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Implementing Corporate Social Responsibility in Globalization
Nirav Rajpara, University of the District of Columbia, Washington, DC
ABSTRACT
Globalization (the process I define for this paper as Integration of commerce, cultures, politics and
people across borders) is a phenomenon which has been ongoing throughout human history. The pace of
globalization dramatically increased in the last half of the 20th century driven largely through advances in
technology and geo-political integration. Rapid global integration has changed the ways and means by
which profit maximizing organizations conduct their operations in a socially responsible manner.
Variations in the political, legal and socio-cultural environments enable Multinational Enterprises (MNEs)
to vary their socially responsible practices across borders. Firms which may be regarded as benevolent
corporate citizens in one country may be the egregious perpetrators of crime and negligence in another.
This results in the need for enforcing and implementing uniform standards and metrics for Corporate Social
Responsibility (CSR) across the globe.
Implementation and enforcement becomes the challenge of uniform global standards and metrics
of CSR. The key question becomes, which enforcement body can and should enforce and implement
standards and metrics of a Multinational Enterprise’s operations which transcend national boundaries and
legal jurisdictions? This paper examines the distinct enforcing bodies at different levels that have the
capabilities and interest to implement CSR. These bodies at various levels are Multilateral Organizations
& Intergovernmental bodies, the host nation-state of the MNE, and the firm itself.
After examining the capabilities and interests of implementing CSR across these various levels,
this paper will examine “why” CSR should be implemented throughout the firm’s global operations
through strategic management.
INTRODUCTION
Globalization is today’s phenomenon that deserves to be studied across various disciplines. Many
social scientists have tried to precisely define this pervasive phenomenon. For our purposes we can
loosely define it as: the internationalization and integration of commerce, culture, politics and peoples.
Contemporary globalization has been in motion since the end of the World War II. The international
community sought to integrate commerce, customs and communities across the world in efforts to prevent
the conditions of another world war. Therefore the international community created large representative
collaborative international bodies, known as Multilateral Organizations (such as the United Nations &
World Bank) to promote building of interacting civil societies. These Multi-Lateral institutions facilitate
political and economic integration of nation states. Political, Economic, Socio-Cultural integration fostered
through international agreements and technological innovation, is the phenomena of “Globalization” for the
purposes of this paper.
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A big component of Globalization is International Trade/Commerce. Two big drivers of
international trade in the latter half of the 20th century have been geo-political integration (through
international treaties and Multi-Lateral Organizations) and major advances in technology. Products,
services, ideas and operations can be exchanged across borders more efficiently than ever, due to
tremendous advances in information and communication technology. Moreover, these exchanges are
protected through international treaties and multi-lateral organizations. These conditions provide fertile
growth opportunity for Multi National Enterprises (MNE or MNC) and also enable small and mid sized
Enterprises (SMEs) to compete globally. Moreover, advances in technology and easing of trade barriers has
enabled more firms to compete for market share or even market presence.
Globalization and Corporate Social Responsibility in the Current Environment
This environment of rapid change and increased competition has led to what Richard D’Aveni
terms as Hypercompetition, marked by short product life cycles, new technologies and frequent entry of
competitors.1
In this hypercompetitive environment, businesses are constantly seeking to reduce
production costs and/or raise sales revenues. Unfortunately, absconding corporate social responsibilities
(obligations to all stakeholders which are impacted by the firm) has been a tactic, which has been used to
meet these seemingly difficult objectives. Particularly, in the international context, firms have been known
to exploit lack of regulation and enforcement in host countries (the foreign nation in which a firm conducts
its business), in order to increase their short term profit margins. This comes in the form of a huge external
cost to other stakeholders (such as workers and the community) and ultimately the firm itself (managers
and investors) in the long run, in the form of litigation costs and diminished brand value. Corporate Social
Responsibility (CSR) covers to a broad scope of a firm’s activities from its disclosures to its investors to
human rights. This paper we use corporate social responsibility in reference to the firms treatment of its
employees, the surrounding community and the natural environment.
