Chapter 1: Introduction to the Concept of CSR

Question 1

What did the World III simulation model presented in “Limits to growth” predict?

Answer 1

The World III simulation model presented in “Limits to growth (1972)” used a computer model of exponential economic and population growth with finite resource supplies.

Variables used:

1. world population
2. industrialization
3. pollution
4. food production
5. resource depletion

Central result:
Assuming that the growth in these 5 variables is continuing at the same rate, the earth’s limits will be reached within the next 100 years.

Question 2

How did the “Brundtland Commision” define sustainable development?

Answer 2

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

Question 3

What does the tripple bottom line approach to sustainability refer to?

Answer 3

The tripple bottom line (TBL) refers to an accounting framework encompassing three parts:
1. social performance
2. environmental (ecological) performance
3. financial performance
Related to the three pillar model of sustainability.

Question 4

What is the three pillar model of sustainability?

Answer 4

Three pillar model (PPP):

1. People (social sustainability): refers to fair and beneficial business practices toward labor and the community and region in which a corporation conducts its business.
2. Planet (environmental sustainability): refers to sustainable environmental practices (benefit natural order as much as possible, minimize environmental impact).
3. Profit (economic sustainability): refers to economic value created by the company.

Question 5

Name three of the biggest problems facing humanity. How can companies contribute to remedying these adversities?

Answer 5

1. Peak Oil -> Provide new technologies using alternative energies.
2. Global Water Crisis -> Reduce water pollution, aim for more sustainable agriculture.
3. Rapid Climate Change -> Reduce CO²-emissions.

Question 6

Which actors can be addressed in the search for solutions for problems like global warming? Discuss how these parties can contribute to solving pressing problems and what the obstacles are to them making a real change.

Answer 6

1. Governments
   ->Can provide frameworks of what is right and wrong from a legal perspective.
   Obstacles: The problem crosses national boarders, so the impact of legal actions is limited.
2. NGOs
   ->Can put pressure on governments, private businesses and society to support certain causes.
   Obstacles: In case of global problems (like global warming) it is necessary to address governments, businesses and people globally, which is very difficult.
3. Consumers
   ->Can contribute via sustainable consumption, boycotts, political action, etc…
   Obstacles: Consumer paradox. People agree on supporting a certain cause but it is not reflected in their actions.
4. Companies
   ->Promote innovation for sustainable products, voluntary adhere to environmental standards, etc…
   Obstacles: Costs.

Question 7

What is meant by the “Consumer Paradox” referred to by Devinney (2008).

Answer 7

The “consumer paradox” refers to the observation that survey responses on sustainable behavior show striking divergence from real sustainable consumption behavior.
When consumers are asked if they would buy a sustainable product, a very high proportion of people say that they would. Yet the market share of sustainable products is very low.

Question 8

What does the term “Greenwashing” refer to?

Answer 8

Greenwashing refers to the practice of falsely promoting an organization’s environmental efforts or spending more resources to promote the organization as green than are spent to actually engage in environmentally sound activities.
The dissemination of false deceptive information regarding an organization’s environmental strategies, goals, motivations, and actions.

Question 9

What is a corporation?

Answer 9

• Corporations are separate entities, independent from those who work in them.
• Perpetual succession, they can survive the death of any individual investor, employees, customers, etc…
• Artificial persons in the eye of the law.
• Notionally owned by shareholders but exist independent of them.
• Managers have fiduciary responsibility towards the owners of the company.

Question 10

Please juxtapose the positions of Milton Friedman and Archie B. Carroll on corporate responsibilities. What is their common core? And how do they differ?

Answer 10

Friedman:

• Companies do not have moral responsibility, only individuals do.
• Manager’s responsibility is to act solely in the interest of shareholders.
• Social issues and problems are not the concern of corporate managers. Managers cannot and should not decide what is in society’s best interest.
• A company has only economic responsibilites.

Carroll:

• Pyramid of CSR :
  1. Economic Responsibilites
  2. Legal Responsibilites
  3. Ethical Responsibilities
  4. Philantropical Responsibilities
• They both agree that a company has economic responsibility that is to maximize profits.
• In Carroll’s view it does not stop there (Pyramid of CSR).
• In Friedman’s view pursuing only economic goals does not necessarily mean that the company should not pursue the resonsibilities mentioned by Carroll. If pursuing this goals is in the interest of the companies owners or if it helps to achieve their economic goal, then the company should in fact engage in this fields.

Question 11

What are the two opposing views of corporate responsibility resulting from the positions of Friedman and Carroll?

Answer 11

Shareholder view:

• focused on shareholders and the relationship between shareholders and management.
• based on Agency Theory.
• Criticism of the idea of wider CSR (Friedman 1970).
• Narrow view of CSR (only economic responsibilities)

Stakeholder view:

• other partners than shareholders should be included in the corporate governance process.
• based on Stakeholder Theory.
• Theoretical foundation of wider CSR.
• Broad and extended view of CSR (Pyramid of CSR).

Question 12

Who are the most important company-internal versus company-external stakeholders?

Answer 12

Internal stakeholders:

1. Employees
2. Managers
3. Owners

External stakeholders:

1. Suppliers
2. Society
3. Government
4. Investors
5. Shareholders
6. Customers

Question 13

Which new role for management does a stakeholder approach to corporate responsibility imply? Please provide an example for conflicting stakeholder interests.

Answer 13

• Management has to take into account the rights and interests of all legitimate stakeholders.
• Management must balance the inerests of shareholders with the competing interests of other stakeholders for the long-term survival of the corporation.
• A lot of times there are conflicting stakeholder interests, e. g. Primark - Customers and oversees employees.