Contents

1. Introduction

2. Criticisms and concerns

A] CSR and the nature of business

B] CSR and questionable motives

3. Corporate behavior

4. Corporate benefit

5. Corporate governance

6. Economic value

7. Criticism of the doctrine of positive responsibility

8. Can a business socially responsible

9. Conclusion

Corporate social responsibility (CSR, also called corporate

responsibility, corporate citizenship, responsible business and corporate
social opportunity) is a concept whereby organizations consider the
interests of society by taking responsibility for the impact of their
activities on customers, suppliers, employees, shareholders,
communities and other stakeholders, as well as the environment. This
obligation is seen to extend beyond the statutory obligation to comply
with legislation and sees organizations voluntarily taking further steps to
improve the quality of life for employees and their families as well as for
the local community and society at large.

The practice of CSR is subject to much debate and criticism. Proponents

argue that there is a strong business case for CSR, in that corporations
benefit in multiple ways by operating with a perspective broader and
longer than their own immediate, short-term profits. Critics argue that
CSR distracts from the fundamental economic role of businesses; others
argue that it is nothing more than superficial window-dressing; still
others argue that it is an attempt to preempt the role of governments as a
watchdog over powerful multinational corporations

Criticisms and concerns

Critics of CSR as well as proponents debate a number of concerns
related to it. These include CSR's relationship to the fundamental
purpose and nature of business and questionable motives for engaging in
CSR, including concerns about insincerity and hypocrisy.

A] CSR and the nature of business

Corporations exist to provide products and/or services that produce
profits for their shareholders. Milton Friedman and others take this a
step further, arguing that a corporation's purpose is to maximize returns
to its shareholders, and that since (in their view), only people can have
social responsibilities, corporations are only responsible to their
shareholders and not to society as a whole. Although they accept that
corporations should obey the laws of the countries within which they
work, they assert that corporations have no other obligation to society.
Some people perceive CSR as incongruent with the very nature and
purpose of business, and indeed a hindrance to free trade. Those who
assert that CSR is incongruent with capitalism and are in favor of
neoliberalism argue that improvements in health, longevity and/or infant
mortality have been created by economic growth attributed to free
enterprise.

Critics of this argument perceive neoliberalism as opposed to the well-

being of society and a hindrance to human freedom. They claim that the
type of capitalism practiced in many developing countries is a form of
economic and cultural imperialism, noting that these countries usually
have fewer labor protections, and thus their citizens are at a higher risk
of exploitation by multinational corporations.

A wide variety of individuals and organizations operate in between these

poles. For example, the REAL leadership Alliance asserts that the
business of leadership (be it corporate or otherwise) is to change the
world for the better. Many religious and cultural traditions hold that the
economy exists to serve human beings, so all economic entities have an
obligation to society (e.g., cf. Economic Justice for All). Moreover, as
discussed above, many CSR proponents point out that CSR can
significantly improve long-term corporate profitability because it
reduces risks and inefficiencies while offering a host of potential
benefits such as enhanced brand reputation and employee engagement.

B] CSR and questionable motives

Some critics believe that CSR programs are undertaken by companies
such as British American Tobacco (BAT), the petroleum giant BP (well-
known for its high-profile advertising campaigns on environmental
aspects of its operations), and McDonald's (see below) to distract the
public from ethical questions posed by their core operations. They argue
that some corporations start CSR programs for the commercial benefit
they enjoy through raising their reputation with the public or with
government. They suggest that corporations which exist solely to
maximize profits are unable to advance the interests of society as a
whole.
Another concern is when companies claim to promote CSR and be
committed to Sustainable Development whilst simultaneously engaging
in harmful business practices. For example, since the 1970s, the
McDonald's Corporation's association with Ronald McDonald House
has been viewed as CSR and relationship marketing. More recently, as
CSR has become mainstream, the company has beefed up its CSR
programs related to its labor, environmental and other practices[17] All
the same, in McDonald's Restaurants v Morris & Steel, Lord Justices
Pill, May and Keane ruled that it was fair comment to say that
McDonald's employees worldwide 'do badly in terms of pay and
conditions' and true that 'if one eats enough McDonald's food, one's diet
may well become high in fat etc., with the very real risk of heart disease.'

Similarly Shell has a much-publicized CSR policy and was a pioneer in

triple bottom line reporting, however, this did not prevent the 2004
scandal concerning its misreporting of oil reserves—an act which
seriously damaged its reputation and led to charges of hypocrisy. Since
then, the Shell Foundation has become involved in many projects across
the world, including a partnership with Marks and Spencer (UK) in three
flower and fruit growing communities across Africa.

