The New Corporate Social Responsibility
Graeme Auld,1 Steven Bernstein2 and Benjamin Cashore3
1
Ph.D. Candidate, School of Forestry and Environmental Studies, Yale University, 205 Prospect
Street, New Haven, Connecticut, 06511, USA, email: graeme.auld@yale.edu
2
Associate Professor, Department of Political Science, University of Toronto, 1 Devonshire
Place, Toronto, Ontario, Canada M5S 3K7, email: steven.bernstein@utoronto.ca
3
Professor, School of Forestry and Environmental Studies, Yale University, 205 Prospect Street,
New Haven, Connecticut, 06511, USA, email: benjamin.cashore@yale.edu
Submission to the 2008 Volume of the Annual Review of Environment and Resources
Abstract
The last half decade has witnessed a remarkable resurgence of attention among practitioners and
scholars to understanding the ability of corporate social responsibility (CSR) to address
environmental and social problems. While significant advances have been made, assessing the
forms, types and impacts on intended objectives is impeded by the conflation of distinct
phenomena, which has created misunderstandings about why firms support CSR, and the
implications of this support, or lack thereof, for the potential effectiveness of innovative policy
options. As a corrective, we offer seven categories that distinguish efforts promoting learning
and stakeholder engagement from those requiring direct on-the-ground behavior changes. Better
accounting for these differences is critical for promoting a research agenda that focuses on the
evolutionary nature of CSR innovations including whether specific forms are likely to yield
marginal or transformative results.
Keywords: Codes of conduct, environmental management, partnerships, NSMD governance,
environmental standards, legitimacy
1 Introduction
In the last 15 years, an array of stakeholders have turned to firms, rather than
governments, to address enduring environmental problems including forest degradation, fisheries
depletion, mining destruction, and even climate change, as well as social problems including
workers’ and human rights. As a result, a wide range of tactics including boycott campaigns,
social and eco-labeling, and environmental “certification”, have been used to appeal directly to
firms to improve their environmental management procedures and performance as well as their
treatment of workers and impacts of their activities in the communities in which they operate.
These efforts to promote what is generally known as “corporate social responsibility” (CSR) (1),
have increasingly attracted the interest of a wide range of scholars within political science,
economics, sociology, anthropology and geography.
Several factors have coincided to explain this renewed interest in CSR among both
practitioners and scholars. These include ineffectiveness, to date, of many governmental and
intergovernmental processes (2), accelerating economic globalization that has placed special
attention on transnational or global firms (3), and general interest in pursuing innovative “smart
regulation” (4) that, supporters argue, would encourage entrepreneurial innovation (5, 6).
Does CSR have the potential to address enduring environmental and social problems? We
argue that the greatest challenge for CSR scholarship in answering this question is the conflation
of very different phenomena under the rubric of CSR (7). To further advance our understanding
of the possibilities and limits of CSR to transform market behavior and ultimately be a
significant force for social and environmental change, we must more precisely define the
particular phenomenon being assessed. The general failure to define and delineate types of CSR
has led to misunderstandings surrounding why firms support it, and the implications of this
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support, or lack thereof, for the potential of innovative policy mechanisms to be effective where
government policy has been inadequate or absent. Furthermore, this gap has significantly
limited the ability to address arguably the most important question facing CSR scholarship:
whether, and how, CSR innovations might evolve to become enduring and meaningful arenas for
the promotion of environmentally and socially responsible behavior?
We advance this argument in four analytic steps. First, we review key definitional and
conceptual challenges facing research on CSR. We delineate different phenomena that fall under
the CSR label and the different expectations practitioners and scholars have regarding such
efforts. In particular, we review scholarly assessments of whether these efforts promote learning
and stakeholder engagement that may have indirect impacts on behavioral change, or directly
require specific on-the-ground behaviors. Second, drawing on these distinctions, we identify
taxonomic categories under which scholars can place their particular research projects. A third
section justifies why we ought to be sensitive to these differences, especially since particular
CSR programs can change over time – moving from one taxonomic category to another. A fourth
section reviews the conceptual, methodological and theoretical challenges in understanding and
researching such an evolution.
We conclude by assessing what our review means for the next generation of CSR , and
the potential of CSR to become an effective tool within domestic and global environmental and
social governance. We are interested not only in what CSR initiatives have done, but also their
transformative potential in the global marketplace. In other words, the next stage for CSR
research is to shift from a debate on whether CSR makes a difference in particular cases to
whether, and what types of, CSR hold promise as alternative forms of environmental and social
regulation.
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2 Conceptual and Analytic Challenges
Any effort to assess the burgeoning interest in CSR should begin with two important
conceptual distinctions: between the old and new CSR and between “win-win” and “win-lose”
CSR efforts. On the first distinction, Vogel (1) notes that while CSR efforts have significant
historical roots, “old” efforts largely focused on corporate philanthropic activity that usually had
little to do with the firm’s core business practices. These efforts were spurred particularly in the
United States by favorable tax law, and remain important in American life. They have led to the
creation of the Carnegie libraries and socially and environmentally active foundations, including
the Ford, Rockefeller Brothers, and, more recently, Bill and Melinda Gates foundations whose
charitable contributions having nothing to do with addressing any environmental or social
challenges within the software and computing industries.
In contrast, the new CSR is squarely focused on internalizing a firm’s negative
externalities. Instead of explicitly or implicitly diverting attention from an environmental or
social concern arising from a firm’s core business activity, the new CSR occurs when firm
officials address such issues directly. Hence, corporate image builders applying the new CSR
seek to show that their firm is actively promoting social and environmental standards that
regulate or alter their core practices, often in an attempt to show they are ahead of their
competitors. Supporters argue that such dynamics, if successful, can lead to a “race to the top” as
firms compete for the title of being the most environmentally and socially responsible.
The second analytic distinction – between situations in which CSR is “win-win” and
“win-lose” from the firm’s perspective – arises because the new CSR imposes social and
environmental requirements/burdens on profit maximizing firms. In “win-win” situations,
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solutions are available internally where improvements in practices are also profitable. In “winlose” cases, however, immediately available internal solutions are unprofitable or otherwise
harmful to the firm’s survival or success in the marketplace. “Win-lose” situations therefore
require the creation of some external economic benefit or change in the competitive environment
to offset the environmental and social costs of new or altered practices. If neither profitable
internal changes nor external economic benefits are available, a profit maximizing firm
undertaking the new CSR will, over time, either suffer comparative disadvantage vis-à-vis nonparticipating firms by losing money, or the self imposed requirements will be marginal rather
than transformative.