Several flagrant violations of CSR are notable. In the early 1970s, U.S. Multinational, ITT acting
in conjunction with the Nixon White House and other U.S. Multi-National Corporations lobbied and
coordinated an overthrow Chile’s democratically elected government. The succeeding leader that was
installed, General Augusto Pinochet, was much more amicable with U.S. business interests, but happened
to turn out to be one of the most egregious violators of human rights, responsible for the killings of
thousands of Chilean citizens.2 Many large MNCs, such as Barclay’s Bank, are believed to have profited
from the racial Apartheid policies of South Africa. This is becoming known through a pending reparation
lawsuit.3 While other violators may not have possessed malicious intent, they became negligent about
social responsibility, because it interfered with being profitable.
Most notably, Union Carbide had a lower set of safety standards for its plant in Bhopal, India; than
its plant in the United States. 4 This ultimately led one of the largest plant disasters in 1984 where toxic
fumes from the plant were released into the community killing over 3,800 people permanently disabling
over 11,000.5 Nestle Corporation continues to receive much skepticism today, from its baby formula
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promotion activities from three decades ago. Nestle baby formula was aggressively promoted in
developing countries, in the 1970s. Nestle launched a massive campaign that sought to substitute breast
milk, with its baby formula, in these developing countries. However, Nestle failed to communicate (or
ignored) the fact this formula, had to be mixed with water, which was usually contaminated in these
developing countries. The ingestion of this contaminated water, which complimented the Nestle baby
formula, unnecessarily caused the deaths of countless infants, in developing nations.6
More recently, Nike Inc. developed an extensive and expensive Public Relations campaign to
overcome unfavorable media attention, from a decade ago. Nike was accused of exploiting, abusing and
sexually humiliating its workers, in its production sites in Southeast Asia. These abuses took place in
subcontracted offshore production facilities. Therefore Nike felt they were not solely been culpable.
Regardless, these abuses gained tremendous media attention in the 1990s, and continue to plague the
Nike’s brand image, to this day.7
These types of socially irresponsible/unethical transnational corporate practices raise discontent
and suspicion over the globalization phenomenon, as a tool for rich developed nations to exploit poor
people throughout the world. This suspicion magnifies coupled with the fact that MNCs continue to grow
infinitely powerful. Consider that 20 of the largest MNCs, have annual incomes greater than 80 of the
world’s developing countries.8 These trends are very troubling to skeptics of post modern globalization,
who argue that globalization primarily concentrates and consolidates resources and power for the rich.9
To make globalization more equitable CSR needs to be in the mix. On the day NAFTA was
signed in 1994, the Zapatista National Liberation Army staged an armed rebellion in the Chiapas region of
Mexico. This uprising shocked many since one of the proposed benefits of NAFTA integration was to
bring greater economic opportunities to less developed regions of Mexico. Most of the cross border trade
with the United States was done through Maquiladora10 towns located along the U.S.-Mexican border,
prior to NAFTA. Therefore these areas tended to be most industrially developed. The Chiapas region in
southern Mexico has been economically underserved for generations and its indigenous populations have
been exploited by landowners and bosses. 11 The NAFTA agreement was looked upon by the exploited
people of this region as another way to be exploited, this time by people from the U.S. and Canada.
Corporations can curtail these types of clashes, by doing business abroad in a way that creates opportunities
and upholds the greatest ethical standards in host countries.
William Parrett the CEO of Deloitte Touche Tohmatsu indicated that it is critical that corporations
show the same degree of concern for all their stakeholders (such as workers and community) that they show
towards making a profit, in a globalizing world. Corporations have responsibilities of making profits, as
well as, promoting sustainable conditions in a host country, such as, creating opportunities, so people are
not left towards turning towards extremism and violence. 12
Lack of opportunity is fertile ground for
extremism and antipathy. Resentment of MNC exploitation and abuse may be manifested in the form of
rebellion or terrorism. A way to prevent these adverse side effects of globalization is for corporations to be
socially responsible. The need for implementing CSR in a globalized economy is paramount. The
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challenge is who will implement CSR, the Multilateral Organizations, Sovereign Nations, or Multi-National
Companies, and how will these entities implement CSR?
CSR implemented by Multilateral Organizations
Multilateral Organizations (NGOs) are uniquely positioned to promote CSR. 13 Through their size
and reach they are positioned to be the biggest promoters and advocates of CSR by giving special
recognition to best practices (which a firm can use as marketing capital). They can train developing
countries on CSR. Through their internationally representative and collaborative structure they are able to
develop coordinated CSR policies. Multilateral organizations have leverage to provide financial support
for socially responsible and sustainable projects, and ensure large banks fund use the equator principles
when financing global projects.14 Because of their scope Multilateral Organizations are positioned to
promote compliance, reporting and accountability. 15
The United Nations recognized the importance of CSR in the globalization process and formulated
the U.N. Global Compact, which addresses the issue of CSR in global development. It is formulated along
principles that aim to promote and protect: human rights, working conditions and the environment.16 The
strength of the U.N. Global Compact is that it is comprehensive. The weakness is that it is guideline for
MNC, which they can voluntarily adopt and enforce. The U.N. global compact uses have been criticized
by some as a way flagrant CSR violators (such as Nike) can “blue wash” their poor records, by
superficially adopting the U.N Global Compact.17
The Organization of Economic Cooperation and Development (OECD) has created guidelines for
MNC operations overseas. These guidelines aim to promote responsible business consistent with
applicable laws of host governments. The International Labor Organization (ILO) has created Tripartite
Declarations of Principles, which are developed guidelines for MNCs, which preserve human rights of
workers in host countries. The drawback is that the host governments must enforce these policies, and in
many cases developing countries cannot afford to enforce these policies. 18
The benefits of these guidelines are that they serve as good frameworks for CSR policies which MNC may
adopt. The barriers is that these policies lack enforceability, and may not have the efficacy to make a
change. Another issue brought to attention is that CSR policies need to be standardized 19 such as ISO
standards.20
A success case for Multilateral Involvement in promoting social responsibility in commerce has
been curtailing the sale of conflict diamonds. 21 Strict “certificate of origin” requirements started by the
United Nations, helped curtail the sale of “conflict diamonds.” The certificate of origin indicates from
which region the diamond originated. Therefore traders would know if the diamond was found to be
originated from a mine controlled my militias and would be classified as a conflict diamond. Firms that
were involved in the trade of conflict diamonds were susceptible to being singled out, which would have
culminated into a barrage of negative publicity and would have ultimately hurt brand image.
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CSR implemented by Nation-States
Since firms usually look to lower production costs, they tend to move operations, where the cost
of production is minimized through factors such as cheaper labor, weaker currency and less regulation.
These countries tend to be lower-income developing countries. These countries are usually eager to host
MNCs (hence their name host country) of rich countries, b/c it attracts investment into their country’s
economy, which leads to economic growth, on a macro economic scale.22
CSR will benefit these host countries because it will preserve the country’s natural resources,
improve the quality of life for its citizens and raise living standards. It is hard to realize these real benefits
to CSR, since, real barriers seem to be more powerful in these host countries. First of all monitoring and
enforcing CSR is costly, and therefore be not be affordable to developing countries. 23 Moreover,
developing host countries attract MNCs into their countries by lowering standards and regulation. This
leads to a “race to the bottom” for standards and regulation.24
Sometimes Home Nations of MNCs implement regulation which governs the practices of their
MNCs overseas, such as the Foreign Corrupt Practices Act (1988) which prohibits U.S. companies from
making corrupt payments to foreign officials to acquiesce or retain business (The success and failure of the
Foreign Corrupt Practices Act, in precluding bribery to host government officials, is a matter of another
discussion).25 Similar Home country measures may be needed in the areas of ensuring human rights, labor
safeguards and environmental protection in host countries. Real barriers to getting these types of
regulations from Home countries exist, because Home countries are reluctant to make law that may hinder
the success of their Home country’s businesses abroad.
The European Union is exploring a different perspective. The EU is attempting to create
universal CSR guidelines, which protect the human rights, labor and the environment for EU MNCs doing
business abroad. This initiative was started at a special summit in Lisbon in 2000. The EU stated the
importance of integrating CSR, when doing business overseas if the EU is to meet it is objective of being
the most competitive knowledge based economy in the world. 26 Furthermore, the EU believes that
encouraging CSR for their MNCs abroad will lead to long term profitability 27 by ensuring that sustainable
markets are created and people in host countries have purchasing power.
Governments of Nation States have the following general roles for promoting CSR:28

Mandating: creating laws, regulations and imposing penalties

Facilitating: setting clear overall CSR policy frameworks and providing incentives and guidance
for CSR

Partnering: combining public resources with business resources (public-private partnerships) to
leverage complimentary skills to promote CSR.

Endorsing: Giving Public political support for attaining particular CSR metrics. The U.S. State
Department, gives an “Award for Corporate Excellence” every year to U.S. firms who conduct
exemplary Corporate Social Responsibility Practices in host countries.29
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The general limitations to the public sector’s role in implementing CSR are its limitations to
monitoring CSR practices. The cost of enforcement may be high in the form of litigation or other
measures, such as loss in productivity. Moreover it may be tough to monitor and enforce a standardized
code of CSR because companies operate under different sets of circumstances based on industries and
environments.
CSR implemented by MNCs
Many benefits exist for business to implement CSR internally. Two obvious rewards are:
reducing costs and creating marketing capital. 30 Certain barriers exist that prevent firms from reaping these
CSR barriers. First, firms believe (sometimes rightly so) that CSR will diminish short term profit
potential. Second, CSR cannot be ensured throughout the supply chain. A firm may itself be socially
responsible, but may find itself in at the heart of controversy, because of the actions of parties in its supply
chain.31 Nike Inc. is a good example of this phenomenon. Advocates of CSR posit that if CSR is
standardized, monitored and enforced, it would be much easier to ensure throughout the supply chain. The
problem with implementing standardized rules which are monitored and enforced is that this solution
ignores different dynamics and environments of the firm. 32 What may be plausible for Ben & Jerry’s to do
for ozone depletion in Vermont, may not be plausible for BP to do in Afghanistan.
To overcome these barriers, profit making organizations need to have a paradigm shift on how
they view the role of the firm. William Parrett the CEO of Deloitte Touche Tohmatsu redefines the role of
a firm to contribute to building a civil society, as well as making a profit. They call this model Integrity
Quality Performance (IQP).33 Firms that are socially responsible feel the rewards in their share prices by
socially responsible investors. Growth in socially responsible investment funds, evidences that investors
and society places a premium on social responsibility by corporations. Whether these funds have the
market power to eradicate all socially irresponsible behavior is more ambiguous. 34
To see CSR implemented, especially on the global scale, firms need to be internally motivated and
committed. To do this, we need to get firms past the notion that CSR will undermine their profit making
capacity. On the contrary CSR may enhance profit making capacity. This is evidenced when we examine
some CSR best practices.
