The Theory of Corporate Social responsibility and the Challenges it faced under Globalization

‘Corporate Social Responsibility’ (CSR) refers to a form of corporate self-regulation integrated into a business model, which usually involves active compliance with the law, ethical standards, and international norms. This theory aims to achieve positive impacts on the environment, consumers, employees, and the communities. Under the force of globalization, this theory has been challenged by the diminishing different roles of the government and firms, especially when the power of multinational companies is rising.

Theory of Corporate Social Responsibility

The idea of CSR first arose in 1953 when it was first become an academic topic in H.R. Bowen’s “Social Responsibilities of the Business”. Since then, there has been continuous debate of the concept and its implementation. Although the idea has existed more than half a century, there is still no consensus over its definition.

One of the most contemporary definitions is from the World Bank Group, stating “Corporate social responsibility is the commitment of businesses to contribute to sustainable economic development by working with employees, their families, the local community and society at large to improve their lives in ways that are good for business and for development”

We all know that the basis of this concept lies in that, corporations, whether small or large, should be responsible for our society since they are also actors of the social institutions, but in what aspects they are responsible for and how far should this responsibility be are not clearly defined in the definition. This ambiguity undoubtedly gives rise to problems since a desirable scope of businesses’ commitment can be subjected to various interpretations by different social actors.

Since there is no one consented definition for corporations to follow, there leads to different levels of engagement of policy with different corporations.

Challenges CSR faced under the globalization

Most corporations, especially multinational corporations (MNCs) have already adopted CSR policy despite the fact that there are still debates over the concept.

Under globalization, states power has weakened where as the power and influence MNCs have significantly strengthened, making them become more state-like. This expansion of role played by MNCs in society has urged the rise of concern groups to pressurize on them to take up more social responsibility. As Amaeshi, Osuji and Nnodim (2006) argues, although the MNCs do not bear legally any responsibilities for the practices of its suppliers, they have a deontological duty to use power responsibly and influence the weaker parties by setting codes of conduct and standards.

In electronics industries, as Good Electronics, a Dutch-origin concern group on human rights issue in electronics, has stated that the lack of effective regulations and inadequate corporate CSR initiatives have caused exploitation of workers. If CSR policy is adopted so widely by different corporations, the question to be asked here is ‘why are there still exploitations?’

i) Limitations of jurisdictions

Under globalization, many corporations have outsourced their products manufacturing process to other countries, mainly developing countries. In those countries, domestic legislations do not usually provide sufficient protection on labour, such as minimum wage or guidelines on health and safety in the workplace. Even countries like China, which does have a well drafted labour protection legislation, labour exploitation issues still exist because of weak enforcement of the law.

ii) No direct responsibility imposed on the purchasing firms

Even if the domestic law is well enforced, the purchasing MNCs are not legally responsible for any of the charges. Ultimately, it is the domestic factory or firm will be held responsible. Since there almost no punitive measures on the MNCs, the law and enforcement system fail to function here. Since it is not an obligatory commitment for the MNCs to provide fair and safe labour treatment, whether a MNC will give equal treatments to factory workers will largely depend on how socially responsible they are. Although acquiring state-like characteristics, businesses are nonetheless still profit-driven actors.

iii) Difficulties in auditing

In order to comply with higher standard of CSR, some firms have undergone active research and auditing on the firms they hired in their supply chain. Discrepancies between reality and audit results do exist. Taking Foxconn as example, after the several tragic incidents of workers suicide, Apple decided to investigate the work condition of those related factories. Its investigation report shows that there are no issues of overtime work, no child or forced labour, which is in the contrary to what the NGOs claim. Ironically, after the reassurance of good working conditions in the investigation report, the suicide incidents have not stopped, which just shows that the conditions have not been improved.

One very crucial difficulty in auditing is that the factory can always hide the bad things since they know what they look for. Workers could also be under pressure and not tell the truth. Since difficulties exist while carrying out active auditing, its effectiveness and reliability is therefore questionable.

iv) Local factories’ attitude

Very often the list of supplying companies and factories are confidential to the public. Since local factories are not directly link to the public, their only goal is to satisfy demands from the purchasing firms. Hence, ‘social responsibility’ is an idea which they may not even be bothered to care. Though the purchasing firms may carry out active research on the companies and factories, as addressed above, there are always ways to hide reality away. Moreover, since there are many of this kind of factories over the world, the purchasing companies may not have much choice other than ‘choosing one sweatshop over the other’. Moreover, since there are many of this kinds of factories over the world, the purchasing companies may not have much choice other than ‘choosing one sweatshop over the other’.

The way forward…

Inevitably, process of globalization has changed the power balance between different social actors, especially the role on states and big businesses. Since hard law is no longer effective in regulating corporate behaviours elsewhere outside their origin countries, a firm can determine how socially responsible they want to be with the situations in developing countries. This is largely dependent on their initiatives.

Since manufacturing process has become far more complicated and many more actors are involved, it is difficult to separate responsibilities. Rather than holding the MNCs solely responsible, labour exploitations in the industry is more like an unfavourable consequence resulted from mixtures of factors.

Though not solely responsible, the MNCs still are the most influential actor to change the situation. Hence, civil societies and concern groups, which pressurize and monitor MNCs will be of growing importance in acting against corporate misbehaviors.

By Janice

References:

Amaeshi, Kenneth M., Osuji, Onyeka K. and Nnodim, Paul, “Corporate Social Responsibility in Supply Chains of Global Brands: A Boundaryless Responsibility? Clarifications, Exceptions and Implications” (2006). Available at SSRN: http://ssrn.com/abstract=947583

Block, R. Apple completes “iPod City” investigation into Foxconn. Retrieved athttp://www.engadget.com/2006/08/18/apple-completes-ipod-city-investigation-into-foxconn/ on 18th April, 2011

Cavett – Foodwin, D. “Making the Case for Corporate Social Responsibility” Retrieved athttp://culturalshifts.com/archives/181 on 17th April, 2011.

Good Electronics, ‘Clear guidance on CSR for the global electronics sector’ Retrieved athttp://goodelectronics.org/good-electronics/news-en/corporate-social-responsibility-in-global-electronics-sector-not-effective on 17th April, 2011

Helft, M. ‘ Apple says Chinese Supplier Made Changes After Suicides’. Retrieved at http://bits.blogs.nytimes.com/2011/02/15/apple-says-chinese-supplier-made-changes-after-suicides/ on 17th April, 2011.

Scherer, Andreas Georg and Palazzo, Guido, Globalization and Corporate Social Responsibility (2008). THE OXFORD HANDBOOK OF CORPORATE SOCIAL RESPONSIBILITY, A. Crane, A. McWilliams, D. Matten, J. Moon, D. Siegel, eds., pp. 413-431, Oxford University Press, 2008. Available at SSRN: http://ssrn.com/abstract=989565

Advertisements

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

%d bloggers like this: