The concept and practice of corporate citizenship is influenced by a nation’s history and the social contract that develops between private enterprise and the public. But while the social contract varies from nation to nation, a common thread appears with the spread of market capitalism, calls among the world’s populace for business to assume broader social and environmental responsibilities, and widespread questioning of the role of business in society. Corporate citizenship is in a state of transformation. Most countries are experiencing a shift from a traditional view of corporate citizenship as providing jobs, earning profits, and paying taxes while “giving back” through philanthropy. The new view takes a more encompassing look at the impact of business on society. In turn, companies are taking steps to move citizenship from the margins to the mainstream of their business management. But the position on these spectrums varies from country to country as well as from company to company. Large corporate multinationals are a driving force behind corporate citizenship today around the globe. But their motivations for doing so and the influence of other actors vary significantly depending on the regional context. The environment and concerns about global climate change now top the list of corporate citizenship issues in all nations. Countries share concern over a number of other issues, such as product safety and working conditions, but the priority given to other issues varies depending on geography. The societal obligations of corporations have become a topic of increasing interest in recent years. The United States has gone through waves of change in its social contract as business operated on a laissez-faire basis throughout the late 19th century until it was reigned in by trust busting, regulation and reform from 1900 to 1915. Then came the “Roaring ’20s” of booming business and stock market speculation followed by the Great Depression, which led to strong intervention by the federal government, and the establishment of a social safety net that continued to expand through human resource management by business and the Great Society programs of the 1960s and early ’70s. Since the 1980s, business has grown and its shareholders prospered while the federal government has receded in its reg- ulatory role. In turn, social costs have spread through widespread corporate downsizing and off-shoring and a gap has grown between the heightened earnings of a “fortunate fifth” of the work force and the stagnant wages of the rest of the nation. As the report on corporate citizenship in the United States states, change seems to be in the air in the early 21st century as most business leaders acknowledge the social contract is broken, and a conversation is beginning on how to fix it. In Western Europe, where the state assumed primary responsibility for social welfare after World War II through the latter half of the 20th century, business was more or less expected to attend to job creation, worker safety and the quality of goods and services. Then deregulation, privatization and the shareholder rights movement swept into the United Kingdom and later the continent. This freed competitive energies, displaced workers and birthed something of an anti-corporate movement in its wake. As the U.K. report explains, an interest in expanding the role of business in the social sphere today has led to the creation of ministry-level support for corporate responsibility, a cottage industry of consultancies and academics proffering advice and training, and significant corporate engagement in social issues and affairs, domestically and internationally. “The British brand of corporate responsibility is seen as the gold standard,” claims Julia Cleverdon chief executive of Business in the Community in the United Kingdom. Similar movement in the state/business relationship is under way in Scandinavia, France and other parts of Southern Europe, but the pace seems slower in Germany. Germans primarily expect their companies to do the basics – pay taxes, comply with laws, provide jobs – but are now considering larger responsibilities such as environmental management and community engagement. As the Center for Corporate Citizenship Deutschland (CCCD) reports, “While the rights and responsibilities of government and civil society have constantly been negotiated and readjusted during the last 30 years, the public debate about the role of business in society has only just begun.” Companies based in developing countries or operating in emerging markets have to negotiate somewhat different challenges. In China, for instance, market-based commerce operates under the dominion and direction of a state that must balance aspirations for economic growth against environmental degradation and social divisions. Concerns also mount about China’s performance in global supply chains. As the report on CSR in China reveals, awareness of businesses’ responsibilities to society is growing fast among government officials, business leaders and the public at large. In the Philippines, where segments of society lack in basic needs, there has long been an expectation that corporations will first-and-foremost contribute to economic development. Still, as the report on CSR in the Philippines explains, a tradition of family-owned enterprise means that many companies take care to treat their employees well and contribute to community development. Today a broader approach is being formalized in leading firms and nascent business-NGO networks. Pressure on corporations to “do more” is also growing in developing countries where the ability of the government to mitigate social concerns is weak. Reports from the United Arab Emirates, South Africa, Brazil and Chile all indicate corporations are expected to address social concerns when the government cannot. Still there are distinct origins and expressions of citizenship in each of these locales as their respective centers report. In the U.A.E., for example, companies are most concerned with economic efficiency, compliance and charity. There is neither a tradition of, nor advocacy for, stakeholder engagement and the state lacks institutional capacity to regulate and monitor enterprise in this sphere. In South Africa, the end of colonialism and apartheid sparked corporate involvement in societal reparation, aggressive legislation to shape the impact of business on society, and nationwide interest in sustainable development. Interestingly, South Africans rate companies as more socially responsible than in any other nation. It may be, however, that a poorly developed legal infrastructure has created an environment where