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CSR and Globalisation

The multinational enterprises’ market cornering has been a major step forward in the development of the concept of CSR in that their international activities immediately faced different legal systems and institutions that stimulated the search of new forms of control and legitimacy of their operations, in particular in weak governance regions.  The growth of a global economy gave rise to new public opinion  demands of social responsibility, sustainability and transparency on the enterprise’s behaviour, in order to counterbalance the negative liberalisation effects.

There are many scopes of application for CSR in the international context, where the corporate socially responsible conduct of the can assure the growth of the public opinion consensus through the achievement of stakeholders’ confidence.

• Environment and Sustainable Development

Production and consumption modes play a primary role in those global phenomena such as pollution, earth overheating, and climate changes that jeopardize the future of the Planet. It is, thus, urgent to promote a  new model of economic development “that guarantees the needs of current generations without compromising the ability of future generations to satisfy their own”, as it has been  stated since 1987 in the report, “Our Common Future” by the World Commission on Environment and Development (better known as the “Brundtland Report” after the name of the Chairman).
Nowadays the state regulations are not always able to assure an entrepreneurial conduct complying with such development model. Moreover, in some cases, outsourcing practices can encourage the adoption of standards lower than those prescribed in the home Countries.
In this context, the voluntary choices of enterprises operating at international level are determinant for turning production into a real advantage for local and global economy; these choices should concern the energy saving as well as the eco-compatible production, the adoption of an efficient environmental management system as well as the application of a reporting system including environmental performances.

Many analysis and studies demonstrate that, in the middle-term period, these choices  turn out to be an economic advantage in terms of:

  • row material saving (in particular regarding traditional  energy sources);
  • introduction of technical innovations in the productive processes;
  • innovation in products;
  • consumers’ favour (market share).
     

• Human and Labour Rights

An enterprise, especially a large-sized one, can have a remarkable influence not only on the economy, but also on the social and political life of the Country in which it operates. Therefore, an essential task  of  a socially responsible behaviour is to refuse to adopt practices that are repressive of human rights and be active in their positive respect.
To this aim, an entrepreneurial strategy based upon CSR demands:

  • that the enterprises operating in developing Countries attain standards no lower than those of the home Countries, promoting their achievement in the host community;
  • that the enterprises localised in Countries where human and labour rights are respected require their commercial partners to adopt the same right standards.

In particular, an enterprise must protect  the fundamental freedoms of its workers, wherever it operates that is:

  • to absolutely refrain from making recourse to forced or obligatory labour, and to whatever form of coercion and
  • to contribute to the abolition of child labour;
  • to assure the respect of the rights of privacy and freedom of opinion, and the exercise of the political rights and of the trade union activities;
  • to refrain from whatever discriminatory treatment  (for reason of sex, race, religion, political opinion, citizenship or social extraction);
  • to provide for a healthy and safe working environment and for shifts allowing the needed rest;
  • to assure a fair pay, including compensation for the intellectual properties, letting the workers and their families have dignified existence.

It is controversial however, whether and to what extent the aforesaid protection standards could be justifiably calibrated on the basis of the socio-economic peculiarities of the host Country (e. g. women conditions, average work age, average earning, etc.).

• Local Economy and  Society

The positive impact of large international enterprises’ plants on the socio-economic local development of less developed Countries can be remarkable, but, often, only so long as they adopt socially  responsible strategic choices. Otherwise, indeed, the existing structural obstacles – such as, for instance, the gap between the proposed technology level and the assimilation capacity of the host region – could frequently prevent local economy from benefiting those effects and the local entrepreneurship could be crowded out by the higher competitiveness of the large enterprises. 
It is essential, thus, to involve the stakeholders in the relevant firm’s decisions and in the search of solutions that, by effectively contributing to the territory’s development, do encourage that local consensus that also reduce the investment risk.
Some typical examples of responsible conduct of multinational firms towards the local economy of less developed Countries are listed below

  • the technology transfer;
  • the grant of licenses for the use of intellectual property rights at costs compatible with the local market;
  • the training activity for the development of local skills and for the implementation of local R&S programmes;
  • the development of new products by means of local know-how and skills;
  • the creation of durable forms of collaboration with local partners, encouraging their access to the global market;
  • the corporate venturing investment in the local start-up capital.

Under a more specifically social profile, many international enterprises promote a kind of initiatives that goes under the denomination of “social responsibility in action” assigning part of their profit to the realisation of infrastructures (schools, hospitals, roads), as well as making available to the local community part of their own production or human resources.
Even if it is controversial that in the aforementioned cases it is correct to call it “CSR” rather than “philanthropy” (link), the advantage of these initiatives is related to the global market - in terms of feedback and business reputation – as well as to the settlement itself, in that it allows consolidating the enterprise presence in the host community.

• Transparency

The effectiveness of an entrepreneurial socially responsible strategy is closely tied to its “accountability”, term that indicates the reliability degree of an enterprise, measured on the basis of its attitude “to render account” of its objectives, its activity and its achieved result. It is a very important function, because through this type of declarations the enterprise holds responsibility of what it decides and of what it does, and to some extent, it avoids acting arbitrarily.
Until recently enterprises have used a type of report (traditional budget) that was only designed for shareholders and which sole content was the achieved profit; but in the last few decades issues linked to liberalisation (corruption, economic unfairness, environmental problems, uncertainty) have generated a new demand for accountability. Its addressees are not shareholders anymore, but all stakeholders, considered as bearers of rights and interests, i.e. employees,investors, consumers, public institutions, NGOs. Also the contents of this demand are new, in that are not circumscribed to economic performance, but extended to paths followed and to resources utilised to achieve them.
As pointed out in the Green Paper of the European Commission, the civil society expresses a new demand of corporate social responsibility and the enterprises “are increasingly aware that corporate social responsibility can be of direct economic value. Although the prime responsibility of a company is generating profits, companies can at the same time contribute to social and environmental objectives, through integrating corporate social responsibility as a strategic investment into their core business strategy, their management instruments and their operations”.
Therefore, the need for a new type of transparency towards society has arisen: a transparency that provides information on economic aspects - according to law provisions in the fields of disclosure, budget, and account books –  and on the social goals realised by the enterprise as well. To this aim, today, enterprises willing to communicate the level of their CSR performances have at disposal an increasing number of internal voluntary instruments  (ethical code, social report, etc).

• Legality

The observance of the regulations in force is the minimal requirement and the prerequisite of the CSR, that in its specificity demands to go beyond the law provisions in order to contribute to the establishment of a fair and sustainable development. Therefore, it is clear that a socially responsible enterprise refuses to choose illegal practices such as unfair competition, corruption and tax evasion, that jeopardize the growth and development perspectives of the societies.
The enterprises that choose a CSR strategy declare to the public opinion and to the stakeholders that they do not participate to illegal phenomena of financial market manipulation and insider trading, as well as tax evasion through the practices of transfer-pricing, facilitated by their transnational structure.
Moreover, above all in the Countries whose institutions are weak, they commit themselves to use much precaution regarding practices such as lobbying that, although legitimate, in their insufficient transparency could compromise the protection of those assets that CSR is aimed to protect.

• Consumers

Since the first environmental movements took stand in the ‘60s, and then, above all, in the following decade, the consumers’ movements have begun to assert themselves at  international level, with the increasing support of the scientists who denounced the harmfulness of some productions for the mankind and the environment.
Consumers’ organizations point out the importance of an aware consumption and, therefore, the necessity of having at their disposal reliable information on the conditions of production and sale of the products, including any indication on the potential risks arising from their use and consumption.
All enterprises know that their reputation and, therefore, their success depends on their commitment towards consumers, but those that have chosen a social responsible behaviour not only watch the consumer-stakeholder as a client, but also as a “collaborator” in  pursuing their CSR strategy,
The aware consumption represents, therefore, a new approach to the social responsibility of enterprise and of consumers, that are acquiring growing importance in the market by promoting a production that is safe and compatible with a sustainable, fair development. The consumers’ demands not only concern health and eco-sustainability of the goods and of all the  productive phases, but also the attestation that they are not produced by means of exploitation of human resources.

• Supply Chain

Due to market globalisation, supply chains have become very complex, often outsourced  in Countries where human right protection is low  and/or there are no environmental regulations. This situation represents a critical point for enterprises that have chosen to adopt a social responsible conduct, because it is difficult to face the economic competition when competitors use labour supplied in critical conditions and neglect to protect the environment.
If this is so, it is equally true that the media and NGOs’ activity, as well as the growing importance of the ethic and aware consumption, have caused the development of the Socially Responsible Investing, that is an investment strategy for privates and institutions placing their financial resources only on enterprises that comply with several social and environmental behaviours. The lack of ethical control on the supply chain, often denounced also by an un-requested social rating, is therefore becoming a not only a commercial risk, but also a financial one.
On the contrary, companies able to guarantee the observance of ethical behaviours through the whole productive cycle,  binding all their partners of the supply chain to their own ethical code, may have many positive effects in terms of:

  • improvement of the reputation on the market, through specific certifications or quality labels guaranteeing the ethics of the company  or of the product, or an  echo-sustainable product;  
  • confidence from the ethical inventors and of the consumers;
  •  good relationss with  institutions and social organizations (trade unions, NGOs, etc.).