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Canadian Business for Corporate A nonprofit, member-led organization, CBSR

Social Responsibility mobilizes Canadian companies to make powerful
business decisions that improve performance and
Samuel O. Idowu contribute to a better world. It offers practical
London Metropolitan Business School, London tools, research, learning events, programs,
Metropolitan University, London, UK and solutions to advance CSR in Canadian

Brief History
With over 15 years of experience, CBSR is
Canada’s oldest organization dedicated solely to
Address with Web Link helping businesses build and advance their
corporate responsibility agenda. Founded in
Vancouver: 205–535 Thurlow Street. V6E 3 L2, Vancouver by a group of mission-based busi-
Canada nesses, CBSR has grown to support a network
Toronto: 300–360 Bay Street, M5H 2 V6, Canada of over 100 active companies across Canada.
Calgary: 225, 404–6, Avenue SW, T2P OR9,
www.cbsr.ca Mission/Objectives/Focus Areas

CBSR is dedicated to providing thought-leader-

Introduction ship, leading-edge research, and executive level
support that helps its members drive successful
The reason for the establishment of the CBSR is CSR initiatives today and in the future. It works
harnessing the Power of Business to create collaboratively with business associations, gov-
a better World. ernment, academia, and NGOs to advance the
Founded in 1995, Canadian Business for CSR agenda in Canada.
Social Responsibility (CBSR) is the globally rec- CBSR’s dedicated Advisor team, through
ognized source for corporate social responsibility Member Services and its Advisory Services con-
(CSR) in Canada and is part of a worldwide net- sultancy, provides candid counsel on:
work that believes business success and respon- • CSR strategy and performance measurement
sibility go hand-in-hand. • Stakeholder engagement

S.O. Idowu et al. (eds.), Encyclopedia of Corporate Social Responsibility,

DOI 10.1007/978-3-642-28036-8, # Springer-Verlag Berlin Heidelberg 2013
C 292 Capabilities Approach

• CSR reporting and communication confirm the link between employee engage-
• Climate change and environmental ment and CSR.
management The Business Case for an Integrated Approach
• Strategic community investment to Water Management – This guide offers
• Employee engagement practical insights to help companies identify
• Ethical sourcing and manage the water-related risks and oppor-
• Social risk assessment tunities that impact their business – includes
a tool, best practices, and resources.
CBSR Transformational CSR Framework and
Structure of Governance Approach – Launched at the 7th Annual
Summit on CSR, this framework describes
CBSR governance model works with a Board of the continuum of CSR performance and
Directors, President, and Chief Executive characteristics of each stage of development.

References and Readings

Activities/Major Accomplishments/
Contributions www.cbsr.ca/resources.

The CBSR major activities, accomplishments,

and contributions to all its stakeholders are in
the following areas: Capabilities Approach
Research and Events, Annual Summit on
CSR, the premier CSR conference in Canada, ▶ View on the Ground: CSR from a Capabilities
Member and Advisory Services. Approach
CBSR produces, solely or in partnership,
a variety of research on the range of issues that
make up corporate social responsibility. Recent
publications include: Carbon Capture
CSR Governance Guidelines – The Guidelines,
Assessment Tool and Roadmap Towards Aysen Muezzinoglu
Good CSR Governance assist corporate Department of Environmental Engineering,
boards, senior management, and CSR Dokuz Eylul University, Buca, İzmir, Turkey
professionals in managing both risks and
opportunities, and providing guidance to get
started or continue advancing in CSR Synonyms
Embedding Sustainability in Corporate Culture – Carbon capture and geological storage (CCGS);
A five-point framework for incorporating Carbon capture and sequestration (CCS); Carbon
sustainability into organizational culture, capture and storage
illustrated by Canadian company examples,
and written in partnership with Network
for Business Sustainability (NBS) – research Definition
network based at University of Western
Ontario. “Carbon capture and storage” abbreviated as
CSR as a Driver of Employee Engagement – Key CCS refers to the method developed to stop car-
CBSR/Hewitt Associates findings from 2010 bon dioxide build-up in the atmosphere, the main
Hewitt Best Employers in Canada Study greenhouse gas that creates adverse effects on the
Carbon Capture 293 C
Earth’s climate. Carbon capture is the first step of But, may be the most important decision about
the method of mitigation. In this first step, carbon carbon capture is to accept the need for it, the
dioxide (CO2) is scrubbed by means of suitable requirements for its applicability at least for
solutions from gas streams or ambient air. For a transient period and merge this technique in
reasons of economy, it may work rather with the overall carbon reduction plans all over the
large point sources such as fossil-fuel-fired world. This is what has been studied and pro-
power plants and some industries that are some posed in International Energy Agency carbon C
large emitters of CO2. mitigation models. In other words, according to
This technique is presently under develop- IEA, carbon capture is an important component
ment. Therefore, it is of importance to the corpo- in the climate change mitigation plans to be used
rations of today and the future. in combination with other options such as renew-
able fuels, chemical binding and energy effi-
ciency enhancement projects, reforestation,
Introduction etc. CCS, unlike some other options is amenable
to cleaning the CO2 already increased in the air
Rapidly increasing quantities of carbon dioxide and not only applicable to the emission streams.
(CO2) emissions contributed largely to global
climate change due to fossil fuel use and indus-
trial processes during the last two centuries. Key Issues
Carbon dioxide has the highest responsibility in
this although it is not the most powerful green- Carbon Cycle
house gas for climate warming potential on a Carbon is the basic element in life forms on the
molecule-by-molecule comparison. But because Earth. It is continuously transported between
of the relative significance of quantities of carbon the atmosphere, oceans, soils, rocks, etc., and
dioxide emissions, it is usually carbon dioxide in biotic or abiotic forms in inorganic and
(CO2) that needs to be controlled. organic compounds. Thus, carbon continuously
It is known that the fossil energy sources will undergoes physical/chemical or biological
not be altogether depleted soon. Even the oil, changes through photosynthesis, respiration, and
although it is proposed that the peak oil year has decay in biological and physical/chemical path-
already passed on 2005, will continue to be used ways; this very powerful circulation is called the
for some more decades. That means that carbon “carbon cycle.” Carbon cycle is the most signif-
will continue to be emitted and must be held out icant natural phenomenon on the Earth and it
from the waste gas emissions. Besides the CO2 includes many critical steps with different rates
concentration in the atmosphere even today is too determining the successive levels of energy and
high to be sustainable and must be sequestered to food for life.
avoid further detrimental changes in the natural Carbon normally exists as carbon dioxide CO2
climatic balances. Finally some industries such as in the atmosphere. Although it is present at a very
cement, iron, and steel, etc., emit high CO2 small percentage in the air mixture (less than
concentrations, which are more easily captured 0.03% before two centuries and presently nearly
in more economical processes. Among all 0.04% by volume), it has a vital role. There are
carbon control techniques, carbon capture and also other carbon containing gas constituents of
storage in geological formations (CCGS) is the natural origin in the air such as methane, carbon
most commercially proven one, thanks to the monoxide, and vapors of resins. Particulate
experiences of oil extraction and natural gas matter may contain carbon in elemental (black
processing sector. Several CCS plants of pilot carbon, BC) or several different organic or inor-
and demo sizes work in the world and try to ganic forms, too. Although they are very active in
generate feasibility data in energy sector and atmospheric physics and chemistry, too, they
industrial plants. exist in much smaller concentrations than CO2.
C 294 Carbon Capture

Increased injection of carbon compounds into greenhouse gases in the atmosphere and increases
the atmosphere is known to have serious impacts the global temperatures thus creating a very con-
on ecological balances both globally and locally venient and warm climate. This natural phenom-
even in minute quantities. Completely synthetic enon is known as the “greenhouse effect” and is
compounds of chlorofluorocarbons causing harm the main reason why living creatures could sur-
to ozone layer at the upper atmosphere and also vive and civilizations emerged. The strength of
taking part in the climate change is a good exam- the greenhouse effect is a result of the overall
ple to this. But the most important carbon injec- radiative properties of greenhouse gases existing
tion occurs through CO2 emissions mainly due to in the Earth’s atmosphere. Thus, any change in
fossil fuel burning and partly from the industrial their concentrations necessarily causes a change
processes. In the carbon cycle, photosynthetic in the global climate.
organisms such as the terrestrial plants and Excess of these atmospheric greenhouse con-
aquatic or marine life forms convert CO2 gas stituents that are in fact man-made pollutants add
into organic compounds as they inhale or use to the extremely delicate mechanism of normal
the carbonate/bicarbonate ions in water solutions. greenhouse warming and cause imbalances in
These organics include cellulose, proteins, lipids climate. The global temperature rises because of
(oils), carbohydrates (starch and sugars) that are the additional heat released by more infrared
stored and either used up by the same organism energy absorbed by excess greenhouse gases
for energy or others for food. These compounds quantities. As increase of the greenhouse gas
are the starting points for the food web and part of concentrations result from human activity since
the energy or raw material needs of industrial use. the industrial revolution, this additional global
Photochemical conversion of inorganic car- warming is anthropogenic in nature. In fact
bon occurs with the help of chlorophyll or other there are many other factors affecting the climate,
pigments in the plants. This reaction utilizes too. For example, other anthropogenic constitu-
water and solar radiation of a certain wavelength ents such as clouds containing more sulfates or
(PAR, photochemically active radiation) range. black carbon from several combustion sources
Thus, carbon dioxide is consumed and converted may negatively or positively interfere thus ending
into food and oxygen is produced and released. in local cooling or heating effects. On the other
An opposite mechanism occurring in all living hand, wildfires or volcano eruptions that are nat-
organisms is respiration, defined as the oxidation ural contribute to the cloud cover and might cause
of stored organic carbon to generate CO2 and cooling. So climate change is a very complex
energy for life. All living organisms in the carbon phenomenon varying in global and local extents
cycle respire and generate CO2, although only as well as in seasonal weather expectations.
photosynthetic organisms such as algae and When we study the respective contributions of
plants can fix the CO2 to form organic the greenhouse gases, water vapor and carbon
compounds. dioxide are the ones with highest impacts.
Some of the natural constituents of the atmo- Water vapor by far is the highest impact green-
sphere such as water vapor, carbon dioxide, and house gas; however, it is formed by secondary
much smaller quantities of methane, nitrous reactions. In other words, as the climate gets
oxide, ozone are known as greenhouse gases. warmer, water vapor increases in amount but it
These altogether impart to Earth’s atmosphere is not possible to directly control its increase
the unique property of absorbing part of the infra- without stopping the warming. Next greenhouse
red radiation emitted from the earth. The energy gas that is emitted more and more everyday by
of this captivated part would otherwise be anthropogenic sources is carbon dioxide, CO2.
reflected from the Earth, should the atmosphere It is mainly generated by combustion of fuels
be lacking these gases. This absorbed part of the of fossil origin.
energy is converted into heat at an amount The natural sinks in the carbon cycle for
corresponding to the concentrations of the excess CO2 in the air exist in three broad groups:
Carbon Capture 295 C
photosynthesis by plants (both aquatic and terres- of engineering technology. Alternative tech-
trial, also including the plankton masses), oceanic niques of energy efficiency upgrading, chemical
capture in the carbonate chemistry, and CO2 capture from emissions, changing the way
weathering of silicate rocks. These mechanisms fossil fuels are exploited and burned, catalytically
might be applied in enhanced forms by incorpo- converting CO2 into other compounds, or totally
rating CO2 into the oceanic part of the carbon abandoning the fossil fuels to replace them with
cycle (Rau et al. 2007), or geochemically binding renewable energy forms are next to improving the C
with serpentinic rocks to transform it into carbon- natural sinks of CO2. Also among the fossil fuel
ate minerals (Krevor and Lackner 2011). types, CO2 release per unit available energy is
Although the natural sinks mentioned have ranked from coal to gas forms; so converting into
very big capacity to uphold CO2 in the carbon more gaseous fuels generate less CO2 per unit
cycle, the pace of the chemical and biochemical activity.
reactions at different layers of the oceans and Specifically following options exist for fixing
terrestrial rocks is not as high as the rate of the atmospheric levels of carbon dioxide and
increase of emissions. Therefore, many decades therefore stabilizing the global temperatures
and even centuries is needed until the excess CO2 without damage to the climate and existing life
will eventually be captured only with these natu- on the Earth:
ral mechanisms. Until then increased atmo- 1. Increasing the energy use and production effi-
spheric CO2 concentrations will go on for many ciencies, therefore less use of fossil fuels
decades and even centuries at ever-increasing 2. Switching into less carbon-intensive sources
rates. It is an inescapable result of heavy use of of energy and consumption, using carbon-
carbon containing fuels that were buried under neutral or even carbon-negative resources,
the ground since geological times and it will such as biofuels or other renewable energy
continue costing us the global climate change. forms
To cope with the increasing carbon dioxide 3. Using techniques of carbon capture and geo-
emissions of human activities it is imperative logical storage (CCS)
that the high quantities of CO2 emissions must 4. Using nuclear energy
be controlled. It has been shown that such high 5. Devising more sustainable land-use practices
and ever increasing levels of emissions of CO2 for better management of more CO2 consum-
cannot be neutralized in any natural way within ing plant growth
a short period of time. Thus, the human activities Each one of these different alternatives has its
such as fossil fuel burning for heat and power, own successes, difficulties, and limitations in use.
transportation, industry, waste handling, space Some are commercially available techniques but
heating, and cooling, etc., as well as existing none of them should be expected to replace others
land-use practices are not sustainable. This is completely. For example, biofuels is a good
severed by the deforestation and loss of green method to capture CO2 either from stack gas
areas for competitive uses. emissions or from the air although it has
The significance of added carbon as carbon a number of economic and technological hurdles,
dioxide in the carbon cycle due to energy conver- but it can better be used as a transportation fuel
sion and use, as well as industrial and similar mix or replacement. Energy efficiency upgrading
activities is very high. Therefore, mitigation of is a must-be method but its success will not
CO2 emissions is of highest importance in our completely stop increases in carbon dioxide in
efforts of preserving the natural climatic bal- the air. CCS with its high coverage in technology
ances. Climate can be protected only by limiting and high-energy expenses is a method suitable to
the quantity of anthropogenically emitted CO2. large-scale fossil fuel power plants and some
Therefore, either the CO2 emissions must be industrial stack gases. There are enough fossil
diminished and/or these natural mechanisms fuel resources left to continue with older combus-
must be enhanced to increase their rates by way tion technologies, which will last until some more
C 296 Carbon Capture

time. However, it is not possible to overlook the formation of CO2 in the stack gases (such as
CO2 problem and for the fossil fuels remaining to IGCC-Integrated Gasification Combined
be used carbon capture is the only acceptable way Cycle)
out. The same is true for cement, iron-steel, lime (c) Oxy-fuel combustion techniques and carbon
industries, etc., which are responsible for moder- looping plants
ately high CO2 emissions. Among these five cat- There are several more techniques that can be
egories, nuclear energy is possibly the only one counted among CCS technologies but many of
that must be taken into consideration with utmost them are not in commercialization stage, yet.
care considering the opinions against it. Rather they are in research and development
Yet, the best strategy to stabilize the atmo- stages or just new concepts.
spheric concentration of CO2 could result from (a) In a postcombustion system, the stack gas
a harmonized approach, where sequestration of mixture coming from combustion of the fuel
CO2 into geological formations is combined with with air contains a relatively small fraction of
increased efficiency in electric power generation CO2. For separation, this mixture is contacted
and utilization, careful industrial management, with a liquid solvent that selectively absorbs
increased conservation of energy and resources, the CO2. Nearly pure CO2 can be obtained
use of lower carbon-intensity fuels, and increased upon stripping the CO2 from this absorbing
use of renewable resources. In this section, only solution. Such separation processes are
the third option is evaluated although it must already in use on large scale to remove CO2
strongly be emphasized that for success, options from natural gas.
must be used in combination and with harmony. (b) In a precombustion system, the primary fuel
There are also many questions in mind as to is subjected to gasification by first converting
the safety, economy, and sustainability of CCS in it into a gas by using steam and air or oxygen.
a given application. One answer to the question The conversion ends in a gas mixture
“do we really need a carbon capture technology” containing mainly hydrogen and CO2 that
is that “yes, we do,” and this answer is based on can be quite easily separated out. Remaining
the reality that the fossil fuels will not be totally hydrogen may be used for energy or heat
depleted very soon. But it might be in the form of production.
physically purifying the stack gas CO2, liquefy it (c) Oxy-fuel combustion uses pure oxygen
and convey it to injection sites to be buried under- instead of air to burn the fuel. It results in
ground. An alternative site of injection could be a gas mixture containing mainly water vapor
depleted oil and gas wells. Carbon capture will be and CO2. Water vapor is easily removed from
needed for at least a transient period of time. this mixture and CO2 is obtained.
Besides more fossil fuels will have to be used Directly capturing the CO2 from stack gases of
per specific work as the quality will be more large sources such as coal-fired power plants into
inferior and their extraction will be more and solvents is a postcombustion CCS method. This
more difficult. This will add to the CO2 emission method has many advantages, such as suitability
per unit amount of work to supply the energy use to retrofit the existing power plants. However,
in extraction, refining, and using of these fossil recycling of the solvent is necessary and it
fuels. requires desorption at high temperatures, ending
in subsequent cooling and heating cycles. At the
Methods of Carbon Capture end, nearly pure CO2 gas is obtained which must
Methodologically, this first step of CCS can be be compressed/liquefied for easy transfer to the
grouped into three main categories: injection site. This makes solvent operations
(a) Postcombustion capture of CO2 from com- a high cost step of the CCS because of high
bustion gases amount of energy required. Higher energy
(b) Capturing the carbon from fuels by requirement of the power plant with CCS com-
precombustion methods thus avoiding pared to a power plant of the same size is called
Carbon Capture 297 C
“energy penalty” and it may constitute nearly gas power plants are the smallest contributors of
30% of the power generated at the plant. Also CO2 compared to the other fossil fuels.
the stack gas operations take place in large
absorber reactors, as the combustor stack gas Industrial Carbon Capture
volumes are high. Such difficulties and disecon- Some industries such as glass, lime, cement,
omies as well as higher energy costs of liquid petroleum, oil shale and crude oil refinery, and
CO2 added by extra cost of transfer high distances open-heart iron furnaces and steel mills are C
to the site of injection must be taken into consid- known to emit large volumes of stack gases
eration in deciding for postcombustion CCS. with higher concentrations of CO2. Therefore,
Carbon capture by postcombustion as the first these industries are easier and more feasible to
step of CCS technologies is based on rather apply carbon capture technologies. But it must be
mature engineering knowledge. This is mainly remembered that the emissions of CO2 totally
thanks to the petroleum drilling and natural gas exceed 200 million tons per year from these sec-
cleaning operations that are already using it in tors only contribute about 0.7 per 100 in the
commercial scale for many years. Therefore, global CO2 emissions (Mills 2011). It might
postcombustion method is more applicable to seem unimportant at the first site, but for large
large-scale plants in contrast to many other car- point sources in these sectors it might be feasible
bon mitigation technologies. to apply CCS.
It has been estimated that there are more than In the future, share of CO2 emissions from
8,000 large-scale CO2 point sources in the world. industry may be expected to increase because of
They contribute to two thirds of the overall the hydrogen and syngas production.
anthropogenic CO2 emissions. For any success When CCS in industries are discussed it might
in carbon abatement, it is proposed that in at be added that some solid wastes from metal
least one-third of these point sources CO2 must industries such as iron scrap, aluminum wastes,
apply CCS (Mills 2011). Remaining one-third of iron and coal slags, concrete waste, mineral
CO2 emissions originate from smaller scale industry tailings, fly ash from oil shale burners,
sources, households, transportation etc., which incinerators, etc., capture CO2 from the air. This
are difficult to economically apply CCS. Other capture is either natural and occurs by itself in
carbon mitigation methods are more applicable to piles or in engineered systems.
those diverse sources. In relation to industrial CCS, an alternative
Contrary to the general belief postcombustion capture process based on the chemical reactivity
CCS is not the only CCS method; there are many ofCO2 especially with hydroxide or carbonate
different technological alternatives to it. solutions are exploitable to end in a low cost
For example, coal (or alternatively biomass) can CO2 mitigation method. As an example, the
be burned in fluidized combustion systems that waste metal oxides produced in cement klinker
have much higher thermal efficiency and can manufacture (cement kiln dust) can be hydrated
integrate pollution control techniques more easily and used to absorb CO2.
compared to conventional pulverized coal
burning. CO2 Purification and Reuse
Oil- and gas-fired power plants and large The separation of CO2 from stack gas emissions
industrial or space heating boilers are in the is possible by using traditional or novel tech-
same category as coal-fired power plants from niques such as scrubbing, sorption, membranes,
the CCS respect. But gas-fired or combined cryogenics, and other advanced concepts.
cycle power and heat plants that are firing gasi- After separation, CO2 can also be purified and
fied coal have higher thermal efficiency of con- reused in industry. For purification leading to
version. Also they produce waste gas mixtures reuse of concentrated or purified CO2 the well-
primarily of nitrogen oxides and CO2, which known process of monoethanolamine (MEA)
make them suitable to CCS applications. Natural process exists.
C 298 Carbon Capture

The Enhanced Oil Recovery (EOR): Bene- beds with recovery of methane and sequestration
ficial use of CO2 in oil recovery is another in deep saline aquifers are being investigated.
method involving beneficial use of CO2. This is Both techniques require a thorough estimation
also a type of carbon capture in geological for- of the potential storage capacity, the storage
mations briefly mentioned above. Several pilot integrity, and the physical and chemical pro-
programs are underway in various stages to test cesses that are to be used for injecting CO2 under-
the long-term storage of CO2 in non-oil produc- ground (White et al. 2003). Several projects
ing geologic formations, too. Also known as have been initiated in which CO2 is injected
geo-sequestration, this method involves injecting into deep coal seam or saline aquifers. In spite
carbon dioxide, generally in supercritical form, of some large-scale carbon sequestration
directly into underground geological formations. applications, substantial research and develop-
Oil fields, gas fields, saline formations, ment is needed to reduce the cost, decrease the
unminable coal seams, and saline-filled basalt risks, and increase the safety of carbon elimina-
formations have been suggested as storage sites. tion in these techniques. Therefore, field studies
Algae cultivation: There is ongoing discus- are needed to generate data for discussion of
sion on the economics and effectiveness of algal possible problems such as the safety concerns
carbon capture. Some researchers indicate that that need to be addressed because of the possibil-
algae may constitute a partial solution for carbon ities of leakage to the surface and induced
capture either for an individual point source emit- seismic activity.
ter or as a passive CO2 absorber from the air. Carbon capture on land: This method
Carbon capture from the air: Carbon diox- involves the net amount of CO2 transferred from
ide sequestration is possible from the atmo- the atmosphere into soils and land vegetation.
sphere. This passive kind of mitigation is in fact In other words, it includes both the removal
quite basic in the nature; CO2 is utilized by ter- of CO2 from the atmosphere and reduction of
restrial and aquatic plants, algae, etc., or transfer the CO2 emissions from terrestrial ecosystems
into the ocean to be used by biota or inclusion into into the atmosphere. Latter is due to the respira-
the aquatic carbonate chemistry or chemically tion and CO2 release into the atmosphere when
combined by serpentinic minerals containing sil- trees are cut down, crops are harvested and their
icates to transform them into carbonate formation residues are decayed, and when the soil is dis-
on land. However, when engineered systems with turbed, tilled, or eroded.
enhanced physical and chemical reactions can be A considerable amount of carbon originally
used, it will be another option of carbon capture. contained in soils and vegetation has been
Chemically bound CO2 injection into the released already as a result of deforestation and
oceans: Post capture operations leading to final traditional agricultural practices. The goal of ter-
CO2 sequestration are also new techniques which restrial sequestration is to reduce the amount of
must be carefully investigated and designed. CO2 that is released while enhancing the storage
Among them is the alternative of fixing the car- capacity of soils, meadows and farmlands, and
bon in ionic forms and dispose it into the oceans. trees through changes in forest management
Methods of deep sea or underground injection of practices.
wastes are well known and applied in various Terrestrial plants fix carbon dioxide during the
different fields of engineering. Our knowledge daytime when there is sufficient solar radiation of
from these applications will help the final seques- correct wavelength, but respire all the time to
tration process for safe CCS operations. How- give off some of this CO2 back to the atmosphere.
ever, in each case monitoring of CO2 gas The carbon taken up by the plants is converted to
leakage into the air must be carefully planned plant carbon and either stored or respired. The net
for safety reasons. amount of CO2 in the air varies with the seasons
Injection of CO2 into coal beds and saline as duration of daytime varies. For agricultural
aquifers: Sequestration in deep unminable coal plants, the same goes on but after harvest the
Carbon Capture 299 C
collected and residual biomass decays and con- limit primary production in the oceans, but the
verts to soil carbon and atmospheric carbon diox- darkness and lack of certain nutrients do.
ide. However, although decaying parts of trees Ocean pH is defined by the action of ocean
return partly into the carbon cycle, woody parts water chemistry and physical conditions such as
continue storing the carbon for many years until temperature and pressure in equilibrium with
the tree dies or cut off. Smaller plants participate respective partial pressures of CO2 in air
in a smaller loop of the carbon cycle by returning and water. Although due to buffering ions of C
CO2 back to the atmosphere in a few years, but salinity in the ocean water, there is a natural
trees may store some carbon that is not returned resistance to acidification, but in the long run
to the atmosphere for sometimes a century or oceans might have reduced pH, too, thus “ocean
longer. Cutting the forests interrupts this natural acidification” (Rau 2011). Carbonates in the
cycle and puts carbon stored in the trees back into saline waters form salts of low solubility, such
the atmosphere before the natural life cycle is as calcium carbonate and depending on the pH
completed. Thus decaying takes over and returns and temperature of the system carbonates tend to
CO2 into the atmosphere. Therefore, sustainable precipitate.
forestry with reforestation policies must be
regarded as one of the most promising carbon Enhanced Oceanic Processes for Carbon
sequestration operations. Sequestration
Because of the strength of the natural oceanic
Carbon Capture in the Oceans sink mentioned above, one might think of adding
Absorption of carbon dioxide by the ocean is one certain limiting nutrients into the ocean in order
of the main natural sinks for carbon. Rates of to improve sequestration of carbon through bio-
circulation of carbon through air-sea and sea- logical cycles. Nutrients such as nitrates, phos-
bottom sediment interfaces have important role phates, and silica, as well as iron may cause ocean
in this process. Sequestration of CO2 by the fertilization. Therefore, it was hypothesized in
oceans may occur via physicochemical and bio- the 1980s that one way to increase the carbon
logical processes. Oceanic carbon capture and sequestration efficiency of the oceans is to add
storage occurs in two compartments: upper and micron-sized iron particles (iron oxides or sul-
bottom compartments. Upper compartment is fates) into the ocean.
euphotic, oxic, and rich in living organisms, con- It was expected that the presence of iron in
tain more bicarbonates and nutrients, so is very waters having sufficient quantities of all other
complex compared to the bottom compartment. It nutrients, plankton populations quickly grow,
takes less time for storing the carbon in this layer a phenomenon called “blooming.” This enhanced
in contrast to much longer time required in stor- biomass productivity helps removing significant
age at the bottom. That is really the final seques- quantities of CO2 from the atmosphere via pho-
tration step. tosynthesis. There have been some proposals for
Depending on physical conditions, oceans adding iron in pulses for fertilization of the
may act as both source or sink for atmospheric oceans, for obtaining effective growth so that
CO2. At about 390 ppm by volume of CO2 con- carbon can be sent rapidly to ocean floor.
centration in the atmosphere today, oceans are net Although some large-scale tests were conducted,
carbon sinks. In fact they are presently the largest there are conflicting views about the iron addition
active carbon sinks on Earth, absorbing more for carbon capture. Risks are still unknown and
than one-fourth of the CO2 that is put into the there is no consensus about its benefits and risks.
air anthropologically. The solubility mechanism As the effect of such small-scale phytoplankton
mentioned above is the primary reason driving blooms on ocean ecosystems is unclear, more
this, with the biological elements playing a less studies are certainly needed to evaluate the envi-
significant role. Because of the abundance of ronmental effects of the enhanced ocean capture
inorganic carbon in the ocean, CO2 does not of carbon. There are strong scientific opinions
C 300 Carbon Capture

against the iron addition into the ocean for carbon also proposed that the bicarbonate approach
sequestration (Long and Caldeira 2010). would help control the ocean acidification and
enhance the retention of CO2 in the ocean.
Disposal of CO2 into the Ocean (Ocean Although it seems rather promising, large-
Storage of Carbon) scale oceanographic studies are needed to
Another option for sequestering CO2 is the deep provide data to show the benefits of this
ocean storage. method.
This is a kind of storage of carbon rather than 4. Storage of CO2 in the form of solid CO2/sea-
purely a capture function and therefore also water/CO2 hydrate composite particles
called “ocean storage.” Ocean storage can be obtained from liquid CO2 at depths below
worked out into a geophysical or geophysical- 500 m has been proposed as another method
chemical engineering operation. Several differ- (Tsouris et al. 2004).
ent ideas are under discussion in this field: 5. In oceanic capture methods, adding limestone,
1. In one of the discussions, it is proposed that quicklime, or dolomite at quantities to fix man-
CO2 is injected either by dumping from ships made CO2 in the air is another novel concept.
or by pumping through pipelines into the And mineralization of the additional CO2 in the
water column at depths of 1,000 m or more, form of bicarbonates in the ocean by adding
and let to stay stagnant there. CO2 there is to alkali cations into seawater in engineered reac-
dissolve. This is called “CO2 dissolution” tors at the coastal facilities is another idea.
method. It is suggested that by injecting CO2 6. A conceptual method for long-term oceanic
directly into the ocean instead of the atmo- carbon sequestration is to deposit carbon-rich
sphere, the ocean’s natural uptake processes agricultural crop residue in the form of heavy
are accelerated, thus reducing the global bales into the alluvial fan areas of the deep
warming (NERSC website). ocean basins. These biomass residues in allu-
2. Alternatively, deposits of CO2 are formed by vial fans would cause them to be quickly buried
directly dumping it onto the sea floor at depths in silt on the sea floor, sequestering the biomass
greater than 3,000 m. Because of hydrostatic for very long time spans. Alluvial fans exist in
pressures at these depths, CO2 is denser than all of the world’s oceans and seas where river
water and is expected to form a “lake” that deltas fall off the edge of the continental shelf.
would delay dissolution of CO2 into the envi- As a result, the environmental effects of oce-
ronment. This is also called “CO2 lake” anic carbon storage are either negative or poorly
method. understood. Large concentrations of CO2 in
3. Another idea for sequestration is converting solution may kill aquatic organisms. Another
the CO2 to bicarbonates in the ocean by adding problem is that dissolved CO2 in water would
suitable reagents such as limestone after injec- eventually equilibrate with the free CO2 in the
tion. Although, under natural conditions, this atmosphere, so the storage would not be perma-
process is expected to take millennia, chemi- nent. So any technique of carbon storage must
cally enhancing this dissolution has been involve the elimination of risk of leakage of
thought as a way of sequestering significant stored CO2. Leakage through the injection pipe
quantities of CO2. This would involve bring- is another risk and the injection pipeline must be
ing mineral carbonates and water into direct equipped with special valves to prevent release
contact with CO2-rich waste gas effluent from on a power cut. There is still a risk that the pipe
centralized industrial or municipal sources; itself could tear and leak.
thus, at least partially, consuming the CO2 to Although carbon capture and storage projects
form relatively long-lived cations and bicar- help reducing the CO2 emissions from industries
bonate in equilibrium which would directly or and power plants, additional energy is usually
indirectly be added to the already large pool of required for CO2 capture. This means that more
these ions in the ocean (Rau et al. 2007). It was fuel has to be used, depending on the method,
Carbon Capture and Sequestration (CCS) 301 C
therefore sustainability of methods of carbon cap- Lackner, K. S. (2010). Capturing carbon dioxide
ture are to be evaluated from this perspective, too. from air. www.netl.doe.gov/publications/proceedings/
01/carbon. . ./7b1.pdf
Long, C., & Caldeira, K. (2010). Can ocean iron fertiliza-
tion mitigate ocean acidification? Climatic Change.
Future Directions doi:10.1007/s10584-010-9799-4.
Mill, R. (2011). Capturing carbon, the new weapon in the
Almost anything discussed in this entry has some- war against climate change. New York: Columbia
University Press.
thing to do with future technologies, as CCS itself NERSC – Nansen Environmental and Remote Sensing
is a futuristic concept. There are many alternative Center a non-profit research institute affiliated with
carbon capture methodologies encountered in this the University of Bergen. http://www.nersc.no/main/
discussion. But it is almost impossible which one nansen_group/coto/disposal.html
Park, A. H. A., Jadhav, R., & Fan, L.-S. (2003). CO2
of them has more chance than others. mineral sequestration: Chemically enhanced aqueous
One thing for sure is that as the fossil fuels will carbonation of serpentine. Canadian Journal of Chem-
continue to be used for some more time, there ical Engineering, 81, 885–890.
will be a definite need to CCS. And R&D projects Rau, R. H. (2011). CO2 mitigation via capture and chem-
ical conversion in seawater. Environmental Science &
show that there will be successful carbon capture Technology, 45, 1088–1092.
technologies in the near future for use. Definitely, Rau, G. H., Knauss, K. G., Langer, W. H., & Caldeira, K.
business as usual for fossil fuel use with no regard (2007). Reducing energy-related CO2 emissions using
to CO2 mitigation will not be a sustainable way of accelerated weathering of limestone. Energy, 32,
life on the Earth. Stolaroff, J. K., Lowry, G. V., & Keith, D. W. (2005).
Among the promising technologies for the Using CaO- and MgO-rich industrial waste streams for
future, oxygen separation for use in oxy- carbon sequestration. Energy Conversion and Man-
combustion energy facilities, CO2 absorption in agement, 46, 687–699.
Tsouris, C., Brewer, P., Peltzer, E., Walz, P., Riestenberg,
better solvent processes, membrane processes for D., Liang, L., & West, A. (2004). Hydrate composite
oxygen and CO2 diffusion, solid sorbents, biotech- particles for ocean carbon sequestration: Field verifi-
nologies, cryogenic separation of CO2 from its cation. Environmental Science & Technology, 38,
mixtures can be counted. Future techniques in rela- 2470–2475.
White, C. M., Straziser, B. R., Granite, E. J., Hoffman, J. S.,
tion to power generation using combustion tech- & Pennline, H. W. (2003). Separation and capture of
nologies with high temperature and pressure thanks CO2 from large stationary sources and sequestration in
to newly developing materials are promising, too. geological formations – coalbeds and deep saline aqui-
When R&D projects will start giving results, fers. Journal of the Air & Waste Management Associa-
tion, 53, 645–715.
CCS might prove itself as a low risk, scalable and
therefore very helpful way of controlling the cli-
mate change.

Cross-References Carbon Capture and Geological

Storage (CCGS)
▶ Carbon Capture
▶ Carbon Emissions ▶ Carbon Capture
▶ Carbon Footprint

References and Readings

Carbon Capture and Sequestration
Krevor, S. C. M., & Lackner, K. S. (2011). Serpentine
dissolution kinetics for mineral carbon dioxide seques-
tration. International Journal of Greenhouse Gas
Control Enhancing, 5, 1073–1080. ▶ Carbon Capture
C 302 Carbon Capture and Storage

risk–related decisions in their investment pro-

Carbon Capture and Storage cess. Based on the data it has gathered, the CDP
also publishes in-depth analyses on various envi-
▶ Carbon Capture ronmental subjects every year, covering a wide
range of geographical regions. It has created the
world’s largest database of its kind, which pro-
vides the data to its partner Bloomberg.
Carbon Cost

▶ Carbon Footprint Introduction

The Carbon Disclosure Project (CDP) was

launched in 2000 in London in order to drive
Carbon Dioxide Emissions disclosure of carbon emissions and reduction ini-
tiatives in the world’s largest public companies
▶ Carbon Footprint (for this section cf. http://www.cdproject.net).
The first questionnaires – the CDP’s instrument
of choice – were sent out in 2002 (CDP1),
targeting all FT500 companies. Signatories of
Carbon Disclosure Project the accompanying letter were 35 institutional
investors who gave this initiative weight, seeking
Annett Baumast disclosure of the data in order to improve the risk
Baumast. Culture & Sustainability, Lenzburg 2, management of their own investments. The
Switzerland response rate was clearly high with 235 compa-
nies providing the requested information or at
least attempting to do so. In 2003, the first report
Synonyms by the CDP on the results of the survey was
published. Since then, the CDP has not only
CDP extended its scope to other environmental issues
but also built up a rather elaborate reporting
structure with a wide variety of reports available
Definition every year.
Currently, there are five programs the CDP
The Carbon Disclosure Project (CDP) is an inde- covers with its surveys:
pendent nonprofit organization collecting and – Investor CDP
providing exhaustive environmental information – CDP Cities
on issues such as climate change and water use in – CDP Supply Chain
order to promote transparency and work toward – CDP Water Disclosure
a more sustainable economy. It is supported by – CDP Public Procurement Program
more than 655 institutional investors worldwide,
representing more than US $78 trillion in assets Investor CDP
(as of July 2012). Through sending out question- Investor CDP was the first and still is the most
naires to businesses in the name of the investors important program that the organization has
backing the initiative, the Carbon Disclosure Pro- started to date. The above-described CDP 1 that
ject gathers information on the companies’ envi- simply covered the FT500 companies has, over
ronmental activities such as the monitoring and the years, developed into a much broader pro-
reduction of carbon emissions. This information gram, covering as well as providing different
serves the investors to make informed, climate indexes. The main focus of the program is to
Carbon Disclosure Project 303 C
provide information on climate change–related Socially Responsible Investment (SRI) products,
company data to investors worldwide. This is claim to use the database provided by CDP on
done with the objective to drive transparency on a regular basis. Signatories are granted access to
the issue of greenhouse gas (GHG) emissions and the database for free. Interested parties also have
promote measures to reduce these emissions, free but limited access to the database.
which have been found to contribute to man- Also based on the data as well as on
made climate change. For investors, this data established indexes is the FTSE CDP Carbon C
means that they can include climate change– Strategy Index Series that focuses on companies
related and therefore risk-related information better equipped for the impacts of climate change
into their investment decisions on a broad scale, than others. Currently, indexes for the UK,
which is one of the approaches of Socially Australia, Europe, and Japan are available in
Responsible Investments (SRI). these series. The date is complemented by
In 2011, more than 3,000 companies that had research from ENDS (http://www.ftse.com/
been requested to disclose data on climate change Indices).
completed one of CDP’s questionnaires. This
includes 81 % of the Global 500 as well as 68 % CDP Cities
of the S&P 500. Table 1 gives an overview of the After a pilot in 2009, CDP Cities was first
original sample size. conducted in 2011. It is a voluntary initiative for
The questionnaire for the annual survey com- the reporting of carbon emissions and climate
prises questions covering three areas: change measures by cities and is mainly
1. Governance, strategy, and measures with addressed to the C40: the Large Cities Climate
regard to carbon emissions Leadership Group (http://www.c40cities.org).
2. Risks and opportunities of carbon emissions Additionally, the program invites any other inter-
3. Carbon emissions (carbon accounting) ested cities to join in the survey. The C40 is
For emissions reporting, the CDP recom- a group of large cities from around the world,
mends using the Greenhouse Gas Protocol working together on reducing climate change by
(GHG Protocol, http://www.ghgprotocol.org/), implementing local climate change initiatives. It
developed by the World Resources Institute was created in 2005 by the then Mayor of London
(WRI) and the World Business Council for Sus- Ken Livingstone. Table 3 lists the current mem-
tainable Development (WBCSD), that has bers of the C40.
emerged as a quasi-standard for carbon emission The 2012 CDP Cities report contains answers
reporting over the past years. from 73 cities, including 75 % of members of the
The process of gathering and analyzing data C40 (45 out of 58), all reporting data on their
follows a simple timeline (Table 2). climate change–related initiatives. In total, the
In 2011 alone, based on the data gathered, the reporting cities are responsible for nearly one
Carbon Disclosure Project published 32 reports billion tons of CO2e emissions. Questions in the
next to the two major surveys of S&P 500 and 2012 questionnaire cover areas such as green-
Global 500 companies. The focus was on single house gas measurement inventories, review and
countries (e.g., Korea, Turkey, or South Africa), management processes for climate change activ-
regions (such as Iberia, Latin America, or the ities, and concrete reduction targets.
Nordic region), indexes (FTSE 350), or sectors
(e.g., energy, consumer staples, or information CDP Supply Chain
technology). CDP provides the reports as well Life-cycle analyses (LCAs) have shown that
as the detailed information reported by the com- depending on the sector, the share of carbon
panies for free, if the participating companies emissions within the supply chain can easily sur-
agree to the publication of their input. pass those coming from a company’s operations.
As of today, a large number of asset managers In order to promote transparency in this matter,
and financial institutions, creating and selling the Carbon Disclosure Project launched its CDP
C 304 Carbon Disclosure Project

Carbon Disclosure Project, Table 1 CDP 2011 samples

Sample size (the largest companies, as
Country Office measured by market capitalization)
Asia (ex-Japan, CDP London 170 largest Asian companies (excluding Japan,
India, China, China, India & Korea) – Hong Kong (75),
Korea) Taiwan (25 companies), Malaysia (15),
Singapore (25), Indonesia (10), Thailand (10),
and Philippines (10)
Australia and CDP Australia/NZ ASX 200/NZX 50
New Zealand
Belgium, CDP BeNeLux and France Benelux 150
Brazil CDP Brazil/Latin America together with the Brazil 80: 80 largest companies by market
Brazilian Association of Pension Funds (ABRAPP) capitalization in the IBrX index, as listed on the
and BANCO REAL – partners to CDP BOVESPA São Paolo Stock Exchange
Canada CDP North America Canada 200
Central & Iparfejlesztési Közalapı́tvány (IFKA – Public CEE 100: largest companies in CEE – Poland
Eastern Europe Foundation for the Progress of the Industry) – (50), Croatia (9), Czech Republic (8), Romania
(CEE) partner to CDP (7), Baltics (7), Hungary (6), Slovakia (6),
Slovenia (5), and Serbia (2)
China CDP China China 100: 100 largest companies by market
capitalization in China based on the FTSE
China A 600 and the FTSE All World Asia
Pacific indexes
Europe CDP Europe FTSEurofirst 300 Eurozone: 300 largest
companies in Europe
France CDP BeNeLux and France SBF 250
Germany and CDP Germany Germany and Austria 250
Global CDP Global offices and international partners Global 500: Top 500 companies within the
FTSE Global Equity Index Series
India CDP India India 200: 200 largest companies by market
capitalization, as listed on the Bombay Stock
Iberia 125 CDP Southern Europe together with ECODES and Spain 85: 85 largest companies by market
BBVA – partners to CDP capitalization, based on the IBEX 35, the IBEX
Small Cap and the IBEX Mid Cap
Portugal 40
Ireland CDP Ireland Ireland 40
Italy CDP Southern Europe, together with Accenture, Italy 100
Banca Monte Paschi di Sienna and the Kyoto Club –
partners to CDP
Japan CDP Japan Japan 500
Latin America CDP Brazil/Latin America together with the Latin America 50: 50 largest companies by
Brazilian Institute of Investor Relations (IBRI) – market capitalization in Latin America based
partner to CDP on the S&P Latin America 40 Index
Korea Korean Sustainability Investing Forum (KoSIF) – Korea 250 based on the KOSPI and the
partner to CDP KOSDAQ Indexes
Nordic Region CDP Nordic, together with ATP and KLP Asset Nordic 260: 260 largest companies in the
Management – partners to CDP Nordic region based on market capitalization
Russia CDP London RTS Index 50: 50 largest companies in Russia
South Africa National Business Initiative (NBI) – partner to CDP South Africa 100: 100 largest South African
companies by market capitalization, based on
the FTSE JSE All Share Index
Carbon Disclosure Project 305 C
Carbon Disclosure Project, Table 1 (continued)
Sample size (the largest companies, as
Country Office measured by market capitalization)
Switzerland CDP Germany, together with Ethos and Raiffeisen Switzerland 100: 100 largest companies by
Schweiz – partners to CDP market capitalization in Switzerland based on
the SPIMLC Index
Turkey Sabanci University Corporate Governance Forum – Turkey 100: 100 largest companies by market
Partners to CDP capitalization, based on the ISE 100 National
USA CDP North America S&P 500
Electric utilities CDP UK and international partners 250 of the largest electric utilities companies
Transport CDP UK and international partners 100 of the largest transport companies globally
Source: https://www.cdproject.net/en-US/Programmes/Pages/samples.aspx, February 07, 2012

