Sustainable Development and Corporate Social Responsibility

Dongyong Zhang, Stephen Morse, Uma Kambhampati

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781317609315
• Edition: 1
• Topic: Economics
• Subtopic: Sustainable Development
• Index: Economics

Corporate Social Responsibility (CSR) has become an important concept in the last few decades. Although it originated in the developed countries of the West, the concept has been embraced and adapted by corporations and policy-making agencies in many developing countries. Not surprisingly, given the importance of growth and development as policy objectives in these countries, CSR has had a significant impact on sustainable development.

Sustainable Development and Corporate Social Responsibility explores the evolution of CSR across the developed and developing world, with a particular focus on China and sustainable development. Through an extensive review of the literature and relevant case studies, the book examines whether CSR can make a contribution to sustainable development, how the patterns of CSR in developed Western economies compare to that in the rapidly growing economy of China, what trade-offs take place between CSR and economic growth as well as the future of CSR and its possible impact on the global sustainable development agenda.

This book is a valuable resource for academics and upper-level undergraduate and postgraduate students in the fields of human/social geography, economics, business studies, sustainable development, development studies and environmental studies.

1
Introduction: Corporate Social Responsibility in Context

Introduction

Corporate Social Responsibility has become an important concept in the last few decades. The term is self-explanatory. CSR is about the responsibility that businesses have towards society, going beyond their legal requirements (paying taxes, making sure their products and services ‘work’, ensuring that they obey employment laws, etc.). Everyone has to obey the law, of course, but our lives involve a lot more than that! The law might set out what you cannot do when driving a car, such as breaking the speed limit or going the wrong way down a one-way street, but it is not against the law to be an inconsiderate driver. Similarly, CSR can be considered as businesses being considerate towards the communities where they are based. While there have always been businesses that have been ‘thoughtful’ in this sense, the notion that this should be a measure of business performance is relatively new. In fact, until very recently, business performance has been measured purely along the profit dimension, and most business models have seen profit maximisation as the core, or even only, objective of the firm.

The idea of such consideration towards communities rather than a sole focus on extracting maximum profit is often said to have its origins, perhaps unsurprisingly, in the Industrial Revolution of the late 18th to early 19th century, which occurred primarily in Great Britain (Box 1.1). The ‘revolution’ was centred around a transition from making things by hand towards the use of machinery, typically powered by water or steam, and the rise of what we now call the ‘factory system’, purpose-built structures with machines set out in a way to maximise production and reduce costs. Factories allow for an economy of scale, an ability to mass-produce something and thereby keep its cost down. The Industrial Revolution in Britain was centred on the production of textiles. But the government was slow to keep up with these changes, and the working conditions and reward systems for employees

Box 1.1 Why did the industrial revolution happen in Great Britain and not somewhere else?

The question often asked is why the Industrial Revolution of the late 18th and early 19th centuries happened in Britain and not, for example, in another European country such as France or Germany or perhaps elsewhere in the world (e.g. China).

The answer is complex and various features came together to allow the conditions for the Industrial Revolution to occur. Historians continue to explore these and the debate over which of them was more important rages to this day. Here are a few of the reasons that are often mentioned:

1. Empire. Britain had long been a maritime trading nation and its companies, such as the famous East India Company, had been involved in trade with distant peoples. Trading relationships gradually morphed into geographical ‘takeover’ as Britain wished to protect its markets from other European powers as well as local struggles for dominance. The result was an empire that spanned the globe. The places that were ‘taken over’ became suppliers of raw material for companies in Britain as well as markets for its products.
2. Glorious Revolution in Britain. Unlike almost every other European country, following the restoration of the monarchy in 1688 and the ‘Bill of Rights’, Britain moved to a position where the monarchy no longer had absolute power over its people. Parliamentary democracy became the dominant force and the country became relatively settled and peaceful, a period that contrasts markedly, for example, with the social upheaval seen in France in the late 18th century and the Napoleonic Wars in Europe that followed in the early 19th century.
3. Entrepreneurship. Given points 1 and 2 above there was much space for entrepreneurs – people with new ideas about means of production – to flourish. They had laws that protected their ideas.
4. Geography. Britain is an island with a lot of hills, mountains and, above all, rain. Not surprisingly, Britain has many streams and rivers that were the source of power for textile mills. As steam power became more important, Britain had abundant sources of coal that could be burnt to create steam. Other resources such as iron were also abundant. Being an island also meant that Britain was isolated from the conflicts, and associated devastation, that spread throughout Europe.
5. Agricultural revolution. Enclosure and various other initiatives resulted in an increase in food production in Britain, and in turn this supported an increase in population which meant that labour became plentiful.
6. Protestant work ethic. This may be regarded as perhaps a more nebulous ‘cultural’ factor, but it is often claimed that the Protestant work ethic encouraged the importance of hard work and progress.

