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Corporate Social Responsibility: Theoretical Underpinnings and Conceptual

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 Corporate Social Responsibility: Theoretical Underpinnings and
Conceptual Developments

By Mark Anthony Camilleri

University of Malta, Malta.

How to Cite: Camilleri, M.A. (2015). Corporate Social Responsibility: Theoretical

Underpinnings and Conceptual Developments. In Vertigans, S. & Idowu, S.O., Stages of
Corporate Social Responsibility: From Ideas to Impacts. Springer
http://www.springer.com/gb/book/9783319435350

Keywords
Corporate Social Responsibility, CSR, Social Responsibility, Environmental Responsibility,
Economic Responsibility, Legal Responsibility, Business Ethics, Corporate Social
Performance, Stakeholder Engagement, Societal Engagement, Shareholder Value Theory,
Stakeholder Theory, Corporate Citizenship, Global Business Citizenship, Philanthropy,
Social Responsiveness, Strategic Philanthropy, Stewardship Prinicples, Strategic CSR,
Creating Shared Value, Synergistic Value, Sustainability, Sustainable Business, Corporate
Sustainability and Responsibility, Systematic CSR, GRI, Global Reporting Iniatiative, CSR
terminology, CSR theoretical underpinnings, CSR conceptual developments.

Abstract
This chapter deliberates on numerous definitions of the corporate social responsibility (CSR)
paradigm and its synonymous terms. The CSR phenomenon has been wrought from
distinctive theories and approaches. Moreover, globalisation may have also augmented the
complexities surrounding the CSR issues in many contexts. Therefore, this contribution
presents a selection of relevant conceptual and empirical findings from authors hailing from
different disciplines within social sciences, over the last sixty years. This chapter features
several well-founded CSR perspectives which have resulted from academic debates and
interdisciplinary research on social and environmental issues involving business
organisations.

© Mark Camilleri 1
Introduction

There are many concepts that are often used interchangeably with the CSR terminology.One
of the earliest contributors on the subject of Corporate Social Responsibility (CSR) had
associated this promising concept with philanthropy and discretionary spending (Carroll,
1979). Notwithstanding, this term is typically used when evaluating the effects of business
on society. Some of these theoretical proposals may seem more significant than others. As a
matter of fact, the earliest contributors on the subject had associated CSR with corporate
philanthropy, stewardship principles and business ethics.

Carroll (1999) reviewed and discussed over 25 different ways which tackle the notion of
CSR. On the other hand, neo-classical economists had acknowledged that CSR is a rational,
economic justification for ‘doing good’ (McWilliams and Siegel, 2001). Nowadays, CSR
behaviour is usually manifested when businesses support other organisations and/or
individuals in diverse fields including humanitarian, medical and social cases, environmental
causes, cultural and heritage protection, philanthropic activities and sport related initiatives.
Moreover, the emerging theoretical underpinnings increasingly point out that CSR is a driver
for business and societal benefits (Camilleri, 2013; Porter and Kramer, 2011, Falck and
Heblich, 2007). Empirical studies have proven that there are significant advantages to be
gained for businesses if they engage in laudable responsible behaviours. Arguably, firms can
leverage themselves through social and environmentally-responsible practices, as there may
be opportunities for operational efficiencies, economies and effective processes. Emerging
notions that relate to the business case of CSR include; strategic CSR and creating shared
value among others (Camilleri, 2013). These academic concepts are gaining considerable
popularity, particularly among business practitioners themselves. In a nutshell, this chapter
explains the evolution of the notion of CSR, and how it has transformed and adapted itself to
reflect societies’ realities.

The Evolution of the CSR Perspectives

The origins of CSR can be traced back to the earlier years of the 20th century. Abrams
(1951) indicated the concerns about management’s responsibilities towards their employees,

© Mark Camilleri 2
customers and the public at large. At the time, these issues were picked up by several
academic contributors as there was an increased awareness on business responsibility.
Bowen, (1953) published his seminal book, ‘Social Responsibilities of the Businessman’.
Interestingly, his enquiry was about the responsibility of businessmen towards society.

Corporate Social Responsibility

The discussions on CSR grew in popularity and took shape during the 60s. Davis (1960,
1973) and Walton (1967) noticed that the corporations had considerable bargaining power;
and that their power called for responsibility. It was widely agreed, that the corporations had
responsibilities towards society beyond their economic and legal duties. The most important
social movements included civil rights, women’s rights and consumers’ rights. Other
individuals were also affilitated with environmental movements. This period was
characterised as an issue era, where companies began noticing specific societal problems
that arose from social, environmental and community issues. There was a focus on
philanthropy and a manifestation in charitable donations (Murphy, 1978; Carroll, 1979).
Muirhead (1999) described the period from the mid 1950s to the mid 1980s as a period of
growth in terms of corporate contributions. Apparently, the gifts in kind have expanded to
the groups representing the health and social services, culture, arts, and the community.

In a book entitled, ‘Corporate Social Responsibilities’, Walton (1967) had addressed many
facets of CSR in society, at the time. He came up with a number of models of social
responsibility as he underlined that social responsibility involves a high degree of
voluntarism, as opposed to coercion. Moreover, the corporations were incurring significant
costs for their CSR engagement. In a similar vein, Johnson (1971) had presented a variety of
definitions or views of CSR in his book entitled, ‘Business in Contemporary Society:
Framework and Issues’. This author may have inadvertently referred to a precursor of the
‘stakeholder theory’. Johnson (1971) indicated that the corporation has a multiplicity of
interests. The author has also identified several interest groups that may affect the
organisation in different ways.