Many of today's examples heralded by firms and advocates fit under the immediate “winwin” category. For instance, one explanation for the plethora of firms now engaged in voluntary
greenhouse gas emissions reductions is that they will realize, if successful, both economic gains
and provide environmental benefits. Firms often attempt to unlock, or advocate, these “win-win”
scenarios in two ways. First, they may collaborate with environmental organizations or champion
multi-stakeholder learning dialogues to assist them in their efforts. Such approaches can save
firms’ time and resources, as the NGO provides what otherwise would have imposed internal
cost. Their purpose, in these cases, is to uncover new business practices as well as build trust
among potential critics of the firm's intentions or commitment. Second, firms seek and apply
advances in new technological innovations (6).
Predictably, fewer examples of “win-lose” cases are available because purposeful internal
behavioral change, in the long run, requires some type of countervailing economic benefit
(whether abstract or direct) to justify cost impositions. Profit maximizing behavior, and the
interests of shareholders, mandates that firms avoid a competitive disadvantage vis-à-vis their
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competitors. No amount of good will or leadership can change this logic (8). While successful
CSR efforts in these “win-lose” situations, are, understandably, more limited than other forms of
CSR, we argue that they deserve the most sustained attention because, if they emerge as
enduring and purposeful features of the marketplace, they hold the greatest transformative
potential.
3 Taxonomic Categories of the New CSR
We focus our review on the new CSR because its goal is to direct and require particular
environmentally and socially responsible behavior – an activity that until recently was something
in the ambit of governments. As Andrews (9) argues, and as most working on CSR agree (1015), the burden of proof on CSR advocates is “to demonstrate how their proposals will in fact
achieve equal or better results than government regulations.” To shed light on differences among
CSR initiatives in pursuing these goals, we identify seven categories of initiatives and the logic
of change underlying each. We pay particular attention to whether their immediate and long
term aim is to encourage broad-based stakeholder learning and/or direct prescriptive behavior on
the ground. Following that discussion, we assess the potential transformative capacity of these
different categories of CSR in win-lose situations.
Our classification and evolutionary emphasis departs from Baron’s (16) approach that,
by definition, CSR must go beyond market demands, and also from much of the remaining
literature’s baseline that to count as CSR, it must promote behavior beyond compliance with
existing laws (8, 11, p. 108, 17-19).
Although there is an elegance and tractability to these approaches, we employ an
alternative for three reasons. First, limiting CSR to only those innovations that do not produce
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market demands eliminates some of the most important and innovative efforts to promote
stewardship through the marketplace. Second, if we focused solely on beyond compliance
initiatives, because governments often change their rules, a firm could lose its CSR status even if
it did not change any internal commitments. Similarly, if a large firm operates in different
political jurisdictions, a corporate environmental strategy may be at once beyond compliance in
some jurisdictions but below compliance in others. In these cases, the same strategy would be
simultaneously classified as both an example of CSR, and not CSR. Third, it is, as we show
below, a conceptual mistake to equate a firm which undertakes a “beyond compliance” CSR
strategy solely as a means to reduce the threat of impending governmental regulations, with a
firm which undertakes a CSR strategy because it wants to find a way to address the
environmental or social challenge. To be sure, both strategies could lead to important changes in
policies, yet their underlying motivations could reveal quite distinct reasons for support and
therefore longer-term prospects of transformation (20, p. 325, 21).
Although a static definition may be easy to operationalize, it can limit understanding of
dynamic change within firms, the interaction of CSR choices with the broader public policy
arena and organizational fields (see e.g. 22), and the motivations for support. These factors are
the most important for understanding the sources of behavioral change/commitment and whether
and how the CSR innovation might lead to direct change, or to learning that ultimately is
influential through other policy innovations and/or governmental processes.
Our classification, rooted in the above distinctions, discerns seven ideal types of CSR
innovations: individual firm efforts; individual firm and individual NGO agreements; public
private partnerships; information based approaches; environmental management systems (EMS);
industry association “corporate codes of conduct”, and private sector “hard law” known as “non-
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state market driven” (NSMD) governance. Their delineation is useful, as Table 1 reveals, in
identifying difference in origins, internal compliance incentives, interactions with state-centered
authority, internal governance mechanisms, policy approach/scope, and enforcement
mechanisms. We develop these seven categories as “ideal types” and recognize that not all
examples fit easily into a category. Nonetheless, we argue that disentangling these differences is
critical to addressing questions about effectiveness – the ultimate concern of most analyses –
including what firm support means for direct impacts (both short and long term) and longer term
transformation via learning across stakeholders.
3.1 Individual Firm Endeavors
Individual firm endeavors are the most common and widely studied form of the new
CSR, which focuses on strategies of individual firms to undertake environmentally and socially
responsible behavior. Scores of practitioner conferences have been devoted to understanding the
“business case” for CSR and the positive economic impacts that can accrue to such firms.
Similarly, researchers invest great effort to assess the links between CSR initiatives and financial
performance (23). Scholarly journals are replete with work detailing the origins, ongoing
development and success or failure in a broader sense of internal CSR initiatives at major
multinational firms including Wal-Mart (24), Chiquita Brands International (25), Ikea (26), Nike
(27), food retailers in general (28, 29) and specific ones such as Unilever (30), among others (31,
32). Providing environmental or sustainability reports (33), supporting eco-labeling, promoting
health and safety for employees and fair working conditions in the factories that produce their
products comprise some of the efforts firms employ.