a company’s engagement in philanthropy and community development is of primary importance to its citizens. Citizenship in Brazil and Chile reflects commonalities and contrasts. Citizens in both nations express high interest in CSR and comparatively high hopes that corporations can deliver social good. As the chapters report, the state and NGOs have steered corporate conduct in Brazil far more extensively than in Chile. With the exception of select multinationals, Brazilian companies are far less likely than those in Chile to look to global standards for setting their citizenship priorities and agenda. A diminishing role of the state is not a phenomenon experienced only in developing countries. The United States and Europe are also facing local and global challenges that have become too burdensome for the state to address. Klaus Schwab, president of the World Economic Forum, notes in his report on “Global Corporate Citizenship” that as the sphere of influence of business has widened everywhere, so have expectations that business behave responsibly. From its roots in company towns and employee- centered practices to longstanding traditions of charitable giving and volunteerism, the U.S. version of corporate citizenship has emphasized ideals of being a good employer and neighbor. Today a range of developments — from financial scandals and human rights issues in global supply chains to the emergence of social and environmental issues as strategic considerations — have helped generate new definitions and approaches to corporate citizenship. Each of the country reports indicates a common phenomenon, a transformation from corporate citizenship as philanthropy to a broader role of societal engagement. As the role of business in society broadens, corporate citizenship is taken more seriously as an integral part of basic business operations and strategy. Some countries are farther ahead on this road than others, but the finding that corporate citizenship is no longer characterized by arms-length philanthropy indicates a worldwide shift. The Boston College Center for Corporate Citizenship released a report in 2006 titled, “Stages of Corporate Citizenship: A Devel- opmental Framework” which describes how companies move from beginning to advanced corporate citizenship practices. Beginning practices are largely focused on legal compliance. As a company advances, more consideration is applied to philanthropy and obtaining a “license to operate” in the community. More advanced companies take a broader view of citizenship and adopt business practices such as measurement and reporting of citizenship performance, stakeholder management and governance reform. At the leading edge are firms that align their many functions responsible for corporate citizenship and aim their business, philanthropically and commercially, at core economic, social, and environmental needs. The reports from the nine countries profiled reveal a worldwide interest and movement forward on citizenship measurement and reporting. The lowest rates of reporting on corporate citizenship are found in Asia and the Middle East, where issues of transparency and accountability are neither codified in law nor an accepted business practice. The report from the Center for Responsible Business in Dubai claims that in the U.A.E., the concept of corporate social responsibility is “still in its infancy,” focused on legal compliance and charity. By contrast, European companies have shown to be the most advanced in terms of reporting. A recent analysis conducted by the Ethical Investment Research Service (EIRIS) found that European companies have “well developed responsible business practices across a broad range of issues due to a sophisticated responsible investment market, NGO pressure and a strong regulatory environment.” Yet the CCCD reports that “German companies are still looking for the “business case” while at the same time they hardly measure and evaluate their corporate citizenship practices.” On the social front, most nations report a long tradition of community giving, which preceded the modern view of corporate citizenship. This tradition has religious and cultural origins that infuse precepts of capitalism in Asia, the Middle East, and Latin America. It has made companies doing business in these regions more sensitive and responsive to the ideas of working with nonfinancial stakeholders and getting involved in community affairs. Among the countries profiled, Germany is the only one with a weak tradition of community engagement. This is largely the result of a welfare state that limited the need for direct investment in communities from the private sector. However, Germans have cultivated a strong respect for the environment over the past few decades that has shaped the discussion around corporate citizenship in that nation and put German companies ahead of many others in this area. Many scholars have pointed to the state of development of the economy as a determining variable of the advancement of corporate citizenship. Overall, they have found corporate citizenship is less integrated into business strategy and less formally managed in developing nations than in most high- income countries. But there is considerable evidence developing and emerging markets are catching up quickly. Jeremy Baskin, for example, reported in the Journal of Corporate Citizenship that 12.4 percent of firms registered with the Global Reporting Initiative (GRI) are from emerging markets and more than two-thirds of emerging market companies in a recent study show some corporate citizenship activ- ity. Vincular, the Center for Corporate Social Responsibility at Catholic University of Valparaiso, Chile, also reports that more than 50 Chilean companies are reporting under the GRI and many are actively involved in the ISO 26000 process. The country reports in this publication provide a detailed picture of the unique stage of development each country is experiencing today. As all move toward a wider view of the responsibilities of the private sector to society, the degree to which citizenship is being integrated into core policies, practices, and business functions is increasing. No country has a defining tradition whereby business incorporates citizenship considerations into products and services, market entry and growth strategies, and operational management and controls. On these counts, the role of multinationals is moving citizenship forward globally. Multinationals drive the agenda forward While the political system, national culture, and state of economic development clearly play a role in how corporate citizenship is viewed around the world, there is no discounting