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The Committee of Economic Development (CED, 1971) with its publication entitled,
‘Social Responsibilities of Business Corporations’ have made a ground breaking
contribution to the notion of CSR. Apparently, the CED became aware of the substantial
changes which business practitioners were experiencing at that point in time. The CED’s
views of CSR were considered quite influential, considering that the committee was
composed of business people and educators. The committee had mirrored the latest
developments which have occurred in the business and societal contexts. Evidently, the
businesses were encouraged to assume their broader responsibilities in society. The business
enterprises were being pressured to contribute more to the customers’ quality of life, rather
than simply producing and delivering quantities of goods and services. Steiner (1972)
substantiated the terminology of CSR and indicated how it can be interpreted and applied.
He suggested that business is and must remain fundamentally an economic institution but it
does have responsibilities to help society achieve its basic goals. He implied that business
has social responsibilities (Steiner, 1972).

Davis (1973) had presented the pros and cons of social responsibilities. Davis (1973:312)
maintained that managers did not have the necessary expertise (social skills) to make
socially-oriented decisions. He went on to say that managers were oriented towards finance
and operations. On the other hand, the author remarked that the businesses at the time were
exhibiting authoritative ‘power’. Generally, the early scholars were seriously taking into
consideration the ethical requirements, without forgetting their societal expectations. Eells
and Walton (1961) affirmed that the general public believed that the subject of corporate
social responsibilities arose following the negative behaviour of some corporations. Davis
(1973) held that the businesses ought to be concerned about the ethical consequences of
their behaviour. Lewis (2003) noted that the corporate reputation was positively related to
the community’s acknowledgement of the businesses’ operations.

Apparently, in the late 1970s, the business ethics movements were raising concern about
ethical values and principles. Some academic experts on the subject such as Frederick
(1986) sought to explain such normative ethics behind the CSR rationale. Carroll (1979)
attempted to synthesise the fundamental principle of social responsibility. He explained the
rationale behind social responsibility initiatives and went on to describe the corporate
responses to social issues. Carroll (1979) implied that businesses had a commitment towards

© Mark Camilleri 4
society. He intimated that businesses were obliged to engage in economic, legal, ethical and
discretionary (philanthropic) activities.

Carroll (1991) described these four distinct categories of activity by illustrating a Pyramid of
Corporate Social Responsibility. He maintained that his pyramid conceptualisation
illustrated the obligations of the business. Carroll (1991) argued that the economic
responsibility was the foundation which was required by global capitalism; the legal
responsibility had to do with complying with the laws and regulations; the ethical
responsibility involved the stakeholders; and the philanthropic responsibility consisted of
charitiable and stewardship principles toward the community at large (Carroll, 2004).

Eventually, Schwartz and Carroll (2003) have proposed an alternative approach that was
based on three core domains (economic, legal and ethical responsibilities). The authors had
produced a Venn diagram with three overlapping domains; which were later transformed to
seven CSR categories. This latest development was consistent with the relentless call on the
part of the business community for the business case of CSR. Kotler and Lee (2005) have
demonstrated how a CSR approach had established a new way of doing business that
combined the success and the creation of value (Wheeler, Colbert and Freeman, 2003; Porter
and Kramer, 2006) with a respectful and proactive attitude towards stakeholders (Freeman,
1984).

Corporate Social Performance

The notion of corporate social performance (CSP) theory had evolved from previous
theoretical approaches. CSP reconciled the importance of both corporate social
responsibility and corporate social responsiveness. It also placed an emphasis on achieving
better performance out of the socially responsible initiatives (Carroll, 1979, Wartick and
Cochran 1985, Wood 1991). This notion had moved the CSR agenda closer to the idea of
the business case. Apparently, the arguments in favour of the business case for CSR were
more relevant at multiple levels. Freeman and Liedtka (1991:96) pointed out that the
businesses’ self interest (‘self creation’) and the ‘community creation’ were two sides of the
same coin. They went on to suggest that they were seeing scope in pursuing both ends of
individual and collective goods (Freeman and Liedtka, 1991).

© Mark Camilleri 5
The CSP theory maintained that businesses were responsible for the social problems they
caused. These responsibilities would extend beyond their typical objectives of wealth
creation as well as their expected observance to comply with relevant regulation and law.
CSP also comprised the ethical, discretionary or philanthropic actions which businesses
should undertake for societal wellbeing. Wood (1991) posited that businesses could
improve their corporate social performance when they engaged in responsible behaviours
that will result in beneficial outcomes for society.

The 1970s were characterised by protests against capitalism and growing social concerns.
These developments have led to formal requirements, which were imposed through
government legislation and regulation. Academic literature was devoted to corporate
behaviours. Sethi (1975) wrote about corporate social responsiveness. Evidently, there were
various societal needs and demands at the time. These authors urged businesses to become
proactive in their societal engagement. Sethi (1975) distinguished between corporate
behaviours (that he considered as social obligation), social responsibility and social
responsiveness. He held that social responsibility implied bringing corporate behaviour up to
a level where it was congruent with the prevailing norms, values and expectations.

