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Volkswirtschaftslehre

Freie Universität Berlin - FU

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Lorenz H. ©
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Corporate social responsibility - as a concept; corporate citizenship; sustainability; necessity of entrepreneurial responsibility
  1. Corporate social responsibility as a concept

The usage of the term “corporate social responsibility” has been increasing for quite some time now in the fields of politics and economics. Nonetheless, the question of a company’s responsibility to society, is everything but new. Numerous companies from the textile industry often speak of environmental and health compatible labour conditions, the foodstuff industry advertises especially meticulous quality level reviews and several carmakers woo with their environmentally friendly automobiles.

This clearly shows that many companies want to actively face their social responsibilities. Reasons for that, however, may be very different. Primarily, companies seek a way to differentiate themselves, to offer a unique selling proposition in the market. The motivation for such actions reaches from honest dedication to simple PR-showmanship.

In present time, the topic of social responsibility has an increased importance. This topic is often the main focus of the media and reason for many discussions, due to scandals, as, for example, in the case of Swedish furniture producer IKEA, which has been accused of using child labour in its supply chain. Dramatic declines in revenue are proof of the fact, that customers take great interest in such topics.

Whether such image loss can be a danger the company’s existence or is forgotten within a short amount of time depends on the crisis management of the affected company.

Especially against the background of increasing globalisation, digitalisation, interconnectedness and the consequential shit of values, many companies see it as their obligation to deal with corporate social responsibility (henceforth referred to as CSR). Such value shift is also caused by new, digital means of communications, such as Skype, IM-services or social networks, which revolutionarily changed human everyday communications.

A good example of the might that social networks hold is the phenomenon of the “Arab Spring”. Many demonstrations and protests on the Tahrir-square in Cairo where only made possible by the presence of new means of communication.


Anna Glombitza, a researcher that deals with CSR, writes that through global changes, new global issues are made visible. This means that:

Grievances, such as intolerable working conditions of factory workers in the third world are only made possible through global conditions of production, and are thus denounced by society and above all, the media. To create the necessary theoretical basis for the argumentation, one needs to define the most important terms that are relevant to CSR.

Despite its wide usage, there is no universally valid definition of what corporate social responsibility really means. The different definitions can be lead back to different market categories and economic structures (e.g. social market economy, free market economy), varying social security systems (such as medical insurance) and also cultural factors, such as tradition.

It appears absolutely logical that the awareness for managerial responsibility has long-standing tradition in open/free market economies, such as the USA.

Things are different in most Western European countries, as they have a more stable welfare net – a pillar of social market economy – to which a high amount of responsibility is transferred. According to the welfare state principle, which is incorporated into article 20 of the constitution of the Federal Republic of Germany, the government is obligated to provide a social-cultural subsistence minimum to the population.

The transfer of responsibility to the state explains, why there is lesser sensitivity to CSR in Germany. The responsibility does not, however, go as far as imposing social responsibilities onto companies in “tailored laws”, as its voluntary nature remains the essence of CSR.


2.1 Corporate social responsibility and corporate citizenship


The aim of this chapter is to further explain conceptual overlaps between the terms “corporate social responsibility” (CSR), “corporate citizenship” (CC), and “sustainability”, the three concepts which are constantly used in relation to corporate responsibility.

It should be determined, in which connection those three concepts relate. According to Archie Carrol, an American professor for business ethics who developed one of the best-known CSR-models “The Pyramid of Social Responsibility” (1998), CC does not only mean entrepreneurial philanthropy and civic commitment. Carrol holds the view that someone who is both entrepreneur and citizen has four faces: an economic, legal, ethical and finally philanthropic one.

When thinking of social unrest, revolutions, or even wars, CSR-concepts recede into the far distance. As Abraham Maslow’s hierarchy of needs, which was first published in the middle of the 20th century, it is important to meet basic human necessities first, such as shelter and food. When such requirements are fulfilled, the next level can be achieved, which is, according to Maslow, safety and secureness.

The fact that Archie Carroll published a similar definition for CSR seven years before that is of particular interest here, despite him arranging it in the so-called CSR-pyramid, which can be seen below.


According to Carroll, a company’s economic responsibility should be seen as the foundation, while legal and ethical responsibilities are to arranged above it, while entrepreneurial philanthropy forms the tip of the pyramid. Due to its comprehensibility the CSR-pyramid is highly accepted in the discussion for corporate social responsibility. Critics of this model object to it’s hierarchic approach.

But where does the difference lie?