Carbon Disclosure Project, Table 2 Investor CDP – who have to choose the supplier companies they
process and timeline wish to be covered by the analysis.
CDP issues a request for information The 2010 report claims that 44 member com-
(questionnaire) to the largest companies panies suggested 1,402 suppliers to be
1 February globally by market capitalization
approached by the CDP; 710 of those (51 %)
31 May Deadline for companies to respond to
the questionnaire
completed and returned the questionnaire they
September– Findings launched across the globe had received. More than a third of the suppliers
December (597 or 42 %), however, did not send a reply of
September– Consultation phase for amendments to any kind.
November annual questions The report covers the following areas:
November– CDP signatories review and sign the 1. Strategic awareness with regard to carbon
January questionnaire
Source: https://www.cdproject.net/en-US/Programmes/ 2. Carbon reduction ambition
Pages/CDP-Investors.aspx#timeline, February 07, 2012
3. Reporting capabilities
4. Implementation practices
The report comes to the conclusion that if
companies want to be on top of carbon emissions
Supply Chain program in 2007, which focuses on along their entire supply chain, there is still a lot
carbon emissions in the supply chain of compa- of work that remains to be done. The CDP Supply
nies. Currently, more than 50 of the largest cor- Chain has indeed drawn attention to supply
porations world-wide are members of the CDP chain carbon emissions and their contribution to
Supply Chain. The program can be seen as climate change from smaller, not necessarily
a concerted action of companies, aimed at gath- stock-quoted supplier companies worldwide.
ering and bundling supplier data on carbon emis- The true impact, however, has not yet material-
sions. When reported according to the GHG ized for all of the relevant suppliers.
protocol, supplier carbon emissions fall into the
category of Scope 3 reporting, thus CDP Water Disclosure
complementing the companies’ data. Once With the CDP Water Disclosure Program, the
again, the CDP uses a questionnaire in order to CDP initiated a survey of how companies handle
gather the data, which has been developed and one of the most important resources today: water.
adjusted over 7 years. The survey is undertaken in The idea behind this survey is to – once again –
close cooperation with the member companies increase awareness and transparency and foster
C 306 Carbon Disclosure Project

Carbon Disclosure Project, Table 3 C40 cities one of the most costly and dear resources for
Steering committee Participating corporations around the world. The CDP sends
cities cities Affiliate cities questionnaires to water-intensive industries or
Berlin Addis Ababa Amsterdam companies that are more than average exposed
Hong Kong Athens Austin to water-related risks in their own business or
Jakarta Bangkok Barcelona along their supply chain. The sample currently
Johannesburg Beijing Basel includes:
Los Angeles Berlin Changwon – The largest 500 companies globally (FTSE
London Bogota Copenhagen Global Equity Index Series)
New York Buenos Aires Curitiba
– The largest 100 Australian companies (ASX
Sao Paolo Cairo Heidelberg
Seoul Caracas Ho Chi Minh
– The largest 100 South African companies (JSE
Tokyo Chicago Milan 100)
Delhi New Orleans – The largest 500 US companies (S&P 500)
Dhaka Portland While the next report is due in 2013, the latest
Hanoi Rotterdam report from 2011 – backed by 354 investors
Hong Kong San Francisco representing assets of US $43 trillion – sums up
Houston Santiago de results from eight different sectors:
Chile – Consumer discretionary
Istanbul Seattle – Consumer staples
Jakarta Stockholm – Energy
Johannesburg Yokohama – Health care
– Industrials
– Information technology
– Materials
– Utilities
Los Angeles
For the 2011 report, questionnaires were sent
Melbourne to selected companies from the FTSE Global 500
Mexico City and, for the first time, to companies from the
Moscow Australia 100 and South Africa 100. The response
Mumbai rates amounted to 60 %, 41 %, and 46 % respec-
New York tively, providing the CDP with data from 238
Paris companies. Fifty-nine percent of them had iden-
Philadelphia tified water as a considerable risk for their busi-
Rio de Janeiro ness and even more (63 %) had already evaluated
Rome water-related opportunities. Overall, water-
Sao Paolo related issues have not yet been attributed as
Seoul much attention as has climate change: only
Shanghai 57 % of the companies report board-level respon-
Tokyo sibility with regard to water issues while 94 % of
the Global 500 (Investor CDP) claim board-level
attention to climate change.
Source: http://live.c40cities.org/cities, February 07, 2012
CDP Public Procurement Program
the sustainable use of water. According to the The CDP Public Procurement Program was initi-
CDP Water Disclosure Program, there will be – ated in 2008 but has received less attention than
by 2030 – a demand for (fresh) water that will the other programs, probably due to its currently
exceed supply by 40 %. Hence, water is or will be narrow geographical focus. The program’s
Carbon Disclosure Project 307 C
Carbon Disclosure 3500
Project, Fig. 1 Number of
responding companies 3050
(Investor and Supply Chain 3000
programs) (Source: Carbon
Disclosure Project 2456
Information Pack (2011),
p. 2) C




500 355
235 295

2003 2004 2005 2006 2007 2008 2009 2010

objective is the assessment and subsequent reduc- also to decision makers from corporations and
tion of carbon emissions within the supply chain politics, investors, etc. The objective is to provide
of public sector organizations in the UK on the a sound decision base that takes into consider-
national as well as local level. By analogy with ation the risks and opportunities of climate
the CDP Supply Chain, the members of the change and water-related issues. With support
Public Procurement Program can request climate from its financial partners, the information and
change–relevant information and data from their data gathered by the CDP are made accessible to
suppliers in order to quantify supply chain emis- decision makers in the financial community
sions. The latest report – from 2010 – covers 25 through established tools such as Bloomberg Pro-
UK government departments as well as the fessional. Companies and organizations partici-
Greater London Authority (GLA Group) and pating in the CDP benefit from increased clarity
five organizations from the National Health Ser- (following a set structure) as well as transparency
vice (NHS). Two hundred and sixty two listed (setting a good example) with regard to their own
and non-listed suppliers from the UK and abroad emissions, strategies, and measures. They can
took part in the survey. also compare their performance with other com-
Across the Investor as well as Supply Chain panies from the same sector or country and thus
Programs, the Carbon Disclosure Project has gen- establish a benchmark.
erated a large growth in the number of respon- More than 70 people work at the CDP’s head-
dents since its beginnings (see Fig. 1). quarters in London, UK, and offices in Brazil,
The CDP thus holds a large database of cli- China, France, Germany, India, Ireland, Italy,
mate change–related as well as water-related data Japan, Sweden, and USA. Partner organizations
from more than 3,000 companies and organiza- working together with the CDP cover more than
tions world-wide with the reporting numbers 60 additional countries. The CDP is a registered
likely to grow as more samples get included charity and funded by corporate sponsoring, phil-
over time. The information is made available anthropic donations, government support, mem-
not only to the signatories and members, but bership fees, and fees for special projects.
C 308 Carbon Disclosure Project

Key Issues already has its value, in particular with regard

to supporting emerging policy measures
The concept of the Carbon Disclosure Project is concerning carbon emissions, carbon trading,
based on the assumption that surveying and pub- and climate change mitigation.
lishing carbon- as well as water-related data as In addition to the criticism of the effectiveness
a basis for investment decisions is an approach to of the CDP’s approach, Renner (2011) discusses
tackling climate change and other environmental three of the most criticized issues regarding the
problems by making use of financial market setup and process of the project, with a specific
forces. The fact that a large number of signato- focus on the Investor CDP:
ries, representing a significant amount of assets, – By drawing on the 2009 CDP data, he proves
are backing the CDP lends substance to the cause wrong the assumption that the CDP is partic-
and motivates companies and organizations to ularly prone to greenwashing. The hypothesis
participate in the surveys. These companies and that because the signatory investors are not
organizations are enabled to derive programs required to disclose the own carbon data and
and measures for the reduction of carbon emis- information, they might be tempted to support
sions and water use by measuring, analyzing, the project just for image reasons, cannot be
comparing, and reporting carbon- and water- substantiated by the data: while the overall
related data and information on respective risks, response rate of the Global 500 in the 2009
opportunities, and strategies. The CDP makes CDP amounted to 82 %, 80 % of the financial
these efforts public and, as Harmes notes, its companies in the sample also returned their
“primary goal is for disclosed information to be questionnaires. As of 2012, however, as
used by investors to create real financial incen- a condition for sign-up to the project, signato-
tives in the form of share price performance” ries of the CDP are requested to return the
(2011). In his study on the limits of carbon dis- questionnaire if they receive one.
closure, however, Harmes comes to the conclu- – With the development of the CDP over the
sion that while other applications of CDP data are years, it has been criticized that over time
highly worthwhile, the creation of financial and also between companies, results are not
incentives for climate change mitigation through comparable. In addition, there is a lack of
share price performance has clearly been validation of the data the companies disclose.
overestimated. While 49 % of the 2009 respondents had their
This is supported by an earlier study from data validated or verified, CDP strengthened
Kolk et al. (2008), who point out that the infor- the criteria in 2011, making a year-on-year
mation gathered and distributed by the Carbon comparison impossible. In 2011, 69 % of the
Disclosure Project has so far only been of little respondents claimed having obtained or being
use for investors. In their analysis based on in the process of obtaining verification for
global governance, institutional theory, and Scope 1 or 2 emissions, but only 37 % of all
commensuration, they come to the conclusion respondents met all new criteria for
that the way carbon emission data is gathered verification.
and reported is not yet generating a type of – Renner also points out that the CDP does not
information useful for financial investors. provide any concrete climate risk–related
Often, reporting companies and organizations data, making it difficult for investors to com-
do not disclose types and meanings of emissions pare financial risk scenarios across different
data, and reliability checks are missing. Gener- companies.
ally speaking, the data is still incomprehensible Even though there have been noticeable
to some extent, rendering it inaccessible for changes, additions, and adaptations to the CDP
thorough financial market application. But since Renner published his assessment, future
Kolk et al. also point out that while there is work is still needed to top off this emissions
a large potential for improvement, the data reporting tool.
Carbon Footprint 309 C
Future Directions ▶ Socially Responsible Investment
▶ United Nations Intergovernmental Panel on
Since its beginnings in 2000, the Carbon Disclo- Climate Change
sure Project has developed into a major player
regarding the measurement and disclosure of car-
bon emissions and, more recently, water-related References and Readings
data. Many – listed – companies have now been C
confronted with the request to annually assess Carbon Disclosure Project. (2011). Carbon disclosure pro-
ject information pack 2011. Retrieved July 2, 2012,
and disclose their risks and opportunities related
from http://www.flad.pt/documentos/1322500796G7z
to carbon emissions and water usage. The sample UT7ss8No88EZ2.pdf
of the CDP Programs is ever growing and will be Harmes, A. (2011). The limits of carbon disclosure.
extended to more stock markets and listed com- Global Environmental Politics, 11(2), 98–119.
Kolk, A., Levy, D., & Pinske, J. (2008). Corporate
panies around the world. The integration of the responses in an emerging climate regime: The
data into investment decisions is also progressing institutionalization and commensuration of carbon dis-
with Socially Responsible Investment becoming closure. The European Accounting Review, 17(4),
a more relevant factor on the financial markets, 719–745.
Labatt, S., & White, R. (2007). Carbon finance: The
but the firm and link to financial performance
financial implications of climate change. Hoboken,
remains to be proven. NJ: Wiley.
With a number of initiatives such as the Global Nichols, M. (2012). Forest footprint disclosure project to
Reporting Initiative (GRI) driving the reporting join CDP. Retrieved June 14, from http://www.envi-
of sustainability or extra-financial data by listed
PriceWaterhouseCoopers. (2011). CDP global 500 report
as well as privately held companies, the CDP’s 2011. Accelerating low carbon growth. Retrieved July
objective of pushing the disclosure of carbon 2, 2011, from https://www.cdproject.net/CDPResults/
emissions and water-related data can be regarded CDP-G500-2011-Report.pdf
Renner, A. (2011). Does carbon-conscious behavior drive
as part of a larger development. Already, many firm performance?: an event study on the global
companies rely on their CDP data, where carbon 500 companies. Wiesbaden: Gabler.
emissions reporting is part of another company
report, and have integrated the survey process.
With the merger of the Carbon Disclosure
Project and the Forest Footprint Disclosure Pro-
ject (FFDP), which focuses on pushing company Carbon Emissions
disclosure of their use of commodities such as
soy, timber, beef, and biofuels, driving tropical ▶ Carbon Footprint
deforestation, in June 2012, the CDP has gained
yet another dimension and might in the future
evolve into an even more all-encompassing dis-
closure initiative. Carbon Footprint

Nicholas Harkiolakis
Cross-References Business, Health and Technology, Higher
Colleges of Technology, Abu Dhabi, United
▶ Accountability Arab Emirates
▶ Carbon Footprint
▶ Climate Change
▶ Communicating with Stakeholders Synonyms
▶ Disclosure (CSR Reporting)
▶ Greenhouse Gases Carbon cost; Carbon dioxide emissions; Carbon
▶ Institutional Investors emissions; Greenhouse gas footprint
C 310 Carbon Footprint

Definition humanity’s carbon footprint is the most essential

step we can take to end overshoot and live within
Carbon footprint is widely defined as the amount the means of our planet.
of carbon (usually in tons) that is emitted during While most areas of weakness for using
a process or by an organization or entity. It is a carbon footprint metric stem from its definition,
a popular metric that appeared in media, confer- we should also add to this the methodologies used
ences, and government and environmental insti- for its analysis as they come with their own short-
tute’s reports as pressure from the public comings and ambiguities. The purpose of the
concerning pollution and its impact on human carbon footprint indicator is to encompass all
health mounted. It is generally used as a measure traces of carbon gas emissions during the life
of atmospheric pollution due to anthropogenic cycle of an activity that will result in a product
activities. or a service, including all subprocesses or
derivative activities associated with this primary
activity. To achieve this objective, one can follow
Introduction either a bottom-up approach based on analysis of
processes or a top-down approach based on
The concern of the public about the climate analysis of environmental inputs and outputs.
change and the future of our environment led The former methodology has been developed to
public bodies and governments to develop met- address manufacturing and development that can
rics for measuring such impact. Footprint frame- easily been identified in terms of processes, while
works are ideal for such measurements as they the latter is more suited for systems like an
enable us to address the problem in organization or a country.
a comprehensive way that does not simply shift The advantage of dealing with processes is
the burden from one natural system to another. that it can clearly identify their primary and sec-
A case for such framework that preexisted the ondary components as they refer to products with
carbon footprint is the ecological footprint. clear specifications and requirements. Given that
While the ecological footprint for businesses in general processes belong to systems that are
existed for some time and included carbon not closed, we need to also decide how far down-
measurements, the concept of carbon footprint stream or upstream processes we consider as con-
gained popularity as a reference metric for atmo- tributors to the CO2 emissions of the primary
spheric pollution after 2005 as more reports process. This eventually leads to truncating the
containing it became public. inclusion process for the footprint calculation and
In practice, the carbon footprint contributes to by default will provide us with an underestimate of
about half of the ecological footprint and it is its the measured quantity. An added disadvantage of
most rapidly growing component. Also, the car- this method is that it is very expensive in terms
bon contribution of the ecological footprint refers of effort and cost.
to the amount of productive land required to By adopting a system-like perspective on the
absorb/sequester the carbon dioxide produced as other hand, we eliminate the effects of cutoffs of
a result of human activities (primarily the burning the process method and allow for an economic-
of fuels). On a practical level, the ecological wide approach. The limitations here come when
footprint can show us how carbon emissions trying to assess individual products or processes
compare with other elements of human demand, because its application assumes uniform prices
such as our pressure on food sources, the quantity and carbon-emitting outputs within sectors.
of living resources required to make the goods we In essence, it provides indicators based on aver-
consume, and the amount of land we take out of ages more than individual contributions.
production when we pave it over to build cities Provided we have the appropriate model of
and roads. Humanity’s carbon footprint has input-outputs, this method can produce realistic
increased 11-fold since 1961. Reducing and cost-efficient analysis.
Carbon Footprint 311 C
To minimize the disadvantages of both emissions) is then compared to preset caps. From
methods, a hybrid assessment approach can be 2013 onward, the EU system for allocating allow-
followed where we preserve the detail and accu- ances is planned to change from the initial free
racy of the bottom-up approach in the most allocation to enforce auctioning as the rule for the
significant processes and allow the remaining to power sector and harmonize EU-wide rules
be accessed with the input-output method. Ini- across its member states. For the industry and
tially, one can conduct an on-site assessment of heating sectors, the allowance will be allocated C
the environmental impact of a product or service for free based on well-established benchmarks.
system under study. Following that an input- These benchmarks are not meant to represent
output analysis will be performed to cover emission limits for installations but rather as
higher-order contributions. A preliminary input- a marker of free allowances. If the benchmarks
output analysis can even reveal the most signifi- are not met, installations will have to purchase
cant process that need to be addressed with the additional allowances to compensate for the
bottom-up approach, allowing us to optimize our excessive pollution.
resource while we achieve the accuracy and Carbon offset refers to the reduction of
precision required for evaluating the carbon emissions of carbon dioxide equivalent (CO2e)
footprint. in order to offset emissions of CO2e. In addition
to CO2, we also consider here other greenhouse
Carbon Footprint Related Terms gases like methane (CH4), fluorocarbons like
Carbon trading is a market-based approach to perfluorocarbons (PFCs) and hydrofluorocarbons
control atmospheric pollution. Governments set (HFCs), nitrous oxide (N2O), and sulfur
up acceptable limits of (CO2e) that organizations hexafluorocarbons (SF6). The unit used is metric
and businesses need to respect. Any entity that ton of CO2e, while the realization of the reduction
directly pollutes the environment needs to apply is usually done through financial support of foot-
and be granted a permit that allows them to print reduction initiatives like renewable energy
pollute the environment within certain upper and energy efficiency projects, recycling and
limits. Beyond those limits, the entity needs to decomposition of industrial waste and agriculture
buy permits from others that have a surplus, while by-products, and reforestation efforts among
if it is below the limits, it can sell its excess others. By providing support and buying carbon
permits to those that needed and willing to buy offsets, companies and individuals can compen-
it. It works like a pollution fine that can be traded sate for their own footprint without actually doing
among entities, and its sole purpose is to motivate anything to reduce it like spending less fuel for
organizations to reduce emissions. Companies transportation and heating.
that manage to reduce their carbon footprint The following two primary carbon offset
and operate below the set cups are rewarded by markets exist today:
making additional profits when selling their • The compliance market where organizations
excess. from companies to governments need to
One scheme that has provided carbon trading comply with internationally set standards and
is the European Union Emissions Trading agreements (like the Kyoto Protocol).
Scheme (EUETS) that was launched in 2005 as • The voluntary market where even
the European Union’s response to combat climate individuals can buy offsets to mitigate their
change. It covers a number of organizations that own contribution to the footprint.
collectively contributed to about half of the EU’s For trading purposes, offset can be sold in
CO2 emissions. Based on that scheme, organiza- local and international markets, allowing transfer
tions are forced to provide yearly reports of their between organizations in different countries.
CO2 emission levels. The average over a period Exchanges like the Chicago Climate Exchange
of years (to eliminate fluctuations due to irregular and the European Climate Exchange have specif-
weather conditions that can adversely influence ically been set to handle such types of
C 312 Carbon Footprint

transactions. Regulating emissions through the individuals to choose what to buy and use. Credit
market is in many ways better to emission penal- allocation is also difficult while at the same time
ties or environmental taxes because it is an incen- important as it reinforces healthy behavior and
tive measure that involves the market. Such further alleviates the problem.
systems by their own nature are more responsive The challenge with carbon footprint is in pro-
to cost and inflation changes than any govern- viding a representative enough term that will
ment could handle. Economic uncertainties allow us to make comparisons and evaluations
though can make it difficult to see which and come up with appropriate decisions and
approach works better in the long run. policies to control its damaging effect. Measuring
total CO2 emissions is difficult as there are con-
tributions from different sources and modes like
Key Issues direct contributions from heating and transporta-
tion and indirect contributions from the genera-
The carbon footprint metric was developed as tion of electricity and the production of goods and
a response to the need for quantifying the services. Some rough estimates indicate that
atmospheric pollution that resulted from human about a third of the emissions is due to transpor-
activity. Measurements allow for critical assess- tation, a third due to heating and electricity in
ments and the design and implementation of homes and the remaining for everything else.
countermeasures to combat pollution. These distributions are quite significant as they
There are two major aspects of any type of allow policy makers to distinguish on the magni-
pollution: tude of the sources of pollution and develop
• How is the pollution taking place and what is policies with the highest possible impact.
the extent of it? In the case of CO2 pollution, Despite the appeal and pressure from the
as we saw before, a major challenge comes media and the public, a precise definition has
from identifying the sources, we will include not been reached yet at least at the academic
in our calculations and the methodology we level. The difficulty with defining the carbon
will use to calculate the metric. footprint stems from the way we measure and
• Who needs to react and what actions need to quantify the metric. Some calculations include
be taken to reduce it? Responsibilities fall on only direct carbon dioxide (CO2) emissions of
both producers and consumers. For produces, greenhouse gas emissions, while others also
it is probably more clear-cut as they have include carbon-based chemical-like methane.
control of the production or service process The sources of production and the units of mea-
and can implement changes. In addition, it is surement are another area of debate. While the
easier to enforce policies through appropriate majority of CO2 comes from burning fossil fuels,
legislation or through market incentives and there are contributions from other sources like
pressures. Being seen as eco-friendly, emissions from soils.
businesses can increase their popularity and One also wonders if a metric focusing only on
acceptance by the public. The challenge with carbon realistically represents the magnitude of
businesses is whether we also want to assign atmospheric pollution, we observe and whether
responsibilities for their downstream the inclusion of other pollutants like nitrogen
processes, or we want to impose responsibili- substances needs to also be part of the
ties for their upstream processes (procurement metric. And should we only include substances
decisions) including the choice of suppliers. with a greenhouse warming potential or allow for
If we go along that line, we also need to decide other pollutants like carbon monoxide (CO) to be
how far upstream or downstream we extend included. CO in particular is a chemical that not
the sphere of responsibilities. only directly damages the environment and our
For consumers, the responsibilities are health but also gets converted to CO2 through
difficult to enforce, and it is primarily up to the chemical processes in the atmosphere further
Carbon Footprint 313 C
impacting CO2 levels. Additional considerations role in the greater community they serve as well
include the possibility of incorporating every- as their impact on all aspects of human life. Busi-
thing that contributes to CO2 throughout the life ness decision makers are bound by the image and
cycle of a product like the involved upstream obligations of their organization to act in the inter-
production processes, the on-site emissions at est of the public and in addition to providing jobs
the time of the measurement, and the contribu- and wealth for their communities to ensure the
tions from the follow-up recycling and degrada- longevity of the environment and our living con- C
tion processes. ditions. Considering carbon footprint reduction
A case in point is the carbon footprint practices instills in businesses an ethical perspec-
contribution in the 2010 report on the National tive and consideration for the future of the people
Footprint Accounts (Global Footprint Network) and the planet. In conclusion, we should keep in
that included in the calculations the CO2 mind that the issues reflected and addressed by
produced for the supply of energy for all purposes a carbon footprint metric concern both producers
and not just heat and electricity. In calculating and consumers. This is vital in assigning respon-
national footprints, contributions from imports sibility and getting both to collaborate in reducing
of energy and a country’s contribution to interna- our overall carbon footprint.
tional transportation (as a fraction of the
countries imports) were also considered.

Future Directions ▶ Ecological Footprint

Carbon footprint is a useful metric in evaluating

atmospheric pollution, and its application can References and Readings
greatly influence the implementation of policies
European Union Emissions Trading Scheme. http://ec.
to combat pollution. What international bodies and
europa.eu/clima/policies/ets/index_en.htm. Accessed
governments need to do first is to clearly define on Nov 2011.
and commonly accept what is being measured and Lenzen, M. (2001). Errors in conventional and input-out-
how. The methodology used to measure is of vital put-based life-cycle inventories. Journal of Industrial
Ecology, 4(4), 127–148.
importance as are the units of measurement. Dif-
Lenzen, M., Murray, J., Sack, F., & Wiedmann, T. (2007).
ferent methodologies might need to be applied Shared producer and consumer responsibility – Theory
when dealing with different entities like and practice. Ecological Economics, 61(1), 27–42.
a product or a nation. For example, when measur- Stavins, R. (Ed.). (2007). Review of environmental
economics and policy (Vol. 1, Issue 1). Cary: Oxford
ing the carbon footprint of a production or con-
University Press.
sumption activity, we might want to consider Suh, S., Lenzen, M., Treloar, G. J., Hondo, H., Horvath, A.,
a hybrid assessment approach where life-cycle Huppes, G., Jolliet, O., Klann, U., Krewitt, W.,
assessments are combined with input-output anal- Moriguchi, Y., Munksgaard, J., & Norris, G. (2004).
System boundary selection in life-cycle inventories
ysis. Regardless of the method of choice, careful
using hybrid approaches. Environmental Science &
attention should be given to avoid double-counting Technology, 38(3), 657–664.
as there are significant implications on the prac- Tukker, A., & Jansen, B. (2006). Environmental impacts
tices of carbon trading and carbon offsetting. of products: A detailed review of studies. Journal of
Industrial Ecology, 10(3), 159.
Corporations can showcase their efforts to Wiedmann, T., & Minx, J. (2008). A definition of ‘carbon
reduce their carbon footprint by applying account- footprint.’ In Pertsova, C. C. (Ed.), Ecological eco-
ing methods like reporting in Triple Bottom Line nomics research trends (Vol. 1, chap. 1, pp. 1–11).
forms. This means that in addition to financial Hauppauge: Nova Science.
Wiedmann, T., Minx, J., Barrett, J., & Wackernagel, M.
reporting, they report also on their social and envi-
(2006). Allocating ecological footprints to final
ronmental performance. This way of reporting consumption categories with input-output analysis.
forces businesses to consider their function and Ecological Economics, 56(1), 28–48.
C 314 Carpooling

There are considerable advantages to

Carpooling carpooling. These include for both society and
individual: a reduced number of cars commuting
Pauline Collins and thus, reduced traffic congestion, noise and
School of Law, Faculty of Business, air pollution, energy consumption, and need
University of Southern Queensland, for expanding infrastructure to accommodate
Toowoomba, QLD, Australia increasing vehicle numbers both for commuting
and parking. At an individual level, travel and
parking costs are reduced, while driver
Synonyms fatigue and vehicle accidents are also impacted
positively. One less identifiable and measurable
Carpooling; Ride sharing; Vanpooling advantage is a greater socializing within
community, generating greater social capital and
less stress for the individuals not having to drive.
Definition The disadvantages to carpooling are that its
informal, ad hoc, private basis may mean it is not
Carpooling is a private arrangement between reliable, it may have less individual flexibility
individuals for a private car to be used for travel, (although some arrangements can be quite flexible),
primarily at preagreed times and generally to an and it usually is only practically useful if there is
agreed destination. The private arrangement, usu- a concentrated number of people living locally
ally made between two to five people, provides proximate who travel to a specific destination, i.e.,
that they will travel in one vehicle to reduce costs workplace or school, on a regular basis and at
related to travel and adopt a more sustainable, a regular time. It has also been noted that the driver
environmental, and communal approach to com- of a carpool can be placed under increased stress.
muting. Carpooling can be further broken down It is likely to be used in situations where public
into household and nonhousehold carpooling. In transport is less available, less reliable, or more
the former, members of the one household travel costly; parking is limited or costly; and also where
in the same vehicle to and from destinations traffic congestion is significant.
such as school and work. In the latter case An adaptation from carpooling is vanpooling.
of nonhousehold carpooling, the persons The difference being that a larger vehicle carrying
ridesharing do not live in the same abode. more passengers is used. This may lead to a more
Irrespective of which type of carpooling is formalized commercial arrangement with the
occurring, both involve no commercial or van owner. Often, vanpooling is operated by an
professional transport arrangements. employer organization for its employee’s to
commute on common routes to and from work
and between workplaces. A negative of car and
Introduction vanpooling is that it can separate commuters from
public transit systems, reducing the need to
Carpooling in which individuals use their private improve public transport and creating a segregated
vehicle for shared journeys is not regulated by community of travelers.
the state specifically and is entirely subject to Carpooling must be distinguished from public
the private, often informal, agreement between transport and car sharing, which involve the use
the individuals concerned. This agreement may of a vehicle that is part of a fleet of vehicles
include a payment by the passengers toward the available for regular rental. Such schemes help
cost of the owner for fuel and parking, in return reduce the number of privately used vehicles in
for the passengers obtaining a comfortable, the area and correspondingly the air pollution,
semiprivate, convenient, and cheaper manner of traffic congestion, and parking needs. Car sharing
transit to their desired destination. is ideal where urban residents only have an
Carpooling 315 C
occasional need for regular travel. It also supports related to land use, economic factors, and the
the use of the public transit system. An early and health and well-being of their employees when
successful example of car sharing is to be found it comes to facilitating the adoption of
in Philadelphia PhillyCarShare. carpooling. For instance, by providing schemes
by which employees can learn about carpooling,
carpoolers can be matched, and the provision of
Key Issues fee-free or reduced fee car parks are some of C
the methods that organizations can adopt. An
Importantly, more comprehensive data needs to be Australian example is the Royal Automobile
collected for research and public policy decision Club of Victoria. A carpooling scheme was intro-
making, along with education on the benefits of duced in 1991 and is still included in their
carpooling. The first real collection of data in Corporate Plan 2006–2009 for improving their
the USA was from the Nationwide Personal environmental performance, with 120 employees
Transportation Study, 1977; other sources have using the scheme in 2007. However, a legally
included the USA Census of Population and the supportive framework is desirable to ensure
American Housing Survey. It is clear that a clear understanding of what carpooling means,
with well-thought-out incentives, such as particularly with regard to taxation and insurance
pricing mechanisms and preferential treatments, issues.
commuter behavior can be altered to take A very thorough study was undertaken in
account of concern for improving lifestyle 1997–1999 covering four European countries
and environmental impact. However, there is con- (Increase of CAR Occupancy through innovative
siderable room for improvement in data collection measures and technical instruments (ICARO)).
and increased research in the area. One of the key findings of this study was that
Another issue is the fragmentation of responsi- while carpooling is generally accepted and rated
bility for transportation between the state and the positively and incentive measures do have
private domain, such as the corporate and a positive influence on increasing car occupancy
employer organizations. With increasing privatiza- rates, it is important to focus campaigns on specific
tion and public private partnerships in the provi- target groups rather than generalized publicity
sion of transport infrastructure, public policy campaigns.
initiatives such as educational and economic incen- With the rise in technologies such as the Internet
tives coincidentally are fragmented. This means and computer software programs, some of the
that a holistic opportunity to motivate changed previous disadvantages of carpooling may be
behavior and market the advantages of carpooling overcome. For instance, the use of mobile phones
could be lost in the gaps. The traditional idea that and the Internet can make using a carpool for transit
the motor vehicle is exclusively a private-use more reliable and efficient, with a growing number
commodity and not something that impacts on of methods for accessing carpools occurring. These
and serves collective needs carrying with it are generally supported by technologies such as the
collective responsibilities requires a revision of Internet and include the use of public websites,
personal attitudes that will take time to change. member access websites, carpooling software, and
Perhaps greater attention could be focused on managed carpooling agencies. An example of how
those people who do carpool to positively reinforce matching schemes work can be found at Monash
their behavior. Research also could focus on why it University in Australia:
works well for those who do carpool. At the my.monash website you create a carpool list-
There needs to be greater clarity in the role of ing as either a lift offered, ride needed, or both. You
government, companies, and organizations in can choose a nickname and an approximate pick-up
location in your neighborhood, such as a bus stop,
their duties and responsibilities toward fostering street corner, or local landmark in order to protect
changes in society’s approach to transportation. your identity. Carpool matching with the My.Monash
Certainly, organizations have many incentives portal is a closed service within the Monash
C 316 Carpooling

community and your personal data is not revealed to vehicle availability, lower cost of fuel, aging
anyone until you choose to. You then finish your population, higher education levels, less children,
listing with commuting times and some optional
comments such as your musical preferences, possible changes in workforce composition with increasing
detours, or further contact details. If you fit some- numbers of female participants, increased emphasis
one’s search criteria, your marker will appear on the on road building, poor governance and
map along with your commuting times once they management of public transport, and, interestingly,
click on it, and people can contact you through the
portal’s email system without disclosing your email increasing suburbanization. On the other hand,
address to work things out. social capital studies have found an increasing
propensity to carpool between neighbors who are
Public policy needs to consider incorporating of a same race and, as the European Union studies
informal arrangements such as carpooling as part indicate, an inclination to accept carpooling where
of an integrated attempt at alleviating issues with support exists within the community in the form of
growth in transport, economic growth, environ- free or cheaper car parking and other preferential
mental concerns and life satisfaction. Encourage- treatment. In fact, the ICARO study suggested the
ment of carpooling can be achieved, as it is in some adoption of a universal logo signifying carpooling
cities, by allowing carpool vehicles preferential in the form of a car with two occupants and
access to freeways and car parks and in establishing the symbol 2+.
exclusive lanes for carpool vehicles, while New ways of adapting this simple but effec-
using restrictive measures such as imposing tive private arrangement between individuals to
fines on one occupant vehicles traveling in minimize any disadvantages may lead to greater
such lanes. See examples with the FasTrak exper- adoption of carpooling, reducing the need for
iment in San Diego California and Salzburg building more freeways for large suburban tran-
testet Fahrgemeinschaften demonstration project. sit systems. With changes occurring in individ-
Private organizations can also play a vital role in uals’ value systems and growing concern for the
encouraging the use of carpooling. For example, environment and community, the likelihood for
people are more likely to carpool when they can be carpooling to increase in usage is considerable.
assured of getting a ride on the return journey. Organizations whose primary concern is with
However, with employees on shifts, or who may the environment are adopting strategies to assist
become sick at work, this cannot always be with this change in values. HelpSaveEarth.org
guaranteed. To overcome this inhibiting factor, and the global Transport Knowledge Partner-
Boots, a major chemist in the UK, encouraged ship are both examples of global organizations
use of carpooling by offering a guaranteed ride that assist in promoting carpooling for work-
home as an inducement to staff at its headquarters places. While more education and information
in Nottingham. It was found that while this encour- at a local level is needed to foster the usage of
aged carpooling from a staff of 7,500 people, it carpooling, organizations that raise environ-
required little extra expense as the backup of mental awareness are assisting in this process.
a guaranteed ride home was only used on a very Clearer understanding of the roles and responsi-
small number of occasions. bility of government and organizations, and
smoother integration between the institutional,
legal and cultural frameworks, driven by well-
Future Directions researched and clear public policy guidelines,
will assist in achieving clarity. However, it
For over a 20-year period, there has been should always be integrated with the overarch-
a significant decline in the use of carpooling ing directions of future transit policy.
in both the USA (1970–1990) and Australia Carpooling should never be encouraged where
(1976–2006). Research has linked this to various it would draw existing public transport users
causes, largely economic factors, but also away from public transit and so risk making
socio-economic reasons such as the increase of public transport less viable and supported.
Carroll, A.B. 317 C
Carroll, A.B.
▶ Carbon Emissions
▶ Carbon Footprint Samuel O. Idowu
▶ Design for Environment London Metropolitan Business School, London
▶ Eco-efficiency Metropolitan University, London, UK
▶ Ecological Footprint C
▶ Government (Role in Regulation, etc.)
▶ Green Workplace Basic Biographical Information
▶ Greenhouse Gases
Archie B. Carroll is professor emeritus of
management in the Terry College of Business,
University of Georgia, Athens, Georgia, United
References and Readings
States of America. He served also as part-time
Charles, K. K., & Kline, P. (2006). Relational costs and director of the Nonprofit Management & Com-
the production of social capital: Evidence from munity Service Program for over 10 years,
carpooling. The Economic Journal, 116, 581–604. a position he currently holds.
Oxford: Blackwell Publishing.
Professor Carroll spent the bulk of his academic
Evans, J. J., IV, & Pratt, R. H. (2005). Traveler responses
to transportation system changes. Ch 5: Vanpools and career as a tenured faculty member in the Terry
buspools (TRCP Report 95). Washington, DC: Trans- College of Business, University of Georgia. He
port Research Board. was on the full-time faculty from 1972 to 2005
Ferguson, E. (1997). The rise and fall of the American
and continued part-time for 6 years more. During
carpool: 1970–1990. Transportation, 24, 349–376.
(2011) Global Transport Knowledge Partnership. http:// this time, he rose among the ranks from assistant
www.gtkp.com/. Accessed 2 Oct 2010. professor to full professor and was awarded the
(2012) HelpSaveEarth.org. http://www.helpsaveearth.org/ Robert W. Scherer Chair of Management and Cor-
custom_commuting_report.asp. Accessed 16 Oct 2010.
porate Public Affairs beginning in 1986 and con-
Mees, P., Sorupia, E., Stone, J. (December 2007). Travel
to work in Australian capital cities, 1976–2006: An tinuing until his retirement. During this time, he
analysis of census data. http://www.abp.unimelb.edu. wrote books, research articles, directed doctoral
au/aboutus/pdf/census-travel-to-work-1976-2006.pdf. dissertations, served on graduate committees;
Accessed 16 Oct 2010.
spoke publically to business, government, and
Millard-Ball, A. (2005). Car-sharing: Where and how
it succeeds (TCRP Report 108). Washington, DC: nonprofit groups; and consulted with numerous
Transport Research Board. organizations throughout the United States and
Monash University Carpool Service. http://fsd.monash. elsewhere. He also served as associate dean of
the college (1979–1982) and department head of
service. Accessed 3 Oct 2010.
OECD Publication (2002). Road Travel Demand: Meeting the Management Department (1995–2000). For
the Challenge; see also World Road Statistics 2010, a decade beginning in 2001, he served on the
Data 2003–2008, International Road Federation. University of Georgia GLOBIS Study Abroad
Sammer, G. (1999). Conclusions on ICARO-lessons from
Program Faculty teaching business ethics to
the ICARO-project. International conference increasing
car occupancy through innovative measures and students in Verona, Italy.
technical instruments, Leeds (UK), 22 Mar 1999; He was born in Jacksonville, Florida, and
See report summary. ftp://ftp.cordis.europa.eu/ spent 8 years (1956–1963) living in the Panama
Canal Zone where his father was employed,
Accessed 16 Oct 2010.
Transport Research Knowledge Centre funded by the Euro- before returning to the states. Dr. Carroll received
pean Commission’s Directorate General for Mobility and his three academic degrees from The Florida
Transport under the Sixth Framework Programme for State University (Tallahassee, Florida): BS, Per-
Research and Technological Development. http://www.
sonnel Management, 1965; MBA, Organization
transport-research.info/web/. Accessed 10 Oct 2010.
Vuchic, V. R. (2007). Urban transit systems and technology Management, 1966; Ph.D. in Business Adminis-
(pp. 503–506). Hoboken: Wiley. tration/Management and Organizations, 1972.
C 318 Carroll, A.B.

