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Multinational enterprises & Corporately Social Responsibility
There are several major issues surrounding the topic of corporate social responsibility, if the concept corporate social responsibility is to require the companies to pay attention to the interest of the various stakeholders. For example, how are firms supposed to identify their key stakeholders among their competing interests? How are firms supposed to prioritize their key stakeholders? And are the stakeholders willing to and how willing they are to enter into debate and impose their point of views on the companies? And also how firms could integrate the view of corporate social responsibility into the practical business practices? (Werther & Chandler 2011, p. 22)
One major debate is that many believe that the performance exhibited by the companies has relationship with the degree of economic development which means that MNCs in the developed countries will do a better job in term of shouldering the social responsibility than those in the emerging economies. But there are also different findings. According to a study done by Jeremy Baskin, after examining the financial reports of 127 industrial leading companies from 21 emerging markets, Baskin managed to come to conclusion that there was no major differences compared MNCs from the high income OECD countries (Hopkins 2007, p. 171).
1.3 Key concepts
1.3.1 Corporate social responsibility
The concept, corporate social responsibility, could be described as both socio-economic and socio-human responsibilities to the stakeholders; it means that management should consider the social effects as well as economic effects in the decision makings (Krishna 1992, p. 66).
1.3.2 Stakeholder theories
A stakeholder refers to a party that has a stake in the company. The stakeholder theory proposes that company exists at the nexus of a series of interdependent relationships with groups that can affect or are affected by the firm (Andriof, Waddock & Husted 2003, p. 40).
1.3.3 Social investment
Social investment could be defined as practice of aligning investment policies with the organization’s mission. This concept contains both making the programme-related investment as well as the refraining from investing in those providing products contradicting with the company’s value and beliefs (Anheier & List 2005, p. 238).
1.3.4 Core competence
Core competence of a company refers to those capabilities that represent the collective learning of the company and provide it with real competitive advantage compared to other competitors (Feher 2006).
1.3.5 CSR report
CSR reports typically address issues impacting operations such as management and ethics, employee employment, equity in the work place, purchasing and selection problems, supply chain management and monitoring, and pollution reduction and environmental influence (asyousow.org 2009).
1.3.6 Non-governmental organization (NGO)
A non-governmental organization (NGO) could be described as a legally acknowledged entity founded by natural or legal persons which runs without interference from any political influences (Zheng 2011).
2. Examine the key trends in CSR related concepts & issues
2.1 Social investment
The view of social investment refers to the development of the classical philanthropy from a top-down method to a socially responsive method by reflecting the demand of the society. In another word, companies that hold the view of social investment consider their Corporate Social Responsibility events as a kind of social investment in exchange of a social return (Contreras 2004, p. 161). BP, which is currently the largest in term of business scale as well an leading firm in the world in the oil and gas industry, it offer a large number of customers with products and services such as fuel for vehicles, energy for heating purpose, retail services as well as oil related by-products (bp.com 2012), is one of the best performers among the multinational corporations in the world. For example, BP through the recent years effort has been focusing on the a number of social investment programs in Algeria: Water Desalination Project at In Salah, Solar Power Project, Illizi Home and English Language Training, Solar Energy Project at Iherir and Community Resource Centre at In Salah (please refer to the appendix for the details of these social investment programs) and so on (bp.com 2012). From these projects in the social investment, we can see that one feature these projects have in common is that they are all investments that will enhance the economy of the target market and create demand for the products provided by the company, BP, in another word, the investments tend to boost the social demand for the specific products.
2.2 Corporate social responsibility as salvaging strategy
Corporate social responsibility (CSR) activities are often used as a salvaging strategy to save the damaged image among the stakeholders such as the investors, employees and the customers as well as the local community (alagse.com 2009). In many companies, they are forced to adopt the CSR approaches to react to the unexpected damage of images or reputations caused by some accidental events. One of the classical events belongs to Shell, which is another international corporate that operates in the oil and gas industry and it offers products and service that also are welcome by business and individual customers in term of heating and transportation as well as other purposes. After the oil leakage, it is reported that company together with other oil companies had contribution to the oil pollution of about a 1,000 sq km area in Ogoniland which is in the Niger delta, and there had been severe consequences for the local people as well as the animals (guardian.co.uk 2011). The following CSR activities in Niger delta have been done with the aim to restore the company’s image as a good global and industrial citizenship. This is a reactive strategy and it turned out to be effective.
