Corporate social responsibility (CSR) has been highly regarded by most corporations. However, the exact reason why corporations implement CSR initiatives is often very vague and confusing to others. This paper will explore in depth how international corporations are motivated to incorporate CSR into the business strategies and how they deal with it. Based on academic references, the report firstly outlined the CSR background as well as some theory and key debates about CSR. Then, the methodology was summarized. After that, the case study of Apple Inc.
was used to demonstrate the reasons for implementing CSR initiatives in depth. Following that, the types of dilemmas the company faced, the CSR approach and tactics it used were analyzed. Finally, a conclusion was drawn at the end of the paper. 2 CSR Background 2. 1 Definition of CSR In accordance with European Commission (2001), the modern corporate social responsibility (CSR) is “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.
” However, there are some changes in the meaning and practice of CSR concept. (Lee, 2008) 2. 2 Evolution of CSR The roots of CSR concept can be traced to the 1930s. (Friedman and Miles, 2006) However, the modern CSR concept originated in the 1950s in the US, and came to be prevalent in the early 1970s. (Srivastava, 2012) In the 1950s, Bowen (1953) defined CSR as “the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society“.
The CSR literature of the definition expanded significantly during the 1960s with Keith Davis’ definition of CSR as referring to “businessmen’s decisions and actions taken for reasons at least partially beyond the firm’s direct economic or technical interest. “(Davis, 1960) Meanwhile, McGuire (1963) stated that corporations have certain responsibilities to society which extend beyond economic and legal obligations. Business and social interest came closer and firms became more responsive to their stakeholders in the 1970s and 1980s.
(Moura-Leite, 2011) The 1970s was the decade in which CSR, responsiveness and performance became the center of discussions (Carroll, 2010), while the focus became fostering ethical corporate cultures in the 1980s. (Frederick, 2008) From the 1990s, CSR became almost universally approved and was coupled with strategy literature. Also, the importance of CSR is definitively realized. (Moura-Leite, 2011) 2. 3 Emergence of CSR CSR tends to be a strategy to face the threats of some global issues such as scarce resources, poverty and inequity, global warming and pollution while promoting the development of organizations.
(Dodiya, 2011) According to Wilson (2003), the implement of CSR initiatives leads to corporate sustainability. Also, the enhanced corporation reputation and global image earned from the implement of CSR activities provide organizations with an economic thrust to embrace the whole corporate sustainability trend as a strategic management model. (Dodiya, 2011) Due to these benefits, CSR has continued to grow in importance and emergence over the decades. 3 Literature Review 3. 1 Carroll’s CSR Pyramid Caroll’s CSR Pyramid is the most well-known and widely used model of CSR.
(Visser, 2005) [pic] Fig. 1 Carroll’s CSR Pyramid, Sourced From Carroll (1996) According to Carroll (1996), a firm has the following four categories of obligations of corporate performance. First and foremost, due to the dimension of philanthropic responsibilities, corporate should contribute to the community and improve the quality of life with the ultimate goal of being a good citizen. Secondly, ethical responsibilities are norms which the society expects the business to be ethical, avoid harm and do what is right.
The third is legal responsibilities, the key of which is to obey the law. The fourth is economic responsibilities which mean the primary responsibility of economic entities such as corporations is to satisfy economic needs of the society and generation of surplus for rewarding the investors and further expansion and diversification. (Srivastava, 2012) 3. 2 Purpose of the firm and how that shapes views on CSR There are mainly three competing approaches about the purpose of the modern corporate.
Each provides a framework for evaluating policies, corporate governance procedures, as well as the economic and social performance of business. The ? rst, shareholder approach, focus on the ? rm’s purpose of increase its profits while minimizing the importance of its other roles in society. (Quazi and O’Brien 2000) [pic] Fig. 2 Stakeholder Map, Sourced From: http://stakeholderengagementnz. wordpress. com/tag/stakeholder-map/ As can be seen from figure2, the second approach theory which is named as stakeholder approach, broadens the ?
rst perspective, recognizing the importance of both creating profits and “any group or individual who can affect, or is affected by, the achievement of the organizations objectives” (Freeman, 1984) The stakeholder includes shareholders, creditors, employees, customers, suppliers, regulators, and local communities and impact on society at large. The third is social approach, which operated by public consent to “serve constructively the needs of society” (CED 1971). 3. 3 Arguments for and against CSR 3. 3. 1 Arguments Against
Friedman (1970) held that management has one responsibility and that is to maximize the profits of its shareholders. He placed three arguments. The first argument was that “Only human beings have a moral responsibility for their actions. ” He claimed that only human beings can be morally responsible for their actions, corporations are not human beings, therefore cannot be morally responsible for their actions. Since corporations are set up by human beings, it is them who can assume responsibilities for the actions of the corporations.