Major Contributions managers (Aupperle et al. 1985). Since that

time, the instrument has been used extensively
Professor Carroll was in on the ground floor of the in the literature as one of the most frequent and
business and society, and social issues in man- popular measures of CSR in research studies.
agement field when he joined the Social Issues in In 1981, Carroll published his first textbook in
Management (SIM) Division of the Academy of the field – Business and Society: Managing Cor-
Management in 1972. There were very few aca- porate Social Performance (Boston: Little,
demics and researchers in the field at this time, Brown and Company, 1981). This was one of
and he quickly rose to chair of the SIM Division the earliest books to focus on the managerial/
in 1976–1977. Approaching the field from the organizational dimension of business and soci-
perspective of management and organizations, ety/CSR and had specific chapters dedicated to
he initially was interested in the managerial corporate social policy and management, plan-
implications of corporate social responsibility. ning and organizing for social response, social
In 1977, he published/edited his first book in the performance measurement and reporting, and
field, Managing Corporate Social Responsibility communicating the business social role. This
(Boston: Little, Brown and Company, 1977) book was named one of the top 20 best and
which was a collection of recent readings on most original contributions in the strategy and
management-related aspects of corporate social planning category in The Good Book Guide for
responsibility (CSR). Business (1984) from the publishers of The Good
One of his earliest and most important theo- Book Guide and The Economist.
retical articles was “A Three-Dimensional This book created the framework that was
Conceptual Model of Corporate Social Perfor- later used in his highly successful book, Business
mance,” published in the Academy of Manage- and Society: Ethics and Stakeholder Manage-
ment Review (Carroll 1979). This article sets ment (Cincinnati: South-Western Publishing
forth a conceptual model which sought to bring Company, 1989), which is in its 8th edition
together a definition of CSR, a categorical today. Carroll wrote the first three editions him-
scheme for corporate social responsiveness, and self and added his colleague Dr. Ann K.
a delineation of the arenas in which CSR might be Buchholtz, now professor at the Rutgers business
applied. His definitional construct of corporate school, as coauthor in the 4th and subsequent
social responsibility was a four-part definition editions. The most recent edition is titled Busi-
which sought to embrace the economic, legal, ness and Society: Ethics, Sustainability, and
ethical, and discretionary (later referred to as Stakeholder Management, 8th Edition, 2012,
philanthropic) expectations on business at any published by South-Western Cengage Learning
given point in time. He later extracted this defi- (Carroll and Buchholtz 2012). The book has been
nition and built upon it and presented it as the popular for over 20 years now and has been used
Pyramid of Corporate Social Responsibility in extensively in the USA and in other countries as
a 1991 article. This article also sought to tie in well. A Canadian version was published in 2005
the stakeholder dimension of the model as well and a Chinese version was published in 2006.
(Carroll 1991). Over the decades, Carroll’s articles, which
Carroll’s four-part CSR definition was number in excess of 100, have been published in
operationalized into a research instrument by most of the major journals that publish work in
Kenneth Aupperle, one of his doctoral students, the business and society and business ethics field.
and was used as the basis of a major data gather- Beginning in the 1980s, he branched into more
ing study in which the results substantiated and work on business ethics and became active in the
validated the definition as a useful construct and Society for Business Ethics, a specialized acad-
method for gathering measures of corporate emy of international scholars who approached the
social responsibility orientation, one of the early field from a variety of disciplines. He was elected
accepted methods of measuring CSR among president of the Society for Business Ethics
Carroll, A.B. 319 C
during the 1998–1999 year and helped to bring James Post (Boston University), and Patricia
together the SIM Division of the Academy of Werhane (DePaul University). The formal title
Management and the Society for Business Ethics. of the book is still tentative as of writing, and
He also served as a founding board member of the the book is expected to be published in 2012. The
International Association for Business and Soci- book seeks to explore the history of corporate
ety (IABS) in 1988–1989. social responsibility in the USA since the mid-
He has written many entries for business and 1800s and chronicles its development up to the C
society and business ethics encyclopedias, dictio- present time. Another volume will explore the
naries, and specialized books over the past development of the topic in the rest of the world.
35 years or more. In 1999, he published an impor-
tant and highly cited article in which he provided Honors and Awards
the history of the corporate social responsibility In 1992, Dr. Carroll was awarded the Sumner
definitional construct as it had evolved over the Marcus Award for Distinguished Service by the
previous half century (Carroll 1999). Social Issues in Management Division of the
Over the decades, he has served on the Edito- Academy of Management. This is the highest
rial Review Boards of the Academy of Manage- award given by the Division. In 1993, he was
ment Review, Journal of Management, Business awarded the Terry College of Business, Univer-
and Society, Business Ethics Quarterly, Journal sity of Georgia, Distinguished Research Award
of Public Affairs, Sage Series in Business Ethics, for his then 20 years of research in corporate
University of Georgia Press, and Annual Edi- social performance, business ethics, and stake-
tions: Business Ethics. He served as one of the holder management. In 1996, he was inducted
associate editors for Encyclopedia of Business as a fellow of the Southern Management Associ-
Ethics and Society, Sage Publishing Company, ation. In 2003, he received the Terry College of
2007. Business Distinguished Faculty Service Award.
In 1999, Carroll began writing a monthly col- He was elected a fellow of the Academy of Man-
umn for the Athens Banner-Herald newspaper agement in 2005. (Less than one percent of Acad-
and continues this public service today. In this emy members have been elected to the fellows
capacity, he sought to take popular topics of group). In 2008, he received the Florida State
interest in business ethics corporate social University College of Business Distinguished
responsibility and present them in the business Ph.D. Alumni Award for his outstanding accom-
section of the newspaper as a public service to plishments over the course of his career.
business lay readers. Since these articles have Over the years, he has been recognized by
been posted on the World Wide Web, they have various Who’s Who publications to include
received far-reaching attention by practitioners Who’s Who in Business of Higher Education,
and academics. In 2009, he published over 100 America, American Teachers, Finance and
of these columns in the book Business Ethics: Industry, and Emerging Leaders in America,
Brief Readings on Vital Topics (Carroll et al. and the South and Southwest. In addition, he
2009). has been recognized during various years by the
In 2008, Dr. Carroll was selected to be one of Dictionary for International Biography, Contem-
four authors to write a History of Corporate porary Authors, Men of Achievement, Personal-
Responsibility book by decision makers within ities of America, International Directory of
the Center for Ethical Business Cultures, Univer- Distinguished Leadership, and Outstanding
sity of St. Thomas, in Minneapolis, Minnesota. Young Men of America.
The editors for the project are Dr. Kenneth E. In terms of professional and honorary socie-
Goodpaster and David H. Rodbourne. The other ties, he has been selected for and inducted into
three authors of the book, to be published by International Honor Society of Beta Gamma
Cambridge University Press, include Kenneth Sigma, Sigma Iota Epsilon National Manage-
Lipartito (Florida International University), ment Honor Society, Phi Beta Delta Honor
C 320 Carroll’s CSR Domains

Society for International Scholars, Golden Key

International National Honor Society, and Honor Carroll’s CSR Domains
Society of Phi Kappa Phi.
His professional web page may be found at ▶ Pyramid of CSR
His newspaper columns on business ethics and
social responsibility have been archived at http://
He may be contacted by e-mail at Carroll’s CSR Pyramid
▶ Pyramid of CSR


▶ Business and Society

▶ Business Ethics
▶ Corporate Social Performance
▶ Gambling
▶ Corporate Social Responsibility (CSR)
▶ Pyramid of CSR
▶ Social Issues Management

References and Readings Catholic Personalism

Aupperle, K. E., Carroll, A. B., & Hatfield, J. D. (1985). ▶ CSR and Catholic Social Thought
An empirical examination of the relationship between
corporate social responsibility and profitability. Acad-
emy of Management Journal, 28(2), 446–463.
Carroll, A. B. (1979). A three-dimensional conceptual
model of corporate social performance. Academy of
Management Review, 4(4), 497–505.
Carroll, A. B. (1981). Business and society: Managing Catholic Social Teaching
corporate social performance. Boston: Little, Brown
and Company. ▶ CSR and Catholic Social Thought
Carroll, A. B. (1989). Business and society: Ethics and
stakeholder management. Cincinnati: South-Western.
Carroll, A. B. (1991). The pyramid of corporate social
responsibility: Toward the moral management of
organizational stakeholders. Business Horizons,
34(4), 39–48.
Carroll, A. B. (1999). Corporate social responsibility: Catholic Theology
Evolution of a definitional construct. Business and
Society, 38(3), 268–295.
Carroll, A. B. (Ed.). (1977). Managing corporate social ▶ CSR and Catholic Social Thought
responsibility. Boston: Little, Brown and Company.
Carroll, A. B., & Buchholtz, A. K. (2009). Business and
society: Ethics and stakeholder management (7th ed.).
Mason: South-Western Cengage.
Carroll, A. B., & Buchholtz, A. K. (2012). Business and
society: Ethics, sustainability and stakeholder man-
agement (8th ed.). Mason: South-Western Cengage.
Cause Marketing
Carroll, A. B., & Ethics, B. (2009). Brief readings on vital
topics. New York/London: Routledge. ▶ Cause-Related Marketing
Cause-Related Marketing 321 C
of a corporation’s image or brand equity based on
Cause-Related Marketing increased brand awareness, brand likability,
favorable brand associations, or bonding of cus-
Rian Beise-Zee tomers to a corporation or a brand. The essence of
College of International Management, cause-related marketing, therefore, is not the
Ritsumeikan Asia Pacific University, Beppu, achievement of the cause itself, but the achieve-
Japan ment of marketing goals. Cause-related market- C
ing is different to “cause marketing.” The term
“cause marketing” denotes the promotion activi-
Synonyms ties by nonprofit organizations whose main
objective is the cause, though it is possible that
Affinity marketing; Cause marketing; Cause- a for-profit organization promotes a cause with-
related marketing campaign; Corporate social out commercial objectives. Accordingly, the
responsibility campaign; Mission marketing; essence of cause marketing is how to persuade
Societal marketing a target audience to either change their behavior
or to support the cause themselves and not nec-
essarily to exploit a customer’s affinity to a cause
Definition for commercial interests of a company.
In a cause-related marketing campaign, there
Cause-related marketing is a promotional activity are various ways in which a company can support
of an organization in which a societal or charita- a cause. Initially, cause-related marketing has
ble cause is endorsed, commonly together with its been understood as an offer of a firm to contribute
products and services as a bundle or tie-in. Cause- a specified amount to a designated cause when
related marketing is a vehicle of communication customers purchase a product or service from the
of CSR which demonstrates to a large audience company (Varadarajan and Menon 1988). More
how the social responsibility of an organization broadly defined, however, cause-related market-
translates into specific benefits for society. ing includes other forms of support, monetary
Cause-related marketing is often organized in and in-kind, such as commissioning advertise-
the form of a promotional campaign and in coop- ment campaigns to raise awareness for a cause,
eration with a charity or nonprofit organization providing a service to a nonprofit organization or
that pursues a specific societal cause. The busi- organizing a fund-raiser event. Promotional
ness community regularly defines cause-related activities of a cause-related marketing campaign
marketing specifically as a cooperation between are, for instance, advertisements in various media
a commercial organization and a charity for channels, in-store displays, or inserting a logo on
mutual benefit. the product package that graphically demonstrate
Cause-related marketing is a part of corporate present or future donations, or other forms of
social responsibility but the two terms are fre- support of a company to a specific cause.
quently and incorrectly used synonymously.
Cause-related marketing encompasses all promo-
tional activities in which a corporation commu- Introduction
nicates to a target audience that it supports
a specific communal, societal, charitable, or spe- Initially cause-related marketing was closely
cial-interest cause that is not the company’s main related to corporate philanthropy, that is, dona-
commercial objective. Cause-related marketing tions of commercial corporations to charities.
has marketing objectives aimed at core commer- Varadarajan and Menon (1988), who wrote the
cial interests of the company. These goals may be first scholarly article on the concept of cause-
short-term, for example, an immediate rise in related marketing, view it as the “alignment” of
sales, or more long term such as the enhancement corporate philanthropy and business interests.
C 322 Cause-Related Marketing

Cause-related marketing is deemed to incorpo- an attempt to align societal and commercial inter-
rate philanthropy into the marketing strategy of ests. Companies who engage in, or intend to
company therefore serving societal as well as practice, corporate social responsibility normally
corporate interests. Compared to philanthropy, seek to leverage their effort and investments in
cause-related marketing particularly and visibly CSR by appealing to a broad audience. Yet, cor-
associates the firm’s contribution with its corpo- porate social responsibility is a complex con-
rate brand, product brands, or particular products struct, which in practice often remains elusive to
and services. At the same time, cause-related many consumers and managers alike. As Brønn
marketing shifts emphasis to communicating the and Vrioni (2001) put it, “the normative universe
company’s support for a cause and engaging cur- is large, diverse, often vague, uncertain of rele-
rent and potential customers actively and emo- vance or application, difficult to customize.”
tionally in a company’s benefaction in order to Managers and practitioners have found it benefi-
foster a bond between brand and customer. cial to pin down the concept of corporate social
Through a cause-related marketing activity, com- responsibility by reifying a company’s social
panies often attempt to engage customers, for responsibility as a material contribution to
instance, by making the firm’s support condi- a specific cause. Cause-related marketing is char-
tional upon purchases of the firm’s products and acterized by cause specificity, hence reducing the
services. abstract realm of corporate citizenship to one
Cause-related marketing is commonly dedicated societal cause. This greatly simplifies
conducted as promotional campaign. A promo- and materializes the societal responsibility of
tional campaign is a series of mass or personal a company. It also localizes corporate social
communication messages that share a single idea responsibility in the common organizational
and theme and that appear in different media structure of a commercial enterprise by assigning
within a specific time frame. Although many the tasks of planning and implementing a CSR
marketing campaigns throughout the twentieth campaign to the marketing department.
century fall under the definition of cause-related The effectiveness of cause-related marketing
marketing, the expression “cause-related market- as a communication tool for corporate social
ing” is commonly attributed to the US financial responsibility results from the following: (a)
services provider and credit card issuer American cause specificity, (b) targeting, and (c) customer
Express, whose marketing department coined this involvement. The essential goal of cause-related
term in 1983 to denote a campaign which donated marketing is to associate a company with a cause
funds to a number of different nonprofit organi- in the minds of a targeted audience. The associa-
zations and causes, most notably the Statue of tion of a company with a cause has two funda-
Liberty renovation (Adkins 1999). Though mental benefits. Firstly, it is an instantiation of
American Express had established a philan- societal responsibility without the obligation to
thropic foundation much earlier in 1954 as change operational processes and, secondly, it
a vehicle for grant making, the new initiative creates company-customer fit. As mentioned
aimed at connecting its customers directly to above, the abstract nature of corporate social
a charity. The amount of the donation was deter- responsibility makes it difficult for consumers to
mined by the number of new applications to the discern. The use of cause specificity within the
payment card and the number of transactions CSR of a company illustrates a company’s efforts
within a certain period of time. Many companies and is, therefore, easier for a broad audience to
have introduced similar campaigns since. comprehend compared to the abstract identity of
Conceptually, the designation of cause-related a company of being a “good” and responsible
marketing has been broadened beyond just dona- corporate citizen. Cause-related marketing
tions to a charity to encompass other marketing answers the question about how a company is
schemes that follow the same theoretical ratio- doing or being “good.” Cause-related marketing
nale. The concept of cause-related marketing is campaigns illustrate and reify the social
Cause-Related Marketing 323 C
responsibility of a corporation enabling it to corporate brand. Caring for a cause creates rele-
appear responsible while keeping all organiza- vance and identification at least for those con-
tional processes unaffected. Since cause-related sumers who care for the same cause. How much
marketing campaigns can be – and mostly are – a consumer cares for a specific cause is denoted
completely separated and independent from the as cause affinity. Cause-related marketing acts as
day-to-day business of a firm, this “CSR effort” mediator from consumer cause affinity to com-
can be contained in the marketing department and pany affinity which is expected to increase pur- C
run with a clear cost-benefit plan and even with chase intention and loyalty. The higher the cause
a small marketing budget. There is no need to affinity of a consumer the more relevant and
restructure (▶ Socially Responsible Enterprise therefore successful the cause-related campaign
Restructuring) or change any internal processes. is expected to be. Cause-related marketing is
Cause-related marketing campaigns are often often indeed being used to target specific demo-
even designed to fit seamlessly into existing inter- graphic or lifestyle segments of the market.
nal processes. For instance, the “Change for Mekonnen et al. (2008) introduce the term
Good” campaign initiated originally by British “affinity marketing” to emphasize the aim to
Airlines in cooperation with UNICEF builds on appeal to a specific group of customers and to
the existing service of flight attendants. During become an identifier of that group. A cause helps
in-flight announcements, passengers are asked to brand marketing to stress the fit between a certain
hand over any leftover loose change of foreign customer group and the brand. Affinity marketing
currency for which they have little use (Pringle has long-term and discrete group orientation,
and Thompson 1999). The change is then handed rather than short-term and mass-market
over to UNICEF. The cost for the airline is mar- orientation.
ginal. In this case, and also in the case of the It has been suggested that another objective of
American Express type of cause-related market- cause-related marketing is to thwart negative
ing described above, a firm’s donations is really publicity in case of a product-harm incident or
a donation of the customer or a direct result of to compensate for negative public attitudes
a purchase of a product or service. The company toward an industry, that are costly to avoid, such
acts merely as the facilitator for the cause. The as the damage to the environment by oil explora-
customer feels that he himself donated to the tion or the animal testing of pharmaceutical firms.
cause. Customer identification with a company leads not
The second essential benefits of a cause- only to more favorable consumer evaluations but
related campaign is fit or congruence between negative events are also expected to be treated
a company and its customers. Company- with more lenience.
customer congruence describes how much Another secondary benefit of cause-related
a company is perceived as sharing similar char- marketing is employee motivation or internal
acteristics with a customer. Bhattacharya and Sen marketing. Employees can be conceptualized as
(2003) view deep meaningful relationships to internal customers. The endorsement and organi-
consumers as the essential aim of a company to zational support of a cause by the company can
create brand loyalty. In this view, a company or increase social identification of employees with
brand can overcome buyer disenchantment and their company’s brand foster the bond between
its own detachment from its consumers by employees and corporate brand. Cause-related
appearing relevant and part of a community marketing campaigns are often more invigorating
with similar interests. Consumer identification to the organization because employees have more
with companies also helps the consumer satisfy opportunities to actively participate in the cam-
one or more key self-definitional needs. paign, for instance, as fund-raiser or by actively
Supporting the same cause creates opportunities soliciting customers for the cause during a service
for a consumer to identify with a corporation and encounter. Sometimes cause-related marketing
as a result grow affection and loyalty to the campaigns are even explicitly communicated as
C 324 Cause-Related Marketing

having been initiated or are organized by the cause affinity is a measure of the size of the
company’s employees instead of the marketing market segment that is most effectively reached.
department. Normally, companies select causes that are gen-
erally liked. However, causes can be also be
controversial and disliked by a part of the popu-
Key Issues lation such a religious causes or societal causes
that infringe upon religious doctrine (e.g., abor-
As a promotional tool, the effectiveness of cause- tion, coeducation, women’s rights). Negative
related marketing is judged by the degree of cause affinity can hurt a brand’s image and it
achievement of the marketing objectives of the has to be assessed by a company whether the
campaign. Cause-related marketing is normally positive effects in the market segment with pos-
targeted at consumers although business-to- itive cause affinity can make up for the negative
business cause-related marketing exists, for brand impression consumer with negative cause
example, campaigns initiated by business consul- affinity might acquire.
tancies or advertisement agencies to raise funds Believability is considered an important
among corporate clients. The response of con- moderator for the success of cause-related mar-
sumers to cause-related marketing campaigns is keting campaigns. Consumers could recognize
the main research objective in the area of cause- cause-related marketing as a sales tactic and attri-
related marketing. bute it to ulterior motives of a company.
The effectiveness of cause-related marketing A company can appear to merely exploiting
rests on its relevance, believability, and the a cause, a form of “greenwashing,” instead of
impact on consumer purchasing decisions. Rele- fulfilling their social responsibility, which can
vance is related to the degree of consumer cause lead to consumer resentment and adverse conse-
affinity and the prevalence of cause affinity in the quence for the brand’s image. For instance, dona-
population. A consumer’s cause affinity is the tion campaigns for disaster victims are typically
concept of how strongly a consumer associates criticized in public as misappropriation of
with a cause either by actively supporting the a tragedy for a branding opportunity. Conse-
cause or just by liking it. Low cause affinity quently, the strength and direction of consumer
leads to indifference of a consumer toward the reaction to a cause-related marketing campaign
cause and lowers the attention for a cause-related depends on the pervasiveness of consumer skep-
marketing campaign. However, for consumers ticism, the quantity of support (e.g., the amount
with low cause affinity, support for the cause donated) and the fit between the company and the
can still be a signifier for a company’s corporate cause (Barone et al. 2007). Cause-related market-
social responsibility. Consumers with high cause ing suffers from consumer skepticism toward
affinity are expected to react much stronger to advertisement claims in general and the per-
cause-related marketing campaigns and therefore ceived upsurge of cause-related marketing cam-
are normally the targeted market segment in paigns after product-harm crises (Webb and
a cause-related marketing campaign. Since con- Mohr 1998; Brønn and Vrioni 2001). The believ-
sumers with high cause affinity are genuinely ability of a company’s social responsibility is
interested in the cause itself, a cause-related mar- suggested to increase with the perceived related-
keting campaign offers them another opportunity ness of a company’s business to the cause that it
to help the cause. By purchasing and supports (or the “fit” between company and
recommending the brand, consumers can feel cause). This fit is commonly defined as the “per-
that they have done something for the cause. It ceived link between the company’s image, posi-
has also been found that consumers with high tioning, target market, and the cause’s image or
cause affinity are more forgiving in case of neg- constituency” (Varadarajan and Menon 1988).
ative media events such as a product-harm crisis A high cause fit evokes the image that the com-
(Sheik and Beise-Zee 2011). The prevalence of pany supports a cause not only for promotional
Cause-Related Marketing 325 C
reasons but because it is serious about the social beginning with successful restoration of the
issue. For instance, since most body care products Statue of Liberty in New York City, it is unknown
are tested on animals for their allergic effects, what cause-related marketing campaigns have
campaigning against animal testing is credible really contributed to more general societal
for a retailer such as Body Shop. A low fit, in causes. Statistics on the monetary contributions
contrast, implies that there are no reasons related of cause-related marketing to nonprofit organiza-
to the product or company context that can tions are rare and their reliability unknown. C
explain why a company supports the cause indi- According to the consultancy IEG, a subsidiary
cating ulterior motives of the company. A low fit of WPP, one of the largest advertisement agen-
between cause and company is expected to cause cies, US companies spent around US$1.5 billion
suspicion in the market, though customers with on cause campaigns in 2008, up from US$828
a high cause affinity may be less concerned about million in 2001. This compares to US$11.5 bil-
the cause fit. lion US companies spend in the same year on
Business organizations emphasize that cause- sports sponsorship, and an estimated total adver-
related marketing is of mutual benefit for the tisement spending of between US$130 and US
company as well as for the cause. Both claims $150 billion, which means that US companies
are not universally supported by evidence. spend around an equivalent of 1 % of their adver-
A growing body of studies aims at measuring tisement budgets on cause-related campaigns.
the commercial benefits of cause-related market- Charities that tap into the source of cause-
ing for a company. Case studies have found that related partnerships with corporations realize
sales, awareness levels, and loyalty have indeed that most corporations view the success of
gone up during cause-related marketing cam- a campaign in terms of increased sales or other
paigns. Yet, cases exist of successful and less commercial objectives. As a result, they are
successful cause-related marketing campaigns. pressured to deliver as much business back to
Statistical evidence is more difficult to produce. the companies in order to maintain the relation-
Surveys usually indicate that a large fraction of ship. This relationship between profit and non-
consumers (typically around 90 %) state that they profit is likely to affect the way charities work as
would prefer a brand that is associated with well, because it means that nonprofit organiza-
a cause. However, surveys are inherently tions are not only pressured to presenting them-
unreliable due to the so-called social desirability selves in order to raise funds from a population
bias which renders it difficult to measure the true for a cause but they are then also obliged to
willingness to purchase products or services that present the cause in such a way as to generate
are promoted through cause-related marketing sales or enhance brand equity of a commercial
campaigns. Most respondents hold a positive atti- corporation. From this, the question arises
tude toward or claim to support a cause if it is whether cause-related marketing really is intrin-
a socially desirable cause. In reality, however, sically part of corporate social responsibility or
many consumers fail to act upon their stated under which conditions cause-related marketing
preferences. In order to statistically validate the can be considered a genuine CSR practice. On the
effect of cause-related marketing campaigns, it other hand, one could argue that cause-related
has to be shown that in a representative sample, marketing is an excellent example of how both
the sales profits or brand equity (depending on the commercial and societal interests can be pursued
marketing objective of the campaign) are higher at the same time. One of the fundamental criti-
during the campaign than before (after deducting cisms against corporate social responsibility is
the cost of the campaign). that for-profit corporations need to concentrate
On the other hand, many charities have tre- on profitability and any deviation from this objec-
mendously benefited financially from donations tive weakens their competitiveness. Cause-
through cause-related marketing campaigns. Yet, related marketing is a model that “aligns” private
despite successful cases of accomplishment, rents and welfare at least for a dedicated cause.
C 326 Cause-Related Marketing Campaign

Another criticism of cause-related marketing Cross-References

is that a campaign, in which a company makes
a donation conditional to an increase in sales, ▶ Advertisment
insinuates that the seller makes less profits and ▶ Greenwashing
shares the margin with a charity. However, this ▶ Marketing Communications and CSR
need not be the case since cause-related market- ▶ Philanthropy
ing is predominantly used for premium products ▶ Sponsorship
with large margins and targeted at affluent cus-
tomers. A cause can render a product as a pre-
mium and therefore a company might be able to
increase the margin. For instance, it has been References and Readings
noted that coffee under the “fair trade” label is
more profitable for the retailer than normal coffee Adkins, S. (1999). Cause related marketing: Who cares
wins. Oxford, UK: Butterworth-Heinemann.
brands because demand from ethical consumers Arnot, C., Boxall, P. C., & Cash, S. B. (2006). Do ethical
is less price elastic (e.g., Arnot et al. 2006). consumers care about price? A revealed preference
analysis of fair trade coffee purchases. Canadian
Journal of Agricultural Economics, 54(4), 555–565.
Barone, M. J., Norman, A. T., & Miyazaki, A. D. (2007).
Future Directions Consumer response to retailer use of cause-related
marketing: Is more fit better? Journal of Retailing,
Cause-related marketing is, most of all, a marketing- 83(4), 437–445.
driven and practitioner-based concept. During the Bhattacharya, C. B., & Sen, S. (2003). Consumer-
company identification: A framework for understand-
past 30 years, cause-related marketing has become ing consumers’ relationships with companies. Journal
a mature and widely used marketing tool. It is clear of Marketing, 67(2), 76–88.
today that in spite of the campaign-oriented imple- Brønn, P. S., & Vrioni, A. B. (2001). Corporate social
mentation of cause-related marketing, it is not responsibility and cause-related marketing: an
overview. International Journal of Advertisement,
a temporary buzz word or a fad but a sustainable 20(2), 207–222.
model that links societal causes with for-profit orga- Mekonnen, A., Harris, F., & Laing, A. (2008). Linking
nizations. Cause-related marketing will further products to a cause or affinity group: Does this really
evolve as the issue of corporate social responsibility make them more attractive to consumers? European
Journal of Marketing, 42(1/2), 135–153.
gains momentum. Innovations in partnerships Pringle, H., & Thompson, M. (1999). Brand spirit: How
between companies and nonprofit organizations cause related marketing builds brands. Chichester:
are driving this evolution. Adjustments in the way Wiley.
cause-related marketing is conducted will be neces- Sheik, S. -u-R., & Beise-Zee, R. (2011). Corporate social
responsibility or cause-related marketing? The role of
sary because, nowadays, consumers are frequently cause specificity of CSR. Journal of Consumer
confronted with cause marketing in the media, the Marketing, 28(1), 27–39.
supermarket aisle, hotels, and various other service Varadarajan, P. R., & Menon, A. (1988). Cause-related
encounters. A general question remains about how marketing: A coalignment of marketing strategy and
corporate strategy and corporate philanthropy. Journal
customers perceive and react to cause-related mar- of Marketing, 52(3), 58–74.
keting, but it must also be asked whether and how an Webb, D. J., & Mohr, L. A. (1998). A typology of
inflation of cause marketing campaigns is altering consumer responses to cause-related marketing:
consumer reaction. Consumers could become more From skeptics to socially concerned. Journal of Public
Policy & Marketing, 17(2), 226–238.
skeptical or even cynical and perhaps less and less
affected by cause campaigns. On the other hand, the
more that products and brands are associated with
causes, the higher the consumer expectation might
be for this to become the standard so that they may Cause-Related Marketing Campaign
react negatively if a company fails to present a cause
worth supporting. ▶ Cause-Related Marketing
Caux Round Table Principles 327 C
Each of the seven core principles is supported
Caux Round Table Principles by further documentation as to their meaning and
application. In addition, a set of Stakeholder
Archie B. Carroll Management Guidelines supplement the princi-
Department of Management, Terry College of ples with more thorough discussion of their
Business, University of Georgia, Athens, implementation.

The CRT Principles were the joint product of
Global codes of conduct; Global ethics guide- collaboration between the Caux Round
lines; International ethics principles, standards, Table and the Minnesota Center for Corporate
and guidelines Responsibility (MCCR). To appreciate how the
principles came into existence, it is necessary to
briefly understand each of these two organiza-
Definition tions and the paths they took that brought them
The Caux Round Table (CRT) Principles for In the 1980s, the Caux Round Table (CRT)
Business articulate a worldwide vision for ethical was founded by senior Japanese and European
and responsible corporate behavior. As a set of executives who were concerned about trade fric-
seven core principles, they serve as a foundation tions that were occurring in the automotive and
for ethical action for business leaders across the electronics industries. In an effort to mediate the
globe. The CRT Principles are a statement of disputes that arose, the founding members agreed
aspirations that seek to communicate a world to meet at a hotel in Caux, Switzerland. The site
standard against which business social and ethi- was chosen to be a neutral site where the execu-
cal behavior can be gauged. tives of the competing companies could get to
The CRT Principles for Business were created know one another so that they could better appre-
through a sophisticated, collaborative process in ciate one another’s views on the issues at hand.
1994. The Principles were developed by business The initial group was approximately 20 execu-
leaders and, therefore, carry considerable credi- tives who agreed to meet each year at the Caux
bility in the business community. They are the location and to have a second meeting annually
end result of a process that sought to identify rotating between the world’s major trading
shared values, reconciling differing values, and regions.
concluding in a shared point of view about busi- By the early 1990s, the group’s objectives had
ness behavior that would be deemed acceptable been achieved. Much of the trade tension had
to and honored by all. dissolved, and the CRT began thinking about
There are seven core CRT Principles which other missions it might pursue. During the years
include the following: of meetings of the CRT, the members would
1. Respect Stakeholders Beyond Shareholders often get together in the evenings and discuss
2. Contribute to Economic, Social, and Environ- the great issues of the day. They often wondered
mental Development what roles CEOs ought to be playing in
3. Build Trust by Going Beyond the Letter of the addressing these world issues.
Law Independent of the activities of CRT, a group
4. Respect Rules and Conventions of responsible business executives in Minneapo-
5. Support Responsible Globalization lis, Minnesota, had founded an organization in
6. Respect the Environment 1977 which they officially called the Minnesota
7. Avoid Illicit Activities Project on Corporate Responsibility (MPCC).
C 328 Caux Round Table Principles

In the 1970s, the group focused on the theme of owners/investors, suppliers, communities, and
corporate citizenship, and by the 1980s, it was competitors. Their principles were copyrighted
thinking in terms of responsibilities to busi- in 1992. But, as Charles Denny later observed,
nesses’ stakeholders – customers, employees, the executives realized that they could have an
shareholders, suppliers, and communities. important impact within the United States, but
The business leaders in the MPCC renamed they needed an organization that was embedded
themselves the Minnesota Center for Corporate in the international business world to carry forth
Responsibility (MCCR). Under the leadership of their message around the globe. Their fortuitous
Bob MacGregor, MCCR brought together connection with the Caux Round Table turned out
a group of business and academic leaders who to be just the linkage they needed.
were deeply interested in the importance of busi- In 1992, Charles Denny, who had been
ness ethics and integrity. The newly named center a member of the Caux Round Table, along with
decided to formulate what would be called the Bob MacGregor, representing the Minnesota
“Minnesota Principles,” a set of ethical guide- Center, arranged to present the Minnesota Prin-
lines, or code of conduct, that they thought ciples at one of the annual Caux meetings in
would be valuable to businesses as they thought Switzerland. Denny reported that the Caux mem-
about their responsibilities to the world in which bership was enthusiastic about their presentation
they operated. In 2000, the Minnesota Center and to their proposal that the Caux Round
took on a new name, the Center for Ethical Table adopt the Minnesota Principles.
Business Cultures (CEBC). The Caux group concluded that a major revi-
Charles M. Denny, Jr., CEO of ADC Telecom- sion of the Minnesota Principles would be neces-
munications was one of the early supporters of sary before it adopted them so that they could
the principles, and MacGregor and Denny integrate the perspectives and philosophies of the
became the prime movers in the development of Asian members to the principles. The Minnesota
a cadre of executives and academics to formulate Principles had been written largely from
the ethical guidelines. They wanted the principles a Eurocentric and Judeo-Christian perspective in
to be both pragmatic and universal in the sense which the focus had been on the rights and dig-
that they could be applicable around the world in nity of individuals. The Asian perspective, how-
spite of cultural differences that might exist ever, emphasized the idea of communitarianism
among the world’s different trading regions. which believed in the subordination of the indi-
The business leaders enlisted the support of vidual to the group or the common good.
Professor Kenneth E. Goodpaster, who had come The chair of the CRT at the time of these
to the University of St. Thomas in Minneapolis in developments was Ryuzaburo Kaku, who was
1989 to fill the Koch Endowed Chair in Business CEO and chair of Canon Corporation, the camera
Ethics, to commit the principles to paper. and office equipment company. Among his many
Dr. Goodpaster had developed the ethics curric- achievements, Kaku was known for adopting the
ulum at the Harvard Business School and had also term “kyosei” to express the concept of “working
taught ethics and philosophy at Notre Dame. and living together for the common good.” In
According to David Koch, who founded the a quest to produce a document that would be
endowed chair which was filled by Goodpaster, satisfactory to all, Charles Denny worked dili-
the professor was their top choice to draft the gently to revise the Minnesota Principles to incor-
principles. porate the philosophy of the common good.
The Minnesota Center decided to name the Chairman Kaku approved of his revisions and
document they produced “The Minnesota Princi- the document was presented to the group and
ples: Toward an Ethical Basis for Global Busi- the Caux Round Table Principles were adopted
ness.” The Minnesota Principles were divided with a unanimous vote of the group.
into five general principles and six stakeholder In the Introduction to the CRT Principles, it
principles, embracing customers, employees, was stated that they were intended to be ethical
Caux Round Table Principles 329 C
norms for acceptable business practices. The trust Principle 3. Respect the Letter and the Spirit
and confidence that is needed to sustain free mar- of the Law. This principle recognizes that some
kets would be reflected in ethical businesses prac- business practices may be legal but not necessar-
tices. It was argued that the singular pursuit of ily fair to all stakeholders. Therefore, it is
profits, with no concern for other stakeholders, recommended that businesses strive to honor the
would eventually lead to business failure and spirit as well as the letter of laws. This means that
sometimes to regulations that were counterpro- business conduct may have to operate at levels C
ductive. Therefore, it was necessary for business beyond the minimums required by law. In this
leaders to display ethical leadership if they pursuit, critical and necessary traits such as truth-
wanted to sustain prosperity. The introduction fulness, transparency, and promise keeping will
also asserted that a moral compass was needed be required.
by the business community and that it could not Principle 4. Respect Rules and Conventions.
just rely on traditional measures of profitability. Responsible businesses strive to emphasize fair-
There are seven core principles in the Caux ness and equality and respect local cultures and
Round Table’s conception of responsible busi- traditions found in the communities in which they
ness conduct. The principles were anchored in operate. They also value relevant national and
three ethical bases. These underpinnings international laws, regulations, and conventions.
included (1) the notion of responsible steward- Principle 5. Support Responsible Globaliza-
ship, (2) living and working together for mutual tion. Open and fair multilateral trade should be
advantage, and (3) respect and protection of supported. In the pursuit of fair global commerce,
human dignity. The CRT Principles are responsible businesses will support the reform of
supported by detailed Stakeholder Management domestic rules and regulations that obstruct this
Guidelines, and these will be discussed after cov- objective.
erage of each of the seven core principles. Principle 6. Respect the Environment. This
Following is a presentation and summary principle addresses the natural environment in
explanation of each of the seven core principles which businesses operate. The idea here is that
as set forth by the Caux Round Table. These businesses will protect and improve the environ-
principles were reviewed and updated in 2009 ment and steer clear of wasteful uses of natural
and 2010. resources.
Principle 1. Respect Stakeholders Beyond Principle 7. Avoid Illicit Activities. To be
Shareholders. Responsible businesses are responsible, businesses do not engage in or
expected to value not just the stockholders but excuse corruption, bribery, money laundering,
other stakeholders as well. Important stake- or other illicit activities. Responsible businesses
holders of business include, but are not limited also avoid transactions that are linked to or
to, its customers, employees, suppliers, competi- supported by terrorist activities, drug trafficking,
tors, and the broader community. Responsible or any other such questionable activity.
businesses are expected to respect the interests In support of these seven core principles, the
of these stakeholders and to deal with them fairly Caux Round Table supplements them with more
and honestly. detailed standards for interacting with key stake-
Principle 2. Contribute to Economic, Social, holder groups. These are referred to as Stake-
and Environmental Development. Economic holder Management Guidelines. The primary
development is needed in societies in which busi- stakeholders are those constituent groups which
nesses aspire to succeed. Therefore, responsible are critical to the success and sustainability of the
businesses will invest in the economic, social, business enterprise. These stakeholders include
and environmental sectors of these societies. the following groups that contribute in the ways
These investments will improve societies through indicated:
sensible use of resources, fair competition, and • Customers purchase goods and services and
technological innovation. provide cash flows for the businesses.
C 330 Caux Round Table Principles

• Employees produce the goods and services. wealth; and to respect the views, complaints,
• Owners and other investors provide the and resolutions filed by shareholders.
capital for the business and any other needed Suppliers. Responsible businesses treat their
funds. suppliers and subcontractors with mutual
• Suppliers provide needed resources. respect, candor, and fairness. They have
• Competitors ensure that markets are efficient. a responsibility to pursue fairness and openness
• Communities provide needed social capital in all relationships; ensure that supplier and sub-
and security for the businesses. contractor activities are free from threats and
• The environment provides natural resources coercion; foster long-term stability in relation-
and other needed conditions for operating. ships; share information and integrate suppliers
Following is a summary description of the into planning processes; seek, encourage, and
Stakeholder Management Guidelines which indi- prefer suppliers that will use upstanding
cate how responsible businesses deal with the employment practices; seek, encourage, and
various stakeholder groups enumerated. prefer suppliers who practice good environmen-
Customers. Responsible businesses treat their tal management and who uphold high environ-
customers with respect and dignity. They have mental standards.
a responsibility to provide customers with high Competitors. Responsible businesses will
quality products and services; treat customers engage in fair competition. They have
fairly; provide high levels of service; ensure a responsibility to advance open markets; encour-
their health and safety; protect them from harm- age competitive behavior; shun anticompetitive
ful environmental impacts; and respect their and/or collusive arrangements; avoid question-
rights, dignity, and culture. able payments that seek to bypass fair, competi-
Employees. Responsible businesses are tive advantage; respect property rights; and
expected to treat their employees with dignity refuse to acquire information through dishonest
and respect. They have a responsibility to provide means, e.g., industrial espionage.
jobs and compensation which improve their liv- Communities. Responsible businesses should
ing standards; provide safe and healthy working strive to be global corporate citizens and to con-
conditions; provide working conditions that tribute to good public policy and human rights
boost employees’ well-being as citizens, family where it operates. These businesses have
members, and capacity for caring for others; be a responsibility to respect human rights and dem-
open and honest with them; listen to them; avoid ocratic institutions, promoting them whenever
discriminatory practices; provide equal treat- possible; respect government’s legitimate obliga-
ment; support differently abled employees; be tions to society and support policies that promote
sensitive to unemployment impacts; work with social capital; promote harmonious relationships
others to assist employee dislocations; ensure that between business and other societal sectors; col-
executive compensation and benefits reward laborate with initiatives aimed at raising stan-
management carefulness and discourage too dards of health, education, workplace safety,
much risk taking; and avoid illicit child labor and economic well-being; promote sustainable
practices. development; support peace, security, and the
Shareholders. Responsible businesses treat rule of law; and be a good corporate citizen
their shareholders with care and loyalty. They through ongoing community investments.
deal with them in good faith. The deal with According to the Caux Round Table, these
them in the best interests of the organization. principles have been published in 12 languages,
They have a responsibility to apply diligent and used in business school curricula worldwide, and
professional management so that fair and com- are widely recognized as the most comprehensive
petitive returns on investment may be achieved; statement of responsible business practices that
disclose all relevant information to shareholders; have been formulated by business leaders for
to conserve, protect, and increase shareholder business leaders.
Caux Round Table Principles 331 C
Key Issues global codes of conduct and other avenues com-
panies are taking to address the global corruption
There is a growing anticorruption movement in issue.
the world. With significant increases in global
trade and competition, free markets and democ-
racy over the past decade, this comes as no sur- Future Directions
prise. There are a number of different avenues of C
development aimed toward curtaining global In looking toward the future, the Caux Round
corruption and bribery. There are multilateral Table web site reveals that the CRT Principles
treaties and agreements such as the North are continuously being reviewed and updated so
American Free Trade Agreement (NAFTA), the that they are constantly relevant and applicable.
Kyoto Treaty on Global Warming, and the OECD They were updated in 2009 and 2010. It is appar-
Anti-Bribery Agreements. Another major avenue ent that the CRT views the principles to be one of
is that of global codes of business conduct cre- the key building blocks in its mission to improve
ated by international organizations. Among the global business and government affairs now and
more well known of these are the Caux Round in the future. To supplement the CRT Principles
Table Principles for Business, Global Sullivan in their application to employees, the CRT has
Principles, United Nations Global Compact, and issued “Guidelines for Management and
the Ceres Principles. Another avenue is that of Employees – People, Performance, Well-Being,”
individual corporations developing company- a statement expressing specific concern for
specific global codes of conduct of their own. employee stakeholders.
Among the more well known of these are the Though the CRT Principles for Business are
global codes promulgated by companies such as the initial platform for improving business con-
Caterpillar Tractor, Chiquita Brands Interna- duct around the world, the Caux Round
tional, Allis Chalmers, S. C. Johnson, Medtronic, Table continues to build upon this platform by
and Levi Strauss & Company. developing related guidelines applicable to other
In light of these outstanding, high profile, and types of organizations. For example, as part of its
competing avenues for improving global busi- continuing stream, the CRT has also developed
ness ethics, the major issue for the CRT Princi- Principles for Governments, Principles for
ples is attracting and retaining adherents in NGOs, Principles for Ownership and Wealth,
a world in which so many diverse ethics initia- and Principles for Responsible Globalization.
tives are competing to be the defining code. Each Another initiative of the CRT, in partnership
of the other global codes of conduct is also striv- with The Global Leadership Commonwealth
ing to be the gold standard by which all others are (GLC), is the creation of an assessment tool
measured. All the competing standards are excel- called the “Ethical Leadership Profile” (ELP)
lent and have their own followings. An issue and which is designed to help individuals in consid-
challenge for multinational enterprises is to ering and applying their individual preferences in
decide which among these various global codes initiating ethical action in both business and gov-
they wish to associate with and support. Some ernment. By using the ELP, leaders may discover
companies try to sign on to a number of different their personal preferences for decision-making
codes and others choose to just select and identify styles.
with one. Still, other companies decide to It is apparent that the Caux Round Table is
develop their own codes of conduct or ethics. a vibrant, mature, and adapting organization and
Most companies would agree, in general, with that many of its initiatives are being built around
virtually all of the elements of the global codes the CRT Principles for Business presented in this
but typically choose to identify primarily with essay. The Caux Round Table is an active group
one of them. The CRT Principles, then, are in of business executives, and it should be expected
a friendly competition with a number of other that they will continue to be a major player in the
C 332 CBSR

quest to improve global ethics in all organizations Denny, C. M., Jr. (with Paige E. Evans). (2008).
operating at the world level. In describing its own The corporation in Modern American Society.
Minneapolis: Hubert H. Humphrey Institute of Public
role and future, the Caux Round Table says it “is Affairs, University of Minnesota.
committed to move its ideals and principles into Goodpaster, K. E. (2000). The Caux Round
action programs to improve the outcomes of Table principles: Corporate moral reflection in
globalization in the world and to enhance the a global business environment. In O. F. Williams
(Ed.), Global codes of conduct: An idea whose time
impact of ethical conduct and social responsibil- has come (pp. 183–195). Notre Dame: University of
ity in companies. The Caux Round Table defines Notre Dame Press.
its principal tasks as discussing, evaluating, Koch, D. A. (2009). Lessons in life and business:
drafting and distributing principles, implementa- Dialogues with David A. Koch. Minneapolis: Opus
College of Business, University of St. Thomas.
tion standards and benchmarks, position papers,
commentaries and proposals.” This statement
clearly suggests that more can be expected from
the CRT in the future.

Cross-References ▶ Canadian Business for Corporate Social
▶ Bribery and Corruption
▶ Coalition of Environmentally Responsible
Economies (CERES)
▶ Corporate Codes of Conduct
▶ Corporate Social Responsibility
▶ Global Governance and CSR CCG
▶ UN Global Compact
▶ Centre for Corporate Governance (Nairobi)

References and Readings

Bockelman, W. (2000). Culture of corporate citizenship.