The social responsiveness was also associated to ‘issues management’. However, this
concept highlighted the social and political issues. Heath and Nelson (1986) maintained that
the ‘issues management’ approach were intended to minimise the potential environmental
threats, which were involuntary triggered through social and political change. Preston and
Post (1975:112) introduced the unpopular concept of public responsibility. They explained
the organisational setting within the context of public life. The term public rather than social
was deliberately chosen in order to give due importance to the public processes. The authors
affirmed that the notion of public responsibility was suitable for setting organisational goals
and criteria. Apparently, this public responsibility approach did not turn out to be so popular,
as it was not widely acknowledged. Some authors pointed out that social responsibility
ought to be considered as participative and responsive rather than being of a substantive
nature. Jones (1980) in particular, was very critical of the concept of public responsibility.
Eilbirt and Parket (1973) and Holmes (1976) have contributed to the development of the
theoretical underpinning which explained the CSR causations. As they identified the
executives’ perceptions of their firms’ social involvement, they investigated the factors
which prompted executives to go for specific areas of social involvement. Some of the most

© Mark Camilleri 6
popular CSR activities at the time were focusing on recruitment and training of the
personnel, community affairs, charities and the like. Caroll (1977) came up with a
managerial approach to CSR, as he suggested that companies should plan and organise
themselves for the institutionalisation of corporate social policy.

Wartick and Cochran (1985) presented their take on the corporate social performance model.
Their model had integrated three dimensions, including; responsibility, responsiveness and
social issues. The authors based their model on Carroll’s approach by suggesting that
corporate social involvement rests on the principles of social responsibility, the process of
social responsiveness and the policy of issues management. The 1970s and 1980s saw the
introduction of legal and regulatory initiatives. At the time, appropriate legislation covering
several aspects of businesses’ operational practices was enacted. This meant that many
companies were being pressured for legal compliance. For instance, law was being enacted
in environmental protection, product safety, employment discrimination and workers’
safety. It may appear that society had mandated the businesses’ to serve society.
Consequently, businesses’ licence to operate was not only creating economic growth, but
also contributed to society’s requirements (see Porter and Kramer, 2006, 2011).

Business Ethics
Frederick (2008) noticed that in the 1980s there were continuous discussions about the
corporate business ethics. There was an increased focus for ethical corporate cultures. The
research at the time was linking CSR with CSP (Lee 2008). There were fewer definitions of
the concept, but they were refined in their content. Complimentary concepts and themes
such as corporate social responsiveness, corporate social performance, public policy,
business ethics, stakeholder theory and stakeholder management had evolved. There was
also more empirical research along with the conceptual development of alternative themes.
At this stage, the CSR variants included business ethics and stakeholder theory (Freeman,
1984) as well as further developments in the CSP area. There were other contributors who
emphasised on the social control aspect of the business, by paying attention to public
responsibility. Freeman and Liedtka (1991) went even further as they implied that CSR had
given a human face to capitalism. Nonetheless, they noticed that there was a complete
separation between economics and ethics. Carroll (1991) pointed out that the vagueness of
the CSR concept might have been considered as a weakness by some contributors. He

© Mark Camilleri 7
remarked about the importance of integrating the stakeholder perspectives within the
existing traditional approaches.

Perhaps, there was a lack of integration between the ethical normative aspects and duty
aligned perspectives. Swanson (1995) noted that Wood’s (1991) institutional principle
searched for legitimacy, but it did not necessarily advocate the moral motivation of respect.
Swanson (1995) had incorporated the business ethics perspectives. However, the proponents
of the CSP model may have struggled to reveal how the business was respectful to all
stakeholders. For instance, the academic contributions in this area were focusing on better
human conditions in the workplace, as they promoted discretionary activities. Apparently,
the terms such as societal values, social expectation, performance expectation and so forth,
were much preferred than the mention of ethical duties or other expressions. Carroll
(1999:284) debated about such ethical responsibilities. He specified the kind of behaviours
and norms that society was expecting out of businesses.

Subsequently, the CSP model had re-emerged by becoming more specific in terms of actors,
processes and contents. This form of CSP was being directed to the constituent parts of
society, as there were more actors which were demanding corporate social performance.
These actors comprised both internal and external stakeholders. Therefore, businesses were
encouraged to establish processes of communication and dialogue with stakeholder groups
in order to determine an appropriate standard of corporate social behaviour.
Notwithstanding, more corporations were becoming adept and proactive in publishing their
CSR or sustainability reports on their economic, social and environmental performance. This
development was consistent with the idea of the triple bottom-line approach, as proposed by
Elkington (1998).

At this time, the Global Report Initiative (GRI) had turned out to be very popular in addition
to the wide array of certifications or reports such as the UN Global Compact, AA1000,
SA8000 and others. All of these developments may have inevitably resulted in more
complexities being introduced in the corporate social performance models. Husted and Allen
(2000) had presented a contingency theory of the corporate social performance (CSP)
model. They integrated elements of the corporate social responsiveness, issues management,
and stakeholder management literatures. Interestingly, Griffin (2000) hinted that the

© Mark Camilleri 8
existing research in related disciplines like marketing and human relations may have helped
to accelerate the understanding of CSP.

The Stakeholder Concept

There are different interpretations of the ‘stakeholder theory’ which have been used to
describe the structure and operations of established corporations (Donaldson and Preston,
1995). This is graphically illustrated in Figure 1. The first authors who contributed in this
field of study have attempted to raise awareness among corporations, to act in a responsible
way toward stakeholders. They suggested that, if the firms behave responsibly, they will
avoid stakeholder pressures.