Critics concerned with corporate hypocrisy and insincerity generally

suggest that better governmental and international regulation and
enforcement, rather than voluntary measures, are necessary to ensure
that companies behave in a socially responsible manner.
 Corporate Behavior
Members are expected to respect human rights and to
conduct themselves in a socially
responsible manner toward the creation of a sustainable
society, observe both the spirit as
well as the letter of all laws and regulations applying to
their activities both in Japan and
abroad in accordance with the following ten principles

Character of corporate behavior

1. Members, by the development and provision of

socially beneficial goods and services in a
safe and responsible manner, shall strive to earn the
confidence of their consumers and
clients, while taking necessary measures to protect
personal data and customer related
information.
2. Members shall promote fair, transparent, free
competition and fair trade. They shall also
ensure that their relationships and dealings with
government agencies and political
bodies are of a normal and proper nature.
3. Members shall engage in active and fair disclosure of
corporate information, not only to
shareholders but also to members of society at large.
4.Members shall strive to respect diversity, individuality
and differences of their employees,
to promote safe and comfortable workplaces, and to
ensure the physical and mental well
being of their employees.
5.Members shall recognize that a positive involvement in
environmental issues is a priority
for all humanity and is an essential part of their activities
and their very existence as a
corporation, and should therefore approach these issues
positively.
6. As "good corporate citizens," members should
actively engage in philanthropic and other
activities of social benefit.
7. Members shall reject all contacts with organizations
involved in activities in violation of the law or accepted
standards of responsible social behavior.
8. Members shall observe all laws and regulations
applying to their overseas activities and respect the
culture and customs of other nations and strive to
manage their overseas activities in such a way as to
promote and contribute to the development of local.

Corporate benefit

Corporate benefit (sometimes referred to as commercial benefit) is the

requirement under some legal systems that the directors of a company
must exercise the powers of the company for the commercial benefit of
the company and its members. At common law, transactions which were
not ostensibly beneficial to the company were set aside as being void as
against the company.
Perhaps the best illustration of this principle is to be found in Hutton v
West Cork Railway Co (1883) 23 Ch D 654, where the English Court of
Appeal held that the paying of a gratuity to employees prior to their
dismissal was an improper exercise of the powers of the company,
because the company was no longer a going concern, and thus stood to
obtain no benefit (and no furtherance of its objects) through the payment
of the gratuity; as Bowen L.J. memorably remarked: "there are to be no
cakes and ale except such as are required for the benefit of the company.
Any transaction which the directors enter into which is outside the
powers of the company (and thus outside the scope of their authority)
may nonetheless be ratified by the shareholders of the company, and will
thereby be binding upon the company

Corporate governance
In A Board Culture of Corporate Governance business author
Gabrielle O'Donovan defines corporate governance as 'an internal
system encompassing policies, processes and people, which serves the
needs of shareholders and other stakeholders, by directing and
controlling management activities with good business savvy, objectivity,
accountability and integrity. Sound corporate governance is reliant on
external marketplace commitment and legislation, plus a healthy board
culture which safeguards policies and processes'.
O'Donovan goes on to say that 'the perceived quality of a company's
corporate governance can influence its share price as well as the cost of
raising capital. Quality is determined by the financial markets,
legislation and other external market forces plus how policies and
processes are implemented and how people are led. External forces are,
to a large extent, outside the circle of control of any board. The internal
environment is quite a different matter, and offers companies the
opportunity to differentiate from competitors through their board culture.
To date, too much of corporate governance debate has centred on
legislative policy, to deter fraudulent activities and transparency policy
which misleads executives to treat the symptoms and not the cause.
It is a system of structuring, operating and controlling a company with a
view to achieve long term strategic goals to satisfy shareholders,
creditors, employees, customers and suppliers, and complying with the
legal and regulatory requirements, apart from meeting environmental
and local community needs.
Report of SEBI committee (India) on Corporate Governance defines
corporate governance as the acceptance by management of the
inalienable rights of shareholders as the true owners of the corporation
and of their own role as trustees on behalf of the shareholders. It is about
commitment to values, about ethical business conduct and about making
a distinction between personal & corporate funds in the management of
a company.” The definition is drawn from the Gandhian principle of
trusteeship and the Directive Principles of the Indian Constitution.
Corporate Governance is viewed as ethics and a moral duty.