A second, and less examined aspect of firm CSR initiatives concerns those proactive
efforts to uncover and pursue “win-win” solutions or turn what appear to be “win-loss” situations
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in the short term into longer term “win-win” situations. That is, some firms have, as Esty and
Winston (6) reveal, been proactive in developing new green and socially responsible markets
that, by their very nature, embed a stewardship ethic ( 34). These include Toyota’s proactive
decision to gamble on creating fuel efficient and green “hybrid” cars, which stands in contrast to
Ford’s ultimately uneconomic decision to focus on the declining SUV market. Similarly, GE’s
decision to promote wind and solar technology is an effort to change the very market demand
upon which it depends. While such technological innovations are not considered CSR by some
(16), we see this as a mistake because, arguably, any effort to find or create “win-win” solutions
will have far greater and enduring impacts than abstract, and unenforceable, commitments to
costly behavioral changes. A search for these technological “win-win” could mitigate, for
example, sub-optimal technologies (35).
In general, then, firm level innovations, by relying on internal firm decisions, are
characterized (Table 1) by the absence of direct governmental requirements on policy making
processes internal to the firm, though the shadow of the state is never completely absent.
Compliance incentives tend to accrue either abstractly owing to the firm’s interest in developing
a “social license to operate” (34, 36), from green markets (34, 37), or technological advances that
reduce costs, enhance profits (34), or serve to offer a first-mover advantage (38).
In this CSR category, then, there are no externally imposed prescriptive requirements to
which a firm must adhere and the firm controls the processes and policies they develop.
However, because these efforts almost always involve interacting with stakeholders, we would
expect such an approach to promote learning and to offer the potential to uncover “win-win”
solutions.
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3.2 Firm-NGO Partnerships
In this category, firms initiate, or are involved in, partnerships with other stakeholders.
Partnerships come generally in two forms: ones in which they partner with environmental or
social groups to address environmental or social issues associated with their operations (39, 40),
which is the focus of this discussion; or “public-private” partnership in which firms,
governments and NGOs all interact toward some common goal, which we categorize separately
in section 3.3. Environmental Defense and Conservation International are prominent US
examples of organizations that have partnered with companies such as McDonalds, Starbucks,
and FedEx, among others (41, 42). The World Wide Fund for Nature (WWF) is also a frequent
partnering NGO that has worked with Unilever (43), and Domtar (44), for instance, and has
developed, in the forestry sector, partnership arrangements with hundreds of forestry products
buyers and suppliers in more than 30 countries that aim to encourage shifts to supply and
demand of sustainable forest products (45).
Such partnerships can be important for both unlocking indirect learning processes and
promoting direct specific requirements. There is little question that when NGOs and firms
discuss issues, they almost always uncover misunderstandings about how things work that led
NGOs to champion a course of action that might not have had the effects they were seeking.
Such partnership can also create outside benefits, albeit abstract, because the public is more
likely to accept a project with NGO participation than one in which firms act alone (46, 47). We
expect perceptions of this outside benefit to largely determine the size and nature of the steps
firms can undertake.
3.3 Public-Private Partnerships
In contrast to private-private collaborations between firms and a counterpart NGO, public
private partnerships involve firms as part of a broader community of interests in which
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government, business, and environmental and social stakeholders interact around solving a given
problem (48). Partnerships come in many forms. They can involve coordination to address rule
or standard setting, implementation, or service provision, where the relationship (from the state’s
perspective) can be classified as co-optation, delegation, co-regulation, or self-regulation in the
shadow of hierarchy (49). Co-optation involves state-consultation with private actors. Delegation
occurs where private actors have responsibilities over governance functions by states and
intergovernmental organizations. Co-regulation involves “true joint decision-making” between
the state and private actors. Finally, self-regulation in the shadow of hierarchy captures cases
where private actors self-regulate to avoid or reduce threats of state intervention (49).
Public-private partnerships also exist at the local, national and international levels (4951). They can include efforts to provide clean water to impoverished communities organized by
a municipality and local companies (52) or provide AIDS stricken communities with access to
drugs, as in the case of the UN HIV/AIDS effort (53, 54). In this latter example, the United
Nations, through the Global Health Initiative, provides an arena and some resources for engaging
drug companies in an effort to bring impoverished communities health care treatments that
would otherwise be prohibitively expensive and out of reach.
At the domestic level, a prominent example is the US Environmental Protection
Agency’s (EPA) effort to give incentives to green firms in the form of reduced regulatory
oversight through such programs as the Common Sense Initiative and Project XL (19, 55-57o 56,
57). Here, the focus is on developing a more efficient means for enforcing costly legislation (19,
58). In other cases, programs can explicitly eschew regulatory relief; the 33/50 program initiated
by the EPA in 1992 to reduce releases of 17 key toxic substances by 33% by 1993 and 50% by
1995, was structured without provisions for relaxed regulatory oversight (59). Another example
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is the US Department of Energy’s Climate Challenge Program initiated in 1994 to encourage
electric utilities to reduce or offset greenhouse gas emissions (55). Indeed, based on a review of
60 extant US public voluntary programs, Lyon and Maxwell (14) uncover that few offer explicit
regulatory relief. Instead the majority aim to disseminate information on best practices or
technologies and to give companies public recognition of their beyond compliance behavior. In
these cases, which were initiated under the Clinton administration (60) but have since been
further favored under the George W. Bush administration, the state is directly involved in
providing firms the option of pursuing these efforts, with the implicit knowledge that refusal by
firms to participate will create pressure on the state to pursue a more traditional “command and
control” or regulatory approach (61).
In all of these cases, the state is directly or indirectly involved – either as facilitator or
financial provider, but never as the sole decision maker. Instead, stakeholders participate in joint
decision making, with a focus on problem alleviation and the alignment of strategic interests.
The type of problem addressed varies widely. Hence the AIDS example is focused on saving
lives, while the UN Global compact, which brings together firms who agree to promote its
principles for global corporate behavior, is more abstract, and emphasizes norms of corporate
responsibility (62, 63). While diverse, we would expect public-private partnerships to be
effective when they explicitly draw on state authority to require behavior, and/or lead to
innovative approaches that the firm, by itself, could not have uncovered and/or implemented on
its own.
