Corporate social responsibility is one of the core aspects of a business; however, it has multiple definitions with many companies and firms framing different meanings based on their understanding. Corporate social responsibility is about how a company manages the business processes to produce an overall positive impact on the society; furthermore, it is through this that organizations can establish the quality of their management (both in terms of people and processes), and the nature of, and their impact on their society in the various areas.
Today, most stakeholders and shareholders take an increasing interest in the activity of a company. Generally, the CSR field is all about profits, political performance, social demands and ethical values; additionally, it covers a broad scope of theories and approaches that are used to guide companies and organizations in enforcing or performing its social responsibility.
Part One: Shareholders and Stakeholders Theories
There some stakeholders and shareholders theories that relate to corporate social responsibility; mainly, these theories affect the relationship between a company and its shareholders and stakeholders (Mahoney et al., 2013, 352).
I. Legitimacy theory – emphasizes that firms and organizations continually seek out to make sure that they operate within the bounds and norms of their respective societies which explains why they try to ensure that parties from outside hence maintaining legitimacy perceive their activities. However, the jumps and models are known to change frequently, thus requiring the organization to be responsive to the environment in which they partake their activities.
This theory relies on the aspect that there is a social contract between a particular organization and its society; concurrently, the contract is the concept used to represent the multitude of implicit and explicit expectation that the company has on how the organization should conduct its operations.
II. Stakeholder normative theory – The ethical and normative perspective of this theory puts much attention on the notion that its every stakeholder’s right to be treated fairly and viewed equally by an organization, and that matters of stakeholder power are not directly pertinent.
III. Universal Rights – Over the years, human rights have been taken as a basis of corporate social responsibility especially in the international market, and recently, some human rights-based approaches have been brought forward on the same. This theory defends the existence of natural human rights; however, many people do not take them seriously, but they have a theoretical grounding with some moral philosophy giving them support.
IV. Sustainable Development – This has become popular and necessary because it is an approach that evolved at the macro level and not the corporate level; typically it demands corporate contribution requiring the integration of social, environmental and economic considerations to make balanced judgements and decisions for the long term.
Significantly, achieving corporate sustainability is a custom – made process/ task, and each corporation should select personal ambitions and approaches to do the same; moreover, these approaches should meet its aims and be in line with the strategy for the sake of the organization’s operations.
V. The Common Good Approach – This is a less combined approach if compared to the stakeholder approach. However, it holds the regular good of society as the referential value for corporate social responsibility with its stress of the business together with any other social group or individual should contribute to it. This theory can be enhanced by creating wealth, productively providing goods and services and respecting the dignity and right of every individual; additionally, it campaigns for the social well being and a harmonic way of living together in just peaceful and friendly conditions today and after that.
Part Two: Positive Accounting Theories
The positive accounting theories include instrumental theories, political theories and integrative theories.
There are three main groups identified in the instrumental theories, and these include:
Maximizing Shareholder Value – This approach takes the straightforward contribution to maximize the shareholder value as the supreme criterion to evaluate specific corporate social activities where it is used in decision making. Today not many shareholders are interested in value maximization alone, and it is through this concept that a firm sets the objective of long term value maximization or value-seeking (Elisabeth & Domenec, 2004, 53).
Strategies for Achieving Competitive Advantages
- Social investments in competitive context – This theory entails spending on humanitarian activities as the only way to develop the framework of competitive advantage of a corporation. It mostly forms more considerable social value than most individual sponsors or the government can.
- The natural resource-based view of the firm and dynamic capabilities – Maintains an organizations ability to be ahead of its competitors; moreover, this is facilitated by other factors like the unique interaction of human, organization and physical resources over time.
- Strategies for the bottom of the economic pyramid – In the past, most business line of attacks concentrated on aiming products at upper and middle-class people in contrast to the most considerable portion of the world’s population is poor or lower-middle-class, and it is from this that it has been decided that disruptive innovations can improve the social and economic conditions at the base of the pyramid (Brennan and Merkl-Davis,
This is the procedure of formulating and implementing activities involving marketing, and these activities are characterized by an offer from an organization to offer a particular amount to selected cause when consumers are engaged in revenue providing exchanges that meet the needs and aims of both the organization and individuals.
Significantly, this is a group of theories and approaches that put most of the attention on interactions and connections between the comprehensive business and society characterizing the different responsibilities. They include:
Corporate Constitutionalism – entails two principles of social power equation and the iron law of responsibility that are used to run business given the different limitations and its impact on the society.
