At the 2002 United Nations (UN) World Summit on Sustainable Development, Hewlett-Packard Company (HP) CEO Carly Fiorina and South African President Thabo Mbeki launched a pilot for a profit-driven community development model; the Mogalakwena HP i-Community project was a three-year public-private partnership looking to develop ICT solutions specifically designed for traditionally under-served markets aiming to improve literacy and citizen participation, to create jobs and income, and to provide education and healthcare services. Although the project won many awards celebrating HP’s contribution to alleviating poverty and stimulating development, HP abandoned the project before it could achieve the business results and developmental outcomes it set out to achieve (see McFalls 2007).

Major corporations are being increasingly targeted as agents in sustainable development. Business is no longer seen as a problem to development, but has been redefined as ‘instrumental’ in its achievement (Oxfam 2008:2). Organisations such as the UN, the World Bank, and the European Union (EU) have embraced Corporate Social Responsibility (CSR) hoping that the private sector can play a key role in achieving developmental goals (Newell & Frynas 2007) such as poverty reduction, improved healthcare and gender equity.

This essay explores to what extent CSR improves the broader business contribution to development. First I will discuss what is meant by CSR whilst looking at different definitions and aspects as well as the interpretation used in this essay. Second, I will look at how historically CSR came to play a role in development by examining the geopolitical and global economic context as well as the changing perspectives in management and development thinking. Finally, I will consider the different critiques and challenges in relation to CSR as an agent of development.

or download this essay: Does Corporate Social Responsibility Contribute To Development

What is CSR?

The broad range of definitions (and theories[1]) shows that CSR means different things to different people and whilst all definitions share the belief that companies have a responsibility for the public good, different organisations emphasise different aspects of CSR, such as environmental management, human and workers’ rights, transparency and compliance, and stakeholder management (Garriga & Melé 2004; Blowfield & Murray 2008). Whether a company’s social responsibility should be voluntary, self-regulatory or legally binding is a matter of considerable debate (Fox, 2004; Utting, 2005; Prieto-Carrón et al. 2007; Blowfield & Murray, 2008). According to Blowfield and Murray (2008), CSR is an ‘umbrella term’ capturing the various ways in which business relates to society; it involves values that guide a company’s interactions with other society members, it addresses business’ role in wider society and the different types of business-society interaction, and it looks at the categories in which business is expected to take action. For the purpose of this essay I will consider CSR in the broad way Blowfield and Murray define it, whereby I will look more concretely into business’ values, role and action in relation to the developing world.

The Rise of CSR

Historically, from the industrial revolution to contemporary globalisation, the relationship between business and society has been a recurring point of discussion and concern (Utting 2005; Jenkins 2005; Blowfield & Murray 2008). But the interest in corporations’ social responsibilities particularly heightened as a consequence of the process of ‘globalisation’ and the neoliberal policies driving that process: the economic liberalisation of goods, services and finance, and the promotion of a minimal state. Market mechanisms have come to dominate world structures, making transnational companies (TNCs) both economically and politically powerful in the developed ánd the developing world. The increased mobility of capital enabled TNCs to exploit regulatory differences between states by (re)locating or threatening to relocate their production facilities in countries with regimes more favourable to the financial bottom line (Jenkins 2005). Since they needed foreign direct investment to boost their own economic development, developing countries came under intense competition to attract the TNCs. So-called global ‘value chains’, with northern buyers controlling a web of low-cost southern suppliers, and economic processing zones offering tax incentives emerged.

Aided by equally globalising communication technologies, international awareness of the consequences of global economic liberalisation grew in the 1990’s. TNCs stood accused of enjoying the benefits of globalisation but letting others pay the bill, most notably the developing countries (Blowfield & Murray 2008). Here, labour and environmental conditions deteriorated and the number of people living in extreme poverty failed to decline whereas inequality increased (Utting 2005). Companies such as Shell, Nike, Gap and Levi Strauss were challenged to justify their actions (Blowfield & Murray 2008) and Wall Street demonstrated that the increased significance of ‘the brand’ and ‘corporate reputation’ made leading companies vulnerable to the effect bad publicity has on profit (Guardian 25 June 1999). A series of UN summits and commissions were set up as public calls for greater regulation and supervision increased (Utting 2005).

Being concerned with the potential damage to their reputations as a result of media exposure and the threat of increased regulation, CSR emerged as a management response. It offered an alternative to regulation and became a way to deflect criticism with a possibility to capitalise on business opportunities associated with ‘doing, and being seen to be doing, good’ (Newell & Frynas 2007:670; see also Jenkins 2005). Since then, business has become a proactive player in shaping and disseminating the CSR agenda through PR-related activities: the promotion of socially responsible investment; reporting and certification; concrete changes in business policies, management systems and performance; and the promotion of CSR partnerships with leading NGOs like World Wildlife Fund and Oxfam, international organisations such as the UN and the World Bank, and academia (Utting 2005). CSR, once a ‘do-gooding sideshow, is now seen as mainstream’ (Economist 17 January 2008).

Changes in development thinking further increased CSR’s momentum. Development strategies focusing on economic growth moved to incorporate the social dimensions of development, exemplified by the global adoption of the UN Millenium Development Goals (MDGs) and the focus on poverty eradication (Jenkins 2005). But liberalisation, deregulation and a reduced state role meant that key developmental functions traditionally associated with the state, such as the provision of basic infrastructure, health and education and access to water and electricity, had been taken over by a range of civil society and market actors (Newell et al. 2002 in Newell & Frynas 2007). The private sector, as service providers, employers, investors, and increasingly as shapers of developing countries’ policies, became considered central to tackling poverty and CSR’s scope started to broaden; focusing not only on corporate conduct impinging on social, environmental and human rights issues (‘do no harm’) but to incorporate business as a contributing development actor (‘do more good’) (Prieto-Carrón et al. 2007; Utting 2005; Sayer 2005; Newell & Frynas 2007; Blowfield & Murray 2008). Realising that firms only concerned with the short-term financial bottom line might not make the long-term investments necessary to promote human development, socially responsible business, however, was expected to ensure a wider spread of benefits and so demonstrating that there are sound business reasons (‘a business case’) for companies to take CSR seriously has become important to maintaining the momentum.

Can and Does CSR make a Difference in the Developing World?

A range of scholars, however, question whether CSR can be adapted into meeting the needs of the poor (Utting 2005; Jenkins 2005; Hamann 2007; Blowfield 2007; Newell & Frynas 2007; Prieto-Carrón et al. 2007). The very idea of business playing a role in development is subject to considerable debate, because it implies the acceptance that you can meet social and environmental challenges through market-based solutions, and that the private sector is better at optimising resources than the public sector (Utting 2005; Hamann 2007; McFalls 2007; Blowfield & Murray 2008).

Criticism is aimed at CSR being 1) misplaced as a concept. Further critique is pointed to 2) competing interests between short-term and long-term horizons; between shareholders and any other stakeholders; between outputs and outcomes when defining CSR’s actual impact; and between sharing and withholding social learning. Criticism is also directed at the 3) dominance of northern and TNC perspectives and at 4) not addressing power and participation issues. The 5) inconsistencies in business’ behaviour furthermore question whether CSR is able to ‘walk the talk’.

First, opponents to CSR argue that there is no place for business to be involved in social development. Neoliberal economists such as Milton Friedman (1970), argue that companies have ‘no business’ getting involved in the public as they already contribute to society through the creation of jobs, the payment of tax and the delivery of goods and services (Newell & Frynas 2007; Economist 17 January 2008). A study conducted jointly by Unilever and Oxfam in 2004-05 found that Unilever in Indonesia supported the equivalent of 300,000 full-time jobs and contributed $130m a year in taxes to the Indonesian government leading the Economist to conclude that this was a lesson for firms not to be ‘too defensive about their contribution to society’ (Economist 17 January 2008; see also Clay 2005).

Other opponents, such as Christian Aid (2004), argue that CSR is only a public relations tool used to mask the sometimes devastating impact large corporations can have on vulnerable people and the environments in which they live, pointing to the continuing negative effects on Nigerian communities because of Shell’s oil extractions; the health issues of workers on the plantations under British American Tobacco contract; and Coca Cola depriving local communities in southern India of clean water.

Second, the competing logics of development imperatives and business realities are not easily reconciled (McFalls 2007). To accomplish social change takes long-term extensive effort, but most businesses look for short-term maximum returns; company shareholders’ interests tend to dominate over the interests of other stakeholders. When a cross-cutting exercise went through HP, the Mogalakwena HP i-Community project was one of the first to be discontinued and its project team and local staff members’ employment terminated (McFalls 2007). This questions the sustainability of CSR itself as a company’s programmes ‘may disappear with the next downturn’ (Economist 17 January 2008). The measurement of ‘impact’ also differs when comparing private vis-a-vis public objectives as how does CSR affect the major societal issues it is intending to tackle (Blowfield 2007)? Information on measuring impact is limited[2] and what CSR seeks to measure is significantly different from what international development is concerned with; focus is often on the economic impact of CSR on the company not on changes in people’s lives (Blowfield 2007; see also Prieto-Carrón et al. 2007 and Hamann 2007). There is a strong academic call to research the developmental impact of CSR (Jenkins 2005; Prieto-Carrón et al. 2007; Newell & Frynas 2007) but whether this is in the interest of the most influential groups that are engaged in CSR, predominantly business itself, is doubtful (Hamann 2007; Blowfield 2007; Blowfield & Murray 2008).