3.4 Information Approaches
Another important feature of many CSR efforts focuses on the provision of information
related to a firm’s behavior. Information-suppression and -disclosure policies and voluntary-
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labeling programs are means by which governments encourage behavioral change through the
control of information (64). The US EPA, for instance, created the Toxic Release Inventory
(TRI) as a provision of the 1986 Emergency Planning and Community Right-to-Know Act that
mandated public access to information on release levels for hundreds of toxic substances emitted
by US industrial facilities (65). Later, in 1991, as discussed above, it launched the 33/50 program
as a voluntary beyond-compliance program intended to expedite emission reductions of certain
TRI toxins (8, 66, 67). More recently, certain US states made it mandatory for power utilities to
disclose environmental information on marketing and product-sales information for utility
customers (68) and amendments to the Safe Drinking Water Act required water suppliers to
disclose information on contaminants (65). Again, Lyon and Maxwell’s work (14) illustrates the
prevalence of information approaches in the suite of recent US public voluntary programs.
Outside the United States, information policies have also grown in popularity. The German ecolabel was first introduced in 1978, followed by similar programs in the Netherlands, Austria, and
France, and the EU as a whole (61, 69). Canada, Australia and the EU have also adopted similar
information-disclosure requirements on toxics to those of the US TRI (70).
Information approaches carry their own logic of effectiveness. The idea behind them is
that by making environmental performance more transparent (and hence shaming or rewarding
through abstract public consternation or support), an economic logic exists that may shift
behavior by eliminating the most detrimental practices, products or byproducts of production in
favor of more benign ones. They can also lead to learning among stakeholders about corporate
practices, facilitating decisions based more on scientific understandings than (often incorrect)
perceptions. As Rosenau (51, p. 12) notes, virtually all of them involve “close collaboration and
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the combination of the strengths of both the private sector (more competitive and efficient) and
the public sector (responsibility and accountability vis-à-vis society).”
Underlying this emphasis on transparency, rather than prescriptive requirements, is the
hypothesis that global firms will be “shamed” into doing the right thing, or they will risk losing
markets if they fail to act. While governments throughout the OECD have adopted this approach
(61, 70, 71), it also exists transnationally in a CSR/voluntary format through the Global
Reporting Initiative (GRI) (72). Firms participating in the GRI voluntary report the
environmental and social impacts of their activities. In these cases, the intergovernmental system
is also in the shadows, but the reporting rules are developed by stakeholder members of the GRI,
with considerable discretion given to individual firms. Currently, compliance mechanisms tend
to be tied to the size of the firm – i.e., larger firms can be more easily shamed or targeted, while
smaller firms are often shielded from such scrutiny.
3.5 Environmental Management Systems (EMS)
A fifth category is the adoption of externally imposed criteria about how to manage a
firm’s internal approaches to environmental and social stewardship. This form of CSR allows
firms to decide which behaviors they will adopt, and instead focus on the “win-win” benefits that
accrue from “learning” about how to develop their environmental management systems. Firms
that adopt EMS also may expect to gain the indirect benefit of the positive image that might
accrue from society. The two most prominent examples of EMS are Europe’s eco-management
and audit scheme (EMAS) and the International Organization for Standardization (ISO) 14001
procedures for environmental management (18, 73). Industry and state delegates have
historically negotiated ISO standards while incrementally increasing access to a range of other
stakeholders (74). ISO is formally a non-governmental organization, and provides certification of
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firms for development of internal processes. While it does provide for third-party certification,
and hence is distinct from self-initiated processes delineated above, its focus on systems, rather
than behavioral “on-the-ground” requirements, provides a more complex picture as to whether
support is an example of a firm being proactive, or attempting to gain cover from more
prescriptive (and costly) requirements. ISO’s environmental management systems have been
commonly and improperly confused with private sector hard law systems. While firms are
audited for following their own “environmental management systems” ISO does not require any
particular on-the-ground changes. It only requires continual improvement from the base-line of
the company’s own specified targets.
We also note that the increasing interest in CSR has now led ISO to develop a standard
for social responsibility (to be published in 2008 as ISO 26000). This includes multi-stakeholder
input, but unlike other ISO standards, it will have no procedural or on-the-ground requirements
(only voluntary guidelines) and there will be no procedure for pursuing third party certification
(75, 76).
EMS systems have been strongly promoted because they often lead to learning among
officials within a firm. That is, EMS often leads to the identification of obsolete or inefficient
practices that might simultaneously improve the bottom line and environmental performance. In
addition, to the extent that goodwill is created, there may be an additional outside benefit that
would permit the firm to implement internal costs consistent with the outside benefit. At the
same time, we expect that confusion between EMS procedural requirements and the “hard law”
systems below may actually lead to less effectiveness. That is, scholarship must carefully assess
whether EMS’s are used as a way to avoid specific behavioral requirements to address an
environmental problem, or to obscure what are actually limited efforts. This means that
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correlational statistical analyses that focus on adoption of standards, by themselves, are
insufficient. They must exist alongside in depth historical case studies that place attention not
only on firm adherence to particular policies, but to the behavioral requirements that follow from
such a course of actions.
3.6 Industry Association Codes of Conduct
Attempts by industry associations to establish industry-wide “codes of conduct” to which
its members commit to adhere fall under this category (77-80). Examples include the chemical
industry’s voluntary Responsible Care Program (4, p. 137-266, 81), the Sustainable Forestry
Initiative in the United States and Canada (82), the recent Cement Sustainability Initiative
supported by the World Business Council for Sustainable Development, a code for responsible
fisheries practices supported by the US-based Responsible Fisheries Society (83, 84), among
others (see 61, see 80).
Unlike the firm-level activities described above, industry-wide initiatives build collective
efforts to improve CSR practices across firms. Hence, they contend with inter-firm as well as
intra-firm politics. Many studies examine these politics to understand the origins of codes across
sectors, and generally find them emerging in industries where companies hold collective
reputations (a bad imagine of the industry impacts all companies, regardless of their individual
performance) (81, 85) and sell primary or intermediary goods, not end-consumer goods (4, p.
161, 86, 87). More recently, however, industry-wide initiatives have formed that contradict this
pattern. The Common Code for the Coffee Community (the 4C process), for instance, serves as a
baseline standard for social and environmental practices in coffee production, trade and roasting,
and it has enlisted many of the world’s largest coffee roasters (88-90). Recent work by King (91)
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proposes explanations for these patterns based on transaction cost theory, but it remains to be
explained why sector-wide initiatives pervade certain sectors and not others.
