins, 2009). Through its transparency, fair trade creates an equal playing
field for everyone.
Sustainability and Business Ethics
Sustainability and business ethics are naturally compatible. Sustainability transforms into
CSR, and ethical companies develop strategies that align with social issues, including eradicating
poverty, engaging in sustainable development, and taking actions to enhance environmental
protection (Visser et al., 2010). Following the 1992 Earth Summit, the concept of sustainability
gained broad exposure and appeal (Sims, 2003). Sustainability has over the years intertwined
with business ethics, and national governments, academics, and corporations use the term. It
correlates with business profitability, environmental perspectives, and social development from a
long-term point of view.
The United Nations uses CSR in its Millennium Development Goals, which encompasses
the eradication of poverty, universal education, gender equity, reduction of child mortality,
improved maternal health, combating HIV/AIDS (along with diseases such as malaria), ensuring
environmental sustainability, and establishing a global partnership for development (Sandbu,
2012). It is critical that the United Nations, academics, national governments, and
nongovernmental agencies support sustainability, and doing so can demonstrate compliance with
and progression toward the Millennium Development Goals.
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Environmental Sustainability
Since the 1980s, the term “environmental sustainability” has been used to describe the
addressing of global environment concerns (Adams, 2013). While environmental sustainability
has always existed in some form, it was not until the late twentieth century that environmental
problems began gaining considerable attention (Adams, 2013). Years ago, coal was used to
power engines, and fossil fuels became a major fuel source around the world (Kronlid & Öhman,
2013). In the 1970s, the global community experienced an energy crisis, revealing how
dependent the world was on fossil fuels and sparking debates on renewable energies (Moring,
2000). Due to global warming in the twenty-first century, environmental sustainability is now
discussed more prevalently in the global community than at any other time (Kronlid & Öhman,
2013). The total global population has had a significant impact on the environment due to
consumption. Populations in developing regions are growing, while data express that populations
in developed regions are decreasing (Kronlid & Öhman, 2013). With the increase in the overall
population of the world, many developing counties are becoming more westernized, affecting the
carrying capacity of the earth (Kronlid & Öhman, 2013). Projections reveal that by 2050, the
world’s population will exceed 9 billion (Walsh & Dowding, 2012).
“Environmental management” provides guidance in measuring the human ecological
footprint by generating estimates that can determine sustainable strategies for a fair standard of
living while controlling environmental impact (Leonidou & Skarmeas, 2017; Goncalves, Pereira,
Leal Filho, & Miranda Azeiteiro, 2012). As a developing region’s standard of living improves,
the environment becomes less sustainable (Goncalves et al., 2012). Therefore, with globalization,
the environmental conundrum will require the collective effort of all global partners (Goncalves
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et al., 2012). In addition, developing regions must engage quickly so that their impact on the
global environment is minimal, as developed regions are doing.
In environmental management, the atmosphere, oceans, and fresh water are the natural
systems that require constant monitoring (Goncalves et al., 2012). Pollutant agents, such as
carbon, sulfur oxides, nitrogen oxides, and aerosols, affect the atmosphere and the ozone layer
(Goncalves et al., 2012). Some experts report that air pollutants cause the earth’s water supply to
experience evaporation problems, which affects the ability of the earth to receive rainfall
(Goncalves et al., 2012).
Environmental responsibility is necessary, and compliance with all environmental
legislation is the responsibility of corporations, civil society, and government entities (Goncalves
et al., 2012). In the Niger Delta, the process of gas flaring has been taking place for four decades
(Adetunji, 2006). The oil business uses gas flaring to refine the product, and it emits harmful
amounts of carbon dioxide into the atmosphere, causing air pollution. This pollution affects the
local community wherever the process in practiced, and the Niger Delta region has experienced
increases in asthma, cancer, and premature deaths (Adetunji, 2006). In 2008, the Nigerian
government set a deadline to end the gas flaring process in its entirety (Adetunji, 2006).
Environmental sustainability is a discipline that has gained wider acclaim due to both the
planet’s condition and the introduction of sustainable development in the late 1980s, which
focuses on development, the triple bottom line of companies, and eco-efficiency (Visser et al.,
2010). Former Vice President Al Gore produced a film titled An Inconvenient Truth that raised
awareness of global environmental concerns (Horrigan, 2010). The United Nations and
organizations such as Greenpeace continue to lead the environmental agenda, and the collective
efforts of business organizations and national governments are needed to make continued
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impacts on legislation that will improve the world’s environmental future. Continued active
efforts to garner all stakeholders’ compliance reflect the commitment to sustainable development
respective of environmental sustainability.
