Corporate Social Responsibility & International Development

Corporate Social Responsibility & International Development

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Inhaltsangabe:Introduction: Global changes of the worldwide economy and free markets offer many business opportunities and advantages for multinational corporations (MNC), but also a lot of social challenges and ecological threats. In the last decades many scandals hit various industries for different casualities, for instance the oil industry for several oil spills, the mining industry for colaboration with corrupt governments and exposing workers to unsafe labor conditions, the clothing industry for exploiting employees or using child labor in sweatshops, the toy industry and other industries for importing tainted and unsecure products from China. As corporations have reaped the benefits of globalization and international trade, they are now, more than ever, demanded to take responsibility for the consequences resulting from their business activities. Due to the risk of a damaged reputation, loosing consumers and hence decreasing profits and as a result of public criticism, more and more corporations are pushed to change their business strategy in a way that fosters sustainable development. As the business world becomes smaller and more transparent, an increasing number of corporations are embracing Corporate Social Responsibility (CSR) to demonstrate their stewardship. CSR is a concept that demands corporations to adress the economic, social and environmental impacts of their global operations while generating profits. The idea of CSR has become a concept that is growing in its importance and it is not only endorsed by corporations and organizations but also by individual consumer and governments. Henry Ford quoted once If there is any one secret of success, it lies in the ability to get the other person s point of view and see things form that person s angle as well as from your own. This statement shows that companies striving to be economically successful are also demanded to consider the interests of all its multiple stakeholders. As corporations are gaining an increasing power and have an enourmous impact on the society in industrialized and developing countries, they are expected to respond to the societal demands and ecological concerns of all those who are affected by a company s business practices. The aim of this paper is to give a detailed overview of CSR with all its components and its implementation process into the overall business strategy. It analyzes the role corporations play or should play in fostering sustainable development and improve the welfare of the community where they operate. In the latter case, the focus will be on how CSR activities can be linked to international development and how they help to address the biggest challenge of the 21st century to eradicate poverty. Chapter 2 describes the relation between corporations with its stakeholder versus its shareholders. Shareholders are at the same time stakeholders who have a stake in a company, but they have different interests in a corporation. This could lead to potential conflicts between short-term shareholders expectations and long-term stakeholders interests. An appropriate Corporate Governance (CG) practice is necessary to address these conflicts and to conciliate the interests of corporations key stakeholders. CSR is seen as a corporation s obligation to respond to all stakeholders expectations - not just to those of shareholders. To give a more detailed understanding of CSR, Chapter 3 outlines the historical evolution of corporate ethics and shows recent global economic trends that led to the fact that CSR has become so important in the 21st century. Furthermore, this chapter represents the main issues of CSR and the incorporation of this concept into the strategic management process. It highlights the importance of CSR communication and an effective Public Relation (PR) strategy for creating awareness about a company s CSR activities. Additionally, the different types of CSR programs also known as Corporate Social Initiatives are elaborated that help to support and create public awareness about social causes. Chapter 4 and 5 link CSR with international development and question corporations role in fostering development. Chapter 4 focuses on the impact corporations have on the poor in developing countries and examines how CSR can help to create wealth and hence reduce global poverty. It further shows how corporations can address development challenges collectively by engaging in Public-Private Partnerships (PPP). It still exist a huge gap between CSR activities in industrialized and developing countries, which implies an additional challenge on promoting CSR standards on a national and international level. As the concept of CSR is often questioned by critics and free marketeers, the last chapter elaborates on the case against CSR and hightlights the different critic points that arise when companies claim to be socially responsible. These criticism has to be addressed in order to handle threats and opportunities in markets of great importance to organizations as well as in areas where problems occur. Inhaltsverzeichnis:Table of Contents: Table of ContentsI Table of IllustrationsII List of AbbreviationsIII 1.Introduction1 2.Shareholder Value vs. Stakeholder Value3 3.Corporate Social Responsibility6 3.1The Evolution of CSR6 3.2Trends in the Global Economy12 3.3Main