Corporate citizenship is not an effective substitute for corporate social responsibility. Discuss. In order to put forward a reasonable argument for the above suggestion, this discussion must focus

With the possible failure of CSR to maintain its objectives, and with the development of companies as “partners” through government initiatives, the theory of corporate citizenship became at the fore front of social responsibility. The theory is much less radical than CSR purports, which would suggest firms increased enthusiasm to become involved with it. Yet again however, there is no single accepted definition for CC, however in essence uses CSR in foundation.

Citizenship is defined as the rights and duties associated with being a member of a country. Therefore, companies, as independent legal entities (SOLOMON CASE?) are members of countries and can be thought of as corporate citizens, with enhanced legal rights, and subsequent duties. All companies therefore, are corporate citizens, but their citizenship performance varies just as it does for any individual citizen. Citizenship subsequently is more than just a legal term, it is a political term:

        “As a political term citizenship means active commitment. It means responsibility.”

Good CC can be defined as understanding and managing a company’s wider influences on society for the benefit of the company and society as a whole, and so subsequently develops the theory of CSR. It takes the organisation beyond being a sole legal entity and gives it a place within the community where it can influence and be influenced by the actions of citizens around it. Underpinning the theory is that a multinational enterprise operating in an integrating world economy should practise global CC: being a good citizen in every host country in which it operates. Moreover, the move toward CC seems to have been founded through the conceptual ambiguity of CSR and its substantive merit, enhancing the pure fundamentals of the theory. Additionally the move by the Thatcher government meant that calls for voluntary action by businesses led to the CC theory filling in the void left from the debate of CSR. Therein global CC sought to serve as a method to integrate CSR and stakeholder management in a way that firms were more willing to become involved in, suggesting that CSR should still however not be totally ignored. Subsequently, the way that CC elaborates CSR, is it emphasises organisations having obligations beyond obeying the law, the same as individual persons. If the concept of CC is to become a useful guide for managerial practice however, it must be embedded in those day-to-day operating practices that most affect critical stakeholder groups and society in general.

The history of social and environmental concern about business seems to be as old as trade and business itself. Commercial logging operations for example, together with laws to protect forests, can both be traced back almost 5,000 years, and as business enterprise developed into the modern age, the sense of accountability seem to underpin most CC and CSR decisions. The idea of CSR appeared around the twentieth century where corporations at that time were becoming under increased scrutiny for being too big, politically powerful, and engaging in antisocial and anticompetitive practices. Faced with this kind of social protest, a few farsighted business executives advised corporations to use their power and influence voluntarily for broad social purposes rather than for profits alone. Automaker Henry Ford developed programs to support the recreational and health needs for his employees, prompting initially internal strategies, but ultimately CSR and CC outside of the business sphere. The point to note is that company leaders believed that the business had a responsibility to society that went beyond, or worked in parallel with their efforts to make profits, and began to consider interests other than just shareholders. Not only did this prompt regulatory review on matters, but paved the way for developed paternalistic programmes found internally and externally in relation to social responsibility. Companies became keener to move away from just giving money to charity, known as the charity principle, or as being a trustee to the public’s interest, referred to as the stewardship principle. These two early principles established the original meaning of CSR.

It became apparent as suggested that private institutions who were exercising a degree of public power, required some level of accountability and responsibility for their actions. Measures existed, and continue to do so, to help maintain a degree of control over firms, and their directors, in the sense of legislation, common law, and shareholder rights to limit directors’ power, yet a great deal of these are internal, or only affect a company decision in the extreme cases. Therein, there was limited law or rulings available for the checks and balances regarding legitimate business decisions in an external context. Moreover, governments were unenthusiastic to introduce stringent business law, as they wanted to maintain good relations with the firms that were working within their countries, whom contributed to the economy. This theory is supported by the current stance given by the UK Government concerning CSR and CC, with the following quote useful to illustrate:

“… CSR the voluntary actions that business can take, over and above compliance with minimum legal requirements, to address both its own competitive interests and the interests of wider society”

The quote above suggests the balance of all stakeholders with the company’s need to make a profit and reward their shareholders adequately. This holistic approach to business regards organisations as (for example) being full partners in their communities, rather than seeing them more narrowly as being primarily in business to make profits and serve the needs of their shareholders. This seems to be the purpose of CSR and CC in the wider context, to encourage (but not necessarily to force) businesses to engage in wider social aspects of their dealings. Directors are often in a powerful position within organisations to influence the expectations of other stakeholders, including the community and also environment in a larger context. Therefore with this power comes an ethical responsibility for the company to work with a level of integrity and responsibility, enhanced through working with CSR.

