Chapter 2: CSR on an Institutional Level: From Shareholder Profits to Shared Value?

Question 1

In which way was the profit-motive viewed in the Christian tradition and in texts of medieval philosophers like Thomas Aquinas?

Answer 1

Christian Tradition:
-In Sermon of the Mount:
Jesus condemned the superficiality of materialism and calls the disciples not to worry about material needs, but to seek God’s Kingdom first.

Thomas Aquinas:

• To a specific extent the human being strives for external prosperity. Exceeding this extent is a sin and is viewed as greed, which is defined as the inordinate love of posession.
• A duty of brotherly love exists of donating everything that is not necessary (for one’s special standing) to the poor and needy.

Question 2

Why did Mandeville’s basic fable of the bees represent such a strong contrast to the ascetic morale? What was Mandeville’s basic proposition in the fable?

Answer 2

Mandeville states that the nation (beehive) achieves economic and cultural success because all professional groups pursue their self-interest and not because of virtue.

Basic propositions:

• not the virtues, but specifically the private vices lead to public welfare.
• virtue is actually detrimental to the state in its commercial and intellectual progress.

Question 3

What is the basic idea behind Adam Smith’s invisible hand and how does it relate to Mandeville’s fable of the bees?

Answer 3

Adam Smith:

• individual self-interest seeking leads to an increase in common good.
• > relates to Mandeville’s statement that private vices lead to public welfare.

Question 4

How can self-interest and greed be differentiated?

Answer 4

Self-interest:
-focus on the needs or desires (interests) of the self.

Greed:
-desire to acquire or possess more than one needs.

Question 5

Why can greed be viewed as a destructive force for human societies?

Answer 5

If people pursue greed for possession that can never be satisfied, this will ultimately lead to problems like resource depletion.

Question 6

What does enlightened self-interest mean?

Answer 6

Enlightened self-interest:

• philosophy in ethics which states that persons who act to further the interests of others (or groups and groups they belong to), ultimately serve their own self-interest.
• companies will increase in value if they identify and respond to the needs of society.
• companies prime purpose is to make profits, but this goal can be reached by fulfilling it’s social and environmental responsibilities.

Question 7

What are the main arguments of Porter & Kramer’s (2006, 2011) Creating Shared Value (CSV) approach? How do the authors define shared value?

Answer 7

Existing CSR efforts do not reach their full potential because:

• > they pit business against society, when clearly the two are interdependent.
• > they presume companies think of CSR in generic ways instead of ways most appropriate to each firms strategy.

Definition of CSV:
Policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates. Shared value creation focuses on identifying and expanding the connections between societal and economic progress.

Question 8

Which threefold distinction do Porter/Kramer propose to prioritize social issues? What do they mean by responsive and strategic CSR? What are inside-out and outside-in linkages?

Answer 8

Three distinctions of social issues:

1. Generic social issues
   - issues that are not significally affected by a company’s operations nor affect it’s long-term competitiveness.
2. Value Chain Social Impacts
   - Social issues that are significally affected by a company’s activities in the ordinary course of business.
3. Social Dimensions of Competitive Context
   - Social issues in the external environment that significantly affect the underlying drivers of a company’s competitiveness in the location where it operates.

Responsive CSR:

• Motivated by ouside pressures
• > good citizenship
• > mitigate harm from value chain activities

Strategic CSR:

• Motivated by economic benefit and social goals
• > Transform value chain to benefit society while reinforcing strategy.
• > strategic philantropy that leverages capabilities to improve salient areas of competitive context.

Inside-out Linkages:
Linkages between business activities and social issues that arise from the companies value chain. (Logistics->Transportation impacts, packaging,…)

Outside-in Linkages:
Linkages between the business activities and the external environment that impacts business (Factor input conditions -> need for high-quality workers, local demand conditions -> unusual local needs)

Question 9

Which three ways to create shared value do Porter/Kramer (2011) propose?

Answer 9

Three ways to create shared value:

1. Reconceiving products and markets
2. Redifining productivity in the value chain
3. Enabling local cluster development

Question 10

Why do Porter/Kramer citicize the fair trade movement?

Answer 10

Critique to fair trade:
Fair trade aims to increase the proportion of revenue that goes to poor farmers by paying them higher prices for the same crops.
->Redistribution instead of expanding the overall amount of value created.

Question 11

Which arguments do Crane et al. (2014) use to criticize Porter/Kramer CSV approach?

Answer 11

Crane et al. critique:

1. CSV is unoriginal
2. CSV ignores the tensions between social and economic goals
3. CSV is naive about the challenges of business compliance
4. CSV is based on a shallow conception of the corporations role in society

Question 12

Which outcomes of corporate behavior does Wood (1991) propose as indicators of Corporate Social Performance?

Answer 12

Indicators of CSP (Wood, 1991):

1. Social Policies
   - >explicit and pronounced social policies stating the company’s values, beliefs, and goals with regard to its social environment.
2. Social Programs:
   - >activities, measures, and instruments implemented to achieve social policies.
3. Social Impacts:
   - >concrete changes a corporation has achieved through the programs implemented.

Question 13

Why is it so hard to measure the value created by CSR activities?

Answer 13

It is hard to measure the value breated by CSR because the company can measure the output level (money invested, donations, trainings,…) but not accurately measure the real impact.
This is especially true if the impact does take a long time to have it’s effect.

Question 14

What are the specific problems of CSR Ratings like the Dow Jones Sustainability Index?

Answer 14

Problems of CSR Ratings:

• criteria used in the ratings differ substantially
• weighing of criteria differs.
• judgement of when a criterion is met is unclear.
• usually ratings are based on data that is easily available.
• Data is frequently unreliable (self-reported company data without external assurance).
• companies who have the most to hide are most likely not to respond to the surveys.