Movement towards Responsible Care, one of the first industry codes, began in the late
1970s within the Canadian Chemical Producer Association (CCPA). Focusing events, including
Love Canal and Union Carbide’s Bhopal disaster, served by 1984 to transform a policy statement
to a condition of membership, an effort by Canadian producers to deflect threats of governmental
intervention (92). This program includes no formal role for social or environmental groups.
Although industry association programs are a step beyond firm-level CSR initiatives, those that
maintain control in their business members and do not engage outside stakeholders are distinct
from full-fledged third-party standard setting. In particular, industry dominated initiatives do not
create an adaptive governance arena that mediates among divergent viewpoints or otherwise
mitigate power struggles.
The Equator Principles represent another emerging example of a principle setting
exercise. These principles provide the banking industry with a “framework for addressing
environmental and social risks in project financing (93).” Firms sign onto the principles
voluntarily and signal their support through “self declarations” (94, p 121-144, 95).
Some codes of conduct are less easily classified, especially those that include
governments in the formulation of rules and therefore have some characteristics of public-private
partnerships. We place them in this category nonetheless because their operational features and
voluntary character make them analytically similar to industry association codes. For example,
the OECD’s Guidelines for International Investment and Multinational Enterprises (revised in
2000) encourages a wide range of good practices and establishes National Contact Points to
promote them, but the standards are voluntary even for those firms that sign on (96, 97). The
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most prominent sustainability information mechanism, the Global Reporting Initiative, while
neither an industry association nor public-private partnership, fits the same pattern (98). Highly
touted as a mechanism to operationalize transparency and accountability for initiatives such as
the OECD guidelines and Global Compact, it simply provides guidelines for organizations to
report their pollution levels and other sustainability measures.
Hence codes of conduct can be important forces for unleashing learning across
stakeholders, and for engaging with the public and organized interests about their stewardship.
They are, however, not the place to identify and produce specific behavioral requirements to
which firms must adhere, nor adaptive arenas for multi-stakeholder decision making.
3.7 Non-state Market Driven (Private Sector Hard Law))
This unique type of CSR institution differs fundamentally from the above efforts because
it is about creating enduring and prescriptive “hard law” (i.e. it sets mandatory behavioral
requirements to which firms must adhere), but in the private sector. While legal theory, and
especially international legal theory, might find this characterization oxymoronic because nonstate forms of governance are defined as soft law rather than hard law (99), we use the term
because this form of CSR creates obligations and rests on a sense of legitimacy more akin to
public “hard law” than declaratory or private “soft law” (which sets abstract goals to which firms
and other actors are encouraged to comply). Elsewhere, Cashore (100), Cashore, Auld and
Newsom (101) and Bernstein and Cashore (102), labeled this phenomenon “Non-state Market
Driven” (NSMD) based on their work on forest certification and the proliferation of other thirdparty certification systems that have emerged over the past 15 years.
Five key features distinguish NSMD governance from other forms of public and private
authority reviewed above. The most important feature of NSMD governance is that, in general,
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the state does not provide implicit, or explicit, compliance incentives. Rather, a private
organization develops rules designed for achieving pre-established objectives (sustainable
forestry, in the case of forest certification). A second feature is that its institutions constitute
governing arenas in which adaptation, inclusion, and learning occurs over time and across
diverse stakeholders. The founders of NSMD approaches, including forest certification, justify
this governance structure because they are more democratic, open, and transparent than the
clientelist public policy networks (i.e., where public authorities have a close relationship to
“clients” in the private sector that they govern) they seek to replace.
A third key feature is that these systems govern within a reconstituted “global public
domain” (62), in which, as Ruggie describes it, states are “embedded in a broader, albeit still thin
and partial, institutionalized arena concerned with the production of global public goods (62, p.
500).” Seeing the global public domain as no longer only the purview of states supports our
position that these attempts to govern the private sector largely independently of state authority
can still be viewed as “hard law.” To achieve global public goods, these systems require profitmaximizing firms to undertake potentially costly reforms that they otherwise would not pursue,
for the potential of longer-term collective (and possibly individual) benefits. This distinguishes
NSMD systems from other arenas of private authority, such as business coordination over
technological developments (the original reason for the creation of the ISO) that can be
explained by profit seeking behavior and through which reduction of business costs is the
ultimate objective.
The fourth key feature is that authority is granted through the market’s supply chain. In
the case of forest certification, the global Forest Stewardship Council (FSC), which has
widespread support from many of the world’s leading environmental groups, and FSC
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“competitors” initiated by forest owners and industry associations, promote and champion their
versions of sustainable forest management (SFM) by focusing on forest products customers.
They attempt to convince consumers and producers along the supply chain to support, and
demand that their supplies come from certified forests (103: chapter 2, 104: 42-43, 105, 106).
Landowners may respond to incentives such as product price premium or increased market
access while environmental organizations may act through boycotts and other direct action
initiatives. These forces convince large retailers, such as B&Q and Home Depot, to adopt
purchasing policies favoring the FSC, thus placing more direct economic pressure on forest
managers and landowners.
The fifth key feature of NSMD governance is the existence of verification procedures
designed to ensure that the regulated entity actually meets the stated standards. Verification is
important because it provides the validation necessary for certification programs to achieve
legitimacy, as certified products are then demanded and consumed along the market’s supply
chain. This distinguishes NSMD systems from many other forms of CSR noted above that
require limited or no outside monitoring (4, p. 137-266).
Buoyed by the forestry example, certification systems have proliferated in other sectors.
These include the Fair Trade Labelling Organization (FLO) International, which, as of 1997,
coordinated under one system national fair trade labeling initiatives that were all, in their
respective national markets, aiming to ameliorate the conditions of poor and marginalized
producers in the developing world by improving the terms of trade for their products. Fair trade
now covers a diverse range of internationally traded commodities and specialized goods
including coffee, tea, cocoa, sugar, bananas, rice, fresh fruit, juice, honey, vanilla, nuts and
oilseeds, cotton, sports balls, flowers, and wine (107). Similarly, Social Accountability
20
International, initiated by the nonprofit Council on Economic Priorities to reduce sweatshop
labor practices, developed into a system that monitors individual companies according to
specified social criteria, including child labor and worker safety (108-111). The FSC model
explicitly inspired the Marine Stewardship Council (MSC) governing wild-capture fisheries
management (112) and the Sustainable Tourism Stewardship Council, among others (113).