Anita Roddick, had a vision to create a firm that would do well not only for herself, but the overall
world. Her creation and fruition of the Body Shop LTD was exemplary on how a commitment to CSR
literally could build a firm with profitable brand value. Body Shop adheres to strict policies to ensure
human rights and labor protections throughout the supply chain. The Body Shop is known to protect
animal rights and for its philanthropy to protect the environment and give to underprivileged communities
throughout the world. They would pay extra for material from a supplier who is socially responsible, over
a competing supplier who is cheaper, but less socially responsible. They would allow employees to swap,
certain amounts of paid work time from the store to go serve in the underprivileged communities. They
would screen franchisees to ensure that they share the core values of the firm. Under Anita Roddick’s
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leadership, the Body Shop never spent one dime Marketing. All their marketing came from Public
Relations and positive press coverage on the Body Shop’s commitment to Social Responsibility. 35 Other
obvious examples of organizations that capitalize on their CSR is Ben and Jerry’s Ice Cream and BP.
Consider what happened to Nestle Co. since the baby formula debacle in the 1970s, the company has been
a target of criticism in the area of CSR. Nestle has come a long way, since the baby formula debacle and
has emerged as one of the world’s most socially responsible MNCs. The reason why they continue to be
such a big CSR target is that they do not incorporate CSR into their marketing and brand building
activities.36 Therefore Nestle, similar to Nike’s brand continues to be stigmatized as socially irresponsible.
Both of these companies need to do a better job of leveraging their social responsibility to their brand
building activities, if they are to overcome the stain on their brand image from many years ago.
CSR has some real benefits since consumers are increasingly conscientious about being socially
and globally responsible. Research by Mintel International Group Ltd. found four in 10 customers worry
that products should not involve the exploitation of Third World countries, while more than half insist they
would stop buying goods if they knew child labor or animal research were involved in their manufacture.37
Customers in various markets (particularly Europe) are willing to pay a premium for Social
Responsible Production of products (See Figure 1).38 These trends have the possibility of spreading to
other markets.
Figure 1
Willingness to pay more for products from socially/
environmentally responsible companies
De nm ark
64
Spain
56
Ne therlands
52
Sw eden
53
Finland
51
Portugal
28
Sw itze rland
55
France
36
Germ any
30
Gr eat Britain
40
Be lgium
48
Italy
16
All
44
0
10
20
30
40
50
60
70
%
Source: MORI, September 2000
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Figure 1: Environment comes out as the top external issue for consumers, with
substantial willingness among consumers to pay more from responsible companies
Conclusion:
Globalization can be a lot more harmonious and sustainable if it were more equitable. A way to
increase equity for stakeholders across the globe is to implement CSR. The issue then becomes who
assumes the onus of implementing CSR. Many advocates point that governments have the monitoring and
enforcement capabilities. Others say that Multi-lateral institutions are well positioned to implement CSR
since they have the insight to standardize CSR and global coordination capabilities through their
collaborative nature. I posit that effective CSR is internally derived from within the organization.
FUTURE STUDIES
The challenge lies in shifting the paradigm of thinking of CSR as practice that hinders profit to
thinking of CSR as a practice that helps profit. This CSR paradigm shift could occur through greater
research and discussion on implementing CSR to reducing costs, creating brand value and attracting
investment.
REFERENCES:
1
Wheelan, Thomas & Hunger, J. David
123
Strategic Management and Business Policy 9th Edition Pearson-Prentice Hall pp.122-
Winston, Morton E. “Review of Human Rights and International Political Economy in Third World Nations: Multinational
Corporations, Foreign Aid, and Repression” Human Rights Quarterly
21.3 (1999)
824-830
3
Rostron, Bryan
“The business of apartheid; the role of multinational corporations and banks under South Africa's racist
regime is finally coming to light. Some would rather it didn't.”
New Statesman
August 12, 2002
2
Meyer, William H. “Human Rights and MNCs: Theory Versus Quantitative Analysis” Human Rights Quarterly
(1996)
371
4
5
6
18.29
See http://www.bhopal.com/pdfs/browning.pdf
CHANDIRAMANI, RAVI
“HOW CAN NESTLE BEGIN TO WIN OVER ITS CRITICS?”
