CORPORATE SOCIAL AND ENVIRONMENTAL

RESPONSIBILITY (CSER) IN SOUTH AFRICA

by

HENRY MUSHONGA

DISSERTATION

submitted in partial fulfilment

of the requirements for the degree

MAGISTER COMMERCII

in

BUSINESS MANAGEMENT

in the

FACULTY OF ECONOMIC AND MANAGEMENT SCIENCES

at the

RAND AFRIKAANS UNIVERSITY

SUPERVISOR: Dr R HUYSAMEN

OCTOBER 2003

CORPORATE SOCIAL AND ENVIRONMENTAL

RESPONSIBILITY (CSER) IN SOUTH AFRICA

H. MUSHONGA

ACKNOWLEDGEMENTS

I would like to express my gratitude and appreciation to the following people for

their support and assistance in moulding this dissertation to this standard.

To Renalde Huysamen, my supervisor for her unstinting support and

inspiration in continuously providing feedback, at her modest home. My

contact with her broadened horizons of how I could use this topic to

contribute towards the development of this new field, and not only for

assessment purposes.

+ I would like to say a big 'thank you' to Ellen Mushonga for her patience and

hard work in the long hours she spent typing the first draft.

:• Also my gratitude goes to Ria Uys for the effort she put in technically

correcting the dissertation.

On a more special note, my wife Ellen and children, Munyaradzi, Miguel and

Mellissa deserve a huge hug for their patience, for the long hours I spent

away from them working on the dissertation.

Dedicated to my late loving brothers, Cornelius and Antony.

ii

ABSTRACT

The purpose of this study is to explore and substantiate why Corporate Social and

Environmental Responsibility (CSER) is important as a business practice in order

to meet the productivity levels, enhance the image or reputation, financial bottom

line and sustainability of the company.

The belief that Business has a socio-economic responsibility is not a new

proposition. Peter Drucker a well renowned sociologist argued that firms have a

social dimension as well as an economic purpose in his second book, The Future

of Industrial Man, in 1942. During the late 1960's and 1970's Corporate Social

Responsibility (CSR) emerged as a top management concern in both the United

States and in Europe only to seemingly disappear in the 1980's. Today, Corporate

Social Responsibility is back on the agenda of many CEOs. This time it is also on

the agenda of governments, both national and local, as well as NGOs, consumer

groups, investors and other actors in civil society.

The concept of CSER has now become an important business practice hence the

need to further investigate its relevance within the South African context. Recently

CSER as business practice has emerged as an important factor due to the ever-

increasing emphasis on human and environmental rights. The pressures for

business to behave in an ethical manner has broadened its core functions, hence

the need to embrace it in the organisational strategy. Due to some of these

reasons CSER has now become a buzzword in the corporate world, among civil

society groups and other stakeholders who have an interest in the behaviour of

business. This spotlight has led to a more voluntary factoring in of ethical

practices, social policies in the overall internal and external organisational strategy

and operations of business. The raison d' etre for this paradigm shift, is also

exacerbated by the new business focus, on triple bottom line reporting, which not

only emphasises the financial bottom line but also transparency and accountability

in the social and environmental aspects which are integral to the firm. The latter

mentioned areas have become important benchmarks for overall performance,

reporting and disclosure to stakeholders.

III

The globalisation phenomenon as the main driver of contemporary business

practices and operations has led to much scrutiny on the impact of business on its

stakeholders. This has consequently resulted in the mushrooming of voluntary

industry specific, global, local codes of conduct and other monitoring mechanisms

being established for compliance and verification. In instances were these have

been flouted, some companies have had to deal with issues of heavy law- suits

and in extreme cases liquidation.

The research methodology for this study has primarily been through a qualitative

approach analysis. The qualitative approach has been based on the analysis of

secondary, grey, online literature on business case studies both at international

and the local South African business environment. The case studies looked at

how companies behaviour correlated with their performances in terms of the

research categories of financial profitability, brand image enhancement,

productivity levels and overall business sustainability.

The findings of this study showed that if CSER practice were factored into the

overall corporate strategy of the firm it would improve the sustainability,

productivity levels, profitability and image of the company. These findings were

also supported by several empirical studies that have demonstrated that there is a

positive relationship between the extent of an organisational's visibility (image),

sustainable profitability and its inclusion of social and environmental

considerations in the broad organisational strategy. Furthermore the study also

showed that, the definition of CSER as coined by different schools of thought is

only a matter of difference in nomenclature than the purpose it serves.

The above synopsis provides the framework for the study, with a deliberate effort

and objective, to justify why an embrace of social and environmental responsibility

becomes a sine qua non in creating a sustainable financial bottom line and the

other research categories mentioned above.

---000---

iv

TABLE OF CONTENTS

Page

ACKNOWLEDGEMENTS

ABSTRACT ii

LIST OF FIGURES ix

LIST OF TABLES ix

CHAPTER 1: ORIENTATION OF THE STUDY

1.1 Introduction 1

1.2 Background 1

1.3 The global generic nature of the problem 2

1.3.1 Pressure of external stakeholders 2

1.3.2 Heightened customer scrutiny 3

1.3.3 The value chain 3

1.3.4 Investor pressure and shareholders 4

1.3.5 High mobility of Human Resources 4

1.3.6 Cost savings on business operations 5

1.3.7 Productivity and quality 5

1.3.8 Corporate Citizenship 5

1.3.9 Contemporary issues and trends 6

1.4 The nature of the problem in South Africa 6

1.4.1 The political past 6

1.4.2 Legislation 7

1.5 The need for the study 8

1.6 The sub-problems 8

1.7 Objectives of the study 9

1.8 Review of related literature 9

1.9 Methodology 12

1.9.1 Research design 12

1.9.2 Target population 12

1.9.3 Location of data 13

1.10 Assumptions 14

V

Page

1.11 Limitations of the study 14

1.12 Outline and overview of the study 15

1.13 Conclusion 16

CHAPTER 2: THEORETICAL CONCEPTUALISATION AND PERSPECTIVES

2.1 Introduction 17

2,2 Background of CSR 17

2.3 The Rhetoric of Corporate Social Responsibility (CSR) 19

2.3.1 Arguments against and for CSR 20

2.3.2 Research categories or variables 24

2.4 Defining CSR 28

2.4.1 Traditional definition 28

2.4.2 A Multiplicity of definitions 30

2.5 Contemporary paradigms/approaches 33

2.5.1 The environment 33

2.6 The Triple Bottom Line (TBL) 34

2.7 Dimensions (Core elements) of CSER 35

2.7.1 Corporate Social Investment (CSI) 35

2.7.2 Corporate Social Citizenship 36

2.7.3 Corporate accountability 36

2.7.4 Corporate governance 37

2.7.5 Corporate Social and Environmental Performance 37

2.8 Measurement of CSER 37

2.8.1 Measurement principles 38

2.8.1.1 Level I: Principles of Social and Environmental

Responsibility 38

2.8.1.2 Level II: Principles of Social and Environmental

Responsiveness 39

2.8.1.3 Level Ill: Outcomes 40

2.9 Measurement of CSER 40

2.9.1 Social and Ethical Accounting, Auditing and Reporting

(SEAAR) 40

vi

Page

2.10 Summary benefits of CSER 41

2.11 Definition for the study 43

2.11.1 Stakeholder theory 43

2.12 Conclusion 44

CHAPTER 3: POLICY AND INSTITUTIONAL FRAMEWORKS OF CSER

3.1 Introduction 45

3.2 Background 45

3.3 Definition of Corporate Codes of Conduct 46

3.4 Growth of Corporate Codes of Conduct 47

3.4.1 The 1970 — 1980 decade 47

3.4.2 The second wave 48

3.5 Morphology of Codes Of Conduct 50

3.5.1 Sectors 50

3.5.2 Types of Codes of Conduct 51

3.5.3 Scope 52

3.6 Critique of Codes of Conduct 53

3.6.1 Coverage 53

3,6.2 Substance 54

3.6.3 Implementation 54

3.7 Global stakeholders and CSER 56

3.7.1 Social movements 57

3.7.2 Trade Unions 58

3.7.3 Governments 59

3.7.4 Shareholders and investors 59

3.7.5 Consumer Pressure 62

3.7.6 Consultancy firms and verifiers 63

3.7.7 The value chain 64

3.8 Examples of Codes of Conduct 66

3.8.1 The United Nations global compact 66

3.8.2 The OECD guidelines for multinational enterprises 67

3.8.3 The Global Reporting Initiative (GRI) 67

vii

Page

3.8.4 The Global Sullivan Principles 67

3.8.5 Social accountability (SA) 8000 68

3.8.6 Caux Round Table 68

3.8.7 Interfaith Center of Corporate Social Responsibility (ICCR) 68

3.8.8 Sunshine Standards for Corporate Reporting to Stakeholders 69

3.8.9 SVN Standards of Corporate Social Responsibility 69

3.8.10 Keidanren Charter of Good Behaviour 70

3.9 Implications of Policy and Institutional Frameworks for

Business 70

3.9.1 An Evaluation of Corporate Codes of Conduct 70

3.9.1.1 Limitations 70

3.9.1.2 Benefits of Codes of Conduct 73

3.9.1.3 Dangers of Codes of Conduct 74

3.10 Conclusion 76

CHAPTER 4: CSER IN SOUTH AFRICA

4.1 Introduction 77

4.2 Historical background 77

4.3 CSER in Apartheid South Africa 78

4.4 The concept of Corporate Social Investment (CSI) 79

4.5 Political and institutional frameworks 80

4.5.1 Government policy 81

4.5.2 Business institutions 84

4.5.3 Non-Governmental Organisations (NG0s) 87

4.5.4 Social movements — Trade Unions 88

4.6 Regulatory frameworks 89

4.7 Conclusion 90

CHAPTER 5: THE BUSINESS CASE FOR CSER IN SOUTH AFRICA

5.1 Introduction 91

5.1.1 Methodology 91

5.2 Findings 92

VIII

Page

5.2.1 An international perspective 92

5.2.1.1 Evidence for the business case of CSER 93

5.2.1.2 Empirical research as evidence for the business case 93

5.2.1.3 Other case studies 96

5.2.1.4 Oil companies 101

5.2.1.5 The Apparel industry 105

5.2.1.6 Other cases of CSER 106

5.3 South Africa's business case evidence 108

5.3.1 Introduction 108

5.3.2 Background 108

5.4 Synopsis of companies involved in CSI 112

5.5 Conclusion 115

CHAPTER 6: RECOMMENDATIONS, SUMMARY AND CONCLUSIONS

6.1 Introduction 117

6.2 Findings 117

6.2.1 Reputation 117

6.2.2 Profitability 118

6.2.3 Productivity levels 119

6.2.4 Sustainability 120

6.3 Recommendations 121

6.4 Summary 123

6.5 Conclusions 124

REFERENCES 125

ix

Page

LIST OF FIGURES

Figure 2.1 Traditional model of CSR 29

Figure 2.2 Goals systems of organisations 31

Figure 2.3 Three reasons why CSR may be important for business 42

LIST OF TABLES

Table 4.1 Selected National Legislation 82

Table 4.2 CSER Institutions in South Africa since 1990 84

Table 4.3 Consultancy and Advisory Institutions 86

Table 5.1 Average Social Investment Contributions 1990/1 109

Table 5.2 Percentage Breakdown Contribution of CSI 110

Table 5.3 List of Companies with High CSER Industry Profile 111

Table 5.4 Good Corporate Grantmakers 113

1

CHAPTER 1

ORIENTATION OF THE STUDY

1.1 INTRODUCTION

In this section the whole orientation of the study will be provided as a map of the

research. As background to the study, the drivers of CSER will be explained and

how they have affected and raised the importance of this practice as making good

business sense. As a basis to articulate any discussions thereof, a generalised

view of CSER is given. On the batis of the pressures driving for CSER, this

becomes the premise to articulate the nature of the problem in the context of the

South African business environment and the sub-problems, which follow. These

sub-problems constitute the research categories on which the study will be

premised. To further expand and conceptualise on the research categories,

review of related literature is examined to unpack the contextual meanings. The

methodological design of the study is of a mainly qualitative approach. The main

research categories of productivity levels, image or reputation, profitability and

sustainability will be defined and common assumptions made from these

articulations. The limitations of this study will also be explained and how these are

ameliorated in the study. This chapter will also provide the whole research outline,

by summarily explaining what will be entailed in each section. In conclusion to this

chapter a synopsis of the whole section is summarised.

1.2 BACKGROUND

Over the past decade, a growing number of companies on a global basis have

recognised the business benefits of corporate social and environmental

responsibility (CSER) practices. These experiences are reinforced by a body of

empirical studies that demonstrate that CSER has a positive impact on business

economic performance and are not harmful to shareholder value (Business for

Social Responsibility [BSR], 2003). The concept of CSER has been given an

ambivalent focus, depending on the category of the individual explaining it. From

2

a traditional perspective, a business's purpose is to make profit and protect the

interests of the shareholders. This perspective has lost support in the current fifth

wave business organisation, and is being refuted by contemporary business

protagonists as a narrow understanding of business. The conceptualisation of this

term will be fairly covered in the next chapter, where in all the conflictual views of

the mentioned paradigms will be extrapolated.

For the purposes of this introductory chapter and as a way to provide a

background, a more generalised definition will be referred, that is, CSER general

purports to business decision making not only concerned with the internal

processes, stakeholders of the company, but, also linked to the external

stakeholders with an emphasis on meeting the ethical values, compliance with

legal requirements, respect for people, communities and the environment

(Business Week, 2001). This rationalisation and operationalisation of CSR within

a business is also viewed as a comprehensive set of policies, practices and

programs that are integrated throughout business operations as decision making

processes, supported and rewarded by top management, with the sole aim of

maximising sustainable profitability (Owen & Adams, 1996). The traditional belief

that the primary purpose of business is to make and maximise profit as expounded

by Milton Friedman is rapidly losing support (Dosier & Hamilton, 1989:88). Even

the company's shareholders contend to the importance of doing business with a

conscience (Levin, 1997:15).

1.3 THE GLOBAL GENERIC NATURE OF THE PROBLEM

The drivers of Corporate Social and Environmental Responsibility (CSER) are

quite many and varied. These drivers have had a significant effect on business, of

which will be discussed later on in this section. These actually constitute the

problem of this study and are explained as the following:

1.3.1 Pressure by external stakeholders

Around the world, consumer pressure, suppliers, employees, communities

investors, activist organisations, governments and other stakeholders including

3

media attention are encouraging business to address corporate and social

responsibility resulting in the adoption of a variety of codes of conduct. Public

demonstrations, shareholder resolution and "denial of service" attack on company

websites are some of the actions being taken to emphasise the growing

importance of corporate accountability to stakeholders.

1.3.2 Heightened customer scrutiny

The interest in the functioning of a business primarily is influenced by business to

business and consumer relationship. As such there is a tendency currently by

consumers to align their purchasing behaviours with social criteria, which is ethical

especially pertaining to environmental and human rights performance. Studies to

attest these correlations have been undertaken, and proved that consumer

purchasing preferences are tied to the ethical and social performance of that

company. In the theoretical section of this study examples of these will be

provided.

1.3.3 The value chain

The whole value/supply chain of a company has now become central to

determining the financial bottom line of companies. The overall performance both

"upstream and downstream" in the chain, be it by suppliers, customers is central to

the viability of business. As the company factors in social and environmental

responsibility in its operations, this also cascades to its value chain. Therefore any

weak link or unethical conduct in the chain leads to the vulnerability, exposure and

undermining of the financial bottom line of the organisation.

1.3.4 Investor pressure and shareholders

According to the Prince of Wales Business School (2001), the growth of social

responsible investing has accelerated in recent years, with investor groups

increasingly pressuring companies on social issues. The United Kingdom, Social

Investment Forum [SIF] (2002) has reported that in the United States, in 2000

more that $2 trillion assets were under management in portfolios using ethics,

4

environment and corporate social and environmental responsibility screens. The

figure grew from $639 billion in 1995, to $1,185 trillion in 1997, to $2,16 trillion in

2000 (SF, 2002). As the above figures reflect, companies addressing ethical,

social and environmental responsibilities clearly have access to capital that might

not otherwise have been available, had they ignored the importance of their social

responsibility. The statistics is also indicative of the growing investor involvement

in the determination of the management of their equity.

According to the same source above, many of the investors are using shareholder

resolution processes to pressure companies to change their policies and increase

disclosure on a wide range of CSER related issues. These include environmental

responsibility, workplace policies, community involvement, human rights practices,

ethical decision-making and corporate governance. In South Africa, the Mervyn

King II report on Corporate Governance exemplifies how business is now also

embracing best practices in the pursuit of meeting their financial bottom line,

through compliance to ethical behaviour. Activist groups are also actually buying

shares in targeted companies in order to gain access to annual meetings and the

shareholders resolution process (Elkington, 1996). This tacit approach is merely

being used as a way to infiltrate companies, which are being deemed to be

unethical in their business practices, hence, the strategy to expose them from

within.

1.3.5 High mobility of human resources

In a very unstable and tight labour marketplace, many workers — especially

professional, technical or highly skilled employees are looking beyond pay checks

and benefits for employers whose philosophies and operating practices align with

their own beliefs (BSR, 2001). For example, some companies have found that

having "family friendly" policies for example "Pick and Pay" has given them a

competitive advantage in attracting customers. Also the identification by

employees as a "good company to work for" has given them a competitive

advantage in attracting and retaining employees, due to change in employment

policies, which are family sensitive.

5

1.3.6 Cost savings on business operations

Some CRS initiatives, particularly environmentally-oriented and workplace

initiatives can reduce costs dramatically by cutting waste and inefficiencies or

improving productivity. For example, many initiatives aimed at reducing emissions

of gases that contribute to global climate change also increase energy efficiency,

reducing utility bills (MERG, 1999). Many recycling initiatives also cut waste-

disposal costs and generate income by selling recycled materials. In the human

resources arena, work-life programs that result in reduced absenteeism and

increased retention of employees often save companies money through increased

productivity and by a reduction in hiring and training costs.

1.3.7 Productivity and quality

Company efforts that result in improved working conditions, lesser environmental

impact, or greater employee involvement in decision-making often lead to

increased productivity and reduced error rate (Swanepoel, 1994). For example,

companies that improve working conditions and labour practices among their

offshore suppliers often experience a decrease in defective or unsalable

merchandise. A study of 15 large employers conducted by the Medstat Group and

the American Productivity and Quality Center found that health benefit programs

can increase productivity and decrease company costs related to absenteeism,

turnover, disability and health-care claims by 30%.

1.3.8 Corporate citizenship

Customers, investors, regulators, community groups, environmental activists,

trading partners and others are asking companies for more and more detailed

information about their social performance. In response, leadership companies

are responding with a variety of reports and/or social audits that describe and

disclose their social performance on one or several fronts. As part of this move

toward greater disclosure, many companies are putting increasingly detailed

information about their social performance — even when it may be negative — onto

6

their publicity accessible websites. Business is being personified, hence a clarion

call for it to be a good citizen.

1.3.9 Contemporary issues and trends

Recent years have seen a growth in the breadth of topics being considered under

the "corporate social responsibility" umbrella. Included among these are corporate

governance issues, such as how boards of directors are chosen and

compensated; religious freedom in the workplace; "cyber ethics" issues of access

to and privacy linked to information technology, both for consumers and

employees; consumer concern over the use of genetically modified organisms in

agriculture; and the new demands brought about by the increased interest in

environmental sustainability.

1.4 THE NATURE OF THE PROBLEM IN SOUTH AFRICA

1.4.1 The political past

The previous political dispensation of South Africa is fundamental to the

understanding of the present socio-economic conditions in the workplace and

business performance. During the era of sanctions against apartheid, the state

attempted to use corporations to supply key resources, such as oil extracted from

coal through SASOL, as well as arms for its war in Angola and other

destabilisation operations in Southern Africa through the state-owned arms

manufacturing enterprise, Armscor (Fine & Rustomjee, 1996). This placed

corporations at the heart of the government political machinations; hence some of

them became targets of boycotts and international isolation. A dual labour market

was created, whereby white South Africans were incorporated into a limited

welfare state and were accorded labour rights, whereas black South Africans were

formally excluded through a repressive labour regime (Joffe, Mailer & Webster,

1995).

Apartheid's pattern of industrialisation and land use also had significant

implications for the environment, and these impacts were primarily felt by the poor

7

(Cock & Koch (eds.), 1991; Ngobese & Cock, 1997; Hamann, Booth &

O'Riordan, 2000). The mining industry, based on migrant labour, became

responsible for generating huge amounts of solid waste, within minimal

rehabilitation and little obligation to workers or neighbouring communities for the

health and pollution impacts. Power generation, based entirely on fossil fuels like

coal and uranium, created significant pollution and contributed to some of the

highest level of respiratory diseases. Under apartheid, corporate irresponsibility

towards the environment was rife, and gestures undertaken in relation to

demonstrate responsibility to the environment were mostly confined to support for

nature conservation, rather than the majority of the workers (Alperson, 1995).

In the context of apartheid, the role of the corporate sector in South Africa was

always considered as controversial. Indeed, the nature of the relationship

between business and the apartheid state was central to the major South African

historical debates, which became known as the race/class debate (Alperson,

1995). Questions revolved around the extent to which industry benefited from the

apartheid regime, or even played an active role in the establishment and

reproduction of the system.

1.4.2 Legislation

Due to the fragmentation of the socio-economic situation in South Africa, which is

characterised by job inequalities, deteriorating workplace conditions, economical

skewed society and general environmental degradation, and the prevalence of

HIV/AIDS, the corporates have become under scrutiny to respond by acting in a

social and environmental responsible manner. Post 1994 has seen a myriad of

legislation in the hope of readdressing the problems associated with the past.

Some of the legislation entail, Black Economic Empowerment (BEE), The

Financial Charter, The Minerals Rights Act, Affirmative Action, Skills Development

Act and other codes like the Mervyn King Commission Report on Corporate

Governance. These drivers have put pressure on the companies to factor in

CSER in their organisational strategies.

8

1.5 THE NEED FOR THE STUDY

Since the advent of the demise of apartheid, the South African business

environment has been reconfigured. This has also been made possible by the

phenomenon of globalisation, which has further forced business to be in sync with

international trends. The response by South African business to these emerging

trends has been differential. Those with global visionary footprints have embraced

international norms with a profound return on investments, examples include SAB-

Miller and TELKOM. The practice of CSER is one of those international norms,

which has become an important cornerstone for the survival of business.

As business in South Africa is in transition to meet the new global order and

demands, this presents an opportunity to investigate the practice of CSER and

highlight its benefits to those companies, which still have a traditional approach to

doing business. By embarking on this study, hopefully a paradigm shift will be

initiated in viewing CSER as an important business practice.

1.6 THE SUB-PROBLEMS

The increase of stakeholder activism and monitoring of the behaviour of business

presents a new challenge for management. Furthermore issues of accountability,

disclosure and human rights now take much more priority than the traditional

normative of doing 'business just for business sake'. Checks and balances are

constantly being put into place on how business operates and makes profit.

These are through different regulatory frameworks, that is, from government,

business organisations, civil society, social movements and other voluntary

interested parties. The effects of not considering the above drivers and pressures

on the company's overall strategy can lead to further sub-problems. These sub-

problems can be classified into four main categories, that is, productivity levels,

profitability, image or reputation and sustainability. Therefore the non-

conformance of a firm in factoring CSER as part of part of business practice will

result in negative performance and the opposite is also true.

9

The following variables will form the basis and measure for the case studies and

literature review in arguing for the business case for CSER in South Africa, that is:

Productivity levels;

Brand image or reputation;

Profitability; and

Sustainability.

1.7 OBJECTIVES OF THE STUDY

The main goals of the study are to:

Argue the business case for CSER as a sine qua non to the achievement of

the following variables:

Increase in productivity levels;

Enhanced brand image or reputation;

Profitability; and

Sustainability of the firm.

Define and contextualise CSER in the South African business environment.

Provide recommendations on best practices to achieve CSER for South

African Business.

1.8 REVIEW OF RELATED LITERATURE

There has been much research considering business and its social responsibilities

in recent decades (Sethi, 1995). This research has attempted to define the

concept of corporate social responsibility (Bucholz, 1991; Carroll, 1979, 1991;

Davis, 1973; Frederick, 1987; Frederick, Post & Davis, 1992; Jones, 1980;

Stone, 1975; Wood, 1991) and provide guidance to companies on how best to be

socially responsive (Ackerman & Bauer, 1976; Frederick, 1987, 1994; Preston &

Post, 1975). It has also encouraged greater emphasis on the consideration of

morals and ethics in business decision-making and business behaviour (Frederick,

10

1986, 1987; Swanson, 1995). Attempts to provide a theoretical framework for the

area of corporate social responsibility have also been proposed in the form of

models of corporate social performance (Wood, 1991; Wartick & Cochran, 1985;

Jones, 1983).

While much of this research involves consideration of the responsibility of

companies to undertake certain actions (or to desist from making certain actions),

Gray, Owen and Adams (1997) also identify a responsibility on the part of

companies to provide an account of those actions. They see corporate social

reporting (CSR) as a means by which companies can provide an account of their

socially oriented actions in order to discharge their accountability to society. CSR

has been defined as "the process of communicating the social and environmental

effects of organisation" economic actions to particular interest groups within

society and to society at large" (Gray, 1996:3) and since the mid-1970s it has been

the subject of much research attention (Neu, Warsame & Pedwell, 1998).

Despite increasing evidence of the use of other media (Zeghal & Ahmed, 1990),

CSR concerns itself with self-reporting by organisations via the annual report. It is

predominantly concerned with reporting on organisation-society interactions

relating to the natural environment, employees, communities and customers

(Gray, Kouhy & Lavers, 1995a) and "is predicated on the assumption that

companies do have wider responsibilities than simply to make money for their

shareholders" (Gray, 1996:3). It may be undertaken voluntarily, as a result of

legislation, or as part of a code of practice (Gray, 1995a). In fact, according to

Gray, (1995a), the practice of CSR is not universally recognised or universally

defined and there is little about CSR, which is not contestable and indeed

contested. In general, there appears to be little regulation governing CSR

(Adams, Hill & Roberts, 1998).

The nature and extent of CSR appears to vary between different countries (Gray,

1995a), which some believe indicates that the practice may be culturally relative

(Lewis & Unerman, 1997). However, with the increasing globalisation of business

and the international harmonisation of accounting standards, country- and culture-

specific factors abound (Adams, 1998). Much empirical investigation of CSR has

11

been undertaken and in order to place this in some form of theoretical context,

research has also attempted to explain why companies might engage in CSR. It

has been contended that the practice may be undertaken as it provides useful

information for investment decision-making (Adler & Milne, 1997; Gray, 1995a;

Mathews, 1993; Tilt, 1994) or can assist in staving off potential regulatory

pressure to be more socially responsible (Adler & Milne, 1997; Gray, 1995a;

Watts & Zimmerman, 1978).

It has also been seen as a means by which companies may attempt to manage

their stakeholders in order to gain their support or approval (Gray, Dey, Owen,

Evans & Zadek, 1997; Roberts, 1992). Legitimacy theory posits that CSR helps

to legitimise companies' actions (Adams, Coutts & Harte, 1995; Adams, 1998;

Deegan & Rankin, 1996, 1997; Gray, 1995a; Guthrie & Parker, 1989; Neu, 1988;

Patten, 1991, 1992) while political economy theory contends that it may help a

company to define itself and project its beliefs, norms, values and perceptions

(Adams, Coutts & Harte, 1995; Cooper & Sherer, 1984; Guthrie & Parker, 1990).

CSR can be divided into three main strands of reporting: reporting on human

resources; the environment; and community involvement. In general, international

surveys of CSR have tended to concentrate on the (so-called) developed countries

(Gray, 1996, but see Andrew, Gul, Guthrie & Teoh, 1989; Choi, 1998) and on

larger companies within these countries (Adams, 1998). The results of these

surveys indicate that companies place the greatest emphasis on human resources

disclosures although the types of human resources disclosure vary (see Adams,

Hill & Roberts, 1995; Gray, 1995a; Guthrie & Parker, 1990; Hackston & Milne,

1996; Roberts, 1990; Savage, 1994). However, much of this disclosure is

mandatory in contrast with the comparative lack of mandatory reporting

requirements in relation to the environment and the community. During the past

decade, most research has tended to focus exclusively on the incidence of

environmental disclosure among companies (Adams, 1998; Gray, 1996;

Mathews, 1997).

The concerns of employees, information about products and instances of

community involvement may be documented in annual reports, but there do not

12

appear to be many accounting researchers who now report on these matters

(Mathews, 1997:496, emphasis in original).

1.9 METHODOLOGY

This study provides a systematic unpacking of all the issues, which pertain to a

historical perspective, theoretical discourse of this practice, trends and emerging

issues shaping the practice and in the final analysis a justification for the CSER

incorporation into the organisational strategy for meeting the triple bottom line.

The evidence or argument for the business case of this practice is provided in the

form of an analogy of successful and worst performances of business

organisations either incorporating CSER or not embracing it at all. The business

case arguments focus on global corporate performances and South African

business community. To achieve this, a more theoretical approach was used.

1.9.1 Research design

Qualitative approach

The study took a primarily desk study approach, focusing more on the review of

textbooks, grey literature (newspapers, business magazines, other business

publications) print media, secondary sources and electronic sources (website

sources), business journals.

Quantitative approach

The interpretation of statistical tables, financial statements and yearbooks showing

percentage contributions by South African companies to different CSER issues

was also done.

1.9.2 Target population

The study entailed an analysis of companies, which in general were:

13

Listed on the Johannesburg Stock Exchange.

Had a large global corporate footprint in terms of visibility, ecological and

consumer awareness.

Part of the League Tables of Corporations well renowned in terms of their

CSER practices.

Reporting on their activities in yearly corporate publications.

Global players, especially with reference to European, Asiatic and American

corporates.

From a diverse spectrum of industry, that is, Food and Beverages, Retail and

Leisure, Extractive (mining), Financial and Insurance, General Manufacturing

and Processing, Energy and Chemical and others.

Information from civil society movements like, Corporate Watch and Monitor on

corporations behaving badly served to justify some of the case studies.

1.9.3 Location of data

A wide variety of corporate publications like, annual reports, social reports,

statements of the companies listed on the Johannesburg Stock Exchange, other

European Stock Exchange like the FTSE were used for the research. The CSR

practices of these companies were also derived from the Trialogue: South African

Corporate Social Investment Directory/Handbook 2000 (P), 2001 (4 th), 2002 (5th)

Editions, KPMG Survey of Sustainability Reports 2000-2001, South African

Grantmakers Association (SAGA) 2000 Annual Report, South African Year Book

2002/2003, King Committee Report on Corporate Governance for South Africa

(2002), Corporate Research Foundation: South Africa's most promising

companies (2003), Nedlac annual report 2000-2001. The data collection was

achieved by means of a form of content analysis. Berelson (1952) defines content

analysis as a research technique for the objective, systematic and qualitative

description of the manifest content of communication. This form of analysis has

been used in numerous studies of CSER practice (Adams 1998; Gray, 1995;

Hackston & Milne, 1996). Needless to say that statistical information was used to

substantiate some of the arguments for the CSER case.

14

1.10 ASSUMPTIONS

The notion that CSER is altruistic and that business can never achieve profitability,

productivity, reputation and sustainability from it, is a misnomer. Demands for

responsible business conduct as a means to realise all of the above categories,

outweigh the narrow profitability focus.

What weighs particularly heavily is the business case, which considers both the

social and environmental responsibility to meet all the categories. This

assumption is widely accepted by business at global level, hence this could also

correct for local conditions. Sound corporate responsibility practices and

appropriate reporting allow businesses to protect their 'license to operate', to

reduce costs, risks and liabilities, to increase employee and customer loyalty and

secure customer advocacy for the business, and to reduce the likelihood of costly

and unwelcome surprises (Little, 1998:2). In this study the above assumptions will

form the basis to argue the business case for the incorporation of CSER in the

pursuit of meeting increased profitability, brand image, productivity levels and

sustainability of the firm.

1.11 LIMITATIONS OF THE STUDY

The length of the study in the form of dissertation handicaps, the use of a

quantitative methodological approach, which could further strengthen the business

argument case. The use of the latter mentioned approach is appropriate for a

longitudinal study, of which would have been impossible for the purposes of the

partial fulfilment of the requirements for this course given the time constraints and

level of study. The literature available in South Africa with regards CSER is still

very sketchy as the field is gradually taking shape. The tendency in such a

situation is the bias in the nature of some of the international literature, which

would prescribe for their contexts, rather than the local business conditions. This

study could form the basis for a more advanced empirical research on the same

subject, especially considering the gaps, which exist in this field in South Africa.

15

1.12 OUTLINE AND OVERVIEW OF THE STUDY

Chapter One provides a brief synopsis of the concept of CSER. Considering the

drivers behind the rapid development of this business practice further expands

this. The major elements of CSER are provided in the literature review, by means

of a reference to categories of research, which have been undertaken. The whole

methodological approach to this study is interrogated and limitations thereof

explained. The conclusion links the aspects of CSER discussed for further

clarification in the preceding chapter on conceptualisation.

Chapter Two forms the main section in the interrogation of the concept of CSER.

The introduction to this chapter considers a historical perspective and

development of this concept. A traditional definitional view is mentioned base as a

starting point and furthermore this translates into the articulation of disclosure and

rhetorical of CSR. From this disclosure analysis, a contemporary view of CSR as

a business practice is discussed by reference to its main dimensions. The

emergence of CSER in terms of (the inclusion to the element of environment)

business practice is emphasised in terms of its linkages to organisational strategy,

structure, management and behaviour. In the final analysis formulating an

operational definition for the study makes a more concerted effort. This definition

is formulated on the basis of the consideration of the South African context.

Chapter Three draws out the institutional and policy frameworks related to CSER.

A global perspective is provided and the same environment and its dynamics

explained. The major global stakeholders in the pursuit of CSER are detailed and

examples of their actions explained. In the final analysis the implications of these

global trends are provided and how they correct for local contexts discussed.

Chapter Four considers the local context of CSER by giving a deep analysis of the

historical continuum and business development in South Africa. The political

economy of this business practice is emphasised by reference to stakeholders

involved in this regard. A contextualise form of CSER for South Africa is explored

and described, in view of the socio-economic challenges to be addressed. The

16

different business strategies employed as part of responding to CSER are

mentioned and their implications are discussed in the next chapter.

Chapter Five forms the main section of the study. It integrates the different

positions articulated in the previous chapters by providing empirical research

findings from the different sources of information. The justifications of CSER as a

good return on investment strategy are motivated. International success stories

are provided before zooming in to the local context. These justifications are also

explained in an opposite perspective, to provide a more unbiased view.

Chapter Six integrates the whole study by formulating recommendations for

aspirant newcomer companies to the practice of CSER. Also the

recommendations are targeted at current implementers of CSER on how to

possible add better and more value to their operations. In conclusion, an overall

broad emphasis is placed on the need for CSER in South Africa.

1.13 CONCLUSION

The above framework has been outlined in order to bring about a broad synopsis

and a logical thread of argumentation in the study. This chapter was also aimed at

providing a central understanding of the main aspects of the study in a fractured

manner, as most of the discourse analysis will be explained in depth in the

preceding chapters. The main focus in the forthcoming chapters will be an

emphasis on the business case of CSER, through deliberate motivations and

justifications.

---o0o---

17

CHAPTER 2

THEORETICAL CONCEPTUALISATION AND PERSPECTIVES

2.1 Introduction

This chapter is aimed at the theoretical development of the concept of CSER and

its dimensions or perspectives. The discourse analysis in this section will entail a

review of the historical context, dimensions and contemporary views of CSR. It is

important that this aspect be covered so as to have an informed direction of the

study. In the analysis of the concept of CSER, various definitions are provided,

due to the existence of differentiated interpretations accorded to it by various

stakeholders. Emanating from the definitional delineations, a working definition of

CSER will be constructed. The most important part of this chapter will be to

discuss and give meaning to the major categories of the research. This is so

because; the integral goal of the study is to show the importance of CSER as a

contributory factor to the profitability, sustainability, reputation and increase of

productivity levels in the overall performance of the company. Therefore in this

chapter the latter mentioned variables will be conceptualised and their importance

explained. Also other related and commonly used CSER concepts with regard to

enterprise strategy will be mentioned.

2.2 Background of CSR

The concept of Corporate Social Responsibility (CSR) also known as 'noblesse

oblige' (literally meaning, nobility obliges) has a long history. Both the Judeo-

Christian and Muslim belief systems incorporate views of giving, from the rich to

the general poor, and from rich entrepreneurs in particular to the community (for

example, the Quaker movement spawned Joseph Rowntree, George Cadbury and

Lever Brothers community building during the nineteenth century in Britain, and

Henry Ford and Robert Johnson [of Johnson and Johnson] in the United states).

Similar belief systems have led to CSR activities in other countries as well, most

notably the Ghandian movement in India.

18

There has been mush research considering business and its social responsibilities

in recent decades (Sethi, 1995). CSR has gradually changed since the 1970s,

from 'philanthropism' (charity giving), to 'trusteeship' (directors as trustees of the

interests of shareholders) and to the contemporary role of active partnership and

engagement with the community (Canon, 1995). CSR is fast becoming an

important issue for both civil and corporate leaders. The free market spirit that

predominates today's' global economy, has led to globalisation from 'above', as is

exemplified by corporate influence in trade and economic policy and from 'below'

by the emergence of powerful civil society, grassroots movements and non-

governmental organisations (NG0s) as countervailing forces (Korten, 1999).

The 1990s have put a global spotlight on the behaviour and actions of the

corporate world and other institutions deemed not to be delivering on social and

environmental related issues. The pressure being exerted on the corporations by

external stakeholders is forcing them to become more accountable and

transparent in their activities, and to report not only on their financial performance,

but also on the social and environmental bottom line (Triple Bottom Line)

(McIntosh, 2000). These new developments have seen a rise in a myriad of

institutions tackling CSR issues, research and Corporations becoming more

involved in CSR activities. Due to the global importance of CSR the United

Nations (UN), through its directorate of Human Development made the year 2000

theme on "Globalisation of Business and Social Responsibility". A subsequent

follow up, to this has been the formation of the UN Global Compact, which is a

voluntary set of principles, standards to promote a legal binding regime for

corporate codes of conduct (UNCTAD, 2001). The nine aspects covered in this

code include issues on labour standards, human rights and environmental

protection.

As earlier mentioned, civil society has risen as a countervailing force against the

hegemony of corporations and other institutions viewed as behaving unethically.

The recent protests at the Seattle World Trade Ministerial conference, Davos

World Economic Forum, the annual World Bank/IMF meeting and the Barcelona

Group of 7 gathering of industrialised countries are testimony to this call for social

19

and environmental accountability (Financial Times, 2002). Corporations have also

become targets of similar protests. Accusations against Transnational

Corporations (TNCs), National Business not behaving socially responsible have

soared (Klein, 2000). Allegations of exploitative labour and human rights abuses

and Union busting by big brand names like, Nike, Gap, Wal-Mart and Starbucks

Coffee have resulted in the concerned corporations rethinking their CSR activities,

in order to avoid confrontations with the pressure groups in a bid to protect their

images (Hopkins, 2001). Other TNCs on the list include well-known brands like

McDonalds, Monsanto and Royal Dutch/Shell Oil. The issues of concern cover a

broad spectrum and include low wages, offering minimal health benefits, depleting

rain forest, using unsafe pesticides, bio-engineering agriculture crops and

colluding with violent and repressive regimes (Klein, 2000).

The above brief synopsis was aimed at giving the scope and direction on the

phenomenon of CSR and its growing importance as a field of research and study.

It was also important to put it into context so as to understand the underpinnings,

which make it an important area for research.

2.3 THE RHETORIC OF CORPORATE SOCIAL RESPONSIBILITY (CSR)

The dichotomy between business and societal goals always underpins the

conflictual views, which are positioned by business and social proponents, and

thus explains the difficult of consensus on the definition of CSR (Halal, 1986).

Professor Milton Friedman, a liberal economist and a strong opponent of CSR

emphasised that, there is only one, social responsibility of companies 'to use its

resources and engage in activities designed to increase its profits (Fjell, 2000).

Other anti-CSR proponents like Sternberg (1980) argue that, business is owned by

its shareholders - any money spent on so called CSR, is a breach of what

business stands for and cannot act as proxy government in meeting social and

environmental needs. Drucker (1976) a social proponent refutes this view on the

premise that business is not all about profit maximisation, but altruism, life and to

have core values and a sense of social purpose beyond making money. Apart

from some of the rudimentary criticism of CSR, the pressure on business to play a

role in social issues continues to grow, especially through civil society institutions,

20

which now wield power and influence over business operations (Lord Holme &

Watts, 2000).

As in most other instances where existing practice has been challenged by critics

and reformers, the term 'corporate social responsibility' has been given several

meanings and emphases by those who have written on the topic. The wide

divergence of definitional perspectives include, CSR as a moral perspective by

business (Smith, 1988); responsibility of company to operate profitably and serve

those interests in society which will be beneficial in realising its bottom line

(Steiner & Steiner, 1994), investment in society to maintain company reputation

(Korten, 1994). These views have been manifested in the establishment of

philanthropic foundations and trusts, which are generally separated from core

business activities, with much of its beginnings in United States. This perspective

has been coined, as the classic/traditional approach to CSR as it encourages a

system of paternalism, fostering over-dependence, and a social environment that

is ultimately unsustainable if the business operation is decommissioned (Warhust,

1998). This approach is reactive and mitigates negative social and human rights

impacts and has been accused of establishing charities, which are exploitative

(Canon, 1995).

While the concept of CSR as defined by numerous authors has been unstable to

some extent, the status of profits in the context of social responsibility still remains

an important aspect of defining CSR, hence the move towards the triple bottom

line of reporting. Carroll (1999) alludes to this statement by stating that, economic

foundations serve as the basis and the driver to implement any other processes.

2.3.1 Arguments against and for CSER

There are opposing views on CSER. The following opinions represent the

different ideological perspectives and motivations for accepting and rejecting

CSER. Friedman (quoted by Jansen van Rensburg, 1992:70; Levin, 1987:14;

Malan, 1992:8; Roodt, 1987:4) argues that CSR is by its nature a subversive

doctrine, which would undermine the foundations of a free society. Organisations

should rather engage in activities designed to increase profits, as this is the core

21

foundation of their existence. Any social obligation is regarded as anti-profit

maximisation. Friedman outlines that the executive is likely to spend money

differently from the way other stakeholders might have spent it. The other fact is

that the executive is trained in the field of creating wealth and not social policy,

hence to embrace CSR is immaterial to the profit motive. He insists that the

government is the only legitimate vehicle for addressing social concerns (Freeman

& Liedtka, 1991:93; HSRC, 1990:15; Levin, 1987:16).

The above arguments by Rensburg, are refuted by Stead and Gray (1990:19) was

they argue that CSER promotes the public image and competitive ability of the

organisation in a complex environment. It also promotes the interests of

shareholders, since new opportunities for dividends or profit sharing are formed

and it promotes the protection of resources. Furthermore, the social involvement

of organisations will prevent interference of the government by legislation that may

force organisations to pay attention to social problems.

Levin (1987:15-16) also supports the arguments by Friedman against CSR. His

assertions convince that CSR is futile, because the executive is unable to

anticipate the social consequences of his actions, thereby imposes additional

costs on the shareholders, customers and employees. Acceptance of CSER is

viewed as a violation of trust, because the owners employ the executive as an

"agent serving the interests of his principal". It has even been said that CSR

amounts to theft, because it constitutes giving away the shareholders' money

(Levin, 1987:16). Mulligan (quoted by Levin, 1987:19) suggests that at the bottom

of Friedman's objections to CSR, is an accurate paradigm and he disagrees with

this violation of trust.

The opponents of CSR based their views on the assumption of a near perfect

market. However, externalities and imperfections in the competitive environment

are evident (Levin, 1987:17). Due to the current social and economic inequalities,

there is a vast need in South Africa for corporations to be involved in CSER. The

dubious role of some of the companies during apartheid, is still a mark, which is

attached to them, hence a proactive social response will assist to repair their

image. Currently the debate taking rounds, on whether to litigate companies,

22

which assisted this system by exploiting the labour market, is testimony on why

the targeted companies should move, before overall performance is affected.

Society expects business to confront issues not looked at by the government.

Therefore, Jansen van Rensburg (1992:67) and Levin's (1987:18) conclusions that

business should not accept CSR as an integral part of the objectives of the

organisation is flawed. By instituting CSR programs, Levin (1987:18) contradicts

himself by postulating that the advantages of the free enterprise system can

accrue to a greater number of people, thereby instilling legitimacy by society who

is the consumers of the products.

Jansen van Rensburg (1992:70-72) summarises several arguments against CSR

by stating that organisations should only deliver quality goods and services and

thereby fulfil the needs of the consumer. The economic system within which the

organisation functions, excludes the possibility of social responsible behaviour.

Social involvement may have a detrimental influence on the competitive ability of

the organisation due to the time spent on it, the cost involved as well as unskilled

and less competent workers that may be employed on the basis of social

considerations. The organisation cannot take over the role of the church as the

dominant social institution and there is no sense in spending money on CSR

programs without measuring the return on investment properly. Freeman and

Leidtka (1991:73), the HSRC (1990:15) and Jansen van Rensburg (1992:70)

agree that CSR promotes incompetence, because managers involve themselves

in areas beyond their expertise, namely repairing society's ills. They do not

possess the necessary political and social skills.

The opponents of CSR based their views on the assumption of a near perfect

market. However, externalities and imperfections in the competitive environment

are evident (Levin, 1987:17). Due to the social inequalities and vast need in South

Africa, CSR has become more important. Society expects business to confront

issues not looked at by the government. Therefore, Jansen van Rensburg

(1992:67) and Levin (1987:18) conclude that business should accept CSR as an

integral part of the objectives of the organisation. By instituting CSR programs,

Levin (1987:18) postulates that the advantages of the free enterprise systems can

accrue to a greater number of people.

23

Jansen van Rensburg (1982:7) further argues that managers have no broad public

legitimacy and therefore no right to force their opinion of public interest on society.

Freeman and Liedtka (1991:92-93) base their views against CSR on various

reasons why the concept of CSR should be abandoned. These positions maintain

that, CSR accepts the prevailing business rhetoric of "capitalism: love it or leave

it". It is regarded as inherently conservative because it starts with standard

received wisdom and then attempts to "fix" its unintended consequences and

views business and society as separable from each other, each with a distinct

ethic, linked by a set of responsibilities. The underlying principle of the language

of rights and responsibilities as expounded by CSER is, itself limiting and often

irrelevant to the world of the practicing manager. What is regarded as important

are the models of CSER (for example Corporate Social Responsiveness) that

accept the terms of the debate as set forth by Friedman's argument that view

corporations only as profit maximisers.

The HSRC (1990:14-15) offers similar arguments against CSER, but with more

focus on the cost implications of this practice. The arguments refer that; the costs

of CSR programs may harm some organisations financially and result in

unemployment. An organisation is regarded as only having an economic

responsibility towards the community, namely the maximisation of profit and the

provision of goods and services to promote its own welfare; hence expectations of

the community with regard to the role of an organisation are unrealistic. CSER

programs will lead to the destruction of the free enterprise approach; therefore

rather the government should take the responsibility for the stability and quality of

life of the community.

The benefits of CSER are not only confined to profit and making goods and

services required by the community. Proponents for CSER propagate that the

benefits of CSER to the organisation in the long-term is to uplift the community

within which it functions, since laws can be promulgated to make provision for all

circumstances hence responsible behaviour is essential for the survival of an

orderly society, thus resulting in the sustainability of the company to operate

without fear of crime or other social impediments which could be detrimental to its

24

performance. CSR programs may benefit shareholders too and may have a

positive influence on the price of shares. In contrast to van Rensburg (1992:67),

McIntosh (1995) believes that executives possess the competence and authority

to pay attention to community problems and make a contribution to the welfare of

society at large. Therefore the profitability and growth of the company is directly

affected by its CSER investment in the community. On the issue of social

responsiveness, organisations are more flexible and politically unrelated and in a

better position than the government to address social problems without delay.

This has positive spin-offs for the image, perceptions of workers thus leads to

loyalty and increased productivity levels. Despite arguments against CSR, no

organisation can afford not to become involved with CSR programs (Jansen van

Rensburg, 1992:72). Organisations are rooted in communities and it is in the

interest of business to be socially and environmentally responsible.

2.3.2 Research categories or variables

From the arguments brought forward for the business case for CSER, this will be

exemplified by considering the extent to which each category is either enhanced or

reduced by the behaviour of the company. These categories, which were

mentioned earlier on, as sub-problems will now be explained.

(a) Sustainability

Sustainability is considered to be a business mega trend in the 21 st century. Until

recently, the general view was that the best way for companies to contribute to the

good of society was by pursuing maximum profit and therefore the highest return

for the shareholders or owners. But with increasing regulation by governments

and other codes of conduct the need to report on the triple bottom line, that is the

environmental, social and economic performance, has become necessary for

accountability to stakeholders and for the company to present itself in a favourable

light. Multiple studies show the positive correlation between shareholder value

and corporate sustainability (Elkington, 2001). In some instances overlooking, this

aspect has led to confrontation and conflict with consumers and society on specific

28

level. Some of these categories are crosscutting hence in specific evidence narra-

tions; it will be difficult to discern them. Due to the different nature of core

business, type of industry and products being offered, some companies will exhibit

strong characteristics of specific categories than others.

2.4 DEFINING CSR

Due to increased attention, complexity and of the amorphous nature of the

concept of CSR, it should be dissected to provide meaningful insights on how it is

useful as a business practice.

2.4.1 Traditional definition

The traditional approach of CSR is based on the arguments provided by Milton,

Friedman (Levin, 1987; Mintzberg, 1983) which emphasises that CSR

undermines the foundation of a free society, since the responsibility of business

lies with making as much money as possible for its shareholders — the classical

economic theory.

The traditional approach to CSR is shown in Figure 2.1, below. The model views

social responsibility from a 'moral and commercial imperative'. The former

emphasises 'philanthropy' in response to appeals for help from society and social

investment in projects of long term importance to the company, that is,

foundations, schools, clinics et cetera. The commercial imperative merely looks at

the provision of goods and services to society, which is the core activity of the

company.

The approach can be summarised as, successfully running a business by paying

regard to the interest of employees, investors, suppliers and customers, while

making charitable donations and social investment in the local community, in

response to perceived moral imperatives, as well as to ensure the maintenance

of a healthy workforce. Some firms do more of this than others.

25

issues. Rosinski (2000:30) supports this by stating that, increasing severity of

ecological and social problems leads to economic hardship, hence CSER should

concern these issues.

Sustainability is defined as the performance by business in a social, environmental

and financial sound way in order to guarantee the future growth of the company

(Leipziger, 1998). The relevance of sustainability differs from one sector to

another due to different activities and processes (Rosinski, 2000). For instance in

the mining and chemical industry sector, the pressures for environmental

responsibility greatly affect the financial bottom line, hence the need for increased

CSER. Other aspects related to the environment can entail products and services.

The social context of sustainability would refer to community perceptions of the

company, respect for human rights, customer health and safety, issues of bribery

and corruption, competition and pricing. The economic sustainability facets can

include the value chain that is, customers, suppliers, providers of capital and

public sector (Global Reporting Initiative, 2002:36). In South Africa the King

Commission Report on Corporate Governance, which was commissioned in 1992

and has subsequently been revised, stipulates that all listed companies on the

Johannesburg Stock Exchange (JSE) must follow, the Code of Conduct. In the

study, this Code will also be used to assess some of the companies on their CSER

practice. Recently the Social Index and Financial Charter were also launched, but

at the time of writing this report, are still in their infancy stage. In the study, the

indicators mentioned in the discussions above will be used as reference points to

solicit for the targeted company's business case for CSER.

(b) Brand image or reputation

A number of studies have attempted to correlate if there is a link between a

company's visibility, brand image and CSER. According to Hackston and Milne

(1996) most of the studies show some correlations. King (2000) also concedes to

this view, by explaining that, adopting CSER principles influence reputation and

the value of a corporation's reputation. As the above concepts of visibility, brand

image and reputation are commonly used simultaneously, for the purposes of

delineating a definition, the term 'reputation' will be used. Drawing on Elkington's

26

(1996:75) definition, reputation is the perceptual representation of a company's

past actions and future prospects that describes the whole overall company's

appeal to all of its key constituents when compared with rivals'. Reputations are

built from stakeholder perceptions of corporate behaviour and because

stakeholders are diverse [each group with particular interests and needs] they are

often contested (King, 2000). This contestation means that the ability to identify,

respond to and mediate between the perspectives of different stakeholder groups

is critical for corporations to gain, maintain and benefit from a good reputation.

Therefore if CSER is well executed it will lead to profitability. The brand logos add

to the tangibilising of the company's reputation, hence corporations with larger

footprints find themselves prone to attack and scrutiny of their behaviours by

external stakeholders. For this research the indicator for reputational value will

entail perceptions and behaviour of stakeholders in dealing with the company.

This could be changes in consumption and investment patterns, employee

satisfaction, productivity and community acceptance, for example, boycotts,

protests, withdrawal of investors, name shaming et cetera.

(c) Productivity levels

Whereas productivity will generically refer to the enhanced increase in production

output by a company's employees, in this study this will also encompass the

internal social dimension of the firm. Productivity levels will entail key performance

aspects surrounding labour practices and human rights in the workplace. The

indicators for measuring will relate to the GRI (2000) Social performance

indicators, which I will list below:

Employment - employee benefits beyond those mandated, for example,

disability, better wages, education and contributions to health care. In South

Africa, the HIV/AIDS workplace policy is relevant and other pieces of

legislation.