the role that multinational companies play in shaping public opinion and business practices. Of course, it can be argued that big corporations have been a primary cause of some of the world’s most pressing environmental and social ills. One poll finds that less than half of the world’s populace in a 20 country sample trusts global companies. Another poll shows that only one-in-five people in 25 countries sampled agree that “most companies are socially responsible.” This may account for why large numbers of business leaders worldwide are placing a new emphasis on responsible business conduct. Each of the country reports indicates that multinational companies are a driving force behind the advancement of corporate citizenship. In Germany, for example, multinational companies are responsible for broadening the definitions of how business can and should contribute to society. In South Africa, the authors describe how the mining sector has led the way in incorporating community involvement and human rights into the agenda of the private sector more broadly. Examining why companies are motivated to engage with stakeholders and communities on social issues reveals some nuances in regional corporate citizenship. Companies in the Philippines, for example, are primarily motivated by their own employees, and secondarily by government regulations and pressure from NGOs. In Chile, a “demanding society” is driving companies as well as an increasingly clear business case for achieving a competitive advantage through corporate citizenship. In China, there is little pressure from local NGOs, but a growing pressure from foreign investors and international NGOs to adopt more responsible practices. By comparison, Western countries are more motivated by the market and consumers than those in developing markets. The 2007 Trust Barometer of the Edelman global public relations firm revealed that actions taken toward distrusted companies are greatest in North America and the European Union, and somewhat lower in Latin America and Asia, explaining the differences in market pressure. Additionally, when the Economist Intelligence Unit polled companies on the groups that would have the greatest impact on their sustainability strategy over the next five years, the global aggregate gave a tie to consumers and government policy makers. However, North American companies listed competitors in first place and government third, European firms voted overwhelmingly for customers, and Asian companies listed the government as the most influential driver of citizenship. While companies themselves seem to be at the forefront of innovation around corporate citizenship, in many countries the civil society sector and the government have significant roles. The public (government) sector seems to play an important role in Asian and Western European nations. European countries tend to have more regulations in place around corporate citizenship issues. This is true in Germany where companies face more regulations on environment issues in particular, and the state plays an important role as a legislator and enabler/networking agent influencing corporations to adopt corporate citizenship. Other nations such as South Africa have reported a “flurry of new legislation” around corporate citizenship, particularly on issues related to the Black Economic Empowerment initiative. In contrast, the government plays a far lesser role in the United States, where companies favor a voluntary approach. The civil society sector has grown in size and influence worldwide. The Johns Hopkins Comparative Nonprofit Sector Project finds that a “global associational revolution” appears to be under way, characterized by a massive upsurge of organized private, voluntary activity worldwide. Its influence on the development of corporate citizenship is also visible everywhere, although perhaps the most so in Latin America. We report here that in Chile, civil society exercises growing scrutiny over companies and is able to exert its demands toward the State to implement corporate citizenship policies and regulate and control the private sector. Social campaigners have also left a mark on industry in the United Kingdom. By contrast, civil society groups are less involved in corporate citizenship in Germany, China, the United Arab Emirates and South Africa. Finally, other groups have been reported as having a strong influence on companies and on the field as a whole. Investors, particularly socially responsible investment (SRI) firms, are becoming a greater driver in South Africa as well as in Europe and the United States. Global standards and frameworks, such as the GRI, Global Compact and ISO formulations have had a decided impact on corporate practice in Europe, a moderate impact on South African and South American businesses and the least impact in the United States. In all countries, the environment and climate change has moved to the top of the list of corporate citizenship issues. A McKinsey Quarterly survey discovered that 53 percent of European executives, 45 percent of Chinese executives, 41 percent of North American executives and 34 percent of Indian executives selected the natural environment as the top issue likely to have the most impact on shareholder value over the next five years. Each nation reporting here also indicates that environment is a significant part of the corporate citizenship agenda. Environmental preservation and climate change can be considered issues of “global concern.” These are unique social challenges that are shared by everyone on this planet while also affecting individuals in their local environments. In an era of quickly progressing globalization, many previously local issues are also becoming global concerns. This is reflected here in that the countries profiled share other common issues of concern such as human rights, health and labor practices. Countries place these issues in different orders of priority, depending on their needs, local conditions and recent events. For example, corporate governance is a priority issue today in Germany after a wave of corporate scandals. Other researchers have found that many corporate citizenship policies are based on localized issues and cultural tradition at a countrylevel. One study found that Asian companies were very likely to have policies for labor conditions and supply chains, while North American and Australian companies were most likely to have policies addressing indigenous populations, a unique consideration in those countries. There are also differences in definitions of what defines a good corporate citizen around the world. Kinnicutt,...
Posted on: Fri, 26 Dec 2014 07:05:12 +0000