The difference is, that the concept of CSR can be seen as more composed than that of CC. CSR refers to the social responsibility of companies in all areas of corporate activity, from the businesses’ core competency to communications with its stakeholders.

In contrast to that, CC is a more narrowly worded concept, often applied to concrete projects. One example that can be given is the electronics company Siemens. Siemens sees CC as “help for self-help”, giving scholarships to gifted students in natural sciences, thus granting them an opportunity to contribute to technological development.

Thus, the CSR is the implementation of the sustainability principles on company level and refers to social responsibilities of the company to society as a whole, having been implemented voluntarily and beyond compliance to legal regulations.


To further address the term “corporate social responsibility”, it is important to particularly focus on the word “social”. In this term paper, the word “social” is used as a synonym for “societal”.

To be more precise, the area of CSR deals with every single interaction between a business and society.

Behind this stands the realization that the success of a company is increasingly dependant on its ability to react to societal developments, to influence them and to use them to the company’s advantage, especially with regard to the key question in reference to potential competitive advantages due to CSR.

Finally, it is important to mention one major aspect of CSR. All definitions have one common feature: their voluntary nature. This means that companies should go beyond the regulations set to them by governments, but rather invest into society themselves, improving relations with other companies and stakeholders. The “Global Compact” of the United Nations represents a reference framework for the implementation of social and economical activities, as well as the “Green book” of the European Commission and the national “Federal government’s action-plan for CSR”, which we will focus on later.


2.2 The concept of sustainability


In contrast to CC and CSR, which are connected to their societal role and the resulting responsibility of businesses, sustainability has become an idea of a more global kind (first and foremost in economically developed countries). Janina Curbach, a sociologist, who dealt with CSR in her dissertation, mentions that today, most companies expect sustainable management to be the societal objective.

This can be explained by the fact that the concept is highly supported across the political spectrum. The economic dictionary defines sustainability as follows:


The principle of sustainability, which has been used in the forestry sector for centuries, can, under the aspect of economy, be referred to as a type of management, which satisfies current necessities, without depriving future generations of their livelihood (sustainable development). Identifiable by long-term oriented thinking and acting, to achieve a dynamic equilibrium of natural resources.”



  1. Justification for the necessity of entrepreneurial responsibility in the context of globalisation and social market economies


The process of globalization, which dilutes many borders and provides numerous opportunities but may also lead to a loss of values and orientation in humans, is widely discussed. Within this term paper however, the main question regarding this topic has to be “What does “globalisation” mean exactly for the economy?”.

In the brochure “with responsibility” it is said, that the media paints a very grim picture of globalisation. Through increasing international competition, salaries will decrease. As a consequence of that, so called “wage dumping” may happen, which will lead to loss of employment at business locations in Germany. The international competition for cheap manufacturing plants leads to a “race to the bottom”, in which international “Turbo-capitalism” promotes exploitation of human and natural resources.

Companies and nation states used to be bound to each other in a stronger manner than they are nowadays. In the past, production, administration and distribution of goods were often handled inside the same country. Companies were strongly bound by legal guidelines set in their “home countries”. As a result of globalisation, those things have changed, as now many companies are active in different countries.

They have outsourced their production and have manufacturing plants all over the world, they are working and communicating across different continents and offer their products for sale on a global market. Thus, today’s “global players” are constantly facing new challenges.

The highly discusses term “globalization” must not be missed out in this work. According to political scientist Bernhard von Plate, that term has been used since the beginning of industrialization. It is important to state that globalization is not an actual state, but more of a constant development, which advances in phases and depends on different driving forces.

At the beginning of the development there was the understanding that countries that opened themselves economically and thus engaged in a freer exchange with other economies would succeed and make long-term profits. A simple example for that is that companies in global markets find new customers and markets, thus achieving higher profits. The OECD (Organization for Economic Cooperation and Development), which is the union of large industry states refers to a globalization as a process that gave the movement of capital, technologies, markets and production in different countries more and more independent from each other, thanks to the dynamics of trade with goods and services.


Globalization blurs many borders in the minds of customers and businessmen. In the discussion there is the consensus that every one has to perceive their responsibility and to focus on the big picture. However, not everyone has the ability/will to be held responsible for “everything”. To win over local business for CSR, the topic has to be made more attractive to them, without using force, and without breaking the framework of the social market economy.

The market introduced to the Federal Republic of Germany after World War 2 was regarded as a compromise in the socio-political conflict between capitalism and socialism, which shaped political discussion and ideologies from the 19th century to the middle of the 20th century.



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