Executive Summary Corporate social responsibility may be defined simply as a way in which corporations act more responsibly having both social and financial objectives. Despite my attempts to offer a simple definition for CSR, key authors in this field are yet to give one universal definition for the term.
This is due to their being two differing schools of thought, which disagree as to the purpose of CSR, be it that businesses are only obligated to maximise profits within the boundaries of the law (Friedman, 1970 & Levitt 1958) Or that business have a much broader range of obligations (Carrolls, 1979 & Andrews 1973). Despite these conflicting arguments for CSR, Carroll’s (1979) definition has been used as he is seen to bridge the gap between these two schools of thought (Schwartz & Carroll, 2003).
CSR practices in today’s business world, according to Crowe & Balch (2000) can be seen in the marketplace, Community and the environment, showing that organisations do not focus primarily on economic and financial gain. However, Perrini et al (2006) states, CSR adoption may be seen by some businesses to have positive financial and economic outcomes, though there seems to be no firm correlation (although research is being conducted regarding this by Jay Barney). CSR has had its fair share of criticisms, since the early days, most notably by Milton Friedman (Mares, 2008) who argues that CSR is a waste of corporate resources.
Friedman’s critique of CSR is still used today as it was in 1970’s, especially as organizations do not enforce their CSR policies, as much as they do in their pursuit for more profits. Examples of businesses disregarding their CSR policies can be seen by a DHL example. DHL’s ddisrespect for employees’ right to freedom of association through Intimidation and other actions, as well as health and safety violations and accusations of racial discrimination all go to show a disregard for their corporate responsibility policies underpinned by its ‘respect & results’ guiding principles.
————————————————- Introduction The core element of this report includes a critical discussion of the Corporate Social Responsibility strategies employed by a transport & logistics firm. The author undertook analysis of the CSR strategies of DHL, owing to the organisations size, breadth and industry presence within transport & logistics. The report will be detailed in three chapters, followed by a conclusion. The first chapter will consist of an academic discussion of Corporate Social Responsibility (here forth referred to as CSR), its definition/s, background and its core elements.
Following this, chapter two will mention some of the key critics of CSR, the reasons behind their criticisms, as well as discussing whether or not CSR is actually needed. Finally, chapter three is based on a case study of DHL, introducing its CSR strategies (in terms of their Legal, ethical, social and philanthropic responsibilities). To summarise the final chapter, the author will critically discuss the organisations CSR strategies, using examples of corporate social irresponsibility demonstrated by DHL, and summarise the report’s findings. ————————————————-
Chapter 1 – What is CSR & why is it important? 1. 1 CSR definitions Defining CSR is not as easy as it might at first appear (Garriga & Mele, 2004). It should be noted that CSR definitions are very many; however a thorough look into CSR definitions illustrates a divide by notable authors. Schwartz & Carroll (2003) argue that CSR definitions fall into two general schools of thought, those that argue that business is obligated only to maximise profits within the boundaries of the law and minimal ethical constraints, and those that have suggested a broader range of obligations toward society.
School of Thought| Notable authors | Business obligated only to maximise profits, within boundaries of the law| Friedman (1970) & Levitt (1958)| Businesses have a broader range of obligations on society| Andrews (1973), Carroll (1979), Davis & Blomstrom (1975), Epstein (1987)| Schwartz & Carroll (2003) not 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 since adopted a similarly holistic view of CSR, including Thorne, Ferrell & Ferrell (2008) whom state that CSR is “the adoption by a business of a strategic focus for fulfilling the economic legal, ethical and philanthropic responsibilities expected of it by its stakeholders”. 1. 2 CSR’s ‘founding father’ Carroll (1999) a well renown CSR academic, believes the CSR construct to have been developed in the 1930’s/40s, though he believes there to be a founding father in 1953.
According to Carroll (1999), the real spark that ignited a study into CSR was Harold Bowen, through his seminal work, entitled ‘Social responsibilities of the businessman’. Harold Bowens contributions were so substantial that Carroll believes he should be called “the father of corporate social responsibility”. 1. 3 CSR within an organisation According to Crowe & Balch (2000) CSR is typically addressed in the context of four key areas: * The Workplace (including suppliers’ workplaces) – eg labour rights, diversity, personal and skills development
* The Marketplace – disclosure, responsible marketing practices * The Community – partnerships, volunteering * The environment – energy, waste. The ideals of CSR suggest that businesses should not only focus on their bottom line, but also have a social and ethical agenda. However, from the research conducted there may be a clear disparity between the ideals of CSR and why organisations may actually have it. One disparity being, a common theme throughout CSR literature being that, firms are adopting CSR policies as they are seen to positively influence a company’s financial and economic performance (Perrini et al, 2006).
This belief is shared amongst many authors. Falck and Hebich (2007) are also of this opinion, stating that an organisations CSR adoption 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 favour’. 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 has been no evidence proving there to be a link between a firm’s ‘doing good’ (i. e. its profitability) and its CSR adoption, neither has there been a negative correlation either (although Jay Barney, is currently looking into 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 of its employees (and their families), the local community, and society at large’.