The private and public sector seem furthermore to have conflicting views on how and why information in the development process is gathered and monitored. During the i-Community project, HP saw any learning as ‘intellectual property’ (IP) aimed at enhancing the company’s reputation as a service provider in development. In the context of a private-public partnership whereby both private but also public funds are involved, normative issues are raised about when and how much information should be withheld by private companies for IP. The debate between HP and the South African government was never resolved (McFalls, 2007).

Third, American and European multi-national companies, NGOs, governments, trade unions and academics drive the current CSR debate and calls to incorporate southern and small and medium enterprise (SME) are increasing (Jenkins 2005; Sayer 2005; Fox 2005; Prieto-Carrón et al. 2007). One-sided perspectives can have negative consequences for enterprises and employment in the South. Codes of conduct for e.g. labour rights or environmental protection and the process of certification that it involves, puts pressure on the margins of local suppliers. TNCs pressured into monitoring their social impact, prefer to monitor a small number of large suppliers than many small ones. But, small, often informal, enterprises are more likely to employ large numbers of poor people and are, perhaps even more so than TNCs, considered vital for development.

Fourth, the focus on the business case of CSR avoids addressing issues of power and participation that are key in poverty reduction debates. Because power relations shape the issues that are raised, the alliances that are formed and the successes that are identified (Dolan and O’Pondo 2005 in Prieto-Carrón et al. 2007) they tend to reproduce poverty as those who do not normally have a voice in society anyway – such as small-scale farmers, children, workers, and women – are often excluded (Garvey & Newell 2005; Prieto-Carrón et al. 2007; McFalls 2007; Blowfield & Murray 2008).

Finally, a number of companies that have initiated or are otherwise involved in CSR are the same companies that continue to ignore or fail to address the human rights abuses, poor labour standards, and environmentally harmful activities that occur within their core operations (Prieto-Carrón et al. 2007; Oxfam 2008). Codes of conduct are a key CSR tool, but can become a ‘tick-box technique’ relieving corporations from any wider social responsibility (Jenkins 2005; Prieto-Carrón et al. 2007). For example, even though British Petroleum had complied with the codes of conduct laid down in the Extractive Industries Transparency Initiative, in relation to the construction of the Baku-Tbilisi-Ceyhan pipeline, it did not address the human rights abuses and the destruction of livelihoods of the local communities as a result (Documentary ‘Source’ 2005).

The CSR message is furthermore often contradicted by actions like corporate lobbying and tax evasion or avoidance. The power of worldwide corporate lobbying is huge, influencing policies and outcomes of national governments, international institutions such as the World Trade Organisation, and scientific research, in favour of corporations (Sayer 2005). Toyota is a case in point; whilst championing green motoring with its Prius hybrid model, the car manufacturer joined the lobby against a tough fuel-economy standard in America (Economist 17 January 2008). With regards to tax evasion and avoidance, according to Oxfam (2008), corporations intentionally avoid paying £221bn each year in taxes, which the organisation considers the equivalent to several times the estimated shortfall in development finance needed to achieve the MDGs (see also Jenkins 2005).

Conclusion

Whilst it might be more conducive to influence business by engagement than by confrontation (Leisinger 2007), the expectation put on business to correct the market’s inability to provide social justice and sustainability is unrealistic. CSR is a consequence of how the relationship between business and society is understood and unless CSR is able to address that relationship and its underlying power relations, CSR will only be a means for companies to secure business as usual, albeit in more social and environmentally sensitive ways (Garriga and Melé 2004; Hamann 2007; Blowfield and Murray 2008). The gap left by the privatisation of public goods and the liberalisation of corporate and financial conduct cannot be filled by socially responsible business (Jenkins, 2005) as the inherent day-to-day business practice is built on fast and maximum profit and growth. ‘There is no substitute for the state as the main provider of public services’ (Oxfam 2008). How cán the poor become the beneficiaries of companies? Partnering with business’ as a stakeholder is limited; they have no stake (Jenkins 2005; Prieto-Carrón et al. 2007). When CSR is taken on board as a ‘business case’ the beneficiaries, as a result, are the shareholders, because a business case is based on the prospect of a return on their investment. The relationship between a company’s actions to reduce poverty and obtain profit is not obvious. Perhaps further research can assist in quantifying and qualifying that relationship, but in whose interest will that research be and who will pick up the bill to pay for it?