Figure 1. The Stakeholder Approach to CSR

(source: adapted from Freeman, 1984)

Jones (1980) maintained that CSR must be considered in all the decision making processes
of the firm. The stakeholder theory considered all groups and individuals with an interest in
the company. Usually, the stakeholders comprised all those who stand to benefit or lose by
the businesses’ behaviour. Therefore, this perspective went even further than the previous
notion of shareholder value theory. Curiously, this theory held that corporations had
obligations towards society and their constituent groups (Jones, 1980 59-60). It was widely
agreed that the firms’ obligations should have not been triggered by coercive forces of law
or union contracts. It was widely agreed by many business practitioners that socially or

© Mark Camilleri 9
environmentally responsible practices ought to be taken up voluntarily by organisations
themselves. The stakeholder theory maintained that the businesses’ obligations go beyond
the traditional fiduciary duties toward shareholders. The organisations’ obligation had been
extended to other groups including the customers, employees, suppliers and neighbouring
communities (Jones, 1980:59-60). Jones (1980) argued that there were reasonable arguments
both in favour and against the notion of stakeholder theory. He admitted that it was difficult
to reach consensus among stakeholders of what could constitute socially responsible
behaviour.

Unfortunately, there were some controversial issues which have emerged during the 1980s.
Some illegal practices involved; employee health and safety issues, the deterioration in the
quality of work life, employment discrimination, consumer abuse, environmental pollution,
the deterioration of urban life and other questionable practices of multinational corporations.
It transpired that the stakeholder theory had developed as a compelling theme. Many authors
agreed that the conceptual framework behind the development of the stakeholder theory was
rooted in strategic management. It was believed that business organisation could enhance
their financial and strategic performance through actors (Waddock and Graves, 1997). For
instance, Freeman (1984) described the constituent groups as the fulcrum of the stakeholder
theory. In his own words; “…the groups who can affect or are affected by the achievement
of an organisation’s purpose” (Freeman, 1984:49). Eventually, Evan and Freeman (1988)
claimed that the businesses need to forge, fruitful relationships with all stakeholders.

The stakeholder theory was considered as a normative theory which pushed managers to
consider their moral duty towards the legitimate interests of all stakeholders. Evan and
Freeman (1988) went on to argue that management’s decision-making should incorporate
stakeholder representatives. There were a variety of perspectives which were closely related
to the stakeholder theory. For example, Clarkson (1995) perceived the firm as a system of
stakeholders which operated legally within society, with a market infrastructure. He held
that the purpose of the firm was to create wealth or value to its stakeholders. Eventually,
Freeman and Velamuri (2006) have revisited their stakeholder theory, by insisting that the
main goal of CSR is to create value to stakeholders, including the local community.
Consequently, they suggested replacing the notion of corporate social responsibility by
company stakeholder responsibility. This was not intended to be a mere semantic change, as

© Mark Camilleri 10
it was a completely different interpretation of the CSR meaning. Perhaps, Freeman’s (2006)
stance may have been influenced by Wheeler et al.’s (2003) article. The authors presented a
proposal for the creation of value (economic, social and ecologic perspectives). Essentially,
they have proposed the reconciliation of the stakeholders’ approach with CSR and
sustainability. They argued that this new approach has increased the economic value for
shareholders.

Apparently, this latter stakeholder value-oriented approach (Wheeler et al., 2003) was
considerably different from the original stakeholder theory (Freeman, 1984). This revised
perspective had highlighted the benefits of inter-stakeholder relationships which ultimately
leads to ‘synergistic value’. Phillips (2003) asserted that certain stakeholders were
particularly important and ‘legitimate’ to the socially responsible organisation. This
legitimacy relied on the organisations’ moral obligation towards their stakeholders.
Evidently, the stakeholder theory seemed ethically superior to the previous versions of
corporate social responsibility. This theory took into consideration the stakeholders’ rights
and their legitimate interests including the shareholders’ interest. According to the
stakeholder theory; the management’s duties’ extended beyond the fiduciary duties they
owed to shareholders. Undoubtedly, this theory has recognised the importance of human
resources to the organisation. This reasoning was also consonant with Handy’s (2002)
statement that a good business is a community with a purpose.

The concept of stakeholder management was becoming very popular among business
practitioners. Apparently, this theory seemed to provide a guideline which led towards
achieving business success in the long term (Pedersen, 2009; Collins and Porras, 1994).
Berman, Wicks, Kotha and Jones (1999) held that there was a need for further research to
establish a clear relationship between stakeholder theory and financial performance.
Interestingly, Phillips (2003) has noted that there was also pertinent criticism to this theory.
There were different views including distortions and / or misinterpretations of the
stakeholder theory. Some saw the stakeholder theory as a comprehensive moral doctrine that
was derived from socialism. There was also the fake perception that stakeholder theory was
not only applicable to business corporations. Some critics including Jensen (2000) as well as
Sundaram and Inkpen (2004) argued that when businesses attempted to balance their
stakeholder interests, they were distancing themselves from their primary objective of

© Mark Camilleri 11
maximising economic value. On the other hand, the stakeholder theory did not necessarily
work against the shareholders’ interests (Freeman, Wicks and Parmar, 2004). Clearly, the
value creating opportunities for stakeholders were also pro-shareholders. Several authors
like Jensen (2000), Marcoux (2000) and Sternberg (2000) noted that managers resorted to
stakeholder engagement for their own good. The managers seemed to justify their
managerial opportunism by appealing to the stakeholders who were benefiting from their
responsible behaviours. Whilst, Phillips (2003) believed that managerial opportunism was a
problem, Sternberg (2000) asserted that the stakeholder theory destroyed the businesses’
accountability. He argued that a business cannot satisfy all its stakeholders at once, as he
remarked;‘…a business that is accountable to all stakeholders is actually accountable to
none’ (Sternberg, 2000).

