Business Ethics and Social Responsibility

Governor Pack Road, Baguio City, Philippines 2600

Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: Grade 12 - ABM
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 9 – ETHICS Subject Teacher:

INTRODUCTION TO CORPORATE SOCIAL RESPONSIBILITY

Learning Objectives:
At the end of this module, student must be able to:
a) explain the concept and rationale of corporate social responsibility (CSR);
b) describe and evaluate the economic, philanthropic, social web, and integrative models of CSR;
c) discuss how companies develop and sustain their CSR programs and practices.

Contents:
a) Corporate Social Responsibility (CSR): An Introduction
b) Ethics and Social Responsibility
c) Models of CSR

CORPORATE SOCIAL RESPONSIBILITY (CSR): AN INTRODUCTION

 Social responsibility is an ethical framework which suggests that an entity, be it an organization

or individual, has an obligation to act for the benefit of the society at large. It is a duty that every
individual has to perform so as to maintain a balance between the economy and our natural
ecosystems (Camilar-Serrano, 2016). Sustainability falls into the social domain of maximizing
positive impacts and minimizing negative effects on stakeholders. As a result, sustainability issues
fit into the stakeholder model (discussed in Module 1), and is therefore directly associated with
social responsibility (Ferrell, et al., 2017).

 Corporate social responsibility (CSR) refers to a business practice that involves participating in
initiatives that benefit the society (Camilar-Serrano, 2016). It encompasses all general and
specific responsibilities that a business has to the society in which it operates (Hartman, et al.,
2014). A corporate culture that includes a sustainability agenda or a CSR report can create
long-term favorable stakeholder responses. In addition, CSR performance can increase
employees’ company identification, organizational citizenship, and commitment (Ferrell, et al.,
2017).

ETHICS AND SOCIAL RESPONSIBILITY

 When we say that a business is responsible, we might mean that it is reliable or trustworthy (e.g.
recommending a car dealership to a friend because it has a proven track record of being
responsible and credible). It could also involve attributing something as a cause for an event or
action (e.g. poor lending practices were responsible, or the cause, of the collapse of many
banks in the US during the 2008 economic crisis). Lastly, it involves attributing liability or
accountability for some event or action, creating an obligation to make things right again (e.g.
to say that a specific company is responsible for air and water pollution in the community does
not only mean that the company caused the pollution, but it also has the obligation to reduce
or completely eliminate the amount of pollution it caused, including other related
circumstances resulting from it).

 Philosophers often distinguish between three different levels of responsibilities in this sense, on a
scale from more or less demanding to binding.
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 Business Ethics and Social Responsibility
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: Grade 12 - ABM
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 9 – ETHICS Subject Teacher:

1. The responsibility not to cause harm. Even when not explicitly prohibited by law, ethics would
demand that we not cause avoidable harm. If a business causes harm to someone and, if
that harm could have been avoided by exercising due care or proper planning, then both
the law and ethics would say that the business should be held liable for violating its
responsibilities. In practice, this ethical requirement is the type of responsibility established by
the precedents of tort law. When it is discovered that a product causes harm, the business
can appropriately be prevented from marketing that product and can be held liable for
harms and/or damages caused by it.

2. The responsibility to prevent harm. To illustrate this, let’s consider the actions taken by the
pharmaceutical firm Merck with its drug Mectizan. Mectizan is a Merck drug that prevents
river blindness, a disease prevalent in tropical nations. This disease infects around 40 to 100
million people annually, causing severe rashes, itching, and loss of sight. However, this drug
would not be a very profitable drug to bring to the market because it has a once-a-year
dosage (limiting demand for the drug among those people who require it) and people who
need the drug are among the poorest people in the poorest regions of Africa, Asia, Central
America, and South America. So in 1987, Merck began a program that provides Mectizan
free of charge to people at risk for river blindness, and pledged to “give it away free,
forever.” In summary, Merck was not responsible for causing river blindness but they still
assumed the social responsibility to easily control the disease with the use of their patented
drug.

3. The responsibility to do good. The most wide-ranging standard of CSR would hold that the
business has a social responsibility to do good things and to make society a better place.
Corporate philanthropy would be the most obvious case in which business takes on a
responsibility to do good. Corporate giving programs to support community projects in the
arts, education, and culture are clear examples. In addition, some organizations and
corporations have a charitable foundation or office that deals with such philanthropic
programs (examples are illustrated below).

a. Angat Buhay – a non-profit organization that links private companies, organizations, and
individuals with the marginalized sector and is one of the major partners of the Office of
the Vice President (OVP) of the Republic of the Philippines

b. Ronald McDonald House Charities (RMHC) Philippines – the flagship charitable arm of
McDonald’s Philippines, it is a global organization whose mission is to make a difference
in the lives of Filipino children through programs that support their need for shelter,
education, and happiness

c. Project H.E.L.E.N. – was formed as an avenue of extension service of the University of the
Cordilleras to the communities for a sustainable development thrust in improving the
quality of life for the less fortunate in terms of health, education, livelihood, and the
environment

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 Business Ethics and Social Responsibility
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: Grade 12 - ABM
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 9 – ETHICS Subject Teacher:

d. Starbucks Coffee – the company practices conservation as well as Starbucks Coffee and
Farmer Equity Practices (C.A.F.E.), a set of socially responsible coffee-buying guidelines
that ensure preferential buying status for participants that receive high scores in best
practices, and involves paying coffee farmers premium prices to help them make profits
and support their families

e. Ramon Aboitiz Foundation – established by the Aboitiz Group as its corporate foundation
to address the social and economic development needs of its stakeholders and the
society, it focuses on key areas such as integrated development, micro-finance and
entrepreneurship, culture and heritage, leadership and citizenship, and education

MODELS OF CSR

1. The Economic Model of CSR holds that the business’ sole duty is to fulfill the economic
functions businesses were designed to serve. On this narrow view, the social responsibility of
business managers is simply to pursue profit within the law. Because profit is an indication
that business is efficiently and successfully producing the goods and services the society
demands, profit is a direct measure of how well a business is meeting the society’s
expectations. Because corporations are created by the society and require a stable political
and economic infrastructure in which to conduct business, like all other institutions, they are
expected to obey the legal mandates established by the society.