References:

Bendell, J. (2005) ‘In whose name? The accountability of corporate social responsibility’, Development in Practice 15(3):362-374.

Blowfield, M. (2007) ‘Reasons to be cheerful? What we know about CSR’s impact’, Third World Quarterly 28(4):683-695.

Blowfield, M. and Murray, A. (2008) Corporate Social Responsibility: A Critical Introduction, Oxford: Oxford University Press.

Christian Aid (2005) ‘Behind the mask, the real face of corporate social responsiblity’, available at http://www.globalpolicy.org/socecon/tncs/ 2004/0121mask.pdf (accessed 23 February 2009).

Clay, J. (2005) ‘Exploring the links between international business and poverty reduction: A case study of Unilever in Indonesia’, available at http://publications.oxfam.org.uk/oxfam/display.asp?isbn=0855985666 (accessed 23 February 2009).

Economist, 17 January 2008, Special Report Corporate Social Responsibility, available at http://www.economist.com/specialreports/
displaystory.cfm?story_id=E1_TDQJTDVV (accessed 19 March 2009).

Elliot, L., Guardian 25 June 1999, available at http://www.guardian.co.uk/ world/1999/jun/25/larryelliott (accessed 26 March 2009)

Fox, T. (2004) ‘Corporate Social Responsibility and Development: In quest of an agenda’, Development 47(3):29-36.

Friedman, M. (1970), The New York Times Magazine, September 13 1970, available at http://www.colorado.edu/studentgroups/libertarians/ issues/friedman-soc-resp-business.html (accessed 21 March 2009)

Garriga, E., Melé, D. (2004) ‘Corporate Social Responsibility Theories: Mapping the Territory’, Journal of Business Ethics 53:51-71.

Garvey, N. and Newell, P. (2005) ‘Corporate accountability to the poor? Assessing the effectiveness of community-based strategies’, Development in Practice 15(3):389-404.

Hamann, R. (2007) ‘Is corporate citizenship making a difference?’, The Journal of Corporate Citizenship 28:15-29.

Jenkins, R. (2005) ‘Globalization, Corporate Social Responsibility and Poverty’, International Affairs 81(3):525-540.

Leisinger, K.M. (2007) ‘Capitalism with a Human Face’, The Journal of Corporate Citizenship 28:113-132.

Mareček, M. and Skalský, M. ‘Zodrj (Source)’, available at: http://www.automatfilm.cz/, (accessed 15 March 2009).

McFalls, R. (2007) ‘Testing the limits of ‘inclusive capitalism – a case study of the South Africa HP i-Community’, The Journal of Corporate Citizenship 28:85-98.

Newell, P. and Frynas, J.G. (2007) ‘Beyond CSR? Business, poverty and social justice: an introduction’, Third World Quarterly 28(4):669-681.

Oxfam (2008) ‘Business and the Millenium Development Goals. Your call to action.’, available at www.oxfam.org/business (accessed 15 March 2009).

Prieto-Carrón, M, Lund-Thomsen, P., Chan, A., Muro, A. And Bhushan C. (2006) ‘Critical perspectives on CSR and development: what we know, what we don’t know, and what we need to know’, International Affairs 82(5):977-987.

Sayer, J. (2005) ‘Guest editor’s introduction: Do more good, do less harm: development and the private sector’, Development in Practice 15(3):251-268.

Utting, P. (2005) ‘Corporate responsibility and the movement of business’, Development in Practice 15(3):375-388.


[1] Theories can be divided into four categories: Instrumental theories focus on the strategic use of CSR as an instrument for maximising shareholder value and a means to achieve competitive advantages. Political theories are concerned with corporations’ power in society and how this power is used responsibly. Integrative theories look at how business integrates social demands. Ethical theories are based on norms that are central to achieving ‘a good society’ and corporations’ obligations to adhere to these norms (Garriga and Melé, 2004).

[2] Blowfield (2007) assesses there are three sources: case studies, CSR reports and ratings. However all three sources are either too individual (case studies), too corporate-driven (CSR reports) and biased in favour of northern corporations (ratings) to draw conclusions from (see also Bendell 2005).

2 Responses to “Does Corporate Social Responsibility Contribute To Development? (essay May ’09)”

  1. Adora Pueblos Says:

    hi!

    I find your ideas quite helpful in my understanding of development. Thank you.


Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Follow

Get every new post delivered to your Inbox.

%d bloggers like this: