WHAT IS CSR?
eople create organizations to leverage their collective resources in pursuit of common goals. As organizations pursue these goals, they interact with others inside a larger context called society. Based on their purpose, organizations can be classified as for-profits, governments, or nonprofits. At a minimum, for-profits seek gain for their owners; governments exist to define the rules and structures of society within which all organizations must operate; and nonprofits (sometimes called NGOs—nongovernmental organizations) emerge to do social good when the political will or the profit motive is insufficient to address society’s needs. Aggregated across society, each of these different organizations represents a powerful mobilization of resources. In the United States, for example, more than 595,000 social workers are employed largely outside the public sector—many in the nonprofit community and medical organizations—filling needs not met by either government or the private sector.1 Society exists, therefore, as a mix of these different organizational forms. Each performs different roles, but each also depends on the others to provide the complete patchwork of exchange interactions (products and services, financial and social capital, etc.) that constitute a well-functioning society. Whether called corporations, companies, businesses, proprietorships, or firms, for example, for-profit organizations also interact with government, trade unions, suppliers, NGOs, and other groups in the communities in which they operate, in both positive and negative ways. Each of these groups or actors, therefore, can claim to have a stake in the operations of the firm. Some benefit more, some are involved more directly, and others can be harmed by the firm’s actions, but all are connected in some way to what the firm does on a day-to-day basis. R. Edward Freeman defined these actors or groups as a firm’s stakeholders. His definition reflects the broad reach of for-profit activity in our society and includes all those who are related in some way to the firm’s goals.2
A Firm’s Stakeholders
A stakeholder in an organization is (by definition) any group or individual who can affect or is affected by the achievement of the organization’s objectives.3
4— S T R A T E G I C C O R P O R A T E S O C I A L R E S P O N S I B I L I T Y
Simply put, a firm’s stakeholders include those individuals and groups that have a stake in the firm’s operations. Such a broad view has not always been the norm, however. Over time, as the impact of business on society has grown, the range of stakeholders whose concerns a company needs to address has fluctuated—from the initial view of the corporation as a legal entity that is granted societal permission to exist by charter, to a narrower focus on the rights of owners, to a broader range of constituents (including employees and customers), and back again and at the end of the 20th century, to a disproportionate focus on shareholders. Increasingly, however, companies are again adopting a broader stakeholder outlook, extending their perspective to include constituents such as the communities in which they operate. Today, companies are more likely to recognize the degree of interdependence between the firm and each of these groups, leaving less room to ignore stakeholders’ pressing concerns. Just because an individual or organization meets this definition of an “interested constituent,” however, does not compel a firm (either legally or logically) to comply with every stakeholder demand. Nevertheless, affected parties who are ignored long enough may take action against the firm, such as a product boycott,4 or they may turn to government for redress. In democratic societies, laws (such as antidiscrimination statutes), rulings by government agencies (such as the Internal Revenue Service’s tax-exempt regulations for nonprofits), and judicial interpretations (such as court rulings on...