3. Global responses to CSR issues
3.1 Global governance approaches
3.1.1 Intergovernmental cooperation- treaties and agreements
Intergovernmental cooperation is an important form to tackle many global issues such as the climate changes and poverty. For example, in year 2005 the G8 nations together with the People’s Republic of China, Brazil, and India, which are the three the largest emitters of greenhouse gases in the raising economies, had come to a consensus regarding the global reaction to the climate change (royalsociety.org 2005), this agreement remarks the common understanding that all the participants of the agreements should adopt proactive steps which are cost effective to contribute to the decrease of the green house gas generation. This agreement is one of the many agreements and treaties agreed by many governments as the inter-government cooperation to contribute to the resolution of many global environment and social issues because of the sufficient resource and overwhelming political, regulatory and military power to implement the proposals designed to resolve the various issues.
3.1.2 Non-governmental organizations
As mentioned above a non-governmental organization (NGO) could be described as a legally acknowledged entity founded by natural or legal persons who runs without interference from any political influences (Zheng 2011). NGOs are usually considered as champions in helping to resolve some global or regional environmental or social issues and there are countless cases providing such confirmation of the important role of the NGOs. There is no doubt about the great effect of the NGOs in the contribution to the resolution of the global issues, but we do have some wrong assumption about NGOs. For example, even though we usually think that NGOs are entities like charities and even they are operating in a non-profit status, the fact is that there are also many NGOs that are for-profit companies in term of cooperatives or groups that do the lobbying to represent the profit-driven interests. Now the problem arises that we have talked about above: how are firms supposed to prioritize their key stakeholders and how they resolve the conflicting interests? We will leave this problem unsolved and will attend to it in the last part of this study.
3.2 Corporate responses
3.2.1 CSR as source of core competiveness
As introduced above, core competence of a company refers to those capabilities that represent the collective learning of the company and provide it with real competitive advantage compared to other competitors (Feher 2006), now there is an increasingly popular view suggesting that CSR could be an important source of core competiveness. One of the most successful companies adopting this strategy is Wal-Mart, one of the largest retailers in the world. The company has adopted a strategy called “sustainability” in term of three major targets as demonstrated in the following:
l To be powered 100 per cent through the renewable energy;
l To create 0 per cent waste;
l To promote the products that protect people as well as the environment (walmartstores.com 2011)
By adopting and implementing this “sustainability” strategy, the company has successfully positioned itself as being an efficient, profitable as well as environmentally friendly super market and makes itself attractive not only because of the “daily low price” strategy but also because of its good performance in protecting the natural and social environment. Therefore, the company has created a major source of core competiveness through the adoption of the CSR activities which is famous in the retail industry.
3.2.2 Publication of CSR report
Now no matter faced by the social pressure or based on the companies’ strategies, many companies would issue their CSR report to make the stakeholders updated about the companies’ CSR activities. Take IBM’s CSR report as an example, the major components include: Environment,Supply chain management,Employee well-being and diversity and Governmental programs and so on (ibm.com 2011). There are two major targets in publicizing the CSR report: on one hand, the company can communicate the CSR fruits created by the company the past one year and take the chance to promote the company’s image as the CSR best performer; on the other hand, a CSR report also could act as a monitoring tool to evaluate the company’s CSR achievement and fulfillment compared to its set goals.
4. Evaluation and critical thinking
Based on our analysis, there are two major kinds of motivators for the CSR activates: proactive strategy to increase the company’s image as a CSR leader or reactive strategy to use CSR events to make up the damaged reputations. Below we talk about some key problem in implementing the CSR principle in the business entities.
Here let’s go back to the problem that we have talked about above: how are firms supposed to prioritize their key stakeholders, especially when there are conflicts of interest? In the normal for-profit organizations, we usually prioritize the stakeholder according to two major dimensions: power of the stakeholders and interest of the stakeholders, for example, we will only keep the low power but high interest stakeholders only informed about the relative issues rather than making some changes because of the high interest of the said stakeholders. It is obviously it is not advisable or possible that companies could still adhere to this principle while at the same time keep the relevant stakeholders stratified, but my recommendation is that companies, especially the for-profit companies should adopt the “cost-effective” rule in implementing the CSR practices. This will have two major implications: first of all, companies should be encouraged to follow the best CSR practices in the industry such as adopting the CSR report publication and reducing the unnecessary waste; and on the other hand, the company also needs to take into account of the cost involved because the company needs to ensure the profitability of the business.