Minneapolis: Minnesota Center for Corporate CDCR
Carroll, A. B. (2009). Business ethics: Brief readings on ▶ Consumer-Driven Corporate Responsibility
vital topics (pp. 251–269). New York: Routledge/
Taylor & Francis.
Carroll, A. B., & Buchholtz, A. K. (2009). Business
and society: Ethics and stakeholder management
(7th ed., pp. 422–439). Mason: South-Western/
Cengage Learning.
Caux Round Table. (2009). Principles for responsible CDP
business. Caux Round Table, 8 pp.
Caux Round Table: Moral Capitalism at Work. ▶ Carbon Disclosure Project
Accessed 21 May 2010.
Cavanagh, G. F. (2004). Global business ethics: Regula-
tion, code, or self-restraint. Business Ethics Quarterly,
14(4), 625–642.
Center for Ethical Business Cultures. (1992, 2001). The Center for Corporate Governance
Minnesota principles: Toward an ethical basis for
global business. Minneapolis: Center for Ethical Busi-
ness Cultures ▶ Centre for Corporate Governance (Nairobi)
Centre for Corporate Governance (Nairobi) 333 C
The CCG initially received financial assistance
Centre for Corporate Governance from the Ford Foundation mainly for purchase of
(Nairobi) office equipment. Other initial financing was
directed toward development of an appropriate
Nicholas Ndegwa Kimani institutional framework to support good corporate
Chandaria School of Business, United States governance and social responsibility in Kenya and
International University, Nairobi, Kenya the larger part of Africa. C
Once established, the CCG received a 4-year
grant from the African Capacity Building Founda-
Synonyms tion (ACBF), which resulted in the signing of the
Grant Agreement in May 2001. Between 2002 and
CCG; Center for Corporate Governance 2003, the Canadian International Development
Agency (CIDA) financed corporate governance
training programs in Francophone Africa over a
Address with Web Link 3-year period. During this time, the African
Development Bank (AfDB) funded the Centre’s
Prosperity House, 5th Floor, Westlands Road two corporate governance training projects for
P.O. Box 13936 Nairobi 00800 Eastern and Southern Africa and West African
Tel: +254 20 3745915/3745918 countries in Nairobi and Dakar, respectively.
Cell: +254 722 700180/733 573276
Fax: +254 20 3745935
Email: info@ccg.or.ke/training@ccg.or.ke Mission/Objectives/Focus Areas
Website: www.ccg.co.ke
Its vision is to be a leading organization in the
promotion and facilitation of best practices in
corporate governance for the economic develop-
Introduction ment and social transformation of Africa. Its mis-
sion is to develop and promote the adoption of
The Centre for Corporate Governance (CCG), sustainable best practices in corporate gover-
sometimes referred to as the Private Sector Corpo- nance through training, education, research,
rate Governance Trust (PSCGT), is a widely advocacy, monitoring, and evaluation.
regarded organization established to promote
the highest standards of corporate governance in Major Activities, Accomplishments, and
African corporations and institutions through train- Contributions
ing, education, research, advocacy, monitoring,
and evaluation. It is headquartered in Nairobi, Achievements of the Centre to Date
Kenya. It has also served as the secretariat of the It is often said of the CCG that it has “introduced
Pan African Corporate Governance Forum since Africa to good corporate governance,” and it is
2001. not difficult to see why from its impressive list of
accomplishments. These are highlighted as
Brief History 1. Institutional Capacity Building
The CCG has supported the establishment of
The organization was first registered in 1999 as the several organizations concerned with promoting
Private Sector Corporate Governance Trust corporate governance, business ethics, and social
(PSCGT). In 2002, it was renamed the Centre for responsibility within Kenya and the rest of
Corporate Governance (CCG) as a company lim- Africa. These include the Kenya Shareholder’s
ited by guarantee. Association, the Institute of Directors (IoD) of
C 334 Centre for Corporate Governance (Nairobi)

Kenya, and Pan African Consultative Forum on sector in Kenya; the cooperative sector in Kenya;
Corporate Governance (PACFCG). disclosure and reporting in Kenya; impacts of the
2. Education and Training Activities 5-day training course on corporate performance
in Kenya; and corporate governance and manage-
Training Activities ment practices in the African Capacity Building
As at early 2010, the CCG had conducted Foundation (ACBF)-supported institutions in
39 five-day residential training courses in Kenya. Eastern, Central, and Western Africa.
The CCG has also played a key role in launching Among the regional studies undertaken are the
of 14 other five-day training courses in various following: Defining and Harmonizing Business
countries in Africa. The Centre has trained and Laws and Standards for Corporate Governance in
certified 2,046 directors from the public and Eastern Africa for the United Nations Economic
private sectors through its 5-day training course as Commission for Africa (UNECA); Defining the
follows: 1,640 directors in Kenya, Uganda, and Status of Corporate Governance in Africa, which
Tanzania; 59 directors in Zambia; 26 in Zimbabwe; was commissioned by the African Development
61 in Rwanda; 41 in Mauritius; 30 in Ethiopia; Bank (AfDB); and Defining the Status of Corpo-
74 in Senegal; 23 in Cameroon; 50 in Gabon; and rate Governance in Tanzania, which was
38 in Ghana. commissioned by the NEPAD secretariat.
The CCG has trained 2,879 directors through The CCG has also developed the following
its 1–3 day training courses as follows: 2,351 generic guidelines on corporate governance prin-
directors in Kenya, 142 in Uganda, 89 in Tanzania; ciples and practices: guidelines for shareholders;
80 in Ethiopia; 43 in Ghana, 19 in Egypt, and 155 guidelines for state-owned corporations; guide-
in Nigeria. In addition, the Centre trained 110 lines for banking sector; guidelines for the coop-
chairmen of leading corporations in East Africa erative sectors; guidelines for disclosure and
and certified 73 trainers in Kenya, Uganda, reporting; guidelines for universities in Kenya,
Tanzania, Zambia, Zimbabwe, and Nigeria. and guidelines on corporate governance certifica-
The CCG has also collaborated with the African tion of suppliers. The eventual adoption of the
Development Bank, the Government of Rwanda, guidelines for state-owned enterprises by the
the West African Bankers Association, and Centre Kenya government in April 2003, culminated in
Africain D’etudes Superieures en Gestion the introduction of performance contracts in gov-
[CESAG] to adopt training courses and materials ernment ministries, companies, and institutions.
to the needs of Francophone Africa. 4. Monitoring and Evaluation and Advocacy and
Education The CCG has conducted monitoring and eval-
The Centre has developed curricula for the uation activities for boards of five organizations
Master of Business Administration (MBA), in Kenya: the Kenya Roads Board, the UAP Pro-
LLM degree programs, and the Postgraduate vincial Insurance Company, KCA University,
Diploma in Corporate Governance for adaptation ICDCI (Investment), and the Centre for Corpo-
and implementation by collaborating institutions rate Governance.
of higher learning. These programs have been 5. Advocacy and Communication
adapted for teaching at the Eastern and Southern Apart from holding awareness-building work-
Africa Management Institute (ESAMI) Execu- shops with leaders of state-owned corporations,
tive MBA, the University of Nairobi (Thematic universities, the Institute of Directors, the media,
LLM), and the KCA University (Executive Post- and shareholders, the CCG has also collaborated
graduate Diploma). with several regional, Pan African, and Interna-
3. Research and Development tional Agencies in Africa within the framework
The CCG has conducted six major research of the Pan African Consultative Forum on Cor-
studies, which relate to corporate governance in porate Governance, New Partnership for Africa’s
state-owned corporations in Kenya; the banking Development (NEPAD), and the African Peer
Cheating 335 C
Review Mechanism (APRM). The Centre has, for
instance, played a key role in the NEPAD African Character Ethics
Peer Review Mechanism for Kenya as the Lead
Technical Agency for the Corporate Governance ▶ Virtue Ethics and CSR
Chapter. ▶ Virtue Ethics and the Environment

Charismatic Authority
▶ Corporate Governance
▶ Authority Versus Bureaucracy

References and Readings

Charitable Giving
▶ Corporate Giving

Certification Tools for CSR and

Sustainability Charity

▶ Sustainability Assessment Models ▶ Philanthropy

Chain of Event
Yvon Pesqueux
▶ CSR Butterfly Effect Conservatoire National des Arts et Metiérs
(CNAM), Développement des Systèmes
d’Organisation, Paris, France

Chain Restaurants
▶ Franchising
Deception; Escheat; Forfait; Fraud; Swindle

Change Management for Definition

Cheating: A durable and clandestine (or half
▶ Managing Change for Sustainability clandestine) action designed to gain an advantage
and resulting in wrongdoing (moral judgment)
and/or fraud (judgment of legal nature) when
found out. Cheating involves three components:
Changing Social Context a person, a type of behavior, and a context.
Deontology: The science of duties essentially
▶ Corporate Social Responsibility Strategy aimed at the behavior of the members of
C 336 Cheating

a profession, providing it with a set of codified thing because it can also be viewed as a source of
rules or at least usages delineating the duties of its learning. Cheating cannot be easily reduced to
members. theft or corruption (which unlike cheating implies
a pact between the “corrupter” and the
“corrupted”). Unlike corruption, cheating does
Introduction not taint the corrupter or the corrupted and it is
not regarded as such.
“Value-based management” is based on the The entry has the following rationale. It first
assumption that those values are necessarily defines cheating and looks into its position in
given a positive content and a process that brings relation to deontology when it comes to
together the values in usage with those professed. bypassing the rules of the profession. The notion
This is a highly deceptive theme as it addresses is also related to mores and rules.
major missteps only as particular cases (e.g., Cheating is about playing with the rules for
Enron, Parmalat, Société Générale) related to the one’s benefit, and it does not lead to wrongdoing
failing of one person or another (one or several or fraud unless the cheater is caught in the act in
managers, an auditing firm, a trader, etc.). In this which case the fact becomes a misdemeanor.
theme of “value-based management,” “manage- In this maneuvering dimension, cheating takes
ment” (including its whole rationalist array) and on a form of lying and trickery. Cheating occurs
“business” (where trickery prevails) tend to be when the lines of tolerance have been crossed –
confused with one another. Yet, the nature of lines that are drawn in order to consolidate
business probably differs widely from that of man- sociopolitical balances. Cheating induces an
agement. “Business practice” affects the way one appropriation process which makes it very simi-
behaves with third parties as well as the relation- lar to ownership (cheating makes a person rich)
ships among organizational agents. In the mean- and interest narrowed down to selfishness
time, the firm is experiencing challenges to its because it helps vindicate it. But it is also
legitimacy with suspicion of cheating looming a learning factor and a potential innovation
over its role in the crises it brings about directly process. It usually leads to forgiveness in the
or indirectly (e.g., the “mad cow” crisis). In some protagonists’ appeal for benevolence based on
ways, the organization is infused with a sense of “I won’t do it again” rationalization. Cheating is
cheating that can be sparked off at any given time. built around the notion of “play” in the primary
“Sense of cheating” – in its moralized sense – and sense of the term (it is about playing with the
“risk” turn out to be closer than they seem in that rules) and in the secondary sense of the term
cheating is also risk-taking. But cheating in and of because cheating not only grows out of the
itself is mostly more about denial than recognition. bypassing of the rules of the game but also of
Cheating spans all the areas of human activity their potential looseness. Cheating, like trans-
including play, gambling, sport, religion, politics, gression, is the middle ground between the limit
and of course business. This entry keeps to the (designed to be crossed) and the border (or
field of business, but the previous list shows the boundary), which cannot be crossed. Emphasiz-
many contexts that cheating is likely to appear in. ing the notion of intention, Y. Vardi and Y.
Similarly, an examination of the unending host of Wierner (1996) refer to types of deviance and
stakeholders reveals that any relationship may distinguish between the “S” type (benefits the
result in cheating, as demonstrated by the insider self) where cheating is performed for the benefit
trading that breaches the level playing field of the organizational agent, the “O” type (benefits
among shareholders. Cheating is a significant the organization) where cheating is performed in
but hidden issue in “business practice” and in order to turn a profit for the organization, and the
other fields for that matter. Its hidden nature “D” type (damages the organization) where
serves conveniently to not recognize the paradox cheating is intended to inflict damage on the
of cheating and that it is not necessarily a “bad” materials or premises.
Cheating 337 C
Whether it is about resistance or a selfish of a misdemeanor and the legal domain on account
act, cheating involves a maneuver that saves of fraud. In both cases, the cheater as a person is
the cheater from getting caught. Accordingly, targeted rather than the process, and beyond poten-
cheating is also about strategy. Identifying the tial reparations, the objective is to punish
cheaters is problematic despite the flurry of coun- a reputation. Its educational virtue lies in the expe-
ter strategies that are carried out, including pre- rience that a person gains from it. The misdemeanor
vention, control, intimidation, education, etc. is judged according to how serious it is and the C
In some ways, cheating is also the dark side of standards vary depending on the conditions, time,
the today’s precedence given to consequentialism and location. Thus, cheating also has a cultural
(to judge acts based on their consequences), sense and whenever “cheating” is involved the
mainly in the business world where the end result reference is both the virtue and the norm because
outweighs how it is achieved. judgment emphasizes conduct and hinges on the
In that way, cheating can be equated with person who makes the judgment. Cheating cannot
transgression and innovation. It implies be regarded as “bad” regardless of the conditions,
a transgression of the rules that is both hidden time, and location. For example, the clandestine
and accepted as it can potentially destroy the practice of a religion consists in cheating with the
reputation and quality of intra- and interorgani- official religious norms by pretending to abide by
zational relationships. In the mean time, it drives the legal cultural forms. This clandestine religious
learning, creativity, and result, creeping into such practice is illegal and resembles cheating of some
thought processes as those of budget control. To kind, but can it be regarded as “bad” anyway?
make instrumentation work, it is necessary to Judging by certain third parties, it is regarded as
bring life to the instruments. A budget control an act of resistance, which brings it closer to trans-
system is redundant unless it is combined with gression than misappropriation. Cheating spills
good management. And this is where the notion over beyond the issue of benefit, interest, and own-
of bargaining comes in, and it should be noted ership and brings into focus the role of notions like
here that there is a fine line between bargaining trickery, maneuver, and learning.
and cheating. The following statements can help pin down
Just as transgression leads to deviance, the definition of cheating:
cheating is contiguous to marginality and can 1. A durable and clandestine action (or half clan-
lead to delinquency. In this sense of cheating, destine – can cheating happen without collu-
the emphasis is laid on the importance of the sion?) designed to gain an advantage and
“middle ground.” It may be traceable to an indi- resulting in wrongdoing (moral judgment)
vidual initiative due to the exercise of willpower and/or fraud (judgment of legal nature) when
and/or the individual’s inability to conform to the found out. Cheating involves three components,
norm. But deviance is acceptable based on how a person, a type of behavior, and a context.
the nondeviant group regards it and thus not only 2. Wrongdoing leads to moral condemnation but
as a departure from the norm. In this case, also leniency and/or forgiveness and/or repen-
cheating and deviance alike can be considered tance whereas fraud results in a sentence (or
as a diversion from conformity. Cheating thus discharge). Opposing these two categories of
takes the form of a conscious maneuver akin to judgment (moral and legal) is the currently
misappropriation and parasitism, both processes developing right to go wrong, which demoral-
consisting in appropriating to one’s benefit izes and decriminalizes cheating.
modalities aimed at different ends. 3. Cheating is an “underlying” process whereby
In that respect, cheating is an ambiguous the cheater is not revealed until another person
“object” because it has a paradoxically educational exposes them, despite all the developments
virtue, although canceled out by moral and legal related to the “principle” of transparency. But
standards. But these cannot be easily confused as it cannot be solely regarded as an offshoot of
the moral domain punishes the cheater on account individual initiative.
C 338 Cheating

4. Cheating lies at the core of the tension “heter- separates winners from losers, thus encouraging
onomy-autonomy” in which heteronomy is cheating in the process (in order to win because
represented by the rule (that was bypassed) one might lose otherwise). Now, what if someone
and autonomy by the exercised will of the else cheats? Then, counter cheating stands as
cheater. The importance of autonomy in man- prevention against cheating, in accordance with
agerial discourses should not be viewed in the ideology inherent in gambling theory. In that
a neutral light because it contributes to increas- case, cheating mirrors doubt, suspicion, distrust,
ing the paradoxical impositions placed on the and defiance.
organizational agent. Cheating also results With the centrality given to opportunism,
from the disjunction of regulations as the auton- cheating is placed at the core of the “new theories
omous regulation prevails over the heterono- of the firm,” however implicitly referred to. It is
mous regulation (Reynaud 2004) and causes latent in the moral hazard of O. E. Williamson’s
cheating to be personalized to the benefit of transaction cost economics or the methodological
the cheater. It then boils down to the pursuit selfishness of agency theory (Jenssen and
of a personal advantage whereas the interplay Meckling 1976; Williamson 1985). It is hardly
of regulations seems to point to a much broader surprising then that the “economization” of the
issue. The heteronomous regulation clears the world, in which the economy occupies a central
way for the cheater’s maneuver (autonomous and legitimate place, corresponds to the legiti-
regulation – to act not to get caught) in relation macy of opportunism and doubts about the uncer-
to a set of culturally defined standards whose tainty inherent in behavior opportunism and the
content varies in space and time. spread of cheating.
5. The “spirit” of the heteronomous regulation While cheating is about playing with the
can be equated with the importance attached norm, it also refers to deontology from
to mores by Montesquieu in De l’esprit des a professional standpoint.
lois (The Spirit of the Laws – 1748). Today, the Deontology is a set of standard rules applied to
legitimacy given to competition can be a professional field. It has a communitarian and
regarded as one component of this “spirit,” “corporate-based” scope, and those rules are built
legitimacy that props up the winners and in on values that are not necessarily explicit (implic-
the process prompts the losers to cheat. itness of the profession). This is where the margin
6. From a demoralized point of view, cheating of interpretation brings cheating into focus. It
can be regarded as a social and moral learning pertains to communitarian liberalism and also
factor (Kohlberg 1972). grounds the communal legitimacy of the lobby.
7. Cheating is anchored in the figure of the cheater The term “deontology” was coined by British
in a rationale where the cheater tends to be author J. Bentham in the nineteenth century
separated artificially from the society (and/or (Deontology, 1834) and is mostly used in French
the organization) in which they are situated. today.
For all the references to ethical evidence in the For R. Savatier in Encycopedia Universalis,
late twentieth century, particularly in business, “etymologically deontology is the science of
what cheating effectively signals is a shift from duties (. . .) It has been restricted due to its
the “impartial spectator” to the “invisible hand” being monopolized by the law of professions
(Smith 1759, 1776). As the reference to (. . .) When a profession gets organized, it tends
Mandeville’s Fable of the Bees (1740) affirms, to equip itself with a codified status or at least
the “invisible hand” may transform private vices usages that lay down the duties of its members.”
into public virtues, hence the consistent spread of But it should be stressed that such comprehensive
cheating in business underpinned by trade and the codification is impossible as evidenced by terms
market. In the market, however, business life is such as “integrity,” “selflessness,” “moderation,”
driven by theoretical tenets referring to competi- “fraternity,” and “honor” featured in those texts.
tion, and ultimately economic judgment that Deontology aims at the internal order of the
Cheating 339 C
profession. It is coupled with sanctions restric- of those interests. The issue of politics gives way
tively defined in the form of “disciplinary law” to the issue of ethics and the norm clears the way
that provides the groups involved with a legal for transgression and cheating (a way to break
basis to defend themselves, ranging from moral rules). Also, the inherent creativity of cheating
sanctions designed to hit professionals (censure, constitutes a form of learning.
reprimand) to warnings designed to prevent fur- The “free-market” moment is also character-
ther violations of deontological rules. Occasion- ized by commonalities between: C
ally, there are fines. The most serious disciplinary – “Traditional” political liberalism which
sentences include suspension or exclusion of the emphasizes the principle of freedom, that is,
professional from the group. The authority that the connections between the universality of
enforces these norms goes hand in hand with the the law and the expression of particular inter-
powers devolved to professional jurisdictions. ests, paving the way for the political legiti-
Accordingly, the specific characteristic of deon- macy of interest and its abridged form,
tology is to punish the cheater based on wrong- selfishness.
doing, fraud, or both at the same time. – Economic liberalism, as crafted by A. Smith
As seen above, the contentious issue is not from a political and moral philosophy based
cheating but the contiguous relationships on moral feelings, which promotes the free-
between the notion and those on either side of dom of expression of interests. This economic
its boundary: “consistent-inconsistent, unsound” liberalism is amoral by nature and completely
or “allowed-forbidden” or “cheating-deviance eludes the notion of cheating.
disorder.” In that way, cheating is not problem- – Utilitarianism formulated in the nineteenth
atic but the issue of cheating is contentious. century by J-Mill, which solely attaches
The relative legitimacy given to cheating ties value to what is useful and legitimizes the
into certain categories of the “free-market distinction between “theory” (incidentally
moment,” a period that we have lived in since useful) and “practice” (fundamentally useful).
the early 1980s. Utilitarianism, similarly, leaves cheating
The “free-market” moment (Pesqueux 2007) “unthought” because it appreciates the result
is an offshoot of changes to the issue of the regardless of how it is obtained.
political. The topic of “living in” broached by – Positivism which attaches value to technical
the philosophy of Enlightenment in the wake of determinism which on account of the suspi-
Greek thought, in particular with Aristotle, was cion of science and technique (e.g., the atom
substituted by the topic of “living with” (the bomb) has resulted in substituting semanti-
others) which lies at the core of free-market cally the term technology for that of technique
thought. The “living in” is built around the con- based on the reference to the firm. Again,
cept of law viewed from the perspective of its cheating is left totally “unthought.”
genesis (who lays down the laws?), its legitimi- – Pragmatism, a doctrine in which practical suc-
zation (the democratic vote), and its enforcement cess is a criterion of truth, here viewed from
(the State and its apparatus). And the law turns the perspective of material success regardless
cheating into fraud. The “living with” is premised of how that success is achieved.
on the individual and the expression of their free- – Legitimacy given to capitalism which is an old
dom. The concept of law corresponds to the con- economic practice born in the fourteenth and
cept of norm, in other words the self-enactment of fifteenth century in its modern form as
rules by a social group regardless of their political a political order and now applying worldwide
representativeness but based on a criterion of from the perspective of a globalist ideology.
efficiency. These norms are focused toward the Arguably, these commonalities have been
expression of freedom of individuals in relation complemented by the following aspects:
to their interests in the general context of a police – Those of libertarian and communitarian liber-
State that lays down the rules for the expression alism, two perspectives of contemporary
C 340 Cheating

liberalism which acknowledge the legitimacy consideration. As noted previously, a plethora of

of individuals’ and communities’ rights and paradoxical injunctions spring from the current
thus the distinction between “differentiated managerial schemes. For example, there are
common goods” and the general “common systems of variable pay that reward the develop-
good.” ment of business and profitability and value
– Those of neoconservatism which are targeted objectives with codes of conduct. Anomy results
toward the excesses of democracy related to from incentive systems that transform into
the “overload” caused by the proliferation of excitement maneuvers, thus making the issue of
new rights resulting from the liberal expres- cheating even more relevant.
sion of communities.
– Those of free-market capitalism which advo-
cate substituting the market categories for Key Issues
those of a redistribution State.
– Those of civic republicanism based on three Cheating is one of the extreme characteristics of
aspects: the existence of the “common good,” today’s business life, and as such it has been of
civic virtue based on the reference to civil the causes of the growing reference to the
society, and reduction of corruption. Civic principle of transparency.
republicanism works to promote deontologi-
cal categories to criticize individualistic and
utilitarian perspectives without referring to Future Directions
the social contract. The challenge is directed
at the organization and society viewed as the The first connection to investigate further is one
aggregation of individuals gathering for their that links cheating with mores. According to F.
common benefit in a given society. Ulti- Bourricaud (in his Encyclopedia Universalis
mately, the neoliberal categories are more article), “the word can be viewed as synony-
radically challenged in the name of civic mous with ways of being, doing, feeling, think-
republicanism, which proposes to recognize ing (. . .). This first sense focuses on the
priority to a “common good” on account of heterogeneity of mores (. . .).” A second sense,
the atomist nature of the liberal conception of of philosophical origin, emphasizes the notion
individuals. Thus, there is room for merits of “good mores” that should be appreciated
(MacIntyre 1982) and the idea of “constitu- against virtues but not confused with them.
tive commitment” (Sandel 1982). But Today, politics, law and mores are fairly distin-
cheating is here mainly reduced to corrup- guished. Mores are about the fact that the
tion, thereby loosening control over its other impulses of pleasure and pain alone are inade-
manifestations. quate, hence the connection between learning,
The mix of all these elements forms the core of education, and the “good mores” as well as the
the “free-market” moment in a context where the correlative entry into the figures of the institu-
thinking is that the economic must trump the tion. Accordingly, it is important to point out
political. This same context leads to the assump- the connections between the concept of mores
tion that the autonomous regulation (of the mar- and the concepts of tradition, religion, authority,
ket) is more valuable than the heteronomous legitimacy, conformity, and thus implicitly,
regulation of the law, clearing the way for maneu- cheating. Mores somehow constitute the con-
vers and thus cheating. nective link between subjective morals and
All this has led to governance as “production” of achieved morality in the sense that they point
the “free-market moment,” a bulwark of some sort to the importance of the individual act and its
against the anomy that would otherwise confront collective reference. The notion of mores pro-
the “subject” due to the paradoxical injunction to vides cheating with an ontological basis and
“live one’s values” while taking others into that is what makes it relevant here. Cheating
Chemical Industry’s Global Initiative 341 C
can be regarded as a vehicle for corrupting Cross-References
mores. This perspective has brought on com-
mentaries about the “demoralization” inherent ▶ Accountability
in industrial societies and, in particular, the ▶ Business Ethics
shift that occurs between individualism as ▶ Corporate Social Responsibility
a concept and selfishness as a moral act. ▶ Transparency
Another perspective is one in which the “good C
mores” serve to bind together civil society, the
State, and individual morality and makes
cheating reprehensible by turning it into wrong- References and Readings
doing. But this position does not distinguish
Jensen, M. C., & Meckling, W. H. (1976). Theory of the
between mores and virtues and the various con- firm: Managerial behavior, agency costs and owner-
fusing orders and domains that compose and ship structure. Journal of Financial Economics, 3(4),
clash in society. 305–360.
Kohlberg, L. (1972). Development as the aim of education.
Cheating also pertains to the idea of rules
Harvard Educational Review, 42(4), 448–495.
and consciousness because a rule is only Macintyre, A. (1982). Après la vertu, collection Léviathan,
a conscious rule. A rule is formed around PUF1997.
a double level of knowledge and recognition Mandeville, B. (1740). The fable of the bees: Or, private
vices, public benefits. Oxford: Clarendon Press, 1924.
of the existence of the rule and the content of
(Reprint The Liberty Fund, Indianapolis, 1988).
the rule. What distinguishes a rule from a habit Montesquieu, C. (1748). De l’esprit des lois (p. 326).
is that it is necessary to know the rules in order Paris: Garnier-Flammarion.
to conform to them. This conscious play with Pesqueux, Y. (2007). Gouvernance et privatisation. Paris:
the rule(s) helps ground a demoralized approach
Reynaud, J.-D. (2004). Les règles du jeu – L’action col-
to cheating by pairing it with learning. In that lective et la régulation sociale. Paris: Armand Colin.
way, cheating is characterized by a play against Sandel, M. (1982). Liberalism and the limits of justice.
the rule (even prior to being a play against Cambridge/New York: Cambridge University Press.
Smith, A. (1759). Théorie des sentiments moraux. Paris:
others). It is formed against the two levels of
PUF, 1998.
consciousness of the rule, with the first level Smith, A. (1776). La richesse des nations (pp. 598–626).
being the most learning-inducing because it Paris: Garnier-Flammarion.
opens up creativity, in relation to the play with Vardi, Y., & Wierner, Y. (1996). Misbehavior in organi-
zations: A motivational framework. Organization
precise rules where cheating is about bypassing/
Studies, 7(2), 151–165.
misappropriation. This same level makes for the Williamson, O. E. (1985). The economic institutions of
“cheating-thinking” pairing. In both cases, capitalism. New York: The Free Press.
cheating taps into the cheater’s bag of tricks as
bypassing/misappropriation are also about rule
learning. It also pairs “learning” with
“cheating” (which results from playing con-
sciously with the rules). Whether one cheats or Checks and Balances
not, to refer to the rule is to ask the question of
what is consistent and inconsistent. In that ▶ Authority Versus Bureaucracy
respect, it is important to distinguish between
the unsound (linked to cheating) and the incon-
sistent (less restrictive sense). Disregard of the
rules (through cheating or any other modality)
enables disorder (opposed to “order”) and the Chemical Industry’s Global Initiative
way out is to revert to (or recreate) order. This
process of reverting to order (or creating a new ▶ Responsible Care (Chemical Industry’s Sector
order) is also “learning.” Wide Initiative)
C 342 Chemical Sunshield

Chemical Sunshield
The arrival of the role of chief sustainability
▶ Ozonelayer officer mirrors the evolution to sustainability as
a strategic issue for a number of large corpora-
tions. Sustainability emerged as a significant
business issue in the 1990s, when it was mainly
the preserve of the corporate social responsibility
Chemical Sustainability Voluntary (CSR) function within a company. As the impact
Initiative of business activities on the environment and
society has increasingly been recognized, the
▶ Responsible Care (Chemical Industry’s Sector CSR department has been tasked with complying
Wide Initiative) with relevant policy and communicating with key
stakeholder groups. Within that context, its prom-
inence is raised sporadically through environ-
mental disasters where a company’s license to
operate would be at risk, but it is largely regarded
Chief Sustainability Officer as a below board-level issue. Larger companies
have employed a dedicated sustainability func-
Jim Woods and Andy Cartland tion, often headed up by a head of sustainability,
Acre Resources, London, England, UK a model that remains the case for the majority of
very large companies in the USA and Europe.

Key Issues
CR director; CSR director; Director of sustain-
ability; Sustainability director A small but increasing number of companies are
seeing strategic opportunities in sustainability.
The following roles can have similar responsibil- As a result, sustainability is raised up the corpo-
ities, but are generally regarded as of lower rate agenda and meriting the attention of the
authority within a firm: head of sustainability, board. As public consciousness of the science of
environmental policy manager, social and envi- climate change has risen, a coalition of drivers
ronmental sustainability manager, head of CSR, which includes government policy, consumer,
head of corporate responsibility, head of corpo- and investor pressure is starting to change the
rate citizenship. paradigm in favor of a low-carbon economy.
This raises the risks associated with high-carbon
business models, but more importantly increases
Definition the opportunities for those who can understand
emerging business opportunities such as the
The chief sustainability officer is a main board emerging low-carbon economy.
role whose responsibility is to integrate sustain- The number of major companies that are seeing
ability into the core strategy and operations of substantial opportunity in sustainability remains
a company. They usually report directly into the the distinct minority, but includes some well-
CEO and will leverage the opinions of those in known global companies. Almost without excep-
the sustainability function as well as the heads of tion, these companies are led by a visionary CEO
other major functions within the company, most and main board; a key common feature is the
notably finance, energy, property, transport and appointment to the board of someone whose ded-
logistics, and IT. icated responsibility is sustainability. Listed below
Chief Sustainability Officer 343 C
are three companies who have achieved significant regard as a business person. Energy managers
commercial advantage through their understand- can see a new focus on energy efficiency as an
ing of the changing paradigm, all of whom have implication that they have not been performing
a board-level person who is dedicated to sustain- well in their job and resent new analytical tools
ability. Some are called chief sustainability officer, such as marginal abatement curves that look to
while others have a more unique title which substantially reduce energy consumption. In
integrates with the company’s business short, it can be a transformational appointment C
strategy, such as “Director of Plan A” (http://corpo- for a company and can involve significant
rate.marksandspencer.com/page.aspx?pointerid¼0 change.
ee5cbc993fe48109cd3215f3f7d5fa9) at Marks &
Spencer. The Activities of a CSO
• Siemens identified the emerging markets in The CSO will typically focus on issues of strate-
wind and solar products in the 1990s, with gic importance, working with the main board.
their environmental products division Their remit will be to explore activities that
generating 28bn revenues in 2010 (http:// which will make a significant difference to share-
www.siemens.com/investor/pool/en/investor_ holder value, as opposed to the looking at sus-
relations/siemens_ar_2010.pdf), or 37 % of tainability as a compliance issue or “the right
total revenues. thing to do,” which is likely to remain the remit
• GE identified opportunities in environmental of the head of sustainability. They will look for
products, from smart grid to nuclear technol- initiatives that, on their own or in total, represent
ogy, which they separate out in their a strategic opportunity. The relevant issues
Ecomagination division that generated change from organization to organization, but
$18bn in 2010 (http://www.ft.com/cms/s/0/ the following can be taken as a generic frame-
342511b2-eb4d-11df-811d-00144feab49a.html# work within which they operate:
axzz1ZRmvfZOg), or 12 % of total revenues. • Revenue generation:
• Marks & Spencer introduced Plan A in • Developing products and services for new
2009, which now generates 10 % of group markets associated with sustainability, for
net profit (http://corporate.marksandspencer. example, Siemens, 28bn revenues in 2010
com/documents/publications/2010/planacom- from environmental products
mitments2010), mainly through energy effi- • Improving the sustainability credentials of
ciency investments. existing products and services which are
demand-sensitive, for example, Phillip’s
The Significance of the Appointment of EcoVision, which generated 7bn in 2010
a CSO from consumer products which have higher
Companies that appoint a CSO envisage substan- energy efficiency
tial strategic and commercial advantage through • Selling sustainability services to other
their sustainability performance. By elevating it companies, where they have developed
to board level, a company is sending out leading expertise, for example, Siemens’
a message that they no longer want CSR to be finance division, which lends to major cor-
viewed as a business silo within the organization porate investing in renewable energy and
and that they want it to impact the major budget- energy efficiency
ary areas of the business. • ADD Supply Chain Innovation
The appointment can be regarded as threaten- • ADD customer/market segmentation
ing to many groups within an organization, and it • ADD customer education leading to new
can be regarded as a brave appointment by markets and opportunities
a CEO. People in a sustainability function can • Other main strategic opportunities:
resent reporting into a new appointment with • Acquisition of companies that lead in sus-
“sustainability” in their title, but whom they tainability in similar markets. This may
C 344 Chief Sustainability Officer

focus on Chinese companies who are being • Introducing a societal model for evaluating
built purely on a low-carbon platform, such performance, for example, Pepsi’s “Full
as electric car manufacturer BYD. Business Value”
• New financing opportunities, for example, • Building corporate marginal abatement
climate bonds, VCTs, or enterprise invest- curve for all divisions of their business,
ment scheme funds, which have a lower for example, the Royal Mail, Scottish
cost of capital than most companies and Water
have government incentives to make low- • Working with the finance function to build
carbon investments. alternative financial statements with a price
• Achieving major cost savings, particularly of carbon factored in
around energy efficiency. It is estimated • Employing life cycle analysis for goods
that 15–25 % of the average big European and services
company’s emissions can be removed by • Measuring how brand/trust/reputation is
investments that have internal rates of impacted by a company’s sustainability
return (IRR) of 16 % or above, representing stance
a substantial strategic opportunity (http:// • Partnerships and collaboration:
www.carbontrust.co.uk/cut-carbon-reduce- • Exploring the outsourcing of energy man-
costs/large-business/Documents/energy- agement to an ESCO. As energy becomes
efficiency-report-2010.pdf). The Royal more expensive and complicated to man-
Mail in the UK, for example, identified in age as a result of policy, the case for
2010 £38 m of energy efficiency invest- outsourcing increases.
ments with a higher IRR than its core • Partnering with nongovernmental organi-
business. zations to give customers confidence in
• Business structure: the supply chain, for example, Lipton tea
• Separating out a “green products” portfolio and the Rainforest Alliance (http://www.
with aggressive goals. Some pioneers of rainforest-alliance.org/newsroom/news/
this technique, such as GE with their unilever).
Ecomagination program, have employed • Working with competitors in the sector to
separate boards including leading venture form a voluntary industry standard in order
capitalists and have invested abnormally to reduce the sustainability risks for the
high amounts of R&D to achieve their sector.
goals. • Engaging in a constructive dialogue with
• Incorporate sustainability into executive policy makers to reduce the uncertainty in
remuneration system. This is not always the policy framework.
popular at the outset, but as Akzo Nobel • Key stakeholder engagement:
in the Netherlands have shown, this is one • Introducing enhanced training for man-
of the most effective ways of engaging key agers across the business
decision makers in the sustainability • Communicating the benefits of the
journey. company’s sustainability strategy to finan-
• Changing the reporting structure so that the cial analysts, who may not yet realize the
sustainability function reports directly to commercial benefits of the program
the CEO. The appointment of the CSO
usually achieves this, but there is additional
credibility work required in evolving the Future Directions
sustainability function from a compliance
unit to the innovations unit. McKinsey & Company reported in their global
• Employing the latest analytical tools to assess survey results in August 2010 (titled “The next
the company’s CSR performance: environmental issue for business”) (http://www.
Christian Way of Doing Business with Societal Obligations 345 C
mckinseyquarterly.com/The_next_environmental_ http://www.carbontrust.co.uk/cut-carbon-reduce-costs/
issue_for_business_McKinsey_Global_Survey_ large-business/Documents/energy-efficiency-report-
results_2651) that the issue of biodiversity http://www.ft.com/cms/s/0/342511b2-eb4d-11df-811d-
now occupies a similar position in the public 00144feab49a.html#axzz1ZRmvfZOg
debate as climate change did in 2007. At the http://www.mckinseyquarterly.com/The_next_environ-
time of their survey, 59 % of executives said mental_issue_for_business_McKinsey_Global_Survey_
they saw biodiversity as more of an opportunity http://www.rainforest-alliance.org/newsroom/news/unilever
than a risk for their company. In comparison, http://www.siemens.com/investor/pool/en/investor_
29 % of executives viewed climate change as relations/siemens_ar_2010.pdf
more of an opportunity than a risk in 2007.
They predict that over the coming years,
biodiversity will reach the same strategic posi-
tion that climate change has reached in the cor-
porate strategy. Christian Ethical Philosophy
It is hard to imagine the issue of climate
change decreasing in importance on the strategic ▶ Christianity and CSR
corporate agenda in the next 20 years, given that
global emissions are still rising, the population is
growing, and the science calls for a carbon reduc-
tion increase rather than decrease. It is likely that
other issues such as biodiversity will add to what Christian Foundations on Ethics
Lord Stern called in his 2007 review for the UK
government “the greatest market failure that the ▶ Christianity and CSR
world has ever seen.” In this context, one can
imagine that the issue of sustainability will rise
in the corporate agenda and that the number of
companies employing a CSO will increase.
On this basis, it seems reasonable to think that
the tenure of the CSO will be substantially longer Christian Guidelines
than the 20-year span of the chief electricity
officer. We expect that the teams managed by ▶ Christianity and CSR
the CSO will grow as they become more special-
ized, looking at the industry leaders at the
moment that trend has already started.

