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CSR

Corporate Social Responsibility (CSR) encompasses the ethical and legal responsibilities of businesses towards society, extending beyond mere compliance with laws. It involves voluntary actions to integrate social and environmental concerns into operations, with frameworks like Bursa Malaysia mandating sustainability reporting. While some argue against CSR, proponents highlight its long-term benefits for reputation, consumer trust, and corporate governance.

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2 views

CSR

Corporate Social Responsibility (CSR) encompasses the ethical and legal responsibilities of businesses towards society, extending beyond mere compliance with laws. It involves voluntary actions to integrate social and environmental concerns into operations, with frameworks like Bursa Malaysia mandating sustainability reporting. While some argue against CSR, proponents highlight its long-term benefits for reputation, consumer trust, and corporate governance.

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Corporate Social Responsibility: An Analysis of its Legal and Ethical Dimensions

Introduction Corporate Social Responsibility (CSR) is a concept that has evolved over time,
shaping the way businesses operate in relation to society. CSR involves companies taking
responsibility for their impact on the environment and stakeholders, extending beyond
compliance with legal requirements. The European Union defines CSR as "the responsibility of
enterprises for their impacts on society." Similarly, Carroll (1979, 2008) states that CSR
encompasses economic, legal, ethical, and discretionary expectations that society has of
businesses. This essay explores the concept of CSR, its legal foundations, and ethical
dimensions, supported by relevant authorities.

Definition and Scope of CSR CSR lacks a universally accepted definition but is generally
understood as the voluntary actions businesses undertake to integrate social and environmental
concerns into their operations (EU’s Green Paper, 2001). Hopkins (2003) defines CSR as
treating stakeholders ethically and responsibly. The World Business Council for Sustainable
Development (WBCSD) describes CSR as a commitment by businesses to ethical conduct
while contributing to economic development and improving the quality of life for employees, their
families, and society at large.

Craig Smith (2001) further asserts that CSR extends beyond legal requirements, with firms
bearing obligations toward stakeholders affected by corporate policies and practices. Bursa
Malaysia (FAQ 9.51) highlights that CSR encompasses business practices based on ethical
values and respect for communities, employees, and the environment.

CSR and Legal Frameworks CSR is often voluntary but has gained legal recognition in certain
jurisdictions. In Malaysia, the Bursa Malaysia Sustainability Framework, introduced in 2015,
mandates all publicly listed companies (PLCs) to disclose sustainability statements in their
annual reports. These statements must address economic, environmental, and social risks and
opportunities.

Practice Note 9 of Bursa Malaysia’s Listing Requirements makes sustainability reporting


mandatory, with specific disclosure obligations outlined in the Main Market and ACE Market
Listing Requirements. Additionally, Section 253(3) of the Companies Act 2016 provides for the
voluntary submission of a Business Review Report, offering insights into corporate direction and
performance.

CSR and Ethical Responsibilities Ethical considerations form a fundamental pillar of CSR.
Carroll’s (1991) Pyramid of CSR outlines four tiers: economic responsibility (profit-making), legal
responsibility (compliance with laws), ethical responsibility (beyond legal obligations), and
philanthropic responsibility (voluntary contributions to society). Businesses are expected to act
ethically, considering the long-term welfare of stakeholders.

The British Department for Trade and Industry (DTI) emphasizes that companies must abide by
the law while considering their impact on society, particularly in economic, social, environmental,
and human rights domains. ISO 26000 (2010) underscores the ethical responsibility of
organizations, advocating transparent and ethical behavior that contributes to sustainable
development.

Arguments For and Against CSR Milton Friedman (1962) argued against CSR, asserting that
businesses should focus solely on maximizing shareholder profits, leaving social issues to
market forces. He believed that CSR diluted business purpose and reduced global
competitiveness. However, proponents argue that CSR benefits businesses in the long run by
enhancing reputation, securing consumer trust, and reducing regulatory risks. Carroll &
Buchholtz (2015) support CSR as a means to achieve profitability while engaging in ethical and
socially responsible practices.

CSR and Corporate Governance CSR is an integral aspect of corporate governance,


influencing business strategies and legitimacy. It ensures that companies maintain ethical
conduct while meeting stakeholder expectations. Business for Social Responsibility (BSR)
equates CSR with corporate ethics, corporate accountability, and sustainability, asserting that it
involves achieving commercial success while respecting social and environmental values.

Conclusion CSR is a vital aspect of modern business, incorporating legal obligations, ethical
considerations, and voluntary initiatives. While some argue that businesses should focus solely
on profits, CSR advocates emphasize its long-term benefits in risk reduction, competitive
advantage, and societal goodwill. The regulatory frameworks, such as those in Bursa Malaysia,
indicate the growing importance of CSR in corporate governance. Ethical responsibility remains
a core tenet of CSR, reinforcing the need for companies to operate beyond mere legal
compliance, fostering sustainability, and contributing positively to society.

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