Marcoux (2000) argued that the stakeholder theory was concerned with the distribution of
final outputs. He suggested that the stakeholder theory is simply concerned with who is
involved in decision making and who benefits from the outcomes of such decisions. Phillips
(2003) held that the procedure for the stakeholder theory was as crucial as its final
distribution. Several criticisms were derived from the idea that managers owed their
fiduciary duties as agents to their principals. In this case, the principals were the
stakeholders. In this light, Marcoux (2000, 2003) and Sternberg (2000) underlined the
importance of balancing the stakeholders’ interests and treating them alike. Marcoux (2003)
made a clear distinction between stakeholders and shareholder relations. The managers
owed fiduciary duties to the shareholders. Marcoux (2003) went on to suggest that the
stakeholder theory lacked in morality as it failed to account for the fiduciary duties towards
shareholders. The stakeholder theory treated all stakeholders’ interests equally; despite the
shareholders have a legitimate claim. Interestingly, Phillips (2003) pointed out that there
were some misunderstandings regarding legitimacy. He concluded that only the legitimate
interests should be considered within the stakeholder theory context.

On the other hand, managers may not always understand what their stakeholders expect
them to do. Gioia (1999) believed that stakeholders do not adequately represent the social,
economic and organisational realities which managers face. Another potential weakness to
the stakeholder theory was the lack of suitable representation of the diverse stakeholder
groups in corporate decision making. Etzioni (1998) argued about this point. He recognised

© Mark Camilleri 12
that there were reasonable difficulties in both implementation and justification, in having
stakeholders’ involvement in corporate governance issues. In addition, Mahoney (2006)
noted that the term stakeholder seemed to include many groups who exhibited conflicting
demands on the company. For instance, the creditors may ask for better terms; the
employees may desire better working conditions including higher salaries and wages. These
demands may be met at the expense of shareholders. Arguably, the better terms for suppliers
and / or distributors may translate to higher prices for customers.

Evidently, the normative stakeholder theory or the company stakeholder responsibility

required further refinement. Nonetheless, this theory is still widely acknowledged in shaping
the business-societal relationship. From a practitioner perspective, stakeholder theory has
taught good managerial and instrumental practices to firms. Similar themes included the
regurgitated notion of corporate social performance and the discourses that revolved around
business ethics and sustainability. Surprisingly, the notion of corporate citizenship was
gaining ground in academic publications, particularly in the later 1990s.

Corporate Citizenship
Corporate citizenship is a recent concept which has its roots in political science. Again, this
notion has recently been used interchangeably with CSR. This term considers the
corporations as social institutions which respond to societal pressures (Crane, McWilliams,
Matten, Moon and Siegel, 2009). Frequently, this notion overlaps with the previous
theoretical perspectives. Moon and Chapple (2005) suggested that corporate citizenship is a
metaphor for business participation in society. Many academic contributions about corporate
citizenship maintain that it reinforces the social and ethical dimensions of the business.

Arguably, corporate citizenship activities can create competitive advantages by reducing

risks and enhancing corporate reputation. Many authors have found a positive link between
corporate citizenship and a long term financial performance (Vidal, 1999, Gardberg and
Fombrun, 2006; Fombrun and Pan, 2006). In the main, these authors asserted that
citizenship programmes and strategic investments in intellectual capital, research and
development, innovations and advertising may also help companies in their endeavour to
improve their stakeholder relationships. During the late 80s and into the 90s, practitioners
seemed to engage themselves in building a relationship with society (Altman and Vidaver-

© Mark Camilleri 13
Cohen, 2000; Windsor, 2001). Several pioneers in the CSR field, including McGuire (1963),
Davis (1973) and Carroll, (1979) have floated the idea of looking at the firm as being a
citizen. Davis (1973) claimed that a firm was not socially responsible enough if it just
complied with the law (Davis, 1973:313). Eilbirt and Parket (1973) floated the concept of
social responsibility by using the expression ‘good neighbourliness’, which sounded as very
close to being a good citizen.

Epstein (1989:586) noted that good corporate citizenship was simply evidenced in socially
responsible organisational behaviour. Apparently, the businesses’ assistance (through
financial and / or non-monetary contributions) to the community demonstrated the
organisations’ credentials in corporate citizenship. Significant empirical and conceptual
work on corporate citizenship was also carried out in the late 1990s (see Tichy et al., 1997;
McIntosh et al., 1998; Andriof and McIntosh, 2001; Logsdon and Wood, 2002). The
increasing popularity of the concept can be attributed in part to certain factors that may have
had an impact on the relationship between business and society. For instance, issues such as
globalisation, the crisis of the welfare state and the power of large multinational companies
have also led to the development of this notion. Muirhead (1999) noted that there was a
considerable diversification of strategies as a result of globalisation. At the time, many
multinational companies were establishing their presence in the global economy. Some of
them were giving prominence to the social and environmental agenda.

For the first time, there were even management positions which were dedicated to corporate
giving. Management roles, particularly within the marketing and public relations were
including the tasks of corporate social responsibility and public affairs. Corporate
citizenship gave way to new concepts such as global social investment, corporate reputation,
community partnerships, corporate social policy and other notions were becoming quite
popular across large companies. By the 2000s, there was an emphasis for the conceptual
development of corporate citizenship. With regards to management philosophy or policy
there was more concern for strategic giving, cause-related marketing, international
donations, employee volunteerism, sustainability and global corporate citizenship (Windsor,
2001).