Christian Morality and Doing

Cross-References Business the Community-Reliable
▶ Corporate Social Responsibility
▶ Christianity and CSR
▶ Sustainable Business: A New Paradigm

References and Readings

Christian Way of Doing Business with
Societal Obligations
pointerid¼0ee5cbc993fe48109cd3215f3f7d5fa9 ▶ Christianity and CSR
C 346 Christianity and CSR

Jesus suffered, died from crucifixion, was buried,

Christianity and CSR and was resurrected from the dead to open heaven
to those who believe in him and trust him for the
Kim Cheng Patrick Low1 and Sik-Liong Ang2 remission of their sins or salvation. They further
Universiti Brunei Darussalam, Gadong, Brunei uphold that Jesus bodily ascended into heaven
Darussalam where he rules and reigns with God the Father.
University of South Australia, Adelaide, Most denominations explain that Jesus will return
Australia to judge all humans, living and dead, and grant
Faculty of Business, Economics & Policy eternal life to his followers. Jesus is considered as
Studies (FBEPS), Universiti Brunei Darussalam, the model of a virtuous life and both the bearer of
Bandar Seri Begawan, Brunei Darussalam good news (revelations) as well as the physical
incarnation of God. Christians call Jesus Christ’s
Synonyms messages the Gospel or Good News and, hence,
refer to the earliest written accounts of his teach-
Accountable businesses in community; Christian ings as gospels.
ethical philosophy; Christian foundations on At the core of Christianity lies the concept of
ethics; Christian guidelines; Christian morality social responsibility that was demonstrated by
and doing business the community-reliable way; Jesus’ leadership during the night of the last
Christian way of doing business with societal obli- Passover, when Jesus apostles were arguing
gations; Doing business the Christian way; Foun- over who was the greatest. Luke expressed,
dations of CSR in Christianity; Practices and “A dispute arose between them about who should
applications of Christian moral teachings, Chris- be reckoned the greatest, but he said to them,
tian business ethics; Principles of Christian ethics ‘Among pagans it is the kings who lord over
them, and those who have the authority over
Definition them are given the title benefactor. This must
not happen with you. No, the greatest among
Christianity is the religion, a monotheistic reli- you must behave as if he were the youngest, the
gion, based on the life and teachings of Jesus leader as if he were the one who serves. For who
Christ. Believers and adherents of the religion is the greater: the one at table or the one who
are called Christians. Christians can therefore be serves. The one at table, surely? Yet here am
seen as a group of people who practice Christian I among you as the one who serves!’” (Luke 22:
rules, principles, and guidelines. 24–27, TJB). And because Jesus serves, in Chris-
Though there are several denominations of tianity, serving and helping implies the notion of
Christianity – Catholicism, Protestantism, and social responsibility. As St. Thomas said, some of
Orthodox, the central tenet is the belief of Jesus the fruits of the Spirit are so unearthly, as to be an
Christ as the Son of God and the Messiah (Christ). anticipation of the joys of heaven. These are
called beatitudes (Saint Thomas 1–2: 70). The
first among them proclaimed by Jesus is the pov-
Introduction erty of Jesus. Jesus preached to the crowd,
“Blessed are the poor in spirit, for theirs is the
Christians believe that Jesus is the son of God, kingdom of heaven” (Matthew 5: 3). This beati-
God having become man and the savior or mes- tude brings such inner freedom, as to make one
siah of humanity. Christians, thus, commonly capable of possessing God and all good things in
refer to Jesus as Christ (Messiah). The basis of God. “We are poor but we make many people
Christian theology is articulated in the early rich; we seem to have nothing, yet we really
Christian ecumenical creeds, which contain possess everything” (2 Corinthian 6: 11).
claims predominantly accepted by followers of In Christian teaching, God was angry with the
the Christian faith. These professions state that original sin man (through the first man Adam) has
Christianity and CSR 347 C
committed, and in order to make peace with God, speaks of how one should respond in the public
man carried out animal sacrifices to accomplish arena of judicial system. And “If anyone forces
the reconciliation of God and humanity. Jesus’ you to go one mile, go with him two miles.” Jesus
sacrifice, dying on the cross, replaced the insuffi- also speaks of how to respond to Roman rulers
cient animal sacrifice of the Old Covenant; Christ who demand forced labor (Matthew 5: 40–41).
the “Lamb of God” replaced the lambs’ sacrifice All these show Jesus’ way of advocating nonvio-
of the ancient Korban Todah (the Rite of Thanks- lence. Jesus’ vicarious death for sinful enemies of C
giving), the main event of which is the Passover God lies at the very heart of our commitment to
in the Mosaic’s law. Nowadays, the Eucharist or nonviolence. It was because the incarnate One
Mass is seen as a sacrifice and has become the knew that God was loving and merciful even
Christian religious ceremony (the enactment of toward the worst of sinners that He associated
Christ’s last supper) in which Jesus Christ’s last with sinners, forgave their sins, and completed
meal with his disciples is celebrated by breaking/ his mission of dying for the sins of the world.
eating of bread and drinking of wine. In the Bible, And it was precisely the same understanding of
the night before his crucifixion, Jesus took bread, God that prompted Jesus to command His
blessed and broke it, and gave it to the disciples followers to love their enemies. It is because we
and said, “Take, eat; this is my body.” And he as God’s children are to imitate the loving
took a cup, when he had given thanks, he gave it characteristics of our heavenly Father who mer-
to them, saying, “Drink of it, all of you for this is cifully showers His sun and rain on the just and
my blood of the covenant, which is poured unjust that we are to love our enemies. And the
out for many for the forgiveness of sins. . .” vicarious cross of the Christ is the fullest expres-
(Mathew 26: 26). For Christians, they believe sion of this aspect of God’s nature.
that Jesus died for the sins of humanity, and in Societies cannot survive if everyone does not
this way Jesus showed his caring and his respon- cooperate and collaborate for the common good.
sibility for the good of mankind. Many centuries Or to put it in the positive sense, everyone in the
later, Mother Teresa inspired by Jesus’ commit- society chips in, contributes, cooperates, and col-
ment, clambered her own words onto the van of laborates for the greater goal of the common
the Missionaries of Charity, “All you do, do for good, and the society progresses.
the glory of God and the good of people.” There is a cross through the two dimensions of
Jesus lived and taught the way of nonviolence. “responsibility,” “conciliation,” and “harmony”
The Sermon on the Mount contains the most (social responsibility) in Christianity. In this
important text such as, “You have heard that it cross, in terms of the vertical dimension, a gap
was said, ‘An eye for an eye and a tooth for exists between God and human, and humankind
a tooth.’ But I say to you, Do not resist one who is alienated from God, and here, Jesus Christ, the
is evil. But if any one strikes you on the Son of God made man (the New Adam) who
right cheek, turn to him the other also; . . .” sacrificed His life, serves as the mediator, the
(Matthew 5: 38). Jesus further remarked, “Put way, or the path (the connection) to God
your sword back into its place; for all who the Father. And in the vertical dimension of the
take the sword will perish by the sword” cross, each person is requested to treat fellow
(Matthew 26: 52). While a common modern human beings well. Each person in the Christian
interpretation means “those who live by violence faith should serve his (her) fellow human beings
will die by violence,” a deeper meaning alludes to in the imitation of Jesus Christ. Additionally,
“those who judge will be judged” in reference each of us needs to treat nature, Mother Earth,
to Matthew 7: 2 and Luke 6: 37 which can also and the environment well as in the Old Testament
be interpreted as for those observed to be wrong- days of Adam and Eve in the Paradise created by
fully condemning others. God (Fig. 1).
“If anyone would sue you and take your coat, In Christianity, the Bible is the authority and
let them have your cloak as well.” Jesus clearly we can see many instances in the Bible where
C 348 Christianity and CSR

Christianity and CSR,

Fig. 1 Jesus Christ closes
the gap between God and
& practices The faithful
closes the gap
Jesus Christ closes the gap, through
being sacrificed as “The Lamb Gap prayers, action
of God”/ Jesus, the Savior and daily
Good including CSR
actions such
as charity, etc.


man needs to protect nature or be in harmony Similar to Islamic ethics, Catholic Catechism
with animals and nature. In the books of Jeremiah teaches that God created an ordered universe, and
(9: 9–11) and Habakkuk (2: 17), for example, since it came out of His goodness, it was good.
God warns against destroying nature and wildlife. Thus, human beings are bound to respect and
defend the goodness of creation, including the
physical world in which they live. God entrusted
Key Issues human beings with having dominion over
the Earth. In giving back, human beings should
Being Responsible Stewards complete the work of creation and perfect it for
We are living in a world with too many problems the good of all.
such as, to name a few, different kinds of pollutions, We can take that Catholics and Christians
violence, environmental problems, global warming, alike believe that God expects humankind to
and a host of others – yet there are too few answers. exercise stewardship over the Earth. As God’s
Here, the Bible, Christians believe that God highest creation, human beings have
has really communicated with humans, stresses a responsibility to use their knowledge to pre-
on the importance of wisdom; after all, “wisdom serve and protect the environment and the crea-
is the prime thing. Acquire wisdom, and with tures which inhabit it.
all that you acquire, acquire understanding” Both the Vatican and the United States Con-
(Proverbs 4: 7). Many may view abortion as ference of Catholic Bishops have pressed for
a matter of personal choice; women have action in response to global warming and have
authority over their bodies, but for Christians, exhorted governments to move toward models of
the Bible – the Word of God, written by men sustainable development. In the United States,
but inspired by God – offers an authority and the Church operates an environmental justice
guidance in matters of morality and even for non- grants program that provides money for environ-
believers; the Bible – like any other Holy Books mental education, research, and action. In short,
such as the Sutras, Quran, and others – can be the Church’s environmentalist posture is closely
argued as offering this great and clear-cut advice: related to its support for developing countries as
a helping attitude really benefits everyone. And their growth hinges on an equitable sharing of the
what more, love conquers all. It is natural to love earth’s resources (Keeler, Grimbly and
ourselves, but to be emotionally healthy, the Wiggins 2005).
Bible says that we have to balance that love for What more, the responsibility of humankind to
self with a love for others. value and protect the natural environment is
Christianity and CSR 349 C
a theme that appears throughout the Bible, often “vocation in beatitude,” and it is the duty of each
referring to just the types of problems we face Christian. Vocation is a call and Christians are
today: brutality to farm animals or heartlessness called to help others. The Catholic Church
to wild animals, damage to wildlife and habitat, explains the beatitudes portray Christ’s charity.
and pollution of our food, air, and water. It is said The beatitudes are principles meant to comfort
that what is possibly the world’s first antipollu- and inspire believers to do charity for the gentle,
tion control or rule is found in the Book of the poor, the hungry, and the marginalized peo- C
Deuteronomy (23: 13–15), which forbids dirtying ple, for whom Christ spoke so eloquently in His
the land with human excrement. Sermon on the Mount.
In stressing the reverence humans should have Jesus was not born with the material advan-
toward the land, the Scriptures convey a strong tages that wealth and social position can give; he
conservation message, warning against overusing was born in a stable. Jesus preached and taught
and wearing out natural resources. In Leviticus but His life did not end on a note of triumph; he
(25: 2–4), God is said to order that “the land shall suffered the shameful death of crucifixion. Over-
keep a Sabbath unto the Lord . . .in the seventh all, in the footsteps of Jesus as the role model and
year shall be a Sabbath for the Lord; thou shalt in whichever the course of action is taken, the
neither sow thy field, nor prune thy vineyard.” Christians are called to be humble, help, and love
fellow human beings, as well as to devote time,
Promoting Human Rights and effort, and money to causes that improve
Charitable Values the world and the life of those in it. Good works
Sweatshops, child labor, and exploitation of labor are not only a requirement or requisite of Chris-
with meager or unsatisfactorily low wages by tian life and a path to unity with Jesus; they also
employers are to be avoided. The Catholic give the opportunity to work for justice and
Church teaches that “the dignity of the human equality on a political stage.
person is rooted in his creation in the image and Pope John Paul II has often been credited with
likeness of God” (Catechism of the Catholic having played a pivotal role in the downfall of
Church, cited in Keeler, Grimbly, and Wiggins communism in Europe in the late of 1980s. How-
2005: 232). Charity is a virtue that exposes or ever, he clarified that his words and actions in
places people to love God above all else and to supporting the Polish Labor Union Solidarity at
include their neighbors as part of that love. that time was not against one system, but he was
There is a definite need to give to and share indeed in favor of the basic rights of every man
with others. and woman. For the Pope (Karol Wojtyla), these
The obligations to give to others are rooted in rights include the right to participate in social life,
the message of the Gospels. Jesus says, “You the right to the truth, the right to join free associ-
shall love your neighbors as yourself” (Matthew ation and assembly, and also various economic
22: 29). Jesus tells people to treat their neighbors and professional rights. Furthermore, the Pope
as they themselves would like to be treated. The believed that a just and peaceful society
Church holds this message in mind as it cham- depended on every member of the community
pions and lobbies in political forums, publishes or nation respecting the dignity of every other
encyclicals, and sends its charities out to work in member and working for the common good.
the world. It seeks the unity of humankind He once remarked, “When human rights are
through a union of the spirit and the cultivation ignored or scorned and that when the pursuit of
of equality for all people. individual interests unjustly prevails over the
In line with Jesus’ teachings, Christians common good, then the seed of instability;
believe that each good deed done for the rebellion and violence are inevitably sown”
benefit of other person is also done for Jesus (Burke 2000: 156).
Christ – after all, the person in need is a child of A paradigm of Christian practices in promot-
God. The Church calls this service toward others ing human rights and charitable virtues is that of
C 350 Christianity and CSR

the works of the late Mother Teresa of Calcutta. Himself the hungry one, the naked one, the home-
Mother Teresa of Calcutta established the less one, the sick one, the one in prison, the lonely
Missionary of Charity which consists of homes one, the unwanted one, and He says: ‘You did it
for women, for orphaned children, and for the to me.’ He is hungry for our love, and this is the
dying; an AIDS hospice; a school for street hunger of our poor people. This is the hunger that
children; and a leper colony. What more, Mother you and I must find. It may be in your own
Teresa’s Missionaries of Charity had grown from home. . .” (Rai and Chawla 1996). To millions,
a one-woman folly in Calcutta in 1948 into Mother Teresa portrayed herself as an image of
a global beacon of self-abnegating care, and the a small woman in a white sari, offering love and
services are provided to people regardless of their compassion to the poorest of the poor. However,
religion or social caste. Mother Teresa, the her speech conveyed her faith, spirituality, and
diminutive nun who straddled her century as simplicity as well as her practical down-to-earth
one of its most towering personalities, was at nature and her understanding of Christian
one level a very simple person and at another practices.
a complex enigma. In modern management par- In the twenty-first century, particularly over
lance, she could well be projected as the past 10 years, social responsibility has come
a management guru who could have presented to be expressed in terms of company social
to the world’s best business schools of social responsibility, community service, the setting up
responsibility, her uniquely evolved model for of charitable organizations, philanthropic foun-
success. With 4,000 nuns, she created dations, and social funds as well as various inno-
a multinational enterprise of service that vative forms of social entrepreneurship, and these
encompassed 123 countries by the time she died have been on the rise. The rising challenges fac-
in 1997 (Chawla 2009). ing our world today include the growing disparity
In 1979, Mother Teresa, in her Nobel Prize or gaps between the rich and the poor, environ-
Acceptance Speech at Oslo, Norway, said, “. . . mental degradation, illiteracy, and inaccessibility
It is not enough for us to say: ‘I love God, but I do to basic services and public goods by more than
not love my neighbor.’” Mother Teresa also half of the world’s population, and have lead to
added that since in dying on the cross, God had a sense of urgency among the privileged or
“(made) himself, the hungry one – the naked the-haves and the various religious groups
one – the homeless one.” And “Jesus’ hunger is including the Christians to return, be answerable
what you and I must find” and alleviate. She also and improve the conditions of their surrounding
condemned abortion and bemoaned youthful communities and environment.
drug addiction in the West (Mother Teresa cited Jesus was born to a peasant family in Galilee,
in Van Biema 2007: 26). St. John said that “you and he attracted a ragtag following of fishermen
are a liar if you say you love God and you don’t and farmers. He preached that wealth and mate-
love your neighbor. How can you love God whom rialism not only was not the way to heaven and
you do not see, if you do not love your neighbor enlightenment but that worldly riches interfere
whom you see, whom you touch, with whom you with humans’ attempt to lead a good life. Jesus
live? And so this is very important for us to spoke of detachment from personal possessions,
realize: that love, to be true, has to hurt. It hurts and personal enrichment was found in heaven
Jesus to love us. It hurts him. And to make sure rather than in the marketplaces of the world. He
we remember His great love, He made Himself spoke of no slave can serve two masters, one
the bread of life to satisfy our hunger to His cannot serve God and wealth (Luke 16: 13).
love – our hunger for God – because we have When a man ran up and knelt before Jesus and
been created for that love. We have been created said that he had observed and followed the com-
in His image. We have been created for love and mandments since youth and that he would like to
be loved, and He had become Man to make it know about how to have eternal life, Jesus
possible for us to love as He loved us. He makes looking upon him loved him and said to him,
Christianity and CSR 351 C
“You lack one thing; go, sell what you have, and their flaws, so that their opposites seemed more
give the money to the poor, and you will have precious than they. He was the founder of the
treasure in heaven; then come, follow me.” At Order of Friars Minor, more commonly known
that saying, his countenance fell, and he went as the Franciscans. And today, St. Francis is most
away sorrowful, for he had great possessions. widely known for his sermon to birds; and for
And Jesus looked around and said to his disciples, this, he is known as the patron saint of animals
“How hard it will be for those who have riches to and the environment (House 2000). C
enter the kingdom of God!” And the disciples In terms of the Catholic Church, it is said that
were amazed at these words. But Jesus said to in Brazil, Ms. Chiara Lubich’s thoughts and
them again, “Children, how hard it is to enter the actions sparked the Focolare Movement, which
kingdom of God! It is easier for a camel to go in 1991 birthed a new business philosophy called
through the eye of a needle than for someone who the Economy of Communion, which promotes
is rich to enter the kingdom of God.” They were operating a business both to make a profit and
greatly astounded and said to one another, “Then benefit society.
who can be saved?” Jesus looked at them Pope Benedict XVI’s social encyclical praises
and said, “For mortals it is impossible, but not such alternative business thinking, because its top
for God; for God all things are possible” priority is not to rack up large profits solely for
(Mark 10: 21–26). a company and its employees.
Here we once again run into the notions of “Once profit becomes the exclusive goal, if it
human detachment for a simpler life that is free is produced by improper means and without the
from desires and worries and of what it means to common good as its ultimate end, it risks
serve the world. Jesus highlighted, “Therefore destroying wealth and creating poverty,” the
I tell you do not be anxious about your life, pope wrote in his encyclical “Caritas in Veritate”
what you shall eat, nor about your body, what (“Charity in Truth”).
you shall put on. Is not life more than food, and The Pope has stressed on the point that man-
the body more than clothing? Look at the birds of kind or human beings are more important than
the air; they neither sow nor reap nor gather into capital, and he places the highest price on the
barns, and yet your heavenly father feed them. . . integrity of every human person. He has also
Therefore do not be anxious about tomorrow expressed that in recent decades, “a broad inter-
for tomorrow will be anxious of itself. Lets the mediate area has emerged” between companies
day’s own trouble be sufficient for the day” that are solely profit-based and those that are
(Matthew 6: 25–34). Thus, one is to be detached nonprofit: companies that “do not exclude” profit
from the worldly possessions, one would have to but consider it “a means for achieving human and
put one’s faith and trust in God. This is similar to social ends” (Abrams 2009).
the birds who do not worry of what they have to It is said that worldwide, there are 754 busi-
eat for the day as they are totally dependent on nesses involved in the Economy of Communion
God’s grace and His providence of nature. initiative.
Following Jesus’ teachings centuries later, The business owners need to be socially
St. Francis of Assisi (1182–1226 A.D.), responsible, yes, they still want to make a profit,
a Catholic deacon and a preacher, renounced but they distribute their profits differently from
both money and possessions at the age of 24. other businesses. The numbers of these busi-
This, combined with his honesty, humility, and nesses is not so important but what is more crit-
courage, released him from the burdens and ical is that they serve as good role models of
restraints of worldly conventions and left him doing business in a viable and responsible way
free to carry out his belief in God, in Jesus as (Abrams 2009).
the Son of God. His song was love and he tossed One of the key issues is that when things are to
up society’s most cherished possessions – rank, be done or carried out, they are to be done for the
wealth, fame, reputation, and power – exposing greater good of the members of the Christian
C 352 Christianity and CSR

community, presumably in line with the Christian in developing countries and/or sponsoring some
principles, or for the greater good of the bigger awareness events including posting Internet arti-
and wider society. Therefore, issues such as abor- cles and printing simple leaflets [which could
tion, birth control measures, and stem cell exper- include facts and figures to end sex trade/traffick-
iments are put in the crucible, being examined ing, prostitution, pornography, and child sex
and discussed to determine the stand of Christian- tourism].
ity [the Church(es)] as well as how, in the spirit of Street children (they are human beings who
continuous improvement, to attain the greater need the basic human rights too), particularly in
goal of the common good. developing countries, can also be attended to.
As the number of priests and clergymen Companies can also help to improve their welfare
increases with time, it is of great importance to and thus fulfilling their CSR while contributing to
make sure that they have proper spiritual and the society’s well-being. The families of street
self-discipline education and training to help children are often too poor to feed an extra
them to live up to the Christian Faith and Prac- mouth, and among other things, companies can
tices. This kind of education, training, and culti- help by giving meals, books/educational
vation is very much needed so that the priests resources, and old toys and improve their welfare.
and the faithful can work together living up to Besides street children, companies can also
Christian expectations and seek up the Christian help prisoners by sending them books so that
Churches’ image and reputation without they can educate themselves to a get a high-
betraying the trusts of the faithful and the overall school diploma or a college degree.
public. For the betterment and future of the churches,
recruitment of church priests and clerics
should be properly screened and examined.
Future Directions Effective standards, procedures (though it be
bureaucratic – but such procedures may have its
One of the chief challenges faced is that of giving beneficial control effects), and guidelines should
back or returning to the community and attaining be carefully followed and monitored by the
the goal of greater common good yet subscribing churches so that a good population of up-to-
to and upholding the Christian guidelines and, in standard and well-disciplined priests and clerics
fact, to some Christian denominations to preserve can keep and maintain the church’s system and
the sacred cows or religious traditions. There image.
is certainly a need to give to and share with
others, and realistically translating these into
actions, unencumbered by the religion’s own
sacred cows or the country’s political obstacles.
Jesus said, “Whoever welcomes one of these
▶ Buddhist Ethics and CSR
little children in my name welcomes me; and
▶ Confucian Ethics
whoever welcomes me does not welcome me
▶ Islamic Ethics and CSR
but the one who sent me” (Mark 9: 37). There-
▶ Trust and CSR
fore, child prostitution, like child slavery, should
not be simply accepted or tolerated. It is a gross
abuse of the human rights of those who are least
able to do anything. Whoever one is and whatever References and Readings
one does, one should and must do something
about it. Just imagine if it happened to one when Abrams, J. (2009). Encyclical brings light to economy of
communion movement. Washington, DC: Catholic
one were young or to one’s own child. Individ- News Service (CNS).
uals and companies alike need to raise public Adrian House. (2000). Francis of Assisi. London: Chatto
awareness such as sponsoring children education & Windus.
Christine Parker 353 C
Burke, G. (2000). John Paul II, An invitation to joy, 2006–2011 Australian Research Fellow, Melbourne Law
selections from the writings and speeches of his holi- School, University of Melbourne (Funded by
ness John Paul II. New York: Simon& Schuster. the Australian Research Council to research
Chawla, N. (2009). The mystery of Mother Teresa. The only for 5 years)
Hindu Newspaper, New Delhi, India. http://beta.
2005–2006 Associate Professor and Reader, Melbourne
thehindu.com/opinion/lead/article9166.ece. Accessed
Law School, University of Melbourne
20 July 2010.
Cheng, P. L. K. (2008). Leadership thoughts to build your 2002–2005 Senior Lecturer, Melbourne Law School,
life on – Leading, the Jesus way. Leadership & Orga- University of Melbourne C
nizational Management Journal, 2008(4), 1–12. 2002–2003 Research Fellow, Centre for Competition
Keeler, H., Grimbly, S., & Wiggins, J. B. (2005). 101 and Consumer Policy, Research School of
things everyone should know about Catholicism. Can- Social Sciences, Australian National
ada: Adams Media and F & W. University
Rai, R., & Chawla, N. (1996). Faith and compassion, the 2000–2002 Senior Lecturer, Law Faculty, University of
life and work of Mother Teresa. Shaftesbury, Dorset: New South Wales
Element Books. 1998–1999 Postdoctoral Fellow, Law Faculty,
Reverends Killgallon, J., Weber, G., & Ziegmann, L. University of New South Wales
(1983). Life in Christ. Chicago: Acta Foundation.
1997–1998 Visiting Fellow and Half-time Lecturer,
Sider, R. (1979). Christ and violence. Bristol: Lion
Law Faculty, University of New South
The Jerusalem Bible: TJB. (1967). New testament.
London: Darton, Longman and Todd. 1994–1996 PhD Student and Part-time Tutor, Law,
van Biema, D. (2007, September 3). Her agony. Time, Australian National University
pp. 26–33. 1993–1994 Research Associate, National Institute for
Law, Ethics and Public Affairs, Law Faculty,
Griffith University

Christine Parker Major Contributions

Mia Mahmudur Rahim Professor Christine Parker’s extensive research

Macquarie Law School, Macquarie University, has indebted the legal regulation and governance
Sydney, NSW, Australia scholarship. Her scholarly contribution are in the
issues of socio-legal research on business
responses to legal regulation and social responsi-
Basic Biographical Information bilities, the impact of regulatory enforcement on
business, internal corporate responsibility systems,
Professor Christine Parker is a leading author in lawyers’ ethics, and the regulation of lawyers. Due
the field of legal regulation, governance, and pro- to her dexterity in research and in-depth knowl-
fessional ethics. She did her Bachelor of Arts with edge in regulation scholarship, she has received a
First Class Honors in 1991 and Bachelor of Laws number of major academic research grants in her
with First Class Honors in 1992 in the University areas of research. She also does research work
of Queensland. In 1997, she finished her doctoral and policy advice on a consultancy basis for the
dissertation and earned her Ph.D. from Australian government and regulatory agencies. She is
National University. She started her academic currently working in the issues of:
career while she was a student of law. Now she 1. The United Nation’s respect, protect, and
is a renowned professor of law and teaching in the remedy framework for business and human
Faculty of Law of the Monash University. Her rights
chronological career record is as follows: 2. Competition and consumer protection regula-
tion and compliance
2011–2011 Professor, Centre for Regulatory Studies and
Law Faculty, Monash University 3. The new criminal anti-cartel offense
2011–2011 Professor, Melbourne Law School, 4. Consumer Affairs Victoria on compliance
University of Melbourne strategies for real-estate agents and
(continued) conveyancers
C 354 Christine Parker

She has published extensively and her works boards of Law and Policy and Regulation and
are highly cited in the academic arena. The num- Governance. Currently, she is the cochair of the
ber of her scholarly articles in reputed journals is Law and Society Association’s Collaborative
many. Among her books, the undermentioned are Research Network for Regulatory Governance
prominent: and a Member of Advisory Committee for
1. Explaining Compliance: Business Responses Australian Law Reform Commission reference
to Regulation. (2011). Edward Elgar. on Discovery in Federal Civil Litigation
(Coedited with Vibeke, L. N.) and Enforceable Undertakings Panel, Environ-
2. Inside Lawyers’ Ethics. (2007). Cambridge: mental Protection Authority, Victoria. She was
Cambridge University Press. (Coauthored also related with the Restorative Justice and
with Adrian, E.) Workplace Death Project of the Creative
3. The Open Corporation: Self-regulation and Ministries Network, Advisory Committee for
Corporate Citizenship. (2002). Cambridge: Australian Law Reform Commission reference
Cambridge University Press on Client Legal Privilege and Federal
4. Regulating Law. (2002). Oxford: Oxford Investigatory Bodies, Cancer Council of
University Press Victoria Legal Policy Advisory Group, Victorian
5. Just Lawyers: Regulation and Access to Legal Ombudsman’s Reference Group, and
Justice. (1999). Oxford: Oxford University New South Wales Bar’s Professional
Press Conduct Committee. In 2008, she was the
With Professor Adrian Evans, she designed Honorary Fellow of the Australasian Compliance
Inside Lawyers’ Ethics to help law students and Institute.
new lawyers to understand and modify their own
ethical priorities; it is not just because this knowl-
edge makes it easier to practice law and earn an Cross-References
income but also because it makes one aware of
lots of related things including self-awareness, ▶ Meta-regulation Approach to CSR
the belief that ethical legal practice is right,
makes him feel better, and above all, enhances
justice. Packed with case studies of ethical scan-
References and Readings
dals and dilemmas from real-life legal practice in
Australia, each chapter delves into the most dif- Christine, P., & Aitken, L. (2011). The queensland work-
ficult issues lawyers face. From lawyers’ part in place culture check: learning from reflection on ethics
corporate fraud to the ethics of time-based bill- inside law firms. Georgetown Journal of Legal Ethic,
24(2), 399–441.
ing, the authors expose the values that underlie
Christine P., Haller L. (2012). Inside running: internal
current practice and set out the alternatives ethi- complaints management practice and regulation
cal lawyers can practice. in the legal profession. Monash University Law
The Open Corporation has already made an Review, 37.
Christine, P., & Nielsen, V. (2011a). The Fels effect: the
immense impact on the traditional scholarship of
impact of business opinions of the ACCC. Griffith Law
corporate regulation. In this seminal book, she Review, 20(1), 91–126.
warns us against institutional reductionism and Christine, P., & Nielsen, V. (2011b). Deterrence and the
underestimation of the complex nature of the impact of calculative thinking on business compliance
with regulation. Antitrust Bulletin, 56(2), 377–426.
personal and institutional relationships which Christine P., & Ruschena D. (2011). The pressures of
comprises the corporation. Her ideas mentioned billable hours: lessons from a survey of billing prac-
in this book give a new insight in the debate on tices inside law firms. St Thomas Law Review. http://
corporate social responsibility from nihilism to ssrn.com/abstract=1790082 or http://dx.doi.org/
10.2139/ ssrn.1790082. Accessed 18 March 2011.
potentially achievable aspiration.
Monash University Law. (2012). Professor Christine
Professor Christine Parker is also the editor of Parker. http://www.law.monash.edu.au/staff/cparker.
the journal, Legal Ethics, and is on the editorial html. Accessed 10 April 2012.
Climate Change 355 C
Climate change, according to the United Nations
▶ Asbestos Framework Convention on this issue, can be
defined as a change in climate which is attributed
directly or indirectly to human activity, which
Cigarettes alters the composition of the global atmosphere, C
and which in the same way as natural climate
▶ Tobacco variability is observed over comparable periods
of time.
It is the greenhouse effect which is causing the
earth to become gradually warmer. Although
Civic or Third Sector greenhouse gases amount to only a very small
part of the atmosphere, they are the cause of
▶ View on the Ground: CSR from a Capabilities what is known as the greenhouse effect. Green-
Approach house gases are located in the upper levels of the
atmosphere. Sunlight is absorbed by these gases
before they are released into space. This creates
Civil Regulation an unnatural warming of the earth known as the
“greenhouse effect” which distorts the natural
▶ Ethical Trading Initiative balance of the earth’s climate systems. There
are a number of factors which cause an abnormal
accumulation of greenhouse gases, the most
important of which is the use of fossil fuels.
Civil-Society Organizations (CSO) Any postponement of measures to curb the use
and CSR of these fuels will lead to irrecoverable situations
with the excessive accumulation of greenhouse
▶ NGOs and CSR gases deepening the problems by depleting the
ozone layer.
Climate change implies the changes have
large-scale and local-regional effects on climate
Clean Technology over a period of time. Changes become apparent
not only through increase in temperatures but
▶ Sustainable Primary Energy Production also through changes in rainfall regimes. Since
economic forecasts, future developments in
technology, and population growth are still
unclear, it is difficult to predict exactly which
Climate Change regions of the world will be affected by climate
change and the degree and rate at which these
Yunus Emre Özer changes might happen. However, one thing is
Faculty of Economics and Administrative certain: the demand for energy will increase
Sciences, Public Administration Department, even more in the next 25 years, and this energy
Dokuz Eyl€ ul University, Buca İzmir, Turkey will be mainly sourced by fossil fuels.
According to the data of the 2009 International
Energy Agency (IEA) report, about 40% of CO2
Synonyms emissions are produced by the energy sector.
This situation shows that if no measures are
Climatic change; Global climate change taken, the effects of climate change will not
C 356 Climate Change

diminish by themselves. When the action and and questions began to emerge (Hulme and
policymaking related to climate change is con- Mahony 2010).
sidered, global cooperation, awareness of In the late 1980s, studies by the United Nations
energy conservation, use of appropriate technol- and other institutions were carried out in order to
ogies, and the production of measurable data are reduce the negative impact of humans on climate
all important issues which need to be change. The “United Nations Framework Conven-
emphasized. tion on Climate Change” which appeared on the
agenda of the international community at the
United Nations Rio Summit in 1992 is recognized
Introduction as a broad acceptance of issues related to the envi-
ronment. In 1994, a contract on sustainable devel-
The world has experienced changes of cooling opment was drawn up. It included measures to
and warming of its climate since its formation. In minimize the effects of climate change with the
retrospect, it is evident that the Athens Charter, cooperation of all countries. Greenhouse gases
which appeared in the 1930s, was probably the were not defined in this context. Under this agree-
first document proposing environmental protec- ment, two annexes were created to clarify respon-
tion of air, plant life, and sun as one of its themes. sibilities. The country parties assigned to Annex
However, toward the end of the twentieth cen- I were Australia, Austria, Belarus, Belgium,
tury, human impact on climate change was Bulgaria, Canada, Croatia, the Czech Republic,
becoming increasingly evident. However, this Denmark, the European Economic Community,
impact was clearly revealed for the first time in Estonia, Finland, France, Germany, Greece,
the World Climate Conference in 1979. In the Hungary, Iceland, Ireland, Italy, Japan, Latvia,
1970s, the effects of chlorofluorocarbons Liechtenstein, Lithuania, Luxembourg, Monaco,
(CFCs) and other ozone-depleting substances Netherlands, New Zealand, Norway, Poland,
(ODSs) were identified. In the 1980s, the subject Portugal, Romania, Russian Federation, Slovakia,
of human impact on the greenhouse effect was Slovenia, Spain, Sweden, Switzerland, Turkey,
agreed upon in a scientific sense. During these Ukraine, the United Kingdom of Great Britain and
years, sensitivity toward ozone depletion and cli- Northern Ireland, and the United States of America.
mate change increased. In 1987, the Montreal According to the United Nations Framework
Protocol demanded the gradual reduction of the Convention on Climate Change, the member
use of substances that were causing the depletion parties of Annex I committed themselves to adopt
of the ozone layer. national policies and take corresponding measures
In 1988, IPCC (the Intergovernmental Panel on the mitigation of climate change by limiting its
on Climate Change) was established with the anthropogenic emissions of greenhouse gases and
contributions of scientists from many countries protecting and enhancing its greenhouse gas sinks
in the world. The main aim of IPCC was to and reservoirs. Countries in this context were
investigate human influence on the greenhouse responsible for reducing greenhouse gas emissions
effect and provide scientific information for to the level of the 1990 level by the year 2000. The
reducing climate change. At the same time within member parties of Annex II, Australia, Austria,
the framework of this information, IPCC made Belgium, Canada, Denmark, European Economic
recommendations in terms of scientific, techni- Community, Finland, France, Germany, Greece,
cal, and socioeconomic areas related to climate Iceland, Ireland, Italy, Japan, Luxembourg,
change. In addition, they prepared assessment Netherlands, New Zealand, Norway, Portugal,
reports, technical papers, and methodologies for Spain, Sweden, Switzerland, the United Kingdom
the use of policymakers, scientists, and other of Great Britain and Northern Ireland, and the
experts. Following the reports prepared by United States of America, were assigned the same
IPCC, climate change policies were understood responsibilities as those in Annex I. According to
to be inadequate at the international level the United Nations Framework Convention on
Climate Change 357 C
Climate Change, “the developed country Parties 92, Netherlands 92, New Zealand 100, Norway
along with other developed Parties included in 101, Poland 94, Portugal 92, Romania 92, Russian
Annex II, shall provide new and additional financial Federation 100, Slovakia 92, Slovenia 92, Spain 92,
resources to meet the agreed full costs incurred by Sweden 92, Switzerland 92, Ukraine 100, the
developing country Parties in complying with their United Kingdom of Great Britain and Northern
obligations in the Convention. The developed Ireland 92, and the United States of America 93.
country Parties and other developed Parties According to the article 3/1 of the Kyoto C
included in Annex II shall also provide such Protocol, the parties included in Annex I
financial resources, including those for the transfer (Australia, Austria, Belarus, Belgium, Bulgaria,
of technology, needed by the developing country Canada, Croatia, the Czech Republic, Denmark,
Parties to meet the agreed full incremental costs of the European Economic Community, Estonia,
implementing measures. The developed country Finland, France, Germany, Greece, Hungary,
Parties and other developed Parties included in Iceland, Ireland, Italy, Japan, Latvia,
Annex II shall also assist the developing country Liechtenstein, Lithuania, Luxembourg, Monaco,
Parties that are particularly vulnerable to the Netherlands, New Zealand, Norway, Poland,
adverse effects of climate change in meeting costs Portugal, Romania, Russian Federation, Slovakia,
of adaptation to those adverse effects. The devel- Slovenia, Spain, Sweden, Switzerland, Turkey,
oped country Parties and other developed Parties Ukraine, the United Kingdom of Great Britain
included in Annex II shall also assist the developing and Northern Ireland, and the United States of
country Parties that are particularly vulnerable to America) “shall, individually or jointly, ensure
the adverse effects of climate change in meeting that their aggregate anthropogenic carbon dioxide
costs of adaptation to those adverse effects.” The equivalent emissions of the greenhouse gases listed
United Nations Framework Convention on Climate in Annex A (carbon dioxide (CO2), methane
Change could not reach the predicted targets (CH4), nitrous oxide (N2O), per fluorocarbons
because firstly the agreement was not binding (PFCs), hydro fluorocarbons (HFCs), sulpfur
and secondly numerical targets for the year 2000 hexafluoride (SF6)) do not exceed their assigned
were unclear. amounts, calculated pursuant to their quantified
After the United Nations Framework Conven- emission limitation and reduction commitments
tion on Climate Change, the subsequent and the inscribed in Annex B and in accordance with the
most important development relating to climate provisions of article 3/1 of Kyoto Protocol, with
change was the Kyoto Protocol adopted in 1997 a view to reducing their overall emissions of such
to control gas emissions. In Annex A of this proto- gases by at least 5% below the 1990 levels in the
col, the greenhouse gases accepted as being detri- commitment period 2008–2012.” Developing
mental were listed as follows: carbon dioxide countries that are not included in Annex I had no
(CO2), methane (CH4), nitrous oxide (N2O), such responsibilities in reducing their overall emis-
perfluorocarbons (PFCs), hydrofluorocarbons sions of such gases within this period. Developing
(HFCs), and sulfur hexafluoride (SF6). Annex countries that were not included in Annex I were
B showed details of the quantified emission obliged to give a greenhouse gas inventory each
limitation or reduction commitments of some year. It is clear that the main responsibility and
countries as a percentage of that of the base year. liability of reducing the effects of global warming
These commitments by member parties of Annex and climate change in the Kyoto Protocol were
I were as follows: Australia 108, Austria 92, based on the Annex I countries. In addition, the
Belgium 92, Bulgaria 92, Canada 94, Croatia 95, protocol planned to develop policies to prevent
Czech Republic 92, Denmark 92, Estonia 92, the climate change within the understanding of the
European Community 92, Finland 92, France 92, cooperation and implement these policies. Also
Germany 92, Greece 92, Hungary 94, Iceland 110, they would contribute to the exchange of informa-
Ireland 92, Italy 92, Japan 94, Latvia 92, Liechten- tion on climate change by “raising awareness.”
stein 92, Lithuania 92, Luxembourg 92, Monaco The Kyoto Protocol set more concrete targets
C 358 Climate Change

than the United Nations Framework Convention inadequate. Its lack of success was blamed on
on Climate Change, thereby demanding greater the delay in its application which was a result of
obligator responsibilities. the reduction in carbon dioxide emissions by
The purpose of the “clean development Annex I parties not being achieved without the
mechanism” included in the Kyoto Protocol is to inclusion of the Russian Federation. In addition,
assist parties not included in Annex I in achieving two countries, Japan and Russia, objected to the
sustainable development and in contributing to the extension of the Kyoto Protocol. Therefore,
ultimate objective of the United Nations negotiations for post-2012 were negatively aff
Framework Convention on Climate Change and ected at COP 16. One positive aspect of COP 16
to assist parties included in Annex I in achieving was the acceptance of the Green Climate
compliance with their quantified emission Fund which will be introduced in 2020
limitation and reduction commitments. (Decision 1/CP.16 of COP 16). Through this f
Although the Kyoto Protocol was signed in und, the sum of $100 billion will be transferred
1997, it did not come into force until 2005 to the developing countries annually by
because according to article 25/1 of the protocol, developed countries, and in addition, issues of
entry into force is possible only if 55 parties to the meaningful mitigation actions and transparency
convention, included in Annex I, which on implementation will be supported.
accounted in total for at least 55% of the total The increase in greenhouse gases is not the
carbon dioxide emissions for 1,990 of the parties, problem of one country alone. The problem
have deposited their instruments of ratification, is global and will have to be solved by global
acceptance, approval, or accession. This changed consensus and cooperation among countries.
when Russia became party to the protocol, thus The many international and supranational
allowing 55% to be achieved. organizations engaged in climate change studies
After the Kyoto Protocol for 2012, processes are therefore important platforms in this context.
and changes in climate were addressed by countries Of these, the United Nations is the key actor in
at meetings of the Conference of the Parties to the climate change issues on the international
Convention (COP). At COP 11, which became the agenda. UNDP’s (United Nations Development
first conference of the parties of the Kyoto Protocol, Program) 2011 report entitled “Adapting to
a 5-year action plan on climate change was adopted Climate Change” argues that the UNDP has
(Decision 2/CP.11). At COP 12, the second confer- been operating in 166 countries to minimize the
ence of the parties of the protocol, organized in effects of climate change and to prevent it. The
2006, it was decided that the Kyoto Protocol UNDP helps developing countries put in place
would continue to apply after 2012 without inter- the elements needed for a decent standard of
ruption. At COP 15 in Copenhagen, the need for an living and aid people’s ability to withstand
international climate change agreement was climate change. UNDP also supports poor people
announced for the period following 2012 (Decision in adapting to climate change since reducing
1/CP.15). The necessity of bringing international poverty and tackling climate change need to
public opinion to the agenda was emphasized by go hand in hand. UNDP works together
negotiation of a new climate change contract. with the least developed countries who are most
COP 16 was organized in Mexico. At this meeting, vulnerable to climate change and whose
it was revealed that no international progress economic growth highly depends on climate-
on climate change had been achieved, the EU’s sensitive sectors in order to adapt their national
leadership on climate change had failed, poverty programs by developing their technol-
and countries had reverted to small-scale ogy, adaptation, and mitigation activities. For
and regional agreements (http://www.tobb.org.tr/ example, the Global Environment Facility
AvrupaBirligiDairesi/Dokumanlar/Raporlar/cop16.pdf). (GEF) assists developing countries and transition
In addition, the Kyoto Protocol, which ceases be countries to cope with the adverse effects of
obligatory in 2012, is considered to be climate change. GEF aims to support developing
Climate Change 359 C
countries to increase their resilience to climate countries. The report also claims that climate
change through both immediate and longer term change could be prevented in both rich and poor
adaptation measures in development policies, countries by the reduction of greenhouse gases.
plans, programs, projects, and actions. According Especially in developing countries, if action on
to the UNDP’s 2011 report, the GEF has invested climate change is postponed, expenditures on this
more than $3 billion and leveraged close to $20 issue will be double. The World Bank is clear that
billion for climate change projects over the on the issue of climate change, they should act C
last 20 years. together with the governments. Long-term plans
The European Union recognizes that climate should be made to impact climate change. The
change is a global problem, but it is the duty of World Bank maintains that energy policies must
industrialized countries in particular to undertake be resolved by resorting to other means of energy
concrete obligations. In 2007, the European such as nuclear energy. The OECD works closely
Union endorsed an integrated climate change with governments to help them identify and imple-
and energy policy. In accordance with this, mea- ment least-cost policies to reduce GHG emissions
sures must be taken immediately and effort and thereby limit global warming, as well as to
exerted before climate change reaches dangerous integrate adaptation to climate change into all rele-
levels. In this context, the increase in temperature vant sectors and policy areas. The 2010 report on
will not exceed the level of 2  C compared to the “Climate Change” states that its Climate Change
period prior to industrialization. The European Expert Group is available to help with negotiations
Commission report of 2008 on climate change for the post-2012 period. This group of experts
entitled “Leading Global Action to 2020 and works on issues such as those related to climate
Beyond” claims that global emissions of green- change which include technology innovation,
house gases will have to be stabilized by around reporting, and verification.
2020 and then reduced to at least 50% of the 1990 Therefore, regarding climate change, it should
levels by 2050. The same report states that if the be emphasized that achievements can only be
major producers of emission step into action, this reached on an international level with the support
target is technically feasible and economically of international and supranational agencies.
affordable. It also commits to putting the world
on track to reduce global emissions by at least
half of the 1990 levels by 2050. Developed coun- Key Issues
tries collectively will need to cut their emissions
to 30% at least of the 1990 levels by 2020 and by The “IPCC Third Assessment Report: Climate
60–80% by 2050. The EU heads of state and Change 2001” shows that since the twentieth cen-
government made a commitment in March 2007 tury, the average global temperature has increased
that the EU will cut its emissions to 30% of the from 0.5  C to 0.8  C and that it is expected to
1990 levels by 2020. This commitment will be increase from 1.4  C to 5.8  C by the end of the
achieved at the global level with the help of twenty-first century. The major effects of climate
contributions by the other developed countries. change in the most general sense are the melting of
Even if there is no reconciliation at the global polar ice, the rise of the average global air and
level, the EU commits to cut emissions by at least ocean temperatures, the rise in sea levels, the
20% of the 1990 levels by 2020. It expects the decrease of ocean pH and the reduction of oxygen
participation of all countries but particularly levels, economic devastation derived from environ-
those producing heavy carbon emissions in nego- mental changes, the warming up of ocean waters,
tiations on post-2012. the loss of homes, the erosion of land, air pollution,
The “World Development Report 2010” of the floods, drought, and diseases (Özt€urk 2002).
World Bank states that development goals are Moreover, climate change will have a negative
threatened by climate change. The effects of cli- impact on the basic elements of daily life such as
mate change are felt most heavily by poor the physical and natural environment, technology,
C 360 Climate Change

economics, agriculture and food, reduction of crop The poorest countries and communities are
yield, tourism, fisheries, drought, health, forest affected most because of their geographic loca-
fires, and clean water. tions, low income, and low institutional capacity,
Generally, industrialization is accepted as the as well as their greater reliance on climate-
major reason for climate change. Although that is sensitive sectors such as agriculture (Nath and
true, human impact should also be considered as Behera 2011). For example, climate changes
a stronger basis for accumulation of gases such as have caused huge economic losses in agriculture
carbon dioxide and methane. Therefore, it would in places such as Africa which result in hunger and
make sense to show the human impact rather poverty. On this subject, the Food and Agriculture
than industrialization as the primary cause of Organization of the United Nations (FAO) is lead-
climate change. ing international efforts to defeat hunger. Serving
Climate change may affect different places both developed and developing countries, FAO
and communities to varying degrees. Socioeco- acts as a neutral forum where all nations meet as
nomic characteristics of urban areas differ from equals to negotiate agreements and debate policy.
those of rural areas. And effects of climate According to the report of FAO “Climate Change
change in urban areas are likely to be more and Food Security in the Context of the Cancun
dangerous than in other areas. Cities will become Agreements – FAO submission to the UNFCCC,”
less comfortable places (Lindley et al. 2006) as it FAO also works on effects caused by climate
impacts infrastructure, human lives, human change. It also points to the areas where adaptation
health, personal property, environmental and mitigation activities merge with ongoing
quality, and future prosperity. While large development efforts to improve sustainable use of
populated cities such as those in south Asia are natural resources for increased production, income,
the most vulnerable, the 2008 European Commis- food security, and rural development. FAO con-
sion Report, “Adapting to Climate Change,” siders climate change as one of the most important
states that climate change will also affect threats in terms of food security which is threatened
European cities. Southern Europe and the by the loss of agricultural land. In addition to this,
Mediterranean basin area are sensitive areas in countries with water scarcity problems, it may be
with regard to high-temperature increases and even more difficult to provide security. Besides
the threat of drought. The European Union water problems between countries, issues of water
foresees that agriculture, tourism, fisheries, and sharing and distribution between sectors are likely
forestry sectors can all be affected by climate to emerge between countries.
change. Another problem encountered with climate
The social impacts of climate change vary change is desertification. In addition, incidents
according to age, socioeconomic class, occupa- of drought are likely to increase, thereby limiting
tions, and gender. The world’s poorest people agriculture and necessitating the development of
will be most affected by these changes because durable and appropriate agricultural products.
of corruption. The UNDP defines corruption as Irrigation systems will need to be changed, and
misuse of entrusted power for private gain. For farmers not prepared for drip irrigation methods
this reason, improper use of funds by administra- are likely to face economic loss. Groundwater
tors can affect poorer people by leaving them will decrease and to reach it may be a costly
victims of climate change. In the 2011 report of process (Cangir and Boyraz 2008).
the UNDP, “Adapting to Climate Change,” it A further consideration is the effect of climate
states that the least developed countries need change on human health which has risen to
most support in fighting the effects of climate a serious level in recent years. Microbes and the
change. Ironically, we have to accept that coun- distribution of infectious diseases are affected by
tries and groups which cause the least climate climatic changes. Cancer, cardiovascular, and
change will be influenced most severely by cli- respiratory diseases, allergic diseases, food- and
mate change. water-borne diseases, air pollution–related
Climate Change 361 C
diseases, epidemic diseases, malaria, dengue, Future Directions
diarrhea, and mental health problems associated
with temperature can all be fatal diseases. The The effects of climate change are not national;
lack of clean water and problems of hygiene they are global. In other words, the problem does
resulting from climate change are marked. Chil- not only concern one country, but the whole
dren, pregnant women, and the elderly population world. Therefore, participation and negotiation
are the groups most likely to be affected by these on a global level are imperative for post-2012. C
problems. For example, poverty and ill-health in At the same time, social participation is crucial in
Southeast Asia and Africa will be exacerbated. In order to minimize greenhouse gas emissions in all
addition, cities are more vulnerable to climate- development plans, programs, and projects
change-related health effects because of their whether initiated by multilateral agencies, gov-
intensive population and infrastructure, the phys- ernments, or the private sector (Braun 2010).
ical (geographical, material, and structural) attri- Global participation by all actors for reducing
butes of the built up environment, and the the effects of climate change is vital. Such
ecological interdependence with the urban eco- a situation will provide the creation of incentives
system (Bambrick et al. 2011). The 2008 report of for reducing climate change and planning the
WHO (World Health Organization) “Protecting way forward in developing countries (and
the Health from Climate Change” states that maybe for non-Kyoto members) for post-2012.
small island developing states and urban In general, for the post-2012 period, setting tar-
populations, particularly those of tropical mega gets for reducing the use of greenhouse gases,
cities, are exposed to a combination of health improving and broadening the global carbon mar-
risks such as heat waves, floods, infectious dis- ket, innovation, and technology transfer (low-
eases, and air pollution; mountain populations are carbon technology), and financing international
at increased risk of water insecurity, floods and adaptation are necessary (Derviş and Jones
landslides, and infectious disease; and the health 2009). Moreover, the experience of developed
of indigenous people in polar regions may be and developing countries shows that adaptation
affected by changes in temperature, food sources, strategies work better when there is a synergy
and livelihoods. According to the report, protec- between climate change initiatives with other
tion of human health should be the main theme of socioeconomic goals and policies (Nath and
climate change studies. Behera 2011).
There are also economic impacts of climate In order to assess the impacts of climate
change. Efforts for reducing greenhouse gas change and to develop suitable adaptation and
emissions to avoid climate change involve signif- mitigation policies, accurate climate change pre-
icant costs. Without financial input now, the cost dictions are needed at the global and, more
arising in the future will be greater and sustain- importantly, the regional and local levels (Giorgi
able development goals will not be reached. Fur- 2005). Increasingly, local governments are devel-
ther climate changes will affect long-term oping innovative policies and programs to
economic plans in certain sectors; for example, address global climate change. A growing body
tourist areas may become less attractive. In sum- of scholarship explores local government behav-
mary, climate change is a factor that may prevent ior with respect to sustainability initiatives and
the realization of sustainable development. involvement in climate change programs and net-
It can therefore be seen that humanity is the works in the United States and elsewhere (Sharp
main destructive factor in climate change. et al. 2010).
Responsibilities differ from local to international In order to reduce the effects of climate
level, but cooperation is the most important key- change, the search for new technology is continu-
word. Cooperation of actors at all levels has to be ing. Solar and wind energies can be problematic
evaluated in the context of corporate social in terms of cost and integration into the energy
responsibility. system. However, cell-to-fuel cells, biomass
C 362 Climate Change Protocol

energy, hydrogen energy, carbon capture and change in the urban environment: Assessing climate
storage, second-generation biofuels, geothermal change related risk in UK urban areas. Journal of Risk
Research, 9(5), 543–568.
power plants, and recycling plants are all exam- Nath, P. K., & Behera, B. (2011). A critical review of
ples of new fields of research. The use of cheap impact of and adaptation to climate change in devel-
and polluting energy sources like coal must be oped and developing economies. Environment, Devel-
restricted by governments who should encourage opment and Sustainability, 13, 141–162.
urk, K. (2002). K€
uresel iklim değişikliği ve T€
alternative incentives such as those mentioned € Gazi Eğitim Fak€
olası etkileri. G.U. ultesi Dergisi,
above, as well as turning to cleaner forms of 22(1), 47–65.
transportation. However, the most important Sharp, E. B., Daley, D. M., & Lynch, M. S. (2010).
way forward is to increase general awareness of Understanding local adoption and implementation of
climate change mitigation policy. Urban Affairs
the problems, and this can best be addressed Review, 47(3), 433–457.
through education. Tanlay, I. (2010). Cancun iklim değişikliği zirvesi –
değerlendirme notu. Resource document. T€ urkiye
Odalar ve Borsalar Birliği. http://www.tobb.org.tr/
Cross-References Accessed 23 Feb 2012.