Labour management relations - provision of formal worker representation in

decision making or management, including corporate governance. Freedom of

association and collective bargaining; Child Labour; Forced Labour and

27

Indigenous Rights especially for the global corporations operating in host

countries and Diversity and Opportunity. In South Africa, compliance with

legislation like Employment Equity Act, BEE, Mining Score Card, other

industry, sector specific regimes and the recent Financial Charter will provide

evidence.

Health and Safety - evidence of substantial compliance with the International

Labour Organisation (ILO) Guidelines for Occupational Health Management

Systems; formal agreements with Trade Unions and compliance with the

Labour Relations Act of South Africa.

Training and Education - descriptions of programmes to support the continued

employability of employee's ant to manage career endings. Specific policies

and programmes for skills management or for lifelong learning, example will be

the Skills Development Act.

The indicators above will correct for both the South African CSER environment

and the global perspectives.

(d) Profitability

Profitability of the organisation as evidence for factoring in CSER, does not imply

the narrow definition of liquidity (money), but covers all economic activities, both

tangible and intangible, direct and indirect. With direct profitability indicators a

company's increase or decrease in market share, its contribution to CSER

compared to other competitors both in terms of infrastructure or cash, investors

contributions, losses in sales volume, debt and any other financial impacts which

can affect the bottom line due to good or bad corporate behaviour. Indirect impact

could be the loss of profitability due to the value chain behaving unethical and the

trickle effect being felt by the main company. In kind donations will also fall into

this category.

The categories explained above and the relevant indicators will form the

benchmarks to argue the CSER business case both at global and South African

The 'Moral 1 Imperative' Social

Responsibility

The Benefits of Business Investment Jobs created

Taxes paid Goods & Services

Technology Transfer Import and substitution

Export earning Development of suppliers

Human resources development

The 'Commercial

Imperative'

Business

29

The traditional models involve two forms of social responsible practice:

philanthropic giving and the implementation of codes of conduct. These

approaches are re-active and mitigate negative social and human rights impacts

in response to the 'moral imperative' through add-on social spending measures

(Warhurst & Lunt, 1997). Such measures are generally costly and non-productive.

This is akin to the concept of cleaning up pollution once it has occurred through

adding on expensive end-of-pipe treatment technologies, like water treatment

plant, dust precipitators (Kolodner, 1994).

Figure 2.1: The Traditional Model of Corporate Social Responsibility

Source: Adapted from David Logan, Corporate Citizenship International (1997)

Over recent decades, the establishment of philanthropic foundations and trusts,

often supported by public policy incentives, epitomised best practice in the

industrialised countries. However, the function of 'charitable giving' or 'philan-

30

thropic gestures' was generally separated out from core business activities. This

is in contrast, to contemporary views on CSER. In many instances, this approach

has been criticised for being exploitative (Logan, 1997).

In developing countries, large state enterprises and TNCs took responsibility for

providing the social welfare needs to their working communities. This included the

provision of education, healthcare, leisure facilities and subsidised basic foods. It

therefore followed that if the corporation's economic activities were well managed

and resources used efficiently, good social behaviour followed.

This traditional approach, however, did not take account of the complex conflicts

of interest that may arise over time and amongst different stakeholders regarding

what constitutes an efficient use of resources. Moreover, it encouraged a system

of paternalism, fostering over-dependence, and a social environment that was

ultimately unsustainable if the corporate operation was decommissioned (Canon,

1995:21).

2.4.2 A multiplicity of definitions

Due to the amorphous nature of CSR, different interpretations have ensured.

According to Bushney (1994) a differentiated focus by varied experts portend the

following:

Amba-Rao (1993:554), Levin (1987:11) and Malan (1992:7) in Bushney, refer to a

lack of consensus regarding a precise definition of CSR. This maybe attributed to

CSR terms, which are value-laden and susceptible to ideological and emotional

interpretations. The CSR if business remains a field without boundary conditions

or unifying concepts. Despite the ambiguities regarding CSR, some definitions are

presented.

Epstein (1987:109) and Roodt (1987:7) refer to the internal and external aspects

of the concept of CSR. Epstein (1987:109) sees CSR as the discernment of

specific issues, problems, expectations and claims upon organisations regarding

31

the consequences of organisational polices and behaviour on internal and external

stakeholders. The focus is upon the products of corporate action.

Roodt (1987:7) sees social responsibility as a key business area, typically

concerned with the external environment issues of community and consumer

relations as well as the internal environment issues of working conditions, racial

discrimination, education and training as well as the notion of fairness.

Farmer and Hogue (1985:4) refer to socially responsible actions by a corporation

as those actions that, when judged by society in the future, are seen to have been

maximum help in providing necessary amounts of desired goods and services at

minimum financial and social costs, distributed as equitably as possible. This

definition is difficult to apply in a practical way. Who can speak for society as it is

now, or as it will be in future? How will society assess the relative values of

providing goods and services? Who can decide how costs should be distributed?

When defining CSR, social responsible actions reflect moral values, which cannot

be determined apart from particular situations. Farmer and Hogue (1985:5)

believe a corporate goal system that makes social as well as economic sense is

necessary to suggest what society wants them to do.

Figure 2.2 shows a continuum of corporate goals, ranging from pure profit

maximisation to socially oriented action:

p 1 2 3 4

Profit maximisation: Profit Growth: Social goals: Social goals: social goals social goals break even money losses incidental also important on money acceptable

Figure 2.2: Goals systems of organisations (Farmer & Hogue, 1985:6)

32

Uys (1987:9) feels social accountability is a more acceptable term for what will be

required of organisations operating a First World/Third World environment. He

defines social life of accountability as a commitment to be co-responsible for the

quality of life within the community from which the company draws its resources

and gets its support.

To integrate social accountability in a business philosophy and plan requires a

new kind of executive (Clutterbuck, 1981:4; Uys, 1987:9-10; Wagenaar,

1987:21). The manager becomes a social entrepreneur who combines material

resources, knowledge and social forces to achieve the desired result.

The attention has shifted from social responsibility to social responsiveness by

several writers. Since the emphasis on responsibility focused exclusively on

business obligations and motivation, action or performance was being overlooked.

According to Carroll (1991:40) social responsiveness emphasised corporate

action, proaction and implementation of social role. Social responsiveness refers

to the extent internal corporate processes anticipate and adjust in ways that are

consistent with changing societal expectations (Malan, 1992:14).

In recent years, the term Corporate Social Performance (CSP) has emerged on an

inclusive and global concept to embrace CSR, social responsiveness and the

entire spectrum of socially beneficial activities of business. CSP refers to the

process and outcomes engaged by an organisation to meet its social

responsibilities and manage change within its social environment. It is a general

term, which reflects an organisation's openness to its social environment, its ability

to change and the way it makes choices with respect to social issues (Malan,

1992:14).

In sum, the concept of CSR is based on corporate legitimacy and values of

management (Amba-Rao, 1993:554). Its development ranges from perceiving

business obligation based on minimal legal and economic criteria and

accountability to the shareholders, to broad societal interests. Others explain CSR

in terms of management orientation, which has changed historically from profit

maximising to trusteeship to quality of life management (Amba-Rao, 1993:554).

33

Business and society are interdependent and are bound by a reciprocal "social

contract" which is seen as the core idea of CSR.

Core elements underlying the concept of CSR are summarised by Jansen van

Rensburg (1992:55-58).

CSR implies an internal responsibility (to satisfy the need of employees and

stakeholders) and an external responsibility (to satisfy the needs of the broader

community;

- CSR is an organisation's acceptance of social and environmental obligations

beyond the requirements of the law;

- CSR means part voluntary restraint of profit maximisation;

- CSR is related to responsible decision-making;

- CSR programs are integral part of the organisation's strategic planning

process; and

- CSR implies communication between an organisation and the internal external

stakeholders about the nature of CSR programs.

2.5 CONTEMPORARY PARADIGMS/APPROACHES

2.5.1 The environment

The practice of CSR has been rapidly evolving global and this is manifested by its

inclusivity of new areas of focus. One of these aspects has to do with the

"greening" of the environment. More especially extractive, chemical, processing

and manufacturing industries are affected by this new emphasis. Recently, the

Food and Beverages companies have also been under attack in terms of their

environmental responsibility. The issue of genetically modified foods, addition of

34

additives in fizzy drinks and their effects on people's health, for example, obesity,

heart diseases have become common cases.

Within the manufacturing industry, compliance in terms of labelling to specify the

health hazards associated with the products has enhanced the importance of the

environmental focus as one of the integral aspects of CSR. Therefore the

strategic approach, has now been to integrate the environmental issue hence, the

reference to Corporate Social and Environmental Responsibility (CSER), of which

from this instance will the term to be used in the study.

Motivations for this inclusion emanate from the "polluter pay principle"' which

stipulates that, the user of the environment should be responsible for its cleaning

and any other human consequences which ensure from the operations. Examples

of the penalties, which can result from negligence, deliberate flouting or

consummation with profit at all costs will be presented in the forthcoming chapters

in which the business case is argued.

The drivers for the integration of social responsibility and environmental

management into operations are diverse, often sector specific and typically include

competitive advantage, enhanced markets access, competitive pressure to

improve resource productivity and eliminate waste, supply chain incentives,

environmental regulation and broad array of stakeholders concerns (MERN,

1999).

From the motivations above, CSR cannot be considered independently of the

effects within the biophysical and economic spheres. Therefore environmental

and economically responsible production within the business strategy is essentially

components of overall CSER.

2.6 THE TRIPLE BOTTOM LINE (TBL)

The emphasis on the sustainability agenda due to popularising of the

environmental has influenced business accountability and format of reporting. In

addition to the economic (financial) and social reporting, the environment aspect

35

has become the new addition in order for a business to meet its sustainability.

This new format of reporting was propagated by John Elkington (1996) and termed

the Triple Bottom Line (TBL). It has also become one of the criteria for listing on

the money market in Europe. South Africa business practice, is gradually

gathering momentum to embrace this contemporary business practice. This is

reflected in many annual financial reports, which are emphasising reporting on the

three bottom lines, that is, the financial status, social justice and environmental

bottom lines.

2.7 DIMENSIONS (CORE ELEMENTS) OF CSER

Various concepts and dimensions on the character of CSER are being used to

express the rights and obligations that corporations have towards those they work

with and work for. In order to have a holistic comprehending of the CSER

practice, it is of prime importance to understand some terms, which are mostly

used to illustrate the dynamic nature of the concept. A semantic analysis of these

terms will assist in clearing misconceptions and a better understanding of the

indispensability of CSER.

CSER and much of the related nomenclature reflect new different assumption and

create varied images. This is so, because different countries, industries and

business environmental conditions differ, hence there are different areas of

emphasis.

2.7.1 Corporate Social Investment (CSI)

The concept of CSI is context specific, in this case more profoundly a South

African localised version of CSER. The difference is more of semantics, than the

objectives, which underlie it. Its emphasis is on a calculated strategic "community

investment" which will add value and ability to realise a "return on investment".

Basically what it entails will be to choose to invest in the projects, which are

beneficial to the corporate goals.

36

The philosophy of CSI is based on a win-win philosophy for the company and the

community. An in depth analysis of this concept only points to its similarities to

CSER in its intent process and practice than a distinct business practice.

2.7.2 Corporate social citizenship

The notion of corporate citizenship is a frequently involved concept, projecting

both a claim to the entitlements and responsibilities that flow from citizenship. A

business is personified as a citizen and thus should abide to the conduct, laws,

ethical values prescribed by that environment to claim "good citizenship".

Therefore to acquire the status of good citizenship, the behaviour of the

corporation is under scrutiny that is in terms of its core business, product,

operations and stakeholder association. Any digression or flouting of this social

and environmental contract is punishable by influencing the financial bottom line.

Later on, the examples of Shell in Nigeria and the Brent Spar debate will be used

to highlight how the financial bottom line can be affected by abrogating the

principle of good citizenship.

Corporate citizenship pre-supposes the idea that business has an obligation to

return something to the communities in which it invests (Newell, 2002:93). Central

to this philosophy, lies the ability of an organisation to identify and meet the needs

of all its stakeholders as part of its strategic planning (Cleene, 2000:283).

2.7.3 Corporate accountability

In contemporary usage, the notion of accountability continues to express this

concern with the application of checks and institutional constraints on the exercise

of power (Schendlers & Plattner, 1999:14). The term implies a measure of

answerability (providing an account for actions undertaken) and enforceability

(punishment or sanctions for poor performance or illegal conduct) (Coetz &

Jenkins, 2001).

Companies are held accountable by regulators in the performance of their triple

bottom line. These regulators can be internal and external stakeholders. Internal

37

to the firm includes employees, management, health, safety regulations et cetera.

External could entail the whole value chain, community government and civil

society. Corporate accountability is generally involved to describe patterns of

disclosure, auditing and monitoring of business (Zadek, 1997).

2.7.4 Corporate governance

This issue of corporate governance has been debated and its nature has evolved

since the rise of the public limited company in 1800s when the owners of a

company were different from day to day managers (World Bank, 2002). Broadly

defined corporate governance refers to the sets of rules that allow shareholders,

that is, owners of the company, to shape the business' actions and overall

direction. The issues on corporate governance have recently revealed that they

have an overarching impact on the financial bottom line of the company, if not

adhered to. The Enron saga in USA exemplifies this. In South Africa efforts in this

regard have been realised through the inception of the King Report on Corporate

Governance. This corporate code of conduct now forms the framework of

reference for companies, which want to list on the Johannesburg Stock Exchange.

2.7.5 Corporate social and environmental performance

This is self explanatory, but it is key to state that the performance of a business is

not only in terms of its internal process but also considers its external social and

environmental role. Different stakeholders using different criteria of assessment,

which makes it risk judge its performance, and difficult for the management to

meet some of the challenges which come with attempts to meet profitability. More

explanations on this concept were discussed in 2.2.2 above.

2.8 MEASUREMENT OF CSER

There is much interest and a growing literature on the measurement of what is

meant by corporate social and environmental responsibility. The impact of the

social and environmental performance of a business can be measured in many

different ways to ascertain whether it is meeting its TBL. Social and ethical

38

accountability (accounting, auditing and reporting) is a voluntary process of

accounting and disclosure that an organisation implements to ensure that its

ethical performance and social impact are in line with its mission and stakeholders'

expectations. It is therefore a tool for corporates to measure Corporate Social

Investment and corporate citizenship.

2.8.1 Measurement principles

Briefly, the raison de' etre' for CSER measurement can be based on the principles

of a business organisation's configuration. This configuration is classified into

three levels:

Principles of social and environmental responsibility

Process of social and environmental responsiveness

Outcome as they relate to the firm's societal relationships

2.8.1.1 Level I: Principles of Social and Environmental Responsibility

The level of application of these principles is institutional and is based on a firm's

basic obligation as a business organisation. Its value is that it defines the

institutional relationship between business and society, and specifies what is

expected of any business. This level of the CSER model itself is all about the

relationship between business and society at large and it has three major

elements:

Legitimacy concerns business as a social institution, and frames the analytical

view of the interrelationship of business and society.

Public Responsibility concerns the individual firm and its process and

outcomes within the framework of its own principles in terms of what it actually

does.

39

Managerial Discretion whereby managers and other organisational members

are moral actors. Within every domain of corporate social and environmental

responsibility, they are obliged to exercise such discretion as is available to

them, toward socially and environmental responsibility outcomes.

2.8.1.2 Level II: Process of Social and Environmental Responsiveness

Corporate social and environmental responsiveness is a business's capacity to

respond to social pressures. This suggests the ability of a business organisation

to survive through adaptation to its business environment. To do so, it must know

as much as possible about this business environment, be capable of analysing its

data, and must react to the results of this analysis. But the environment of

business is not static; it is a complex and ever changing set of circumstances.

Three elements are identified as basic elements of this level of the CSER model:

Business Environment Scanning indicates the information-gathering arm of

business and the transmission of the gathered information throughout the

organisation.

Stakeholder Management. A stakeholder is defined as any group or individual

who can affect or affected by the achievement of the firm's objectives for

example: Owners, Suppliers, Employees, Customers, Competitors, Domestic

and Foreign governments, Nonprofits organisations, Environmental and

Consumer Protection Groups and Others. Stakeholder Management refers to

mapping the relationships of stakeholder to the firm (and among each other)

whilst finding, listening and meeting their seeking to balance and meet

legitimate concerns as a prerequisite of any measurement process.

Issues Management. Having identified the motivating principles of a firm and

having determined the identities, relationships, and power of stakeholders, the

researcher now turns to the main issues, which concern stakeholders.

40

2.8.1.3 Level Ill: Outcomes

The main focus of measurement is the third level of the CSER model. To

determine if "CSER makes a difference" all of the stakeholders relevant to an

issue or complex of issues must be included in any assessment of performance.

There are again, three main categories:

Internal Stakeholder Effects are those that affect stakeholders within the firm.

An examination of these might show how a corporate code of ethics affects the

day-to-day decision making of the firm with reference to social and

environmental responsibility. Similarly, it can be concerned human resource

polices such as the positive or negative effects of corporate hiring and

employee benefits practices.

External Stakeholder Effects concern the impact of corporate actions on

persons or groups outside the firm. This might involve such things as the

negative effects of a product recall, the positive effects of community related

corporate philanthropy, or assuming the natural environment as a stakeholder,

the effects of toxic waste disposal.

External Institutional Effects refer to the effect upon the larger institution of

business rather than on any particular stakeholder group. Several

environmental disasters made the public aware of the effect of business

decisions on the general public for example. This new awareness brought

about pressure for environmental regulation, which then affected the entire

institution of business rather than one specific firm.

2.9 MEASUREMENT OF CSER

2.9.1 Social and Ethical Accounting, Auditing and Reporting (SEAAR)

SEAAR is a cyclical process that organisations employ to measure performance in

two ways: social impact and ethical behaviour. Measurement of performance is

anchored in the organisation's mission and guiding values but carried out through

41

comprehensive stakeholder engagement. SEAAR closely follows the financial

accounting, auditing and reporting cycle in that it requires an organisation to

develop an accounting system to monitor its performance through data capture,

analysis and report writing. This is followed by the auditing/verification of reports

to ensure the integrity of the accounting and report writing processes. Finally, the

audited report is published and made accessible to stakeholders. This cycle

culminates in an organisation holding itself accountable to its stakeholders and

doing so in a transparent way.

The Institute spearheads this method for Social and Ethical Accountability — South

Africa (ISEA — SA). Other institutes in South Africa are also emerging with an

interest in this practice for example, African Citizenship, Sustainability. Other

forms used to measure (CSER) will be considered in the next chapter on codes of

conduct for business.

2.10 SUMMARY BENEFITS OF CSER

From the above theoretical discussion and especially on the argument provided for

the case CSER the reasons why a business should take a wide range of

responsibilities in society are threefold: -

- for moral or ethical reasons;

because of a responsibility to the society and environment it operate in; and

- because it makes commercial sense.

42

Figure 2.3: Three reasons why corporate social responsibility may be important for business

Source: Grimshaw, Howard & Wilmott (Future Foundation, 2000:14)

The above-mentioned reasons are not independent; they are inter-linked and are

all-important in the debate about the role of business. Although there is some

form of consensus developing about business roles and responsibilities some

differences still remain revolving particularly around the different positions taken

on the 'moral' as opposed to 'commercial' role of companies. Some of the

arguments for and against have already been discussed in this chapter. The

general position from the previous argumentations can be summarised as follows:

1. Firstly, the company may have some fundamental moral or ethical beliefs

about various issues — human rights or worker exploitation, for example.

These may be the views of the company managers (currently the most

important influence), the company's employees and customers (likely to

become increasingly important) or other constituent parts (for example,

suppliers or shareholders).

Secondly the company may feel that it has a responsibility to give

something back to the society it operates in. This may not be completely

altruistic since companies benefit from a thriving, stable and cohesive

society and as such may see that they not only have a duty to contribute to

43

the stability of society but will also, in turn, benefit from it. It does, of

course, particularly apply to larger companies, although smaller companies

could feel the same about local community in which they operate.

3. Finally, there is the much more hard-headed issue of whether it is actually

in a company's commercial interest to take a wider role in society. This is

the main debate and case for this study.

A broad synopsis of the theoretical unpacking of all the dimensions, definitional

perspectives and other related nomenclature in this chapter, lead for a need to

constitute a practical definition for the study. This will be discussed in the next

section.

2.11 DEFINITION FOR THE STUDY

2.11.1 Stakeholder theory

Although there is as yet, no universally agreed definition of the term, CSER

requires business to acknowledge that its responsibilities extend beyond

maximising profitability and shareholder value, but to meeting the needs of other

interest groups. Often referred to as "stakeholders" these groups may be defined

as those with which the company closely interacts — such as employees, suppliers

and local communities — or more broadly to include national government and

societies as one whole.

For the purpose of this research the working definition will be premised on the

contemporary Stakeholder Theory as expounded by Pava and Krausz (1995).

This perspective emphasises a pro-active CSER approach, which is contingent in

nature and takes into account a diversity of circumstances. This is the approach,

which is now popularly adopted by many firms.

This theory assumes that the firm is responsible and answerable to its

stakeholders and the larger community directly affected by its activities. These

stakeholders are both internal (directly related to the production and profitability of

44

the corporation) and external (extending beyond the doors of the corporation). It

further emphasises that social and environmental responsibility becomes an

integral part of wealth creation process — which if properly managed should

enhance competitiveness of business and maximise the value of wealth creation

to society (Carroll, 1996:55). In other words CSER should be an important aspect

of the triple bottom line (Elkington, 1998).

The justification and rationale for the selection of this definition, is the simply fact

that the core operational functions of the firm are based on the production of

goods and service for the market, which is comprised of all the above mentioned

stakeholders. Therefore it is business logic that the firm should establish sound

relationship with these stakeholders in order to capture market share and maintain

a sustainable market. The promotion of community and other stakeholders'

interests is important in mitigating risk, which could affect the financial bottom line.

TNCs who have experienced global protests against their business practices are

testimony to the fate, which can befall business failing to embrace CSER. The

approach of stakeholder's partnership minimises this risk.

2.12 CONCLUSIONS

This chapter highlighted the theoretical framework of the concept of CSER. The

analogy provided will form the basis to articulate arguments for the business case

in engaging CSER. It is also significant to note that CSER as an umbrella term for

the study will be synonymous used to refer to other protracted social and

environmental definitional perspectives, nomenclature like CSR, CSI and Strategic

Philanthropy. These concepts virtually relate to the same theoretical framework.

Therefore with this in perspective, it is appropriate to interrogate a global

perspective of CSER in practice in the next chapter.

---o0o---

45

CHAPTER 3

POLICY AND INSTITUTIONAL FRAMEWORKS OF CSER

3.1 INTRODUCTION

In this chapter, the policy guidelines, institutional frameworks, benchmarks, and

corporate codes of conduct pertaining to CSER will be discussed from an

international and South African perspective. A background on the emergence of

these frameworks both at local and global level will be explained. The growing

importance and understanding of these frameworks and institutions as measures

of business compliance with CSER, is essential in understanding how the

research sub problems of productivity, profitability, reputation and sustainability

can be influenced. Therefore in light of this, motivations on how these policy

frameworks are of importance to business will be interrogated in order to justify

their relevance. In the conclusion a summary is provided on the importance of

policy and institutional frameworks as argument for the business case of CSER.

3.2 BACKGROUND

Business is now resorting to have broader trust and legitimacy through voluntarily

compliance to preferred benchmarks, standards codes and guidelines on CSER.

Although much focus is on specific issues, other companies are now focusing on

broader issues. Although the extent of the comprehensiveness of the social and

environmental responsibility of a company could be debated, there is need to find

the common minimum ground for this responsibility. The first of this element could

be compliance with the laws of the country in which the company operates or the

adherence to the international acceptable policies. In a globalising world, CSER

becomes more complex, especially for business operating at this level.

Globalisation has expanded the set of stakeholders far beyond the immediate

community in which a business operates thus making it vulnerable to comply with

more responsibilities. For example the listing of SAB in Europe, has exposed it to

more vulnerability to comply with much more defined social and environmental

46

responsibilities in order to meet its bottom line. Apart from the fact that much of

international business has been making efforts to act as social and environmental

responsibility citizens of a new global society, it is argued that they are few global

guidelines to help and support them in their quest for good corporate citizenship

(Kofi Annan, 2002:10).

Globalisation is thus one part of the rationale for having global guidelines on social

and environmental responsibilities for business (Kofi Annan, 2002:10). This has

also been influenced by the current policy orientations in many developed and

developing countries and the diminishing role of the public sector in the economic

and social spheres of society. The increasing large and unpredictable private

capital flows across national boundaries have substantially reduced the leverage

of governments, particularly those of developing countries in controlling their

economic fate. This they have used as a scapegoat to pressure business to take

social and environmental roles. Due to an unprecedented economic growth in

many parts of the developed world, there has also been an increase in corporate

wealth benefits and influence in decision-making. This has made these

corporations much more visibly and thus put them under scrutiny by society of

their behaviour. As a consequence of this may of these international businesses

have resorted to compliance with those codes of conduct dictated by the social

and environmental context in which they operate.

3.3 DEFINITION OF CORPORATE CODES OF CONDUCT

Most initiatives towards establishing a corporate strategy for CSER are laid down

in codes of conduct. A code of conduct can generally be defined as a written

policy or statement of principles intended to serve as a basis for commitment to

particular business behaviour (Wood, 1999). A code of conduct is mostly defined

and developed by companies themselves and generally do not carry any legal or

regulatory obligation (McIntosh, 1997). Corporate codes are voluntary initiatives,

which have been adopted by the business sector itself. These codes range from

vague declarations of business principles applicable to international operations, to

more substantive efforts at self-regulation.

47

3.4 GROWTH OF CORPORATE CODES OF CONDUCT

In this section an international historical perspective on the growth of corporate

codes of conduct will be discussed. It is important to do so, as this will highlight

how the practice of CSER has become important in addressing issues, which

pertain to sustainability, productivity, reputation and profitability.

3.4.1 The 1970 — 1980 decade

In the 1970s, there was the emergence of more critical attitude towards

transnational corporations (TNCs) in developing countries in particular due to

major efforts to develop international standards for corporate behaviour. The first

proposal came from the International Chamber of Commerce's 'Guidelines for

International Investment of 1972'. This was driven from the corporate sector itself,

even though supplemented mostly by the efforts emanating from international

organisations, particularly the United Nations agencies. In 1974 United Nations

set up its Centre on Transitional Comparisons and led to the, Draft Code of

Conduct on TNCs, which set a framework for regulation. Several specialised UN

agencies also developed codes concerning particular aspects of TNC behaviour.

These included the ILO's Tripartite Declaration of Principles Concerning

Multinational Enterprise and Social Policy (1977) and UNCTAD's proposed codes

on Restrictive Business Practices and on the Transfer of Technology. In 1976 the

organisation for Economic Co-operation and Development (OECD) adopted its

Declaration on International Investment and Multinational Enterprise. This was a

pre-emptive emphasis on business responsibility (Robinson, 1983).