Issues of CSR17 3.3.1Corporate Governance17 3.3.2Stakeholder Management18 3.3.3Competitive Advantage22 3.3.4Marketplace26 3.3.5Workplace28 3.3.6Environment34 3.4The Strategy Context of CSR39 3.4.1CSR Implementation Process39 3.4.2CSR as a Public Relations Strategy48 3.4.3Corporate Social Initiatives51 4.The Importance of CSR for International Development65 4.1CSR - A useful concept for poverty reduction?66 4.1.1The Supply Side67 4.1.2The Demand Side70 4.1.3The Government Side72 4.2The importance of PPP74 5.Critiques of CSR79 6.Conclusion86 AppendicesIV Appendix 1: Different ChartsIV Appendix 2: International Organizations promoting CSRX Appendix 3: International CSR Instruments and InitiativesXIII Appendix 4: International CSR StandardsXV Appendix 5: International CSR Rating InstitutionsXVII ReferencesXVIII Textprobe:Text Sample: Chapter 4.1, CSR A useful concept for poverty reduction? Almost half of the world s population (2, 7 billion people) lives on less than US2$ a day and another 1, 2 billion people have not even US$1 a day to survive. Eleven million children under the age of five die every year from malnutrition and preventable diseases. Everyday over 6, 000 people die from and another 8, 200 people are infected with HIV/AIDS. Every minute a woman in the world dies in pregnancy or childbirth. Every 3, 6 seconds a person somewhere dies of starvation and the lack of access to clean water. It is against these facts and due to the failure of governments and their international arms to address questions of underdevelopment that the corporate sector with its economic power is increasingly demanded to cope with key global challenges of the 21st century. Axel Hesse, a consultant for Sustainable Development Management, ascertained in his dissertation the six most important global challenges for sustainable development are: climate change, water shortage and pollution, deforestation and desertification, biodiversity loss, population growth and migration all which have an huge impact on poverty in the world. Altough poverty alleviation is not an explicit component of CSR, this section analyses to what extent multinational corporations are able to reduce global poverty with CSR programs. Here the focus will be on multinational corporations who have a wholly owned subsidiary, a joint venture or a major supplier in developing countries. Hence, not the private sector as such will be examinated but rather multinational corporations and the impacts of their FDIs on poverty in the developing world. A direct relationship between FDIs and poverty allevation cannot be established as FDIs in host countries create economic growth which in turn is recognized as a powerful force to fight global poverty. However, MNCs foreign direct investment in developing countries depends on prevailing conditions in the host country in terms of stability, tax regulations, corruption, infrastructure and local foreign policies, laws and regulations. Even if corporations decide to make their investments in developing countries, the location of investment is a crucial factor for development since investments are often made in wealthier regions of host countries. The opportunities for and impacts on poor countries resulting from investments by MNCs and the incorporation of CSR in all their worldwide operations are analyzed in the following from the supply side (poor as producer) and the demand side (poor as consumers) as well as the government side of host countries. The Supply Side: Considering the poor as producer, MNCs can contribute to poverty alleviation by having both a direct effect on the poor through supplying jobs and income opportunities in their foreign affiliates and an indirect effect through creating a linkage to local firms and suppliers. First of all, an association will be drawn between MNCs and their direct impacts on poor communities. In the later case, it will be elaborated on the indirect impact MNCs have on the private sector in developing countries. Even if the total number of people employed in foreign affiliates of MNCs has increased three times, from more than 25 million in 1990 to 73 million workers in 2006, these numbers account only for a small proportion of the total number of poor people living on less than US$2 or US$1 a day. The problem with this is, furthermore, that mainly skilled workers are in these employments which means that the poor do not benefit from FDIs to such an extent. So, in which way can CSR contribute to address poverty considering that just some of the poor work directly for MNCs? MNCs can help to tackle poverty and development issues through carrying out core business activities in a proactive and responsible way which decreases negative impacts of business activities and increases its positive impacts. This can be done by generating income through creating jobs, developing capabilities of human resources, building local business linkages and other economic multipliers that are directed to poor communities in host countries. Other CSR strategies which companies can apply in their core business activities and which address poverty issues include the compliance with international norms, standards, codes of conduct and principles throughout the value chain. These principles include amongst others to treat employees fairly, to cover minimum marketplace standards if government laws are not available, to take actions that do no harm to the environment and to contribute to the welfare of the (poor) community. However, as