Ethics, CSR, and business

Even as the practice of CSR is gradually gaining momentum among companies all across the globe, there is still no single, universally accepted concept regarding what could be the ideal CSR practice that would convince everyone about its importance in raising the company performance. Therefore, CSR practice is yet to shrug off the labels like "tortured" (Godfrey and Hatch, 2007, p. 87) or "fuzzy"(Lantos, 2001, p. 595) concept. On the other hand, the proponents of CSR observe, "the relationship of an organisation’s ethics and social responsibility to its performance concerns both organisational managers and organisation scholars” (Daft 2007, p. 377).

The above state of affairs clearly shows that the difference of opinion stems out of complexity of the term "ethics", which can be applicable both in favour of CSR and against it, where in the first instance, it can be used in support of the fair treatment to the surrounding ecology in which a company operates, i. e. , in the macro level situations, and on the other hand, it can be used to shield the interest of the investors of the company who expect a fair treatment too, in terms of financial returns.

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The issue of employees too can be attached to it, as any money spent on CSR may contain a fragment from their share as well! However, researched evidence suggests that there is a small, but positive relationship between ethical and socially responsible behaviour and the organisation’s financial performance, as Baker (2009) observes that best practice of CSR can be underpinned in the cases where CSR enables companies to manage the business processes to produce an overall positive impact on society and on the other hand becomes an integral part in the process of wealth creation (Baker, 2009).

Therefore, this essay explores the nuances of both CSR and ethical dilemma involved in its proceedings to ascertain if there is any true impact of CSR on company performance and whether it would be best to put CSR before profit-making mindset. 2. 0. Background 2. 1. What is CSR One of the common definitions of CSR is that it is a "concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis" (Prieto-Carron et al. , 2006).

However, definition of CSR has always remained multidimensional. The early attempts of defining CSR were limited into fundamentalism or neo-classicism (Moir, 2001, p. 17), which held the view that corporations' social responsibilities ends with paying taxes and creating employments (Klonoski, 1991, p. 9). Thus it wanted to exploit legal avenues over and above the greater aspects of CSR.

The views of Friedman (1970, p. 31) would be enough to substantiate the above view, where he said that "... [social] responsibility is to conduct the business in accordance with their [owners or shareholders] desires, which generally will be to make as much money as possible while conforming to the basic rules of society, both those embodied in law and those embodied in ethical custom.. "

Gradually the concept took a new turn with the advent of social corporatism (Drucker, 1973), which can be considered as a step forward from the ghetto of legal explanation of CSR, as Drucker commented that Friedman's approach is untenable and that the corporations need to concern themselves with society and for that matter they should stretch themselves beyond the legal umbrella to perform social duties (p. 349). In all, social corporatism wanted to redefine CSR as a business strategy with potential to adjust the companies with the dynamism of the environment (WBCSD, 2002, p. 2).

On the other hand, Social Institutionalism (Klonoski, 1991, p. 12) observed that corporations are social institutions with associated social responsibilities, while operating from the philosophical background created by Hobbes, Locke, Rousseau, or Kant, who provided a rationale for relationships between persons, society and its members, as well as between society and institutions (Gauthier, 1977, p. 135; Moir, 2001, p. 19). Since social contract is not bound by law and yet potent enough to influence humans about the desired mechanism of value system, this may be underpinned as one of the catalysts that propelled CSR into further prominence in modern times.

Moralism is another such catalyst (Klonoski, 1991, p. 10), which brought forth the issue of accountability of the companies regarding their actions and its impacts on the society, where the companies would be treated as a natural person. This approach has gained ground even in modern times through the works like Palazzo and Scherer (2006), who suggested adopting moral legitimacy as the foundation of CSR (p. 71). Yet the world of researchers is divided with varied opinions.

For Mintzberg (1983), CSR can be seen from four perspectives, one, in a purist form where CSR would be practiced for its own sake, two, when it would be practiced with the belief of a return in any form, three, when CSR would be treated as an investment and four, when CSR would be practiced to avoid external influences. However, Minzberg voted for the purist form of CSR. In all, it can be seen that the issue of ethics is embedded with CSR, and thus it would be pertinent to explore CSR from ethical perspective. Ethics

Going by the lexicon, ethics refer to the principles of right and wrong that are accepted by an individual or a social group, or to a system of principles that govern morality and acceptable conduct. However, the elements like right, wrong and morality can always carry more than one explanation and thus, can produce conflicting situation. For example, it would be ethical for the companies to safeguard the interest of their shareholders, and at the same time it would be ethical for the companies to respond to the social responsibility.