The International Labour Organisation in 1975 also promulgated codes of conduct

focusing on the working conditions of employees and social aspects (Jenkins,

2001:2-4).

The trend of both national and international policies from the late 1970s was

toward voluntary and deregulation and the same period saw a trend toward

voluntary corporate codes of conduct. These began to be adapted particularly by

US corporations, in response to the bad publicity received by TNCs. This was

48

mostly as result of the ITT scandal and also revelations about bribery and

questionable payments by many leading US companies (Kline, 1985:23-25). The

first move of corporate codes was predominately concerned with issues of

questionable payments. A study of 174 codes found that the more than half of

them covered questionable payments as passage for politicians to US Congress

and this led to Foreign Corrupt Practice Act of 1977 to control the behaviour of

corporations (Kline, 1985:103). The latter were seen as a means of regulation of

TNCs by international bodies, which would support of supplement national state

regulation.

Whereas support for codes in the 1970s came mainly from the South, particularly

from Southern governments, in the 1990s support came mainly from the

developed world (Jenkins, 2000). The international codes were seen in the main

as an attempt to redress the balance between the growing power of TNCs and the

nation states, particularly in the South, where they invested. They emerged from a

perception that the growth of gint international companies posed a threat to

sovereignty of small, poor states. A common perception at the time was that of

"sovereignty at bay". International regulation was seen as necessary in order to

ensure that developing countries shared in the gains from the growth of

international corporative activity (Vernonn, 1971). By the mid-1980s however,

Kline (1985:108) comments that, the public pressure for adoption of codes had

decreased.

3.4.2 The second wave

The second wave of corporate codes began to emerge in the early 1990s and saw

a renewal of interest in corporate codes of conduct. The main areas that are now

addressed in these contemporary codes are environmental and labour issues,

which contrasts with the emphasis found in the first wave of corporate codes. The

OECD inventory of 246 codes found that 60% referred to labour standards and

59% to environmental stewardship, in contrast, only 23% codes in the 1990s

addressed the issue of bribery (Jenkins, 2000).

49

During this phase, companies like Levi Strauss became the first to establish their

own code, which was called Business Partner Terms of Engagement. It was then

followed in the United States by a number of other clothing manufacturers and

retailers (Sajhau, 1997). By the mid-1990s, the fashion for codes of conduct had

spread to Europe and to a number of companies in the United Kingdom. Many

companies on the continent were beginning to take them up. Again clothing

manufactures and retailers were among the first to adopt codes covering labour

conditions, these included C & A, Otto Versand in Germany and the Pentland

Group in the United Kingdom (Jenkins, 2001:5). Although the range of issues

covered by the corporate codes of the 1990s tends to be more focused than the

comprehensive efforts of the 1970s, in another respect the scope of the more

recent codes is broader. Whereas the 1970s emphasised the activities of TNCs

and their subsidiaries, in the 1990s this was extended to include a responsibility

for the labour and environmental practices of their suppliers as well as their direct

activities. Indeed for many companies, the major impetus behind their code of

conduct is to ensure acceptable behaviour on the part of their subcontractors.

Although comprehensive codes are relatively limited in number, they are being

introduced by a growing number of companies, and there is a trend for the scope

of codes to expand as company experience with them increases. Their

significance, if any lies in fact that they are being adopted by leading corporations

in their respective fields, such as Levi Strauss and Gap in clothing, Nike and

Reebok in sports goods, and the major British supermarkets in retailing, (Jenkins,

2001:5). Although sharing a common nomenclature, corporate codes of conduct

are very different from the international codes that were proposed in the 1970s,

particularly the UNCTC Draft Code.

The 20th century wave of corporate codes has tended to focus on the impact of

TNCs in two main areas — social conditions and the environment. They are part of

a much wider debate concerning the impact of globalisation on labour and the

environment, which is also reflected in the call for social and environmental

clauses in trade agreements and within the WTO. Here international trade union

organisations, development and environmental NGOs and the corporate sector

50

itself have all contributed to the demand for some form of code of conduct for

international business (Jenkins, 2001:6).

3.5 MORPHOLOGY OF CODES OF CONDUCT

In this section the differentiated application of codes of conduct according to

sector, type and the scope will be discussed. The main reason why attention has

to be paid to these codes is that they are benchmarks on which a company's

response to CSER is judged. The pressures, which are brought to bear on the

behaviour of a company by consumers, and other stakeholders, are based on

whether some of codes are being implemented. It is also important to highlight

that the categories of this study and their indicators are drawn from these codes.

3.5.1 Sectors

One of the striking characteristics of the recent growth of codes of conduct is the

tendency for them to be concentrated in particular sectors. The OECD inventory

of codes of conduct indicated that the leading sectors in terms of number of firms

were trade, textiles, chemicals and extractive industries. Detailed case studies

indicates that codes of conduct addressing labour issues tend to be concentrated

in sectors such as garments, footwear, sports goods, toys and retailing. These

sectors supply consumer goods and usually involve well-known brand names.

They have also been the sectors on which NGOs have focused their campaigns to

promote ethical trade. The reputational category of the study is embedded in this

explanation. In contrast, environmental codes are most commonly found in quite

different industries. The sector that has led in this respect has been the chemical

industry, but other sectors where such codes are common include forestry, the oil

industry and mining. These tend not to be consumer good industries, although in

the case of oil, they do produce well-know brand names. They are largely process

industries, which have significant environmental impact, and may also involve

hazardous processes.

51

3.5.2 Types of Codes of Conduct

Codes of conduct come in a wide variety of different forms, and this can be a

cause of some confusion. While it is possible to classify codes in a number of

ways, below are some of the five main types of codes identified:

Company codes

These are codes that are adopted unilaterally by companies. They can relate to

their own operations as, for example, with Shell's "Revised Statement of General

Business Principles" or be applied specifically to their suppliers as in the case of

Levi Strauss's "Business Partner Terms of Engagement.

Trade association codes

These are adopted by a group of firms in a particular industry. Like company

codes, they tend to be a unilateral measure adopted y the firms. They may be

adopted by associations of firms based in developed countries, as in the case of

British Toy and Hobby Association code, or by developing country firms, such as

the Bangladesh Garments Manufacturers and Exporters Association (BGMEA)

code and the Kenya Flower Council code.

Multi-stakeholder codes

These are adopted as a result of negotiations between several stakeholders,

including firms or their industry representatives. NGOs, Trade Unions and

governments may also be involved in the development of such codes. The UK's

Ethical Trade Initiative Base Code is an example of such a multi-stakeholder

approach.

Model codes

These are designed to provide a benchmark of what a particular organisation

regards as good practices in terms of codes of conduct. They are not generally

52

applied in practice, but intended as a model which companies or trade

associations could follow. These have been proposed, both by Trade Unions, for

example, the ICFTU's Basic Code of Conduct covering Labour Practices, and by

NGOs like Amnesty International.

Inter-governmental codes

These are negotiated at an international level and are agreed to by national

governments. They date back to the 1970s when both the OECD's Guidelines for

Multinational Enterprises and the ILO's Tripartite Declaration of Principles

Concerning Multinational Enterprises were adopted.

3.5.3 Scope

The selection of which issues are covered (and which are avoided) is a key

element of any code of conduct. Several surveys of individual company, sectorial

and comprehensive codes provide summaries of the coverage of a sample of

codes. The most comprehensive type of code of conduct would refer to the core

labour standards identified by the ILO. These are derived from the following ILO

Conventions:

Freedom of Association (C87)

Right to Collective Bargaining (C98)

No Forced Labour (C29, C105)

Minimum Age (C138)

No Discrimination (C111)

Equal Remuneration (C110)

In addition, such a code might refer to a number of other aspects of labour

conditions, which have not been included within the core labour standards, such

as provisions on health and safety, maximum hours of work, wages and security of

employment. The above ILO conventions provide most of the indicators to be

used in the evidence of the productivity and sustainability categories of the study.

53

Unfortunately the OECD data on the coverage of labour issues does not

distinguish between the different types of codes. This is an important limitation

since it is likely that codes drawn up by international organisations or by social

interest groups, will have a more comprehensive coverage of core labour

standards than those of individual companies or business groups (Kolk, 1999).

This loophole is used by pressure groups on those companies who conveniently

disregard international norms and devise self-interest ones. In the next chapter

this will be revisited when the issue of labour standards as a factor of loss of

business is discussed.

3.6 CRITIQUE OF CODES OF CONDUCT

3.6.1 Coverage

There are several levels on which a code can operate. First, it can apply only to

the companies own operations and thus operates as a declaration of business

principles. Some companies, such as the Sara Lee Corporation, have both a code

of principles, which it applies to its operating units, and a separate set of

guidelines used in selecting suppliers (Sajhau, 1997). In many cases the code of

conduct is specifically designed to ensure that suppliers comply with certain

standards. For example, over 40% of the codes covering labour issues in the

OECD survey placed obligations on suppliers. This was particularly prevalent in

the garment industry where 26 out of 32 company codes survey were addressed

to suppliers and contractors (Jenkins, 2002:24). However, there is the question of

how far along the supply chain these standards are met. In clothing industry,

multiple subcontracting relationships are common and it is not always clear

whether the code only applies to immediate suppliers to the firm, or to sub-

subcontractors as well. There is also the issue of whether the code applies only to

enterprises, or whether it also includes home workers, who are not formally

employed by the manufacturer or its suppliers. None of the UK company codes

studied by Ferguson covered home-workers or small-scale farmers (Ferguson,

1994:4). The only code that has been specifically developed for home workers is

the Australian Code of Practice for Home workers developed by the Textile,

Clothing and Footwear Union of Australia. Home-Net has been active in initiating

54

discussions of implications of codes of conduct for home workers, and is now

involved in the UK's Ethical Trade Initiative. The implication and relevance of this

summation to the study, is that CSER cannot only be ascribed to the internal

processes of the company but extends further to include the value chain which

also affects the categories of sustainability, productivity, profitability and

reputation. The boycotts of British supermarkets, for example Sainsbury, for it's

outsourcing its agricultural products from the repressive regime in Zimbabwe, are

a stark case.

3.6.2 Substance

Although the range of issues that are addressed by different codes gives a very

broad picture of their coverage, a simple checklist approach does not provide a full

picture of the extent to which a code achieves and improvement in labour

conditions. Thus, for instances, codes may specify a maximum number of hours

per week, but this can be as high as 60 hours in many cases. Similarly, in some

cases, the code only requires the observance of local requirements, for example,

in terms of minimum wages or the use of child labour. It could be argued that a

code of conduct that requires that a supplier or subsidiary operate within the law is

not a very stringent one. Due to this fact whereby companies take advantage of

weak host countries labour policies end up encouraging sweatshop conditions,

thus evoking the might of social movements resulting in name shaming and other

labelling strategies to tarnish the reputation and image of the company. Social

movements actually become the custodians of the rights of the affected workers.

For the company to redress its reputation takes a lot of resources and affects all

the aspects of productivity, profitability and sustainability.

3.6.3 Implementation

For a code of conduct to be meaningful, it must have clear methods of

implementation and means to ensure that it is being complied with. The adoption

of a code involves a statement of principles concerning business behaviour, which

is not necessarily the same as application of those principles in the firms

operations. The International Organisation of Employers, for example, estimates

55

that 80% of codes are really statements about general business ethics, which

have no implementation methods (quoted in ILO, 1998:7). In practice,

implementation can only be guaranteed where there is an element of independent

monitoring of codes of conduct. This has often proved to be a contentious issue

because firms are reluctant to accept such arrangements. Even where there is a

commitment in principle to independent monitoring, different stakeholders may

differ over what they consider "independent" in this context. Of the 246 codes

included in the OECD inventory, only just over 10% included provisions for

independence (external) monitoring, only four out over 100 company codes had

such provision (Jenkins, 2000). A survey of 132 codes by Kolk (1999:168) came

to very similar conclusions. In 41% cases there was no specific mention of

monitoring, and in a further 44% the firms themselves monitored compliance.

Less than 10% of company codes and 5% of those set up by business groups and

some form of external company codes found that none of them made a clear

commitment to systematic monitoring and independent verification. This is despite

the fact that model codes often emphasise the importance of such systems. There

are some exceptions to this general rule. The Gap in El Salvador has set up an

independent monitoring working group in co-operation with Interfaith Centre on

Corporate Responsibility, Business for Social and the National Labour Committee

(Sajhau, 1997). Involvement of other groups in monitoring is more in the case of

sector wide codes than individual company codes and, not surprisingly, is

particularly evident in the case of codes that have been initiated by NGOs (Seyfan,

1999). However the general conclusion that can be drawn is that, in most cases,

stakeholder involvement in implementation is minimal. This is paradoxical since

the discourse of corporate responsibility is replete with references to stakeholders

and the need to take account of more than narrowly defined financial returns. It is

in this area that the contrast between rhetoric and reality is particularly jarring. In

the absence of independent monitoring and verification, it is difficult to evaluate

whether company codes are applied extensively in practice or remain mere

expressions of good intentions.

There is also the further question of the sanctions imposed when a code is not

adhere to. In many cases no clear sanctions are defined. Around 60% of the

company and business association codes in the OECD inventory do not specify

56

any penalties for non-compliance (OECD). When a supplier code is applied, it

may specify that failure to comply will result in a contractor being dropped,

although this is not always the case. It can also be argued that same approach is

not necessarily desirable, since both ultimately suffer from such sanctions and the

workers themselves, ending up without a job. Therefore, in addition to the need

for monitoring, it is also desirable that there should be clear guidelines on how to

deal with compliance failure. Apart from these implementation gaps, the onus is

on the company to be proactive and voluntarily factor in implementation

mechanisms into its CSER strategy. The neglect of this draws attention of

consumers and other pressure groups thus resulting in negative impact on overall

sustainability.

3.7 GLOBAL STAKEHOLDERS AND CSER

Although the longest number of initiatives aimed at enhancing CSER have been

undertaken by business, national governments participation in alliances of

business representatives and non-governmental organisations (NG0s), civil

society movement's inputs have also become necessary watchdogs in monitoring

and implementation of social and environmental responsible practices. Corporate

codes of conduct have increasingly become a matter of concern outside the Board

level of individual companies. Businesses have included not only branches and

franchises but also suppliers in the coverage and implementation of their codes.

The attitudes of the stakeholders and business applying CSER are quite varied

and needs attention. As already mentioned companies need to be outward

looking in terms of achieving comprehensive sustainability, hence the need to

have a social and environmental barometer to check on productivity, reputation

and profitability which could easily be affected by irresponsible behaviour. In light

of this, it important that the role of external stakeholders be discussed.

3.7.1 Social movements

The 1990s saw a considerable increase in NGO activism around issues of

corporate responsibility. No doubt this was partly a response to the perception

that governments were not effective in controlling the activities of large

57

corporations, following the deregulation of the1980s. There was also an increased

awareness of the power and influence of TNCs among NGO activist, who became

concerned that unregulated globalisation would have negative social and

environmental consequences in developing countries. Three major areas of the

impact of TNCs became a focus of NGO campaigns. First there were issues of

labour rights. These were taken up by development NGOs such as Oxfam,

Christian Aid and the Catholic Institute for International Relations. Some focused

on specific issues within their remit, such as Save the Children Fund focused on

child labour. Campaigning specifically around labour issues, new NGOs or

coalitions of NGOs emerged, such as the Clean Clothes Campaign in Europe and

the Coalition for Justice in Maqulia in the Americas.

A second area that came to prominence was human rights, particularly in relation

to the actions of security forces and the rights of indigenous peoples. Mining and

oil companies, opening up new sources of natural resources in the South, often

found themselves in conflict with indigenous groups in the areas where they

operated. Frequently the nation state, interested in expanding exports and

increasing tax revenues and extractive royalties, repressed local opposition to the

expansion of extractive activities. Thus TNCs found themselves conniving, at

least tacitly, in the suppression of the indigenous population. The most prominent

example of this was the involvement of Shell in Nigeria, and the repression of

Ogoni people (Amnesty International, 2000:94). Organisations such as Human

Rights Watch and Amnesty International have raised the question of the impact of

TNCs on human rights.

Northern NGOs see codes of conduct as one element in the regulation of

international business. Given the lack of an inter-governmental system for

regulating TNCs, they see comprehensive codes of conduct, which are effectively

monitored and independently verified, as means of constraining corporate power.

However, codes should complement government regulation not to be seen as a

substitute for it. In some cases there has been tendency for NGOs to concentrate

on issues that have an immediate appeal and can evoke a popular response.

Child labour is a case in point, although a number of NGOs have argued that a

simple ban on the use of child labour might be counter-productive in terms of

58

raising living standards. Indigenous rights are another issue, which has been

taken up prominently by NGOs. It is in fact difficult to generalise about the position

of NGOs in relation to codes of conduct because of the wide variety of

organisations that tackle the issue. Environmental NGOs tend to concentrate

more on labour rights. However, what is clear is that in a number of instances,

NGO activism, by threatening a company's reputation, has forced those who are

targeted to respond in some way. Often the response is to adopt a code of

conduct, or where one already exists, to revise it to alleviate criticisms. Thus NGO

pressure has played an important role in putting codes on corporate agendas.

3.7.2 Trade Unions

Another interest group that has been at the fore in advocating codes of conduct

covering social issues, and has a direct interest in their application, is the Trade

Union movement. The International Confederation of Free Trade Unions

produced a draft code of conduct in 1996. At the sectorial level, several

international Trade Union secretariats have also been involved in developing

codes of conduct and negotiating framework agreements, which can include a

code of conduct, with employers. The International Textile, Garments and Leather

Workers Federation (ITGLWF) participated in developing codes of conduct with

the European Textile and Garment Employers (EUROTEX); and the European

Footwear Employers was one of the parties involved in developing the FIFA-

sponsored code of football (Kearney, 1999). Similarly the International Union of

Food, Agriculture, Hotel, Restaurant, Catering, Tobacco and Allied Workers'

Association (IUF) has played a role in establishing codes with the French TNC

Danone and with the ACCOR hotel chain. The International Federation of Building

and Wood Workers (IFBWW) have an agreement with IKEA that covers suppliers

and incorporates the ILO core standards (Justice, undated).

An important concern for the trade unions is to prevent the erosion of workers'

rights through the exploitation of unorganised workers in the South. A major factor

for them is support for the various ILO conventions, particularly the core labour

standards that relate to freedom of association and collecting bargaining. Trade

unions regard codes as an inferior means of securing labour rights compared to

59

the self-organisation of workers in trade unions and collective bargaining (Justice,

undated: 3). They are also sceptical of unilateral codes adopted by companies

and those of trade associations, which they regard as public relations exercises

(Kearney, 1999:209). While trade unions stress that codes of conduct should not

be seen as a substitute for national legislation efficiently implemented by

governments, nor as an alternative to trade union representation and collective

bargaining (Kearney, 1999:208), they have in some cases negotiated codes of

conduct with companies which have real bite. Despite reservations that they may

create alternative channels of representation, trade unions have supported specific

codes on the grounds that they give a space for workers to organise and may, if

they become widespread, provide a platform from which governments can develop

new mechanisms to enforce labour legislation (Kearney, 1999:209).

Therefore as trade unions are the custodians of workers rights, they also put

pressure on companies to embrace CSER in their workplace policies. This is of

advantage to the company because of productivity levels, which also influence

profitability. Workers need to identify with responsible organisations and will pay

more loyalty to them, thus leading to business sustainability.

3.7.3 Governments

As it has been indicated earlier on in the chapter, the priorities of governments

have been shifting in terms of their public policy engagement to giving more

leeway to business to engage in CSER. Government view corporate codes as

more attractive options to force business in assuming the social responsibilities.

Governments are shifting much of pressure on corporate accountability to NGOs

and social movements to monitor business behaviour.

3.7.4 Shareholders and investors

Given the separation of ownership and management in the modern corporation, it

is necessary to identify shareholders as a distinct stakeholder in relation to

corporate codes of conduct. Ultimately shareholders' interests are in the value of

the shares of the companies in which they have invested. In a minority of cases,

60

however, they are also interested in the ethical behaviour of the companies in

which they invest. This is the case both for some individual investors and for

institutional investors. The latter include religious organisations, "ethical" or

"green" investment funds and some pension funds. Even in cases where ethical

investment criteria are used, from the investor's point of view these should not

render the asset financially unattractive. This places a limit on the extent to which

shareholders are prepared to push for the adoption of such policies. However,

against this, there is evidence to suggest that taking such factors into account

does not, in practice, adversely affect returns. Indeed some analysts claim that

companies that behave ethically perform better, and that failure to do so can

damage the financial position of a company (Sajhau, 1997:4; Gonella, 1998:13).

It has also been suggested that the stock market reacts unfavourably to adverse

environmental news about a company (such as criticism of its environmental

impacts) and positively when good environmental performance is recognised

(Dasgupta, 1999).

The extent to which stock markets are a major factor in promoting corporate

responsibility is open to question. Despite the recent rapid growth of ethical funds

in the United Kingdom, they have only just broken through to take more 1% of the

market (Cowe, 2000). With such a small market share, these funds have minimal

impact on the share price of individual companies (Lewis & Mackenzie, 2000:84).

This may change in the future, however. Since July 2000 new government

legislation has required all UK pension funds to state which social environmental

and ethical considerations are taken into account in their investment polices. This

has led some mainstream fund managers, who in the past have taken no account

of corporate social and environmental responsibility in their investment decisions,

to start addressing these issues (Henderson Investors, 2000).

Although initially ethical funds were characterised by avoiding investment in

companies with operations in particular sectors that were considered unethical,

such as tobacco or armaments, recently the criteria for ethical investment have

become more sophisticated. In the United States, which has a much longer

history of ethical investment than the United Kingdom, investment in ethically

screened portfolios doubled between 1997 and 1991, by 13% (Bury, 2001:75-91).

61

The stock market is not the only way in which the influence of shareholders can

make itself felt. In the United States "active engagement" has become a routine

way of pressuring companies to adopt ethical polices (Lewis & Mackenzie, 2000).

Minority shareholders have table resolutions and raised questions concerning the

ethical behaviour of companies. This first arose in relation to companies with

investments in South Africa, but has subsequently been extended to other issues

(Amnesty International, 2000:68). Institutional shareholders have significant

power in this regard. In the United States, the Interfaith Centre of Global

Corporate Responsibility (ICCR), which brings together 275 religious institutional

investors who hold a portfolio estimated at around $110 billion, have been

extremely active in this area, sponsoring 140 resolutions elated to over a hundred

companies (ICCR, 2000:2-3). In the United Kingdom, however, shareholder

activism has been less extensive than in the United States (Lewis & Mackenzie,

2000:86).

The need to develop criteria on which to base their investment to ensure ethical

corporate behaviour in the fields of human rights, social and environmental issues

has led the churches to develop their own code of conduct. This led to the

Principles for Global Corporate Responsibility: Benchmarks for Corporate

Responsibility proposed by the ICCR in the United States, the Ecumenical

Committee for Corporate Responsibility (ECCR) in the United Kingdom and the

Task Force on the Churches and Corporate Responsibility (TCCR) in Canada.

Given that the primary responsibility of managers continues to be their shareholders,

the growth of shareholder activism around ethical and environmental issues has a

potential to alter corporate behaviour, at least as far as publicly quoted companies

are concerned. Moreover, whereas pressure organised around consumption tends

only to apply to companies, which produce consumer products and particularly

those, which rely heavily on branding and image, shareholder pressure can be

brought to bear on quoted companies operating in any sector of the economy,

whether or not they are a household name. Codes of conduct can be one way of

assuring shareholders and investment funds that a company does meet certain

ethical standards. As the criteria on which ethical investors base their decision are

62

extended beyond the avoidance of holdings in certain 'unethical" industries, it is

possible that the adoption of a code of conduct could become an important indicator

of a firm's ethical stance. However, the extent to which investors will insist on

adequate monitoring and verification of such codes, in order to be assured that the

fund is meeting its ethical objectives, is yet to be seen.

3.7.5 Consumer pressure

It is often claimed that as consumers become more aware of the impacts of

production on labour and the environment, they demand ethically produced goods.

Codes of conduct are then simply a response by firms to consumer preferences

expressed in the marketplace. The former UK Secretary for International

Development, Clare Short, explicitly adopted this view, stating, "Codes have come

into existence because consumers do not want to purchase goods produced by

exploiting workers here or abroad" (Ferguson, 1988: foreword). While at first sight

plausible, role of consumer demand needs to be problematical.

In a market economy, the consumer is individualised and her/his decisions can have

little or no influence on producer decisions. In other words, there is a problem of

collective action as far as consumers trying to change the overall ethical behaviour

of a firm are concerned (Rodrik quoted in Lee, 1997:10). Of course, this is not to

say that there is not a market for products with an ethical dimension, as the growth

in demand for fair-trade coffee illustrates. Some consumers obviously do value

such a product and are prepared to pay a premium price for it. However such

examples remain niche markets supplying a predominantly middle class customer

base. Their market penetration remains very limited (Cowe, 2000).

Theoretical, therefore there is reason to be sceptical about the likely impact of

consumers as such bringing greater corporate responsibility. In fact, what is often

referred to, as consumer pressure, is usually political pressure from civil society,

orchestrated by NGOs, which uses the threat of consumer action to achieve this

end. There are relatively few cases where there appear to have been significant

actual effects on consumer demand for a particular product or range. The most

63

notable are boycotts, such as the boycott of South African products during the

apartheid era, and of Nestle in reaction to the baby milk scandal.

The logic of the argument above applies to the individualised consumer of the

economics textbooks. However, not all consumers are individuals, and it may be

possible to affect corporate behaviour through consumer pressure. This can be

seen, for instance, in cases where local authorities are a major purchaser from a

corporation, Although there are many instances where local governments have

attempted to use their buying power in an ethical way, this has been severely

circumscribed in recent years by the actions of national governments. In the United

States, the Supreme Court struck down the attempt by the state of Massachusetts to

prevent companies with activities in Myanmar from participating in state contracts.

In the United Kingdom, local government legislation passed under the Conservative

government has limited the ability of councils to take non-financial considerations

into account in awarding contracts.

Another example of pressure from collective has been the movement in US

universities to ensure that the sportswear supplied with their name and logo is not

produced in sweatshop conditions. Again, because firms are faced with bulk

purchasers rather than individualised consumers, this has evoked a corporate

response. As in the case of local authorities, this is a result of political decisions and

mobilisations, rather than the development of consumer preferences. With the

exception of these collective purchasers, therefore, the majority of consumers are

mainly concerned with value for money. A study in Canada found that only 5% of

consumers were willing to pay more for fair-traded products (Forces quoted in

Utting, 2000:27). While a minority have been an interest in buying ethically

produced goods, the majority are unwilling to pay more for such products.