Emergent umbrella systems include the International Social and Environmental Accreditation
and Labelling Alliance, which was created to develop agreement on best practices for any
certification system (114, 115). The NSMD system is the category of CSR that most directly
requires specific courses of action, but also simultaneously engages a range of firms, NGOs and
other stakeholders in a range of learning efforts. Thus, NSMD deserves more sustained focus and
assessment of its short, medium and long term potential to transform markets and, ultimately,
effectively address environmental and social problems.
4 Why firms support CSR: the benefits of refined classification
The need for a more refined classification of CSR initiatives is borne out by the research
on its effects. A core finding is that both the type of initiative and the context in which firms are
motivated to support CSR play significant roles in determining the strength and kind of effects
CSR has. For example, researchers applying both large-N studies (85, 116) and case research
(117) find that when specific environmental standards, third party oversight, and sanctions are
absent, firm support does not tend to equate with on-the-ground changes in practices. For
example, in an early examination of Responsible Care, King and Lenox (85) found no aggregate
evidence that the program led members to accelerate their pollution reduction relative to nonmembers. Indeed, the opposite occurred: non-members improved faster than members. Even
where third party oversight is present, as is the case with ISO 14001, Potoski and Prakash (118)
21
found that facilities with a moderate level of regulatory compliance, measured against their
peers, were most likely to participate. Those with low or high levels of compliance were less
likely to join. However, those that joined did improve their environmental performance, a result
in contrast to King and Lenox’s (85) findings noted above. Additional analysis of design features
of industry codes of conduct emphasize that small or federated systems are better tooled to
ensure effective compliance (119), particularly because small groups are better able to monitor
and sanction members.
Forces, or institutional pressures, outside a given initiative are also important
determinants of effectiveness. Pressure from stakeholders and threats from regulators serve to
motivate voluntary participation in CSR initiatives, even if they include sanctioning mechanisms
that overcome the poor performance-participation correlation mentioned above (120). The
formal education and environmental expertise of a CEO also correlates with participation (121),
illustrating the importance of internal company factors such as organization culture( 8, 122). A
sector with close business-to-business relations – where companies buy and sell to each other –
also enhances the potential for effectiveness (10, 123).
Within specific policy issue areas, authors argue for or against the usefulness of CSR
activities in addressing underlying public policy problems. For water and energy sectors, for
instance, concerns have been raised about voluntary CSR initiatives due to the vital importance
of these resources and the often-limited capacity of governments to control corporate
involvement (124).Conversely, case studies have identified successful examples of connections
between impoverished producers and niche markets for particular products. In these cases,
marketing ethical or environmentally sound products can make a limited difference (125).
22
Other research has examined participation across industry-, government-, and NGOsponsored voluntary programs to assess differences in the diversity of stakeholders’ participation
(56). At the global level, studies uncover how particular CSR initiatives have built in biases
against particular stakeholders, e.g., those from the developing world (74, 126). The limited
attention to developing-world perspectives also means that power imbalances between the poor
and corporations are overlooked, leading to accountability problems with existing CSR
initiatives (127). Other analyses have also emphasized the limited potential of CSR as a tool for
addressing poverty (128).
Following in this vein, CSR has been distinguished from corporate accountability in an
effort to emphasize that both are required for corporations to have any potentially beneficial
effects on development. However, even in the best case, broad changes in the global economy
are considered necessary for real changes to occur (129). Some place hope in the role of NGOs
and so called anti-globalization or global justice movements as the agents that would drive a
major shift toward regulating TNC activities (94, 130).
As a response to these problems and criticisms, scholars have offered new frameworks
for improving the sustainability of CSR operations in the developing world (131). Multilateral
development institutions are showing increasing interest in being drivers of global CSR and its
coordination to foster improved corporate accountability (132). Supporters of CSR are also
looking to these institutions to play a role in enhancing developing country governments’
capacity (133), a crucial condition for CSR to be effective.
Finally, some authors argue for and/or show how CSR can benefit developing countries,
either alone or in combination with traditional development programs and projects. First, CSR
approaches could be usefully adopted by NGOs and donors working on development issues
23
(134). Second, working with communities to develop social capital is seen as a “win-win” for
corporations operating in the developing world (135).
5 Toward an evolutionary sensitive CSR project
Another benefit of a more refined categorization of CSR is that it highlights, and allows
analysis of, how particular programs can evolve, adapt and change. For example, in 2005 the
Responsible Care program created a third-party monitoring component in response to criticism,
which moved it closer to the private sector hard law model. Similarly, The Fair Labor
Association (FLA), spawned by the US Apparel Industry Partnership, initially lacked well
developed mandatory standards or independent verification of compliance. But the FLA
developed a mandatory third-party auditing system in 2002 that was implemented in 2003 (136)
in response to competition with the Workers Rights Consortium, a group established to
investigate and report labor-code violations perpetrated by controversial factories (109, 137).
Thus, it is important to note that organizations can change in response to external pressures.
Evolution may occur through competition with other third-party certification systems. This
competition can lead business associations that first initiated voluntary “soft law” codes of
conduct to be ultimately spun off as independent organizations. For example, the American
Forest and Paper Association’s voluntary code-of-practices program, the Sustainable Forestry
Initiative (SFI), initially developed in response to threats of regulation and the emergence of the
FSC (86). Now the SFI’s nine-member board comprises one third business, one third academic,
and one third NGO members. Though the governing structure is more narrowly cast than the
FSC model and tends to include relatively moderate civil society interests, the SFI example
nicely illustrates the importance of assessing how governing arrangements can change. While
24
clearly giving more authority to industry than the FSC model, the SFI has adapted and included
other non-firm actors in ways that few would have predicted just a few years ago.