© Mark Camilleri 14
Moreover, empirical research has been carried out into the related topics of stakeholder
theory, business ethics, sustainability and corporate citizenship. Some authors argued that
there was potential for further theoretical development in this promising field of study.
Perhaps, there was scope in drawing several practices under the umbrella of corporate
citizenship. Kotler and Lee (2005) had presented several practices which were aimed at
business practitioners in their CSR engagement. They categorised the best practices into six
types of social initiatives which included; cause-promotion, cause-related marketing,
corporate social marketing, corporate philanthropy, community volunteering and socially
responsible business practices. The authors suggested that cause-promotion increased
awareness and concern for the social causes. The cause-related marketing effectively sought
increased sales. The corporate social marketing involved initiatives which triggered the
required behavioural change. Kotler and Lee (2005) and Kotler (2011) genuinely believed
that corporate philanthropy contributed directly to societal causes. The community
volunteering encouraged the organisations’ human resources to dedicate their time and
talents in the community.

For decades, businesses were taking part in philanthropic activities. Sometimes they
contributed through their donations in cash or in kind to the community. This was widely
perceived as a clear expression of appropriate corporate citizenship. Apparently, this was the
way how corporate citizenship has been conceived and accepted by the general public. The
businesses were voluntarily engaging themselves in social and environmental activities.
Such practices were not necessarily mandated by law. Carroll (2004) noted that the
businesses were never expected to engage themselves in such activities, yet they felt that
they acted as good citizens in society.

Towards the end of the 1990s, the businesses in general, seemed to have genuine concern
towards the communities around them. Perhaps, this may have been attributed to a backdrop
of intense protests against globalisation. Undoubtedly, it appeared that the businesses in
general were facing difficult times ahead. In 2002, thirty-four chief executives of the world’s
largest multinational corporations signed a document during the World Economic Forum
(WEF) entitled, ‘Global Corporate Citizenship: The Leadership Challenge for CEOs and
Boards’. Evidently, the WEF had recognised that corporate citizenship was a business

© Mark Camilleri 15
response towards society. The WEF urged businesses to engage themselves in social
investment, philanthropic programmes and public policy (WEF, 2002).

Wood et al. (2006) and Matten, Crane and Chapple (2003) among others, have noted that the
language of corporate citizenship was frequently used when referring to CSR. Other scholars
went even further as they suggested that the notion of corporate citizenship was actually a
different approach of understanding the role of business in society. Logsdon and Wood
(2002) believed that this linguistic change (from CSR to corporate citizenship) has resulted
in changes in the firms’ normative behaviour. Windsor (2001) also stressed that corporate
citizenship was a completely different conceptualisation than corporate social responsibility.
Moreover, Birch (2001) described the notion of corporate citizenship as innovation. It
seemed that there was more to corporate citizenship than the name itself. While some
business practitioners were using notions such as social responsibilities and business ethics,
the concept of corporate citizenship was gaining ground among academia. The corporations
were recapturing their rightful place in society, next to other citizens with whom the
corporation form a community (Matten et al., 2003:111). Eventually, Moon et al. (2005)
have developed a related concept to corporate citizenship, which they entitled ‘Global
Business Citizenship’ (GBC). Curiously, this notion was effectively an extended view of
corporate citizenship. The authors suggested that in some places, large corporations were
noticing that there was a lack of government intervention, as there was a lack of regulation
in some sensitive and ethical issues. Conspicuously, this approach described how businesses
were adopting a similar role to that of the government in tackling societal and environmental
problems.

Van Oosterhout (2005) alleged that there was little empirical support on the subject. The
author criticised Matten and Crane’s approach to corporate citizenship, claiming that they
were not clear enough about the corporate rights and responsibilities. Consequently, Crane
and Matten (2004) have responded to these criticisms by elaborating their previous
conceptual works. Windsor (2001) argued that corporate citizenship is dependent on
managerial discretion and on the firms’ philanthropic ideology. In a similar vein, Goddard
(2006) affirmed that corporations can create value in the long term through undertaking
corporate citizenship activities.

© Mark Camilleri 16
This philanthropic ideology considered the business entity as a member of society.
Moreover, the related definition; global business citizenship was increasingly being
associated to moral duties and human rights. There were beneficial effects for the companies
themselves, as they were resorting to philanthropy and corporate citizenship practices.
Nonetheless, it was widely agreed that there was a need for further conceptual development
and empirical studies in this area of study. Munshi (2004) noted there was a lack of clarity
among practitioners with regards to who is responsible for setting the standards for global
citizenship. According to Orlitzky and Swanson (2008), corporate citizenship was
rhetorically a superior synonym to the concept of corporate social performance. As a matter
of fact, more authors were using the corporate citizenship term (see Gunther, 2004; Crane
and Matten, 2004).

Orlitzky, Schmidt and Rynes (2003) investigated the relationship between corporate social
performance and corporate financial performance. Clearly, the financial performance is clear
cut in its measurement, as it indicates the degree to which a firm achieves its financial or
economic objectives (Venkatraman and Ramanujam, 1986). The corporate financial
performance was assessed by using the market and/or the accounting standards. On the
other hand, the construct of corporate citizenship could have raised dubious measurement
properties. Empirical studies have suggested that the construct validity of both variables
were far from perfect. Nonetheless, their measurement was still considered for research
syntheses (Orlitzky et al., 2003). Hunter and Schmidt. (2004) asserted that there was a lack
of construct validity in corporate citizenship. In fact, they identified random and systematic
errors which could produce flawed research literature.