Responsible Reporting
Responsible reporting has manifested in the discipline of business ethics (Knight &
Ellson, 2017; Lu & Abeysekera, 2017). The Sarbanes-Oxley reporting legislation was passed in
July 2002 to ensure the trustworthiness of public reporting of financial information and to
reestablish assurance in the U.S. financial capital markets (Green, 2004). It contains extensive
responsibilities and consequences for corporate boards, executives, directors, auditors, attorneys,
and securities analysts (Bainbridge, 2007). It even directs how corporations conduct daily
operations to prevent theft and deception of funds, requiring corporations to preserve sufficient
internal controls (Green, 2004). Sarbanes-Oxley requirements are compulsory only for public
companies that file a 10-K with the Securities and Exchange Commission (Green, 2004).
Sarbanes-Oxley regulates several professional positions within a corporation (Green,
2004). Board members, auditors, attorneys, multiple levels of management, and the regular
members of the employees’ population all play supporting roles. Corporations must create audit
committees inclusive of independent directors (Green, 2004) who are responsible for gathering
applicable information from management and assisting with the auditing process (Bainbridge,
2007).
Chief executive officers and chief financial officers are responsible for financial reporting
(Bainbridge, 2007). Criminal penalties are enforced if any erroneous reporting or errors of
statements in reference to earnings surface (Bainbridge, 2007). Under Sarbanes-Oxley, all
members of management are expected to certify that they manage compliant operations
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(Bainbridge, 2007). To ensure unwavering accountability, in addition to the audit committees,
companies must establish management certifications (Bainbridge, 2007).
Dow Jones Sustainability Indices
RobecoSAM is an investment organization specializing in sustainability investing.
Taking a best-in-class approach to assessing CSR, the firm publishes the globally recognized
Dow Jones Sustainability Index (DJSI) annually (RobecoSAM, 2015). Wai Kong Cheung (2011)
explained that the global investor community recognizes the DJSI as an informational instrument
and views it as being both transparent and objective. The DJSI formed in 1999, and its reporting
was first published on September 8, 1999, tracking the CSR performance of a broad spectrum of
companies. Every year, the DJSI examines 3,000 publicly traded companies based on market
capitalization and active engagement in CSR. These companies are invited to participate in the
RobecoSAM’s CSR survey assessment, which is based on economic, environmental, and social
factors that are relevant to the financial success of the individual companies.
Concerning economics, the assessment examines all financial metrics, supply-chain
management, strategic planning, knowledge management, and governance that contribute to
maximizing the value of the firm (RobecoSAM, 2015). The environmental aspect of the
assessment includes carbon mapping, environmental reporting, executive commitment to the
environment, eco-design, and the overall impact that the firm makes on the environment
(Robinson, Kleffner, & Bertels, 2011). Finally, the social sustainability factor seeks to
understand the corporate efforts a firm is engaged in supporting, such as employment policies,
management development, human rights compliance, and anticorruption (Sethi, Martell, &
Demir, 2017; Visser et al., 2010). The assessment consists of 80 to 120 questions that pertain to
general management practices, firm performance metrics, corporate governance, human capital
39
development, and risk and crisis management (RobecoSAM, 2014). Robinson, Kleffner, and
Bertels (2011) explained that institutional investors rely on socially responsible indexes for the
creation of their portfolios, which total 8 billion dollars in assets and serve to attract other
investors while establishing credible sustainability reporting.
Global Reporting Initiative
The Global Reporting Initiative (GRI) began as a project with the Coalition for
Environmentally Responsible Economies (CERES) and the Tellus Institute, which aimed to
ensure companies were being environmentally responsible (GRI, 2015). The GRI dates back to
1997, and investors were the organization’s initial audience. Based on the recommendation by an
internal steering committee at CERES, the GRI’s focus expanded beyond environmental
concerns to include economic, social, and governance reporting (GRI, 2015). By 2007, the GRI
was collaborating with experts from civil society, business, and labor while establishing alliances
with the United Nations to increase its network.
The GRI assesses environmental reporting by focusing on a firm’s impact on climate
change, emissions, use of materials, waste management, transport, biodiversity efforts, supply
chain, and overall environmental reporting. Economically, the assessment focuses on financial
performance, market presence, indirect economic impacts, and procurement practices. In the
social area, the GRI assess labor practices, human rights (with reference to the Universal
Declaration of Human Rights), product responsibility (health and safety), public policy
compliance (as it relates to politics and contributions), anticorruption, and the true cost of
performing corporate business (GRI, 2015; Horrigan, 2010, p. 46). The GRI works to promote
sustainability by helping organizations understand their economic, social, and environmental
impacts.
