Corporate Social Responsibility - The Case Of De Beers

ABSTRACT

Corporate Social Responsibility, a theory that has evolved since the 1990s, seeks to see businesses be responsible for their actions socially and environmentally. There is an increasing trend by businesses to adopt Corporate Social Responsibility Practices. This paper attempts to define the reasons why this is so, and what strategic issues are faced by companies who adopt these practices. The issue of Corporate Social Responsibility will then be highlighted in a case study of De Beers, the world's leading diamond producer.

CORPORATE SOCIAL RESPONSIBILITY - AN INTRODUCTION

Research into the topic of Corporate Social Responsibility (CSR), has shown that there is no single universally accepted definition. CSR has many areas including employee rights, consumer rights, the environment, codes of conduct, ethics, community engagement, and corporate philanthropy. The World Business Council on Sustainable Development (WBCSD) states that CSR is "the commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life" (HKTDC, 2005) Business for Social Responsibility (BSR) believes CSR to be "operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that society has of business" (HKTDC, 2005). A definition that is from The Northern Miner, a Canadian journal for the mining industry states that "CSR is a concept of corporate behaviour that recognizes that companies have a duty of care to all their stakeholders, including employees, customers, local communities, and shareholders. Its holistic approach requires that businesses account for and measure the actual or potential economic, social and environmental consequences of their actions" (Purden, 2007). And finally, the text Business, Government, and Society defines CSR as "the duty of a corporation to create wealth in ways that avoid harm to, protect, or enhance societal assets" (Steiner and Steiner, 2006).

Corporate Social Responsibility is a voluntary action. Though laws and regulations are in place to ensure that firms do not directly do anything to harm society, these laws rarely account for all of the imperfections in today's marketplace. Therefore some corporations believe they have a duty of care to go beyond what is required by government. Examples of voluntary actions are lowering emissions below acceptable standards, creating education and health funds in poor neighbourhoods, and ensuring safe working conditions for employees. There are others however, who feel that these actions are really a smokescreen for the true goal of the corporation...to increase profit. And indeed, Friedmanism is a theory that states that the sole responsibility of a corporation is to optimize profits while obeying the law (Steiner and Steiner, 2006). Economists who subscribe to this school of thought believe that business is most socially responsible when it makes money, not when it wastes time on social projects (Steiner and Steiner, 2006).

Regardless of a company's motives for practicing good CSR, it is apparent that this is a trend that is not going away. In fact, it has increased in importance dramatically since the 1990s and does not look to be slowing down.

INCREASING INTEREST FOR CORPORATE SOCIAL RESPONSIBILITY

The following is a list of the various reasons why firms are becoming increasingly interested in Corporate Social Responsibility:

1. Globalization - The world is becoming an integrated commercial system based on free markets where nations are open to foreign trade and investment (Steiner and Steiner, 2006.) With this come new challenges in human rights, environmental and societal issues.

2. Stronger expectations of citizens in developed countries - Advancement in communication technology, including the internet, means that corporate activities globally are easily monitored by the general public (McWilliams et al., 2005). Interest in the role in business in society is due to the increase in awareness of global environmental and ethical issues that this advancement in technology brings.

3. International Codes and Standards - Subscribing to International Codes and Standards, that are not necessarily legally binding, helps avoid government intervention through taxation and regulations (Wikipedia, 2007). These are also often adopted in response to activist attacks, critical media reports, and consumer anxieties (Steiner and Steiner, 2006).

4. Sustainable Development - CSR is closely linked to sustainable development. Corporations are realizing that decisions for the future must not only be based on profits and dividends but on long-term societal and environmental issues, as these will affect financial performance in the future.

5. Competitive Advantage - Corporations are consistently looking for that "edge", that one thing that will differentiate their product from others that are on the market. Good CSR can help to increase brand awareness and the resulting media coverage is free advertising to enhance the firm's reputation...of course bad CSR can have the opposite effect!

6. Risk Management - Companies who are pro-active and adopt good CSR will be seen by the stakeholders as practicing risk management by heading off any future internal and external threats (Story and Price, 2006).

7. The Role of Non- and Inter-governmental Organizations - Non-governmental Organizations (NGOs) are becoming increasingly powerful operators in the global marketplace. Their tactics and campaigns can be extremely detrimental to corporations who are not seen to have good CSR. Examples of NGOs are Greenpeace and People for the Ethical Treatment of Animals. Examples of Inter-governmental Organizations include the United Nations and the Organization for Economic Cooperation and Development. These organizations have created guidelines to ensure that corporations act responsibly.

8. Labour Market Competition - Good CSR can aid in the recruitment and retention of graduates. Skilled workers are looking for companies that have more to offer in today's market.

STRATEGIC ISSUES FOR ADDRESSING CORPORATE SOCIAL RESPONSIBILITY

The benefit to business of good Corporate Social Responsibility is difficult to quantify as it varies depending on the nature of the enterprise. Some scholars believe that there is a business justification for CSR. That is, what is good for the environment and society will be good for company profitability.