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Andriof, J., Waddock, S. & Husted, B. 2003, Unfolding Stakeholder Thinking 2: Relationships, Communication, Reporting and performance. Sheffield: Greenleaf Publishing Limited. p. 40
Anheier, H. K. & List, R. 2005, A dictionary of civil society, philanthropy and the non-profit sector. London: Routledge. p. 238
asyousow.org 2009. Corporate Social Responsibility. accessed on 30 Mar 2012. [online] available: http://www.asyousow.org/csr/
Ba, A. D. & Hoffmann, M. J. 2005, Contending perspectives on global governance: coherence, contestation and world order. New York: Routledge. p. 40
bp.com 2012. Trends and Innovations in Corporate Social Responsibility. accessed on 30 Mar 2012. [online] available: http://www.bp.com/genericarticle.do?categoryId=98&contentId=2018495
Bp.com 2012. BP at a glance. accessed on 30 Mar 2012. [online] available: http://www.bp.com/sectiongenericarticle.do?categoryId=3&contentId=2006926
Contreras, M. E. 2004, Corporate social responsibility in the promotion of social development: Experience from Asia and Latin America. Washington, DC: Free Hand Press. p. 161
Feher, P. 2006. Proceedings of the 7th European Conference on Knowledge Management. London: Academic Conference
guardian.co.uk 2011. Niger delta oil spills clean-up will take 30 years, says UN. accessed on 30 Mar 2012. [online] available: http://www.guardian.co.uk/environment/2011/aug/04/niger-delta-oil-spill-clean-up-un
Hopkins, M. 2007, Corporate social responsibility and international development: is business the solution? London: Bath Press. p. 171
ibm.com 2011. About IMB. accessed on 30 Mar 2012. [online] available: http://www.ibm.com/ibm/responsibility/
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Zheng, M. 2011. On Equal Terms: Redefining China’s Relationship with America and the West. Danver, MA: John Wiley & Sons, Inc.
6. Appendix 1.0 Details of the BP’s social investment programs in in Algeria
Water Desalination Project at In Salah: The first is our clean water project in the city of In Salah, near the major joint gas development project of In Salah. Over the past few years, we installed four water treatment stations that provide, for the very first time, potable water to the 35,000 residents of In Salah. At the same time, we created a micro-enterprise – “Saharan Water Company – to run and manage the project, providing jobs and invaluable skills for local residents. The company sells the water at a nominal cost, using the revenue to pay wages, rent of the buildings, maintenance, and access to city water
Solar Energy Electrification Project at Hassi Ghanem: The second is a solar energy project in the agricultural village of Hassi Ghanem, near one of the operational hubs of our In Salah project. We supplied and installed solar panels for the town that provided electricity, for the first time, to entire village. At the same time, we trained the local residents in maintenance and care for the panels. Today, the residents of Hassi Ghanem not only have electricity but also the local authorities established teams that clean, maintain, and ensure the proper functioning of the solar energy system
Clean Water at Hassi Ghanem: The third was just inaugurated three weeks ago. It is a clean water project for the village of Hassi Ghanem. It features the installation of a 3.5 kilometre water pipeline from the source of the town’s water source and the construction of seven water distribution stations around the town. For the first time, the town not only has its own source of electricity but also its own source of clean water
Illizi Home: The fourth, and perhaps the most innovative and clearly unique, is Illizi Home. This project entails the production and marketing of Algerian products that are specifically designed and targeted for the UK consumer market. In particular, with the assistance of design teams, the scores of Algerian artisans – most of whom live in the desert south – craft and build products and then shipped to several high-end UK shops. Moreover, Illizi Home also features an e-business marketing channel through which you can purchase these products on-line. Products include furniture, carpets, baskets, ceramics, etc. I encourage you to visit the web site at Illizi.uk.com
English Language Training: Lastly, and equally importantly, we are establishing English language resource centres in several Saharan desert communities. In collaboration with King’s College in London, we have trained 250 English language instructors from several Algerian communities and also acquired requisite instructional materials. As part of a collaborative effort, local communities have provided the infrastructure and other centres resources
Solar Energy Project at Iherir: Partnering with the Wali of Illizi and the local community near our In Amenas gas project, BP will soon begin an ambitious tri-lateral solar energy project for the 3000 residents of town of Iherir. The project will provide electricity for homes, offices, shops, community centres, and even street lights. For the very first time, the town will have its own source of electricity, and is one of the region’s most important development priorities
Community Resource Centre at In Salah: As an extension of our clean water project, we have partnered with the Mayor and local residents in the city of In Salah to establish and kit-out a community resource centre in In Salah. The centre will feature a cyber café, library, business resource centre, and community centre. The Mayor will provide the facility and maintenance; BP will provide the resources and train a local group to provide on-site training and assistance, and centre our English language training there as well.