3.7.6 Consultancy firms and verifiers

The proliferation of codes of conduct and other related activities in the areas of

environmental and social management, and auditing, has created a rapidly growing

sector of consulting firms and verifiers who have an interest in the growth of these

activities. Accountancy firms such as KPMG, Delloite and Touché, Ernst and Young

64

and PricewaterhouseCoopers have expanded into this area. Verifiers who have

been involved in auditing quality standards, such as ISO 9000, have also moved into

environmental and social auditing. These firms have a direct interest in the

formalisation of codes of conduct, ensuring that codes move beyond mere

statements of business principles to include verifiable standards and clear

procedures for monitoring (Burns, 1997:28-29). However, since most of these

organisations are moving into social auditing from other fields, they are likely to

bring with them the procedures and attitudes, which apply elsewhere and this, may

introduce a particular slant to their approach toward codes of conduct.

Since monitoring reports are usually produced in confidence for the companies

which commission them and the entire process lacks transparency, the extent to

which this colours the way in which monitoring is carried out remains largely

unexplored. However, a recent report by Dara O'Rourke (2000) on factory

inspection in Asia by PricewaterhouseCoopers, the world's largest private monitor of

labour and environmental practices, raises serious concerns. The standard format

used PWC is designed primarily to elicit information from managers and does not

effectively gather information from workers, or compare the options of workers and

managers. Factory walk-through inspections are brief and cursory, in one case

lasting only 30 minutes. As a result, the inspection team missed a number of flawed

labour practices and did not give an accurate picture of conditions in the factory.

While it is true that not all the firms involved in labour monitoring have come from

the fields of accountancy, consultancy and quality control, such firms are playing a

leading role in defining standards.

3.7.7 The value chain

In developing countries, corporate social and environmental responsibility is not

generally seen as being very high on the business agenda (Kofi Annan, 2001:12-

13). In most cases, the demand for codes of conduct has been externally driven.

Therefore, firms in developing countries, which produce for developed country

markets, have a somewhat ambivalent attitude toward codes of conduct. On one

hand, where their customers require them to meet certain labour or environmental

standards, they need to comply in order to keep their markets. On the other hand,

65

they are likely to perceive such measures as increasing their costs, either directly or

indirectly. Where inspections reveal that suppliers are not complying with the code

of conduct of their customers, then corrective action has to be paid for by the

supplier itself in order to comply. Suppliers also complain about lack of support in

the form of training to meet code requirements. In Indonesia, for example,

subcontractors often receive no training but are required to make and pay for all the

changes to be carried out (Kemp, 2000). Since the subcontractors generally

operate in highly competitive markets, they may find it difficult to pass on such costs.

Indeed in an Indonesian case study, it was found that one foreign company did not

increase its purchase price to the contractor who was required to improve working

conditions.

This tends to lead to a situation in which the subcontractors favour relatively weak

codes of conduct, which will meet the requirements of their customers without

imposing undue costs. Weak codes of conduct are a much more attractive option

for them than the incorporation of labour standards into trade agreements. They are

opposed to any toughening of the regulatory regime, or to measures that would

strengthen the role of trade unions (Zadek, 2000:16).

Given the proliferation of codes of conduct, exporters are likely to be faced with a

variety of demands from different companies, each with its own code. This can lead

to conflicting demands or, at best, considerable transactions costs in meeting the

requirement of a range of customers. In such circumstances, there are advantages

to the exporters in having a single industry wide code, or standardised code

covering a limited number of key issues (Burns, 1997:31-32). In many, but not all, of

the industries in which codes of conduct are found, workers are not unionised and

are often women. In export processing zones where a large share of the garment

industry is located, exemption is often granted from national labour laws. In

horticulture the producers are often unorganised.

Relatively little is known about the attitudes of workers in these industries toward

codes of conduct. Their priorities, however, are not necessary the same as those

that are highlighted in many codes. While women workers have an interest in

improving their working conditions, it has been found that their demands often

66

revolve around issues such as protection of employment following pregnancy,

prohibition of enforced testing and provision of safe transport home (Pearson &

Seyfang, 1996). These specific issues are rarely mentioned in codes of conduct.

Codes of conduct may also have a negative effect on the most marginal workers. In

horticulture, for instance there is a tendency for production to become centralised

and for smallholders to be displaced where buyers find it easier to monitor

conditions among a reduced number of producers. Similarly, efforts to eliminate

child labour in the football industry led to production being shifted way from home

working, carried out by women and children, to larger factories where men were

employed. Thus while codes of conduct are intended to improve conditions for

workers, they do not necessarily achieve this. First of all, they may not address the

priorities of the workers themselves. Second, they may have indirect effects, which

actually worsen the position of those who were originally employed.

3.8 EXAMPLES OF CODES OF CONDUCT

A significant number of standards codes and guidelines on CSER currently exist.

The following are several of the most prominent standards providing guidance to

companies on one or more aspects of CSER.

3.8.1 The United Nations Global Compact

The United Nations Global Compact was launched at the World Economic Forum in

Davos, Switzerland, in January 1999. UN Secretary-General Kofi Annan called on

world business leaders to voluntarily "embrace and enact" a set of nine principles in

their individual corporate practices and to support complementary public policy

initiatives. Topics addressed by the Global Compact include environmental

responsibility, and human rights and labour issues such as health and safety,

freedom of association, forced and child labour, and non-discrimination

(http://www.unqlobalcompact.com ).

67

3.8.2 The OECD guidelines for multinational enterprises

First introduced by the Organisation for Economic Cooperation and Development

(OECD) in 1976, and subsequently revised, these guideline are recommendations

by OECD-member country governments multinational enterprise on appropriate

business conduct in a range of areas. The Guidelines establish non-legally binding

principles and standards for business ethics, employment and industrial relations,

human rights, the environment, information disclosure, competition, and science and

technology. The most recent review, concluded in June 2000, recommends

significant changes, including a call to companies to "respect the human rights" of

employees and help abolish forced and child labour, as well as take a more

proactive role in "promoting" environmental sustainability. The review also proposes

new chapter on combating bribery and protecting consumers (http://www.oecd.orq ).

3.8.3 The Global Reporting Initiative

The Global Reporting Initiative (GRI) was established in 1997 to "develop and

disseminate globally applicable 'Sustainability Reporting Guideline' for voluntary use

by organisations reporting on the economic, environmental, and social dimension of

their activities, products and services". The GRI was originally convened by the

Collation for Environmentally Responsible Economies (CERES) in partnership with

the United Nations Environment Program (UNEP), and incorporates the active

participation of corporations, nongovernmental organisations, consultancies,

accounting organisations, business associations, universities, and other around the

world. GRI first released Exposure Draft Guidelines for comment and pilot testing in

1999. In June 2000, GRI released revised Sustainability Reporting Guidelines

(http: //www. q lo ba !repo rting o rq).

3.8.4 The Global Sullivan Principles

Introduced in 1999, the Global Sullivan Principles expand upon the original Sullivan

Principles, developed by the Reverend Leon H. Sullivan in 1997 as a voluntary code

of conduct for companies doing business in apartheid South Africa. According to

Reverend Sullivan, "The objective of the Global Sullivan Principles are to support

68

human rights and to encourage equal opportunity at all levels of employment,

including racial and gender diversity on decision making committees and boards; to

train and advance disadvantaged workers for technical, supervisory and

management opportunities; and to assist with greater tolerance and understanding

among peoples; thereby helping to improve the quality of life for communities,

workers, and children with dignity and equality (http://.www.sullivanprinciples.orq).

3.8.5 Social Accountability (SA) 8000

Social Accountability (SA) 8000 is a voluntary standard designed to help companies

monitor and demonstrate accountability on a variety of workplace conditions. SA

8000 also provides a system for independency-verifying factories' compliance with

the policies and practices outlined in the standard. Issues addressed by SA 8000

include child labour and forced labour, health and safety freedom of association and

collective bargaining, disciplinary practices, working hours, and non-discrimination.

The standard was developed by the Council on Economic Priorities Accreditation

Agency and released in 1997 (http://www.cepaa.orq ).

3.8.6 Caux Round Table

The Caux Round Table (CRT), based in Caux, Switzerland, promotes principled

business leadership and the belief that business has a crucial role in identifying and

promoting sustainable and equitable solutions to key global issues affecting the

physical, social, and economic environments. The CRT is composed of senior

business leaders from Europe, Japan, and North America.

3.8.7 Interfaith Center of Corporate Responsibility (ICCR)

The Interfaith Center of Corporate Responsibility (ICCR), made up of more than 275

religious institutions that use their investments to promote social change, has

published "Principles for Global Corporate Responsibility", which is not a standard

but a "collective distillation of the issues of concern" for religious-oriented

institutional investors developed by groups in the United States, Canada, and the

United Kingdom. The principles cover the entire spectrum of CSR issues, including

69

workplace, community, the environment, human rights, ethics, community economic

development, and marketplace. The principles are published as a reference tool

that companies (and investors) can use to benchmark or monitor their own policies

or those of the companies in which they invest.

3.8.8 Sunshine Standards for Corporate Reporting to Stakeholders

The Sunshine Standards for Corporate Reporting to Stakeholders, first proposed in

1996 by the Washington, D.C. — based Stakeholder Alliance — an association of

individuals and organisations from environmental, consumer, and religious

organisations — are described as "the information that corporations should routinely

provide in an annual "Corporate Report to Stakeholders"'. The standards cover a

wide spectrum of information, including "customer information needs" (related to

actions against the corporation, and product contents), "employee information

needs" (job security, health and safety risks, equal opportunity employment data,

employee grievances), "community information needs" (company ownership,

financial data, environmental impact, taxes paid, job creation data, investments,

contributions), and society's information needs" (trade with hostile nations, major

government contracts, fines levied against company).

3.8.9 SVN Standards of Corporate Social Responsibility

The SVN Standards of Corporate Social Responsibility, developed by the Social

Venture Network and released in 1999, are voluntary set of principles that address

corporate social environmental, and financial performance. In addition to

recommending specific practices, the Standards suggest arrange of indicators for

companies seeking to measure and report on their corporate social responsibility

performance. The Standards also include principles related to the following nine

topics: ethics, accountability, governance, financial returns, employment practices,

business relationships, products and services community involvement, and

environmental protection (http://www.svn.orq).

70

3.8.10 Keidanren Charter for Good Behaviour

The Keidanren Charter for Good Behaviour was developed by Keidanren, the

Japanese Federation of Economic Organisations, a nationwide business association

whose membership includes more than 1,000 of Japan's leading corporations and

more than 100 industry groups. The 10-point Charter states, "Corporations, in

addition to being economic entities engaged in the pursuit of profit through fair

competition, must be useful to society as a whole". Keidanren members agree to

follow the spirit of the charter as "the criterion of their corporate behaviour"

(http://www. keidanren.or. ip ).

3.9 IMPLICATIONS OF POLICY AND INSTITUTIONAL FRAMEWORK FOR

BUSINESS

There is no doubt that the growing emphasis on corporate social and environmental

responsibility and the increased adoption of corporate conduct in the 1990s

represent a significant new development. However, the question of what they really

represent remains to be answered. Are codes of conduct part of public relations

exercise on the part of corporations keen to deflect criticism of their activities, or do

they reflect a new form of stakeholder control over business that is more appropriate

in a globalised economy? Are codes a realistic alternative to the traditional

mechanisms of state regulation and trade union bargaining, or do they need to

operate in conjunction with them?

3.9.1 An Evaluation of Corporate Codes of Conduct

3.9.1.1 Limitations

As the previous sections have suggested, there are a number of limitations to codes

of conduct as an instrument for promoting improved standards in developing

countries. Some of these are practical limitations, which arise from the way in which

codes have (or have not) been implemented up to now. Others are inherent to the

nature of corporate codes, and therefore, go beyond just problems related to the

way in which codes have been applied in the past.

71

Despite the considerable publicity surrounding codes of conduct, the extent to which

they have been adopted so far is relatively limited. Many company codes are little

more than general statements of business ethics with no indication of the way in

which they are to be implemented. Model codes are, by their very nature, only

intended as an example of best practice on which individual firms or sectors can

base their own codes.

Many of the codes that have been drawn up by NGOs or by other collective

organisations. Indeed in some cases the codes are still under negotiation and

remain in draft form. For instance the Code of Labour Practice for the Apparel

Industry Including Sportswear, the Ethical Trading Initiative Base Code and the

Dutch Fair Trade Charter for Garments are still under negotiation. Any firms have

not yet adopted the international Federation of Football Associations Code of Labour

Practices, and relatively few have so far been accredited under SA8000 (Seyfang,

1999). Codes tend to be taken up by industry leaders, but the majority of firms do

not necessarily adopt them. However, this last factor is partly a reflection of the

recent increase in the number of firms adopting codes.

Other limitations are the scope and extent of most corporate codes, in terms of

issues addressed and workers covered. As was noted above, many codes do not

even cover the ILO core labour standards, particularly those on freedom of

association and collective bargaining, let alone go beyond these core standards to

include other aspects of workers rights, such as security of employment. In terms of

coverage, although codes usually immediate suppliers to the firm adopting the code,

they do not always link further along the supply chain. Furthermore, there are whole

groups of workers, often the most marginal, who do not come under the code. This

is often the case for home workers, who are not directly employed by suppliers. In

agriculture too, some of the most marginal and vulnerable groups are not always

covered by a code of conduct.

The other major limitation of existing codes of conduct is the lack of independent

monitoring to ensure that they are not just general statements of business principles,

but actually regulations that get applied to the firm's operations and those of its

72

suppliers. The reluctance of many firms to include independent monitoring as an

integral part of their code of conduct rise to some suspicion that they may be used

as a public relations exercise rather than a genuine attempt at improving conditions

and performance. However, some leading firms have accepted such monitoring,

and the growth of auditing and accreditation bodies indicate some improvements in

this area.

The more deep-seated structural limitations of codes of conduct relate to the drivers

identified earlier as giving rise to the growth of such codes in the 1990s. First of all,

they tend to be concentrated in consumer good sectors where brand names and

corporate image are very important. This helps explain why the large-scale retail

sector, garments and footwear, toys and some food products have been the sectors

where codes covering social issues have most commonly been found. They also

tend to be sector in which the cost of individual purchases is relatively low, and

where production costs often make up a relatively small part of the final product

price. Sectors that produce durable consumer goods, where the cost of a single

item is relatively high, such as cars, have been much less prominent in the decision

of corporate codes of conduct.

Not only are codes limited to particular sectors, they are also mainly applied to firms

which are engaged in exporting. Since pressure for the adoption of codes of

conduct has come primarily from the North, it is firms selling in Northern markets

that need to meet these requirements. Despite globalisation, many producers in the

South are not linked to the global market directly or indirectly and therefore; do not

have to worry about codes of conduct. There is a possibility, therefore, that when

codes are adopted, they become an oasis of best practice, leaving most producers

unaffected.

Finally, there is tendency for codes to focus on particular issues regarded as highly

damaging for companies to be associated with. Issues that have a high profile in

developing countries are likely to figure prominently in most codes. Child labour is a

case in point, highlighted because of the emotive reaction of those in the North to

the idea of children working in factories. This does not necessarily coincide with

what are perceived as key issues by other stakeholders, particularly those in the

73

South. It is inherent, therefore, to the way in which codes of conduct have

developed that they tend to be patchy in scope and not at all comprehensive.

3.9.1.2 Benefits of Codes of Conduct

Productivity

Notwithstanding the limitations of codes, they can and have generated positive

benefits for stakeholders. The Gap agreed to continue to source from the Mandarin

factory in El Salvador, following improvements in working conditions. Workers were

restrained (including members of the union executive) and allowed to re-establish

the union. A similar situation occurred in the Kimi garment factory in Honduras-

sacked workers were also reinstated and allowed to organise a union (Jeffcott &

Yanz, 2000). Concrete improvements have been reported in Nike's factory in Viet

Nam, including the reduction of hazardous chemical and improvements in ventilation

and safety conditions (Grayson, 1999:20). These examples illustrate the fact that

codes of conduct do provide a point of leverage on corporate behaviour. First, if

companies adopt codes that are very limited in scope and coverage, other

stakeholders can criticise the company. Model codes perform a useful role in this

context since they can be used to show how far a company's practice fall short of

recommended standards or industry best practice.

Reputation

Second, if companies sign up to codes that are meaningful, they are open to

criticism if they fail to implement the code. Although, in the absence of independent

monitoring, it is difficult sometimes to know whether a company is abiding by the

terms of its own code, instant international communications and contract between

different stakeholders, particularly NGOs and trade unions, can help reveal cases of

violation. Management then runs the risk of being accused of hypocrisy if these

failures are publicised.

74

• Sustainability

A third potential benefit from the emphasis on codes of conduct is the growing

awareness that consumption is not divorced from production, not only an activity of

exchange in the marketplace. Codes of conduct, therefore, whether covering social

or environmental aspects, go beyond what is produced to look at how it is produced.

This could have long-term implications for the way economic activity is viewed. In

conventional economic thinking, consumer concerns are limited to the quality of the

product and its price. This means that the individual consumer's priorities are

directly at odds with those of the social actor. However, once wider issues of

production are recognised, then the potential for further mobilisation around the

implications of consumer choices is opened up.

Finally, an important advance associated with codes of conduct is the acceptance

by firms of responsibility for the activities of their suppliers as well as their own

subsidiaries. This concept of extended responsibility makes it more difficult for firms

to externalise costs, whether social or environmental, and then claim that they

themselves are behaving ethically or in an environmentally friendly way. Just as

lifecycle analysis of the environmental impacts of products has widened the concept

of corporate responsibility in relation to environmental issues, the development of

codes covering social issues, which apply to suppliers, has widened the concept of

social responsibility.

3.9.1.3 Dangers of Code of Conduct

There are nevertheless several dangers associated with the growth of codes of

conduct. The first is that they may come to be seen as something more than they

really are. In some cases they can simply be a means to deflect public criticism,

without really changing what is happening on the ground. In other words, there is a

distinct possibility of "bad faith" in the development of codes of conduct. It is

important, therefore, that codes not be seen simply as a set of guidelines to be

established and complied with for the rest of time. Rather they should be thought of

as a process which facilitates stakeholder engagement, and which provides a

75

platform for further advances in terms of improving the impact of big business on

social and environmental conditions.

Even when a code of conduct is adopted in good faith, its effect may prove to be

counter-productive. Codes tend to involve prohibitions, but this may not always be

the best way of improving conditions. It has been argued that an outright ban on the

use of child labour can bring about deterioration in the livelihoods of the most

vulnerable families, who depend on the additional income that children bring in. It is

also possible that children are banned from working in export industries, they will

end up being employed in even worse conditions in enterprises that only supply the

domestic market. This is reported to have occurred in Bangladesh after child

workers were dismissed from the garment industry in the mid-1990s (DFID, 2000).

Another situation in which the requirements of codes of conduct may worsen the

situation of least well placed is the case of firms that find it impossible to ensure that

a large number of small suppliers all abide by the terms of its code of conduct. In

this case, there may be pressure to centralise suppliers and dispense with the

smaller suppliers that are impossible to monitor. Thus, a shrinking of the supplier

base may leave the most disadvantaged without access to the export market.

Another concern is that the development of codes of conduct will tend to undermine

the position of traditional trade union organisations. Of course, in some cases

codes of conduct can be used where trade unions are not recognised. If trade union

organisation is impossible, then it is hard to argue that codes of conduct are

displacing trade unions. In general, the appropriate response would be to ensure

that codes maximise the space for trade unions to act, rather than bypassing them

or trying to replace them.

A further fear is that codes of conduct will replace government regulation and

remove the pressure of government control of corporations. It is true, as was

pointed out earlier in the paper; codes of conduct have grown rapidly in the

aftermath of the period of extensive liberalisation. However, the growth of codes as

such has not led to the reduced role of the state, although the reverse may be

partially true. Corporate codes often explicitly mention the need to observe local

76

standards as an element in their code, whether in terms of hours of work, wage

levels or environmental standards. It would be a mistake to see codes of conduct as

a substitute for government regulation, and any realistic evaluation of codes must

take this point into account.

The limitations and the dangers of codes of conduct that have been identified above

are undoubtedly real. It is important, therefore, to develop strategies to ensure that

codes are complementary to government legislation and provide space for workers

to organise. They are most likely to do so when they are multi stakeholder codes

rather that unilaterally developed by companies or trade associations. Codes of

conduct should be seen as an area of political contestation, rather that as a solution

to the problems created by the globalisation of economic activity.

3.10 CONCLUSION

Every company takes a different approach to the compliance to codes of conduct in

executing its social and environmental responsibility. Factors, which affect this,

include, company size, sector, culture and the philosophy of existing management.

Therefore the development of guidelines that aim to promote CSER by business is a

complex task due to some of the factors previously mentioned, but does not absolve

companies from implementing this practice for a better return on investment.

Central to all codes of conduct is the promotion of human rights, labour standards

and environmental protection. These should form the cornerstone in strategising

CSER. This section aimed to emphasise the global footprint of the CSER practice

and justify its emerging popularity as a business core function.

77

CHAPTER 4

CORPORATE SOCIAL AND ENVIRONMENTAL

RESPONSIBILITY IN SOUTH AFRICA

4.1 INTRODUCTION

This chapter looks at the historical context, visibility of corporate social and

environmental responsibility in South Africa. It is important that this chapter be

allocated to these issues, as the South African business environment is a unique

one due to the legacy of apartheid. The responses to socio-economic and political

factors determine both the type of CSER and impact on business in South Africa;

hence also in chapter the concept of Corporate Social Investment as a version of

CSER will be discussed. The dynamics, peculiarities, and dimensions of CSER as

a response to local and global CSER pressures will be analysed in the form of

existing policies, legislation, institutions, codes of conduct and other related

benchmarks correcting for the business case for CSER.

4.2 HISTORICAL BACKGROUND

South Africa is now coming of age as it approaches its 10 th year democratic

celebration, since its acceptance into the international business community. Its

visibility, further exacerbated by the phenomenon of globalisation has led to

Business South Africa (BSA) voluntarily or involuntarily embracing global socio-

economic trends, which affect its bottom line. Issues pertaining to corporate

citizenship, accountability, performance and responsibility have surfaced as critical

areas to consider in the business practice. The history of the development of

business in South Africa is characterised by a strong political undertone, which

could be classified into different phases. These are mainly characterised by either

economic or political dominance (Slabbed & Swanepoel, 1998:25). These phases

transcend from colonialism, the mining industrial revolution, segregative political

legislation (which created a dual labour market and other inequalities), to state

monopolies in the management of industrial infrastructure that is, iron and steel

78

manufacturing, mining, agriculture, water, telecommunications and electricity

provision (Bezuidenhout, 2003:6). The business landscape which was inherited

from the apartheid era, comprised industrial policies which created a dual labour

market, degradation of the environment and concomitant pollution which was

mostly felt by the poor and a lot of inequalities in terms of remuneration, job

reservations and ownership (MERG, 1993; Bell, 1995; Fine & Rustomjee, 1996).

The corporate sector played a central role during apartheid, hence the current

controversial debates.

4.3 CSER IN APARTHEID SOUTH AFRICA (1966 —1994)

Efforts to highlight CSER during the Apartheid era took many forms and were

propagated by different stakeholders. As early as 1966, the issue of South Africa

marked the beginning of CSER' as remarked by Tim Smith an anti-apartheid

activist. As executive director of the Interfaith Centre on Corporate Responsibility

he played a role in the anti-apartheid movement for 30 years, by participating in

the first shareholders meeting where resolutions challenging South Africa were

raised (Investing for Social Change, 2001). According to Bezuidenhout (2003:7);

Feldburg (1972); Mann (1992) and Alperson (1995), CSR was raised formally in

the 1970s in an inaugural lecture at the University of Cape Town, in which it was

argued that business was not responsible for the creation of the apartheid system,

but following an argument of enlightened self interest, it was important for

business in South Africa to take CSR seriously.

Through concerted efforts of consumer boycotts and increasing international

isolation, some business voluntarily embarked on subtle forms of CSR. The

Soweto uprising of 1976 steeped in the increased vocalisation and expression of

black demand for better treatment. This could no longer be ignored by business

and it had to be pre-emptive. Employers began to realise that social and

environmental aspects could generate conflict and numerous imbalances (Malan,

1992:9). These imbalances entailed the fact that political and social discontent

inadvertently led to workplace grievances.

79

In redressing some of these issues the American business operating in South

Africa were to comply with a voluntary code of conduct developed by the

Reverend Lean H. Sullivan in 1977. These Sullivan Principles have already been

mentioned in the discussion of Corporate Codes of Conduct in Chapter 3.

Alperson (1995:5) in Bezuidenhout (2003:8) argues that the Sullivan Principles

can be seen as a "turning point" in the vocabulary of CSR in South Africa.

Officially adherence to the code was voluntary, but anti-apartheid lobby groups

kept a close watch on the compliance of companies to these principles. Through a

realisation of the deteriorating urban conditions in the black Townships of Soweto,

the mining moguls comprising Harry Oppenheimer and Anton Rupert of

Rembrandt, set up the Urban Foundation as a social responsibility initiative to

alleviate the scourge (Alperson, 1985 in Bezuidenhout 2003). From these

initiatives, other private companies through contributing funds followed

philanthropic gestures to institutions and providing public amenities

(Bezuidenhout, 2003).

The transition in South Africa gathered momentum in the 1980s and the corporate

sector became instrumental in the negotiation between the government and

political groups through sponsorship of endeavours in this regard. Post 1994 and

the inception of the Constitution of the new democratic South Africa, a myriad of

legislations came into being and one such was NEDLAC, which became a forum

of engagement between business, government and civil society. The mainly

extractive industrial base of South Africa made issues pertaining to environmental

responsibility of prime concern. Many corporations had to involve themselves in

conservation exercises as part of their environmental responsibility.

4.4 THE CONCEPT OF CORPORATE SOCIAL INVESTMENT (CSI)

Within the South African business landscape the tendency has been to scorn the

term "corporate social responsibility" and prefer the "investment' aspect. My

immediate reaction to this is that it is a question of semantics because the overall

intent, motive or underlying objectives of CSR and CSI are synonymous. Be that,

as it may, the arguments for emphasis on CSI are that, this approach actually

emphasises a redress of social capital decimated by the apartheid era hence more

80

emphasis on investment in the community, whereas CSR is pervasively viewed as

obligatory (Bezuidenhout, 2003). The justification for CSI is that it is strategic

philanthropy with a subtle intent of improving social conditions and ameliorates

further social fragmentation and conflict, more especially in lieu of the volatile

South African labour market.

From a philosophical perspective, many companies invest in projects, which are

integral linked to their core business. For example Sasol, would emphasise more

environmental awareness projects, Unilever sponsors tertiary education bursaries

and market related educational programmes, Nestle considers sports sponsorship

as their target market are the ardent sports people who consume much of their

energy drinks and products. One stark difference between CSI and CSR provided

by Pinney (2001) in Bezuidenhout (2003) is that in the South African context, CSI

is regarded as corporate giving which is meant to benefit the beneficiary in the

long run and is also used as a tax relief rather than the sustainability aspect. This

is in contrary to CSER, which is more holistic in terms of multi-stakeholder

engagement, legal compliance, economic performance and ethical conduct.

CSER has much wider far reaching returns on investment as issues of

sustainability are factored into the corporate strategy and core functions.