————————————————- Chapter 2 – Critiques of CSR 2. 1 Critics of CSR The increased awareness and drive towards businesses towards 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 1970’s newspaper article by Friedman has faced just as much mention as the founding father of CSR Harold Bowens.
Friedman’s main argument was that CSR is a misuse of corporate resources; since businesses are owned by their shareholders, money invested on projects beyond the core business that do not add to the bottom line can be seen as money stolen from its rightful owners (Mares, 2008). However, some feel that Friedman’s article was a short, offhand article, using rhetoric quite natural in a newspaper article, which did not aim to stir an intense level of analysis and criticism as it has done. ‘The doctrine of social responsibility… is fundamentally subversive……
there is one and only one social responsibility of business- to use its resources and engage in activities designed to increase its profits so long as it engages in open and free competition without deception and fraud. ’ Friedman (1970) Since Friedman’s, another influential critique of CSR was produced by David Henderson, who characterizes CSR as a ‘misguided virtue’ stating: ‘CSR involves the voluntary adoption by businesses of broader objectives, more complex procedures, and more exacting standards.
To this extent it would tend to impair enterprise performance, with effects on both costs and revenues, short-run and long-run. …The system effects of CSR, as well as the enterprise effects, will tend to make people in general worse off…. (CSR) forms one element of new millennium collectivism. It adoption would reduce competition and economic freedom and undermine the market economy. The commitment to it marks an aberration on the part of the business concerned, and its growing hold on opinion generally is a matter for concern. ‘ Henderson (2001)
It is evident here that the views of Henderson differ very much from Friedman, as Henderson’s critique is an economists view of the situation as he believes that CSR is an outside interference with efficient resource allocation, accusing it of being an anti-capitalist ideology, ‘a salvationist illusion’: (Henderson, 2001). These views have been refuted by LSE (2012) who believes that Henderson’s report is incorrect due to its definition of CSR, as Henderson states that there no generally accepted and precisely defined ‘notion of sustainable development’, although the Brundtland Report regards the notion of‘sustainable development’ as
definitive, and quoted with the same kind of, respect that Islamic scholars quote the Koran. (Brundtland, 1987) To conclude, critic’s views on CSR differ greatly, though it can be argued that this is the nature of critical thinking, in that different people have different views. CSR criticisms will continue to exist, especially as its popularity in the business environment grows. ————————————————- Chapter 3 – DHL Case study 3. 1 CSR According to DHL
DHL’s corporate social responsibility initiatives come under the label, ‘living responsibly’, by applying core competencies, their people know-how, their global presence in making a positive contribution to society and the environment, whilst striking a balance between economic and social responsibility targets. DHL’s attempt to achieve CSR targets are through their focus on the areas of: environmental protection (GoGreen), disaster management (GoHelp) and championing education (GoTeach), as well as support for their employee’s volunteer work through Global Volunteer Day and the Living Responsibility Fund (DHL CR Report, 2011) 3.
2 Critical discussion of DHL’s approach to CSR DHL’s Chairman and CEO comments that the future belongs to companies who embrace Corporate Social Responsibility as an integral part of their business model (DHL CR Report, 2011). There are social, ethical and philanthropic responsibilities underpinned by the CSR strategies of an organisation. However, in this report I aim to critique in more detail some of the legal aspects of DHL’s approach to CSR. The reason being, that in my CSR research I have come across detailed critiques mentioning (with evidence) DHL’s corporate irresponsibility’s.
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, which 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 them saving money from the same initiatives?
* Philanthropic Responsibilities * Go Teach – Engaging in education worldwide, by supporting equal opportunities in education globally. * Critique – Programs usually in developing countries where people may feel large multi-national organisations are ‘breeding their next set of employees’ * Go Help – Using DHL’s logistics know how to good use by helping people in need, in disasters or famine, DHL employees voluntarily offer to help in the worst affected areas.
* Why don’t DHL dedicate their services to areas where there are famine and drought (less televised) rather than just receive news coverage (marketing them) of their efforts in disaster zones? The legal responsibilities of organisations require that employers and employees obey the law. These laws include financial, environmental and labour laws, with non compliance resulting in charges for unfair competition, criminal sanctions and reputational damage to name a few. However, there seems to be a paradox from the start, should an organisation adopt the voluntary legal initiatives or just follow the statutory/legal obligations?