Given these dynamics, what path ought CSR scholarship to take? Our answer also takes
into account that any analysis of CSR efforts should assess not only existing impacts, but also the
potential of CSR innovation if it were to fully institutionalize in a sector. The implications are
important: empirical work is critical but, by itself is insufficient for understanding the
implications of CSR. Rather, we need better theories about the evolutionary capacity of CSR
initiatives – that is to assess transformative capacity. A lack of such theory development,
combined with a continuing focus only on the present and the past, inadvertently increases the
risk that any practical advice offered from this type of scholarship may make recommendation
that hamper, rather than improve, the potential of CSR to address enduring global social and
environmental challenges. To illustrate the importance of such an approach, we briefly review
Bernstein and Cashore’s (102) efforts to understand the evolution of the private sector hard law
form of CSR. Their framework delineates three phases through which initiative must move to
achieve full fledged “political legitimacy.” Our focus on an evolutionary framework moves
beyond an emphasis solely on learning and technical fixes, which, as we argued above, can only
make a difference in “win-win” situations. Instead, an evolutionary framework addresses ways
in which “win-lose” situations might be transformed to “win-win” situations as a hard law
system gains political legitimacy. By gaining legitimacy, they alter the firm’s cost-benefit
calculations by transforming the marketplace environment. They facilitate the emergence of the
external benefits and/or costs of inaction that shift situations from “win-lose” to “win-win”,
which is ultimately necessary for CSR initiatives to succeed.
25
5.1 The evolutionary logic and the conundrum
NSMD system exist within a suite of policy innovations that include corporate codes of
conduct that pose few or no mandatory rules regarding on-the-ground behavioral changes, and
where businesses dominate policy development. Given this, what types of support might firms be
expected to grant NSMD systems? Drawing on Bernstein and Cashore (102) we discern two
phases that NSMD certification systems pass through towards their hypothesized third and final
phase of “political legitimacy”- in which members of the sector collectively agree to abide by the
rules and procedures of the NSMD governance system or a common standard or set of standards
across systems that operate in a particular sector.
5.2 Phase I: Initiation
What types of firms whose operations are the target of a certification system might be
expected to join, at the outset, the NSMD certification? Moreover, why would any firm ever join
these “hard law” programs? After all, in most sectors where NSMD certification is vying for
support, there are also more flexible or non-prescriptive programs they could join instead, such
as ISO 14001, the UN Global Compact or Responsible Care. Hence, based on our review of
existing work above, there remains an important gap in our understanding of why firms seek to
participate in NSMD “hard law” programs when they impose greater requirements than other
CSR initiatives
Many firms would indeed balk at supporting such systems precisely because they would
be viewed as imposing greater costs than benefits. Moreover, support translates to relinquishing
their own authority to decide on what to do about an environmental issues when more palatable
voluntary alternatives are available that leave all, or a great deal of, discretion to individual
firms. One would expect those firms operating close to, or at, the requirements of the
26
certification system to be the first to join. Thus, at the initial phase, when an NSMD hard law
initiative gains some degree of recognition, it creates a degree of abstract economic benefits,
either because they provide a boycott ‘shield’ or because membership will provide them
environmental stewardship recognition in ways unavailable to other CSR programs. Likewise,
firms that would have to undergo significant changes and costs to meet the requirements of the
systems will be the last to join.
This argument also begs the question of why some firms would already be practicing
closer to the standards of the NSMD system? In almost all cases, the reason is public policy
requirements – i.e., what traditional governmental regulations dictates about how firms must
behave. When government regulations are the most prescriptive, and when certification rules do
not deviate too far from required practices, the greatest support from firms can be expected. This
does not mean that all firms operating under these conditions will agree to join (since the costs of
foregoing autonomy is uncertain), but it does mean the reverse is true: those firms that are not
highly regulated by governments and that compete with other non-regulated firms will be much
less likely to support certification, as it could lead to their economic demise.
During this initial phase, it is important to assess the evolving expectations of other
members of the NSMD community as well, particularly environmental and social groups that
joined in order to ameliorate the particular environmental resource use or social problem. One
would expect such members to develop close community ties with those initial firms that have
demonstrated that the rules of the program are indeed obtainable, and to differentiate these firms
as ‘heroes’ from the ‘villains’ that have refused to participate. They also have an interest in
highlighting, emphasizing, or exaggerating the marginal on-the-ground changes that do occur, in
order to justify the importance of their program.
27
5.3 Phase II: Gaining Widespread Support
Given the expectation of limited uptake in phase I, how might NSMD hard law systems
evolve to gain widespread support? Such support is necessary since any marginal improvements
that occurred in Phase I will not, by definition, be adequate to address the core problems in a
global sector for which NSMD systems were designed (whether it be mining, forestry, fisheries,
coffee and so on). How might NSMD certifications move to this second phase? The hurdles are
immense and reveal a conundrum. First, to appeal to the firms that did not join in Phase I,
certification programs must, in the absence of increased market incentives, relax their behavioral
requirements. That is, moving to Phase II requires readjusting the cost/benefit calculations of
firms that rejected membership during Phase I. Moreover, because of the chicken and egg
problem in developing certified markets in which supply and demand must be in synchrony,
market pressures can only advance incrementally. Behavioral requirements may have to be
lowered, albeit until markets are fully developed, if Phase II is ever to be achieved. However, the
lesson from environmental and social groups in Phase I is that firms can indeed meet the
(relatively) high requirements. Over time, these environmental and social activists will want to
demand an increase in standards.
The challenge for those promoting NSMD certification systems then is to overcome this
conundrum. If it is not overcome, we would expect a significant degree of competition between
the NSMD certification systems, and the more palatable CSR alternatives. Whether and how this
conundrum might be overcome is a key question facing students of CSR. Bernstein and Cashore
(102) have offered an initial set of propositions that argue for greater attention on norm
generation and community building. The point for this article is to illustrate how isolating
different phenomenon conflated under CSR, a much more complex and dynamic picture emerges
about how support for a particular taxonomic form is contingent upon, and interacts with, other
28
CSR forms and existing governmental regulations. It is these interactions which are critical to
understanding whether and how, CSR institutions might evolve into become enduring and
purposeful forms of global authority.
6 Conclusions
Do CSR efforts address enduring environmental and or sustainability challenges in ways
that traditional governmental approaches have been unable to achieve? Are the impacts
transformative or marginal? Do they provide interesting cases, but fail to have widespread
impact on the problems for which they were created? Or worse, are they best classified as an
effort to escape governmental regulation, resulting in fewer behavioral changes than otherwise
would have occurred?