Now if the companies choose to meet the first responsibility in purist form, it cannot meet the second responsibility, as in the purist form, the companies are responsible to provide maximum return for the money invested by the shareholders and thus have no right to spend any money provided for business or earned from business in any activity other than developing the business. This is what ethical dilemma is all about, and thus it is not only ethics, but also ethical dilemma that is embedded with CSR practice. Ethical Dilemmas

An ethical dilemma arises in situations where humans find it difficult to take one decisions out of the options, because all probable decisions carry elements like morality, obligation, duty or responsibility. For example, a worker might come to know about a certain act of her colleague that could be harmful for company, and might feel the ethical urge to inform the authorities about that, but at the same time the worker might be pulled back by another ethical call that reminds her about her duty as a friend – where she is expected to save her colleague from losing her job!

Much like the personal ethical dilemmas, companies too can suffer from indecision, for example, a company can be caught in the middle of deciding whether to go for business ethics or to go for ethical business - where in the first case it requires to maintain the ethical norms under legal framework, and in the second case it requires to put the universal ethical norms before business gains. While the first one would allow the company to do business, the second one would expand its horizon on greater ethical perspective, but that may cost a slice of its business.

It is for this reason some opine that corporate responsibility is the expression of the values of business both within core business strategies and as a set of commitments and obligations made to its stakeholders (IBE, 2009). In all, ethical dilemma for a company can boil down to situations like companies cannot do XYZ to fulfil their promise to the stakeholders, and yet they ought to do XYZ to fulfil their obligation to the society and environment (Klempner, 2009). Which way to go? Theorists and researchers provided several answers to such dilemmas, though none fixing the issue for once and all.

Lantos (2001) saw three divisions in CSR practice, like ethical CSR, altruistic CSR and Strategic CSR, where the first one refers to the moral responsibility to prevent any harmful outcome from business practice, second one refers to a CSR practice with wholehearted care and concern for the society even at the expense of organizational sacrifice, and the third one refers to a kind of CSR practice that ultimately aims to accomplish strategic business goals. Lantos, however, took a leaf from Caroll's (1979) model as presented below: Caroll's CSR Pyramid

The same elements have been represented through concentric circles or intersecting circles, though none clearly advocating on whether CSR should be put ahead of Profit or vice versa. CSR or Profit: Which Should be Top Priority? While "shareholder accountability" is still a haunting issue to many companies, there are ample evidences of gains through successful practice of CSR, where the companies put ethics and social responsibilities ahead of profit making and yet profit making surpassed their expectations, as it emerged as if a byproduct of CSR practices.

On the other hand, there are instances of bad CSR practice too – which served clear hint about the possibility of losing business to a great extent. The above state of affairs thus prompts this essay to advocate in favour of putting ethics and social responsibility ahead of profit making, followed by its own justification. Best Practice of CSR: Altruistic Pattern Firstly, one look at the toppers' list in CSR practice would provide a fair hint that CSR practice only added to their success.

CSR Quest (2009) has provided a list of CSR International Business Leaders as on 2004, where the rated the following seven companies as the leaders: 1. Aviva, the world’s seventh-largest insurance group and the biggest in the UK; 2. BP, the leader in oil, gas and renewable energy resources; 3. Carrefour, the second largest company in food retailing; 4. Credit Suisse, a leading global financial services company; 5. Intel, the largest chip maker and producer of computer and communication products; The brief description of the all the five companies clearly point at their success, and all of them are big companies.

It would be pertinent to review the policies adopted by Aviva, the topper of the list, and which is a company with 30 million customers, 56,000 employees, ? 240 billion assets under management, and ? 30 billion premium income and investment sales from continuing operators (Corporate, 2004). Aviva provided clear mission statements for areas that are intimately related to social responsibility, such as environment, community, workforce, health and safety, customers, human rights, suppliers and standards of business conduct.