Strategic CSR
As the CSR concept has gained momentum among businesses, the notion progressed from
its apparent shallow considerations of ‘window dressing’ to a strategic orientations.
Arguably, CSR can be considered as strategic in its intent and purposes. Businesses are
capable of implementing socially responsible behaviours as they pursue their profit-making
activities. Carroll (1979) affirmed that business has economic responsibilities as it provides
a decent return on investment to owners and shareholders; by creating jobs and fair pay for
workers; discovering new resources; promoting technological advancements, innovation,
and the creation of new products and services along with other objectives.

© Mark Camilleri 17
Interestingly, Reinhardt (1998) found that a firm which engages in CSR strategy can
generate significant returns when it prevents its competitors from imitating its strategies.
Expenditures on strategic CSR activities are typically intended as long-term investments that
are likely to yield financial returns (Vaughn, 1999). This is a type of philanthropy that is
aligned with profit motives (Quester and Thompson, 2001). The strategic CSR perspective
seems to resonate well with Friedman’s (1970) vision. Yet, businesses’ way of thinking has
changed dramatically since Levitt, (1958), Friedman (1962, 1970) held that the companies’
only responsibility is to maximise their owners’ and shareholders’ wealth. CSR developed
during the latter part of 20th century as the recognition of all stakeholders, rather than just
shareholders being the legitimate concern for the business, see Freeman (1984).

Strategic CSR or strategic philanthropy (Carroll, 2001) is undertaken to accomplish strategic

business goals. Carroll (2001:200) described CSR’s goals as “good deeds are believed to be
good for business as well as for society”. With strategic CSR, corporations “give back” to
their constituencies because they believe it to be in their best financial interests to do so.
Many authors including Baron (2001), Fedderson and Gilligan (2001) and Johnson (2003)
claimed that strategic CSR was a driver for innovation and economic growth. They believed
that CSR will help the company to achieve a competitive advantage. Lantos (2001)
suggested that CSR can derive positive benefits for both the societal stakeholders and the
firm itself. Lantos (2001) was very clear and straightforward about strategic responsibility,
as he described it as the fulfillment of philanthropic responsibilities that will simultaneously
benefit the bottom line. The author held that companies should undertake CSR strategies
which add value to their business and disregard other activities which are fruitless. In this
context, Porter and Kramer (2002) have raised the issue about CSR as they held that
corporate philanthropy should be deeply rooted in the firms’ competences and linked to its
business environment. Snider et al. (2003) held that strategic CSR optimises the
organisational performance. Zadek (2004) also suggested considering the socially
responsible practices, in a strategic way. He argued that the full realisation of CSR can only
be achieved after the concentration of civic concerns. Soon, the relationship has developed
into a kind of necessary integration of ‘business in the society’, where the society interacts
with the business at large. Garriga and Mele´ (2004) suggested that in the long term the
business creates value in society. McWilliams and Siegel (2011) affirmed that Strategic CSR

© Mark Camilleri 18
is defined as any “responsible” activity that allows a firm to achieve a sustainable
competitive advantage, regardless of motive.

Yet, some cynical commentators maintained that strategic CSR had impoverished the notion
of citizenship. Arguably, philanthropy could be considered as self-serving and insincere.
Perhaps, this is one of the reasons why many companies are not communicating their CSR
initiatives which are related to their core business activities. Moon (2001) held that the
motivation for engaging in CSR is always driven by some kind of self-interest. Rollinson
(2002) admitted that it is difficult to tell whether ethical behaviour is triggered by altruism or
self-preservation. Similarly, Hemingway and Maclagan (2004) described the strategic CSR
contributions as disguised profit-motivated expenditures (regardless of whether the activity
is strategically-driven, or altruistic).

Generally, it is quite difficult and daunting to quantify the returns of responsible behaviours,
Past empirical studies have yielded inconclusive findings. Relevant research has shown that
those companies that practice social and environmental responsibility did prosper in the long
run (McWilliams and Siegel, 2001; Orlitzky, 2003). However, other research has indicated
that it is also possible to over-spend on strategic CSR — as this is true of all discretionary
marketing expenditures (Lantos, 2001). It may appear that there is an optimal level of
spending on strategic CSR (Orlitzky et al. 2010). The factors contributing towards creating
value are often qualitative and may prove very difficult to measure and quantify, such as;
employee morale, corporate image, reputation, public relations, goodwill, and popular
opinion (Miller and Ahrens, 1993). Lantos (2001) advocated the need to identify CSR
activities that will yield the highest payback. Of course, every stakeholder group has its own
needs and wants. Therefore is is important to continuously balance conflicting stakeholder
interests and measure the returns from strategic CSR investments (McWilliams and Siegel,
2011; Camilleri, 2013).

Porter and Kramer (2006) believed that organisations can set an affirmative CSR agenda that
produce maximum social benefits and gains for the businesses themself, rather than merely
acting on well intentioned impulses or by reacting on outside pressures. They referred to the
value chain (Porter, 1986) as an appropriate tool to chart all the social consequences of
business activities.

