Corporate social responsibility (CSR) can be defined as a way for corporations to act more responsibly by having both social and financial objectives. However, despite attempts to offer a simple definition for CSR, key authors in this field have yet to give one universal definition for the term.
This is due to there being two differing schools of thought that disagree on the purpose of CSR. One school believes that businesses are only obligated to maximize profits within the boundaries of the law (Friedman, 1970 & Levitt, 1958). The other school argues that businesses have a much broader range of obligations (Carroll, 1979 & Andrews, 1973). Despite these conflicting arguments for CSR, Carroll’s (1979) definition has been widely adopted as it is seen to bridge the gap between these two schools of thought (Schwartz & Carroll, 2003).
CSR practices are prevalent in today’s business world, as noted by Crowe & Balch (2000), and can be observed in the marketplace, community, and environment. This indicates that organizations are not solely focused on economic and financial gain. However, according to Perrini et al (2006), some businesses may view CSR adoption as having positive financial and economic outcomes, although there appears to be no definitive correlation (although Jay Barney is conducting research on this). Since its inception, CSR has received its fair share of criticism, most notably from Milton Friedman (Mares, 2008), who argues that it is a waste of corporate resources.
Friedman’s critique of CSR is still relevant today, as it was in the 1970s. This is especially true as organizations prioritize profits over enforcing their CSR policies. One example of this can be seen in DHL’s actions. DHL has been accused of disregarding their CSR policies by intimidating employees who wish to exercise their right to freedom of association, violating health and safety regulations, and facing accusations of racial discrimination. These actions demonstrate a clear disregard for the corporate responsibility policies that are supposed to be underpinned by DHL’s ‘respect & results’ guiding principles.
Introduction
This report critically discusses the Corporate Social Responsibility strategies employed by a transport and logistics firm. The author has analyzed the CSR strategies of DHL due to its size, breadth, and industry presence within transport and logistics. The report comprises three chapters followed by a conclusion.
The first chapter includes an academic discussion of Corporate Social Responsibility (hereafter referred to as CSR), its definition/s, background, and core elements.
Chapter two will discuss some of the key critics of CSR, the reasons behind their criticisms, and whether or not CSR is necessary. In chapter three, a case study of DHL will be presented, highlighting its CSR strategies in terms of legal, ethical, social, and philanthropic responsibilities. The final chapter will critically analyze DHL’s CSR strategies by providing examples of corporate social irresponsibility demonstrated by the company and summarizing the report’s findings.
Chapter 1 – What is CSR and Why Is It Important?
1.1 CSR Definitions
Defining Corporate Social Responsibility (CSR) is not as easy as it might first appear (Garriga & Mele, 2004). It should be noted that there are many definitions of CSR; however, a thorough examination of these definitions reveals a divide among notable authors.
Schwartz & Carroll (2003) argue that CSR definitions fall into two general schools of thought. The first school argues that businesses are only obligated to maximize profits within the boundaries of the law and minimal ethical constraints. The second school suggests a broader range of obligations toward society.
School of Thought:
- Business obligated only to maximise profits, within boundaries of the law
- Notable authors: Friedman (1970) & Levitt (1958)
However, other scholars argue that businesses have a broader range of obligations on society. These include:
- Andrews (1973)
- Carroll (1979)
- Davis & Blomstrom (1975)
- Epstein (1987)
Schwartz & Carroll (2003) note that it was Archie Carroll’s work in 1979 that offered to bridge the gap between the two schools of thought, in terms of defining CSR. ‘The social responsibility of business encompasses the economic, legal and discretionary expectations that society has of organisations at a given point in time’ – Carroll (1979).
Various authors have adopted a holistic view of CSR, including Thorne, Ferrell & Ferrell (2008). They state that CSR involves a business adopting a strategic focus to fulfill the economic, legal, ethical and philanthropic responsibilities expected by its stakeholders.
Carroll (1999), a well-known CSR academic and considered the ‘founding father’ of CSR, believes that the concept was developed in the 1930s/40s. However, he also recognizes a founding father in 1953.
Carroll (1999) states that Harold Bowen’s seminal work, titled ‘Social Responsibilities of the Businessman,’ was the real spark that ignited a study into CSR. Bowen’s contributions were so substantial that Carroll believes he should be called the father of corporate social responsibility.”
When it comes to CSR within an organization, Crowe & Balch (2000) suggest addressing it in four key areas:
- The workplace (including suppliers’ workplaces) – such as labor rights, diversity, personal and skills development.