Bezuidenhout (2003:21) emphasise that this might constrain South African

companies' ability to respond to international demands for the incorporation of

sustainability into core strategy. From a social development perspective CSI as a

South African approach is well received in terms of its fulfilment of the social and

environmental bottom lines. The meet the government and civil society agenda.

4.5 POLITICAL AND INSTITUTIONAL FRAMEWORKS

It is quite an unfair assumption to suggest that CSER is a post 1994 initiative.

During the apartheid era, companies some did embrace the Sullivan Principles

especially those which were subsidiaries of TNCs. Post 1994 has been

characterised by the government coming up with legislation aimed at addressing

post socio-economic inequalities. These will be discussed in the next section.

81

4.5.1 Government policy

Government legislation, pertaining to business has made it indirectly compulsory

for business to factor in some of the stipulations in their CSER programmes. The

Employment Equity Plan, Skills Development Plan, Tender acquisition procedures

and criteria which has been legislated by government has become law. This

legislation intends to have enskill, empower people from designated groups in at

least 40% of all leadership and professional positions in business operations. The

following policies are being factored in as part of CSER:

- Black Economic Empowerment (BEE) is another piece of legislation in terms of

equity participation. This has been extended to all the value chain of business

as part of social responsibility.

- The Skills Development Act which obliges business to pay 1% levy towards its

SETA for skills development of workers is a piece of legislation which indirectly

forces companies to act in a social responsible manner.

Occupational Health and Safety at the workplace in South Africa, does not

have a national system for reporting accidents and occupational disease and

this is left to individual sectors to formulate their own. CSER involves the

internal fraction and this lack of an accepted code can result in companies

taking advantage.

- Within the mining sector, government has legislated on issues pertinent to

CSER. According to Bezuidenhout and Hamman (2003:38) the table below

explains some of these:

82

Table 4.1:

Selected national legislation of pertinence to CSER in the mining sector

Legislation Overview and pertinence to CSER

Mineral and Petroleum

Resources Development Act

(No. 28 of 2002)

Vests all mining rights with the state and requires

mining companies to re-apply for mining permits,

with reference given to black economic

empowerment companies; companies need to

demonstrate due diligence in social and

environmental matters, and directors may be held

liable for environmental damage. This law is

discussed in more detail in the text.

Promotion of Access to

Information Act

(No. 2 of 2000)

Promulgated to enforce the constitutional right to

access to information that is pertinent to the Bill of

Rights; it allows access to (almost) all information

held by the state, as well as significant types of

information held by private persons.

National Environmental

Management Act (No. 107 of

1998)

Promotes development that is socially,

environmentally, and economically sustainable,

seeks environmental justice and equitable access

to environmental resources promotes public

participation in environmental decision-making,

protects 'whistle-blowers', allows for public interest

litigation provides duty of care and remediation

responsibilities — particularly for employers.

National Water Act (No. 36 of

1998)

Designates water as a national resource and

requires water users to apply for licenses from the

state, with an allocation to a basic water right and

a natural reserve, including stringent water

pollution regulations (which is a key concern in

mining).

Employment Equity Act (No.

55 of 1998)

Seeks to eliminate unfair discrimination in the

workplace and implement affirmative action for

83

"designated groups": black people, women, or

people with disabilities.

Constitution (No. 108 of 1996) Contains the Bill of Rights, including the rights to

equality, a clean and healthy environment access

to information, administrative justice, other;

significantly, constitutional provisions and case law

suggests that key elements of the Bill of Rights are

of horizontal application, i.e. they bind individuals

and corporations, as well as the state.

Mines Health and Safety Act

(No. of 1996)

This was the first element of the government's

efforts to transform the mining industry, focusing

on the need to reduce the number of fatalities and

injuries in the industry. It provides for tri-partite

(labour, business, government) structures at all

levels of the industry for the purpose of

implementing and monitoring health and safety

management systems, as well as identifies causes

of accidents.

Labour Regulations Act (No.

66 of 1995)

Promotes collective bargaining at workplace and

sector level, and promotes employee participation

in company decision-making through workplace

forums.

Companies Act (No. 61 of

1973) and Closed

Corporations Act (No. 69 of

1984)

Contain various provisions regarding company

registration and conduct, including the potential for

'lifting the corporate veil' and adjusting personal

liability for directors (particularly section 424 of the

Companies Act), though this has been criticised as

being difficult to implement

Source: Bezuidenhout (2003).

84

4.5.2 Business institutions

Bezuidenhout (2003) in their research provided a list of institutions set up since

1990, to co-ordinate CSER programmes at national level. There are shown in

Table 4.2 below.

Table 4.2: CSER institutions since 1990 in South Africa

INSTITUTIONS DESCRIPTION

The Joint Education Trust (JET),

established in1992

It is a multi-stakeholder initiative spear-

headed by the private sector, to support

education. It allocates funds committed by

its members, as well as funds provided by

foreign donor agencies.

The National Business Initiative The initiative came about through building up

(NBI), formed in 1995 on lessons of the Urban Foundation

(established 1997) and the Consultative

Business Movement (established 1989), as

a new business-supported organisation

aimed at realising business's commitment to

the new democracy. It co-ordinates a

number of projects related to corporate

social investment and policy formulation.

One of its most prominent projects is the

Business Trust. Founded in mid-1999, the

Trust set itself the task of raising a billion

Rand (US$100m) over five years through the

donation of 0.5% of profits of participating

companies listed on the JSE Securities

Exchange (the former Johannesburg Stock

Exchange) and 2% of a year's profit spread

over 5 years from participating unlisted

companies. The Trust's projects focus on

85

job creation, capacity building, crime, and

malaria control, and are managed by the

National Business Initiative (Laurence,

2000). Another initiative of the NBI, the Big

Business Working Group, meets monthly

with President Mbeki and sees itself as a

communication conduit with the government

in terms of policy development.

The Business Council on It was formed to advise its members (mainly

Sustainable Development — the larger corporations) on environmental

South Africa (BCSD-SA, formerly best practice, and on developing a balance

the Industrial/Environmental Forum between wealth creation, social progress,

(IEF), was set up in 1992 and environmental protection. Its affiliation

to the World Business Council on

Sustainable Development (WBCSD) has

become an increasingly important factor,

promoting the name change. The IEF was

initially heavily subsidised by Escom, the

parastatal energy utility. It represented

business and industry in the multi-

stakeholder management team of the

Consultative National Environmental Policy

Process (1995-8).

Source: Bezuidenhout (2003)

In addition to these broad based organisations, there are important sector-specific

associations that contribute to corporate social and environmental responsibility

initiatives and information provision. Prominent examples include the Chamber of

Mines and the Chemical and Allied Industries' Association (CAIA). In addition

to representing their members in government policymaking and the media, they

act as platforms for the sharing of information and best practices, and the

implementation of voluntary initiatives (such as Responsible Care or the gold

mining industry's cyanide code).

86

Other consultancy, advisory institutions have also emerged and the list is provided

below.

Table 4.3:

Advisory and Consultancy Institutions

INSTITUTION DESCRIPTION

The Southern African

Grantmakers' Association

(SAGA) and Charities Aid

Foundation (CAF)

These two consulting firms have played an

important role in facilitating the corporate social

investment initiatives of south African companies,

as well as overseas donors. Interestingly, these

organisations are now trying to reinvent

themselves according to broader corporate

citizenship and governance ideals.

The African Institute of

Corporate Citizenship

(AICC)

Established in 2000, it sees itself as being both

advocacy and consulting group, with an emphasis

on integrating CSER into core business

management. It is producing a report on

corporate social responsibility for the BoE

financial group (recently sold to Nedbank).

The Accountability Institute Initially affiliated to the UK-based Accountability,

[Lifting], as yet predominantly works with

government agencies, but is increasingly working

with companies.

The Centre for Development

and Enterprise

It is a policy research institute, which emerged in

succession to the Urban Foundation, has, also

conducted research on corporate social

investment.

The Ethical Trade Initiative It has initiated a project on the treatment of labour

in the wine lands of the Western Cape province.

Source: Bezuidenhout (2003)

87

Established management and accounting consultants are increasingly offering

social, ethical, or environmental accounting, certification, or assurance services.

KPMG, for instance, has recently combined its ethical and environment

departments into a 'Global Sustainability Services' programme.

A number of business schools are beginning to include sustainability issues in

their courses offerings. The University of Cape Town's Graduate School of

Business for instance, is currently establishing a short course on business and

sustainability, modelled on the Prince of Wales' Cambridge business Leadership

Programme. The University of Pretoria offers an environmental MBA.

4.5.3 Non-Governmental Organisations (NGOs)

Several NGOs are also active in this realm. They can be divided essentially into

three types:

NGOs, which were founded on or mostly, depend on corporative support. An

example of this would be the World Fund for Nature (WWF-SA).

NGOs that are recipients of corporate assistance. These include projects like

Trees and Food for Africa, and EcoLink whose activities are extensive in

townships and rural communities. Such NGOs rely somewhat on corporate

philanthropy to maintain their activities, and therefore have not developed a

critical stance on question of poor environmental citizenship in the private

sector.

NGOs networks such as Environmental Justice Networking Forum, the

Trade Policy Network, notable key affiliates like GroundWork and Earthlife

Africa. These organisations see themselves linked to an agenda critical of

corporate damage to the environment. They therefore prefer to remain

independent of any corporate financial support, leaving them able to monitor

and whistle-blow where necessary. At times it has been deemed appropriate

to draw on public interest law firms, such as the Legal Resources Centre, to

advance litigation against transgressors corporations. Such NGOs have also

88

participated in multi-stakeholder agreements, such as the gold mining

industry's cyanide code. Of all the NGOs in this group, GroundWork and

Transparency International South Africa have gone the furthest in taking up

the question of corporate environmental accountability. Each has linked up

with counterpart international NGOs in this regard, and have also

commissioned a number of studies and popular booklets on corporate

environmental behaviour, in the run up to the World Summit on Sustainable

Development.

4.5.4 Social Movements — Trade Unions

The final element in emerging institutions is that of organised labour. Extensive

deaths of workers in mining accidents, exposure to harmful substances such as

asbestos, mercury, uranium, cyanide and industrial pollution, have galvanised the

trade union movement into taking action on health, safety and environmental

matters (Lukey, 1995). Key amongst these are the Food and Allied Workers'

Union (FAWU), the Chemical Energy Paper Packaging Wood and Allied

Workers' Union (CEPPWAWU) and the National Union of Mineworker (NUM),

all affiliates of the Congress of South African Trade Unions (COSATU), the

country's largest trade union federation.

NUM has created the Mineworker's Development Agency to combat

retrenchments and to retain migrant miners who have returned toothier rural base

in setting up alternative employment, using co-operatives and other models.

Unions have acted on numerous occasions in support to better co-operatives and

social and environmental practices. To this end, they have participated in multi-

stakeholder agreements and play a significant role in the National Economic

Development and Labour Council (NEDLAC), a tripartite labour-business-

government institution that has statutory rights to discuss and review economic

legislation. Labour representatives have taken part in a number of key policy

processes with respect to the environment.

89

4.6 REGULATORY FRAMEWORK

Due to the recognition and influence of international CSER pressures South

African companies are now involved in different initiatives, codes of conduct and

other forms of compliance.

The following are some of the initiatives, being embraced thus far: -

- The Sullivan Principles emphasising human rights and workplace conditions.

- Mervyn King II Commission Report in Corporate Governance as a compulsory

benchmark for listing on the JSE.

- KPMG Sustainability Awards, which recognise companies reporting on the

TBL.

- UN Global Compact of which Escom is a signatory to it.

Certification through the International Standards organisation 15 014 000. This

certification is the recognised international environmental management

standard, and greatly serves manufacturing exporting companies. South Africa

has introduced SA 8000 standard for its companies, but they are also sector

related standards.

In terms of corporate reporting and accountability the Global Reporting Initiative

[GRI] Guidelines based on TBL are gradually being embraced by companies.

Presently SAB-Miller, Sasol and Escom are using this approach.

Fair Trade and Ethical Trade Initiative (ETI) which are a UK based consortium

have developed codes of conduct to make companies become responsible for

their value chain in terms of issues like, workplace conditions, human rights. More

especially this has been aimed at the horticulture, citrus farmers who are exported.

Recognition in terms of the stamp on the products is criteria for penetration into

the European market.

90

Other important developments in terms of the regulatory framework is the on-going

exercise to develop a South African Index for the social and environmental

performance of firms such as the UK FTSE 4 Good Index as benchmark for listing

on the JSE.

4.7 CONCLUSION

From the above discussion, the role of the corporate sector in the political

transition and development agenda of South Africa has been significant. The

different policies and institutional frameworks, which are constantly coming to the

fore, emphasise the importance of CSER. With the advent of South African

companies venturing into the global marketplace, the pressures of accountability

and responsiveness to CSER are compounded, thus reinforcing the business case

for this practice, and the need to comply with global acceptable standards. Multi-

stakeholder partnerships in tackling socio-economic problems through the practice

of sustainable CSER are now becoming a common phenomenon, thus

exemplifying the prominence of CSER. The perceived connivance of the

corporate sector with apartheid paints a bad picture on specific companies who

benefited from this repressive system, hence adapting CSER will assist in

reputational value, sustainability, profitability and productivity. Impending

compensation claims and litigation by civil society could be ameliorated if there is

a proactive response by business.

91

CHAPTER 5

THE BUSINESS CASE FOR CSER IN SOUTH AFRICA

5.1 INTRODUCTION

This chapter forms the main focus of the study. In this section the business case

for CSER will be argued by first providing global cases in which successes have

been achieved through factoring in of the CSER principles. These arguments will

be based on selected company case studies and their actions, behaviours

weighed against the research categories of sustainability, productivity, reputation

and profitability. The consequences emanating from non-fulfilment of the research

categories will form the evidence for arguing the business case for CSER. Past

empirical research findings pertaining to issues relating to correlations between

business and the research categories of the study will also be provided as

evidence.

5.1.1 Methodology

It is relevant to reiterate, that the research design was wholly desk study based,

vis-a-vis analysis of the different CSER discourse material. More information in

this regard has been provided in chapter one. It is also significant to mention that

the evidence for the business case is by analysis of case studies which are either

positioned by the company itself or other multi-stakeholders, for example NG0s,

governments, community groups, workers or activists. Some of this evidence

could be value laden and can pose subjectivity. In instances where empirical

research has been undertaken to correlate and justify the practice of CSER,

statistics is provided for the arguments on sustainability, profitability, productivity

and reputation of business in meeting it TBL.

In the South African context the reports by KPMG and the Corporate Social

Investment Handbooks serve as a more informed evidence of articulating the

business case. Needless to mention that, other sources are also integral to

92

providing evidence information. The recent research and findings by

Bezuidenhout, Fig, Hamann, Omar and Miller (2003) on CSER in South Africa,

with specific reference to the Food and Drink Industry, Chemical Industry and the

political economy provides most recent information. This study sponsored by the

United Nations Research Institute for Social Development and conducted through

the Sociology of Works Unit at the University of Witwatersrand has complemented

a lot of gaps, especially the South African business context.

Furthermore the workshop I attended on the submission of the above research

findings was a multi-stakeholder forum, attended by Business South Africa (BSA),

NGOs, Trade Unions, Industry Sectorial Bodies and government, respectively the

Department of Trade and Industry. More insights into this developing practice in

South Africa were highlighted at this meeting. Other related forums, especially the

2002 Global Reporting Initiative (GRI) Guidelines seminar at the Unisa Business

Leadership campus (November, 2002), Midrand, Johannesburg assisted to reflect

the international perspective nature of CSER and more especially on indicators.

5.2 FINDINGS

Therefore in order to provide more meaning to the evidence on CSER,

international examples provide quiet a good benchmark, due to the fact that at this

level the business case for this practice has been accepted, tested and developed

over time. The phenomenon of globalisation has led to industry in South Africa

being aware of the implications of good corporate behaviour. These shocks and

stresses on business are far reaching in the South African CSER environment and

thus will be exemplified.

5.2.1 An International perspective

The large ecological footprint and visibility of companies operating at global level

has made them to be more exposed to different pressures thus making driving

them to be more accountable and transparent in their behaviour. Because of high

visibility through their brands, they are easy to target, hence the need to factor in

CSER in organizational strategy.

93

5.2.1.1 Evidence for the Business Case of CSER

Being a good corporate citizen is increasingly crucial for commercial business. It

is not good enough any longer just to be good a corporate citizen, you need to be

seen to be. CSER has become increasingly important for business. The case for

demonstrating CSER is getting stronger. Expectations among key opinion

formers, customers and the public are increasingly staying on top and in front of

this strengthening tide of opinion and challenge for company involvement. Some

are meeting it; others are failing to do so to their detriment (Financial Times, 3rd

December 1998).

The pressure for TNCs to embrace CSER is quite profound. TNCs have

responded to both home and host environments in their behaviour and reporting.

TNCs with large ecological footprints especially in the mining, oil, chemical and

food Industries are more susceptible to the pressure to implement CSER. The

global brands are also another factor of visibility pressuring companies to behave

ethical. Therefore with this as general background, the evidence for the business

case will be detailed under the core elements of business, which earlier on were

referred to as research categories.

5.2.1.2 Empirical research as evidence for the Business Case

(a) Case 1:

According to BSR Library (2002) the business case for CSER is supported by

findings of different research conducted across the globe. The following evidence

will specify the research category satisfied or achieved.

• Productivity levels

A 1999 study, cited in Business and Society Review, showed that 300 large

corporations found that companies which made a public commitment to rely on

their ethic codes out performed companies that did no do so by two to three

times, as measured by market value added.

94

Profitability

A 1997 DePaul University study found that companies with a defined corporate

commitment to ethical principles do better financially (based on annual sales/

revenues) than companies that do not.

Sustainability

A recent longitudinal Harvard University study found out that "stakeholder-

balanced" companies showed four times the growth rate and eight times the

employment growth when compared to companies that are shareholder-only

focused.

Reputation

Similarly, a study by the University of Southwest Louisiana entitled "The Effect

of Published Reports of Unethical Conduct on Stock Prices" showed that

publicity about unethical corporate behaviour lowers stock prices for a

minimum of six months.

(b) Case 2

A 1999 landmark study was conducted by Environics International Ltd, in

cooperation with The Prince of Wales Business Leaders Forum, and The

Conference Board, named the "Millennium Poll", it surveyed 25, 000 citizens in 23

countries regarding corporate social responsibility. The findings revealed that all

aspects of sustainability, profitability, productivity levels and profitability are

affected if a company does not take into account its behaviour and actions. The

evidence to support these assertions was based on the following findings:

Profitability

90% of people surveyed want companies to focus on more than profitability.

The social and environmental role of companies is now being regarded as

more primary than the financial bottom line. The Body Shop chain's business

philosophy is rooted on employee and community welfare by only dealing with

products which are manufactured in an ethical manner and are free from any

95

human rights violations in terms of working conditions, pay and health and

safety. The chain is now global reputed and has recently expanded into South

Africa. To further qualify this rationale, 60% of respondents from the same

research, said that they form an impression of a company based on its social

responsibility (defined as regard for people, communities, and the

environment).

Reputation

40% responded negatively to, or said they talked negatively about, companies

they perceived as not being socially responsible. The reputation and image is

compromised and the effects to try and redress a damaged reputation are

costly. Word of mouth is strong, and should be guarded against by being

socially and environmentally sensitive. A tainted reputation and image is

costly. It needs more resources for marketing purposes and to bring back

customer loyalty. The AECI chemical company in Durban, South Africa's

social irresponsible behaviour of disposing its chemical waste into the Isipingo

river and area has cost its image through community protest and government

intervention to clean up the area.

Sustainability

17% of respondents reported that they had actually avoided the products of

companies they perceived as not being socially responsible. This affects the

future growth and sustainability of the company. Obviously profitability

becomes a prime concern and affects productivity. Examples in this regard

points to the apartheid era of which many companies perceived to be in

cahoots with the government suffered product boycotts and this led to their

relocation at a huge cost. Some of these companies have only returned after

1994.

(c) Case 3

Cross-cutting effects

The contextual meaning of this term is that, all elements of sound business are

affected, that is the sustainability, profitability, productivity and reputation. The

96

effect on one, cascades to all others and the position of business becomes

untenable. Instances when this domino effect takes place are explained in the

following research findings. The 1999 Cone/Roper Cause Related Trends

Report determined that American consumers and employees solidly and

consistently support charitable cause related activities and that companies see

benefits to their brand and organisation's reputation, image, and bottom line.

The report is the only longitudinal analysis of rapidly evolving cause-marketing

trends in the United States

• Reputation

A 1997 study by Walker Research found that when price and quality are equal,

76% of consumers would switch brands or retailers if a company were

associated with a good cause. A 1998 survey of marketing directors at 170

leading UK companies found that 34% of the directors believe that linking

marketing to charities can enhance their brands. British Telecommunications

(BT) marketing strategy is based on linking their brand with charitable causes

and this has paid dividends in terms of increasing their reputation thus

increasing market share and cutting down their competitors.

5.2.1.3 Other case studies

More substantive case studies of randomly selected companies with a larger

footprint were analysed under a specific research category in terms of their

conduct and performance. The implications of their behaviour provide evidence

for the business case.

(a) Case 4: "COCA-COLA: The real thing"

According to the Multinational Monitor (2002) Coke's adage of the "Real Thing"

has been brought to scrutiny, thus leading to global increase of competitors in the

beverage industry with an emphasis on health drinks. A synopsis of Coke's social

irresponsible behaviour emanates from the following issues.

97

Earlier in 2002, Coca Cola reportedly paid Warner Brothers (a unit of AOL Time

Warner) $150 million for the exclusive global marketing rights to the first Harry

Potter movie possibly sequels. Coca-Cola's marketing strategy is to reach out to

as many children as possible by featuring Harry Potter image on packages and in

adverting for its carbonated (Coca-Cola, Minute Maid and other brands and

uncarbonated Chi-C, Minute Maid) soft drinks. Coke's Potter promotion, called

"Live The Magic" also uses contests, games and a website to entice kids to drink

more soft drinks.

This marketing strategy has caused global outrage by adults and children to have

Harry Potter their beloved image being used to market "liquid candy" to kids. The

outrage is on the concerns of over-consumption of Coca-Cola and other sugar-

laden soft drinks, which contribute to obesity and diabetes, reduced nutrient intake

and tooth decay. The strategy, which includes a free coke with the Minute Maid

hamburger, leads to the promotion of eating junk food, which has a healthy

problem. Due to this social irresponsible marketing strategy the market share of

Coco-Cola also dropped tremendously with consumers opting for healthy drinks.

Implications:

Reputation

The case study above shows that the image of Coca-Cola as a responsible

corporate citizen is tarnished due to emphasis of making profit at all costs and

the disregard of the health of the community.

Sustainability

The future growth and sustainability of a company depends on its current ability

to retain its existing customers and loyalty. The future customer base of Coca-

Cola is the young generation of which in this case study is not preserving in a

sustainable manner. Since the youth are dependent upon their parents for

spending money, the latter have more influence in terms of determining

allegiance and loyalty to Coca-Cola products.

98

Profitability

Nowadays people are more health conscious and, focus on a healthy lifestyle.

Because Coca-Cola's response to its social environment has neglected the needs

of the consumers, the competitors in the beverages industry have emerged with

healthy drink products, which have led to a drop in the market share, thus, leading

to loss in revenues.

Productivity levels

In this case, the productivity category as part of CSER does not reflect.

Conclusion

This case links directly to the sub problems of profitability, sustainability and

reputation. The productivity levels does not clearly manifest in this case.

Case 5: Coca-Cola and race discrimination

In 2001, Coke agreed to pay $192.5 million to resolve a federal lawsuit filed in

April 1999 by African-American employees of the Coca-Cola Company. The

settlement requires Coca-Cola to pay $58.7 million in compensatory damages;

$24.1 million in back pay, $10 million for promotional bonuses and $43.5 million in

pay equity adjustments, as well as make weeping programmatic reforms costing

another $36 million.

Case 6: Coca-Cola and human rights

In a similar, but much more sensitive case Coca-Cola had to pay the price for

having a loose CSER focus.

In year 2002, in Miami, the United Steel Workers Union and the International

Labour rights Fund filed a lawsuit against Coke and Pan American Beverages,

Inc., the primary bottler of coke products in Latin America and owners of a bottling

plant in Colombia where Trade Union leaders have been murdered. Sinaltrainal,

the Trade Union that represents workers at the Coke facilities in Colombia,

initiated the case. Sinaltrainal has long maintained that Coke maintains open

99

relations with murderous death squads as part of a program to intimidate Trade

Union leaders. Union officials said that Colombia holds the "terrible distinction of

being ranked number one in the world for the number of Trade Union leaders

murdered each year, and that Coke plays a key role in maintaining that

distinction". Other plaintiff includes the estate of Isidro Segundo Gil, a Trade

Union leader who was murdered while working at the Coke bottling plant in

Carepa, Colombia. The plaintiffs charge that the manager of that facility, owned

by an American, who is also a defendant in this case, specifically threatened to kill

the leaders of the union if they continued their union activities. Some of the

leaders of Sinaltrainal, while employed by Coke, were subjected to torture,

kidnapping, and/or unlawful detention in order to encourage them to cease their

trade union activities. The lawsuit alleges that Coke employees either ordered the

violence directly or delegated the job to paramilitary death squads that were acting

as agents for Coke.

Implications

Reputation

The image of Coca-Cola as a good employer as described in case 2 and 3, is

at threat. The failure to comply with ILO conventions in terms of workplace

conditions, fair labour practices and freedom of association has cost Coca-Cola

its image. The issue of respect for human rights is a universal code and in

case 3, this has been completely ignored and thus resulting in the brand being

associated with violence. The effects of this are quite tremendous, and

exemplify how if a company cannot take stock of its CSER environment can

lead to the tarnishing of its brand and consequent cascading into other

operational aspects of the firm.

Profitability

The settlement in case 2, granted broad monitoring powers to a panel of

outside experts jointly appointed by Coke and the plaintiffs' lawyers. This

decision and the consequent huge payouts resulted in the eroding of the

financial bottom line of the company.

100

Productivity levels

Obviously with the non-recognition of workers rights, the result is a sabotage, high

employee turnover, strikes, absenteeism and general despondency in work output.

The work ethic is also affected leading to disloyalty. All these consequences result

in low productivity levels, and have effects on meeting demand, quality and

maintaining a competitive advantage.

Conclusion

The reputation, productivity levels and profitability indicators come out strong.

(d) Case 7: ENRON: Shareholders Rip-Off

A classic example of failure to comply with Corporate Governance can lead to the

entire liquidation of a business; is the global acclaimed Enron Debacle which sent

shock waves across the whole global business landscape. Issues brought to light

by this case were the executive ladder and the accountability to the investor;

grotesque fraud characterized by manipulation and falsification of documents to

present a wrong picture and complicity by auditors (Arthur Anderson). The matter

of the fact is that the Enron executives flouted the code of conduct in their

management of the business by overstating its earnings over the years. Huge

sums were spent over shady inside deals thus portraying a wrong picture to the

shareholders and encouraging even more people to invest to their detriment. By

flouting corporate governance codes the executives self paid themselves multi-

million dollar bonuses and inflated the price of stock to deceive the shareholders.