2. As the name suggests, the Philanthropic Model of CSR holds that, like individuals, the business
is free to contribute to social causes as a matter of philanthropy. From this perspective, the
business has no strict obligation to contribute to social causes, but it can be a good thing
when they do so. This approach is especially common in small, locally-owned businesses
where the owners also often play a prominent leadership role within their local community.
Within the philanthropy model, there are occasions in which charity work is done because it
brings the firm good public relations, provides a helpful tax deduction, and builds goodwill

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 Business Ethics and Social Responsibility
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: Grade 12 - ABM
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 9 – ETHICS Subject Teacher:

and/or reputation within the community. However, there are also some cases in which
businesses might contribute to a social cause without seeking any reputational benefit.

3. A variety of perspectives would fall under the Social Web Model of CSR because they all
share in common the view that the business exists within a web of social relationships. The
social web model views business as a citizen of the society in which it operates and, like all
members of a society, the business must conform to the normal ethical duties and obligations
that we all face. While producing goods and services and creating wealth and profits are
among the business’ responsibilities, they do not trump the other ethical responsibilities that
equally bind all members of the society. Examples of practices under this model includes the
high respect for human rights, specifically on employee working conditions, the right to
privacy, and the right to due process.

4. The Integrative Model of CSR refers to the framework used by firms that bring social goals into
the core of their business model and fully integrate economic and social goals. There is
indeed a growing recognition that some for-profit organizations also have social goals as a
central part of the strategic mission of the organization. In two areas in particular, namely
social entrepreneurship and sustainability, we find for-profit firms that do not assume a
tension between profit and social responsibility. In relation to the implications of sustainability
in this model, sustainability holds that a firm’s financial goals must be balanced against, and
perhaps even overridden by environmental considerations. This sustainability version of CSR
suggests that the long-term financial well-being of every firm is directly tied to questions of
how the firm both affects and is affected by the natural environment. A business model that
ignores the biophysical and ecological context of its activities is a business model doomed
to the future.

ACTIVITY 9: (handwritten)

Activity 9-A: ESSAY. Read and analyze each of the following questions carefully. Answer each question
in not more than three (3) sentences. (5 points each)

Rubrics Points
Content (theoretical richness and
3
organization)
Relevance and creativity 2
HIGHEST POSSIBLE SCORE FOR EACH ITEM 5

1. What is your overall perspective of CSR after reviewing this module?

2. Which of the four models of CSR is the most persuasive to you and why? Which do you believe
is most prevalent among companies that engage in CSR efforts?

Activity 9-B: CASE ANALYSIS. Read and analyze each of the following cases carefully. Answers and/or
discussions for each case should not exceed five (5) sentences. (10 points each)

Rubrics Points
Content (theoretical richness and
5
organization)
Relevance and creativity 5
HIGHEST POSSIBLE SCORE FOR EACH ITEM 10

1. In 2005, Nestle S.A. CEO Peter Braeck-Letmathe explained, “Companies shouldn’t feel obligated
to ‘give back’ to communities because they haven’t taken anything away. Companies should
only pursue charitable endeavors with the underlying intention of making money. It is not our
money we’re handing out but out investors.’ A company’s obligation is simply to create jobs
and make products. What the hell have we taken away from society by being a successful
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 Business Ethics and Social Responsibility
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: Grade 12 - ABM
Email: [email protected]; Website: www.uc-bcf.edu.ph

MODULE 9 – ETHICS Subject Teacher:

company that employs people?” Which model of CSR would the Nestle CEO advocate, and
do you agree with his assessment? Why or why not?

2. A good analogy for social distrust and responsibility can be found in the “tragedy of the
commons”. This phrase can be traced back to Oxford professor William Forster Lloyd, who
described the phenomenon in his 1833 book on population. He noted that in medieval England,
parishes had common land on which each member of the community could graze a limited
number of cattle and sheep. Keeping the number of animals low allowed the grass to grow
back at a speed that kept its level more or less the same. This approach was rather successful
when farmers stuck to the rule, but as they tend to become selfish to improve their own
situations, the amount of grass dwindled and the land could not already support the needs of
the animals. This in turn made the livestock become malnourished and underproductive, hurting
everyone including the greedy farmers. In what instances is this phenomenon applicable
today? Cite at least one example and discuss it briefly but comprehensively.

References:

 Ariely, D. (2009). Predictably Irrational: The Hidden Forces that Shape our Decisions. Revised and
expanded edition. New York: HarperCollins Publishers.

 Camilar-Serrano, A. (2016). Business Ethics and Social Responsibility. Manila: Unlimited Books
Library Services & Publishing, Inc.

 Ferrell, O., Fraedrich, J., and Ferrell, L. (2017). Business Ethics: Ethical Decision Making and Cases.
11th ed. Boston: Cengage Learning.

 Hartman, L., DesJardins, J., and MacDonald, C. (2014). Business Ethics: Decision Making for
Personal Integrity and Social Responsibility. New York: McGraw-Hill Irwin.

“Success is no accident. It is hard work, perseverance, learning, studying, sacrifice

and most of all, love of what you are doing or learning to do.”
Pele

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