The purpose of this study

To know how important the CSR especially in the big businesses, and also ensure there are

positive social and environmental effects associated with the way the business operates.

Businesses that engage in active CSR efforts take stock of the way they operate in the world to

incorporate addressing cultural and social issues, with the aim of benefiting both in the process.

Not only can CSR models increase business and revenue, they promote change and progress

throughout the world, which often involves helping people with few or no resources.

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Statement of the Problem

CSR is believed to have a significant influence on corporate sustainability. In the business

context, CSR has emerged as a form of sustainability governance with advantages to the

economic, environment and social progress. Successful executives know that their long-term

success is based on continued good relations with a wide range of individuals, groups and

institutions. Smart firms know that business can’t succeed in societies that are failing whether

this is due to social or environmental challenges, or governance problems. Moreover, the general

public has high expectations of the private sector in terms of responsible behavior. Consumers

expect goods and services to reflect socially and environmentally responsible business behavior

at competitive prices. In the recent past organization had a choice to return back to the society
but due to competition, it has become an obligation for them to become socially responsible by

giving back to the society for them to improve their image in the eyes of the public. In as much

as these organizations are returning back to the society, do they benefit from this investment in

terms of increased profit, satisfy and retain customers and also increase market share.

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LITERATURE REVIEW

The concept and definition of CSR has evolved since its inception. Archie B. Carroll (1999)

follows the evolution of the CSR construct from the 1950s to the 1990s. Within this period,

CSR transformed from a basic definition, followed by an expansion of the literature and

proliferation of CSR definitions, to increasing research and adoption of alternative themes of

CSR (Carroll, 1999). From the existing literature, CSR can be categorised into four main

theories with related approaches: Instrumental theories, political theories, integrative theories

and ethical theories (Garriga and Melé 2004, 51). The four main theories offer arguments and

counterarguments for CSR.

According to instrumental theories, the corporation is viewed as the sole driver for wealth

creation and involvement in social activities is only a process to achieve economic results
(Garriga and Melé 2004, 51). The most well-known proponent of this theory is Milton

Friedman whose article titled “The Social Responsibility of Business is to Increase its Profits”

reflects his arguments about CSR (Friedman, 1970). Studies and approaches of instrumental

theories focus on shareholder value maximisation according to the Agency Theory of

Michael C. Jensen and William H. Meckling (1976) and Stephen Ross (1973). Political

theories recognise that corporations inherently possess responsibility and power in the

political landscape of society (Garriga and Melé 2004, 51). There are three dominant

approaches under the umbrella of political theories of CSR. Keith Davis (1960) explored the

role and power that business has in society in accordance with corporate constitutionalism.

His argument was that the amount of power that businessmen have dictates their social

responsibilities and if the power is not used in a manner that society deems responsible they

will lose it (Garriga and Melé 2004, 56). The instrumental and political theories approach

CSR from corporation or business perspectives. Both theories are business-centred as

opposed to the more people-centred approaches of integrative theories and ethical theories.

The propositions that are raised demonstrate the core arguments of opponents of CSR.

Corporations integrate the social demands of society into the management of business as

society shapes the existence, continuity and growth of the business in accordance with

integrative theories of CSR (Garriga and Melé 2004, 51). Studies on CSR in this field focus

on the role of public policy, decision-making by stakeholders, and a combination of the

influence that public policy and stakeholder decision-making has on social expectations.

Finally, ethical theories of CSR are based on the notion that corporations have ethical

responsibilities to society (Garriga and Melé 2004, 51). This branch of CSR considers

concepts such as sustainable development, universal rights and contribution to the common
good (Garriga and Melé 2004, 60-62). The work of Ralph Hamann and Nicola Acutt (2003)

critiqued business motivations of CSR by arguing for a partnership between civil society,

government and business. In a nutshell, one observes a progression of CSR theories from

complete opposition to CSR to growing support and justification for CSR. Studies based on

the four theories and their related approaches illustrate the ongoing debate about CSR. Within

this debate, one finds that these theories are also inter-related.

There are some limitations in the existing literature on CSR. First, there are few studies of

CSR in the extractive industry. For instance, Jedrzej G. Frynas (2005) conducted a study on

the effectiveness of CSR initiatives by multinational oil companies. In another study, Dima

Jamali and Ramez Mirshak (2007) apply Carroll’s and Wood’s conceptualisations of CSR to

examine CSR approaches by retail, banking, manufacturing, and hospitality companies in

Lebanon. Second, the few studies that investigate CSR initiatives in the extractive industry

are descriptive in nature and fail to explain how and why some MNMCs fail to adhere to their

CSR initiatives and the implications thereof. Explanatory research in the field of CSR focuses

strictly on environmental, social, economic or political justifications for CSR as separate or

unrelated factors in society. These include, amongst others, studies by Bob Manteaw (2007),

Patrick Bond (2008), Emmanuel K. Boon and Frederick Ababio (2009), and Kwesi

Amponsah-Tawiah and Kwasi Dartey-Baah (2011). It is recognised that there is a

relationship between the intended CSR initiatives by MNMCs and the environmental, social,

economic or political aspects of society. This study will explore this relationship as it is

crucial in reaching an understanding of CSR. In addition, it is important to explore the

relationship between CSR and the concept of ‘social license to operate’ which MNMCs are
incorporating into their CSR strategies.