The consequences of such irresponsible corporate behaviour by the executives

were that: -

Millions of investors were cheated out of billions resulting in countless lives and

retirements being destroyed.

Enron employees were hit harder, because the company used stock rather

than cash to match employee contributions to their retirement fund, and lost

their life savings.

The company folded up.

101

Implications

Sustainability

The Enron saga shows a classic example of the need for CSER as measured

by adherence to corporate governance and code of conduct. Enron folded up

and the effects were quite acute for both the shareholders and employees.

Had there been a comprehensive CSER base, the liquidation of the company

could have been avoided earlier.

Profitability

The company became insolvent as a result of this scandal and led to the arrest

of the senior executives. Not only did this end up with Enron, but it further went

on to affect its other complicit stakeholders namely Arthur Anderson auditors

for flouting acceptable codes of accounting. The evidence in this case is that

even the value chain cannot escape its CSER mandate but is also liable due to

its association with the main wrong doer.

Conclusion

The insolvency of the company reflects that all the categories were actually

neglected, indicating the absence of CSER.

5.2.1.4 Oil companies

(a) Case 8: Exxon Mobil

Exxon Mobil, the leading world oil industry is regarded as the king of Global

Warming Revival. It has attracted a lot of anti-activists and campaigners on its

environmental damage to the planet. Its actions and reckless behaviour is

evidence by the following cases :

An Australian Head Office in June 2002 convicted its sister company "ESSO

Austria unit", of 11 charges linked to a 1998 explosion at a gas processing

plant, which killed 2 people.

102

Exxon Mobil has continued to fight against the $5 billion punitive damages

verdict in the Valdez case. In November 2002, a federal appellate court ruled

that the $5 billion was too high. The appellate court agreed that Exxon's

conduct in the Valdez case was social and environmentally irresponsible, but

held that precedent compelled it to reduce the punitive verdict, which was

approximately 17 times the compensatory damages awarded to commercial

fishers in the case.

The company is culpable for some of the mass atrocities committed by the

Indonesian military in the Aceh province, in North Sumatra, a June lawsuit filed by

the Washington, D.C.-based International Labour Rights Funds alleges. The suit

charges that Mobil Oil contracted with the Indonesian military to provide security

for its Arun natural gas project, and controlled directed the units assigned to it.

Exxon Mobil responded in a statement saying it "condemns the violation of human,

rights in any form and categorically denies these allegations. We believe a lawsuit

recently filed by the International Labour Right Fund (ILRF) containing these

allegations is without merit and designed to bring publicity to their organization".

A New Orleans jury in May ordered Exxon Mobil to pay a Louisiana judge and his

family $1 billion for contaminating their land with radioactive material. Exxon has

leased the land, and an Exxon contractor allegedly did not know the pipes

contained radioactive material. Exxon says remediation costs for the land are

minimal, and is appealing the verdict. The punitive award "was clearly not justified

by the law evidence," Exxon's lawyer Gregory Weiss told the National Law

Journal. "The only thing that I can conclude is that they hit Exxon because it's Big

Oil."

Implications

Profitability

Apart from the fact that Oil companies are major money-spinners, but due to

their recalcitrance, they have had a huge fall-out on their financial bottom line

due as a result of poorly or disregard in implementing CSER. Because of their

103

size, they are a target of activist groups hence the unending lawsuits filed

against them the world over. Financial stability can only last for a specific

period because it is not infinite. Therefore with the never-ending claims the

bottom line is bound to suffer.

Reputation

The record of Exxon Mobil 's reputation is synonymous with the highest polluter

of earth. This has a negative effect on all its associations and social

movements. The attitude by its executives towards the environment has drawn

a lot of criticism. Because of the nature of their business of exploration in

mostly developing countries, the local indigenous people who are custodians of

their areas are often badly treated and this has damaged Exxon Mobil's image.

Conclusion

Reputation category comes out strong followed by profitability. The fact that

the industry has huge cash reserves highlights why productivity levels are not a

problem because of the capacity to use sophisticated machinery, which

nullifies to a greater extent the labour issue and sustainability.

(b) Case 9: British Petroleum (BP)

The British Petroleum (BP) oil Company is the largest company listed on the

London Stock Exchange. BP's global reach means it has been dragged into

disputes as varied as environmental concerns about Alaska, human rights issues

in Colombia and the future of Tibet. The resulting furore shook firm and made it

realize how easy it would be for its worldwide brand name to be tarnished.

Implications

Profitability

High oil prices gave BP record pre-tax profit of £11.8 billion in 2001. The

company has been increasing its social spending in areas such as education,

biodiversity and literacy. It also supports a wide variety of causes including

Red Cross, Save the Children and Human Rights Watch down to small local

104

companies. The oil major has been reallocating resources away from the

corporate sectors so that the bulk of social spending is now originated, funded

and executed at local level.

Reputation and sustainability

As an act of business sense BP has since raced the forefront of oil companies,

which take CSER seriously. This has been achieved by engaging in dialogue

with NGOs and pressure groups such as Greenpeace. It has also introduced

tough targets on its own pollution emission, has adopted a sunburst logo and

visualized a future "beyond petroleum" to underline a commitment to clean

funds such as natural gas and solar power. This was after realization that its

global brand would be damaged and result in not meeting its financial and

sustainability.

Conclusion

Reputation and sustainability are key issues for the above company, which is

proactively embracing CSER after the realization of its effect. Profitability is being

viewed as a bonus.

(c) Case 10: Shell

Shell's case of intention to dump the oil platform Brent Spar, in the North Sea,

which it had sunk, became the turning point for the business case of CSER. In

this case business, government, consumers and activists — all the main actors in

the debate over CSER were present and the verdict was that, business is

expected to give more, do more, and accept the responsibility that power brings.

To further re-emphasize the CSER lesson, Shell was once more entangled in

Southern Nigeria in the Ogoni area because of its unsustainable oil drilling

operation. Connivance of Shell officials with the corrupt, military government of

Nigeria resulted in the assassination of Ken Saro Wiwa, an Ogoni activist and his

compatriots. This galvanized world opinion in their struggle against environmental

damage caused by oil drilling and Shell as an oil company.

105

Reputation

In response Shell has adopted the TBL reporting format and has been

engaged in clean up (green wash) in Southern Nigeria and set up funds for

environmental education. In the process it has also embarked on a rebranding

marketing exercise to improve its image, in many other parts of the world

where it has business interests. The case of Malayamppa natural gas power

project in the Philippines is worth mentioning in Shell's commitment towards

sustainable development.

Other oil companies have also followed suit to engage CSER, but recalcitrants like

Chevron Texaco are stalling and once the pressure from consumers meets with

them, there will be grave consequences on their financial bottom line and image

as experienced by other oil companies.

Conclusion

Reputation is regarded in this case as the most important categbry for the

license to operate and response to CSER.

5.2.1.5 The Apparel Industry

The apparel industry is one of the fastest growing businesses, due to constantly

changing consumer tastes and the competition in designer names. These

pressures and cutthroat competition has led to high inventory turnover resulting in

accelerated production to meet demand. Most of these production and

manufacturing centres are located in developing countries and because of slack

national policies of host countries the working conditions, wages are appalling and

have attracted controversies from developed countries campaigners. The

consequences and companies who have met the wrath of the failure to practice

CSER in the host countries are exemplified below.

(a) Case 11: Wal-Mart

Wal-Mart used to be a company respected for its socially responsible investment

in the community, till the KLD Research and Analytics, which maintains the

106

Domini, 400 Social Index — one of the leading indices in the USA of socially

investment responsible firms — ejected Wal-Mart from its list. The reason for it's

striking off was due to Wal-Mart's hawking of sweatshop-made clothing, handbags

and other products, and its refusal to take steps to ensure its contractors was

sweat-free shops. Wal-Mart's tolerance of sweatshop abroad is matched by its

vicious anti-unionism in its home country. The Wal-Mart is the largest employer in

the USA and is completely union free. Ultimately this position is untenable and

unsustainable in the future survival of the company.

Implications

Reputation

Following reports from the National Labour Committee, Business week, the

Interfaith Centre for Corporate Responsibility and others, KLD reviewed Wal-

Mart's vendor/value chain contracting polices and practices. This review

condemned the company for the failure to make its suppliers comply with its

code of conduct, thereby leading to exploitation of workers in the host

manufacturing countries. Other apparel companies have simply been exposed

to the same socially irresponsible behaviours. Gap, Disney, Lis Claireborne,

Nike, Timberland, Reebok and Adidas have had consumer boycotts of their

products because of sweatshop conditions, child labour, poor working

conditions and unsustainable wages. These companies have now embarked

on steps to improve their records on these issues.

Conclusion

In this fast moving apparel industry, reputation seems to be the main category

being emphasized by consumer protesters in response to poor labour conditions

and human rights of the labour force.

5.2.1.6 Other cases of CSER

Reputation

No firm is immune to consumer pressure if it acts in an unethical manner or

social irresponsible. MacDonald's will attest to this. Its employment record of

107

targeting youth employment, has been a weapon for anti-globalists, who have

actually created a website to tarnish the image of this giant fast food chain.

Scorn for the franchiser, has been blamed on the quality of food sold, which is

attributed to the rising poor eating habits leading to health problems of obesity

and heart failure.

In the late 1980s public trust in big business fell due to the environmental

movement and revelations of unethical corporate practices. Disgruntled

citizen's organized consumer and shareholder companies to expose

companies who were complicit in human rights and environmental violations

(Ayers, 1997). Such actions targeted companies like, Nestle' for its unethical

marketing of breast milk substitutes in Africa, Union Carbide for its complicity in

a fatal explosion at its factory in Bhopal and General Motors for selling vehicles

with military application to the apartheid government.

Sustainability

Leadership examples in the CSER at global level have been awarded to some

of the following companies. The Co-operative Bank, PLC (United Kingdom),

Body Shop (Anita Roddick's health shop which has an endorsement of the

Ethical Trade), Starbucks Coffee Company (headquartered in Seattle, USA),

Natura Cosmetics (Brazil), Kellogg (USA) and Xerox Corporation (USA). The

list is quite endless as companies gradually develop and complete to be

accepted as responsive to social and environmental factors (BSR, 2002).

Norsk Hydro, a Norwegian industrial group is taking CSER to a different level.

Its operations are in Indonesia, Iran, Colombia and Anglo, which are sensitive

areas in terms of human rights. In view of this it is training its senior managers

as champions of human rights, as a pro-active approach to reduce the risk of

its reputation.

Conclusion

The general cases given prioritise reputation and sustainability as the reasons

to practice CSER in the companies' organisational strategies.

108

5.3 SOUTH AFRICA'S BUSINESS CASE EVIDENCE

5.3.1 Introduction

Evidence of the business case in South Africa, will be presented in terms of gross

contributions by companies to issues relating to the developing of the country,

sectorial success, individualized efforts in terms of certification and any recognition

emanating from high achievement for example the KPMG sustainability awards.

Cases of social and environmental irresponsibility will also be highlighted as non-

compliance or disregard for CSER.

5.3.2 Background

The commitment to CSER in South Africa is realized through the concerted efforts

by business in redressing socio-economic inequalities brought by the previous

apartheid dispensation. CSER in South Africa is issue driven in terms of aspects

like HIV/AIDS, unemployment, crime, housing and general poverty. The

government has deliberately created Nedlac as the tripartite forum to thrash out

socio-economic problems. The president of the country Thabo Mbeki has also

gone to push the importance of business in South Africa by creating the

Presidential Investment Advisory Committee in order to involve the market in the

development policy of the country. Many companies have responded by

contributing to foundations established o address the issues affecting the country

or individual devising their own programmes to meet the same needs. Whilst

CSER in South Africa is still developing and cannot be comparable to the global

standards, efforts in this regard point to an ongoing recognition of the need to be

socially and environmentally responsible.

According to Bezuidenhout (2003:30) research on actual spending is sketchy,

since many companies prefer not to make figures available. According to their

research the vast majority of CSI spending was directed at education

programmes. (See table 5.1 below)

109

Table 5.1:

Average social investment contributions according

to type of programme, 1990/1

Programme R m % contribution

Education 554 66

Environment conservation 59 7

Health 57 7

Welfare 51 6

General community projects 42 5

Small business development and job creation 30 4

Arts and culture 27 3

Housing 13 1

Other 8 1

Total 840 100

Source: Nel (1992:28)

Another research conducted in 1998 by the Centre for Development and

Enterprise on corporate social spending (Bezuidenhout, 2002:31) presented the

following findings: -

- The first survey of large and prominent corporations achieved a response rate

of 34% (75 corporations)

- A second survey conducted randomly drew 545 companies of all sizes

Survey of large corporations found that an average of about R580 million was

spent on CSR programmes annually an average of R7.7 million was spent by

the corporation in the 1997 financial year

110

Table 5.2:

Percentage breakdown of CSI of R7.7 million per company, 1997/8

Education and related 44 Small business development 15 Arts, music drama 13 Welfare and benevolence 13 Sports development 6 Policy / research grants to NGOs 5 Environment 4 Total 100

Source: Schlemmer (1998) In: Bezuidenhout (2002)

An estimate by CDE researchers estimates that, when large corporates, which

did not respond to their survey, are included, the overall spending on CSI by

these firms is about R725 million per annum.

The research found that smaller firms spend more on local welfare and

benevolent agencies than on other categories listed in Table 2.

CDE researchers the annual contribution of the corporate sector to CSI

programmes at between R4 billion and R5 billion annually. This accounts for

roughly 0.26% of turnover of large corporations and 0.15% of turnover of small

and medium enterprises.

An incentive for more spending has been attributed to tax rebate purposes.

Spending priorities are changing being redirected towards the areas of

HIV/AIDS, as well as crime.

South African companies who have engaged with CSER and are perceived to be

doing better are herein under-mentioned according to criteria, which has

necessitated their recognition according to research undertaken by Bezuidenhout

(2003).

ri Sri

perc

epti

ons

of i

nte

rvie

wee

s

Lis

t of c

om

pan

ies

wit

h a

hig

h C

SE

R p

rofil

e, in

te

rms

of b

us

ines

s as

soc

iati

on m

em

bers

hip

, aw

ards

for

rep

ort

ing,

and

11).c 4 6

Te

lko

m;

Um

ge

ni W

ate

r P

PC

a) I_ I_ S .92 2 m

E E co a) o) 0 xIX E f0 (7) D C5 0

u) c

2

Ang

lo A

me

rican

plc

; A

nglo

Pla

tinum

; Is

cor;

Imp

ala

Pla

tinu

m;

lng

we

Coa

l; S

am

anco

r

Go

ld F

ield

s

Ang

lo A

me

rica

n p

lc;

BHP

Bill

iton

Ang

lo P

latin

um;

De

Bee

rs;

Pha

labo

rwa;

Im

pa

la P

latin

um

; Is

cor

Ang

lo A

me

rica

n p

lc;

BHP

Bill

iton;

D

e B

eers

; P

hala

borw

a;

Ric

hard

s B

ay M

ine

rals

Man

ufa

ctur

ing

/ Au

tom

otiv

e

-0 •- '-- o d- c >, -g a) a a)

u) aa w c E , a) c 0 (Ts _c 0 -E, co Tis 0 0 2 —, 2 m

2 CO

Insu

ranc

e /

Fina

nci

al c

U NO a) >., • - ,.„ o_ lii -c < "- 2 ...., CJ < iz 2 Li

bert

y;

Old

Mu

tua

l

Fore

str

y /

Pap

er /

Sug

ar

. , rol ct?)a c c co a

o 0 0

i— i CO

'5 c t 0 (13 Y

1.-

.-cs_

'ate a ac co 0 2

Foo

d an

d B

ever

ages

co T) 0 co o m C < 0 co

m C U)

m < u")

Ene

rgy

an

d C

hem

ical

t).12 ec'a)

Ea? E 0 > E- = a) Z

-NC a.) a) es) u) cn 0 n c to W Cl o (/) LLI CO

' To 0 o a) E -E o 0 . Z a) w co -c W co

LW C.) CO CO Esk

om

SE

CTO

R

O. Z -- 0 C 0 -0 IA 0

2 al; ._2 -773 Lu .0 a) 73 1.— Ea 0 2 . a) 2 CD ;:t 2 "c3 ea

Z 0 .E ca 2 a) c U2 12 0 f r, c CO 2 o EC 3 Ct. = (.) id < 22 co C

RIT

ERIO

N

C:

Per

cep

tio

ns

of

Inte

rvie

wee

s

112

PPC stands for Project Performance Corporation (a US based management

consultancy).

SAB stands for SAB Miller (formerly South African Breweries) now also quoted

on the London Stock Exchange, and the second largest brewing company in

the world.

BHP Billiton owns Ingwe Coal.

Samancor is owned 60% by BHP Billiton and 40% Anglo American plc.

De Beers is privately owned (following recent restructuring).

Phalaborwa is 49% owned by Rio Tinto Zinc plc.

5.4 SYNOPSIS OF COMPANIES INVOLVED IN CSER

The companies with a high profile in terms of CSER are classified by

Bezuidenhout (2003) into three main categories, that is, membership of Business

Associations, Awards in KPMG reporting survey and Perceptions of Interviews.

Eskom and Telkom top the list in membership of business association with high

CSER profile.

Anglo American plc, SAB-Miller and Investec due to pressures and stringent

criteria of listing on the London and New York Stock Exchange have also high

CSER profile because they have to comply.

The same result of the above high CSER profile are also confirmed by the CSI

(2000) survey which provided the extent of involvement by business South Africa.

This latter study provided a broad synopsis of CSI performance in terms of level of

contributions. The diagram below illustrates the findings in terms of high

contributions to least contributors.

113

Table 5.4:

Good Corporate Grantmakers and highest profile corporate grantmakers

COMPANY GOOD GRANTMAKER HIGHEST PROFILE

GRANTMAKER %

South African Breweries 28 35

Anglo American 11 18

Eskom 9 12

Standard Bank 9 14

Transnet 9 14

Vodacom 8 19

Old Mutual 7 10

Pick 'n Pay 6 12

Coca Cola 6 17

Liberty Life 6 11

Billiton 5 6

Woolworth's 5 1

Zenex 5 4

BP 4 0

Nedcor 4 11

Absa 4 10

MTN 3 9

Nedbank 3 0

Safmarine 3 0

Sasol 2 2

Telkom 2 5

Sanlam 0 5

First National Bank 1 3

Shell 1 2

Source: The Corporate Social Investment Handbook (2000).

114

Implications

Sustainability

The highest social investment contribution is on education according to Nel

(1992:28) and Bezuidenhout (2002). This could be in view of the fact that the

companies need to invest in education in order to create a knowledgeable market

base for their future. This makes business sense because ultimately they will

spend less in skills development and this will assist in increasing efficiency and

productivity levels. The increase in social spending also supports this finding.

Environmental responsibility is the second highest but the least in terms of

individual company contribution. Reason for this discrepancy could be the fact

that companies in the mining and chemical industries are quite few and are directly

affected .

Reputation

A glaring feature of the companies with the highest CSER profiles according to

the different categories is that they are foreign listed, mining and chemical

giants, TNC subsidiaries and national corporations. They all have a large

footprint both global and national. Their core business includes, products,

which have a high environmental and social impact. South African breweries

are the largest contributor followed by Anglo American. The least contributor is

Shell Plc, a TNC subsidiary.

Productivity levels and profitability

These categories do not clearly reflect, as companies are conservative about

their actual revenues emanating from the proceeds of embracing CSER.

Contributions towards CSI do not guarantee that workplace conditions and

productivity levels are being realized.

115

Other CSER cases

Reputation and profitability

Other corporations in South Africa who have not heeded to the call of CSER over

long periods have met with litigations on their social and environmental impacts.

The Cape plc (United Kingdom) asbestos mining company is testimony to the

consequences of irresponsible behaviour. According to City Press (2002:23)

Cape plc was hit by 7 500 asbestos claimants from the Northern Cape and

Limpopo and this resulted in the claimants using the case for compensation for the

health problems which emanated from the mining activities over a period of 20 —

30 years. The financial burden in compensating for the victims is going to run into

millions. This has become a test case for many South African companies to

understand the business case for CSER. The debate which is starting on the

possible litigation of companies which benefited from the apartheid regime is

gathering momentum, even though President Thabo Mbeki has cautioned about

this move, of which he postulates will be against the reconciliation spirit adopted

post 1994. Efforts in the USA are already underway by international lawyers to

sensitise the affected community to prepare for litigation and testify.

Reputation

Recently in Durban, the chemical company AECI had a similar outrage and by the

government and community and have now accepted that they are going to clean

up the area. Thor Chemicals also met with the same fate. As a way of responding

to ethical behaviour many companies have embraced the Sullivan Principles, GRI

reporting initiative and also embraced the King II Commission on Corporate

Governance which is a significant initiative by the Institute of Directors of South

Africa to improve governance, sustainable development and triple bottom line

accounting.

5.5 CONCLUSION

According to the case analysis and the different findings, the general linkages to

the categories or sub problems of the study are more primed on the reputational

and sustainability aspects. The sub problems of profitability and productivity seem

116

to cascade from the above. Global case studies provided more clearly direct links

between CSER and corporate behaviour. This could be alluded to the

advancement of the CSER practice and consumer rights consciousness in

demanding ethical behaviour from the companies. In South Africa, CSER

responses are mostly issue driven and respond to the current socio-economic

problems in the country, hence different benchmarks could serve as arguments for

CSER, for example, HIV/AIDS policies and company provision of anti-retroviral in

the workplace, as measures to ascertain the social responsibility of a firm.

117

CHAPTER 6

RECOMMENDATIONS, SUMMARY AND CONCLUSIONS

6.1 INTRODUCTION

In this last part of the study the findings will be discussed. The approach to this

will be a comparative analysis of the business case for CSER practice at

international level and the South African business environment. This will be done

under the four sub problems or categories of the study, that is, reputation,

profitability, productivity levels and sustainability. A list will then be drawn on

recommendations emanating from the findings. In the summary an integration of

the main issues arising will be articulated. The conclusion of this chapter will entail

a linkage between the main research finding and focus of the study.

6.2 FINDINGS

The findings from the research are explained under the sub problems of the study

on a comparative basis, that is the international perspective and the South African

business environment.

6.2.1 Reputation

(a) International perspective

From an international perspective the drive for CSER is strongly driven by the

need to maintain a good reputation. The brand image is viewed as an intangible

asset on which all the other core functions of business are based on. From the

study in most of the cases analysed, reputation came out as the most important

category motivating the corporation to engage in CSER. Also the examples given

in which there was an outcry from external stakeholders all hinged on reputation.

An important finding is that the bigger the brand name, the more visibility and

coverage the company will transpose itself, hence attract scrutiny from external

118

stakeholders. Most of the international companies with big brands are a victim of

this attack. Some companies have voluntarily engaged CSER to change the

perception of their image by embarking on massive marketing strategies, through

piggy backing on charitable organisations institutions or redesigning their logos in

order to seek legitimacy and corporate citizenship. The study also found that

publicity about unethical corporate behaviour lowers stock prices for a minimum of

six months. Consumers also form opinion about a company based on its CSER.

(b) South African perspective

The aspect of big brand names and visibility features is also relevant to South

Africa, even though the pressures by external stakeholders are still minimal. This

could be alluded to weak social movements and immature consumer base, which

does not necessarily exercise their consumer rights unlike as compared to,

developed countries. Reputation is seen to be associated with financial

contribution to social problems and the highest contributors have global footprints,

for example SAB-Miller and Telkom. The TNC subsidiaries all contribute

significantly towards CSER and this could be due to the fact that their parent

headquarters entrench the need for their subsidiaries to do so. The cases in

South Africa of reputation risk seem to be related either to chemical, mining and

industries, which operated during apartheid. The environmental degradation factor

seems to be the major concern for judging the CSER behaviour of the companies.

During apartheid, boycotts served as a strong way to punish companies, which

were partisan to the system, thereby resulting in a bad image internationally.

6.2.2 Profitability

(a) International perspective

The financial bottom line as the main aim of business seems to affect by the

reputational aspect in the cases analysed. This is so due to huge financial awards

given to claimants after successful litigations. These litigations emanate from

failure to comply with codes of conduct, gross human rights violations and poor

labour conditions. The boycotts of products as resistance or sign to highlight

119

irresponsible behaviour by a company are a method used by consumers and other

stakeholders. This is used as an indirect way to cause damage to the financial

bottom line. For companies who have experienced a downturn due to

irresponsible behaviour, they have now embraced CSER and have recorded

higher financial returns. The study also found that Corporations that reflect public

commitment in their values outperform by two to three times those that don't as

measured by the marker value.

(b) South African perspective

Not much evidence was brought to light to correlate the high profile of CSER

involvement and the profitability of the company. As the practice is still in its

infancy in South Africa many companies seem not to consider the return of

investment in terms of liquidity but would instead view it from a philanthropic

perspective to show the government and communities that they are doing

something. The chemical and mining industry seems to be at risk of loss in

profitability due to the emerging accountability called by the affected communities.

The apartheid dispensation is a factor, which threatens the financial viability of

companies, which operated during this period.

6.2.3 Productivity levels

(a) An international perspective

Poor workplace conditions are associated with extractive industries both chemical,

mining and forestry, clothing manufacturing companies. Issues of child labour and

sweatshops are seen as evidence of not being social responsible. In cases where

the above are prevalent, there is evidence of absence in union representation.

Collusion between host governments and companies investing the host country is

seen as a motivating factor for non-adherence to ethical behaviour and a disregard

of CSER practices. The employment growth rate was found to be more at

companies that used a stakeholder approach than those that were only focused on

the shareholder.

120

(b) South African perspective

Workers' rights and workplace conditions in South Africa are deeply protected by

legislation and that involuntarily cancels out the need for companies to be forced

by CSER to act in an ethical manner. Some companies have gone an extra mile

to act above legislation by further voluntarily enhancing their social responsibility in

providing their workers with family assistance and health benefits, for example

wellness programmes, anti-retroviral for HIV/AIDS infected workers, retirement

annuities and local community empowerment. Many top-flight workers in South

Africa want to be associated with a company, which has good corporate

governance, and I think this is as a result of lessons being learnt from international

cases like the Enron, Arthur Anderson debacle and most recently Mutual Fund

controversy in the USA.

6.2.4 Sustainability

(a) International level

The sustainability of company is viewed as being influenced more, by the

reputation and image than by the profit motive. At this level growth is being

prioritised by huge financial injection into research and development and

marketing. A highly competitive market place pressures companies to constantly

innovate even in their CSER practices in order to have a competitive advantage

and stay abreast with a highly unstable business environment. Doing more for the

environment and society is also reinforcing sustainability. The belief among many

company officials is that enhancing their brands results in sustainability. Violation

of human rights is viewed as a definite cause of stunted growth of the company.

Providing share to locals is regarded as a definite case of maintaining

sustainability and license to operate in a host country.