in many of those early factories were truly abysmal. People had to work long hours in dangerous conditions, and children were often employed, which meant they could not attend school. The outcome was a society where many, if not the majority, of people lived in poverty, with disease and malnourishment rampant. While this was not against the law at the time, some wealthy industrialists began to question this state-of-affairs and sought to improve conditions for their employees and the communities where they lived, as we will see in Chapter 2. They were motivated partly by altruism and partly by the knowledge that such activities improved labour productivity and therefore profits in the long run. In fact, this dual incentive has thrown up a dilemma for CSR studies even to this day, as we will see in Chapter 4. The 19th and 20th century philanthropists who built schools and hospitals also sought to increase wages and working conditions, not because they had to do any of this to obey a law but because they thought it had to be done. Eventually the government caught up with the developments and brought in laws to protect employees and, albeit much later, limit any damage to the environment.

CSR may have its roots in the ‘thoughtfulness’ and consideration of philanthropists towards their fellow human beings, but as we know it today, it has become much more formalised and exists at the heart of the ‘mission statement’ of many companies. The rise of globalisation and of social media means that companies operate in many places and at a level of scrutiny never seen before. Events such as the Wall Street Crash of 1929 and the Great Recession that began in 2008 remind us of the power that markets have over our lives. We see in the media how pollution events such as the Great Smog of London in 1952, the Bhopal disaster in India in 1984, the Exxon Valdez oil spill in 1989 and the BP oil spill in the Gulf of Mexico in 2010 damage the environment and have consequences for human health. The relationship between businesses and the local and global communities within which they operate has become more transparent than ever before, and businesses are very aware of that.

Although CSR originated in the developed countries of the West, the concept has been embraced and adapted by corporations and policy-making agencies in many developing countries. Not surprisingly, given the importance of growth and development as policy objectives in these countries, CSR has become a tool for the move towards sustainable development which demands that development today should not damage the well-being of future generations. The Sustainable Development Goals (SDGs) released by the United Nations in early 2016 is dedicated to ‘Build resilient infrastructure, promote sustainable industrialization and foster innovation’ (United Nations, 2017). Within this goal there is an acknowledgement that:

Inclusive and sustainable industrial development is the primary source of income generation, allows for rapid and sustained increases in living standards for all people, and provides the technological solutions to environmentally sound industrialization.

UN, 2017

In this book, we consider the link between CSR and sustainable development, in particular with respect to the role that businesses might play in attaining sustainable development. CSR and sustainable development have often been seen as synonymous. Both terms are concerned with progress along three separate axes – economic, social and environmental. In the context of CSR, this triple bottom-line (as it is called) relates to business performance, whereas in the context of sustainable development it refers to the performance of entire economies. Having said this, businesses are a crucial agent of the latter and therefore we would expect CSR to be a significant component of sustainable development. Business enterprises have a pivotal role in economic production and consumption (UNEP, 2015). This is not surprising since these enterprises manage enormous resources – finance, investment, natural resources and labour – and therefore can have a significant impact on the economic, social and environmental performance of a country. As firms generally expect to continue business for more than one year and are likely to invest in the future, their impact is likely to also stretch into the future. Unsurprisingly, therefore, the private sector has a role to play in all 17 of the SDGs.

Having said this, there are clearly limits to the extent that corporations can be held responsible for sustainable development (Moon, 2007). Moon concludes that responsible business is a necessary but not sufficient condition for sustainable development (p. 305).

While much has been written about the origin, form and impact of CSR and its benefits in the developed world, much less has been written about how CSR has evolved in the developing world and transitional economies like China. This is particularly true with respect to its impact on sustainable development rather than growth alone. Given the extraordinary growth of many of these transitional economies over the past 20 years, the lessons that can be learnt from the evolution of CSR within them are invaluable. These centres on the trade-offs between economic performance and social and environmental concerns that are at the heart of sustainable development.