▶ Carbon Emissions
▶ Global Warming Climate Change Protocol
▶ Greenhouse Gases
▶ Kyoto Protocol ▶ Kyoto Protocol
▶ Mitigation
▶ United Nations Intergovernmental Panel on
Climate Change
Climatic Change

▶ Climate Change
References and Readings

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Environment, Development and Sustainability, 12,
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CH-8400 Winterthur approach in doing this, focusing on the long-term
Switzerland consequences of growing global interdependence
www.clubofrome.org and applying systems thinking in order to under-
Email: info@clubofrome.org stand why and how it was happening. This was
how the Club of Rome was born. In 1972, the
campaigns of this growing group of like-minded
Introduction individuals gained a new worldwide recognition C
with the first report to the Club of Rome: “The
The Club of Rome is an independent, not-for- Limits to Growth,” commissioned by the Club
profit organization, headquartered in Winterthur, from a group of systems scientists at the Massa-
Switzerland, with a European Support Centre chusetts Institute of Technology. The report
located in Vienna, Austria. The Club of Rome is explored a number of scenarios and stressed the
at the forefront of debate in assessing the nature choices open to society in order to reconcile
and consequences of the changes which confront sustainable progress within the prevailing envi-
us and identifying the challenges and pathways ronmental constraints. With its focus on long-
that could lead us to a more harmonious world. term vision and provocative scenarios, the report
The Club of Rome does not attempt to predict the sold more than 12 million copies in some 30
future, but attempts to analyze the potential evo- languages worldwide. Building on this success,
lution and the options available to our world. The the Club of Rome membership grew as it contin-
organization’s knowledge is based upon systems ued to produce reports on the global issues it
thinking and analysis on the one hand and prac- identified. Particularly, the goal of raising
tical actions, options, and opportunities for long-term awareness among world leaders and
change on the other hand. It believes that with decision makers regarding the delicate interac-
rigorous analysis, sound and well-conceived tion between human economic development and
solutions, and political will, it can make the fragility of the planet was achieved, contrib-
a difference. It seeks interested and committed uting to the establishment of Ministries of the
sponsors to join its efforts in what is ultimately Environment in several countries.
a race to ensure that our global civilization During the 1980s, the Club of Rome continued
secures a safer and more hospitable world for all. its high-level work on a global scale. It contrib-
uted significantly to the development of the
concept of sustainability, which has played
The History an important role in highlighting the
interdependence of environment and economics.
In April 1968, a small group of international pro- At the same time, the Club of Rome broadened
fessionals from the fields of diplomacy, industry, the scope of its work and advanced the global
academia, and civil society were invited by an agenda in the fields of education, welfare, and
Italian industrialist – Aurelio Peccei – and environment.
a Scottish scientist – Alexander King – to meet Building on the work of the 1980s, the Club of
in a quiet villa in Rome. It was at this meeting that Rome continued its work in the 1990s by focus-
they discussed the dilemma of prevailing short- ing on major issues such as the Digital Divide
term thinking in international affairs and, in par- between North and South, global governance,
ticular, the concerns regarding unlimited and cultural diversity. Reports such as The
resource consumption in an increasingly Capacity to Govern and Factor Four: Doubling
interdependent world. Each participant in the Wealth – Halving Resource Use and No Limits to
meeting agreed to spend the next year raising Learning were particularly influential during this
the awareness of world leaders and major deci- period in pointing the way towards solutions.
sion makers on the crucial global issues of the This period also saw the emergence of several
future. They would offer a new and original National Associations of the Club of Rome,
C 364 Club of Rome

where interested individuals would pursue Structure of Governance

activities at a national level in line with the
mission of the international Club, expanding the The Club is supported by a network of distin-
involvement in and output of the Club as a whole. guished honorary members and over 30 National
At the beginning of the twenty-first century, Associations, drawn together by a common
international problems such as rising awareness bond: a deep concern for the future of the planet
about global inequalities, the consequences of and for the welfare of future generations. Its
climate change, and the overuse of natural members include academics, business leaders,
resources have proven that the Club of Rome’s former political leaders, senior government offi-
fundamental views are broadly correct and have cials, and concerned individuals. In total, some
revived interest in its activities: unlimited con- 1,500 people around the world are active in the
sumption and growth on a planet with limited work of the Club. The activities of the Club are
resources is unsustainable and indeed dangerous. guided by the general assembly of its members
In recent years, the Club of Rome has embarked which meets once a year. The general assembly
on a whole new range of activities and has mod- elects the members of a small executive com-
ernized its organization and its mission. Its mittee which supervises the activities of the
commitment to finding new and practical ways Club. At present, the Club has two co-
of understanding global problems and turning its presidents, Dr. Ashok Khosla of India and
thinking into action is as strong as ever. Dr. Eberhard von Koerber of Germany, and
In early 2008, the Club of Rome relocated two vice presidents, Professor Heitor Gurgulino
its international secretariat from Hamburg, de Souza of Brazil and Dr. Anders Wijkman of
Germany, to Winterthur (Canton Zurich), Sweden.
Switzerland. It has established a new team and Honorary members and contributors
is working in close cooperation with a number of include Kofi Annan, Jacques Delors, Mikhail
private and educational institutions globally, as Gorbachev, Juan Carlos I King of Spain, among
well as finding new ways to involve the general others.
public. Since May 2008, it has also launched
a new 3-year program, A New Path for World
Development, which will be an important focus
of the Club’s activities until 2012. Activities/Major Accomplishments/

Mission/Objectives/Focus Areas Since its founding, just over 40 years ago, the
Club of Rome has been promoting interdisciplin-
The Club’s mission is to identify the most crucial ary analysis, dialog, and action on fundamental,
problems which will determine the future of systematic challenges which determine the
humanity and to depict and highlight, through future of humanity. The Club is recognized
integrated and forward-looking analysis, the around the world for its early work on the
risks, choices, and opportunities in order to relationship between economic growth and
develop and propose practical solutions to the the environment which was identified with
challenges identified, and to communicate such “The Limits to Growth,” a perspective which
knowledge to policy makers in the public and holds even more weight today than before.
private sectors and also to the general public in Over the years, the Club has engaged in
order to stimulate public debate and effective a series of thoughtful, interdisciplinary, and
action to improve the prospects of the future. independent analysis of many critical issues in
We are a catalyst for informed debate about the world affairs. It has clarified threats, opportu-
options and solutions and a driver of real change nities, and choices and has advanced
in the world. practical solutions by provoking debate, by
Coalition of Environmentally Responsible Economies (CERES) 365 C
briefing top leaders in government, business,
and civil society, and by disseminating publica- Coalition of Environmentally
tions – some of them best sellers – aimed at Responsible Economies (CERES)
informed opinion and the general public. Other
remarkable publications include “Factor Five” by Henry L. Petersen
Ernst von Weizs€acker and “Blue Economy” School of Management, Alliant International
by Gunter Pauli. University, San Diego, CA, USA C
At the Club’s 40th Anniversary Assembly in
June 2008, it launched a 3-year integrated
program of international research and consulta-
tion on the topic “A New Path for World Synonyms
Development.” The program will not only engage
decision makers and experts and provide CSR
them with feasible proposals for action but
will also engage with the public through
a variety of channels. It will be, in part, an Address with Web Link
“open source” program. It will undertake only
a limited amount of original research, drawing www.ceres.org/
on the wide array of available information and
research in progress. It will be implemented in
close collaboration with partner organizations, Introduction
providing a framework through which their
ideas and contributions can be integrated. CERES is a leading coalition made up of envi-
The program will focus on five “clusters” of ronmental, investor, and advocacy groups. The
related issues within the overall conceptual network comprises of over 80 organizational
framework of A New Path for World Develop- members, over 130 nongovernmental organiza-
ment: environment and resources, globalization, tions, and 75 institutional investors with over
world development, social transformation, peace $7 trillion in assets. To be endorsed by CERES,
and security. an organization must commit to a ten-point code
of conduct that is listed within the “CERES”
principles. The CERES principles are a set of
guiding values that assist organizations with
Cross-References their corporate behavior and mandate that their
members measure their performance against each
▶ Coalition of Environmentally Responsible of the principles and issue a public environmental
Economies (CERES) report on an annual basis. CERES declares to be
▶ EABIS (European Academy of Business in one of the leaders for standardized corporate
Society) environmental reporting and has developed
▶ WBCSD guidelines for sustainability. Their Global
Reporting Initiative (GRI), a voluntary standard-
ized reporting mechanism for sustainability, has
received considerable recognition.
References and Readings

http://www.bibliotecapleyades.net/esp_sociopol_clubrome. Brief History

htm. Accessed 18 Oct 2011.
frome.htm. Accessed 18 Oct 2011. In 1989, several members of the Social Invest-
www.clubofrome.org. Accessed 14 Aug 2010. ment Forum, an association for socially
C 366 Coalition of Environmentally Responsible Economies (CERES)

responsible investment firms and pension Structure of Governance

funds, formed an alliance with environmentalists.
The goal of the alliance was to influence The governance of CERES is structured as
corporations to change their environmental prac- a coalition. To become a member of the coalition,
tices. The new organization called CERES was candidates must go through an application pro-
named after the Roman goddess of fertility and cess. Once membership is attained, members
agriculture, and served as an acronym for must pay membership dues, and direct the orga-
the Coalition for Environmentally Responsible nization by serving on the board of directors and
Economies. providing oversight of the organization. Staff
After the Exxon Valdez disaster in Alaska in provide the day-to-day management of the oper-
1989, CERES announced the creation of the ations with opportunities for coalition members
Valdez principles, which would later be changed to work or participate in projects or special inter-
to the CERES principles. The ten-point code est areas as needed.
of conduct would become popular as environ-
mental and social issues grew in importance
and more stakeholders were taking a greater
interest in how the issues were managed. Initially Activities/Major Accomplishments/
the CERES principles were adopted by environ- Contributions
mentally proactive companies; however,
Sunoco’s participation in the early 1990s, the Initially, CERES’ initial unique proposition was
first Fortune 500 company to sign up, would that it represented a group of investors with an
then lead to many more less environmentally interest in sustainability. Citing investor assets,
sensitive organizations to endorse and adopt the CERES boasted of reaching out to corporations to
principles. influence behavior and bring about a change in
In 1997, CERES initiated a major interna- practice that would have a positive impact on the
tional reporting project termed the Global natural environment. By encouraging the adop-
Reporting Initiative (GRI) with the United tion of the CERES principles, organizations
Nations Environment Programme (UNEP) join- would align with the investment interests of
ing the project in 1999. The GRI, a voluntary CERES and therefore become preferred invest-
reporting guideline on sustainability, was then ments. Since then, CERES has adopted the coa-
spun off in 2002, forming its own entity. The lition approach by bringing investors, NGOs, and
guide, which provides direction for reporting on other stakeholders together to influence compa-
economic, environmental, and social perfor- nies to change their management practices of
mance, has undergone several reiterations with environmental and social issues. As a result,
the latest edition, the third generation, being they have made a number of significant accom-
released in March of 2011. plishments and these are listed below:
• Recipient of numerous awards including the
2006 Skoll Award for Social Entrepreneurship
and the Fast Company/Monitor Group Social
Mission/Objectives/Focus Areas Capitalist award, and was named one of the
100 most influential players in the corporate
CERES is a national network of investors, envi- governance movement by Directorship
ronmental organizations, and other public inter- Magazine.
est groups that work with companies and • Launched the Global Reporting Initiative
investors to address sustainability issues. (GRI), now the de facto international standard
Their mission is: integrating sustainability into used by over 1300 companies for corporate
capital markets for the health of the planet and reporting on environmental, social, and eco-
its people. nomic performance.
Codes of Ethics in Marketing 367 C
• Joined with Yale University and insurance Cross-References
firm, Marsh, to create the Sustainable Gover-
nance Forum on Climate Risk. A unique lead- ▶ Nongovernment Organizations (NGOs)
ership development program designed to help ▶ Public Private Collaboration
corporate leaders address the problem of
climate risk.
• Spearheaded dozens of breakthrough achieve- C
ments with companies, such as Nike becoming References and Readings
the first global apparel company to disclose
the names and locations of its 700-plus http://www.ceres.org/
contract factories worldwide in 2005, or
Dell Computer agreeing in June 2006 to
support national legislation to require elec-
tronic product recycling and “takeback”
programs, or Bank of America announcing
a $20 billion initiative in March 2007 to
support the growth of environmentally
▶ Sponsorship
sustainable business activity to address global
climate change.
• Brought together 500 investor, Wall Street,
and corporate leaders at the United Nations
in 2005 to address the growing financial risks
and opportunities posed by climate change. Code of Best Practice
The ground-breaking meeting included 28
US and European investors approving a ten- ▶ Evolution of Corporate Governance Reports in
point action plan seeking stronger analysis, the UK and Ireland
disclosure, and action from companies, Wall
Street, and regulators on climate change.
Another investor summit will be held in
February 2008.
• Launched and directed the Investor Code of Conduct
Network on Climate Risk (INCR), a group
of more than 70 leading institutional ▶ Corporate Governance
investors with collective assets of more than ▶ Global Governance and CSR
$7 trillion.
• Published cutting-edge research reports to
help investors better understand the implica-
tions of global warming. Among those:
a January 2007 report, Climate Risk Disclo- Code of Ethics
sure by the S&P 500, an August 2006
report, From Risk to Opportunity: How ▶ Corporate Codes of Conduct
Insurers Can Proactively and Profitably Man-
age Climate Change, and a March 2006
report, Corporate Governance and Climate
Change: Making the Connection, which ana-
lyzed how 100 of the world’s largest Codes of Ethics in Marketing
companies are addressing the business chal-
lenges from climate change. ▶ Marketing (Ethics of)
C 368 Codetermination

on the one side, workers have fought for better

Codetermination conditions and a say in the respective decisions
by management. On the other side, progressive
Matthias S. Fifka1 and Dirk Classen2 entrepreneurs, such as Robert Owen or Robert
Cologne Business School (CBS), Dr. J€
urgen Bosch, had an interest in promoting the working
Meyer Endowed Chair for International Business conditions for their employees and supported the
Ethics and Sustainability, Koeln, Germany respective legal reforms or introduced them on
Classen Fuhrmanns & Partner Rechtsanw€alte, a company level. Especially in Europe, such
Köln, Germany voluntary and legal improvements were gradu-
ally made in the late nineteenth and the early
Synonyms twentieth century in order to avoid a clash
between capital and labor, and to maintain social
Employee representation; Industrial democracy peace. After WW II, broader codetermination
rights were introduced in Western European
Definition countries, whereas they remained rather uncom-
mon in the Anglo-Saxon world. In Eastern
Codetermination provides for the participation of Europe and other communist states, codetermi-
employees and their representatives in the man- nation, on a theoretical level, was extensive due
agement of a company. Thus, they can actively to strong unionization. However, on a practical
influence the decision-making process through level, the unions mostly accepted and transmitted
legally stipulated rights. This possibility is what was decided by the upper political echelons.
expressed by the German word Mitbestimmung, In most Asian, African, and Latin American
from which codetermination was literally trans- countries, codetermination is a weak or even
lated. This is no coincidence since Germany has unknown concept until today.
the oldest and most far-reaching codetermination From the perspective of the employees, code-
laws. Irrespective of the country, codetermina- termination is justified as a mechanism to create
tion can happen at two levels. At the plant a balance between the employer’s strive for profit
or establishment level, it usually consists of the and the consideration of employment guarantees,
formation of works councils. At enterprise level, working conditions, as well as employee partici-
it guarantees employee representation on the pation in the success of the company. Moreover,
supervisory board of a corporation. it can be seen as providing for democratic
Codetermination can be seen as one element processes on an economic level. Business ethics
of industrial or labor relations, terms that are also emphasizes these functions of codetermina-
used to describe the employment relationship in tion: Creating equality between labor and capital,
general. Aside from codetermination, there are limiting economic power of employers, and per-
other forms of industrial relations which allow mitting for humane working conditions through
for employee influence on management employee participation. Nevertheless, also from
decisions, such as collective bargaining and an employer perspective, there are justifications
strikes. Therefore, codetermination should not for codetermination as it can reduce friction
be seen as a substitute for these forms, but rather between employers and employees and, thus,
as a parallel or complimentary instrument that the risk of fluctuation and strikes.
permits continuous influence by employees. As it can be seen from these arguments, the
extent of codetermination usually coincides with
the overriding economic philosophy to be found
Introduction across countries. In countries with a strong liberal
tradition, characterized by self-reliance and low
Codetermination rights have developed in a long governmental involvement, such as the USA,
historical process. Throughout the course of time, Australia, and Switzerland, codetermination is
Codetermination 369 C
weak or nonexistent. In countries with social when employers and employees can
market economies, where social safety nets and only make certain decisions jointly. If
redistribution are extensive, e.g., Germany and a mutual agreement is not being reached, the
the Scandinavian countries, codetermination is tie is usually broken by an independent arbiter.
a widely accepted principle. Moreover, in coun- 3. Union participation: It is possible that
tries with two-tier/dual board systems, where employee representation takes place without
management and supervision are separated (e.g., union involvement, includes partial involve- C
Germany, Austria, and Sweden), codetermina- ment of unions, or is fully handled by unions.
tion on the enterprise level is stronger than in 4. Thresholds: These provisions determine
countries with one-tier/unitary board systems, what company size is needed in order to
in which management and control is not sepa- be able to form a works council or to have
rated, as in the USA and Ireland. In two-tier representatives on the supervisory board.
systems, employees’ representatives usually In the following, some features of codetermi-
make up one third of the supervisory board mem- nation systems to be found in selected countries
bers, but in some countries they can even take shall be pointed out by referring to the four
half of the seats. In the latter case – except for criteria just mentioned. In the European Union
employee representation in the German coal and (EU), employee representation on the enterprise
steel industry – a representative of the share- level differs significantly, as shown by Table 1.
holders serves as director and can cast the deci- Likewise, the possibilities to establish works
sive vote in case of a parity. In one-tier systems councils on the plant level and their degree of
where codetermination exists, employee repre- influence are profoundly different. In general, it
sentatives usually do not hold more than one or can be said that in countries, where board repre-
two seats on the supervisory board. sentation of employees exists, works councils are
Overall, substantial differences in codetermi- widespread as well and relatively easy to estab-
nation across countries exist, as the legal provi- lish. In Austria and Germany, e.g., works coun-
sions and nonwritten customs vary greatly. There cils can be set up in all enterprises with more than
are four central criteria by which codetermination five employees and wield significant power. Such
regimes can be distinguished and classified: representation does not require union participa-
1. Legal Basis: The codetermination rights are tion, though in most cases works council mem-
established either on a legal basis, a collective bers are union members. In most other countries,
bargaining agreement, or on a voluntary workplace representation is provided directly by
agreement between the employer and the the unions. Consequentially, in countries where
employees. unions are weak, e.g., in the Baltic countries,
2. Enforcement: This refers to the degree of works councils are rather insignificant.
codetermination, which can happen on differ- A detailed overview on the individual laws,
ent levels. On the lowest level, the employer regulations, and structures in individual EU
merely has the obligation to inform the member countries is provided by Fulton (2011).
employees about certain activities, especially In order to create more coherence with regard
with regard to personnel. On a next level, to employee representation, the EU Commission
the employees can express their opinion issued a directive in 2002. It requires the intro-
without any binding character for the duction of information and consultation practices
employer, or participate in consultations. for enterprises with more than 50 employees in
On the highest level, there are two possibili- all member countries, seeking to “promote social
ties. The employees have a veto right or need dialogue between management and labor”
to give their consent in decisions made by the (EU Commission 2002). By March 2005, member
employer, but they cannot initiate or propose states had to implement the directive in their respec-
measures on their own. This is only possible tive legislation and to establish procedures which
in the most extensive form of codetermination, would guarantee that employees are informed
C 370 Codetermination

Codetermination, Table 1 Employee representation on the board level in the EU (According to Fulton (2011))
No representation One third representation representation Other forms
Belgium Austria (in listed and limited Germany (listed Finland (in companies with more than
Bulgaria liability companies with more companies with 150 employees, but details are left to
Cyprus than 300 employees) more than 2,000 negotiations on company level)
Estonia Czech Republic (in listed employees) France (a variety of possibilities
Greece (except for companies with more than 50 Slovakia (in state- applies, depending on company size,
some state-owned employees) owned companies) and private or state ownership)
companies) Denmark (in all limited Slovenia (depending on company size
Ireland (except for companies with more than 35 in terms of employment and turnover,
some state-owned employees) and the existence of a two-tier board)
companies) Germany (listed companies with
Italy 500–2,000 employees)
Latvia Hungary (in companies with
Lithuania more than 200 employees and
Malta a two-tier board)
Poland (except for Luxembourg (companies with
state-owned and more than 1,000 employees and/
partially privatized or significant state ownership)
companies) Netherlands (companies with
Portugal more than 100 employees, but
Romania only external persons can be
Spain nominated)
UK Norway (in companies with more
than 50 employees)
Slovakia (in companies with
more than 50 employees and
a share capital of more than
Sweden (in most companies with
more than 25 employees)

about their employer’s economic situation and are in American labor laws, [. . .] the introduction of
consulted on issues regarding employment and the European model of co-determination to the
work organization. However, as Schoemann et al. U.S. is unlikely.” In the UK, the Bullock Report
(2006) have concluded, “transposition of directive of 1977 laid out widespread proposals for
2002/14/EC into national law has been minimal, if employee representation and even included direct
not incomplete.” This observation holds true until election of board members by unions. However,
today. the report was dismissed due to employer resis-
In the USA, as in other liberal market econo- tance and fell from the agenda after Margret
mies, labor law does not require any form of Thatcher‘s electoral victory in 1979.
codetermination. Employee representation on With regard to Asia, codetermination is gener-
boards is an unknown concept, though works ally weak or nonexistent, though Japan marks
councils infrequently do exist. Usually, they are a notable exception. Its unique model of codeter-
supplanted by the respective local union and are mination does not provide for mandatory partici-
not of remarkable significance since the respec- pation, but employees are informed and consulted
tive issues, e.g., salaries and working conditions, to a considerable degree, nevertheless, since they
are usually subject to collective bargaining. are regarded as a vital part of the corporate com-
Consequentially, Prenting (1992: 17) concluded munity. Thus, employee participation is based upon
that due to “the voluntary nature of collective informal social norms, and unions act as transmit-
bargaining in the United States and restrictions ters of the employees’ interests (Jackson 2005).
Codetermination 371 C
Concerning China, labor relations in general has referred to these relations as “atomistic and
have been altered dramatically due to the transfor- anomic,” because workers are only weakly linked
mation of the economic system from a planned to to enterprises and there is high turnover, and there
a rather free market economy. As Hanlin (2012) is hardly any link or bond provided by unions,
points out, a rising number of conflicts between which are extremely weak. Consequentially, the
employers and employees could be observed after respective countries do not have mechanisms
1990 since privatization has led to unemployment, such as codetermination to provide for worker C
poor working conditions, the collapse of the social representation within firms. As unions mostly
safety system once provided by state-owned enter- are politicized and controlled by the state, their
prises, rising income inequality, and a shift of intermediation at plant as well as at enterprise
power from the employees to the capital owners. level is mostly ineffective.
As a reaction, the Trade Union Law was passed by
the Chinese People’s Congress in 2001. It holds that
unions have to be set up at plant level in enterprises Key Issues
with more than 25 employees and have to be
consulted on any issue relevant to the employees. One of the key issues on codetermination is the
In case the employer violates rights regarding occu- question if it has overall positive or negative
pational health and safety, payment, and working effects on a company’s performance. Aside from
hours, the union can even ask for rectification and providing democratic processes within companies,
participate in investigations. Despite these reforms, a balance between capital and labor, and improv-
codetermination in China remains weak because of ing working conditions, which are undoubtedly
its union-centric character. Unions are not accus- beneficial from the employee perspective, there
tomed to this new and challenging task yet. More- are also reasons which support codetermination
over, Art. 4 of the Trade Union Law explicitly from the capital owners’ and employer’s perspec-
determines economic development to be the central tives. As pointed out above, it can help to reduce
mission of unions, which in many cases can be friction and dispute between management and
diametric to the tasks of worker representation labor, and thus prevent against costly strikes.
(Heuer 2005). Moreover, the possibility to participate in deci-
Concerning Africa, South Africa is the only sion-making processes can be a motivational fac-
significant country where codetermination has at tor for employees and produce innovations so that
least a legal foundation. After the end of apartheid, company performance increases.
the Labor Relations Act was introduced in 1995, However, codetermination can also be seen as
which primarily aims at establishing rights of asso- a burden on company performance. First of all,
ciation and collective bargaining. However, the there is the classical argument that worker-
attempt to strengthen worker representation has participation rights will lead to higher costs for
been largely unsuccessful due to the traditional an enterprise as employees have an interest in
confrontational stands of employers and higher wages and salaries, less working hours
employees, long-standing state opposition against and more holidays, and better working condi-
unions, and the legacy of racial discrimination. tions. Aside from these pecuniary arguments,
Some progress, though, has been made on the procedural concerns might be of even bigger
plant level. In the 1990s, companies started to importance. Codetermination, especially when it
establish “joint forums with unions, within which guarantees for veto or voting rights, can lead to
information sharing, consultation and, in some a blockade of decisions which might be necessary
cases, joint decision-making occurs (Webster and for the enterprise as a whole, but might be seen to
Macun 1998, 66).” have negative consequences for the workforce.
In Latin America, finally, codetermination is The necessity to dismiss employees in order to
very weak as labor relations overall are heavily remain competitive and survive in the market is
tilted in favor of the employer. Schneider (2009) a traditional issue in that regard. Moreover, it can
C 372 Codetermination

be questioned whether employees do have the to more groups that are affected by a company’s
necessary qualification to serve on the supervi- operations. Employees clearly are one of those
sory board, as it is the case in several European stakeholders, who are regarded as having
countries. Someone from a manual profession a legitimate interest in a company.
without a background in business administration Though the creation of a balance between
can hardly be expected to oversee the potential capital and labor, and the supervision of manage-
impact of far-reaching strategic decisions. ment by employees speak for a stakeholder
This last argument can be taken further onto model, employee board membership can also be
a macroeconomic level. Companies from coun- criticized, because it actually promotes employee
tries with no employee representation on super- self-interest. The idea of supervision, especially
visory boards might be hesitant to invest in in countries with two-tier systems, is to guarantee
countries where such codetermination rights an independent control of the management and its
exist, because they fear the powers that decisions. These decisions often evolve out of
employees can wield. After the turn of the mil- previous negotiations with labor representatives,
lennium, it was fiercely discussed in Germany, e.g., when salaries, working hours, and condi-
e.g., if the extensive codetermination laws actu- tions are concerned. The systemic problem lies
ally were a barrier to the attraction of foreign in the fact that employee representatives on the
direct investment (FDI). To address this issue, it board, in their function as supervisors, sanction
was suggested to liberalize codetermination and the deals which they or their colleagues have
provide for individual solutions to be negotiated previously negotiated with management.
between the social partners on the company level. Whereas codetermination on the enterprise
Due to resistance from the labor side, no respec- level is relevant for corporate governance issues,
tive reforms were passed, however. That codeter- it has increasingly become a CSR topic on the plant
mination might be seen as a disadvantage in level. Especially in developing and emerging coun-
international competition is supported by the tries, poor working conditions and low salaries
fact that an increasing number of companies in have led to increasing calls for improved worker
Germany have changed their legal status and participation. The obstruction of the freedom of
taken on legal forms to be found in other assembly, union work, and collective bargaining,
European countries where no codetermination which is common in states with weak legal sys-
exists. Whereas in 2006, there had been only tems, is equally criticized. Large corporations, first
17 companies with more than 500 employees and foremost, have come under pressure to permit
that resorted to such a measure, the number rose worker unionization and representation. The ISO
to 31 in 2009, according to the Hans-Boeckler 26000 as an international guideline on social
Stiftung. Taking on legal forms that are existent responsibility explicitly points out that “informa-
in other EU member countries has become tion and consultation mechanisms such as works
possible due to European integration laws. councils and collective bargaining” are vital to
Consequentially, codetermination is an impor- social dialogue and shall be introduced by compa-
tant issue in corporate governance, especially in nies. Moreover, the establishment of such councils
those countries where employee representatives are and unions must not be hindered and companies
to be found on supervisory boards. The essential are asked not to “obstruct workers who seek to
question is whether a shareholder-oriented or form or join their own organizations and to bargain
a stakeholder-oriented model of corporate gover- collectively, for instance, by dismissing or discrim-
nance is applied. The former clearly takes a position inating against them, through reprisals or by mak-
against employee representation. It pursues share- ing any direct or indirect threat so as to create an
holder profit maximization as overriding goals and atmosphere of intimidation or fear.”
assumes that employees will pursue goals, higher Furthermore, disclosure on the treatment
wages, e.g., which are diametric to this aim. The of workers and employee representation is
latter argues for extending the supervisory function increasingly expected. The Global Reporting
Codetermination 373 C
Initiative (GRI), in its section on governance, decline that is observable in industrialized coun-
demands reference to “[i]nforming and consulting tries. Thus, Jackson (2005, 419) pointedly
employees about the working relationships with remarks in his comparative study that “the size
formal representation bodies such as organization of the core model is getting smaller.”
level ‘works councils’, and representation of In developing and emerging countries, where
employees in the highest governance body.” codetermination is hardly existent, initiatives
such as the ISO 26000 and the GRI, but also C
public and political pressure will most probably
Future Directions lead to better employee representation. Though
the effective introduction of codetermination on
With regard to the future of codetermination, the enterprise level seems to be unlikely, there
national distinctions have to be made. In coun- will be improvements on the plant level.
tries where codetermination on the enterprise This does not mean that extensive consultation
level exists, it has come under increasing criti- or even voting rights will be established, but basic
cism because it is perceived as a disadvantage for principles, such as the provision of information,
attracting foreign investors. Moreover, as will gradually be introduced.
demonstrated above, companies in the EU – the Overall, despite a globalization of economic
region with most extensive codetermination structures and the attempt to foster regional
rights in global comparison – have found ways homogenization with regard to codetermination,
to circumvent national legislation in order to convergence on a single model remains out of
avoid employee representation. Due to the desire question. Moreover, codetermination will remain
for appealing to international investors and for a controversial issue of discussion on economic,
creating a more homogenous legal environment social, as well as on moral grounds.
for codetermination in the EU, it can be expected
that codetermination will be weakened on the
enterprise level in countries where it has tradi- Cross-References
tionally been strong. Nevertheless, in the very
recent past, a countertrend has been observable, ▶ Board of Directors
which has its roots in the financial and economic ▶ Collective Bargaining/Trade Unions
crisis. The seeming carelessness and risk taking ▶ Corporate Governance
by top-management in many companies have ▶ Corporate Social Responsibility
reinforced calls that labor representation on the ▶ Global Reporting Initiative
board can help to effectively constrain manage- ▶ ISO 26000
ment from pursuing excessive, short-term ▶ One Tier Board
oriented goals. ▶ Trade Union Recognition
Codetermination on the plant level will not be ▶ Two-Tier Board
affected as much, though it has to be said that the
concept in general does and will continue to
suffer from declining union membership. Some References and Readings
examples shall be given: In Germany, the rate of
unionization has declined from 36% at the begin- EU Commission (2002). Directive 2002/14/EC of the
European parliament and of the council of 11 Mar
ning of the 1990s to 19% in 2010. In the same 2002 establishing a general framework for informing
period, union membership went down from 16% and consulting employees in the European Community.
to 11% in the USA, and from 38% to 28% in the http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri
UK. Finally, in Japan, it dropped from 25% to ¼CELEX:32002L0014:EN:HTML. Accessed 14 May
17%. As codetermination – regardless of the
Fulton, L. (2011). Worker representation in Europe.
country – is bound to the work of unions, either Labour Research Department and ETUI. http://www.
directly or indirectly, it will be eroded by this worker-participation.eu. Accessed 14 May 2012.
C 374 Collaborative Advantage

Hanlin, L. (2012). Participation and co-determination in to provide a foundation or counterbalance to

