The Modern-Era Policy Developments
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The Modern-Era Policy Developments
Social Value Added: A Metric for
AT&T’s SVA tool helps quantify
the value of EH&S activities
Despite the fact that “corporate social re- sponsibility,” or CSR, is one of the hottest current cor- porate buzzwords— and an increasingly popular course sub- ject in many busi- ness schools—there is little consensus on what the concept actually includes. In part, this is be- cause the current reincarnation of the term is not a simple extension of past experience, but repre- sents a new confiuence of a number of previously independent trends.
In this article, we offer some background on CSR, including some of the more recent policy developments that have driven expansion of the concept. We then describe and illustrate a metric that AT&T has developed for measuring social value added. This metric has helped AT&T under- stand the advantages of implementing CSR activ- ities; we believe it could be of use to many other organizations as well.
Background: A Brief History of CSR The idea that institutions have responsibili-
ties to the broader society within which they function is clearly ancient. Business activities
have long been constrained by moral dictates (reli- gious edicts against usury, for example). Religious and civil authorities have often judged and controlled business
activity based on behavior, economic activity, and the hke (Epstein, 1987).
That this idea of reciprocal privileges and du- ties would extend to corporations as they began to evolve in their modern form is not surprising. The medieval merchant and craft guilds, and the subsequent royal charter trading companies, were entrusted with social expectations that reflected the ethical structure of their times.
Many of these implicit expectations bridged over with the advent of the truly modern firm, a creature of general incorporation laws under which any entity meeting statutorily defined cri- teria was able to incorporate. (The first of these laws was passed in 1811 by New York State.)
Even though the incorporation laws created a structure where responsibility to shareholders
Clair Krizov and Brad Allenby
© 2004 Wiley Periodicals, Inc. Published online in Wiley InterScience (www.interscience.wiley.com). DOI: 10.1002Aqem.20036 Environmental Quality Management / Winter 2004 / 39
was paramount, this injunction has never pre- vented firms in virtually all countries from en- gaging in philanthropy, outreach, employee sup- port, and other activities that reflect a broader social role (Allenby, 1997). As the Committee for Economic Development (1971) notes:
[B]usiness functions by public consent and its basic purpose is to serve constructively the needs of society—to the satisfaction of
society. Business has a responsibility for economic effi- ciency—the core responsibility. Out of that responsibil- ity comes a need to be sensitive to so-
Many global firms now produce annuai sustainability reports tbat are eitber in addition to or incorporate tbeir previous environmental reports.
cial values and pri- orities when per-
forming the economic function.
Modern-Era Policy Developments The firm’s historic responsibility to behave
somewhat ethically has in the past few decades been significantly augmented by four additional policy developments, as discussed below.
Ttie Environmental Movement The first factor is the increasing power of the
environmental movement. This movement has a long history but exhibited a significant increase in activism and importance beginning in the late 1960s, especially in developed countries (Chou- cri, 1993).
The Human Rights Movement The second factor is the human rights dis-
course. This movement also has deep historical roots (in antislavery activities and child labor leg- islation, for example) but accelerated signifi- cantly in scope and scale after WWII. Article I of
the United Nations Charter established as a core purpose of the UN the promotion of relationships among states “based on respect for the principles of equal rights and self-determination of peo- ples,” an approach confirmed in the subsequent Universal Declaration of Human Rights of 1948.
The subsequent evolution of human rights, and the rise of nongovernmental organizations (NGOs) dedicated to that cause around the world, has fundamentally changed the relationships among nation-states, firms, communities, and in- dividuals (Sassen, 1996).
Sustainable Development The third element is the growth of the con-
cept of “sustainable development,” an effort to integrate environmental and economic develop- ment values.
The concept originally was popularized by the World Commission on Environment and Devel- opment (1987). Subsequently, the idea that cor- porations should be agents of “sustainability,” in addition to their statutorily defined role as profit centers, has taken hold, and has been enshrined in the idea of the “triple bottom line,” which states that firms should attempt to perform well not just economically, but also socially and envi- ronmentally.’
At least from a public relations perspective, the result of the sustainable development trend is certainly apparent: many global firms now pro- duce annual sustainability reports that are either in addition to or incorporate their previous envi- ronmental reports.^
Civil Society’s Reaction to Unethical Corporate Behavior
The fourth factor, of course, is a continuing reaction by civil society against perceived un- ethical behavior by firms. From the 1960s through the 1980s, reaction against corpora- tions tended to center on their involvement in
40 / Winter 2004 / Environmental Quality iVIanagement Clair Krizov and Brad Allenby
unpopular wars (e.g., tbrough production of na-
palm) and on tragedies such as the Bbopal re-
lease of toxic fumes from a cbemical facility,
which killed thousands.
More recently, social disapproval has focused
on the criminal mismanagement of large firms in
the United States and Europe and disparities in
pay between top executives and workers.