The ideals of CSR suggest that businesses should not only focus on their bottom line, but also have a social and ethical agenda. However, research has shown that there may be a clear disparity between the ideals of CSR and why organizations may actually adopt it. One common theme throughout CSR literature is that firms adopt CSR policies because they are seen to positively influence a company’s financial and economic performance (Perrini et al., 2006).
- The Marketplace – disclosure, responsible marketing practices
- The Community – partnerships, volunteering
- The Environment – energy, waste
This belief is shared among many authors. Falck and Hebich (2007) are also of this opinion, stating that an organization’s adoption of CSR has a long-term positive impact. If a company’s aim is to survive and prosper, the best way is to take a long-term view and understand that if it treats society well, society will return the favor,” they say. Similarly, Bhattacharya and Sen (2004) believe that “not only is doing good the right thing to do, but it also leads to doing better.”
Despite the views of those writers, there is no evidence proving a link between a firm’s doing good” (i.e. its profitability) and its adoption of CSR. There has also been no negative correlation found, although Jay Barney is currently investigating this link. According to Watts & Holme (1999), a general theme throughout CSR strategy is for a firm to “behave ethically and contribute to economic development while also improving the quality of life for its employees (and their families), the local community, and society at large.”
Chapter 2 – Critiques of CSR
The increased awareness and drive towards businesses adopting and promoting corporate social responsibility has raised various criticisms. What is most astounding with today’s critics is that their voice still rehearses the same insights of the influential economist Milton Friedman, over 40 years ago. It can be argued that the 1970s newspaper article by Friedman has faced just as much mention as the founding father of CSR, Harold Bowens.
Friedman’s main argument was that Corporate Social Responsibility (CSR) is a misuse of corporate resources. He believed that businesses are owned by their shareholders, and investing money in projects beyond the core business that do not add to the bottom line can be seen as stealing money from its rightful owners (Mares, 2008). However, some argue that Friedman’s article was a short and offhand piece using rhetoric commonly found in newspaper articles. It did not aim to stir an intense level of analysis and criticism as it has done. The doctrine of social responsibility… is fundamentally subversive…
According to Friedman (1970), the only social responsibility of a business is to use its resources and engage in activities that increase its profits, as long as it operates in an open and free market without deception or fraud. Another influential critique of CSR was presented by David Henderson, who describes CSR as a misguided virtue,” involving businesses voluntarily adopting broader objectives, more complex procedures, and more exacting standards.
To this extent, CSR would tend to impair enterprise performance, affecting both costs and revenues in the short and long run. The system effects of CSR, as well as its enterprise effects, could make people worse off in general. CSR forms one element of new millennium collectivism. Its adoption could reduce competition and economic freedom while undermining the market economy. The commitment to it marks an aberration on the part of the business concerned, and its growing hold on public opinion is a matter for concern. – Henderson (2001)
It is evident that Henderson and Friedman hold differing views on CSR. Henderson, an economist, sees CSR as an outside interference with efficient resource allocation and accuses it of being an anti-capitalist ideology, referring to it as a salvationist illusion” (Henderson, 2001). However, LSE (2012) refutes Henderson’s report by stating that his definition of CSR is incorrect. Henderson claims there is no generally accepted and precisely defined notion of sustainable development; however, the Brundtland Report regards the notion of sustainable development as crucial.
According to Brundtland (1987), CSR is definitive and should be quoted with the same kind of respect that Islamic scholars quote the Koran. However, critics have different views on CSR, which is natural in critical thinking since different people have different perspectives. As the popularity of CSR grows in the business environment, criticisms will continue to exist.
Chapter 3 – DHL Case Study
3.1 CSR According to DHL
DHL’s corporate social responsibility initiatives fall under the label living responsibly.” They apply their core competencies, people know-how, and global presence to make a positive contribution to society and the environment while balancing economic and social responsibility targets. DHL focuses on environmental protection (GoGreen), disaster management (GoHelp), championing education (GoTeach), supporting employee volunteer work through Global Volunteer Day, and the Living Responsibility Fund. (DHL CR Report, 2011)
2. Critical discussion of DHL’s approach to CSR
DHL’s Chairman and CEO has commented that the future belongs to companies that embrace Corporate Social Responsibility as an integral part of their business model (DHL CR Report, 2011). An organization’s CSR strategies underpin social, ethical, and philanthropic responsibilities. However, in this report, I aim to critique some of the legal aspects of DHL’s approach to CSR in more detail. The reason being is that during my research on CSR, I have come across detailed critiques with evidence pointing out DHL’s corporate irresponsibility.
At this stage, I would like to briefly mention some of DHL’s CSR policies that it is doing well at, as well as some critiques.