Moreover, directors became increasingly aware that through the medium of CSR reporting they could put across a valued and positive image of their organisation. France for example has now made the declaration of social and environmental impacts of companies mandatory in their annual reports and press releases, a step to make CSR not necessarily just a voluntary scheme. However there is no common template for the reporting and the style and the evaluation methodology varies between companies (even within the same industry). Furthermore it could be seen that through producing a CSR report, companies are no more than trying to place political spin on their actions. British American Tobacco frequently produces a social report for example:

        “If a business is managing products which pose a risk to health, we believe it is all the more important that it does so responsibly” 

This seems to weaken the case for CSR and the objectives that it is ultimately trying to achieve, in that although a firm may express its interests for social responsibility, the degree to which it achieves it is still under question. A company can voluntarily choose to what level it wants to pursue CSR, as there are no stringent measures stating how far the company must go. Therefore this can only strengthen the argument for CC, which shall be discussed below.

        The United Nations Global Compact was announced by United Nations Secretary-General Kofi Annan in an address to The World Economic Forum, when he challenged business leaders to join the Global Compact to bring companies together with UN agencies, labour groups and civil society to support ten principles in the areas of human rights, labour and the environment. It encouraged firms to promote sustainable growth, and good citizenship through committed and creative leadership. The Global Compact is not a regulatory instrument, but rather a forum for discussion and a network for communication including governments and companies, whose actions it seeks to influence; and civil society organizations, representing its stakeholders. Its set of ten principles address CC theory in a much more detailed way, giving for the first time, an effective set of guidelines for companies to follow to achieve good CC. Moreover, the principles are universal, applying globally, in that the UN being the only body with the power to do this, and to do it effectively. Having said this however, the use of the ten principles has a rather limited overall effect. Companies are able to pick and choose which principles they want to follow, and have to give limited evidence that they are doing so. Ultimately this refers back to CSR that firms may be seen to be simply signing up for the Compact only to increase their reputation as being a good company, rather than actually increasing standards or social responsibility. Further to this there is no monitoring of business’s actions after they have initially signed up, or stringent enforcement policies to make sure that the principles are adhered to.

As proposed, CSR tries to achieve a limited sense of accountability of a firm’s business actions and decisions. And having said this, a number of organisations’ views on CSR seem to only be to increase press relations and consumer happiness in the long run. Some critics of CSR, such as the economist Friedman, argue that a corporation's principal purpose is to maximize returns to its shareholders, whilst obeying the laws of the countries within which it works. Others argue that the only reason corporations put in place social projects is utilitarian; that they see a commercial benefit in raising their reputation with the public or with government. Nevertheless, it seemed to some academics and businesses alike, that the idea of CSR needed to be strengthened through CC, and for firms to be more willing to act upon it, not purely for profit based reasons. Indeed for if a company was to trade and work abroad, it is almost impossible for an international form of regulation to account for their actions. In order for the concept of CSR to be taken seriously by businesses, the theory needed to be developed further. Moreover, directors began to realise that spending money on CSR initiatives didn’t necessarily always improve their profitability suggesting that CSR needed improvement if it were to achieve its goals of accountability.

“Being a CSR-leading company was negatively or not correlated with compound annual net income growth…”

        It seems through the debate above that we ought to question whether CSR and CC are the same or different ideals. As suggested with the Nestle case, businesses should continue to become aware of their social responsibility if they are to continue to have the support they require from consumers and government. Unfortunately, even through the heightened interest of social and environmental concern, regulations that firms must adhere to have not been implemented successfully or at an international level. The degree that both CSR and CC have achieved their objectives therein depends on the level of priority the individual company gives to each. In this way, government initiatives are one of the best ways at present to enable companies to understand, and to act on social accountability and responsibility. The sense of responsibility therefore still seems to be very much a broad concept. Through the introduction of the Global Compact firms must now respond to social responsibility and account for actions therein. Yet however, without sufficient enforcement policies, the Global Compact will always be unable to fully account for business practices, negating the real reason of its purpose.

        CC and CSR should not necessarily be theories that should work independently in order to achieve responsibility and accountability. Through a successful implementation in a business context, both could quite easily be adhered to, with a minimal loss of profit. As suggested, using either CC or CSR could either benefit the company or hinder it financially, but ultimately both can compliment each other. In this way firms should try to look at social responsibility not necessarily in a pure economical way, but also ethically. Especially in a modern context with increased media and activist group attention on all activities that businesses carry out.

        As suggested the main reason supporting the two theories is to try and ascertain a higher level of accountability. Both theories can achieve this function, but only as far as the company is willing to adhere to it. Subsequently until further regulations exist it should be suggested that both compliment each other in trying to achieve the goal of responsibility and accountability. CC seems to still be in an early phase of development, and perhaps with effective compliance and monitoring, it can become what CSR tried to accomplish.

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Websites

• http://www.bcccc.net/ - Center for Corporate Citizenship

•  - Corporate Responsibility Coalition

•  – institute for business ethics

•  – Organisation for Economic Co-operation and Development

•  – Foreign Commonwealth Office

•  – The Centre for Business Relationships, Accountability, Sustainability and Society

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