In its report (Corporate, 2004) it stressed on the fact that "Aviva board has a clear view of the importance of CSR to the success of business" (p. 3), and aired their observation that they are "closer to their ambition of having CSR as simply the way they do things around here" (p. 4), while declaring, "we describe CSR as our corporate DNA, since that describes how we do things round here" (p. 6). This shows that AVIVA adopted an altruistic approach in practicing CSR and yet doing top business.

Aviva Group has extended their support to community development across the globe and during 2004 it donated ? 4. 6 million to various worldwide community initiatives like youth education and development, crime prevention, etc. Apart from that it also achieved notable success in preserving the environment. According to its report, it was able to reduce 22. 3% CO2 emissions, increased the use of renewable-sourced electricity; reduced paper usage by 33%, increased waste-recycling and reduced 20% in total business mileage.

Not only that, it partnered WWF and Amnesty International to promote and manage a host of projects. There are scores of other instances too, where the companies have risen over the ethical dilemma and are geared for future success. For example, Unilever, the largest tea company of the world has already taken the decision to purchase all of its tea from sustainable, ethical sources and accordingly it has involved the international environmental NGO, Rainforest Alliance, to begin the process by certifying tea farms in Africa.

Accordingly, Lipton, the best-selling tea in the world and PG Tips, UK's largest selling brand will be the first brands that would contain certified tea. Unilever has also declared its plans to sell certified Lipton Yellow Label and PG Tips tea bags in Western Europe by 2010 and certified Lipton tea bags globally by 2015. This is an ample example of how the companies can respond to corporate social responsibility and yet maintain their positions. However, someone may argue that bigger companies like Unilever can afford to take such steps, which the smaller companies cannot afford.

Yet, such argument can be countered by the question that the companies too are created by humans and thus the sole aim of any company should be to serve the humans and not to harm them in any way (Unilever, 2007). Another such instance can be found in the actions of MUCOS Pharma CZ, Ltd. , a company from Czech Republic, which even operating under unsettled market condition vowed to the chosen task of transforming their society by introducing a new treatment method, though at the same time realizing that uncertain and non-profit projects cannot be the solution to achieve their aim.

Amid this state of affairs, they first convinced their shareholders about their long-term plan and risked a huge fund in training, mass media campaign about their intention. In the end MUCOS Pharma products amount to 1 per cent of all Czech exports to Russia (CSR Europe, 2007). On the other hand, strategic CSR can be a boomerang, and a handy instance of the same can be found in the case of Taj Group of Hotels. Worst Practice of CSR: Strategic Pattern

The account of Mangalassery (2009) involves the fishing community of Kovalam fishing village of India and Taj Group of hotels, owned by Tata group. It started 30 years ago, when Tata established Fishermen's Cove Beach Resort at around Kovalam village by taking two acres of land on lease and taking over another seven acres from the village land through an oral agreement of providing basic services to the village community like drinking water of two tanks a day, children's education and rice during rainy season, besides paying them fees to take hotel guests on boat cruises.

But that oral agreement abruptly ended right after the tsunami struck in the area in 2006, and soon the community and the hotel officials embroiled into conflicts, as the village people wanted back a portion of land and the group denied, though the group assured the villagers at the time of acquisition that they would return the land if the villagers needed it for housing or education institutions. The conflict involving Taj Hotel Group ran for three years before the two parties signed an agreement with government as its mediator, who coaxed the villagers to forego the seven acres in lieu of the three acres of land from the government.

However, that too has not been realized yet, while the group has started construction on the disputed land, allegedly violating the Coastal Regulation Zone Notification Act. It takes a continuous effort to establish the impression of a company through its deeds, and instances of Aviva and Taj Hotel Group corroborate that from both ends, where Aviva would continue to enjoy the positive impact of their good deeds, and Taj Hotel Group would continue to suffer from its bad image of corporate citizen.

Accordingly, one cannot ignore the implication of CSR in the businesses of the companies mentioned above, and from that perspective, Taj Hotel Group is definitely not in comfortable position. The Trend Too Favours CSR Practice over Profit Culture According to Welford (2005) the trend is that the companies seem to respond to what is important in their own country and reflect the challenges. Singapore (with an economy based on trade) has put up much more stress on the external aspects of CSR than internal ones, while Norway and Canada, with their own significant indigenous population, have the highest incidence of local policies.