© Mark Camilleri 19
This value chain model presents operational issues which have an effect on the companies’
performance. It depicts some of the activities a company engages in while doing business.
This model can be used as a framework to identify the positive and negative social impacts
of those activities. Porter and Kramer (2006) held that through strategic CSR the company
will make a significant impact in the community.They suggested that companies may be
triggered to doing things differently from competitors, in a way where they could lower their
costs. The authors went on to say that strategic CSR involve both inside-out and outside-in
dimensions, working in tandem. Interestingly, the authors indicated that there are ‘shared
value’ opportunities through strategic CSR (Porter and Kramer, 2006, 2011). They argued
that the companies’ may strengthen their competitiveness by investing in social and
environmental aspects.

The success of the company and of the community may become mutually reinforcing (Porter
and Kramer, 2006). They maintained that the more closely tied a social issue is to the
companies’ business, the greater the opportunity to leverage the firms’ resources and
capabilities and will in turn benefit society at large. Falck and Heblich (2007) related the
notion of strategic CSR to the shareholder value theory. This approach implied a long term
view of wealth maximisation. As it was also the case for the agency theory. These authors
suggested that proper incentives may encourage managers ‘to do well by doing good’.

Creating Shared Value

The concept of creating business value is not new to academia. Wheeler et al. (2003) came
up with a simple framework for the creation of value. They reconciled the concepts of
corporate social responsibility and sustainable development (or sustainability) with a
stakeholder approach. They held that the reputational and brand value were good examples
of intangible value. However, they failed to relate them to economic value over the long
term. Nonetheless they came up with a business model in their value creation approach.
Their sustainability model embraced the concepts of CSR, corporate citizenship and the
stakeholder theory (Wheeler et al. 2003). In a similar vein, Porter and Kramer (2006)
claimed that the solution for CSR lies in the principle of ‘shared value’. According to Porter
and Kramer (2011), the businesses are in the best position to understand the true bases of
their company productivity. It is in their interest to collaborate across profit and non-profit

© Mark Camilleri 20
boundaries. Porter and Kramer (2011) gave relevant examples of how efficient processes are
aimed at adding value to the firm and to society at large.

The authors explained that the creation of shared value focuses on identifying and expanding
the connections between societal and economic progress. A shared value proposition
requires particular areas of focus within the businesses’ context (workplace) as well as
looking after society’s interests (comprising the environment, marketplace and the
community) for the firm’s self-interest. The enterprise’s performance must be continuously
monitored and evaluated in terms of its economic results. Creating Shared Value (CSV) is
about embedding sustainability and corporate social responsibility into a brand's portfolio.
All business processes in the value chain (Porter, 1986) operate in an environmental setting
within their wider community context. Porter and Kramer (2011) held that this new
approach has set out new business opportunities as it created new markets, it improved
profitability and has strengthened the competitive positioning. Crane and Matten (2011)
admitted that Porter and Kramer (2011) have once again managed to draw the corporate
responsibility issues into the corporate boardrooms. Crane and Matten (2011) had words of
praise for the ‘shared value’ approach as they described the term as compelling and
endearingly positive. Elkington (2012) argued that sustainability should not be consigned to
history by Shared Value. The author recognised that Porter and Kramer’s shared value
proposition is undeniably a key step forward in corporate strategy. Yet he maintained that
shared value can play a key role in destroying key resources, reducing the planet's
biodiversity and destabilising the climate. Then Elkington (2012) went on to say that Porter
reduced corporate sustainability to resource efficiency. Eventually, Crane, Palazzo, Spence
and Matten (2014) have also critiqued Porter and Kramer’s (2011) shared value proposition.
They argued that this concept ignored the tensions that were inherent to responsible business
activity. They went on to suggest that shared value is based on ashallow conception of the
corporation’s role in society. Eventually, Porter and Kramer (2014) admitted that “shared
value” cannot cure all of society’s ills as not all businesses are good for society nor would
the pursuit of shared value eliminate all injustice. However, Porter and Kramer defended
their (2011) proposition as they argued that they had used the profit motive and the tools of
corporate strategy to address societal problems.

© Mark Camilleri 21
Research Limitations

An extensive literature review has revealed that there are wide set of definitions of CSR. It
may appear that there is still no consensus on an appropriate term that could encapsulate
CSR. This chapter indicated that there is a lack of uniformity and consistency in the use of
the CSR notion. Moreover, this research area is attracting researchers from heterogeneous
backgrounds; bringing different values, ideologies and perspectives in shaping and
formulating CSR theory.

Summary

This chapter has reviewed the evolution of CSR theories. Remarkably, all of these CSR
perspectives can be used to describe the businesses’ laudable behavioural practices. Most of
these theories and paradigms were normative in nature. Debatably, not all the proposed
concepts may be equally acceptable for today’s businesses. Any theory is usually established
after a significantly number of tests of validity and internal consistency. In practice, many
companies may be better described as following the shareholder model. Other businesses
may seem closer to the stakeholder model. However, one can also find some companies
which correspond to the corporate social performance model. It may appear that an
increasing number of corporations may be intrigued to adopt the corporate citizenship or the
global business citizenship model. This may be the case of the larger multinational
companies. Interestingly, every theory has been derived from a different field of knowledge.
For instance, the corporate social performance is related to sociology, the shareholder theory
to economic theory, the stakeholder theory is rooted in several ethical theories and the
corporate citizenship has been derived from a political concept. The concept of creating
shared value seems to be integrating many different perspectives. This chapter has explained
the evolution of the notion of CSR, and how it has transformed and adapted itself to reflect
societies’ realities.

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