The Iron Law of Corporate Social Responsibility - Evolution and Debate

What CSR is

What we are experiencing now is the culture of innovation which is changing our minds and our social and economic paradigms. Companies are required to change their organization models and redefine their operative strategies.

CSR introduces (or should do so) a new ethical mechanism of doing management. But this is not only a company affair. This process, this new way of thinking involves all business stakeholders, even the customers with their purchasing choices (YES, we got the power!).

A CSR perspective recognizes the main role of human, social, environmental dimensions, which, in the end, becomes finally a priority in business affairs. The respect of rules, not only legal laws, but also the unwritten ones, as the trust relationship, become management indicators in dealing with business as a sort of self-regulation.

But let’s see how CSR has evolved

The concept of CSR was born in USA in the 1920’s when the labor unions, churches and the leaders of the moral majority began to apply democratic forms of pressure to which the manufacturers and businessmen were called on to provide proactive responses such as becoming aware of living conditions, safety in the workplace and then to develop an early form of corporate welfare.

Later on in the 1930’s there was a change in the way companies were seen by people. Managers were acting on behalf of the whole community wellbeing and companies were involved in social responsibility.

After the Great Depression the American businessmen became as “hero of innovation and success”. Companies became part of the system and they were no longer represented as an entity in their own right. They started to feel the need to seek recognition on both technical (such as performance standards) as well as in moral level.

In 1960’s the theorist Davis with his “Iron law of responsibility” combines the concept of power to that of social responsibility. According to Davis “SR of businessmen needs to be commensurate with their social power” The rejection of SR leads to an erosion of power. With Davis we see how economic affairs and SR blend together. We see the birth of CSR, therefore the company contributes to promote human values such as cooperation, motivation, honesty and self-development at work. In a certain way the author is calling for companies to fulfill human dignity and creativity.

McGuire developed the idea of “corporate citizenship”, which means that companies must act justly as a proper citizen should. Walton introduces the concept of “volunteerism”, i.e. a company should be voluntarily willing to act in a responsible way on behalf of the community regardless of the economic return.

What happens next

The debate intensifies and the first critics to CRS are born. Questions like that starts being asked: “Should companies conform to social requirement or should they be innovative?” “How much should a company be involved in social questions before it is considered a socially oriented company?” “How is it possible to measure and define the standards of a CSR?” Davis claimed simply that the SR starts where the law stops.

In 1970’s and 1980’s the CSR developed even more becoming part of the organizational processes and influencing the corporate decision making in doing business.

Finally the CSR develops a communication’s strategy, a kind of corporate accountability, CSR starts to have two goals. On the one hand it is considered a corporate defender improving the company image, while on the other hand it encourages positive behavior.

How CSR has changed our society

The economic behavior includes the social, cultural, ethical and environmental sphere. We start talking about “participative democracy”, a new way of liberal democracy in which society is seen as an aggregation of powerful groups who have the ability of putting pressure on the system. In that system everyone of us has the power to influence the system and for that reason it is important to be informed and to have the correct information. Whoever is involved in an economic activity has to take into consideration how their activity affects the environment through the exploitation of natural resources or pollution and how it is influencing society and culture (for example with the development of workers rights).

What governments are doing

CSR takes a central role also in European politics. They are involved in the development of a strategic plan defined by the Lisbon European Council whose goal it is to make Europe an economy based on knowledge. The European commission, in order to promote a new way of thinking of the question has also developed the guidelines to improve companies’ awareness. The commitment for a sustainable development becomes an opportunity even economically such as increasing the investments in technology and improving the sustainable economy. Also CSR is an opportunity for social progress. If a company presents itself as a competitive one from a social point of view whole the market has to adapt to these new standards according to the principals of market self-regulation.

How companies can improve their SR

They can act on two different levels, through a first environmental sustainability improving their supply chain procedures, reducing the environmental impacts, working on a sustainable production and reducing the waste. Also through a social development and improvement of working condition, such as improving the diversity management, valorizing gender equality, through smart working politics, stimulating the cooperation and the participation of the employees, improving the workplace climate (which means a lower rate of absenteeism), improving the motivation and doing talent attraction and talent retention.

What does it mean?

​It means that when You Company take the time to effectively measure the social impact of an hypothetic strategy, You will be more willing to manage considering the social ramification of your business model and then you will make smarter and effective investments.

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