Chinese enterprises. Beijing: Hans-Boeckler-Stiftung. “Competitive Advantage,” which has dominated
Heuer, C. (2005). China’s labor law: an effective instrument
of worker representation? China Analysis 45. http:// business discourse and business education for
www.chinapolitik.de/studien/china_analysis/no_45.pdf. many decades. This may mean adding a fresh
Accessed 18 May 2012. perspective and looking at units of analysis
Jackson, G. (2005). Stakeholders under pressure: corpo- beyond the individual enterprise.
rate governance and labor management in Germany
and Japan. Corporate Governance, 13(3), 419–428. It is not simply a matter of setting out a simple
Prenting, T. O. (1992). Co-determination: its practice and alternative to a conventional model of capitalism,
applicability to the U.S. SAM Advanced Management in which “Competitive Advantage” has been
Journal, 57(2), 12–17. emphasized. We will see the meaning of the
Schneider, B. R. (2009). Hierarchical market economies
and varieties of capitalism in Latin America. Journal term “Collaborative Advantage” in its use.
of Latin American Studies, 41(03), 553–575. Thus, Collaborative Advantage has many mean-
Schoenmann, I., Clauwaert, S., & Warneck, W. (2006). ings around the world, rooted in diverse cultures.
Information and consultation in the European Companies and organizations are composed of
Community – Implementation report of directive
2002/14/EC. Brussels: European Trade Union Institute individuals, who have come together, in
for Research, Education and Health and Safety. a particular context, in order to create Collabora-
Webster, E., & Macun, I. (1998). A trend towards tive Advantage. Building social capital is closely
co-determination? Case studies of South African enter- linked to developing structures which can gener-
prises. Law, Democracy & Development, 2(1), 63–84.
ate financial capital. Typically, individuals do not
operate in business by themselves. They work
with others, toward common objectives. They
Collaborative Advantage build legal structures, such as limited liability
companies, which provide them with legal pro-
John Richard Ennals tection. This means observing common conven-
Kingston University, Kingston Upon Thames, tions and ways of working, the rules of the
Surrey, UK particular chosen game. Ownership is pooled.
Companies are often described as being “cul-
turally situated.” They are configured in particu-
Synonyms lar ways to fit the local context. This may give
them Collaborative Advantage, by comparison
Neither “collaboration” nor seeking “advantage” with external rivals who lack such connections.
is new. Linking the two in policy debates is Business is not solitary and free standing, but
a recent development, reflecting current debates has an inherent social dimension. Organizations
around business strategy. come into contact in practical market situations,
There are a number of related and associated where knowledge is exchanged, accompanied by
terms: partnership, trust, collaboration, confi- economic transactions. New arrangements may
dence, cooperation, social capital, community be agreed, for mutual benefit, for Collaborative
collateral, development, partnership, networking, Advantage. This may have the effect of reshaping
and cluster. Each has an associated literature in the market. It is expected that those who collab-
the social sciences, with some common refer- orate will treat each other with social responsi-
ences. Applications of these terms can take bility, recognizing their relationships and
many distinctive forms. reciprocal obligations. Social capital is built up
over time, through successive experiences of
Definition Business is concerned with developing sus-
tainable enterprises. This means addressing the
We need to offer a simple redescription of busi- wider context, including relations with other eco-
ness. “Collaborative Advantage” is here defined nomic actors. Partners today may be competitors
Collaborative Advantage 375 C
tomorrow. Indeed, this may be planned, for The perspective of corporate social responsi-
example, in managed programs of bility is important in developing sustainability. It
precompetitive collaborative research. is integral to Collaborative Advantage and not
Collaborative Advantage can be seen at sev- a separate optional add-on category. Individuals
eral levels: within organizations, between orga- and companies can be judged by the company
nizations, and at a wider economic and social they keep.
level, including regional, national, and interna- We illustrate the historical background for C
tional levels. It draws on insights and literatures Collaborative Advantage through cases from
from several social sciences. At each level, suc- around the world.
cess depends on building collaborative relations. John Bellers, the seventeenth century English
Individuals and companies benefit from devel- Quaker economist, argued that societies need
oping collaboration with appropriate partners, the contributions of all of their members. He
creating Collaborative Advantage. Collaborative proposed new education and training related to
Advantage involves partnerships, alliances, net- useful work. The twentieth century company
works, coalitions, and clusters. It helps to explain named after him offered employment and
how particular configurations arise: they are the accommodation for the unemployed and home-
results of sequences of decisions, rather than nat- less, paying wages and receiving rent, giving
urally occurring phenomena. They may be individuals dignity by enabling them to work
related to local institutions and traditions. together. John Bellers Ltd was a co-ownership
Such relationships need to be seen as socially company, part of a movement which includes
responsible, if they are to be sustainable. This is the John Lewis Partnership, where employees
not a separate or additional dimension, but are also partners or co-owners. Employment
a reflexive characteristic of the relationships. relations are based on partnership, rather than
Conduct at the level of the single organization adversarial conflict.
will inevitably be interpreted and understood in Adam Smith, the Scottish Enlightenment phi-
the wider context. losopher, laid the foundations for Collaborative
Creating Collaborative Advantage constitutes Advantage in “A Theory of Moral Sentiments” in
a form of corporate citizenship, engaging with 1759, before addressing core principles for capi-
others. It is recognized that there is a public talism in “The Wealth of Nations” in 1776. Col-
sphere in which organizations are considered. laboration provided the context for competition,
Creating Collaborative Advantage may build within an Enlightenment framework of moral
new structures which take on roles which had responsibility. Smith noted some adverse conse-
previously been left to voluntary activities in the quences of the division of labor and
field of corporate social responsibility. recommended that attention should be given to
working conditions, the life of the worker outside
work, and public facilities. He warned of the
Introduction danger of managers acting as if they were owners
rather than senior employees, acting against the
While businesses, business educators, and gov- interests of workers and the public.
ernments have emphasized the importance of Mohamed Yunus, Nobel Peace Laureate,
securing Competitive Advantage, less emphasis founded Grameen Bank in Bangladesh. Taking
has been given to the context of collaboration and his inspiration from traditional local markets,
Collaborative Advantage. Where entrepreneurs Yunus developed a system of “microcredit,”
and managers do not know how to demonstrate based on community collateral. Loans are repaid,
social responsibility in their collaborative activi- and support can then be given to others. The level
ties, their organizations will be disadvantaged in of repayments is higher than in conventional
the longer term, together with others with whom banking, resulting in more effective use of avail-
they work. Antisocial irresponsibility is common. able funds. Each loan serves to test and
C 376 Collaborative Advantage

strengthen local collaboration and results in an in sectors such as food, fashion, textiles, and
increased capacity to compete. automobiles. Supported by infrastructure pro-
Kaoru Ishikawa founded Quality Circles in the vided by a communist regional government,
Japanese automobile industry, with the intention industrial districts were collaborative environ-
of empowering workers whose skills were central ments; high-quality products were produced by
to the success of the company. Workers came networks and partnerships, supported by advice
together to take co-ownership of the process of from intermediaries. The culture of the region
continuous improvement. Japanese automobile was distinctive; neighboring Tuscany and Veneto
companies derived Collaborative Advantage provided very different environments for busi-
from this relationship with their workforce, and ness, with less emphasis on collective provision
the resulting reputation for quality products gave and more on individual entrepreneurialism.
them Competitive Advantage in global markets. In South Western Norway, companies around
Quality was a bottom-up process. the Odda fjord came together to work in net-
A sales outlet for the Japanese automobile firm works, with a common foundation of quality edu-
Isuzu in Thailand sought to increase the loyalty cation. Through engaging in regular dialogue,
and engagement of their employees, by they identified unexpected synergies between
supporting their education and training, raising their activities. The toxic output of one factory
their level of knowledge, and thus improving the process could be a valuable input for another
quality of service that they could offer to factory, at the other side of the fjord. The net-
customers. works were supported by projects addressing
Jagdesh Gandhi, an entrepreneurial school regional development, part of a national program
manager in India, visited Japan in 1992, was of enterprise development.
impressed by Quality Circles, and founded the Across Europe, partner organizations
Student Quality Circle movement at City concerned with work organization and innova-
Montessori School in Lucknow, India. Through tion are able to come together and collaborate
the World Council for Total Quality and Excel- on projects supported by the European Commis-
lence in Education, he supported the formation of sion. Exchanging experience on workplace inno-
national chapters in 25 countries. The network vation, they are working together to produce
offers Collaborative Advantage to participating a handbook for social partners and policy makers,
researchers and teachers and enables school stu- helping readers to produce new hybrid organiza-
dents to develop skills which give them local tions of their own. The core challenge is to
Competitive Advantage. address such a diverse audience. In each country,
In the town of Abbottabad, in the foothills of the roles of the government, public, and private
the Himalayas in the North West Frontier region sectors are differently divided, leaving distinct
of Pakistan, a new network is developing, seeking areas for corporate social responsibility at com-
Collaborative Advantage. Schools have been pany level.
piloting the use of Student Quality Circles and In Mauritius, there is a long established Qual-
observing the rapid improvement in student con- ity Circles movement, and the Mauritius National
fidence and language skills. Employers have Productivity and Competitiveness Centre sees
attended presentations and recognized that such collaborative approaches in schools as offering
skills could play a valuable part in developing enhancement of national Competitive Advan-
their businesses, which have been held back by tage. Schools are encouraged to organize Civic
problems of literacy and numeracy. Schools who Action Teams, which are in essence Student
are normally competitors have decided to collab- Quality Circles, addressing a range of problems
orate, building a new system which offers their within a wider social agenda. Despite the remote
students Competitive Advantage. location in the Indian Ocean, there have been
In the Emilia Romagna region of Italy, major developments in the Knowledge Economy
a population of 3 m gave rise to 300,000 SMEs, and Business Process Outsourcing in Mauritius.
Collaborative Advantage 377 C
Civic Action Teams, based on collaboration, can Experience of the credit crunch and global
be seen as underpinning plans for national Com- economic crisis has been that there were key
petitive Advantage. deficiencies in understanding how systems
The Wola Nani charity and trading company work, including financial market systems and
in South Africa brought together women living interconnections between organizations. Eco-
with HIV/AIDS. A range of medical and social nomic recovery depends on acting on recent les-
services are offered, and an income generation sons, such as with Enron, Lehman Brothers, and C
division is making products for sale. Papier Goldman Sachs.
mache bowls with distinctive design and decora- It is not sufficient to analyze business and
tion are made for export. Expert consultancy economic activity in terms of individual firms
advice is sought from the Faculty of Art, Design and national government policies. We also need
and Architecture at Kingston University in the to consider the meso or intermediate level, which
UK, to develop new designs and to improve pro- involves relations between firms and other orga-
duction methods. With improved medical care, nizations. There may be matchmakers who facil-
including the availability of antiretroviral medi- itate and catalyze collaboration.
cation, the women now live for many years after Emphasizing Collaborative Advantage, in the
diagnosis, and they can both develop craft skills context of corporate social responsibility, means
and take an active role in decision making. that qualitative approaches are likely to be
In Kingston, UK, the first Senior Quality Cir- needed, rather than traditional quantitative
cle is being formed. Knowledge workers at the approaches. Successful collaboration requires
university are coming together to reflect on their relational understanding and the discovery of
experience, skill, and tacit knowledge. At a time common languages which enable shared mean-
of budget cuts and restructuring in higher educa- ings. We will also encounter areas of misunder-
tion, workers need to take co-ownership of their standing and disagreement.
knowledge and consider alternative approaches
to work organization. Senior managers who are
new to the university may lack previous experi- Future Directions
ence of the culture which they have joined. The
contribution of particular individuals may only There is a case for revisiting business strategy,
come to be appreciated after they have left: the marketing, human resource management,
Senior Quality Circle enables contact to be accounting and finance, informatics, and opera-
maintained. tions management: both in practice and in how
they are taught. Wherever there is mention of
Competitive Advantage, we need to explore the
Key Issues underlying collaborative dimension. This has
been the source of the common language which
Success in business involves a twin track we use in business, which now appears
approach. Individuals and companies seek Com- unbalanced.
petitive Advantage, but this is situated in Globalization means that different markets are
a context of collaborative relationships. Compet- no longer completely separate. Collaboration has
itive and Collaborative Advantage are linked, multiple dimensions. It is not adequate to con-
each providing a backdrop for the other. centrate only on local markets and relationships.
Advantage is not secured simply by following However, international and cross-cultural collab-
textbook guidelines. It is a matter of exercising oration can be complex, as there can be areas of
judgment in practice, built up incrementally misunderstanding.
through experience. It is based on trust, used to New collaborations and business configura-
create social capital. As this develops, under- tions are needed. If they are to be sustainable,
standing is required and is tested through actions. they will need to be seen as corporately socially
C 378 Collecting

responsible. They may take the form of new legal

entities. Collective Bargaining/Trade Unions
Both business and business education face the
need for radical reform. They have been based on Martin Quinn
partial knowledge and power imbalance. They Business School, Dublin City University,
have been more likely to promote the status quo Glasnevin, Dublin, Ireland
than to encourage change.

Collective bargaining; Craft union; Guild; Indus-
▶ Competitive Advantage trial union; Organized labor; Trade unionism
▶ Globalization
▶ Region

References and Readings A trade (British English) or labor union (Ameri-

can English) is an organized group of workers
Bellers, J. (1696). Proposal to establish a colledge of who, through their collective power, aim to
industry. London: T. Sowle.
improve the working conditions of members.
Ekman, M., Gustavsen, B., Asheim, B., & Pålshaugen, O.
(Eds.). (2011). Learning regional innovation. Working conditions refers to rates of pay, paid
Basingstoke: Palgrave. leave, safe working conditions, and other benefits
Ennals, R., & Gustavsen, B. (1999). Work organisation associated with employment. Typically, mem-
and Europe as a development coalition. Amsterdam:
bers of a particular union belong to a similar
Friedman, M. (1962). Capitalism and freedom. Chicago. trade/sector and union officials represent the
IL: University of Chicago Press. interests of members in negotiations with
Gustavsen, B., Nyhan, B., & Ennals, R. (Eds.). (2007). employer organizations. The term industrial (or
Learning together for local innovation: Promoting
learning regions. Luxembourg: Cedefop.
employment) relations is associated with trade
Hutchins, D. (2008). Hoshin Kanri: the strategic approach unions and refers to the multidisciplinary study
to continuous improvement. Aldershot: Gower. of the relationships and interactions between
Ishikawa, K. (1980). General principles of the QC circle. organized labor, employers/managers, and
Tokyo: Japanese Union of Scientists and Engineers.
Johnsen, H. C. G., & Ennals, R. (Eds.). (2012). Creating
collaborative advantage. Farnham: Gower.
Porter, M. E., & Kramer, M. C. (2011). Creating shared value.
Harvard Business Review, January – February. pp. 62–77. Introduction
Sen, A. (2009). Edition of a theory of moral sentiment.
Adam Smith (1759). London: Penguin.
Origin and History
The origin of trade/labor unions predates the
industrial revolution, which is typically associ-
Collecting ated with the introduction of factories, mecha-
nized production, and large concentrations of
▶ Waste Management workers. Prior to trade unions per se, medieval
craft guilds existed, dating back to the fifth cen-
tury AD in Europe. These guilds controlled entry
to crafts (e.g., stone masonry, glass making) to
Collective Bargaining ensure that artisans were not overwhelmed by
numbers and could exert a degree of price con-
▶ Collective Bargaining/Trade Unions trol. By about 1100, guilds were equivalent to the
Collective Bargaining/Trade Unions 379 C
modern organization. Members provided mutual government sentenced six laborers in Tolpuddle
aid to dependents and supported each other in to transportation (to Australia) for joining the
feuds and/or business. As markets began to GNCTU. Public outcry and the questionable
expand in the eighteenth century, some craftsmen legality of the sentences led to them being
began to employ others, leading to the appear- quashed in 1840. This case was symptomatic of
ance of “journeyman organizations” to provide the time; widespread intimidation both by
mutual aid, support for widows and orphans, and employers and the United Kingdom government C
to assist those who had fallen on hard times. toward union organization.
A “journeyman” was a craftsman who earned By the late 1840s, the United Kingdom
money from his trade but had yet to submit entered into a second phase of industrialization.
work to a guild for judgment to be admitted to The construction of an extensive railway network
the guild as a master. Thus, the journeyman orga- had stimulated the growth of the coal, iron, steel,
nizations were a progression in organized labor as and engineering industries. Together with tex-
capitalist societies developed. During the eigh- tiles, these formed staple industries. For the next
teenth century, there are many recorded instances 30 years or so, these industries were both stable
of strikes to increase wages or decrease working and profitable. Workers in these industries
hours in the United Kingdom. This led to pressure benefited. Such workers were the backbone of
from employers to ban “combinations,” such as a trade union revival, which differed from earlier
guilds and journeyman organizations. Thirty periods. Many existing craft organizations were
pieces of legislation were enacted in the United remodeled as unions. The Amalgamated Society
Kingdom between 1720 and 1799 to ban of Engineers (ASE), established in 1851, was
“combinations” among specific groups of workers, organized at a national level and had a highly
culminating in two General Combination Acts centralized organization. This was possible as
in 1799 and 1800. These Acts outlawed combi- the ASE levied high dues on membership. The
nations, meetings leading to combinations, and ASE was modeled as a friendly society, provid-
strikes in England and Wales. The early 1800s ing unemployment, sickness and disablement
saw the development of the factory system and benefits, and a funeral allowance. It became the
with it urbanization, social change, and social “model” followed by later unions. The origins of
unrest. The disruption caused by industrializa- trade unions in the United States follow a similar
tion, and rising food prices due to 22 years of pattern to the United Kingdom, with origins
war with France (1793–1815), saw combinations stemming from collective organization of jour-
continued to spread across a range of occupations neymen in the late eighteenth century. In 1794,
in the United Kingdom. This period was in effect the Federal Society of Journey Cordwainers
the birth of trade unions. The Combination Acts (shoemakers) was one of the earliest sustained
were repealed in 1824. The Combination Act organizations. The first general union exceeding
1825 permitted workers to combine only for the narrow interests of a particular craft, the
specified actions on hours and wages and intro- Mechanics’ Union of Trade Societies, formed in
duced new offenses covering intimidation and 1827. The first Canadian craft unions appeared in
molestation of other workers. This new regime Montreal and Toronto around 1830, with the first
witnessed a rapid increase in the development of general union, the Toronto Trades Assembly,
trade unions particularly in textile factories. formed in 1871.
There were also attempts to form general unions, The history of unions of the Western Europe
regardless of trade. In 1834, there was an attempt differs in a number of respects from the United
to establish a Grand National Consolidated Kingdom and the United States. Progress from
Trades Union (GNCTU) bringing together all the Industrial Revolution came later and
unions. It did not attract general support and proceeded faster in Western Europe. Firms
was resisted by the United Kingdom government started on a larger scale and often used the
of the time. In the same year, a crisis arose as the best available technology. This disconnected
C 380 Collective Bargaining/Trade Unions

European unions from medieval craft guilds and through national pay agreements. Alternately, the
prevented craft unions representing only workers organizing model involves full-time union orga-
with specific skills. Attempts at craft unionism nizers, who create strong networks and leaders.
were absorbed into broad industrial unions, which This model is orientated more toward direct con-
organized all workers in an industry or country frontational campaigns. Many unions are a blend
regardless of skill and employment status. of both philosophies. Union leaders and key roles
Such unions possessed (and still retain) strong at national and local level are usually determined
political bargaining power on issues such as social by democratic means.
insurance, health care, and occupational safety. As In dealing with employers, unions typically
a consequence of being removed from a craft have an agreement on membership of new and
origin and traditional, Western European unions existing employees. Membership models are
were also more recognizing of the rights of normally one of the following:
management to manage and less concerned about 1. A closed shop, which employs only workers
distinctions between skilled and unskilled workers. who are already union members.
2. A union shop, which employs nonunion
Structures, Politics, and Activities of Unions workers also, but new employees must join
Unions may be organized by a particular section a union within a certain time limit.
of skilled workers (craft unions), workers from 3. An agency shop requires nonunion workers to
many trades (general unions), or by particular pay a fee to the union for its services in nego-
industry (industrial unions). At a national level, tiating their contract.
unions often unite in national federations, who in 4. An open shop does not require union member-
turn may be affiliated with international federa- ship. If a union is in place, workers who do not
tions such as the European Trade Union Confed- join benefit from the collective bargaining
eration or the International Trade Union process.
Confederation. As noted, the form of unions varies, but in
A union may be deemed a quasi-legal entity, general, all unions pursue similar activities. The
with a mandate from its membership to negotiate main activity is collective bargaining, that is,
with employers on pay and working conditions. In negotiation with employers and employer orga-
such cases, unions have certain legal rights, most nizations on pay and working conditions with
importantly the right to engage in collective unions representing employees’ interests. Unions
bargaining (see later) with employers. If employer also engage in some level of political activity,
negotiations do not reach a satisfactory outcome, which can range from lobbying interests favor-
a union can take the course of industrial action, able to members to financial support of particular
culminating in either strike action or binding arbi- candidates or political parties. Although unions
tration. In other circumstances, unions may not may have originally provided assistance to unem-
have the full legal rights to represent workers. ployed or ill members, this role has now been
Unions may also engage in broader political or assumed by the State in most jurisdictions. How-
social struggle, as is the case in many European ever, unions do still provide benefits to members
countries where unions are often closely aligned such as legal representation or loyalty schemes.
with certain political parties. They may advocate Lastly, industrial action is the primary defensive
for social policies and legislation favorable to activity of unions. This may range from work-to-
members or workers in general. rule to strike action in furtherance of objectives.
In terms of internal structure and organization,
unions can be classified by a services model or
organizing model. The services model focuses on Key Issues
maintaining worker rights, providing services,
and resolving disputes through methods other As the origins and forms of unions vary, this
than direct pressure on employers, for example, section outlines the general environment and
Collective Bargaining/Trade Unions 381 C
issues faced by unions according to broad geo- 6. Administration – in the United States, the
graphical area. National Labor Relations Board (NLRB) is
empowered to interpret labor law and decide
United States and Canada on matters of representation. The NLRB
The systems of trade unions and industrial rela- covers all sectors except agriculture, railway,
tions in the United States and Canada reflect and the airline sector. In Canada, provincial
similar values (Morley et al. 2008). The National labor relations boards fulfill a similar function. C
Labor Relations Act (NLRA) 1935, as amended According to the Bureau of Labor Statistics
in 1947, is the basis of the legal environment for (2010), 12 % of workers in the United States were
unions in the United States. In 1948, a similar law represented by unions, with the corresponding
was passed in Canada using the NLRA as figure in Canada at 31 % (HRSDC 2010). This
a model. The basic model consists of six difference can be explained through the historic
attributes: divergence of the labor relations environment in
1. Employee choice – in both countries, there is both countries from the 1960s. The New Demo-
no presumption that workers are represented cratic Party (NDP) was formed in 1961 with the
by a union. Workers determine whether they support of Canadian unions. As the NDP
wish a union to represent them, and there in no progressed, the political landscape for unions
presumption that representation will affect changed, with the result that government involve-
terms and conditions of employment. ment in bargaining, arbitration, and dispute reso-
2. Majoritarianism – the choice to be lution is more common than in the United States.
represented, and by which union, is based on For example, referral of a dispute to a third party
a majority of workers in a firm or facility. for resolution is mandatory in Canada but not
Selection is normally by means of a secret currently in the United States (Morley et al.
ballot in the USA; once 30 % of workers 2008). In both the United States and Canada,
express a wish to be represented, a ballot is work stoppages since 1970 have declined steadily
held to ascertain a majority. In Canada, (Morley et al. 2008). In the event of a union
a ballot may be replaced by evidence of signed strike, the United States allows employers to
union application forms, payment of dues, or hire temporary replacement workers under the
signed cards. provision that any strike is an economic strike –
3. Decentralization – workers in a firm, facility, one centered on the terms and conditions of
or craft within a facility comprise employment. Litigation may result to determine
a “bargaining unit.” This system means if a strike is in fact an economic strike. In Canada,
that bargaining is more decentralized with some states (Ontario and Manitoba) allow
agreements cover a single employer or replacement workers, but the two largest states
facility. (British Columbia and Quebec) do not permit
4. Exclusive representation – once a majority of replacement workers. Additionally, for a strike
workers select a union to represent their inter- to be recognized as legitimate, all states require
ests, this union represents all workers in a vote of workers.
a bargaining unit. In Canada, all workers
must pay union dues even if they are not Latin America
union members, whereas United States federal The State is (and has been) a key actor in the labor
legislation states that nobody can be forced to movement in Latin America. Unions and union
join a union. affiliation has increased during the latter part of
5. Legally enforceable – in both the United the twentieth century as democracy permeated
States and Canada, when agreements are writ- Latin American countries, but historically, the
ten, they are legally enforceable. The courts do State imposed restrictive structures on unions
not normally enforce agreements; rather, bind- (Morley et al. 2008). Labor laws limited the
ing arbitration is utilized in the main. rights of workers to organize, strike, or negotiate
C 382 Collective Bargaining/Trade Unions

collectively. Many states also had powers to remains more widespread than in the United
control unions. By the 1990s, however, countries States or Japan, for example (Morley et al.
like Mexico and Venezuela had introduced 2008). Another feature in some Western Europe
legislation to approve unions as well as engage countries is participation of workers in
in arbitration. management decision-making. This is particu-
Transition to democratic society has been dif- larly so in European Union member states,
ficult in most Latin American countries – high where employee consultation at a minimum is
poverty levels, high unemployment, economic a legal requirement in organizations with more
hardship, and high levels of external debt are than 50 employees (EU Directive 2002/14/EC).
still key issues in many economies. These issues Countries like Germany, Sweden, Belgium,
have affected the labor markets and levels of France, and the Netherlands allow some form of
unionization/collective bargaining in the region. indirect participation in decision-making, nor-
Although many Latin American countries have mally through a works council or similar
ratified International Labour Organisation committee.
treaties (even more than the United States and
Canada), the nature of their economies means Central and Eastern Europe
bargaining power of workers and unions is some- The development of former socialist countries
what diminished. Labor markets have deterio- post 1989 in Central and Eastern Europe saw
rated as the growing pains of democratization the transformation of those economies toward
become apparent. The informal (or black) eco- international trade and Western European mar-
nomic activity of the region may be as high as kets. On May 1, 2004, eight former socialist
50 % (Morley et al. 2008). This works against the countries joined the European Union – Czech
development of unions and collective bargaining. Republic, Estonia, Hungary, Latvia, Lithuania,
However, countries like Brazil, Argentina, Slovakia, Slovenia, and Poland. In 2007, Roma-
Mexico, and Uruguay have centralized collective nia and Bulgaria were also admitted. Accession
bargaining processes, which with the exception rules to the European Union specify the need for
of Uruguay involve the State. Other countries like overarching industrial relations legislation. Thus,
Chile, Peru, Venezuela, and Colombia have more all accession countries have some form of legis-
decentralized processes. lation on unions and collective bargaining. Trade
unions pre-1989 had higher membership than
Europe their Western European counterparts. Post-1989,
Western Europe unions fragmented into pro- and anticommunist
The social model in many Western European unions, which in turn led to fragmented industrial
countries is more supportive of a welfare state relations (Morley et al. 2008). Although EU
than the United Kingdom. Thus, unions have accession has been granted to most for the former
been a more powerful force in societal develop- Eastern Bloc countries, their socialist past is still
ment. Traditionally, centralized collective influential on cultural values and the fragmented
bargaining is more common and is supported by nature of trade unions may continue for some
unions, employers, and governments as a means time yet.
of achieving numerous objectives. Unions view
it as a means to control and reduce wages differ- Middle East and Asia
entials. Employers, particularly large firms, As data on unions in the Middle East is generally
benefit from less direct workplace bargaining. not available, the countries of Jordon, Saudi
Governments benefit from the ability to monitor Arabia, Syria, Turkey, and Egypt are briefly
wage agreements for inflationary pressures. described as reflective of the state of unions in
From the 1980s, pressure from employers in the Middle East. Similarly, several countries will
some countries resulted in more local bargaining, be used as representative sample of issues faced
but the coverage of collective bargaining by unions in Asia.
Collective Bargaining/Trade Unions 383 C
Middle East government’s view, and it has been used to effec-
In Jordan, the union movement is quite weak and tively ban strikes (Morley et al. 2008).
government intervention and control is normal. Similar to Syria, Egypt has a single recognized
A legal framework in the New Labor Law 1996 is confederation, the Egyptian Trade Union Feder-
the primary legislation. This law gives more ation, to which all unions must be affiliated.
power to employer organizations and limits the Labor law in Egypt allows the government to
roles of trade unions. Additionally, the main term a union illegal or render a unions charter C
union body in Jordan, the General Federation of invalid (Morley et al. 2008). Strikes are deemed
Trade Unions, had a rigid structure which does a form of public disorder and thus are illegal,
not easily permit members to change the Federa- although they do occur.
tion’s policies or leadership. Thus, unions in Thus, in general, trade unions in the Middle
Jordan do not reflect typical progress toward East are to some extent dependent on the levels of
better conditions of employment for members. democracy in the region. In all cases mentioned,
Following the discovery of oil in Saudi Arabia, the government plays a major role in the indus-
a shortage of skilled labor attracted many foreign, trial relations field by close supervising and/or
high-paid workers. This influx of expatriate controlling workers and unions.
workers remains a key feature of the labor market.
Trade unions and collective bargaining are Asia
prohibited by law, as are strikes. Employers set Unions in Japan, while present and free from
wages, and the government controls all aspects of government intervention, have been in decline
industrial relations. In 2001, the government in recent decades. The three pillars of the labor
approved the establishment of an employee’s relations system in Japan – life-long employ-
committee, which provides recommendations to ment, seniority-based pay, and enterprise unions –
employers on pay work conditions (Morley et al. have been threatened due to increased global
2008). competitive pressures on Japanese industry.
Syria operates a single union confederation, Bargaining is informal and based around these
the General Federation of Trade Unions, founded three pillars. A national labor movement (Rengo
in 1948. This confederation is closely linked to or the Japanese Trade Union Confederation) was
the ruling Baath party, and all unions must be formed in 1989 and has attempted to unify
affiliated to it. The Syrian government, while unions. Its success to date has been limited.
encouraging organized labor, restricts the politi- Korea and Taiwan share some similar charac-
cal influence and economic power of unions teristics in that they both have had considerable
(Morley et al. 2008). While strikes are permitted, industrial development. In Korea, mass industrial
they are generally discouraged. unrest from the late 1980s to the late 1990s
Trade unions in Turkey have had mixed for- resulted in increased trade union membership
tunes in the past 30 years or so. The Trade Union and a shift from unions at enterprise level to
Law of 1947 legalized unions. A confederation of representation at industry level. Bargaining in
unions (Turk-Is) was formed in 1952 and until the metal and health industries in particular
1980, union membership grew steadily. occurs at industry level (Morley et al. 2008). In
A military coup in 1980 shut down Turk-Is and 1997, a Tripartite Commission of workers,
two other union confederations. From 1986, employers, and government was formed which
a resurgence of unions saw a period of intense was the first formal recognition by the govern-
industrial conflict which resulted in several ment of a partnership approach to negotiation on
rounds of collective bargaining within the public terms and conditions. In Taiwan, prior to democ-
sector. An outcome of this bargaining process ratization in 1987, unions were for the most part
was agreement that all Turk-Is unions display arms of the state. A Council of Labor Affairs was
unity and not enter into any individual agreement. established in 1987, as were several independent
This outcome has advantages from the unions. Labor laws do allow the government to
C 384 Collective Bargaining/Trade Unions

dissolve unions or change leadership if public common than previous as the government is
order is threatened. Strikes are permitted only increasingly reluctant to attract global media
after a mediation process, and most government attention which might deter continued foreign
employees are not permitted to strike. investment.
Countries such as Malaysia, Indonesia, and
Thailand, often termed “emerging tigers,” share Africa
a common historical repressive approach to trade The diversity of the African continent implies
unions linked to political circumstance (Morley many unique features in each country. Diversity
et al. 2008). Malaysian unions are not permitted can be seen across ethnic background, historical
to bargain on issues such as promotions or lay- colonialism, political structures, and economic
offs, and bargaining at national level is unusual. growth. Historically, the formation of unions in
Strikes are legal under limited conditions and Africa took place after the Second World War.
may be prohibited by the government. Indonesia Unions were often supported by colonial admin-
repressed unions until the late 1990s and in 1998 istrators, who saw them as a means of keeping
ratified International Labour Organisation (ILO) social peace.
conventions. This has resulted in increased union Ironically, independence from colonial pow-
activity, although high unemployment levels ers reduced the independence of unions as many
limit the power of unions. A checkered history new regimes were single party (Schillinger
of military coups/democracy in Thailand in the 2005). Over time, however, many union move-
1990s has left a relatively weak and fragmented ments have contributed to political change in
union movement. Unions are more powerful in Africa. For example, in Mali, Congo, and Niger,
the state sector. unions opposed single party rule and play an
Singapore also has a somewhat repressive atti- important role in bringing about multiparty
tude to unions, as the National Trade Union Con- democracy. South African unions are often cited
gress is controlled by the government. Union as an example of the involvement in political
activities are controlled by regulation, with only change as a considerable number of postapartheid
limited collective bargaining permitted, and political leaders came from union ranks. How-
strikes are illegal in sectors deemed necessary ever, the traditional role of unions – improvement
for economic development. Industrial relations, of pay and working conditions – has been sub-
however, follow a paternalistic approach in that sumed by political concerns in many African
worker layoffs have been reduced or prevented countries. More developed economies such
through tripartite agreement (Morley et al. 2008). as South Africa, Ghana, Kenya, Libya, and
Labor in China is tightly controlled. Unions at Mauritius have more robust union movements
enterprise and industry level are state-controlled. and associated labor legislation.
All unions must deal with the All-China Federa- Structural Adjustment Programs (SAP) of the
tion of Trade Unions (ACFTU), and striking is IMF and World Bank have a serious effect on
illegal. The ACFTU is closely linked to the economic growth and recovery of many African
Chinese government. The increasing openness economies. This, is turn, has an effect on entre-
of the Chinese economy to foreign business and preneurship, business development, and employ-
investment has resulted in an increasing number ment. In a similar manner to some Latin
of unofficial workers unions (Morley et al. 2008). American economies, informal business activity
At the same time, the ACFTU actively encour- has been a hindrance to the development of
ages unions to join them and global companies unions. Recent years have seen some level of
area a particular focus for the federation, who aim increased foreign direct investment in African
to have control of all unions in non-state compa- economies, mainly in the area of natural
nies by 2010 (Economist 2008). Strikes have resources. Investments are not based on low-
become more commonplace, as workers seek to cost labor nor are labor costs significant. High
get improved wages. Repression of strikes is less capital cost implies that relatively good labor
Collective Bargaining/Trade Unions 385 C
relations are more a priority. This may lead to 1991 was based on the philosophy that workers
increased union organization (Schillinger 2005). were freely contracting individuals. This regime
placed significant obstacles in the path of unions
Australia and New Zealand and collective bargaining and denied legitimacy
For the most part of the twentieth century, con- to unions. The Employee Relations Act 2000
ciliation and arbitration between the state and the reinstated the legitimacy of unions but did not
Australian Council of Trade Unions (ACTU) was restore the arbitration system. C
the predominant feature of the union movement.
In the latter part of the century, change occurred.
While the 1980s was period of national wage Future Directions
setting, the 1990s saw a devolution to enterprise
level bargaining. The Labor government was Collective Bargaining
replaced by a coalition in 1996, who introduced Collective bargaining, while used as a synonym
the Workplace Relations Act which changed the for trade/labor unions, also refers to negotiations
industrial relations environment. The Act between employers and employees’ organiza-
curtailed the role of the ACTU in collective tions as a collective. The negotiations normally
bargaining. In place, bargaining at the enterprise focus on wage rates, working hours, holidays, and
level was by two principal means – a certified grievance mechanisms. Any resulting collective
agreement or an Australian Workplace Agree- agreement may apply to a sector, business feder-
ment (AWA). In the case of an AWA, this agree- ation, or at the national level.
ment is effectively between individual workers In line with declining union density, the focus of
and employers, with a union acting only as collective bargaining has become more
a bargaining agent (Morley et al. 2008). A certi- decentralized in recent years. This is due to factors
fied agreement refers to a collective agreement. such as devolved responsibility among global orga-
Fair Work Australia (formerly the Australian nizations, a lack of statutory regulation, and
Industrial Relations Commission) was outsourcing. Decentralized bargaining also assists
established under the Fair Work Act 2009. The employers in minimizing the influence of unions.
Fair Work Authority has a number of oversight The global economic downturn beginning in 2007
functions including minimum wages and also has had impacts on collective bargaining, as
employment conditions, enterprise bargaining, governments and employer organizations faced
industrial action, dispute resolution, and termina- turbulent economics conditions, which have in
tion of employment. Effective July 2010, the Fair turn reduced the ability of collective bargaining at
Work Act has refocused collective bargaining to a national or sector level to deliver improved pay
an enterprise base and remove individual and/or conditions. For example, collective
arrangements and AWAs. A key tenet of the bargaining at national level in Ireland has been
Fair Work Act is the concept of “good faith strained by economic events. However, the decline
bargaining,” which requires parties to make in collective bargaining at industry and national
sincere efforts in negotiations. level has been compensated for to a degree through
Similar to Australia, the New Zealand regula- an increasing number of jurisdictions with national
tory system was also based on an arbitration or industry minimum wage levels.
system for the most part of the twentieth century.
The 1970s and 1980s was a period of increasing Recognition and Legal Framework
industrial relations strife as strong unions negoti- The legal recognition of unions is an important
ated directly with employers, bypassing the arbi- factor in negotiations from a unions’ perspective.
tration process (Morley et al. 2008). A change Union recognition can be voluntary or statutory.
from a Labor to Conservative government in Voluntary recognition implies employers accept
1990 brought about a dramatic change in the collective bargaining procedures and some
labor market. The Employment Contracts Act of involvement of the state in an umpire role.
C 386 Collective Bargaining/Trade Unions

A voluntary regime exists in countries such as had a small positive effect on union membership.
Australia, New Zealand, and Ireland. Statutory The most influential factor in union density
recognition normally implies union must be rec- decline has been a global shift away from tradi-
ognized once certain conditions have been met, tional manufacturing employment to service and
for example, majority representation. The United retail sectors – which traditionally are nonunion.
States, Canada, and the United Kingdom operate The number of employees in manufacturing at
this approach. Another approach to statutory the turn of the century was approximately half
union recognition is that adopted by Scandina- that of 1950, with the numbers employed in ser-
vian countries, where an automatic right to be vice and retail sectors doubling or tripling in
represented exists (D’Art and Turner 2003). some economies during the same period. Finally,
Statutory recognition is favored by unions, but institutional factors such as the inclinations of
with the exception of the Scandinavian countries, ruling political parties can contribute to
union membership has declined (see next section) increases/decreases in union density, but this
despite statutory recognition. A debate continues has not been a major factor. The main exception
on the relative merits of voluntary versus statu- to declining union density is Scandinavian coun-
tory recognition and recognition procedures. tries, where, as noted previously, an automatic
For example, in the United States, as of mid- statutory right to union recognition exists.
2010, the Congress continues to debate the
Employee Free Choice Act, which was passed
by the House of Representatives in March 2007. Cross-References
This Act proposes some important changes. First,
it proposes to streamline union recognition by ▶ Minimum Wage
removing the need for a secret ballot. Second, ▶ Trade Union Recognition
the Act facilitates initial collective bargaining
and agreement by setting timelines for agreement
and allowing binding arbitration. Third, the Act References and Readings
strengthens the ability of the National Labor
Relations Board to seek injunctions against Bureau of Labor Statistics. (2010). Union Membership.
employers who discriminate against employees www.bls.gov/news.release/union2.toc.htm. Accessed
6 July 2010.
seeking representation. Another example of the Colling, T., & Terry, M. (2010). Industrial relations.
issues on recognition is Ireland, where Chichester, UK: Wiley.
a voluntary regime exists. The Irish Congress of D’Art, D., & Turner, T. (2003). Union recognition in
Trade Unions (ICTU) continues to strive for stat- Ireland: One step forward or two steps back? Industrial
Relations Journal, 34(3), 226–240.
utory recognition and has stated that Irish legis- Economist. (2008). Trade unions in China: Membership
lation is contra to International Labour required, 31 July 2008. http://www.economist.com/
Organisation (ILO) conventions. A complaint node/11848496. Accessed 14 July 2010.
has been lodged with the ILO to this effect. Human Resources and Skills Development Canada
(HRSDC). (2010). Union Membership in Canada, 2009.
Decline in Unionization info_analysis/union_membership/index2009.shtml.
A steady global decline in union membership has Accessed 6 July 2010.
continued since the 1950s. This has been attrib- Morley, M., Gunnigle, P., & Collings, D. (Eds.). (2006).
Global industrial relations. London, UK: Routledge.
uted to several factors. First, the generally OCED. (2010). OECD Stat Extracts. http://stats.oecd.org/
improved economic and business environment index.aspx. Accessed 8 July 2010.
has increased the demand for labor and resulted Schillinger, H. R. (2005). Trade unions in Africa –
in improved pay and conditions. Second, several weak but feared. http://www.fesnam.org/pdf/
structural factors can influence union density. pdf. Accessed 8 July 2010.
Increased participation in the labor force by Trade Union Congress (TUC). (2010). TUC History.
females, minorities, and migrant workers has www.tuc.org.uk. Accessed 1 July 2010.
Combined Code (June 2008) 387 C
Code is meant to promote and to support confi-
Collective Intentionality dence in corporate reporting and governance,
being rather a “guide to the components of good
▶ Community Relations board practice distilled from consultation and
widespread experience over many years. While
it is expected that companies will comply wholly
or substantially with its provisions, it is C
Collective Responsibility recognised that noncompliance may be justified
in particular circumstances if good governance
▶ Community Relations can be achieved by other means. A condition of
noncompliance is that the reasons for it should be
explained to shareholders, who may wish to dis-
cuss the position with the company and whose
Combination voting intentions may be influenced as a result”
(FRC 2008). This edition of Combined Code
▶ Mergers and Acquisitions (June 2008) was applied to accounting periods
beginning on or after 29 June 2008 and took
effect until 28 June 2010, when the next revised
version of this Code was issued.
Combined Code (June 2008)

Adriana Tiron-Tudor and Cristina Boţa-Avram

Babes-Bolyai University, Cluj-Napoca, Romania
Looking for the origins of corporate governance,
in the specialty literature (Paape 2007) it is gen-
erally accepted that Berle and Means (1932) are
the real founders of this controversial issue. Berle
Combined Code on Corporate Governance
and Means (1932) have promoted the idea of
(Revised June 2008); UK CG combine code;
separation of ownership and control, because the
UK Corporate governance framework, UK Code
ownership is dispersed among small shareholders,
of best practices in Corporate Governance
while control is concentrated in the power of man-
agers. According to Berle and Means (1932),
while typical shareholders are not interested in
the day-to-day affairs of the company, the man-
agement and the directors who are directly inter-
The Combined Code on Corporate Governance
ested have the ability to manage the resources of
issued in June 2008 (Combined Code) by Finan-
the company to their own interest without the
cial Reporting Council represents the fourth ver-
effective shareholder’s control.
sion (first version of the Combined Code was
issued in 1998) of the UK Corporate Governance The property owner who invests in a modern cor-
poration so far surrenders his wealth to those in
Code, which sets out the standards of good prac-
control of the corporation that he has exchanged
tices in corporate governance related to board the position of independent owner for one in which
leadership and effectiveness, remuneration, he may become merely recipient of the wages of
accountability, and relations with shareholders. capital. . . [Such owners] have surrendered the right
that the corporation should be operated in their sole
According to the Financial Reporting Council
interest. . . (Berle and Means 1932)
(the UK’s independent regulator responsible for
promoting high-quality corporate governance From an academic perspective, corporate
and reporting to support the investors), this governance issues were in the middle of
C 388 Combined Code (June 2008)

researchers’ interests mostly beginning in the governance is subject, in part, to federal securi-
second half of the twentieth century, but in ties laws, and, in part, to the jurisdiction of indi-
terms of recognizing the legitimacy, the moment vidual states.”
of recognition of the importance of corporate The Cadbury Code of 1992 was followed by
governance took place quite late. At the Euro- the recommendations of the Greenbury Commit-
pean level, the first significant step in this direc- tee on directors’ remuneration (Greenbury
tion could be identified in UK and is given by the Report 1995), after a review made by Hampel
issuing of the Cadbury Report in 1992 by the Committee (Hampel Committee 1998), the first
Cadbury Committee managed by Sir Adrian version of the Combined Code was published in
Cadbury (Cadbury Committee Report: Finan- 1998. Subsequently, Combined Code (1998) was
cial Aspects of Corporate Governance). The followed by further reports issued by various
major objective of this report was to find some committees like the ones chaired by Turnbull
answers to the concerns manifested by the public (Turnbull Report 1999), Myners (Myners Report
sector, but also failures of some major corpora- 2001), Higgs (2003), and Smith (2003). The sec-
tions from private sector. All these concerns ond version of the Combined Code was published
were also increased by the fraud events that in 2003 (FRC 2003).
affected the Maxwell Company, but also by the Starting from the general idea that corporate
ease with the abuses of power could be achieved governance is focused on the rights and respon-
within such large corporations. Some of the sibilities of a company’s board of directors, its
Cadbury Report’s conclusions showed that cor- shareholders, and different stakeholders, corpo-
porate bankruptcies were generated by the rate governance practices have became one of
major problems of internal control system func- the major interest for managers, investors, aca-
tioning, all these aspects being the top manage- demics, and policy regulators, and various finan-
ment’s responsibility, which not only failed to cial scandals that have shaken the global capital
avoid such problems, but in some cases, it was markets and the public confidence had deter-
proved that it had an important contribution to mined an increasing focus and preoccupation
disaster. By the end of 1992, the Cadbury over the incidence and effects of corporate
Report had been completed with a Code of fraud and fraudulent financial reporting, and
good practices, promoting the idea that the the impact of corporate governance structure
existing system of corporate governance was over the strategies, policies, and performances
weak and lacking only from a single point of of the companies. A synthesis of UK’s corporate
view, the one of transparency and accountability governance developments until the issuance of
issues (Cadbury 1992). Combined Code (June 2008) is presented in
The significance of Cadbury Report in the Table 1.
regulatory process of corporate governance The Combined Code issued in June 2008
principles is also recognised by researchers (the fourth version of the UK Combined Code)
from all over the world (Paape 2007; Abdullah was revised following the consultation
and Page 2009), because following the process during 2007, which was intended
publication of the Cadbury Report, codes of generally to reassure the Code’s content and
corporate governance practices started to prolif- impact of its recommendations, this edition
erate all over the world, many of them being applied to accounting periods beginning
being under the influence of Cadbury Code rec- on or after 29 June 2008 until 28 June 2010,
ommendations. A possible explanation of this when a new revised version of Combined
enormous influence of the Cadbury Code is Code (December 2009) was issued. A synthesis
given by Bush (2005) cited by Abdullah and of the main principles and recommendation
Page (2009), which presents as a principal of corporate governance practices included in
argument: “the relative lack of competing Combined Code (June 2008) is presented in
guidance from the United States, where Table 2.
Combined Code (June 2008) 389 C
Combined Code (June 2008), Table 1 Major benchmarks in the UK’s corporate governance developments until
Combined Code (June 2008)
Year Issuer Report Main recommendations
1992 A committee on the financial aspects of Cadbury Focus on the quality of the company’s financial
corporate governance in 1991, under the Report reporting
chairmanship of Sir Adrian Cadbury Provisions related to board composition, the
appointment and independence of non-executive
directors, remuneration of executive directors, and the C
system of controls for financial reporting process of
The requirement that each company have a minimum of
three non-executive directors
1995 A committee established by the UK Greenbury Concentrated on issues related to board remuneration,
Confederation of Business and Industry Report the role of remuneration committee in establishing the
on corporate governance remuneration packages for the executive directors,
requirements concerning the disclosure of directors’
remuneration, service contracts and remuneration
1998 A committee established for the Hampel It was intended to make a revision of the corporate
revision of the corporate governance Report governance system in the UK, trying to combine,
system in the UK converge, and clarify the recommendations of Cadbury
and Greenbury Reports
Comparing to the Cadbury and Greenbury “box-
ticking” approach, the Hampel Report is relied more
on broad principles and a “common sense” approach
1998 Committee on Corporate Governance Combined Combined the recommendations and principles
from the Committee’s Final Report and Code outlined in the Cadbury, Greenbury, and Hampel
from the Cadbury and Greenbury Reports (1998) Reports based on “comply or explain” approach
established by London Stock Exchange London Stock Exchange adopted the Combined Code
and required listed companies to make corporate
governance statements and disclosures, the general
recommendation being to conform to it
1999 A committee established by London Turnbull The report is focused on the issues of internal control
Stock Exchange under the chairmanship Report and risk management
of Nigel Turnbull of The Rank Group plc. Starting from the directors’ obligations under the
Combined Code, related to keeping good internal
controls in their companies, this report emphasizes the
board’s responsibility for ensuring that an internal
control system is implemented and requires companies
to report about their internal control systems and risk
2001 A commission established by HM Myners Focus on institutional investors, by taking the
Treasury under the supervision of Paul Report approach of asking whether institutional investors
Myners. were acting in the best interests of their beneficiaries
2003 A commission established by UK Higgs Reviewed the role of non-executive directors and of the
Government, chaired by Derek Higgs. Report audit committee, trying to contribute toward enhancing
the existing version of the Combined Code
This report claims more severe criteria related to
board composition and the evaluation of directors’
2003 Financial Reporting Council Smith In the light of financial scandals of Enron and Arthur
Report Andersen, focus on the independence of the auditors,
role of the audit committee especially in the process of
monitoring the financial reporting and internal control
systems in the best interest of shareholders
Its recommendations were incorporated in the next
version of the Combined Code (2003)
C 390 Combined Code (June 2008)

