The Politics of Ethical Standards: How is CSR used in a Political Context?
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If we look at different definitions of corporate social responsibility, we might summarize them, in a very basic and minimalistic way, as firms’ actions towards the society and the environment which go beyond what is legally required of them. This simple definition already gives us a hunch that legal and political obligations play an important role in the choice of businesses’ CSR strategies. But how do companies choose their CSR strategies considering their political environment? And how do they interact with political entities?
There seems to be no simple answer to these questions. On the contrary, the strategies to choose from appear to be numerous. In order to disentangle different CSR-government interactions, I will suggest differentiating between domestic and international political CSR strategies in a first step. Lastly, it is worth mentioning that both domestic and international strategies seem to show a more controversial political engagement which is concerned with questions of societal justice.
Domestic CSR Strategy
Domestic CSR strategies are defined by businesses’ relationships with national governments and regulatory bodies in which they invest to boost their economic performance. Firms can perform better economically if domestic regulations are favourable to them. This is why domestic CSR strategies are often reactive or pre-emptive strategies amid existing or changing regulations.
CSR can be used to shape the relationship with regulators and politicians positively. It might include a whole range of voluntary actions to keep a positive reputation and to prevent stricter regulation – ranging from donations to charities, engagement in local social and environmental projects and organisations, to the implementation of voluntary standards. In a more proactive form, companies might attempt to actively shape future regulations by providing policy input and information about business practices of the social or environmental issue in question. This strategy vis-à-vis domestic governments is also known as non-market strategy.
International CSR Strategy
In the last decades, globalization has not only changed the ways of doing business but has also initiated another strategic use of CSR – many multinational firms have adopted an international strategy which is directed at foreign governments and international organizations in the first place, rather than at domestic governments. This happened mainly when MNCs’ global supply chains came under scrutiny and companies reacted with the implementation of ethical standards or the voluntary participation in multi-stakeholder initiatives.
After the collapse of the Rana Plaza clothing factory building in Bangladesh in 2013, for example, multinationals were pressured to take voluntary action where national regulation did not suffice. Companies started to account for institutional voids in the countries of their global operations by providing labour and environmental standards through self-regulation which went beyond existing national laws. In the academic literature, this action of filling institutional voids through voluntary (self-)regulation is known as political CSR.
In contrast to domestic political CSR strategies, the “international strategy” is not primarily used to obtain favourable regulations but to incentivise positive political changes, which gives this strategy a rather normative character. However, the threat of stricter regulations has a role to play in businesses’ international efforts. With their efforts to foster, for example, labour and environmental standards, businesses might prevent that international soft law and voluntary self-regulation will translate into unfavourable national hard law.
Corporations and Societal Justice
It is interesting to see that both domestic and international strategies have adopted a more confrontational character in recent years. Besides paying attention to ESG criteria, by and by, firms have started to make their voice heard and to take action in controversial issues of societal justice.
In the domestic context, the Florida school shooting in February 2018 is a recent example. Shortly after the incident, Black Rock Inc exerted pressure on gun firms and Walmart and Dick’s Sporting Goods, two major US retailers, have implemented new gun restrictions. These responses stand in sharp contrast to the president’s stand on gun control.
Globally, companies have attempted to utilize their leverage with the explicit aim to change societal and political rules in foreign countries. An example is Google. In 2010, the company threatened to refrain from undertaking business in China on grounds of its convictions about human rights and the freedom of information.
The faces of political CSR strategies have diversified in the course of the years. To distinguish between domestic and international strategies is one way to attempt the disentanglement of different aims, means and scope. The shift towards engaging in salient political issues of societal justice will be worth watching closely – we might see more of this sort of firm engagement in the future.
Juliane Markscheffel