His second argument was that it is the manager’s responsibility to act solely in the interests of shareholders. Here the interests of the shareholders should be profit making. If the manager acts for any other purpose, he is betraying his employer. His third argument was that corporate had no need to deal with social issues since it’s the job of governments. A second objection to CSR was that it diluted corporates’ primary purpose. The adoption of CSR would put business into efforts unrelated to their “proper aim” (Hayek 1969). A third argument against CSR was that there was no need to wield social power since business has enough power.
(Davis 1973) It should be noted that the positions present here were applied decades ago, when the idea was narrowly conceived. 3. 3. 2 Arguments For The argument for CSR begin with the belief that it is in business’s long-term self-interest to be socially responsible. (Carroll, 2010) This view holds that, if business is to have a healthy climate in which to function in the future, it must take actions now that will ensure its long-term viability. Carroll and Buchholtz (2009) stated that acting beforehand is more practical and costs less money than simply reacting to social problems.
Since pro-acting is better than reacting, adopting CSR initiatives can be beneficial. Another moral argument in favor of CSR is that powerful corporate should be engaged in social issues since their access to significant resources should be used responsibly. (Davis 1973) Besides, brand differentiation was one of the primary reasons companies embraced CSR from the past which means CSR activities enhance corporate reputation (Aswathappa, 2008) Two additional arguments in favor of CSR include that CSR initiatives help corporates to draw employee attraction.
(Epstein-Reeves, 2012) Finally, it has been argued that corporate have a duty to take the public’s interests and goals into account based on the theory of stakeholders approach which may avoid boycotts and satisfy customers. (Aswathappa, 2008) 3. 3. 3 Summary of the key debates These arguments for and against CSR leave the legitimate perspective that there are, indeed, two sides of the arguments to CSR. However, nowadays, the public believes that, corporate should take the responsibilities of the employees, communities and other stakeholders, in addition to pursuing profits. (Bernstein, 2000) 4 Methodology
The analysis was based on exhaustive literature survey regarding the topic and related concepts as well as a case study for CSR issues at Apple Inc. In this paper, secondary sources were gathered to make the research more objective. “Secondary research is so called because the data come to research ‘second-hand’ (other people have compiled the data). ” (Jobber, 2007) Both quantitative and qualitative data were collected from various sources including academic journals, newspapers, periodicals, websites, industry reports and were well used for the purpose of study. A list of all the references is put at the end of the manuscript.
5 CSR at Apple Inc. 5. 1 Apple’s profile Apple Inc. (Apple) is a MNC deals with consumer electronics and software. It was founded on 1st April, 1976 by Steve Job and Steve Wozniak in California. By the year of 2011, Apple became the biggest MNC on both revenue and profit. At present, Apple owns more than 300 retail stores over 13 countries and an on-line store. 5. 2 Reasons to engage in CSR “To protect the environment, health and safety of employees, customers, and the global communities while bringing the best personal digital experience through innovative products and services” is the mission statement of the corporate.
(Form 10-K, 2012) Thus, the reason why Apple adopts CSR is not simply for the pursuit for profits or reputation, but also for the protection of human rights and global communities, a part of which is to be engaged in the global issues including environmental protection, energy reduction as would be introduced below. 5. 3 CSR policies at Apple Inc. Apple’s CSR policies can be summarized from three main resources including the company code of conduct, the Apple supplier responsibility progress report and Apple’s on-line reports in respect with CSR.
Apple’s company code of conduct, which deals with corporate governance, information disclosure, environmental health and safety, and procurement can be driven from “Form 10-K”, the annual report required by the U. S. Securities and Exchange Commission. The Apple supplier responsibility (SRP) progress report include audit results of labor and human rights, worker health and safety, environmental impact, ethics, management systems. Apple insists that “suppliers provide safe working conditions, treat workers with dignity and respect, and use environmentally responsible manufacturing processes.