DHL’s legal CSR strategies can be seen through its ‘respect & results’ principles, which are as follows; True to our Guiding Principle “Respect and Results,” we seek—in everything we do—to achieve both good economic results and respectful relationships with employees, customers, investors, the public, political decision-makers, and labor unions. Our “ethical compass” is our Code of Conduct, which stipulates mandatory principles for ethical and responsible behavior for our employees worldwide. (CR Report, 2010)
The above statement by DHL lists numerous stakeholders within the organisation that it aims to ‘respect’, and thus gain ‘results’ from. The results in question have been omitted from their statement, and may only be seen to be a profit oriented ‘result’ that they wish to seek. Obeying the law, does have a positive indirect financial ‘result’ for the firm, as it means fewer fines to pay, court fee’s, or wasted unproductive time. But the direct financial results that may be gained from obeying the law are less so, therefore it may be that firms 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 as well as the conventions issued by the International Labour Organization (DHL CR report, 2011). The Universal Declaration of Human Rights aims 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). Although DHL states there codes of conduct are based on the Universal declaration of faith, its actions contradict this, and thus its very own corporate responsibilities.
A recent report by the UNI Global Union (UNI) and the International Transport Workers’ Federation (ITF) reveals that the organisation directly contradicts its very own corporate responsibilities ([email protected], 2012). These contradictory actions include; * Disrespect for employees’ right to freedom of association through Intimidation and other actions – The UN Global Compact that DHL states it also abides by, calls on employers to respect the right to freedom of association.
However, in some countries employee’s rights have been denied, because they wanted to form or join a union. Not only have they been denied, but some have been sacked (See Turkey example), Harassed (Guatemala, South Africa, India), Bullied (Colombia). If DHL’s operations in the countries mentioned contravene its own policies on respecting employee’s freedoms of association, then it must re-assess why there is such disparity between there seemingly heavily unionised employee workforce in Europe, compared to a less/or nonexistent union presence in these other nations.
If DHL does not make necessary adjustments in these countries, then it could face employee dissatisfaction, leading to protests, poor productivity and further media pressures. * Heavy reliance on subcontractors and labour brokers to provide agency workers – DP- DHL (in particular, Exel) uses contractors or labour agencies to supply workers throughout its global operations, despite this meaning for this that those employee’s 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 being the financial gain of this, as agency staffs receive low pay without benefits, and they may also lack the health and safety protections of permanent employees. Evidence does suggest that in the Non European countries DHL do not conform to their image for high employment standards and its self-proclaimed status as an employer of choice. * DHL’s avoidance for the responsibility of labour, health and safety violations – DHL’s subsidiary Exel, has been accused of exploiting vulnerable foreign exchange students in order to keep costs down at a Pennsylvania distribution centre.
These accusations state that International university students taking part in the summer exchange program in Pennsylvania were required to stand for long periods without breaks and had to lift heavy loads without protective equipment. According to NGA (2012), this led to hundreds of student guest workers going on strike at the plant in 2011, which tried to expose some of the brutal conditions, sub-minimum wage pay, and 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, the OSHA who fined Exel for nine workplace violations, to which six were seen to be intentional acts. According to the OSHA, these violations carried penalties to the total of $283,000. The reasons behind these workplace health & safety violations may have been motivated by extra financial gain, however the risk of injury as well as the reputational damage Exel’s action could have on DHL are vast, especially as their corporate responsibility values are to minimise risk and maximise safety.
* Racial discrimination – DHL’s Corporate Responsibility policies aims to promote the diversity of their workforce, firmly rooted in their corporate culture. However, DHL Express had a lawsuit filed against them by its African American employees, because “black drivers were assigned to predominantly black neighbourhoods, and white drivers to predominantly white neighbourhoods (EEOC, 2011). In this example, there seems to be a clear strategy ‘not’ to promote DHL’s diverse workforce, but rather to segregate them according to delivery locations.
Further to this, a Hispanic employee was fired in 2011, after reporting racial mistreatment to management. The EEOC, 2011 report suggests that after union officials started asking questions regarding the mistreatment, they too were subsequently fired. This example shows DHL’s complete disregard for federal laws and fairness, promoted throughout its corporate responsibility report. ————————————————- ————————————————- Conclusion
Recently, DHL has come across various accusations, and guilty acts showing a complete disregard for their corporate responsibilities (both legal and ethical). However, a balance must be reached, as some may argue that the organisations, Ethical, Social and Philanthropic acts far outweigh (Go Green, Go Teach, Go Help) the examples of corporate irresponsibility displayed in chapter 3. Despite this, ‘bad news sells’, and more examples of corporate irresponsibility by DHL or its subsidiaries could risk overshadowing its positive impacts on society.
This scenario could potentially cause an opposite result to their ‘Respect and Results’ guiding principles on corporate responsibility, by achieving negative economic results, employee, customer, investor and public dissatisfaction. True to our Guiding Principle “Respect and Results,” we seek—in everything we do—to achieve both good economic results and respectful relationships with employees, customers, investors, the public, political decision-makers, and labor unions.
Our “ethical compass” is our Code of Conduct, which stipulates mandatory principles for ethical and responsible behavior for our employees worldwide. CSR, is here to stay, and will be part of business processes for a long time, and the world’s response to CSR at these early stages of the 21st century will play a significant part in determining the shape and fate of the world for generations to come (Horrigan, 2010) ————————————————- ————————————————- ————————————————-
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