(b) South African perspective

Community involvement is regarded as a sure way of guaranteeing sustainability.

This is also seen as being reflective of satisfying government policy and thus

121

makes the company to be perceived as a good corporate citizen. Education and

the Environment are the highest earners of mainly large corporate contributions

and are regarded as good investments to maintain sustainability. Smaller firms

spend more on local welfare and philanthropic issues than on other social issues.

To encourage CSER the tax rebate acts as an incentive and indirectly increases

the sustainability of funding social and environmental issues. The conformance to

codes of conduct and corporate governance is viewed as an indicator of the

sustainability of a company, thus attracts top achieving workers and executives.

This also attracts shareholders and increases the market value of the company.

Citizens want their employers to be involved in their immediate community where

they live so as to create a lasting relationship with them. Employees with social

understanding should make policies on CSER programmes and not accountants,

financial mangers or marketing departments as they devise irrelevant projects.

6.3 RECOMMENDATIONS

From the research findings of the study, the following recommendations were

arrived at:

There is no common definition for CSER. Each company responds in its

own way, depending upon its core competencies and stakeholders'

interests. It therefore follows that in the South African context companies

should tailor their CSER strategies to comply with their own unique needs

which are contributory to their sustainability. The type of product, business

sector it is involved in, can influence some of this strategy tailoring.

From the comparative analysis of the evidence provided in chapter 5

between international and national forms of CSER, it is important to note

that the case for business can also be influenced by country specific and

cultural traditions. Therefore in formulating the CSER agenda issues

correcting for cultural and traditional values, norms of that country should

be taken into consideration. The MacDonald market penetration into India

a Hindu nation, and the subsequent boycotts of its beef burgers, which are

taboo to the local tradition is a classic example of a strategy gone wrong.

122

The size of a company does not necessarily relegate smaller business

enterprises from also engaging in a substantive way towards CSER. These

smaller business enterprises should engage in a host of other activities like

cleaning the environment, assisting in organising charity events and family

or sporting activities, which contribute towards self-esteem for the

communities. Such events cascade in solving social ills like crime and

alcohol and drug abuse which are a consequence of 'having nothing to do

syndrome'.

As more South African companies start to spread their business interests

and tentacles internationally, the pressures for CSER will become more.

Therefore it is an ideal opportunity now, before the decision to

internationalise for national companies and those who have ambitions of

going international to voluntarily embark on factoring in global acceptable

benchmarks, codes of conduct and values of a good corporate citizenship.

The success of any CSER strategy can only be successful if the

management philosophy supports it. Therefore the relationship of

business, society and the environment can only be sustained if the

leadership buys into it. It is important that top management view and sell

the idea of CSER to its stakeholders in terms of its unique benefit and

return on investment. The arguments brought forward by Friedman (1970)

that, the duties of corporate managers is only to increase profits for the

shareholders does not hold water in this new business environment as the

shareholders constitute the same community.

In most cases the return on investment is only viewed in terms of financial

profitability, which is rather a traditionalistic, second wave ideology way of

looking at business. CSER is underlied by intangible returns on investment,

which are not easily measurable, for example, the value brought in by a

good reputation or image. Management should realise that stakeholders

resulting in the sustainability of the company could express this in the

123

attractiveness of the company, which creates loyalty. This guarantees

perpetuity in real profit terms.

CSER cannot be viewed as a once off practice, but is a process of

continuous improvement, just like any other business practice, which

depends on research and development. For this to be a success, the

mechanistic practice of hand picking individuals with an interest in social

issues or accountants, financial managers to spearhead CSER divisions

should be desisted from. Rather experts who have a social science and

integrated business/commerce grounding should be employed to drive this

business practice. Internationally, CSER is now a big discipline even taught

at primary and secondary schools. The UK government has made

advances in this regard by appointing a Minister of CSR as a statement to

show its importance.

6.4 SUMMARY

The launching of the Social Responsibility Index (SRI) by the JSE Securities

Exchange in October 2003, to measure listed companies' responsiveness to the

country's social welfare challenges, reflects the importance and how business will

have to shape to the new demands in South Africa. The emphasis on the TBL as

a prerequisite to list, indirectly forces companies to be pro-active in immediately

starting to avoid future pressure, which could be detrimental to the sustainability of

the financial bottom line. It is insignificant for companies to compete about their

individual social and environmental responsibilities, as the best forms of CSER

through publications of glossy annual reports. The success of these will be

measured according to the practicality, relevancy to the communities they seek to

serve and to what extent the programmes affect profitability, productivity and

sustainability of the company. The bottom line is, business cannot act in isolation

but has a reciprocal relationship both its internal and external functions. After all

business is created to serve society and its needs.

124

6.5 CONCLUSION

This study was aimed at highlighting the importance of integrating CSER into the

organisational strategies of business in South Africa. The findings of the study

showed that CSER makes business sense and should be factored into the overall

business strategy. It also highlighted that, the lack of considering CSER as a

business practice can result in a crosscutting impact on the core elements of

business viability. These crosscutting impacts affect are the reputation or image,

profitability, productivity levels and sustainability of the company. The study

revealed that the neglect or disregard of one of these would result in a domino

effect. The main important category was identified as the reputation or image of

the company. Therefore in the conceptualisation of a CSER strategy these

categories should be taken cognisance of, in order for the business activities to

thrive. Being a good corporate citizen has become increasingly crucial for

business success. Though it is not good enough any longer to be a good

corporate citizen, you must also be seen to be. The study concluded that the

business practice of CSER is inextricably linked to profitability, as there cannot be

social and environmental responsibility without profits, but is not the absolute.

Lastly the study raised the importance of CSER as a business strategy to gain a

competitive advantage in a highly unstable business climate.

125

REFERENCES

Ackerman RW & Bauer RA. 1976. Corporate Social Responsiveness: The

modern dilemma. Reston.

Adams CA, Coutts A & Harte G. 1995. Corporate Equal Opportunities (non)

Disclosure. The B (non) disclosure. The British Accounting Review, 27(2):87-108.

Adams CA, Hill WY & Roberts CB. 1998. Corporate Social Reporting Practices in

Western Europe: Legitimating Corporate Behaviour? The British Accounting

Review, 30(1):1-21.

Adler RW & Milne MJ. 1997. Media exposure, company size, industry and social

disclosure practices. Paper presented at the Fifth Interdisciplinary Perspectives

on Accounting Conference. Manchester.

African Institute for Corporate Citizenship. CSI. 2001. Report on Global

Reporting Initiatives. Midrand, South Africa.

Alperson M. 1992. Contemporary Trends in Corporate Social Responsibility. In:

Innes D, Kentridge M & Perold H (eds.) Profit and Power Politics, Labour and

Business in South Africa. Cape Town: Oxford University Press.

Alperson M. 1995. Foundations for a New Democracy: Corporate Social

Investment in South Africa. Johannesburg: Raven.

Ambao-Rao M. 1993. Social responsibility in India — Bangalore. Zurich Financial

Services.

Andrew BH, Gui FA, Guthrie JE & Teoh HY. 1989. Note on corporate social

disclosure practices in developing countries: The case of Malaysia and

Singapore. The British Accounting Review, 21(4):371-376.

126

Andrew RW & Milne MJ. 1997. Media exposure, company size, industry and

social disclosure practices. Paper presented at the Fifth Interdisciplinary

Perspectives on Accounting Conference. Manchester.

Annan K. 2002. Secretary General's opening address to the World Summit on

Sustainable Development. [Online] Available from:

http://www.iohannesburgsummit.orq [Accessed: 29-8-02].

Bevelson B. 1952. Content Analysis in Communications Research. Glencoe:

The Free Press.

Bezuidenhout A. 2001. Industrial policy: An overview of South African debates.

In: Coetzee J, Graaf F, Hendricks & Wood G (eds.) Development: Theory, Policy

and Practice. Cape Town: Oxford University Press.

Bezuidenhout A, Fig D, Hamman R & Omar R. 2003. A political Economy of

Corporate Social and Environmental Responsibility. A paper presented at the

UNRISD Workshop on Corporate Social Responsibility. Johannesburg, University

of the Witwatersrand, Sociology of Work Unit. 22 May 2003.

Burns T. 1997. Open Trading: Options for Effective Monitoring of Corporate

Codes of Conduct. London. NEF and CIIR.

Bury J. 2001. Corporation and capitals. World Development Report (World

Bank). Journal of Corporate Citizenship, 1(Spring):75-91.

Buscholz RA. 1991. Corporate social responsibility and the good society: From

economics to ecology. Business Horizons, July-August: 19-31.

Bushney MJ. 1994. Corporate Social Responsibility. Johannesburg: People's

Dynamics.

127

Business for Social Responsibility. 2003. Introduction to corporate social

responsibility. [Online] Available from: http://www.bsr.orq/resourcecenter

[Accessed: 14-09-03].

Cannon T. 1995. Corporate Responsibility. London: Pitman.

Carroll AB. 1979. A three dimensional conceptual model of Corporate Social

Performance. Academy of Management Review, 4(4):497.

Carroll AB. 1991. The pyramid of Corporate Social Responsibility: Toward the

moral management of organizational stakeholders. Business Horizons, July —

August: 39-48.

Carroll AB. 1999. Corporate Social Responsibility: Evolution of a Definitional

Construct. Business and Society, 38(3):268-295.

Choi JS. 1998. An evaluation of voluntary corporate environmental disclosures:

Korean evidence. Social and Environmental Accounting, 18(1):2-8.

Clutterbuck D. 1981. How to be a good corporate citizen. London: McGraw-Hill.

Cock J & Koch E (eds.). 1991. Going Green: People, Politics and the

environment in South Africa. Cape Town: Oxford University Press.

Cooper DJ & Sherer MN. 1984. The value of corporate accounting reports:

Arguments for a political economy of accounting. Accounting Organisations and

Society, 9(3&4):207-232.

Corporate Research Foundation. 2003. South Africa's most promising compa-

nies. Cape Town: C.R.F.

Corporate Social Responsibility. 2000. Making Good Business Sense: World

Business Council for Sustainable Development. Geneva.

128

Cowe SS. 2000. The impact of corporate characteristics on social responsibility

disclosure: A typology and frequency based analysis. Accounting Organizations

and Society, 12(2):111-112.

Cowen R. 2000. Morality is spending force. The Guardian, 6 October: 29.

Dasgupta S. 1999. Pollution and capital markets in developing countries. In:

Fredrickson P (eds.) Trade, Ethical Policy and Environment. Washington: World

Bank.

Davis K. 1973. The Case For and Against Business assumption of Social

Responsibilities. Academy of Management Journal, 16(2):312-322.

De Cleene S. 2000. Corporate citizenship: Beyond CSI. Cape Town: CSI

Handbook.

Deegan C & Rankin M. 1996. Do Australian companies report environmental

news objectively?: An analysis of environmental disclosures by firms presented

successfully by the Environmental Protection Authority. Accounting, Auditing and

Accountability Journal, 9(2):50-57.

Dosier J & Hamilton A. 1989. Corporate Social Responsibility and business

ethics. [Online] Available from: http://www.cclsweb.oro/midniqhtfiles/midniqht.php

[Accessed: 18-09-03].

Drucker PF. 1976. Management Tasks, Responsibilities and Practices. New

York: Harper and Row.

Elkington J. 1996. The Triple Bottom Line for 21 5' Century Business.

Greenpeace Business Conference, Brent Spar and After, 25 September 1996.

Elkington J. 1998. Cannibals with forks: The Triple Bottom Line of Sustainable

Development. London: Capstone Publishing.

129

Epstein EM. 1987. Corporate good citizenship and corporate social policy

process: A view from the United States. Journal of Business Ethics, 8.

Farmer R & Hogue WD. 1985. Social responsibility from a pluralistic perspective.

Massachusetts: Lexington Books.

Feldburg M. 1972. Business profits and social responsibility. Inaugural lecture as

Professor of Business Administration. Cape Town: University of Cape Town.

Ferguson C. 1998. A review of UK Company Codes of Conduct. People

Dynamics. London: DFID Social Responsibility.

Fine B & Rustomjee Z. 1996. The political economy of South Africa: From

Minerals-energy complex to Industrialization. London: Hurst.

Fjell 0. Chief executive's speech at the 16 th World Petroleum congress in

Calgary, Canada, le June 2000. [Online] Available from:

http://www.statoil.com/STATOIL/.../opendocument [Accessed: 17-10-01].

Frederick WC & Post JE. 1992. Business and Society: Corporate Strategy Public

Policy, Ethics. Singapore: McGraw Hill.

Freeman RE & Liedtka J. 1991. Corporate Social Responsibility: A critical

approach. Business Horizons, 34(4):92-98.

Friedman M. 1970. The Social Responsibility of business is to increase profits.

New York Times Magazine, 13 September: 137-141.

Global Business Responsibility Resource Centre website at

http://www.bsr.orq/resourcecentre [Accessed: 2003-5-2]:

The following specialized, in depth reports within the major areas of Corporate Social

Responsibility were accessed through the: -

• The United Nations Global Compact. [Online] Available from: http://www.unqlobalcompact.com [Accessed: 2003-5-2].

130

The OECD Guidelines for Multinational Enterprises. [Online] Available from: http://www.oecd.orq [Accessed: 2003-5-2]. The Global Reporting Initiative. [Online] Available from: http://www.qlobalreportinq.orq [Accessed: 2003-5-2]. The Global Sullivan Principles. [Online] Available from: http://www.sullivanprinciples.orq [Accessed: 2003-5-2]. Social Accountability (SA) 8000. [Online] Available from: http://www.sepaa.orq [Accessed: 2003-5-2]. Caux Round Table (CRT). [Online] Available from: http://www.cauxroundtable.orq [Accessed: 2003-5-2]. SVN Standards of Corporate Social Responsibility. [Online] Available from: http://www.svn.orq [Accessed: 2003-5-2]. Keidanren Charter for Good Corporate Behaviour. [Online] Available from: http://wwwkeidanren.or.ip [Accessed: 2003-5-2].

Global Reporting Initiative. 2000. GRI South African Briefing. Midrand,

Johannesburg: UNISA Post Graduate School of Business Leadership.

Gray RH. 1996. The developing state of the art in environmental reporting in the

K and Continental Europe. In: Yamagani T & Kikuya K (eds.) Green Reporting:

Environmental Protection and Accounting, 323-324. Journal published annually by

the University of Pretoria, South Africa.

Gray R. 1996. Sustainable development and accounting: Incentives and

disincentives for the adoption of sustainability by TNCs. Environmental

Accounting and Sustainable Development. The Final Report. Limperg Institute,

The Netherlands.

Gray RH. 1997. Struggling with the practice of Social Accounting: Stakeholders,

accountability, audits and procedures. Accounting, Auditing, Accountability

Journal, 10(3):325-364.

Gray RH, Kouhy R & Lavers S. 1995a. Corporate social and environmental

reporting: A review of the literature and a longitudinal study of UK disclosure.

Accounting, Auditing and Accountability Journal, 8(2):78-101.

Grayson D. 1999. Cleaning the Air. Financial Times. Responsible Business: A

Financial Times Guide, 1999.

131

Grimshaw C. 2001. The Responsible Organisation: The roles and

responsibilities of the Big Citizens of the 21 st Century. London: The Future

Foundation.

Guthrie J & Parker LD. 1989. Corporate social disclosure practice: A

comparative international analysis. Advances in Public Interest Accounting, 3:76-

159 .

Guthrie J & Parker LD. 1990. Corporate social disclosure practice: A

comparative international analysis. Advances in Public Interest Accounting, 3:159-

176.

Hackston D & Milne MJ. 1996. Some determinants of social and environmental

disclosures in New Zealand companies. Accounting, Auditing and Accountability

Journal, 9(1):77-108.

Halal EW. 1986. The new capitalism. Washington DC: John Wiley & Sons.

Hamman, R & O'Riordan T. 2000. Resource management in South Africa. South

African Geographical Journal, 82(2):23-34.

Henderson Investors. 2000. Import of SRI Legislation on SIPs Ethical Matters.

Human Science Research Council of South Africa. 1990. Model of Social

responsibility, p. 24.

International Labour Organisation (ILO). 1998. Labour and social issues relating

to export processing zones. Geneva, 1998.

Jeffcott B & Yanz L. 2000. Codes of Conduct, Government Regulations and

Worker Organizing, ETAG Discussion Paper 1.

132

Jenkins R. 2001. Corporate Codes of Conduct: Self-Regulation in a Global

Economy. Technology, Business and Society Programme, Paper Number 2,

Geneva: UN Research Institute for Social Development.

Joffe A, Mailer D & Webster E. 1995. South Africa's industrialization: The

challenge facing labour. In: Frenkel S & Harrod J (eds.) Industrialization and

Labour Relations. Contemporary Research in seven countries. Ithaca NY: ILR

Press.

Jones TM. 1980. Corporate Social Responsibility Revisited, Redefined.

Californian Management Review, 22(2):59-67.

Kearney N. 2000. Corporate Codes of Conduct: The privatise application of

labour standards. In: Picciotto S & Mayne R (eds.) Regulating International

Business: Beyond Liberalization. Basingstoke: Macmillan.

King M. 2002. King Report on Corporate Governance for South Africa.

Johannesburg: Institute of Directors.

Klein N. 2000. No Logo. London: Flamingo.

Kline J. 1985. International codes and Multinational Business: Setting Guidelines

for International Business operations. Connecticut: Quorum Books.

Kolk A. 1999. International codes of conduct and corporate social responsibility.

"Can transnational corporations regulate themselves?" Transnational Corpora- /

tions, 8(1):1.

Kolodner E. 1994. Transnational Corporations: Impediments or Catalysts of

Social Development? Occasional Paper No 5, World Summit for Social

Development, November 1994.

Korten D. 1999 The post corporate world. Life after capitalism. San Francisco:

Kumerian.

133

KPMG. 1993. International Survey of Environmental Reporting. London: KPMG.

KPMG. 1997. International Survey of Environmental Reporting 1996. London:

KPMG.

KPMG. 2001. KPMG Survey of Sustainability Reporting in South Africa 2001.

Johannesburg: KPMG.

Lavelle L. 2001. KPMG: Big leap into the cold. Business Week. 11 May 2001.

Lee E. 1997. Globalization and Labour standards: A review of issues.

International Labour Review, 136(2).

Lergarde-Hubo C. 1998. Corporate social responsibility in the Philippines.

Financial Times, 3 December 1998.

Levin D. 1996. Corporate Philanthropy and Business Performance. In: Young

DR (ed.) Corporate Philanthropy at the Crossroads. Bloomington: Indiana

University Press.

Levitt T. 1958. The Dangers of Social Responsibility. Harvard Business Review,

September/October: 41-50 (Archives).

Lewis A & Mackenzie C. 2000. Green and Ethical Investment: Can it make a

difference? In: Warhurst A (ed.) Towards a Collaborative Environment Research

Agenda, Challenges for Business and Society. Basingstoke: Macmillan.

Lewis L & Unerman J. 1997. Ethical Relativism: A reason for international

differences in Corporate Social Reporting? A paper presented at the CSEAR

Summer School.

Ligthelm AA & Martins JH. 1998. The informal sector's role in the soft drink

market in South Africa. Bureau of Market Research. Pretoria.

134

Little A. 1998. Responsible, Accountable, Transparent: Managing Corporate

Responsibility in Practice. Cambridge: The Accountable Business.

Logan D. 1997. Global corporate citizenship: Rationale and strategies.

Washington DC: The Hitachi Foundation.

Lukey P. 1995. Health before profits: An access guide to Trade Unions and

environmental justice in South Africa. Scottsville Environmental Justice

Networking Forum.

Malan R. 1991. My traitors' heart. London: Vintage.

Mann M. 1991. The rise of Corporate Social Responsibility in South Africa. In:

Innes D, Kentridge M & Perold H (eds.) Profit and Power Politics, Labour and

Business in South Africa. Cape Town: Oxford University Press.

Matthews MR. 1993. Socially Responsible Accounting. London: Chapman and

Hall.

McIntosh M. 1995. A ladder to the moon: Corporate citizenship in the Twenty-

first century. London: Palgrave.

McIntosh, MD. 2000. Corporate Citizenship: Successful Strategies for

responsible companies. London: Pitman.

Mining and Environment Research Network (MERN). 1998. Corporate Social

Responsibilities and Human Rights: A pro-active Approach. Bath: University of

Bath, School of Management.

Mintzberg H. 1983. Power in and Around Organizations. Englewood Cliffs:

Prentice Hall.

135

Moloi D. 2002. Asbestosis Case in Limpopo and Kimberley. City Press, 23

August 2002.

Murray S. 1999. Inside track: When exploration rights meet human rights.

Financial Times. Responsible Business: A Financial Times Guide, 1999.

Natrass N & Seekings J. 2001. Two nations? Race and Economic Inequality in

South Africa today. Daedulus, 130 G: 45-70.

Nedlac. 2000. Code of Good Practice on Key aspects of HIV/AIDS and

Employment. Johannesburg: Nedlac.

Nedlac. 2001. NEDLAC Annual Report 2000 — 2001. Johannesburg: Nedlac.

Nel B. 1992. Social Investment: Recent Trends. People Dynamics, 10(10):26-

28.

Neu D. 1988. Managing public impressions: Environmental disclosures in annual

reports. Accounting, Organisations and Society, 20(6):457-466.

Newell P. 2002. From Responsibility to Citizenship: Corporate Accountability for

Development. IDS Bulletin, 33(2):91-99.

Ngobese P & Cock J. 1997. Development and the environment. In: Fitzgerald P,

McLennan A & Minislow B (eds.) Managing Sustainable Development in South

Africa. Cape Town: Oxford University Press.

O'Rourke D. 2000. Monitoring the Monitors: A critique of Pricewaterhouse

Coopers (PWC). Labour Monitoring. Cambridge: Massachusetts Institute of

Technology.

Pava ML & Krausz J. 1995. Corporate social disclosure and the capital market:

How does the market value the good corporate citizen?

136

Pearson R & Seyfang G. 1996. New hope or false dawn? Codes of conduct and

social policy in a globalising world. Global Social Policy, 1(1):2001.

Preston LE & Post JE. 1975. Private Management and Public Policy: The

Principle of Public Responsibility. Englewood Cliff, NJ: Prentice Hall.

Roberts RW. 1992. Determinants of Corporate Social Responsibility disclosure.

Accounting Organizations Society, 17(6):595-612.

Rockey V (ed). 2000. The Corporate Social Investment Handbook. 3rd edition.

Cape Town: Trialogue.

Rockey V (ed). 2001. The Corporate Social Investment Handbook. 4th edition.

Cape Town: Trialogue.

Rockey V (ed). 2002. The Corporate Social Investment Handbook. 5 th edition.

Cape Town: Trialogue.

Roodt A. 1987. Social responsibility. Paper published by the Witwatersrand

University Business School Centre for Business Studies. Business Alert, No. 84 of

August 1996.

Rosinski N. 2000. Sustainable finance at Daimler Chrysler Society and

Technology Research Group. Berlin. M.Sc. thesis.

SAGA (South African Grantmakers Association). 2001. 2000 Annual Report.

Johannesburg: SAGA.

Sajhau, Jean Paul. 1997. Business ethics in the textile, clothing and footwear

(TCF) industries: Codes of Conduct. ILO Sectorial Activities Programme, Working

paper. Geneva.

Savage AA. 1994. Corporate social disclosure practices in South Africa: A

research note. Social and Environmental Accounting, 14(1):2-4.

137

Schendler ADL & Plattner M. 1999. The Self-restraining state: Power and

Accountability in New Democracies. Boulder and London: Lynne Rienner

Publishers.

Sethi SP. 1995. Dimensions of Corporate Social Performance: An Analytical

Framework. California Management Review.

Seyfan G. 1999. Private Sector Self Regulation for Social Responsibility:

Mapping Codes of Conduct, Social Policy Research Programme Working Paper

No. 1, Overseas Development Group, University of East Anglia, Norwich 1999.

Slabbert FvZ & Moodley K. 1998. Comrades in business: Post liberation, politics

in South Africa. Cape Town: Tafelberg.

Smith T. 1988. Accounting for Growth: Stripping the Camouflage from Company

Accounts. Trafalgar Square.

South Africa. Government Communication and Information Systems. 2003.

South Africa Yearbook 2002/3. Johannesburg. STE.

Stead J & Gray E. 1990. The challenge of ethical behaviour in organisations.

Journal of Business Ethics, 11(7):42-45.

Steiner GA & Steiner JF. 1994. Social responsibility: A key strategic issue. lPB

Journal in People's Dynamics, 1992:27.

Sternberg E. 1980. The importance of business ethics. In: Malchowski A (ed.)

Business ethics: Critical perspective on business and management. London:

Routledge.

Survey by UK Social Investment Forum (UKSIF). October 2002. London, UK.

Swanepoel S. 1994. Real estate confronts profitability. [Online] Available from:

138

http://www.swanepoel.com/publicafionsiresearch-realestatetechnoloqyhtml.htm

[Accessed: 20-09-03].

Tilt CA. 1994. The influence of external pressure groups on Corporate Social

Disclosure: Some empirical evidence. Accounting, Auditing and Accountability

Journal, 20(1).43-64.

UNCTAD. 2001. The competitiveness challenge: Transnational corporations and

industrial restructuring in developing countries. UN. (New York, 2000)

Utting P. 2002. Corporate Responsibility and the Movement of Business.

Presentation summary from the UNRISD conference. The Political Economy of

Sustainable Development, Johannesburg, 30 August 2002.

Uys FM. 1987. Issue paper Regulation and competition in South Africa. Cape

Town: University of Stellenbosch.

Van Rensburg R. 1992. Participation and progress: Labour relations in South

Africa. Durban: Butterworths.

Wagenaar H. 1987. Value pluralism in public administration. Administrative

Theory and Praxis, 21(4):443-449.

Warhurst A & Lunt A. 1997. Corporate Social Responsibility: A survey of Policy,

Research and Consultancy Activities.

Watts P & Zimmerman J. 1978. Toward a positive theory of the determination of

accounting standards. The Accounting Review, 10(4):758-769.

Willis P. 2001. Business and sustainable development. Prince of Wales

Business School. [Online] Available from:

http://www.nbi.orn2a/publications/bottomline2.pdf [Accessed: 20-08-03].

139

Wilson C. 1954. The History of Unilever A study in economic growth and Social

change (2 Vol.). London: Cassell and Company.

Wood DJ. 1991. Corporate social performance revisited. Academy of

Management Review, October: 591-718.

Wood DJ. 1999. The measurement of corporate social responsibility. MHC

International Limited. Monthly News item. [Online] Available from:

http://www.mhcinternational.com/measurement.htm [Accessed: 17-10-01].

Zadek S. 1997. Building Corporate Accountability: Emerging practices in Social

and Ethical Accounting, Auditing and Reporting. London: Earthscan Publications.

Zadek S. 2000. Ethical Trade Initiatives. London: NEF.

Zeghal T & Ahmed N. 1990. Organisational performance and environmental

consciousness: An empirical study. Management Decision, 36(2):57-23.