The objective of the book is to explore the evolution and role of CSR within sustainable development. The book takes a global perspective, as it must do with sustainable development, but we have opted to concentrate on CSR evolution in the West and on China. With its unique cultural and institutional background and fast economic development, China’s adoption and successful implementation of CSR will have great significance for sustainable development in large parts of the developing world. In addition, China is important in terms of its population, land area, rapid industrialisation and significant issues it has thrown up with regard to sustainable development. The book asks the following the important questions:

1. Is CSR making or indeed can it make a contribution to sustainable development. If so, how?
2. What are the patterns of CSR in the developed economies of the world and how do these differ from what is seen in other places, most notably the rapidly growing economy of China?
3. What are the trade-offs between CSR and economic growth?
4. What is the future of CSR and its possible impact on the global sustainable development agenda?

Structure of the book

The book has six chapters after this one. Chapter 2 explores the historical evolution of CSR, what it has meant for businesses in the past five decades and how business attitudes towards CSR have changed. We also introduce some important debates regarding businesses and their social responsibility, and discuss critiques of CSR. Chapter 3 looks specifically at the relationship between CSR and sustainable development, beginning with the origins of sustainable development before we consider how businesses have contributed to it. Some complementary themes to CSR are also introduced in this chapter along with measures of CSR and sustainability. Chapter 4 explores the motivations for companies to engage in CSR and the factors that may influence this willingness to engage. Some important discussions in the field, such as the relationship, if any, between CSR and corporate financial performance, are introduced. Chapter 5 provides an overview of the methods that researchers have used to explore CSR. Chapter 6 explores CSR and sustainable development within China since its market reform in 1978 and how lessons from that experience have relevance for other places in the world. China was selected for special attention partly for its size (population, land area, economy) but also for its history of market reform and how this has played out in terms of CSR and sustainable development. The rapid economic growth in China over the past few decades has been extraordinary, and the country is now the second-largest economy in the world by some measures, yet this has come at a price. We have seen the latter take various forms, perhaps most notably in terms of environmental degradation. In the final chapter of the book (Chapter 7) we set out some of our key thoughts about CSR and sustainable development and what we think is its future.

The reader will see that we have used many references in the book, and they are listed at the end of each chapter. Needless to say, the literature on CSR and sustainable development is vast, spanning the academic literature as well as company reports and those of national and international agencies and non-governmental organisations. Given the size of the topic we can only hope to touch upon what we think are the key issues in CSR and its place within sustainable development, but we also hope we can at the very least provide lots of food for thought. At the end of each chapter we have also provided questions for the reader and have suggested further readings through which the reader can explore some of our points in greater depth.

Further reading

It is suggested that the reader explores the United Nations’ Sustainable Development Goals website (www.un.org/sustainabledevelopment/sustainable-development-goals/). Also, the following texts that explore the relationship between CSR and sustainable development, especially in the context of the developing world, are recommended:

Bhinekawati, R., 2017. Corporate Social Responsibility and Sustainable Development: Social Capital and Corporate Development in Developing Economies. London and New York: Routledge.

Eweje, G. (ed.), 2014. Critical Studies on Corporate Responsibility, Governance and Sustainability. Volume 8 – Corporate Social Responsibility and Sustainability: Emerging Trends in Developing Economies. Bingley, UK: Emerald Publishing.

Vajpeyi D.K., Oberoi R. (eds.), 2015. Corporate Social Responsibility and Sustainable Development in Emerging Economies (Globalization and Its Costs). London: Lexington.

Discussion questions

1. Explore the Sustainable Development Goals and identify the elements where you think CSR has a role to play.
2. What is the difference between CSR and sustainable development?
3. For a company of your choice, explore its website and documentation on CSR and analyse how they address (or not) wider issues of sustainable development.

References

Moon J., 2007. The contribution of corporate social responsibility to sustainable development. Sustainable Development, 15: 296–306.

United Nations (UN), 2017. Sustainable development goals: 17 goals to transform our world. Retrieved from www.un.org/sustainabledevelopment/sustainable-development-goals/.

United Nations Environmental Programme (UNEP), 2015. Sustainable Production and Consumption: A Handbook for Policymakers. New York: United Nations.

Table of contents

• Cover
• Title
• Copyright
• CONTENTS
• List of figures
• List of tables
• List of boxes
• Abbreviations
• 1 Introduction: Corporate social responsibility in context
• 2 Overview of corporate social responsibility
• 3 Corporate social responsibility and sustainable development
• 4 Drivers for corporate social responsibility
• 5 Exploring corporate social responsibility
• 6 Corporate social responsibility and sustainable development in China
• 7 Concluding remarks
• Index