Corporate social responsibility (CSR) in the changed landscape of contemporary business has the power to drive a firm’s competitiveness and increase its returns as well as long-term prospects. A company’s CSR exerts impact on the possibility of sustainable development that in turn can have influence on the company’s business prospects.
Sustainable development (SD) has been is evaluated against three interrelated dimensions – social, environmental, and economic (Stevens, 2005, p.1). It is defined by the Global Community Assessment Centre (GCAC) as “a sound balance among the interactions designed to create a healthy economic growth, preserve environmental quality, make wise use of our resources, and enhance social benefits.”
Although questions have been raised about the possibility of adequately measuring sustainable development without bias, researchers have nevertheless come up with a few models for its assessment (Sumner, 2004). The choice of sustainability development indicators varies from one nation to another. Canada and Norway, for instance, have adopted an approach under which SD is evaluated through “stocks and flows of various national assets: natural assets, financial capital, human capital, etc. (Stevens, 2005, p.2). In general, indicators of SD used by the OECD include environment quality, natural resource levels, output volume, amount of human capital, consumption, income distribution and others (Stevens, 2005, p.3). Attempts to integrate different indicators of sustainable development into a common framework have resulted in the appearance of various indices. One of them is the Gross Environmental Sustainable Development Index (GESDI) that combines variables related to ecological, medical, social and cultural factors that exert influence upon the life of the society (GCAC, n.d.).
As the measurement indicators for SD suggest, this concept appeared in order to promote the development of regions that will be sustainable over the long run in terms of preserving and enhancing the economic, social, and environmental potential of these areas. Too often unreasonable exploitative policies of major corporations and local business leave the region ecologically depleted and economically destitute after it was exploited to generate short-term profits. Governments have taken measures to prevent this from happening by crafting policies that will prevent exploitation and reduce negative externalities from corporate activities; however, because the impact of government policies remains limited, the responsibility for the promotion of sustainable development should gradually move to a greater extent to corporations.
The concept of CSR is increasingly linked to sustainable development as a way to promote the role of business in society. The notion of corporate social responsibility is closely linked to stakeholder concept – the idea that corporations exist in society in order to balance the interests of multiple stakeholders, including employees, customers, environmental groups, community, and others. This contrasts with the shareholder concept, or the idea that a corporation is predominantly involved in generation of profits for its shareholders. CSR and the involvement of a company in sustainable development initiatives often means “collaborating with both internal and external stakeholders to improve CSR performance” (Industry Canada, 2005). In general, CSR is a broad term that can be understood as “the way a company achieves a balance or integration of economic, environmental, and social imperatives while at the same time addressing shareholder and stakeholder expectations” (Industry Canada, 2005).
Issues related to CSR are important to all regions without exception. With this said, they seem to surface more often in areas where people experience problems with basic infrastructure, low income, and ecological devastation. In Latin America, for instance, the pressure has been high on multinational corporations to enhance their supply chains in industries such as oil production and mining. Companies that build their business on exporting from the region, be it a local venture or an MNE branch, “have promoted CSR as a risk management tool, decreasing the risks of a scandal in the end market owing to bad behaviour by themselves, their subsidiaries or their suppliers” (Schmidheiny, 2006). For example, a forestry company GrupoNueva was forced to obtain certification with the Forest Stewardship Council (FSC), despite technical difficulties, because its American customer, retail chain Home Depot, required proof that GrupoNueva maintained high standards of corporate social responsibility. Confronted with high poverty levels, low education and health care standards, Latin Americans and people in other developing regions of the world are sensitive to problems stemming from irresponsible behavior by corporations – yet the notion of CSR often comes from Northern customers of Latin American products rather than vice versa (Schmidheiny, 2006).
Corporate agents in all areas in which they operate have to assure that they maintain the current asset base (preserve the environment, current level of human capital etc), meet current needs (generate an adequate income for the population, support health care), and create a foundation for future development (Stevens, 2005, p.3). This foundation can be built through investment in human capital, construction of adequate infrastructure that will support future economic development, and restoration projects in the environment. The company can, for instance, sponsor a project of river cleanup or planting of new forests to repair harm that has been done to the environment through industrial and agricultural activities (Koch Industries, 2004).
CSR can be understood as the “contribution” businesses can make to the idea of sustainable development (Industry Canada, 2005). It is obvious the promotion of SD is impossible with the input of business alone, and even less from the input of only one corporation. However, the integration of efforts from government, community, and corporate actors requires that business does its share of homework to contribute to SD. This is where the concept of CSR comes in as a useful way to define the set of practices that businesses can use to improve the standing of social, economic, and environmental environment in which they operate. On the practical level, this involvement can mean different aspects of a firm’s behavior such as “health and safety, environmental protection, human rights, human resource management practices, corporate governance, community development” and others (Industry Canada, 2005).
Corporate Social Responsibility is therefore closely associated with SD and can be understood as the tool for the achievement of this laudable goal. It is only with the input from corporations and other agents that nations can hope to enter the path of development that will create healthy long-term prospects. Corporations, therefore, have to continuously work to identify the potential for contributions to make this goal more attainable.
References Global Community Assessment Centre (GCAC). (n.d.). Measurement of Sustainable Development. Retrieved May 9, 2006, from http://www.telusplanet.net/globalcommunity/measurementofsd.htm Industry Canada. (2005). Corporate Social Responsibility. Retrieved May 9, 2006, from http://strategis.ic.gc.ca/epic/internet/incsr-rse.nsf/en/Home Koch Industries. Press release. (2004, April 28). CSR Wire. Retrieved May 9, 2006, from http://www.csrwire.com/article.cgi/2685.html Schmidheiny, S. (Spring 2006). A View of Corporate Citizenship in Latin America. Journal of Corporate Citizenship 21. Retrieved May 9, 2006, from http://www.wbcsd.org/plugins/DocSearch/details.asp?type=DocDet&ObjectId=MTg1MDQ Stevens, C. (2005, September). Statistics Brief: Measuring Sustainable Development. Retrieved May 9, 2006, from OECD website at: http://www.oecd.org/dataoecd/60/41/35407580.pdf Sumner, A. (2004). Measuring sustainable development in the era of globalisation: can it be done and what way ahead? World Review of Science, Technology and Sustainable Development 1(2), 116 – 128.
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