- Legal Responsibilities
- Go Green – Environmentally friendly initiatives that promote more environmentally friendly technology, climate protection initiatives and driving dialogue on environmental issues.
Critique – How measurable are the results for the Go Green initiatives? And is DHL promoting the need to be environmentally friendly so it can then pass on higher fees for services despite saving money from the same initiatives?
Philanthropic Responsibilities
- Go Teach – Engage in education worldwide by supporting equal opportunities in education globally.
- Critique – Implement programs, usually in developing countries, where people may feel that large multi-national organizations are ‘breeding their next set of employees’.
- Go Help – Use DHL’s logistics know-how for good by helping people in need during disasters or famine. DHL employees voluntarily offer to help in the worst affected areas.
Why doesn’t DHL dedicate their services to areas affected by famine and drought, which receive less media coverage, instead of just focusing on disaster zones for the sake of marketing?
Organizations have legal responsibilities that require employers and employees to comply with laws related to finance, environment, and labor. Noncompliance can result in charges for unfair competition, criminal sanctions, and reputational damage. However, there is a paradox at play: should organizations adopt voluntary legal initiatives or simply follow statutory/legal obligations?
DHL has implemented legal CSR strategies that are reflected in its ‘respect & results’ principles. These principles are based on our Guiding Principle of “Respect and Results,” which aims to achieve positive economic outcomes while maintaining respectful relationships with employees, customers, investors, the public, political decision-makers, and labor unions. Our Code of Conduct serves as our “ethical compass” and mandates ethical and responsible behavior for all employees across the globe. (CR Report, 2010)
The statement by DHL lists numerous stakeholders within the organization that it aims to respect” in order to gain “results.” However, the specific results they are referring to have been omitted from their statement and may only be seen as profit-oriented. Obeying the law does have positive indirect financial consequences for the firm, such as fewer fines, court fees, and wasted time. However, direct financial gains from obeying the law are less certain. Therefore, it is possible that firms simply follow the law because they need to.
DHL abides by its code of conduct, which is based on the principles of the Universal Declaration of Human Rights, the United Nations Global Compact, and the conventions issued by the International Labour Organization (DHL CR report, 2011).
The Universal Declaration of Human Rights promotes an individual’s right to just and favourable remuneration,” “to just and favourable conditions of work,” and “to form and to join trade unions” (UDHR, 2012). However, DHL’s actions contradict these principles despite claiming that their codes of conduct are based on the Universal Declaration.
A recent report by the UNI Global Union (UNI) and the International Transport Workers’ Federation (ITF) reveals that the organization contradicts its own corporate responsibilities ([email protected], 2012). These contradictory actions include disrespecting employees’ right to freedom of association through intimidation and other means. The UN Global Compact, which DHL claims to abide by, calls on employers to respect this right.
However, in some countries, employees’ rights have been denied because they wanted to form or join a union. Not only have they been denied, but some have also been sacked (see the example of Turkey), harassed (in Guatemala, South Africa, and India), and bullied (in Colombia). If DHL’s operations in these countries contravene its own policies on respecting employees’ freedom of association, then it must reassess why there is such disparity between its seemingly heavily unionized employee workforce in Europe and the less or nonexistent union presence in these other nations.
If DHL does not make necessary adjustments in these countries, it could face employee dissatisfaction, leading to protests, poor productivity, and further media pressures. DP-DHL, particularly Exel, heavily relies on subcontractors and labor brokers to provide agency workers throughout its global operations. This means that these employees lack employment security and are more vulnerable to threats of firing or other retaliation when they complain or organize with their co-workers.
The sole reason for this is the financial gain, as agency staff receive low pay without benefits and may lack health and safety protections of permanent employees. Evidence suggests that in non-European countries, DHL does not conform to their image of high employment standards and self-proclaimed status as an employer of choice. DHL avoids responsibility for labor, health, and safety violations. Its subsidiary Exel has been accused of exploiting vulnerable foreign exchange students to keep costs down at a Pennsylvania distribution center.
According to NGA (2012), international university students who participated in the summer exchange program in Pennsylvania were accused of being required to stand for long periods without breaks and lift heavy loads without protective equipment. These accusations led to hundreds of student guest workers going on strike at the plant in 2011, trying to expose some of the brutal conditions, sub-minimum wage pay, threats, and retaliation by supervisors and labor recruiters.
This led to an investigation by the US Department of Labor’s Occupational Safety and Health Administration (OSHA), which fined Exel for nine workplace violations, six of which were deemed intentional acts. According to OSHA, these violations carried penalties totaling $283,000. The reasons behind these workplace health and safety violations may have been motivated by extra financial gain; however, the risks of injury as well as the reputational damage Exel’s actions could cause DHL are vast. This is especially concerning given that DHL’s corporate responsibility values prioritize risk minimization and safety maximization.