Here, we argue that to better address these questions, two primary tasks must be
undertaken. First, clearly specify the policy innovation and assess its relationship to the problem
for which it was created. Second, assess not only today’s impacts, but the potential for affecting
behavioral change at Time 2. Such an approach requires not only developing correlations
between support and impacts, but also building theory on the causal mechanisms and temporal
logic of different CSR innovations. Arguably the most important efforts for making practical
contributions are those that undertake greater and more sophisticated theoretical work. For these
reasons, both scholars and practitioners must be neither preemptively Pollyannaish nor
dismissive of CSR innovations.
Summary List
(1) A focus on what firm-focused efforts can do to ameliorate environmental and social problems
requires, as Vogel (1) explains, recognizing the difference between the old and the new CSR.
29
The former largely focuses on corporate philanthropic activity not directly linked to a firm’s core
business practices. The latter focuses on internalizing the externalities produced by a firm’s core
business activities
(2) Distinguishing short term “win-win” from “win-lose” outcomes helps separate motives for
participation and possible futures for CSR efforts. Attention to both is important for different
reasons. Seeking “win-win” technological solutions can help move us away from sub-optimal
technologies. With “win-lose” situations, the critical issue is assessing how and whether CSR
initiatives can transform market conditions, over time, to make a “win-lose” into a “win-win.”
(3) We identify seven ideal types of CSR innovations: individual firm efforts; individual firm
and individual NGO agreements; public private partnerships; information based approaches;
environmental management systems (EMS); industry association “corporate codes of conduct”,
and private sector “hard law” known in the scholarly literature as “non-state market driven”
(NSMD) governance.
(4) Our taxonomy permits the adoption of an evolutionary approach, which stands in contrast to
“beyond compliance” definitions prevalent in existing CSR scholarship. We argue for a broader
definition that captures dynamic changes within firms, the interaction of CSR choices with the
broader public-policy environment and organizational fields, and the motivations for support.
(5) These taxonomic categories are discussed according to whether their immediate and long
term aim is to encourage broad-based stakeholder learning and/or direct “prescriptive” behavior,
and assess the potential transformative capacity of these different categories of CSR in “winlose” situations.
Future Issues
(1) Future work in this area would be well served to carefully specify the policy innovation at
hand and assess its relationship to the problem for which it was created.
(2) Research should also consider not only today’s impacts but also reflect on the potential
different innovations have for transforming markets at time 2 – ultimately the most important
question for understanding whether, and when, CSR initiatives might result in significant
behavioral change.
(3) In order to make practically important contributions, CSR scholars must place greater
attention to building theory on causal mechanisms and the temporal logic of a range of firmfocused policy innovations.
30
7 Table
TRADITIONAL
Government
traditional
Information
approaches
Global
Reporting
Initiative
Examples
Non-state Market
Driven
(Private Sector Hard
law)
Forest Stewardship
Council, Marine
Stewardship Council,
Fair Trade
THE NEW CORPORATE SOCIAL RESPONSIBILITY
Public/Private Partnerships
Environmental
Industry Associations
Management Systems
“codes of conduct”
Individual Firms
EPA star preferred treatment
US voluntary standards
program (state in background)
Global compact
International Organisation for
Standardization (ISO), EMAS
Responsible Care, Equator
Principles, American Forest
& Paper Association’s
Sustainable Forestry
Initiative, Australian Forestry
Standard
1000s of exmamples
Starbucks CAFÉ
standards, McDonald’s
sustainability,
Who creates
the rules?
The state
Government
al, industry
and/or other
stakeholders
Members of the
certification body.
Usually environmental,
social and business
interests
Agreed upon by participating
governmental and nongovernmental actors
Private bodies. Range of
stakeholders. Industry
dominated. Implicit links to
intergovernmental efforts
such as WTO
The Trade Association
The Firm
Compliance
incentives
The state
State (s)
(sometime
require)
Transnational Supply
Chain
State (s). Either explicitly or
implicitly
Public image, “win win”
learning
Benefits in membership,
public image
Scrutiny of firm activities
by public, stakeholders
and shareholders
State does not use its
sovereign authority to
directly require
adherence to rules.
State (s) delegate and/or share
In background. Helps
facilitate intergovernmental
agreements.
Often in shadows
Often in shadows
Institutionalized
procedures for ongoing
policy participation
from diverse societal
and stakeholder groups.
Compliance must be
verified.
Prescriptive
Ranges from closed
communities to wide ranging
stakeholder participation.
Developing.
Limited to members of
regulated group.
Internal to the firm
Association oversight varies.
Tends not to be as extensive.
Emphasizes broad goals.
Flexible approach. Fewer “on
the ground” requirements.
Internal. Often relies on
self-declarations
Varies.
&
Role of state
Central
Markets
(Public
shaming)
Variable
Can require
or encourage
Variable
Governance
Enforcement
Policy
Approach
Wide ranging.
Historically
focused on
“command and
control”
Moral
suasion
Varies – often turn first to
voluntary approaches.
Consensual. Scope can be wide
ranging
Focuses on management
systems. Does not contain “on
the ground requirements”
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Glossary
Environmental systems management: A structured framework that sets out procedures and plans
for how to implement and achieve a company’s self-established or legally-required
environmental performance targets and goals.
Eco-management and audit scheme: A voluntary environmental management system program of
the European Union officially enacted in March 2001 to reward and recognize companies that
“go beyond minimum legal compliance and continuously improve their environmental
performance.” (http://www.emas.org.uk/aboutemas/mainframe.htm)
Non-state market drive (NSMD) governance: A special case of private governance where, most
importantly, states do not implicitly or explicitly provide compliance incentives. Additionally,
these programs include governing structures for adaptation, inclusion, and learning over time and
across stakeholders; they regulate directly the social and/or environmental externalities of
economic production; they derive their authority from the market’s supply chain; and, finally,
they include verification procedures designed to ensure that the regulated entity actually meets
the stated standards.
List of Acronyms
EMS
TRI
GRI
EMAS
ISO
NSMD
FSC
FLA
MSC
SFI
Environmental Management System
Toxic Release Inventory
Global Reporting Initiative
Eco-Management and Audit Scheme
International Organization for Standardization
Non-State Market Driven
Forest Stewardship Council
Fair Labor Association
Marine Stewardship Council
Sustainable Forestry Initiative
39