” (Apple SRP report, 2012) The CSR website for Apple includes Apple’s actions and progress about CSR issues which include respects of energy reduction and the design of environmentally safe products (Apple CSR website) The details of the above CSR practices would be outlined in part 5. 6. 5. 4 Type of CSR approach taken by Apple Inc. From the mission statement above, it is not hard to judge that Apple takes the stakeholder approach, since it took not only the demand of the shareholders but also the demands of employees, customers, and the global communities.
In this part, a summary would be put on how it keeps the promises. Firstly, Apple satisfies the demand of shareholders by increasing share price and profits. In 1997, Apple’s share price was $3. 30 while in 2013 its share price had risen to $417. 20. (Morningstar, 2013) For the past four years, Apple has earned first place among Fortune magazine’s World’s Most Admired Companies. As can be seen from figure 3, the revenue and share earning has been continuously growing in the last five years, which proves that the profits of Apple’s shareholders are promised.
[pic] Fig. 3: Sourced from Morningstar: http://tools. morningstar. co. uk/uk/stockreport/default. aspx? tab=10&vw=is&SecurityToken=0P000000GY]3]0]E0WWE$$ALL&Id=0P000000GY&ClientFund=0&CurrencyId=GBP , accessed on 29 April 2012 Secondly, Apple meet the customers’ needs with high quality products with a fair price while satisfying the employees with stable jobs and fair salary. Evidences show that by the year of 2012, 62000 jobs have been offered worldwide by Apple with higher than minimum wages of their countries and 60 working hours per week.
(Form 10-K, 2012) Last but not least, Apple also takes its CSR of communities which includes the engagement with environmental issues. The highest standards of social responsibility across worldwide supply chain Apple adopted as well as its’ concern with the environmentally sound products commit its engagement in the environmental issues. (Apple SRP report, 2012) 5. 5 Key dilemmas within CSR challenges 5. 5. 1. Labor and human rights In May 2010, it was reported that several suicide cases occurred at one of Apple’s suppliers, Foxconn.
And 13 workers had committed suicide from 2009 to 2010. (M. Moore, 2010) To the result of the investigation, the reason for the multiple suicides was related to the overrate working times. The weekly working hours of workers in Foxconn were up to 70 hours, ten hours above the maximum hours set by Apple’s Supplier Responsibility Report, 2010. In February 2011, another issue about the child labor occurred in Apple’s suppliers. (M. Moore, 2011) According to Apple’s SRP Report 2011, there were up to 91 underage workers at the suppliers.
To deal up with these problems, Apple has signed the “Supplier Code of Conduct” with the suppliers about the working hours and workers’ human rights. However, since Apple makes sure that suppliers comply with the Supplier Code by conducting audits. (Apple SRP report, 2012) There’s possibility that similar issues still exit due to the quality of the audit. On the other hand, Apple set up a training program to prevent the hiring of child workers in addition to the regulations set by the code of conduct. However, since the child labour can easily be hidden by providing fake work schedule data, it’s difficult to solve the problem.
What make things worse is the fact that many children in poor families are willing to do the work to make up for the living expense. 5. 5. 2. Workers’ health and safety Concerning workers’ health and safety conditions at the suppliers, in May 2010, The Guardian reported that “workers from Wintek had been poisoned by n-hexane, a toxic chemical used to clean the touch screens of iPhones”. The employees complained that the compensation Wintek offered for the health damage was not sufficient. However, the workers who did receive compensation were asked to resign from their jobs.
(Reuters, 2011) Apple addressed the issue of the use ofn-hexane. Apple obliged Wintek to stop using n-hexane and required Wintek to repair its ventilation system and to work with a consultant to improve its environmental health and safety systems. (Apple SRP report 2011) However, one cannot deny that other issues of using poisonous chemicals may happen in the future since it is easy to be hidden in the process of manufacture. 5. 6 CSR tactics at Apple Inc. Apple has taken steps to become a greener company, such as reducing its environmental impact at its facilities. [pic] Fig.
4 Sourced from Apple CSR Website: http://www. apple. com/environment One of the tactics Apple applied to reduce its impact on environment is to reduce energy use. Apple’s reduced energy use is due to the product design and the use of renewable energy. Apple designs the products as energy efficient as possible. In addition, Apple aims to power every facility at Apple entirely with energy from renewable sources including solar, wind, hydro, even if the fact that the investment is expensive. Since 2008, Apple has reduced the average power consumed by Apple products by 40 per cent.
