Corporate citizenship: from social responsibility to social responsiveness

Citation

Ali, A.J. (2008), "Corporate citizenship: from social responsibility to social responsiveness", International Journal of Commerce and Management, Vol. 18 No. 1. https://doi.org/10.1108/ijcoma.2008.34818aaa.002

Corporate citizenship: from social responsibility to social responsiveness

Article Type: Editorial From: International Journal of Commerce and Management, Volume 18, Issue 1.

In an interview with McKinsey Quarterly (Tata, 2005), Ratan Tata, the Chairman of the Tata Group, asserted, “companies that are not good corporate citizens those that don't hold to standards and that allow the environment and the community to suffer are really criminals in today's world.” His statement, though provocative, addresses three interrelated issues: the nature of responsible corporate citizenship, socio-political obligations, and whether or not corporations should be held responsible for actions which have already met existing standards. These issues take on significant value in today's world as the presence of corporations, especially MNCs, in economic, social, and ecological spheres has directly touched and influenced the lives of every individual irrespective of location.

Tata's statement signifies that meeting existing legal and social constraints may not be enough to prevent future negative consequences and potential harm to society. In addition, the statement clearly conveys the message that corporations, in their business conduct and pursuit of profits, are more likely to engage in activities that either overlook existing constraints or, despite efforts to monitor conduct, are purely criminal. While the first case may be within general expectations and can be corrected over time, the second can lead to severe consequences. For example, the Wall Street Journal (2007) reported that Chiquita made illegal payments to a violent Colombian group. This has landed the company in legal jeopardy in the USA. This demonstrates that corporations, on some occasions, do not carefully consider the consequences of their actions and seldom factor in what might happen, as a result of a current action, in five or ten years time.

In a globalized world, the role of corporations as social actors has gained wide acceptance. In the meantime, complaints stemming from corporations' behavior abound, which may invite popular backlash. For years, practitioners and scholars have focused on social responsibility (SR) as a means of preventing or correcting corporate wrongdoings. But, the definition of SR in its classical conceptualization may not be adequate to cope with today's challenges or at least to calm civic organizations and activists who, in recent years, have effectively voiced their concerns over questionable corporate conduct and generated an ever-increasing list of grievances against corporations. In classical terms, a firm behaves in a socially responsible manner if it meets prevailing social norms and performance expectations of society. Recently, Campbell (2007) defined two conditions which must be met by a firm to be considered socially responsible: a firm must not knowingly do anything that could harm its stakeholders and it must rectify any harm done to society whenever it is discovered or brought to its attention.

Whether SR is viewed in its classical terms or according to Campbell's framework, firms are not inclined to map long-term consequences of their actions. In addition, SR is limited only to firms' conduct independent of what is taking place in the society. As such, a firm is considered socially responsible as long as its managers are not knowingly participating in harmful action and are willing to take corrective measures when things go wrong. Harmful events and abuses to the environment and society which are not of their making are not their concern and, by necessity, are not under the realm of SR. However, accumulated evidence in recent decades demonstrates that executives in their competitive business behavior and their never-ending search for opportunities and profits often ignore warning signals and thus overlook possibilities of wrongdoing. Remarkably, some executives (e.g. the case of Enron and other companies) show an unwillingness to learn from market and business mistakes, especially those committed by other corporations, and disregard the need to carefully review business engagements and rethink their practices. In these cases, corporate citizenship is obviously not nurtured.

According to the UN (1999), citizenship involves both rights and responsibilities. The term citizenship is traditionally used in association with individuals belonging to a nation-state. Its implications under the national legal system and in international relations revolve around entitlements and obligations. Individuals are entitled to security and legal protection and equal treatment. In the meantime, they are expected to engage in a wide range of social and economic activities without harming others. However, at the individual level, the term citizenship has never implied that citizens need behave similarly and have identical aspirations. Differences do exist and, as a result, there are those who abide by the law and those who engage in questionable activities.

Certainly, the same is true at the corporate level. There are corporations that are led by conscientiousness, executives who often make great efforts to avoid minefields. Others may behave recklessly. Nevertheless, corporations have a social contract with both the state and the society wherever they operate. They are entitled to compete in the marketplace without undue restrictions and intrusiveness. Simultaneously, corporations are not expected to endanger the welfare of current and future generations. In upholding social and economic ideals in their conduct, corporations will not only live up to the measure of citizenship but, in doing so, will more likely optimize their economic activities and strengthen their market position.