Marketing
June 27, 2002
13
Griffin, Ricky W. et al,
“Nike Inc: Developing an Effective Public Relations Strategy”
rpt in
International Business 4th Edition
301-303
8
Meyer
373
9
El-Khawas, Mohamed & Ndumbe, J. Anyu
“The Developing Nations, the U.S., and Globalization: an unbalanced
Triangle” Journal of Development Alternatives and Area Studies (23) 1.2 March – June 2004 17-33
10
Maquiladoras are factories in Mexico which are treated as free trade zones for products flowing into the United States
11
“Mexico: After NAFTA Where would You Rather Be, North or South?” rpt in
International Business 4th Edition
.
298-299
12
Parrett, William G. “Globalization’s Next Frontier: Principled Codes of Conduct That Bolster the Rule of Law”
Executive
Speeches Dayton: Aug/Sept. 2004
19(1)
6-9
13
Vives, Antonio
“The Role of Multilateral Development Institutions in Fostering Corporate Social Responsibility”
Development (2004) 47 (3)
45-52
14
“Equator Principles” are business projects which meet a certain level of social responsibility and aim to promote sustainable
development in host country.
15
Vives, 45-52
16
Kuper, Andrew
“Harnessing Corporate Power: Lessons from the UN Global Compact”
Development (2004)
47 (3)
9-19
7
17
Ibid
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J. Felix Lozano & Alejandro Boni.
“The Impact of the multinational in the development: An ethical challenge”
Journal of Business Ethics Dordrecht: August 2002
39(1/2)
169-178
19
Millar, Sheila A. “CSR Must Be a Balancing Act” Paper, Film And Foil Converter Chicago: August 200478(8)
20
I.S.O. stands for the International Organization of Standards
18
16
“Conflict Diamonds” are diamonds that are derived from mines that are controlled by rebel militia groups and warlords, in Africa.
The revenues generated from the sales of these diamonds are used to fund armed conflict for these militia groups. See
http://www.un.org/peace/africa/Diamond.html
22
Herrmann, Kristina K.
Corporate Social Responsibility and Sustainable Development: The European Union Initiative as a
Case Study
Indiana Journal of Global Legal Studies
11. 2
Summer 2004
212
21
23
Ibid 214
Ibid
25
See
http://www.lectlaw.com/files/bur21.htm
26
Herrmann, 226
24
27
28
Ibid
Fox, Tom
47(3)
“Corporate Social Responsibility and Development: In quest of an agenda”
32
Development
2004
29
Interview with Daniel A. Clune,
Director of the Office of Economic Policy and Public Diplomacy
11/18/04
Ramachandran, Pavit
“The Business Case for Sustainable Development: How to Profit from the Environment” Issue
Paper for PA Consultants
January 1, 2002
30
31
Millar, Sheila A. CSR Must Be a Balancing Act Paper, Film And Foil Converter Chicago: August 200478(8)
p16
Herrmann, 228-230
33
Parrett,.6-9
34
Matthew Haigh et.al.
Financial Markets: A Tool for Social Responsibility?
Journal of Business Ethics.
Dordrecht June 2004 52(1)
pp.59-71
35
Fogarty, Ellie A. et.al
“The Body Shop International PLC: Anita Roddick, OBE” rpt in Wheelan, Thomas & Hunger, J.
David
Strategic Management and Business Policy 9th Edition Pearson-Prentice Hall 7.1-7.26
32
36
CHANDIRAMANI, RAVI
Marketing
“HOW CAN NESTLE BEGIN TO WIN OVER ITS CRITICS?”
June 27, 2002
Pg. 13
Wheatley, Catherine
“Many Businesses Seek to Promote 'Corporate Social Responsibility'”
Sunday Business
(London) February 20, 2002
38
Ramachandran, Pavit
“The Business Case for Sustainable Development: How to Profit from the Environment” Issue
Memo for a Executive Management Consulting Firm January 1, 2002
37
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