(Apple CSR Website) Another tactic Apple adopted for reducing environmental impact is the greenhouse gas emissions strategy. [pic] Fig. 5 Sourced from Apple Website: http://www. apple. com/environment Apple embraces the action for reducing greenhouse gas lease in the progresses of manufacturing, transportation, product use, facilities and recycling In effort to reduce its overall environmental impact, Apple also offers incentives such as transiting subsidies for employees who use public transportation in Mexico.
(Apple CSR Website) In addition, Apple’s free buses powered by bio-diesel are severed between the Apple headquarters and the train station. These incentives reduce fuel costs for employees while contributing the environmental protection. Apart from the tactics on environmental issues, Apple is also running an ethical business by satisfying customers with high quality products, insisting highest standards of social responsibility, setting up codes to protect workers’ human rights, as has been analyzed in part 5. 3 and 5. 4.
As the first technology company admitted to the Fair Labor Association, Apple is setting a new standard in transparency and oversight. (FLA, 2012) 6 Conclusion Bearing in mind the premise of CSR which is to treat the stakeholders in a manner deemed ethically acceptable in society (Dolida, 2011), it is inadequate for corporate to solely incorporate CSR for the purpose of increasing shareholders’ value. Furthermore, Wilson (2003) argues, in CSR debate, “what is usually in question is not whether corporate managers have an obligation to consider the needs of society, but the extent to which they should consider these needs”.
Although Apple has made efforts for CSR practices, there’s still something needs to be improved. From the analysis above, it’s not hard to see that Apple has contributed nothing to the poverty and inequity issues even if it has enough power to do so. Thus, it’s expected that Apple would be engaged in a wider range of global issues. As a conclusion, in this paper CSR is understood as corporates’ obligation to meet the interests of its stakeholders as well as to consider both social and environmental consequences of its business activities within the global economy.
And, this can be achieved if corporations devote more attention to nonfinancial performance dimension. 7 References Aswathappa K. International Business, Tata Mc. Graw Hill, 2008 Apple Computers Inc. , Form 10-k, Spet. 29, 2012, U. S. Securities and Exchange Commission, Washington D. C. 20549: http://www. sec. gov/Archives/edgar/data/320193/000119312512444068/d411355d10k. htm, accessed on 24 February 2012 Apple Inc. Corporate Social Responsibility Website: http://www. apple. com/environment/, accessed on 24 February 2012 Apple Supplier Responsibility Progress Report 2011: http://investor. apple.
com/secfiling. cfm? filingID=1193125-11-282113&CIK=320193. Accessed on 24 February 2012 Apple Supplier Responsibility Progress Report (2012) : www. apple. com/supplierresponsibility, accessed on 24 February 2012 Bernstein, A. 2000. Too much corporate power. Business Week, 11 September Bowen Howard. 1953. Social Responsibilities of the Businessman. New York: Harper and Row, Inc. Carroll B. Archie and Shabana M. Kareem. 2010. The Business Case for Corporate Social Responsibility: A Review of Concepts, Research and Practice. International Journal of Management Reviews DOI: 10. 1111/j. 1468-2370. 2009.
00275. x Carroll, A. B. 1996. The pyramid of corporate social responsibility: toward the moral management of organizational stakeholders. Business Horizons. p. 39–48. Carroll, A. B. and Buchholtz, A. K. 2009. Business and Society: Ethics and Stakeholder Management, 7th ed. Mason, OH: South-Western Cengage Learning. Dodiya M. Bhavsinh. 2011. Emergence And Concept of Corporate Social Responsibility. International Referred Research Journal, November, 2011. ISSN- 0974-2832, RNI-RAJBIL 2009/29954; Vol. III *ISSUE-34 Davis, K. 1973. The case for and against business assumption of social responsibilities.
Academy of Management Journal, June, p. 312–322 Davis, K. 1960. Can business afford to ignore social responsibilities? California Management Review, 2, p. 70–76. Epstein-Reeves James. Six Reasons Companies Should Embrace CSR: http://www. forbes. com/sites/csr/2012/02/21/six-reasons-companies-should-embrace-csr/, accessed on 2 February 2012 European Commission. 2011-14. Communication from the Commission to the European Economic and Social Committee and the Committee of the regions: A renewed EU strategy for Corporate Social Responsibility, COM (2011) 681 final, p. 6. Fair Labor Association, 13 January 2012:
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