53 Reading: Demands for Corporate Social Responsibility
53 Reading: Demands for Corporate Social Responsibility
Stakeholder Pressure
Most of the pressure on businesses/corporations in the last twenty-five years has come from shareholders. More recently, however, a different source of pressure—the demand for corporate social responsibility (CSR)—has emerged, which is forcing directors into new governance territory occupied by stakeholders other than shareholders. While pressure on corporate executives to pay greater attention to stakeholder concerns and make CSR an integral part of corporate strategy has been mounting since the early 1990s, such pressure is only now beginning to filter through to the board of directors who are responsible for making decisions for the corporation.
The emergence of CSR as a more prominent item on a board’s agenda reflects a shift in popular opinion about the role of business in society and the convergence of environmental forces, such as the following:
Globalization
There are now more than 60,000 multinational corporations estimated to be in the world (World Investment Report, 2004). Perceptions about the growing reach and influence of global companies have drawn attention to the impact of business on society. This has led to heightened demands for corporations to take responsibility for the social, environmental, and economic effects of their actions. It has also spawned more aggressive demands for corporations to set their sights on limiting harm and actively seeking to improve social, economic, and environmental circumstances.
Loss of Trust
High-profile cases of corporate financial misdeeds (Enron, WorldCom, and others) and of social and environmental irresponsibility (e.g., Shell’s alleged complicity in political repression in Nigeria; Exxon’s oil spill in Prince William Sound in Alaska; Nike’s and other apparel makers’ links with “sweatshop” labor in developing countries; questions about Nestlé’s practices in marketing baby formula in the developing world) have contributed to a broad-based decline in trust in corporations and corporate leaders. The public’s growing reluctance to give corporations the benefit of the doubt has led to intensified scrutiny of corporate impact on society, the economy, and the environment, and a greater readiness to assume—rightly or wrongly—immoral corporate intent.
Civil Society Activism
The growing activity and sophistication of “civil society” organizations, many of which are oriented to social and environmental causes, have generated pressure on corporations to take CSR seriously. The International Chamber of Commerce, a global advocacy group for the private sector, observed in 2000 that “non-governmental organizations have gained an enormous influence” over corporate decision making, as quoted in Barrington.[1] Well-known international nongovernmental organizations (NGOs), such as Oxfam, Amnesty International, Greenpeace, the Rainforest Action Network, and the Fair Labor Association, have influenced corporate decision making in area