Racial discrimination is a serious issue that DHL takes seriously. Their Corporate Responsibility policies aim to promote diversity in their workforce, which is firmly rooted in their corporate culture. However, DHL Express faced a lawsuit filed by its African American employees because they claimed that black drivers were assigned to predominantly black neighborhoods and white drivers to predominantly white neighborhoods (EEOC, 2011). This example suggests that there was a clear strategy not to promote DHL’s diverse workforce but rather to segregate them based on delivery locations.
Further to this, a Hispanic employee was fired in 2011 after reporting racial mistreatment to management. According to the EEOC’s 2011 report, union officials who asked questions about the mistreatment were also fired. This example illustrates DHL’s complete disregard for federal laws and fairness, which are promoted throughout its corporate responsibility report.
Conclusion
Recently, DHL has faced various accusations and has been found guilty of acts that show a complete disregard for their corporate responsibilities, both legal and ethical. However, it is important to strike a balance as some argue that DHL’s Ethical, Social and Philanthropic initiatives far outweigh the examples of corporate irresponsibility displayed in chapter 3. Nevertheless, bad news sells,” and further instances of corporate irresponsibility by DHL or its subsidiaries could risk overshadowing the positive impacts it has on society.
This scenario has the potential to contradict our ‘Respect and Results’ guiding principles on corporate responsibility, resulting in negative economic outcomes, employee dissatisfaction, customer dissatisfaction, investor dissatisfaction and public dissatisfaction. We remain committed to our Guiding Principle of “Respect and Results” which aims to achieve positive economic results while maintaining respectful relationships with employees, customers, investors, the public, political decision-makers and labor unions.
Our Code of Conduct serves as our ethical compass, outlining mandatory principles for ethical and responsible behavior among our employees worldwide. Corporate Social Responsibility (CSR) is a vital aspect of modern business processes and will remain so for the foreseeable future. The world’s response to CSR during these early stages of the 21st century will play a significant role in shaping its fate for generations to come (Horrigan, 2010).
References:
- Bhattacharya, C. B. and Sen, S. (2004). Doing Better at Doing Good: When, Why, and How Consumers Respond to Corporate Social Initiatives.” California Management Review, 47, pp. 9–24.
- Watts, P. and Holme, R. (1999). “Meeting Changing Expectations.” Corporate Social Responsibility. Geneva: WBCSD. Available from URL: http://www.wbcsd.org [accessed 22 November 2012].
- Falck, O., and S. Heblich (2007). “Corporate Social Responsibility: Doing Well by Doing Good.” Business Horizons 50(3):247–254.
4. Carroll, A.B. (1999). Corporate Social Responsibility: Evolution of a Definitional Construct. Business & Society, 38(3), 268-295.
5. Franklin, D. (2008). The CSR report. The Economist, October 2008 edition.
6. Horrigan, B. (2010). Corporate Social Responsibility in the 21st century: Debates, models and practices across Government, Law and Business. Cheltenham: Edward Elgar Publishing Ltd.
7. Garriga, E., & Mele, D. (2004). Corporate Social Responsibility Theories: Mapping the Territory. Journal of Business Ethics, 53(1-2), 51-71.
8. Crowe, R. & Bach, O. (2000). Corporate Social Responsibility: A Management Report. Croner. [Online] Available at: http://www.croner.co.uk/Croner/Docushop/CSRexecsum.pdf [Accessed 25th November 2012].
9. Perrini, F., Pogutz, S., & Tencati, A. (2006). Developing Corporate Social Responsibility: A European Perspective. Cheltenham: Edward Elgar Publishing Ltd.
10. Carroll, A.B. (1979). A Three Dimensional Conceptual Model of Corporate Performance. Academy of Management Review 4(4): 497-505.
11. Schwartz, M., & Carroll A.
B (2003) Corporate Social Responsibility – A Three Domain Approach, Business Ethics Quarterly, Vol. 13, Issue 4.
12. UDHR (2012) Article 23 of the Declaration of Human Rights, The United Nations, sect. 1, 3 & 4 [Online]. Available at: http://www.un.org/en/documents/udhr/ [Accessed 22 November 2012].
13. NGA (2011) OSHA Citations Against Hershey’s Subcontractors Exel and SHS, The National Guestworker Alliance [Online]. Available at: http://www.guestworkeralliance.org/2012/02/osha-citations-against-hersheys-subcontractors-exel-and-shs/ [Accessed 30th November 2012].