Integrative Social Contract Theory – It has been assumed that there is a sort of contract between a business/ organization and the society that implies some indirect obligations of business towards society; considerably, this approach is based at overcoming some limitations of deontological and teleological theories applied in any business environment.
Corporate Citizenship – This is simply a new understanding of the duties of business in society and depending on which way it is defined, the idea is also widely expressed in conjunction with other theories that also cover the businesses responsibilities.
This is a group of theories that evaluate on how business incorporates social demands, elaborating on the fact that a business depends on the society for its existence, continuity and growth; generally, these demands are regarded to be how the company interacts with the business giving it a certain legitimacy and prestige. Groups of integrative theories include:
Issue Management – In any business, social responsiveness is required when there are social issues, and also the processes to manage them; therefore, this approach comprises the methods by which an organization can identify, evaluate and respond to those social and political issues which may impact significantly upon it.
The Principle of Public Responsibility– is about the scope of managerial responsibility when it comes to its involvement in its social environment; which entails primary involvement, i.e. locating and establishing its facilities, procuring suppliers, engaging employees, carrying out production functions etc. and secondary involvement: offering career and earning opportunities for some individuals and advancement of employees (there result from primary involvement).
Stakeholder Management – involves achieving maximum overall cooperation between the complete stakeholder groups’ system and objectives of the organization; moreover, it also states the most efficient strategy for managing stakeholder relations putting on a lot of effort when dealing with issues affecting multiple stakeholders (Elisabeth & Domenec, 2004, 58).
Corporate Social Performance (CSP) – Significantly, includes a search for social authority, with processes for giving suitable comebacks. The central beliefs of CSR are known to be methodical forms to be filled with valuable content that has been put into operations; all the same, they include: principles of CSR, expressed on institutional, organizational and individual levels, processes of corporate social responsiveness, such as environmental assessment, stakeholder management and issues management, and outcomes of corporate behaviour including social impacts, social programs and social policies (Elisabeth & Domenec, 2004, 56).
Part Three: Environmental Performance
The legitimacy theory explains the relationship between the quantity of environmental information and the environmental performance in non-environmentally sensitive industries; moreover, the quality of ecological disclosures increases whether the firm is a better ecological performer (Janet, 2005, 507). For instance, according to green peace, there is a negative correlation between the mandatory disclosure of environmental legal sanctions and the subsequent regulatory violations between firms working with the Chinese conglomerate about discharging hormone distributing chemicals.
Currently, most of the theories associated with corporate social responsibility concentrate more on establishing a good relationship between the organization and its society, using the power in business responsibly and in the best possible way. Moreover, most of these theories also lean more on helping organizations and firms to achieve their objectives and aims so that they can have long term profits as a reward; all the same, the core principles of these theories are all about integrating demands of the society and make sensible contributions to it by acting in the best possible way.
- Janet, L. 2005 Mandatory environmental disclosures in a legitimacy theory context: Accounting, Auditing & Accountability Journal. Vol.18 (4), pp.492 – 517
- Brennan, N. &Merkl-Davies, D 2013, Accounting Narratives and Impression management, In Jackson, L., Davison, J., and Craig, R. (eds.): Routledge Companion to Communication in Accounting. Routledge, Vol.1 (2), p. 109-132
- Deegan, C. and Rankin, M., 1996. An analysis of environmental disclosures by firms prosecuted successfully by the Environmental Protection Authority: Accounting, Auditing, and Accountability Journal. Vol. 9 No. 2, p. 50-67
- Hooghiemstra, R, 2000, Corporate communication and impression management; New perspectives why companies engage in corporate social reporting: Journal of Business Ethics. Vol.27 (2), p. 55-68
- Mahoney, L.S., Thorne, L., Cecil, L., &LaGore, W. 2013, A research note on standalone corporate social responsibility reports: Signalling or greenwashing: Critical Perspectives on Accounting. Vol. 24 (5), p. 350-359
- Merkl-Davies, D. &Brennan, M, 2011, A Conceptual Framework of Impression Management: New insights from psychology, sociology, and critical perspectives”, Accounting and Business Research. Vol. 41 (5), p. 415-437
- Moir, L., 2001. What do we mean by corporate social responsibility? Corporate Governance. Vol.1 (2), p. 16-22.
- Elisabeth, G &Domenec, M. 2004. Corporate Social Responsibility Theories: Journalism of Business Ethics. Vol.53, p.51-71