Economic Value
Economic value is one of many possible ways to define and measure value.
Although other types of value are often important, economic values are
useful to consider when making economic choices – choices that involve
tradeoffs in allocating resources.
Measures of economic value are based on what people want – their
preferences. Economists generally assume that individuals, not the
government, are the best judges of what they want. Thus, the theory of
economic valuation is based on individual preferences and choices. People
express their preferences through the choices and tradeoffs that they make,
given certain constraints, such as those on income or available time.
The economic value of a particular item, or good, for example a loaf of bread
is measured by the maximum amount of other things that a person is willing
to give up to have that loaf of bread. If we simplify our example “economy”
so that the person only has two goods to choose from, bread and pasta, the
value of a loaf of bread would be measured by the most pasta that the
person is willing to give up to have one more loaf of bread.
Thus, economic value is measured by the most someone is willing to give up
in other goods and services in order to obtain a good, service, or state of the
world. In a market economy, dollars (or some other currency) are a
universally accepted measure of economic value, because the number of
dollars that a person is willing to pay for something tells how much of all
other goods and services they are willing to give up to get that item. This is
often referred to as “willingness to pay.”
In general, when the price of a good increases, people will purchase less of
that good. This is referred to as the law of demand—people demand less of
something when it is more expensive (assuming prices of other goods and
peoples’ incomes have not changed). By relating the quantity demanded
and the price of a good, we can estimate the demand function for that good.
From this, we can draw the demand curve, the graphical representation of
the demand function.
It is often incorrectly assumed that a good’s market price measures its
economic value. However, the market price only tells us the minimum
amount that people who buy the good are willing to pay for it. When people
purchase a marketed good, they compare the amount they would be willing
to pay for that good with its market price. They will only purchase the good if
their willingness to pay is equal to or greater than the price. Many people are
actually willing to pay more than the market price for a good, and thus their
values exceed the market price.
In order to make resource allocation decisions based on economic values,
what we really want to measure is the net economic benefit from a good or
service. For individuals, this is measured by the amount that people are
willing to pay, beyond what they actually pay. Thus, two goods that sell for
the same price may have different net benefits. For example, I may have a
choice between wheat and multi-grain bread, which both sell for $2.00 per
loaf. Because I prefer multi-grain, I am willing to pay up to $3.00 for a loaf.
However, I would only pay $2.50 at the most for the wheat bread. Therefore,
the net economic benefit I receive for the multi-grain bread is $1.00, and for
the wheat bread is only $.50.
The economic benefit to individuals is often measured by consumer surplus.
This is graphically represented by the area under the demand curve for a
good, above its price.

The economic benefit to individuals, or consumer surplus, received from a

good will change if its price or quality changes. For example, if the price of a
good increases, but people’s willingness to pay remains the same, the
benefit received (maximum willingness to pay minus price) will be less than
before. If the quality of a good increases, but price remains the same,
people’s willingness to pay may increase and thus the benefit received will
also increase.

Economic values are also affected by the changes in price or quality of

substitute goods or complementary goods . If the price of a substitute good
changes, the economic value for the good in question will change in the
same direction. For example, wheat bread is a close substitute for multi-
grain bread. So, if the price of multi-grain bread goes up, while the price of
wheat bread remains the same, some people will switch, or substitute, from
multi-grain to wheat bread. Therefore, more wheat bread is demanded and
its demand function shifts upward, making the area under it, the consumer
surplus, greater.
Similarly, if the price of a complementary good, one that is purchased in
conjunction with the good in question, changes, the economic benefit from
the good will change in the opposite direction. For example, if the price of
butter increases, people may buy less of both bread and butter. If less bread
is demanded, then the demand function shifts downward, and the area under
it, the consumer surplus, decreases.
Producers of goods also receive economic benefits, based on the profits they
make when selling the good. Economic benefits to producers are measured
by producer surplus, the area above the supply curve and below the market
price. The supply function tells how many units of a good producers are
willing to produce and sell at a given price. The supply curve is the graphical
representation of the supply function. Because producers would like to sell
more at higher prices, the supply curve slopes upward.
If producers receive a higher price than the minimum price they would sell
their output for, they receive a benefit from the sale—the producer surplus.
Thus, benefits to producers are similar to benefits to consumers, because
they measure the gains to the producer from receiving a price higher than the
price they would have been willing to sell the good for.

When measuring economic benefits of a policy or initiative that affects an

ecosystem, economists measure the total net economic benefit. This is the
sum of consumer surplus plus producer surplus, less any costs associated
with the policy or initiative.

Abstract
Socially responsible business and ethical behaviour of
companies have been of interest to academia and practice for
decades. But the focus has almost exclusively been on large
corporations while small- and medium-sized enterprises (SME)
have not received as much attention. Thus, this paper focuses on
socially responsible business practices of SME entrepreneurs or
owner-managers in Germany. Based on the assumption that
decision-makers in SMEs are the central point where all business
activities start, members of a German entrepreneurs association
were approached in the course of a qualitative and quantitative
survey. They were asked to assess in what way their social
responsibility is expressed in specific management practices
towards selected stakeholder groups. These practices in turn
were assumed to result in perceived positive reactions of the
respective stakeholders and subsequently to positively influence
the firm's financial performance, i.e. cost reductions and increase
in profits. In the paper, a research model is presented that
elaborates the relationship between an SME executive's social
responsibility and the value creation of a firm, i.e. whether
(personal) values create (economic) value. It was found that
socially responsible management practices towards employees,
customers and to a lesser extent society have a positive impact
on the firm and its performance. As such, values can create
additional value.

Conclusions
All these CSR-related activities will shape UNIDO’s further development
towards an ever-stronger position as a competence partner in the field of
sustainable private sector development, focused on small and medium
enterprises. Responding to an emerging demand towards CSR-related
support for SMEs in the developing world, UNIDO is developing further
practical knowledge, which will enhance the private sector in becoming
more competitive in their local markets as well as in global value chain.
Being on the forefront of practical support for SMEs, UNIDO takes up an
important role as a competence partner in helping SMEs to survive and
grow in a changing business environment, which will require the adherence
to an increasing number and complexity of standards, which is most
prominently marked by the advent of ISO 26000.