There is growing recognition that mineral developers need to gain a ‘social license to operate’

(SLO) in order to avoid potentially costly conflict and exposure to social risks. This SLO is

obtainable from local communities. According to Jason Prno and Scott Slocombe (2012), “a

social license can be considered to exist when a mining project is seen as having the ongoing

approval and broad acceptance of society to conduct its activities” (Prno and Slocombe 2012,

346). SLO has been examined from the perspective of corporate responsibility, competitive

advantage and growth (Nelsen 2006); governance and sustainability theories (Prno and

Slocombe 2012); and stakeholder theory (Wilburn and Wilburn 2011). The emergence of

SLO has increased the standard of environmental and social performance of mineral

developers. Previously, mineral developers merely insured full compliance with host-country

environmental regulations. However, there is a growing recognition that full legal compliance

is insufficient in meeting society’s demands with regards to mining issues (Prno and

Slocombe 2012, 346). The concept of SLO has thus broadened the range of governing actors

by incorporating the state, mining companies, local communities, market actors and civil

society in decision-making processes.

The literature on SLO indicates that SLO is an emerging concept which lacks in-depth

analysis and theoretical refinement. Thus the study aims to extend the work on SLO by

demonstrating the link between CSR and SLO. The main argument is that SLO is necessary

to encourage MNMCs to adhere to CSR initiatives as mutually beneficial rather than forced

processes. Also, the study will examine community politics that drive national politics in the

mining sector.
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Theoretical Framework on Corporate Social

Responsibility: The companies must be concerned that the implementation of corporate social

responsibility willing increase their value in term of the responsibility not only in economic but

also responsible for the environment and social commitment. The upcoming corporate social

responsibility implementation will be reinforced by looking at the approach of theoretical

framework as following Corporate Accountability Theory: The company should be responsible

for all the consequences arising either intentionally or unintentionally to stakeholders. The theory

stated CSR activities not only generosity (charity) or the activity of mutual love (stewardship)

which are voluntary action which are understood by business men so far, but it involved an

inherent and fundamental obligation and has becoming a "spirit of life " in systems and business

practices. The underlying reason implies that CSR is a logical consequence of the existence of

human rights issued by the state to the company to live and thrive in certain environment. If there

is no harmony between human rights and obligations of the company in that environment, there

will live two parties, the company as gainers and society as the losers (Dellaportas, 2005).

Stakeholder Theory: This theory states that the success and sustainability of a company depends

on its ability to balance the various interests of the stakeholders. If able, then the company will

achieve ongoing support and enjoy a growing market share, sales, and profits. Stakeholder theory

is a theory that describes to any parties (stakeholders) who is responsible for the company.

Stakeholder theory assumes that the existence of the company requires the support of
stakeholders, therefore the activity of the company is also considering the approval of

stakeholders (Freeman, 1984; Garriga, 2004). The theory also advises that the company is not the

only entity that operates for its own profit, but should provide benefits to its stakeholders for

example shareholders, creditors, customers, suppliers, government and public, analysts

(Freeman, 1984; Garriga, 2004; Wilson, 2003). Legitimacy Theory: The original definition of

legitimacy theory is a generalized perception or assumption that the actions of an entity are

desirable, proper, or appropriate within some socially constructed system of norms, values,

beliefs, and definitions (Suchman, 1995). Legitimacy theory perceives that the company and the

surrounding community have close social relations as both are bounded in a social contract. The

theory of the social contract states that the company's presence in certain area because of

politically supported and guaranteed by government regulation and parliament which is also a

representation of the community. Thus, there is indirect social contract between the company and

the community in the costs and benefits, for the sustainability of a corporation (O’Donovan,

2002). Therefore, CSR is a fundamental obligation of a company that is not voluntary and the

disclosure practices of corporate responsibility should be implemented in such a way that the

activities and performance of the company can be accepted by society. Corporate Sustainability

Theory: The theory underlines that in order to live and grow sustainably, corporations must

integrate business goals with social and ecological objectives as a whole. Business development

should be based on three main pillars, i.e. economists, social, and environment in an integrated

manner, and does not sacrifice the wellbeing of future generations to live and meet their needs.

Corporate sustainability theory perceives society and the environment is the main pillar and

foundation that determines the success of a business enterprise; therefore, it must always be

protected and empowered. The theory identifies that the corporate growth and profitability are
essential. However, it also involves the corporation to pursue societal goals, specifically those

relating to sustainable development which include environmental protection, social justice and

equity, and economic development (Wilson, 2003). Political Theory: The economic domain

cannot be isolated from the environment in which economic transactions carried out. A financial

statement of company is a document of social and political as well as economic documents.

Since they cannot be isolated from the community and the environment, companies must

consider and implement CSR. Political theory focuses on a responsible use of business power in

political arena. The theory implies that social responsibilities of businesses occur from the

amount of social power that they have (Garriga, 2004). Justice Theory: The theory implies in a

free market capitalist system, profit or loss is highly dependent on the inequality of rewards and

privileges contained in earnings and compensation. Profit or loss reflects inequality between

parties who enjoyed or suffered by the existence of company. Therefore, the company should be

fair to the community and environment that endured the external impact of companies through

CSR programs (Freeman, 1984; Garriga, 2004). Signaling Theory: The theory discusses how the

company signals the external parties in providing information. The impetus was due to the

information asymmetry between management and external parties. To reduce the asymmetry of

information, the company must disclose information, both financial and nonfinancial. Manager

generally is motivated to deliver good information about the condition of the company to the

public because it can convince people to invest in the company. On the other hand, the external

parties would only have minimal information about the reliability of the information delivered. If

the manager can provide a convincing signal to the public which must be supported by the

underlying data, then the public will respond positively. One of the mandatory information to be

disclosed by the company is information about corporate social responsibility. This information
can be integrated in a company's annual report or a separate corporate social report. The

company discloses Corporate Social Responsibility in conjunction to improving the reputation

and value of the company (Johnston,2005).

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Aust. J. Basic & Appl. Sci., 9(7): 248-250, 2015(Corporate social responsibility)

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