Chapter 10 - Test yourself Q&A's - CSR and Stakeholders Flashcards
Explain the difference between CSR, corporate citizenship and sustainability.
There is no one definition of CSR. Some organisations understand it as purely charitable giving, others as an integral part of their business models and hence strategic planning. Others combine their environmental activities with CSR. The
type of involvement in CSR by organisations will depend on their operational activities, their understanding of CSR, and the philosophy and values of their organisation.
The term corporate citizenship has a wider definition than CSR. Corporate citizenship describes how companies should act in the same way as the citizens of the countries in which they operate, that is, to meet the countries’ legal, social, ethical and economic responsibilities expected of its citizens. This requires companies to balance the financial needs of its shareholders with the societal need of the countries within which it operates.
The term sustainability refers to an organisation focusing on its long-term survival. It requires organisations to balance their current requirements for operating their businesses, without compromising the needs of future generations. In doing
this, CSR obviously plays a part in ensuring the long-term survival of the organisation – this is often why the two terms are linked.
Why did companies give up responsibility for the welfare of their employees?
Some believe that following World War II, the advent of free education and the National Health Service in the UK saw the state take over from companies the responsibility for the well-being of the workforce. This in turn led to companies
focusing more on making profits and achieving growth to help economic recovery after the war than on acting in the interests of society at large.
What changed to create an interest in the social responsibility of companies?
By the late 1980s, society was becoming more and more concerned with the behaviour of corporations and their lack of concern for the communities within which they operated. There was a belief by some that short-term profits were
being focused on to the detriment of long-term profitability and sustainability, not just of the organisations but also of society as a whole.
In 1991, a theoretical debate on ‘doing well by doing good’ was started by the Porter hypothesis that the financial benefits from innovation induced by CSR more than offset the engagement and compliance costs. There has also been a growing recognition since the early 1990s that the reputational impact of a good CSR rating is positive as the outside world sees the organisation as decent, trustworthy, and good to its employees, the community and the environment. Evidence shows that this increases the financial returns for an organisation’s investors.
Give three reasons why companies initiate CSR activities.
To obtain competitive advantage.
To reduce risk, especially reputational risk.
To attract human capital.
For innovation.
For sustainability.
Describe what is required for a win-win CSR partnership.
There can be many factors which aid a win-win partnership, including:
having clear reasons to collaborate
having core people entirely committed to the partnership
having simple and credible goals
having a facilitator
incentivising workers
flexibility
having a clear exit strategy planned
Why is it important for companies to think in an integrated way?
Integrated thinking considers things in a balanced way to allow the effective and efficient utilisation of the capital resources available to an organisation when developing strategy or decision making. These capitals are growing rare
and therefore costs to the organisation are growing. It is important for an organisation to manage resources in the most effective way.
What are the six capitals that companies need to manage effectively and in an integrated way?
Financial capital – money, equity, bonds, monetary value of assets, etc. that an organisation needs to operate.
Human capital – the collective skills and experience of the people that work for the organisation.
Manufactured capital – physical means and infrastructure needed for an organisation to provide its products and services, e.g. fixed assets.
Intellectual capital – patents, copyright, designs, goodwill, brand value and knowledge accumulated, i.e. intangible assets.
Natural capital – natural resources and energy that the organisation depends on to produce its products/services.
Social capital – value added to an organisation by the social relationships with individuals and institutions that an organisation has developed through its stakeholder engagement.
What are the challenges with determining a company’s sustainability?
Sustainability requires the balance of current needs against future needs. The challenge with this is determining:
* The current and future needs.
* The time period to be considered when looking at future generations.
* Who the sustainability should be for (e.g. the company, the country or the world).
Why is there a greater focus on the longer-term in organisations?
By focusing on the long-term sustainable success of the company, organisations should generate value for shareholders and contribute to wider society.