the poor benefit more from jobs that are created indirectly by suppliers and suppliers of suppliers of MNCs, it is more essential to focus attention on the linkages of MNCs to the private sector of developing countries. The private sector is also the main area of economic growth which provides most job opportunities in developing countries. These are often jobs provided to the poor by small and medium-sized entreprises (SMEs), agricultural smallholders or those in self-employment. MNCs and international agencies have realized the SME potential in developing countries and have begun in their development efforts to contribute to SME development by providing credit and entrepreneurial training as well as by enhancing responsible business practices in supply chains. CSR in the supply chain of MNCs plays an important role for development as suppliers are the main connection between a corporation and the developing world. This is because many corporations outsourced or offshored services and the manufacturing operations, which were usually produced onshore, to suppliers in developing countries. Many designer clothes and branded goods, for example, are basically produced in developing countries. Similarly, basic IT Services, back-office work and call centres were transfered to developing (emerging) countries like India or China. As a great impact of MNCs on the poor takes place through its supply chains, it is more essential to question: how far down the supply chain MNCs should go to ensure responsible business practices in all stages of the product buying process? As supply chains are long and complex, it poses real ethical challenges to corporations to identify abuses of any kind in suppliers operations. MNCs often demand that their direct suppliers apply the same standards as they do, however, do not go farer down the supply chain. In this new business environment, where corporations and retailers face operational and reputational risks, if exploitative practices are discovered in their supply chains, MNCs have begun to map out their supply chains and to identify countries, suppliers that pose the greatest risk. More and more corporations establish auditing systems and adhere to international standards for their supply chains such as AA1000, SA8000 or FLA. These standards and the ILO core labor standards (ICLS) cover mainly labor issues typically included in corporate codes of conduct. In addition, the OECD Guidelines for Multinational Enterprises and Supply Chain Responsibility, an expansion of the OECD Guidelines for Multinational Enterprises are standards for responsible business practices in the supply chains of MNCs. They are voluntary instruments promoted by governments among MNCs operating in their countries and serve as a tool to hold companies accountable for their global business and supply chain operations. Since these standards are voluntary, many companies still ignore to apply such standards in their supply chains. This was the result of a survey by Integrity-Interactive, a risk consultancy where 2000 big companies where surveyed on their supply chain practices. More than half of the respondents admitted that they are still lacking to apply ethic codes in their supply chains, but 42 % asserted that they are regularly assessing ethical risks in their supply chain. However, it more crucial to ask if not corporate buying practices and their expectations for greater efficiency put pressure on suppliers in the developing world to meet buying requirements which in turn cause exploitation of labor? For example, suppliers are often confronted with issues around flexibility (to respond quickly to costumers demand) and seasonality (to cover demand for certain seasonal products) on the one hand, and price pressure on the other hand. Are not these factors drivers that lead to coercive and exploitative labor practices where workers have to work excessive overtime hours for minimal wages? The CSR aspect here is to ensure an ethical sourcing or trading by following the subsequent steps. In the first place, it is necessary to review a corporation s own purchasing and pricing practices which have negative effects on suppliers who then in turn cannot meet supply chain labor standards. Key labor standards in the supply chain could be covered by establishing a code of conduct developed by the corporation on its own or by an external organization such as the Ethical Trading Initiative (ETI). The ETI is an initiative that sets minimum standards for labor and human rights practices within supply chains. By offering on-going training programs, buyers and employees can be trained on ethical buying practices. At the same time, it is necessary to carry out a risk assessment which identifies suppliers who do not comply with ethical standards. An audit management systems that involves visiting suppliers on side helps to assess suppliers compliance with the established code of conduct. By drawing up improvement plans, corporations can ideally work together with their suppliers to implement the required standards. Finally, it is important to be transparent and to disclose responsible supply chain practices openly.The problem with this is, furthermore, that mainly skilled workers are in these employments which means that the poor do not benefit from FDIs to such an extent.

Title:Corporate Social Responsibility & International Development
Author:Claudia Bara - 2010-01-11


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