Hong Kong corporations may not have heaps of written policies like their European counterparts but they too are not lagging behind the British or other developed countries in the sphere of CSR. The earlier notion that the degree of CSR practice increases with the degree of development in a country is now proved wrong, as the Asian countries too are coming up with evidence of quality CSR practice, such as Japan or Korea (Welford, 2005). Welford's (2005) survey also highlights the Global leaders of CSR practice where UK, Germany, Canada, or USA share the limelight.

Interesting angles are provided by Business Ethics magazine (Business, 2009), which found USA's CSR practice stemming out of philanthropic perspective, where even big companies are spending portions of profit in CSR practice in a "zero return" policy. European companies, according to Baker (2009), is more focused on operating their core businesses in a socially responsible way, complemented by investment in communities for solid business case reasons.

A 2002 survey of more than 1,000 Indian companies (India, 2002) showed increased state of CSR practice in India. Therefore, the global trend of CSR looks very encouraging, especially with the increasing instances of Asian countries responding to this cause. Scopes to Mix CSR and Business Companies can be the great social problem solver in any society, and if their mission gets integrated with CSR goals, then such endeavours get high momentum.

Such is the state in the energy sector, where multinational companies or even countries have found a new meaning of corporate social responsibility as they are searching for alternatives to fossil fuels. For example New Energy Movement (2008) is already working in the field of emerging technologies that can produce the gadgets that would have ability to access the primary sources of energy from cosmos and thereby building sustainable future of earth (New, 2008).

There are other energy-related works are going on too, like Vattenfall's (2008) aim to reduce CO2 emissions per generated energy unit in own operations by 50% by 2030. Alongside it has planned to meet the rising European demand for energy with low emissions. Apart from that, they have already invested in wind power and plans to introduce Carbon Capture and Storage (CCS) technology, which is estimated to make up approximately 16% of total generation and would highly contribute to lower CO2 emissions per KWh.

They are also probing the ocean energy including wave and tidal power, bioenergy and natural gas. These ventures, therefore are gearing up to open new horizons of corporate social responsibility. British Energy Group (2008), the largest electricity provider in UK too is working hard on lowering the carbon emission and it has already succeeded in avoiding emissions of around 35 million tones of CO2 according to its CSR report of 2008, where it also claims as the largest producers of low carbon electricity in the UK.

NEC Corporation (NEC, 2008), a leading provider of information and communication technology in Singapore, has sponsored the "Henderson Secondary School's Energy Efficiency Project" under their CSR programme, through which they aim to utilize wind power to generate electricity. Mitsubishi Corporation has opened The New Energy ; Environment Business Division in 2007, which is developing new energy business models that would help to solve global warming and recycling of water and other resources.

It has also signed a memorandum of understanding with Al Fateh University, to carry out a programme to stimulate applied field study of new energy (JCN, 2009). Hitachi, the refrigeration giant, has come up with power-saving IT equipments, besides introducing highly efficient air conditioners and electrical equipment that would run with less electricity (Using, 2008). US too is emphasizing on more usage of renewable energy, where both corporations and individuals are purchasing renewable energy from local vendors (PR. , 2005).

Japan Energy (Promoting, 2008) is contributing to energy conservation and reduction in CO2 emissions from air-conditioning in large buildings by collaborating with Shimizu Corporation. The above endeavours clearly show that corporations can highly contribute to the society if they aim to search, identify and solve those social problems with which they too are closely associated, and in the process may hit goldmine of profit. 5. 0. Conclusion While the best and worst practice of CSR showed that the quality CSR practice is not only earning name and faith on the company but also that faith is eventually getting translated into good business.

This is the real-life situation, far from the smoke of theories. The above discussion also showed that companies worldwide too are favouring this strategy of putting ethics and CSR above the traditional thrust on business, and eventually garnering more profit. This new prospect of doing business by being a social player first has surely encouraged the companies, as more and more companies are coming out of the shell of ethical dilemma and aligning their mindset with the need of this earth and its subjects.

The instances of unique ventures viewed above surely carry refreshing news for the world that the companies have started aligning their business aims with the positive factors of living. Yet all said and done, this essay finds that there is a hidden key in this process too, which is the ability of the companies to look outside the box with an intrinsic desire to serve the society and ultimately finding unique avenues of business where there would be no age-old traditional conflict between shareholders' claim and responsibility to the society.

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