In some cases, the application of corporate citizenship, within the boundaries of SR and its framework of expectations, is often based on a shaky foundation. Over the years, accumulated evidence demonstrates that while corporations have widely and aggressively promoted SR, its application has been far from ideal and often fraught with frauds and contradictions. It is not known for certain whether these practices are nurtured because the concept is inherently deficient or because it is generally vague and therefore many CEOs seldom give it serious consideration. What is sure, however, is that the application of SR suffers from five main deficiencies. First, it is possible that executives simply pay lip service to it. Recently, it was reported in the New York Times that the Willbros Group agreed under the Foreign Corrupt Practices Act to pay the US Government $32 million as a fine for engaging in bribery in Nigeria and elsewhere including $1 million handed over in a suitcase. This practice was carried out despite the assertion of the company, in its corporate responsibility, to “not compromise our ethics to meet any goal or objective.” The same can be said for numerous organizations including BAE Systems, Aon, Halliburton, and Siemens AG. Second, the idea of SR is often used as a marketing tool to promote corporations and project them as responsible community actors. Wal-Mart has, for example, entered a partnership with an environmental non-profit group, Conservational International, to educate the world about Brazil's indigenous Kayapo Indians. However, as the Washington Post (2007) reported, Wal-Mart's relentless focus on “low prices has been blamed for the outsourcing of manufacturing jobs and deadly pollution in underdeveloped countries.”

Third, corporations may limit their conduct to literally observing their stated objectives of SR or viewing it primarily in terms of charitable contributions to environmental groups or immediate communities. However, charitable contributions or limited environmental concerns are not a guarantee that corporations meet the tenets of corporate citizenship. Four, SR does not focus on the future harm of current actions. Free of any responsibility of future negative consequences regarding business conduct, it is rare to find a company taking deliberate care in translating SR concepts into a total commitment to preserving its role and image in the society with the intent of preventing any possible harm to the environment and or community.

Finally, and most importantly, the learning process necessary for vital immersion of SR philosophy, under the application of SR, is lacking. For example, the UN (1999) reported that since most guidelines for SR are voluntary and lack precise wording, corporate executives tend to assign corporate legal departments to the task of representing business interests in discussions regarding how social contract concepts might be used to develop voluntary guidelines. These legal experts are interested in promoting minimalist norms. That is, there is not only an aversion to having reasonably articulated guidelines but also a lack of interest on the part of senior executives to engage in a learning process.

Under the framework of social responsiveness, executives should be more receptive and sensitive to what the public expects of them in terms of their corporation's social and economic roles and contributions. That is, under social responsiveness, firms should not only respond to current stakeholders' norms and expectations but also rethink the long-term consequences of their actions, be proactive in anticipating social changes and emerging legal pressures, and be attentive and receptive to ecological and human rights and concerns of citizens. This by no means implies that corporations have to actively advocate and lobby for change in government policies pertaining to these issues. Rather, it implies that firms and their executives seriously consider all the possibilities pertaining to their actions today and in the future. They should consciously use their capabilities to sensitize other actors to the fact that a marketplace free of deceptions and abuses optimally serves the interest of all who are involved, be they competitors, governments, suppliers, customers, employees, or general citizens.

That is, social responsiveness motivates executives to avoid compartmentalizing issues and marginalizing concerns. It induces executives not to differentiate between customers and employees but to treat them as citizens and to strategically position firms as responsible citizens serving the interest of the general public through a learning process guided simultaneously by the spirit and the framework of a creative free market economy. Furthermore, under social responsiveness the existence of divided commitment, as in the case of engaging in bribery, fraud, or polluting the environment while contributing generously to charitable organizations or worthy causes, would be minimized. Unlike SR, social responsiveness involves a realistic assessment of socio-political trends and priorities, the company's strategic role, and a careful anticipation of outcomes resulting from company's involvements. This provides a safety valve against abuses and continuously sensitizes executives to their social contract with the society. This implies that executives not only address emerging problems but also a number of possible scenarios.

A cornerstone of social responsiveness is that corporate citizenship is possible and is optimally served when a firm safeguards human dignity while pursuing economic and non-economic activities which benefits all stakeholders without impairing their business vision and future generations' ability to meet their needs. In recent years and in many countries, business fraud and deceptions and corporate scandals have multiplied. This not only manifests shortcomings of SR but also the failure of business executives to learn and take note of changing business conditions, the rise of social and legal activism, the danger of underestimating customers' reactions and changing priorities, and the dialectic relationship between the thriving of a business and serving customers' needs.

A survey conducted by McKinsey Quarterly (2007) of executives around the world found, among other things, that eight out of ten executives indicate that it is relevant to identify top business, social, and environmental trends. Only half, however, reported that their companies frequently do so. Likewise, the Conferences Board (November 9, 2007) surveyed 198 medium and large MNCs in the USA and reported that two-thirds said that corporate citizenship and sustainability issues are of growing importance to their business and that the greatest challenges currently facing citizenship programs were: measuring results (75 percent), coping with limited financial and staffing resources (58 percent), and aligning with business objectives (57 percent). When the same executives were asked to identify the top three activities as the focus of current citizenship and sustainability, they mentioned community and stakeholder involvement (64 percent), corporate giving to worthy causes (55 percent), and environmental sustainability/climate change (52 percent).

These results prove that today's executives have no clear understanding of corporate citizenship and of their obligation to SR. These executives cannot be expected to take seriously corporate citizenship programs without being involved themselves in a learning process pertaining to changing trends in society and the marketplace. This is possible only when the concept of corporate citizenship is broadened to incorporate the elements of social responsiveness. The latter would allow executives to develop critical thinking pertaining to societal and market priorities, closely familiarize themselves with business and social trends, and consciously take their economic and social roles seriously.

Abbas J. AliEditor-in-Chief