The Evolution of CSR Taken together, the effect of this “perfect
storm” of discourses, issues, and communities,
and the rise of nongovernmental organizations as
independent centers of perceived authority, has
profoundly changed the governance structure
within which firms conduct their business (Math-
ews, 1997). Thus, not only is the meaning of CSR
in the modern context less clear than it has been
for centuries, but the governance structure within
which CSR occurs is also increasingly undefined
This has important implications. It may be
relatively easy for parties to verify, and eventually
agree on the validity of, financial or scientific
data. But almost by definition, “social responsi-
bility” is a matter of values as well as performance
metrics. The question of “whose values” one sup-
ports remains open and contentious.
The Eiements of Corporate Sociai Responsihiiity
Lack of Clear Definitions As the above discussion suggests, a major
problem regarding CSR is that there is no general
agreement about its meaning from an opera-
tional or a managerial point of view. Although
somewhat dated, Friedman’s (1970) comment is
perhaps more true now than it was then: “The
discussions of the ‘social responsibilities of busi-
ness’ are notable for their analytical looseness
and lack of r i g o r . . . . The first step toward clarity
A major prohienn regarding CSR is that there is no generai agreement
about its meaning from an operational or a managerial point
in examining the doctrine of the social responsi-
bility of business is to ask precisely what it im-
plies for whom.”
Almost all of the existing definitions of CSR still
generally reflect vague concepts—desirable actions,
socioeconomic welfare, activities beyond the firm’s
direct economic or technical interests, ethical con-
sequences, voluntarism, satisfaction of society, so-
cial order, behaviors congruent with prevailing so-
cial norms, human competence, responsiveness,
beneficial rather than adverse affects, social legiti-
macy—rather than operational terms. (Although
some such standards do exist. They are codified in,
for example, antifraud and worker health and
This lack of rigor is
frustrating both from
an academic perspec-
tive (because such lan-
guage fails to provide a
basis for empirical re-
search) and for compa-
nies (because the gen-
erality of the exhortations is difficult to translate
into organizational behavior, or into design and
operation of products and services).
A Changing Kaleidoscope of Issues Of course, there have been efforts to put
substance around the concepts—not through
definitions, but through discussions around the
For instance, in the 1950s and 1960s, societal
values noted in the literature included concerns
with pricing policies; shady sales inducements;
support of the arts; organizational pressures on
employees; involvement in military production;
antitrust activities and self-dealing; politics; wel-
fare of the community; education; and the “hap-
piness” of employees.
In the 1970s, other elements surfaced as
major components of CSR: working conditions;
Social Value Added: A Metric for Implementing Corporate Social Responsibility Environmental Quality iVIanagement / Winter 2004 / 41
There is very iittie tliat firms do, or might do, that has not at one time or another been associated with CSR.
product safety; environmental effects; fraudulent advertising; employment inequities; community- oriented programs; environmental conservation; labor policies; consumer transparency; fair treat- ment; protection from injury; poverty and urban blight; racial discrimination; pollution; urban decay; employment of minority groups and asso- ciated affirmative action policies; greater partici- pation in programs to improve the community; medical care; industrial health and safety; Third World dealings; employee whistle-blowing; dis- tributive justice; employee rights on and to the job; sexual harassment; affirmative action for women; and bribery of foreign officials.
In the 1980s and 1990s, the CSR focus shifted toward still other issues: white- collar crime; business indictments for al- leged criminal acts; overcharging in de- fense projects; envi- ronmental disasters;
employee communications, training, and devel- opment; career-planning; retirement and termi- nation counseling; layoffs; redundancies; plant closings; stress and mental health; absenteeism and turnover; health and safety; employment eq- uity and discrimination; women in manage- ment; performance appraisal; day care; public policy; trade associations; flexible work hours; unemployment programs; and employment of children, especially in developing countries (Ep- stein, 1987).
Input from NGOs Civil society has also been an uneven source
of prioritization regarding CSR. While NGOs fre- quently and visibly campaign on various aspects of CSR, the ad hoc and single-issue character of such organizations provides neither a compre-
hensive guide to CSR nor the assurance that all aspects of CSR will be equally weighted.
Input from Business-Oriented Research Business-oriented research organizations,
such as the Conference Board, have been very ac- tive in attempting to help companies understand the demands of the environment within which they are now operating. But here again, achieving a comprehensive approach has been difficult.̂
Input from Socially Responsible Investment Funds and Groups
A relatively new source of input consists of the socially responsible investment funds and invest- ment indexes, such as the Dow Jones Sustainability Group Index, and special interest groups, such as the Council on Economic Priorities (CEP), which have begun rating corporations on CSR issues.
For instance, the CEP has rated corporations on their impact to the environment; support of minorities; advancement of women; contribu- tions to charities as a percent of income; treat- ment of workers; and family benefits, such as flexible work arrangements and paid leave (Council on Economic Priorities, 2000).
AT&T’S Sooiai Value Added Tooi
Making Sense of CSR It is apparent from the above discussion that
there is very little that firms do, or might do, that has not at one time or another been associated with CSR. This raises a number of risks: that firms will ignore the concept completely as being im- possible to operationalize; that firms and different stakeholders will come into conflict over claims regarding CSR because they may have different operational concepts about what CSR means; or that ideological conflict may negate otherwise de- sirable initiatives (in the latter case, the best can become the enemy of the good if companies re-
The Modern-Era Policy Developments
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