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Alonso-Almeida, Llach, and Marimon (2014) stated that the GRI is a solid start to
environmental reporting. However, they reported that many environmental indicators on which
the GRI collects data are not actually used by companies. Additionally, because the GRI has
made a deliberate effort to include socially responsible indicators in its data collection efforts, it
has formed partnerships with the UNGC and the Organization for Economic Cooperation and
Development (Alonso-Almeida et al., 2014).
Carbon Disclosure Project
The Carbon Disclosure Project (CDP) attempts to influence organizations to prevent
dangerous climate change and to protect natural resources. The CDP has maintained a large
collection of self-reported information on climate change, supply chain, water, and forestry risk
data (CDP, 2015). It leverages market factors such as customers, shareholders, and varying
levels of government to measure and disclose environmental reporting information.
In 2000, the CDP was created with the intent of gathering climate data to enable
management teams to make insightful decisions concerning the environment. The CDP functions
as an independent nonprofit organization that gathers data on behalf of institutional investors.
One-third of its funding originates from corporate sponsorship, while other funding comes from
grants, donations, international partnerships, memberships, and special projects (Andrew &
Cortese, 2011). Andrew and Cortese (2011) stated that the number of institutional investors has
grown from 35 to over 500, with assets that are worth 64 trillion dollars. Institutional investors
depend on the results of the CDP’s data collection to support their own research and decisionmaking efforts.
The CDP’s goal for its body of work is to allow organizations to analyze their greenhouse
gas emissions and assess their internal firm energy policies, which can create opportunities to
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develop management strategies and reduce emissions. In addition, the research efforts provide
investors with a better path to transparency with respect to firm energy consumption and
behaviors, and with strategies to lessen environmental impacts. In an effort to improve the
quality of data collection, in 2007, the CDP began compelling companies to report their
methodologies used to generate CSR data reporting. This effort contributes to standardizing
reporting, which allows company comparisons of data across diverse sectors of industry
(Andrew & Cortese, 2011).
Matisoff, Noonan, and O’Brien (2013) discussed that economic incentives compel
business managers to participate with the CDP in an effort to drive transparency and credibility.
Investors perceive organizations absent of transparency and credibility as untrustworthy, and
may become skeptical of investing their capital in them. The CDP serves as a strong, reliable
instrument of insight for business leaders and investors of all types. Matsumura, Prakash, and
Vera-Munoz (2014) explained that an organization’s environmental reporting reputation creates
pressure for adequate reporting, which drives business leaders’ relationships with the CDP.
Strong environmental reporting can benefit revenue, customer satisfaction, employee retention,
and support from varying stakeholders (Matsumura, Prakash, & Vera-Munoz, 2014).
Currently, both the GRI and DJSI have aligned their environmental data collection tools
with the CDP (CDP, 2015). The CDP’s purpose is using data collection, measurement,
transparency, and accountability to drive change in global businesses. The CDP focuses its
attention on the individual company’s carbon emissions, energy usage, and projection of
reduction.
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United Nations Global Compact
The UNGC is a departmental unit of the United Nations that collaborates with companies
globally on the largest CSR initiative (UNGC, 2015). The UNGC operates on the Circles of
Sustainability, which includes the CSR framework of focusing on economics, human rights,
labor, environment, supply chain, sustainable development, governance, society, and
anticorruption (UNGC, 2015). The UNGC seeks to influence companies to align their strategies
and operations with 10 principles. For companies that decide to join the UNGC, the firm’s chief
executive officer must submit a letter and formally share at least one example annually about
how their organization has operationalized one or all of the 10 principles into practice (Visser et
al., 2010). The UNGC would like companies to adopt each of the principles and align them with
their strategic intents. The UNGC is a voluntary effort and relies on the frank effort of the
participating firms.
Sethi and Scheper (2014) claimed that over a 10-year period, no significant progression
has resulted, although the UNGC boasts that membership has increased, and CSR efforts have
gained traction among firms in their network. Because of Sethi and Scheper’s reporting, the
UNGC may have lost credibility and trust with a segment of civil society familiar with their
efforts. However, Williams (2014) argued that the UNGC has influenced organizations to work
toward its mission successfully, demonstrating that the UNGC is progressing and is not as
dependent on company participation as other researchers have articulated. Again, the UNGC is
part of the United Nations, which holds global influence on the ability to bring forth consistency
in how CSR is practiced within the business community (Williams, 2014).
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The Role of Capitalism
Capitalism is a financial practice in which property and material possessions belong to
individuals and entities (Friedman, 2002). Individuals own their efforts and energy – described
as labor – and business organizations pay for it in the form of wages. According to Fri…