Combined Code (June 2008), Table 1 (continued)

Year Issuer Report Main recommendations
2003 Financial Reporting Council Combined This Code supersedes and replaces the Combined Code
Code (June 1998). It derives from a review of the
(2003) recommendations included by Smith and Higgs reports
The code contains the main supporting principles and
provisions related to corporate governance practices
The approach is “comply or explain,” which means
certain flexibility in applying code’s provisions or –
where it does not – to provide an explanation
It is recommended that each company review each
provision carefully and give an argued explanation if it
departs from the Code provisions
2006 Financial Reporting Council Combined This Code supersedes and replaced the Combined
Code Code issued in 2003
(2006) Presents minor revisions compared to the version from
2003, being the results of the review process made by
Financial Reporting Council of the implementation of
Combined Code in 2005 and consultation process on
possible amendments to the Combined Code
Source: Authors’ projection based on relevant literature review

Key Issues every 2 years. After the Combined Code issued in

June 2008, next review began in March 2009,
The significance of the UK Combined Code in the with a call for evidence on the impact and effec-
context of European corporate governance, and tiveness of the Code. The process of review
not only, is highlighted especially from the per- ended in May 2009 and 114 responses were
spective of difficult economic conditions that received. In the same time, the FRC held
strongly influence further financial and economic a series of meetings with chairmen from nearly
developments at European level. Therefore, for a 100 FTSE companies between April and June
the UK’s independent regulator in corporate gov- 2009. All consultation documents, copies of indi-
ernance area – Financial Reporting Council – vidual responses, and other documents associated
a significant challenge will be to keep effectively with the review process are accessible on the FRC
under constant review developments in corporate website (http://www.frc.org.uk/corporate/review
governance generally, to undertake reviews, and Combined.cfm). The major coordinates that had
to consider whether any actions are necessary for influenced the review process are generated by
justified reviews of the UK’s Code of corporate the number of various reports and recommenda-
governance practices. Also, huge importance is tions like the European Commission’s Recom-
given by continuous monitoring of the implemen- mendation on the remuneration of executive
tation of corporate governance practices and directors of listed companies (European Com-
recommendations by listed companies and by mission Recommendation complementing Rec-
shareholders. ommendations 2004/913/EC and 2005/162/EC
as regards the regime for the remuneration of
directors of listed companies) published at Brus-
Future Directions sels, April 2009, and the conclusions of the
Report issued by House of Commons Treasury
A permanent concern for Financial Reporting Committee focused on the consequences of finan-
Council is to review the impact and implementa- cial crisis – “Banking Crisis: reforming corporate
tion of the Combined Code periodically, at least governance and pay in the City” (2009).
Combined Code (June 2008) 391 C
Combined Code (June 2008), Table 2 A synthesis of corporate governance principles – Combined Code (June 2008)
Section 1 A – Directors A1 – Board Every company should be headed by an effective board,
Companies which is collectively responsible for the success of the
A2 Chairman and There should be a clear division of responsibilities at the
chief executive head of the company between the running of the board and
the executive responsibility for the running of the company’s
business. No one individual should have unfettered powers C
of decision
A 3 – Board The board should include a balance of executive and non-
balance and executive directors (and in particular independent non-
independence executive directors) such that no individual or small group
of individuals can dominate the board’s decision taking
A4 – Appointments There should be a formal, rigorous, and transparent
to the board procedure for the appointment of new directors to the board
A 5 – Information The board should be supplied in a timely manner with
and professional information in a form and of a quality appropriate to enable
development it to discharge its duties. All directors should receive
induction on joining the board and should regularly update
and refresh their skills and knowledge
A 6 – Performance The board should undertake a formal and rigorous annual
evaluation evaluation of its own performance and that of its committees
and individual directors
A 7 – Re-election All directors should be submitted for reelection at regular
intervals, subject to continued satisfactory performance. The
board should ensure planned and progressive refreshing of
the board
B – Remuneration B.1 The level and Levels of remuneration should be sufficient to attract, retain,
make-up of and motivate directors of the quality required to run the
remuneration company successfully, but a company should avoid paying
more than is necessary for this purpose. A significant
proportion of executive directors’ remuneration should be
structured so as to link rewards to corporate and individual
B.2 Procedure There should be a formal and transparent procedure for
developing policy on executive remuneration and for fixing
the remuneration packages of individual directors. No
director should be involved in deciding his or her own
C. Accountability C.1 Financial The board should present a balanced and understandable
and audit reporting assessment of the company’s position and prospects
C.2 Internal The board should maintain a sound system of internal
control control to safeguard shareholders’ investment and the
company’s assets
C.3 Audit The board should establish formal and transparent
committee and arrangements for considering how they should apply the
auditors financial reporting and internal control principles and for
maintaining an appropriate relationship with the company’s
D. Relations with D.1 Dialogue with There should be a dialogue with shareholders based on the
shareholders institutional mutual understanding of objectives. The board as a whole
shareholders has responsibility for ensuring that a satisfactory dialogue
with shareholders takes place
D.2 constructive The board should use the AGM to communicate with
use of the AGM investors and to encourage their participation
C 392 Combined Code on Corporate Governance (Revised June 2008)

Combined Code (June 2008), Table 2 (continued)

Section 2 E. Institutional E.1 Dialogue with Institutional shareholders should enter into a dialogue with
Institutional shareholders companies companies based on the mutual understanding of objectives.
shareholders E.2 Evaluation of When evaluating companies’ governance arrangements,
governance particularly those relating to board structure and
disclosures composition, institutional shareholders should give due
weight to all relevant factors drawn to their attention
E.3 Shareholder Institutional shareholders have a responsibility to make
voting considered use of their votes
Source: Authors’ projection based on the synthesis of principles included in Combined Code (June 2008)

The main findings of this review report are syn- Combined Code. (1998). The combined code: Principles
thesized in the 2009 Review of the Combined of good governance and code of best practice derived
by the Committee on Corporate Governance from the
Code: Final Report, available on FRC’s website. committee’s. Final Report and from the Cadbury and
Greenbury Reports. London: Gee Publishing.
Financial Reporting Council. (2003). The combined code
Cross-References of corporate governance. London: Accounting
Standards Board, Financial Reporting Council.
Financial Reporting Council. (2008). The combined code
▶ Agency and Corporate Governance of corporate governance. London: Financial
▶ Agency Theory Reporting Council. www.frc.org.uk
▶ Corporate Governance Greenbury Report. (1995). Study group on Directors’
Remuneration. Report of a study Group chaired by
▶ Corporate Governance Reporting Sir Richard Greenbury, July. London: Gee Publishing.
▶ Enron Hampel Report. (1998). Committee on Corporate Gover-
▶ European Corporate Governance Institute nance: Final report, January. London: Gee Publishing.
▶ Evolution of Corporate Governance Reports in Higgs Report. (2003). Review of the role and effectiveness
of non-executive directors, January. London.
the UK and Ireland House of Commons Treasury Committee. (2009). Bank-
▶ Financial Reporting Council (UK) ing crisis: Reforming corporate governance and pay in
▶ Greenbury Report (UK) the city, 15 May 2009. London: House of Commons,
▶ Hampel Report (UK) and CSR The Stationery Office.
Myners Report. (2001). Institutional investment in the
▶ Higgs Report (UK) and CSR United Kingdom: A review. London: HM Treasury.
Paape, L. (2007). Corporate governance: The Impact on
the role, position, and scope of services of the internal
References and Readings audit function. Doctoral Thesis, ERIM Ph.D. Series
Research in Management. Rotterdam School of
Management (RSM) Erasmus University, Erasmus
Abdullah, A., & Page, M. (2009). Corporate Governance Research Institute of Management (ERIM).
and Corporate Performance: The UK FTSE 350 Com- Smith Report.(2003). Audit Committees Combined Code
panies. Edinburgh: The Institute of Chartered Accoun- Guidance, June. London: Financial Reporting
tants of Scotland. Council.
Berle, A. & Means, G. (1932). The Modern Corporation Turnbull Report. (1999). Internal control – guidance for
and Private Property. United States: Transaction Directors on the combined code. London: Institute of
Publishers. Chartered Accountants in England and Wales,
Berle, A. A., & Means, G. C. (1991). The Modern Corpo- September 1999.
ration and Private Property. Revised Edition 1967.
Harcourt. Brace&World, New York
Bush, T. (2005). Divided by Common Language: Where
Economics Meets the Law – US vs Non-US Reporting
Models, London: Institute of Chartered Accountants of
England and Wales (ICAEW). Combined Code on Corporate
Cadbury Code. (1992). Report of the committee on the
financial aspects of corporate Governance: The code
Governance (Revised June 2008)
of best practices. London: Gee Professional
Publishing. ▶ Combined Code (June 2008)
Communicating with Stakeholders 393 C
mutuality between those involved in the commu-
Command nication process. It also implies a less mechanis-
tic view of communication, which seems a better
▶ Management fit for the realm of human communication. The
latter point is particularly relevant in the context
of corporate social responsibility (CSR), as this
concept is fundamentally about corporations C
Commercial Organizations negotiating their social relationships and han-
dling the externalities they incur for society and
▶ View on the Ground: CSR from a Capabilities the environment. Ultimately, a corporation that
Approach wants to succeed with CSR has to communicate
with its stakeholders, groups, or individuals “that
can affect or be affected by the realization of an
Commitment organization’s purpose” (Freeman et al. 2010,
p. 26). CSR can include the process of mapping
▶ Trust and evaluating expectations and demands from
such stakeholders, as well as the formulation and
implementation of actions and policies that
address the expectations and demands (Ihlen
Common Good et al. 2011). Communication is at the heart of
this process since it helps the corporation to
▶ Community Relations understand which expectations exist and which
demands stakeholders are making. Communica-
tion is also absolutely necessary when corpora-
tions want to share their views of CSR and how
Communicating with Stakeholders they manage the externalities they create. When
a corporation is communicating with stake-
Øyvind Ihlen holders, it must be thought of as a two-way pro-
Department of Media and Communication, cess that involves the use of symbols, including
University of Oslo, Oslo, Norway language, to influence or share an idea or
a perspective, and/or to learn more about the
ideas and perspectives of stakeholders.

CSR communication; Stakeholder dialogue Introduction

Communicating with stakeholders is a crucial

Definition CSR activity and at the heart of CSR communi-
cation. Indeed, it can be argued that communicat-
Early communication theory proposed ing with stakeholders is the same as CSR
a transmission view of communication based on communication, although the former is a wider
a model with three elements: sender, message, category since it can include non-CSR-related
and receiver. Tracing the etymological roots of communication as well. A case in point can be
communication, however, points to the Latin marketing or investor relations that primarily
noun communicatio (sharing or imparting) and focus on attracting or keeping customers or share-
the verb communicare, which means to share or holders. Then again, of course, in a wider sense it
“to be in relation with” (Cobley 2008, para. 1). can be argued that communicating with cus-
The latter understanding hints at a form of tomers and investors is part of the financial
C 394 Communicating with Stakeholders

responsibility of corporations and hence also environment, relations that have both ethical
linked to CSR. This entry will concentrate on and strategic implications. The success of the
the CSR dimension relating to communication organization is dependent on how it relates to
with stakeholders and ask some specific ques- key groups, such as customers, employees,
tions like: What does communicating with stake- unions, suppliers, communities, politicians, and
holders mean? Why does it matter? How can it be owners. Stakeholder theory functions as a useful
done? Then the last two sections will address heuristic when an organization wants to map its
some issues that are not discussed in the main external and internal relations and can help
section, as well as specify future directions for secure that key groups are not forgotten. Norma-
research on the topic of communicating with tive stakeholder theory also argues that managers
stakeholders. must keep the support of stakeholder groups, and
that the organization should be the place where
What? stakeholder interests are maximized over time
The definition section above belies the fact that (Freeman et al. 2010). Still an essential and recur-
stakeholders and communication are defined in ring problem discussed elsewhere in this ency-
a bewildering number of ways and that a number clopedia is how to prioritize between different
of different theories are built around these stakeholders given that resources are scarce.
notions. Some think of communication as Communication is key in the endeavor
a process, others as a product (oral or written). described above. You cannot really learn about
Communication has also been seen as that which the perspective of others without communicating
makes up public life, exemplified with the notion directly or indirectly with them, and others can-
of the public sphere. Yet others have focused on not truly grasp your perspective unless you have
the technology involved when communicating communicated directly or indirectly with them.
and on how this influences both the process and Direct communication can take the form of stake-
the product (Cobley 2008). It is important to holder meetings, written statements posted on
remember that it is not possible for corporations websites, or communication in social media for
to not communicate with stakeholders, since that matter. Indirect communication can be
silence can also be seen as a form of communi- thought of as communication through the news
cation. Communication is implicated in CSR and media (although the mass media itself can of
business strategies whether the corporation likes course also be considered a stakeholder). Corpo-
it or not. It is also important to emphasize that rations will typically use a mix of different media
communication and action are interrelated and that differs in the degree that they allow for two-
co-construct one another. Communication is way communication. The goal is not to commu-
a form of action. It can also constitute corporate nicate to but rather with stakeholders since
practice and the meaning of CSR and stakeholder feedback is beneficial. The goal of
a corporations’ relationship to its stakeholders. the communication process can be located along
Said differently, communication can have a continuum according to the degree of persua-
a performative function, creating the effect that sion that is attempted. Sometimes a corporation
it names. might choose to listen and consult on issues, other
Another premise for this entry is that commu- times it might actively seek to influence stake-
nication with stakeholders has an ethical poten- holder thoughts and actions.
tial. CSR communication can in general breed
skepticism and be perceived as self-serving and Why?
manipulative. On the other hand, it can be As posited above, a corporation communicates
maintained that communication is necessary to with stakeholders whether it intends to or not.
ensure stakeholder participation. Basically, the Silence on the topic of CSR is also a form of
stakeholder concept points out that organizations communication, either a signal that the corpora-
have important relations to their social tion does not care, or that the corporation is not
Communicating with Stakeholders 395 C
sophisticated enough to pay attention. Research dispose an oilrig at sea and for its relations to the
shows, however, that most of the major corpora- military regime in Nigeria. In hindsight, Shell
tions in the world report on CSR issues (KPMG concluded that it had lost touch with social expec-
2008). It can be said that this is the ethically right tations and failed to recognize how more stake-
thing to do, but corporations typically engage in holders wanted to have a say about its way of
CSR and communication with their stakeholders conducting business. The point is that in order to
as a way of reaching organizational goals. As will maintain legitimacy, corporations need to iden- C
be pointed out later, an argument has been made tify and react to the social norms and expecta-
that the latter type of motives cheapens the moral tions. This is something that can only be done by
value of CSR and stakeholder communication. communicating with stakeholders. Communicat-
CSR is, nonetheless, often seen as a form of risk ing with stakeholders can ideally improve corpo-
management, or a part of reputation management rate decision-making, stakeholder engagement,
and ultimately profit making. Some define repu- and corporate governance. New issues that oth-
tation as the long-term collective judgments erwise might be ignored can be catapulted to the
observers have of an organization based on forefront as a result of communicating with stake-
assessment of the corporate financial, social, holders. Such communication can also help cor-
and/or environmental impacts (Barnett et al. porations make sense of issues and be of value
2006). In other words, CSR is sometimes directly when a corporation wants to strategize about the
linked to reputation. And although it has been same issue.
methodologically difficult to link reputation Finally, communicating with stakeholders can
with profit, many argue that a good reputation be recognized as an ethical duty when corporate
boosts sales, attracts investors and employees, actions affect stakeholders. It has been pointed
cushions against crises, and curries positive out that corporations have a responsibility to
media coverage. On the other hand, as some address and seek to rectify the externalities they
scholars have pointed out, “CSR can work, for create, and this would necessarily entail commu-
some people, in some places, on some issues, nication as well. Corporations must use commu-
some of the time” (Newell 2005, p. 556). Neither nication in order to map and evaluate problems
adhering to CSR nor communicating with stake- and solutions, as stakeholders perceive them.
holders is a quick fix for corporations bent on This duty is also said to spring from the very
improving their profits. Ultimately, however, fact that it is the society and the society’s infra-
communicating with stakeholders is also structure that have made it possible for corpora-
a matter of surviving, that is, it is a matter of tions to earn a profit.
earning legitimacy. Business must answer the
big question concerning how this institution How?
serves society. When communicating with stakeholders, an
It is also beneficial for corporations to recog- obvious first step is to get an idea about whom
nize that what is considered ethical corporate you are going to address. Corporations first need
behavior is a social construct. This also means to map their stakeholders and prioritize between
that it is a construct that is changing over time. them as pointed out above. Next, the type of
During one period of time some pollution from overall communication strategy has to be
industry plants seemed to be an acceptable price decided, certain communication principles
to pay for prosperity. These days, this type of should be implemented, and rhetorical strategies
thinking does not have the same resonance in and media types have to be chosen.
Western countries. Another example is Shell’s The overall communication strategy can be
annus horribilis, 1995, which illustrates the dan- considered as one-way or two-way. The corpora-
ger of not keeping abreast with changes in the tion can choose to inform stakeholders about the
public view on CSR. The company was shaken corporate view on CSR and about what actions
by international reactions when it attempted to are taken in this regard, or the corporation can
C 396 Communicating with Stakeholders

seek out stakeholder feedback on the same issue of good CSR communication. Transparency can
and the CSR actions. The degree to which the foster trust, respect, fairness, and a sense of pro-
corporation opens up and engages with stake- cedural justice. Corporations should have clear
holders in this regard is also a matter of impor- and visible missions, policies, procedures, and
tance. The attempt to get stakeholders to be guidelines. They should also provide honest
involved through frequent, systematic, and pro- information about aspects of their business that
active dialogue can help build mutually benefi- can affect stakeholders, including risks related to
cial relationships (Morsing and Schultz 2006). If their products or services. Transparency must
the dialogue process is transparent and stake- include financial performance, as well as trans-
holders feel that the corporation responds con- parency about the social and environmental per-
structively, dialogue can increase corporate formance. The aim is to give stakeholders an
legitimacy and trust. In other words, dialogue opportunity to make decisions about purchases,
with stakeholders is preferred and it is also employment, and/or investments based on their
a key word that occurs frequently in corporate own values (Ihlen et al. 2011).
rhetoric on CSR (Ihlen et al. 2011). An overarching goal of communication with
Communication theory proposes several ways stakeholders is to create trust. In some literature,
for a dialogue to work for all those involved. It it is argued that corporations can build trust by
has, for instance, been argued that all relevant discussing problems and dilemmas they encoun-
stakeholders must be included in the dialogue, ter in their CSR work when they communicate
and that it should be possible to discuss all types with stakeholders. The rhetoric should be based
of issues. Furthermore, it is pointed out that stake- on proof through numbers and statistics were
holders should be able to present critical and available in terms of numbers and statistics, as
alternative views, and that all stakeholders should well as examples of outcomes and impacts. Cred-
be able to influence the structure, process, and ible third parties should attest to the success or
outcome of the dialogue. Finally, the principle of lack of success. In most cases, a low-key
transparency must be met. The latter point would approach to CSR communication seems advis-
mean, for instance, that the corporation is open able. That is, stakeholders can react negatively
about its motives for the dialogue, but also that if the corporation flaunts its efforts. Again, how-
stakeholders have access to information about the ever, some research indicates that stakeholders
outcome of the dialogue (Pedersen 2006). tolerate the profit motive, as long as they also
A pointed criticism of corporate dialogue see an ethical motive at the same time. Strength-
efforts is that they are only conducted to let the ening trust and credibility is also something that
stakeholders provide supportive and positive is done through the creation of “common dwell-
comments. The normative dialogue ideals ing places” between the corporation and its stake-
described above ask that corporations actually holders. This could, for instance, include arenas
risk something, that they open up the where the demands from normative dialogue the-
decision-making process and set judgments and ory are met (Ihlen et al. 2011).
assumptions under scrutiny (Bohm 2008). Corporations can choose from a plethora of
Critical feedback from stakeholders might be media types for communication with stake-
unpleasant, but if the corporation does not engage holders, including, for instance, nonfinancial
in dialogue it also risks only asking questions that reports, advertising, homepages, blogs, and
it would like to hear. The corporation can end up social media. Particularly the advent of the latter
only engaging itself rather than follow a course has created new possibilities for dialogue. This
that will help it handle public pressure, social can allow corporations to develop their CSR
change, and complexity. strategies and practices more in line with the
Other normative demands include that com- expectations expressed by their stakeholders. In
munication has to be honest, reciprocal, and addition, corporations can of course attempt to
open. Transparency is another important feature use the traditional mass media channel. Again,
Communicating with Stakeholders 397 C
research has shown that a heavy reliance on such a one-way affair. Some dialogue is also carried
communication and choosing a self-indulgent out to co-opt NGOs and critical stakeholder
celebratory rhetoric in these media can create groups. The purpose in such instances is to
negative feedback (Ihlen et al. 2011). privatize the debate and keep it out of the public
Some researchers have suggested that corpo- sphere. In other instances, stakeholders might
rations should use an inside-out approach when feel that the dialogue is only window dressing.
communicating about CSR. The communication The corporation might be pursuing a predefined C
process should first involve the employees, and goal that stakeholders have no real influence
secondly outside expert stakeholders, that is, crit- on. Furthermore, it is often the corporation that
ical stakeholders, the media, and local decision lays down the premises for the dialogue: who is
makers. A corporation is not likely to build going to discuss what issues in what timeframe.
a good reputation by communicating about CSR Second, another reason why CSR communication
directly with the general public. Instead, corpo- in particular is viewed with skepticism is when
rations should rely on the third party strategy, stakeholders perceive a discrepancy between
whereby NGOs, employees, or public officials the verbal and the physical corporate CSR
declare their support for the corporations’ efforts. actions. Corporate discourse also creates
Information can also be made available to the expectations that the corporation needs to ful-
greater public through Internet sites designed fill. A fundamental task for management and
for those that are particularly interested (Morsing communicators alike is to attempt to close
et al. 2008). The latter point that the general gaps that exist between announced policy
public might not be much interested in CSR com- and implemented policy. Here, however, it is
munication can also be a challenge for stake- also possible to hold the view that corpora-
holder dialogue, in general. Dialoguing with tions should be given some leeway, as aspira-
corporations can be perceived as tiresome and tional talk also has the potential to bring about
time-consuming, at least in the traditional form social change. This is also in line with the
of a stakeholder meeting. There are indications, mentioned point that there is no simple or
however, that a declared intention and invitation clear-cut distinction between talk and action
to engage in dialogue in itself is considered (Ihlen et al. 2011).
favorably. Third, there are some systemic and ethical chal-
lenges that arise for corporations and their
stakeholders. It could be argued that corpora-
Key Issues tions are located in an economic system that
necessarily has corporations reduce every-
Above, two issues for communicating with stake- thing around them to tools. Corporations are
holders are touched upon, namely, the matter of driven by an economic rationality where
who counts as stakeholders and how to prioritize ethics have to be profitable if it is to be taken
between them, as well the fact that the stake- into account. The value system is extremely
holders might not be as interested in communi- limited and it is hard if not impossible to move
cating with the corporation as the latter is. Here beyond an instrumental perspective. This also
are three other issues that arise from CSR com- puts the corporation at rhetorical disadvantage
munication and corporate attempts to communi- when seeking to communicate with stake-
cate with stakeholders: holders (Ihlen et al. 2011).
First, the corporate tendency to instrumentalize the
dialogue to serve corporate self-interest leads to
criticism. Stakeholders might feel that the dia- Future Directions
logue is only serving the purpose of informa-
tion mining to give the corporation the upper Much more research could be conducted on the
hand. The learning process can be perceived as way symbols are used in the communication of
C 398 Communications Strategies

corporations with stakeholders. That is, how are ▶ Stakeholder Engagement

the communication processes shaped and ▶ Stakeholder Relationship
influenced by corporate values and interests? ▶ Stakeholder Theory
With respect to the issues mentioned in the pre- ▶ Trust and CSR
vious section, is it possible to find examples of
non-instrumental corporate stakeholder commu-
nication? Do we have to settle for corporations References and Readings
doing the morally right thing, engaging in stake-
holder communication, but not with pure motives Barnett, M. L., Jermier, J. M., & Lafferty, B. A. (2006).
Corporate reputation: The definitional landscape. Cor-
in the Kantian sense?
porate Reputation Review, 9(1), 26–38.
While much of the research conducted on cor- Bohm, D. (2008). On dialogue. New York: Routledge.
porate communication with stakeholders takes Cobley, P. (2008). Communication: Definitions and con-
the perspective of the corporation, it would be cepts. In W. Donsbach (Ed.), The Blackwell interna-
tional encyclopedia of communication. Oxford, UK:
interesting to hear more about stakeholders and
their experience in communicating with corpora- Freeman, R. E., Harrison, J. S., Wicks, A. C., Parmar,
tions. What is, for instance, stakeholders’ view on B. L., & De Colle, S. (2010). Stakeholder theory: The
the normative demands from dialogue theory? state of the art. New York: Cambridge University
Furthermore: Is the finding that stakeholders
Ihlen, Ø., Bartlett, J., & May, S. (Eds.). (2011). Handbook
accept a mix of intrinsic and extrinsic corporate of communication and corporate social responsibility.
motives true? What tolerance exists toward the Malden, MA: Wiley-Blackwell.
corporate instrumental agenda? Are there cultural KPMG. (2008). KPMG international survey of corporate
responsibility reporting 2008. Amsterdam: KPMG.
differences in this respect?
Morsing, M., & Schultz, M. (2006). Corporate social
As mentioned, the advent of social media pre- responsibility communication: Stakeholder informa-
sents corporations with a new opportunity to tion, response and involvement strategies. Business
communicate with stakeholders. Still, the ability Ethics: A European Review, 15(4), 323–338.
Morsing, M., Schultz, M., & Nielsen, K. U. (2008). The
to forge a lasting relationship with stakeholders
‘Catch 22’ of communicating CSR: Findings from
using social media might be over-hyped. Com- a Danish study. Journal of Marketing Communica-
municating through Twitter and on Facebook tions, 14(2), 97–111.
certainly allows for more two-way communica- Newell, P. (2005). Citizenship, accountability and com-
munity: The limits of the CSR agenda. International
tion than a typical newsletter mailed to stake-
Affairs, 81(3), 541–557.
holders. Still, both time and energy are needed Pedersen, E. R. (2006). Making corporate social
to get social media to work in the sense of com- responsibility (CSR) operable: How companies trans-
municating with stakeholders. More research is late stakeholder dialogue into practice. Business and
Society Review, 111(2), 137–163.
needed, however, to understand the potential and
the pitfalls of social media with this purpose. It
would be particularly interesting to learn what
rhetorical repertoire corporations have developed
in social media to address CSR issues, including Communications Strategies
not too favorable comments on a corporation’s
CSR track record. ▶ Marketing Communications and CSR


▶ CSR Communication Communities

▶ Primary Stakeholders
▶ Reputation/Reputation Management ▶ View on the Ground: CSR from a Capabilities
▶ Social Dialogue Approach
Communities of Practice 399 C
lifetime, one travels through an array of commu-
Communities of Practice nities. Communities of practices exist in lunch-
rooms at work, in field settings, and on factory
Fernanda de Paiva Duarte floors, but they can also operate in virtual envi-
School of Business, University of Western ronments, including chat rooms, discussion
Sydney, South Penrith DC, NSW, Australia boards, and newsgroups. Communities come in
a variety of forms: They can be small or large; C
local or global; actual or virtual; personal or work
Synonyms related; formally recognized or informal;
supported with a budget or unfunded; visible or
Learning systems; Teams; Teamwork invisible (Wenger 2006). A community of prac-
tice can either evolve naturally because of the
members’ shared interest in a particular domain,
Definition or it can be created with the goal of gaining
knowledge on a specific topic or field. Through
The phrase “communities of practice” was coined the process of sharing information and experi-
by educational theorists Jean Lave and Etienne ences with the group, members learn from each
Wenger (Lave and Wenger 1991) in the ground- other, and develop themselves personally and
breaking book Situated Learning: Legitimate professionally.
Peripheral Participation. In this work, they put It must be taken into account, nevertheless,
forward the idea that learning “is a process of that not every community is necessarily a com-
participation in communities of practice” – par- munity of practice. According to Wenger (2006)
ticipation that is at first peripheral but that communities of practice must embody three core
increases gradually in engagement and complex- characteristics: the domain, the community, and
ity. Communities of practice refers to groups of the practice. The domain defines the identity of
people who share a concern or a passion for a community of practice, which is not merely
a topic, a craft, and/or a profession (Wenger a group of friends or a network of connections,
1998, 2006). These individuals deepen their but a commitment or a “shared competence that
knowledge and expertise through regular interac- distinguishes members from other people”
tion with each other (Wenger 2006; Wenger et al. (2006). This shared competence is valued by the
2002). Therefore, a community of practice acts as members and encourages them to learn from one
a “living curriculum” that engages participants in another. The community is constituted by the
a process of “collective learning” (Wenger 2006). interactions between members of a given domain
Examples of communities of practice can be: and the mutual relationships they build, which
. . .a tribe learning to survive, a band of artists enables them to learn from each other. The prac-
seeking new forms of expression, a group of engi- tice refers to the repertoire of resources, experi-
neers working on similar problems, a clique of ences, stories, tools, and problem-solving
pupils defining their identity in the school, techniques that the members of the community
a network of surgeons exploring novel techniques,
a gathering of first-time managers helping each develop in their interactions with each other. The
other cope (Wenger 2006). emergence of a shared practice may be more or
less self-conscious. For example, academics who
meet regularly for lunch in a staff room may not
Introduction realize that their conversations actually convey
knowledge on how to teach or how to conduct
All of us belong to communities of practice – research. In the course of these “learning conver-
often to more than one – acting as core members sations,” they develop a set of stories and cases
of some, and peripheral members of others that become a shared repertoire in their practice.
(Lave and Wenger 1991). Indeed, in one’s Hence a community of practice is not merely
C 400 Communities of Practice

a community of interest, but its members are, in needs to be managed strategically. Whereas tradi-
actual fact, engaged practitioners. tional forms of knowledge management placed
In addition to the above elements, communi- greater emphasis on information systems, the com-
ties of practice have three dimensions that allow munities of practice model focuses on people and
practice to be the source of coherence in a given on the social structures that enable organizational
community: mutual engagement, a joint enter- members to learn with and from each other
prise, and a shared repertoire of (Wenger (Wenger 2006). In contemporary organizations,
1998). In a community of practice, practice is knowledge is a valuable resource and, in many
not just an aggregate of people or a network cases, the key to success; it must not therefore be
defined by a common goal, but it resides in left to chance. Managers are becoming increasingly
“the relations of mutual engagement by which aware of the need to understand the types of
[people] can do whatever they do” (1998, p. 73). knowledge that will confer ▶ competitive
Mutual engagement is therefore fundamental to advantage to their companies. Cultivating
creating meaningful relationships and learning, communities of practices in strategic areas is
as it connects people in ways that can become hence an effective way to manage knowledge as
deeper and more abstract, creating a “tight node an asset. This is particularly the case in times of
of interpersonal relationships” (1998, p. 76). rapid change where organizations frequently
Not only do communities of practices arise from restructure their relationships in response to the
a commonly shared goal, but they also generate demands of shifting markets (Wenger et al. 2002).
relations of mutual accountability among According to Wenger (2006), the growing
participants. These relations do not stem purely interest in the notion of communities of practice
from conformity, but they are linked to the as a means of developing strategic capabilities in
members’ ability “to negotiate actions as organizations is due to three reasons: First, com-
accountable to an enterprise” (1998, pp. 77; 82). munities of practice allow for collective respon-
Relations of mutual accountability endow sibility for knowledge management; second, they
communities of practice with their character of create a direct link between learning and perfor-
a joint enterprise which both engenders and direct mance, because members of communities of
social energy, and which encourages new ideas practice are also members of teams and business
and projects (Wenger 1998, p. 82). Communities units; third, communities of practice are not
of practices also have a shared repertoire which is restricted to formal structures: They create
developed over time. It consists of words, organic connections among people across orga-
routines, tools, ways of thinking and acting, nizational and geographic boundaries. As noted
stories, gestures, symbols, genres, and concepts. by Wenger (2006) “. . .the knowledge of an orga-
The shared repertoire also includes the discourse nization lives in a constellation of communities
through which members create “meaningful of practice each taking care of a specific aspect of
statements about the world” and styles through the competence that the organization needs.”
which they express their membership and identi- Communities of practice have also been found
ties as members (p. 82–83). This shared reper- to be a means of developing and maintaining
toire is adopted in the course of the community’s long-term “organizational memory” (Hedberg
existence and becomes an integral part of 1981), defined by Conklin (1997) as a type of
its practice. memory that “extends and amplifies” organiza-
tional knowledge “by capturing, organizing, dis-
seminating, and reusing the knowledge created
Key Issues by its employees.” In order to understand the role
of communities of practice in preserving organi-
The communities of practice approach has been zational memory, Conklin (1997) describes two
embraced by business organizations following the kinds of knowledge found in organizations: for-
realization that knowledge is a critical asset that mal and informal. Formal knowledge is found in
Communities of Practice 401 C
books, manuals, documents, and training courses, create loyalty to a brand or service. Furthermore,
and it is easily and routinely captured in organi- a growing trend is observed for organizations to
zations. By contrast, informal knowledge join forces with competitors to take advantage of
includes “ideas, facts, assumptions, meanings, markets opportunities that engender complex
questions, decisions, guesses, stories, and points knowledge. Mergers, joint ventures, and alliances
of view,” which are hard to capture and sustain. depend on trust between the parties involved
It is the kind of knowledge that can be captured which, in turn, can be cultivated through C
and maintained through the mutual exchanges of interorganizational communities of practice
communities of practice. It is for this reason that (Wenger et al. 2002, p. 221).
Wenger et al. (2002) describe communities of As concluded by Wenger et al. (2002, p. 232),
practice as “the social fabric of learning organi- business organizations are in an ideal position to
zations” According to Senge (1990, p. 3), learn- take advantage of the benefits of communities of
ing organizations are: practice as they have both the resources and the
motivation to attain new knowledge to keep
. . .organizations where people continually expand
their capacity to create the results they truly desire, abreast of ever-changing markets. As they put it:
where new and expansive patterns of thinking are
nurtured, where collective aspiration is set free, Firms that understand how to translate the power of
and where people are continually learning to see communities into successful knowledge organiza-
the whole together tions will be the architects of tomorrow – not only
because they will be more successful in the mar-
Acting as a living curriculum and engaging ketplace, but also because they will serve as
a learning laboratory for exploring how to design
participants in a process of collective learning, the world as a learning system.
communities of practice are critically important
to foster learning organizations. Mutual engage- The communities of practice concept has
ment among participants generates a shared rep- been, nevertheless, regarded with reservation by
ertoire of ideas, which in turn consolidates some scholars. For example, Kimble and Hildreth
learning and enhances organizational memory. (2004) argue that, given the self-directed and
There is also evidence that sponsorship and self-motivated nature of communities of practice,
support of communities of practice can improve they can emerge and disappear over time. This
organizational performance. According to Lesser can be a problem if the organization becomes
and Storck (2001, p. 831), a community of prac- reliant on the work of these groups for its devel-
tice can operate as “an engine for the develop- opment. Moreover, as noted by Hislop (2004),
ment of social capital,” and the social capital due to their strong sense of internal identity,
inherent in communities of practice can lead to communities of practice might not be effective
behavioral changes that may positively influence in sharing knowledge with people outside their
business performance. These authors’ claims are boundaries. From a similar perspective, Vaast
based on a study of seven business organizations (2004) found in one of her case studies of public
in which communities of practice were found to and private sector organizations in France that the
have created value for the participating internal sense of identity of a community of prac-
companies. tice can make employees outside the group feel
Communities of practice can also operate at marginalized.
consumer level, as business need knowledgeable Wenger et al. (2002, pp. 139–159) themselves
consumers, and the latter, in turn, benefit from draw attention to the dangers of overidealizing
companies that understand their needs (Wenger the idea of communities of practice. Like all other
et al. 2002). An increasing number of consumer human institutions, communities of practice can
communities are emerging in the United States, “hoard knowledge, limit innovation, and hold
for example, with focus on topics such as travel, others hostage to their expertise.” They illustrate
parenting, musical interests, and fitness activities. this point with the example of medieval guilds
These types of communities have the potential to which turned into exclusive cliques when they
C 402 Communities of Practice

made membership a right which was passed on by disciplinary- and industry- focused communities,
fathers to sons only. The guilds excluded women, with 24,000 active members supporting project
which defeated the idea of participation so central teams. Services provided by the communities
to communities of practice. Wenger et al. (2002) included the creation of guidelines for work prac-
further note that in contemporary times problems tices and procedures; publication of technical
can emerge with communities of practices at documents; access to expert advice; and career
three levels: single communities, constellations development. McDermott and Archibald (2010,
of communities, and organizations. At a single- pp. 85–86) identify four principles for a more
communities level, the domain may not arouse strategic establishment of communities of prac-
passion in all members, or members might fail to tice in business:
communicate with each other. With regard to 1. Focus on issues important to the organization.
constellations of communities, rigid boundaries 2. Establish community goals and deliverables.
of practice may emerge through the use of tech- 3. Provide real governance.
nical jargon, specialized methods, and custom- 4. Set high management expectations.
ized environments. This can make The concept of communities of practice can be
communication with other communities difficult, also applied beyond organizations (Wenger et al.
and misunderstandings might arise. At an orga- 2002). The complexity of markets and learning
nizational level, there is a risk of rigidity, espe- systems in the knowledge economy have created
cially when a practice is successful, and a trend whereby communities “weave” broader
a community tightly knit; members tend to value webs forged by relationships and
become reluctant to seek other practices. Com- exchanges that operate beyond organizational
munities of practice can also generate increased settings. This creates an “extended knowledge
structural complexity, which poses new manage- system” which includes suppliers, distributors,
rial challenges as they create multiple centers of customers, and communities outside the organi-
power based on knowledge. As concluded by zation. These stakeholders provide fertile ground
Wenger et al. (2002, p. 154) communities of for the emergence of “inter-organizational com-
practice can be “irrational, counterproductive, munities of practice” (Wenger et al. 2002,
political and rampant with suspicion and con- p. 221), with strong potential for knowledge
flict.” Nevertheless, if members are aware of exchange. For example, Toyota has encouraged
these risks, it is likely they will be able to manage the creation of knowledge-sharing networks
these problems effectively. This can itself be among its suppliers, and Hallmark has facilitated
transformed into a new learning experience for the formation of communities of practice among
the group. its retailers.
Despite its limitations, communities of prac-
tice remains a relevant concept in contemporary
times. Research by McDermott and Archibald Future Directions
(2010, p. 84) reveals, for example, that commu-
nities of practice continue to “thrive” in contem- More recently, work on communities of practice
porary business organizations. However, these has broadened the focus of learning theory from
communities operate differently from their “fore- merely acquiring new knowledge to a changing
bears,” in that they have lost their informal char- relationship of participation in the world. As
acter. They are now an “actively managed part of stated by Wenger (2004, p. 1), referring to his
the organization, with specific goals, explicit project “Learning for a Small Planet”:
accountability, and clear executive oversight.”
For example, at the engineering company Fluor, We cannot address today’s challenges with yester-
day’s perspectives. We need new visions of what is
global communities of practice have replaced the possible. We need new models to learn how to
company’s distributed functional structure. At learn at multiple levels of scale, from the personal
the time of their study, the company had 44 to the global. Increasing our capacity to learn—
Community Activism 403 C
individually and collectively—is taking on Kimble, C., & Hildreth, P. (2004). Communities of prac-
a special urgency if we see ourselves caught, as tice: Going one step too far? In Paper presented at the
I believe we are, in a race between learning and the 9e colloque de l’AIM, France, http://halshs.archives-
possibility of self-destruction. ouvertes.fr/docs/00/48/96/32/PDF/Kimble_2004.pdf.
Accessed 3 Jan 2011.
This is particularly relevant within the context Lave, J., & Wenger, E. (1991). Situated learning. Legiti-
of the ▶ sustainability debate which requires new mate peripheral participation. Cambridge: University
of Cambridge Press.
visions and new models to address global envi-
Lesser, E. L., & Storck, J. (2001). Communities of practice
ronmental problems. Sustainability also requires and organizational performance. IBM Systems
the creation of new conceptual discourses to Journal, 40(4). Retrieved 23 May 2012, from http://
encourage “new ways of looking at the world” www.research.ibm.com/journal/sj/404/lesser.html
(Wenger 2004, p. 2). This broader conceptualiza- McDermott, R., & Archibald, D. (2010). Harnessing your
staff’s informal networks. Harvard Business Review,
tion of communities of practice can be applied 88(3), 82–89.
within the context of international development, Seely Brown, J., & Gray, S. E. (1995). The people are the
in view of a growing recognition of the benefits of company. Fast Company Retrieved 23 May 2012, from
knowledge for developing nations (Wenger et al. http://www.fastcompany.com/online/01/people.html
Senge, P. M. (1990). The fifth discipline: The art and
2002, pp. 228–229). The communities of practice practice of a learning organization. New York:
approach can provide a new paradigm for inter- Currency Doubleday.
national development transforming the world Vaast, E. (2004). The use of intranets: The missing link
into a giant “learning system.” For example, between communities of practice and networks of
practice? In P. Hildreth & C. Kimble (Eds.), Knowl-
development agencies such as World Bank now edge networks: Innovation through communities of
see their role as convenors of global communities practice (pp. 216–228). Hershey: Idea Group.
of practice, rather than just providers of top-down Wenger, E. (1998). Communities of practice: Learning, mean-
knowledge for developing nations. ing and identity. New York: Cambridge University Press.
Wenger, E. (2004). Learning for a small planet: A
research agenda. www.ewenger.com/research/index.
htm. Accessed 23 May 2012.
Wenger, E. (2006). Communities of practice: A brief
Cross-References introduction. Retrieved from http://www.ewenger.
com/theory/ Accessed 2 Dec 2010.
▶ Competitive Advantage Wenger, E., Mcdermott, R., & Snyder, W. (2002). A guide
▶ Corporate Social Responsibility to managing knowledge: Cultivating communities of
practice. Boston, MA: Harvard Business School.
▶ Social Capital
▶ Sustainability

References and Readings
▶ Community Relations
Black, L. D. (2006). Corporate social responsibility ▶ CSR and Catholic Social Thought
as capability: The case of BHP Billiton. Journal of
Corporate Citizenship, 23(Autumn), 25–38.
Conklin, E. J. (1997). Designing organizational memory:
Preserving intellectual assets in a knowledge econ- Community Activism
omy. Retrieved 23 May 2012, from http://citeseerx.
ist.psu.edu/viewdoc/download?doi¼10. Pauline Collins
rep¼rep1&type¼pdf. School of Law, Faculty of Business, University
Hedberg, B. (1981). How organizations learn and unlearn.
In P. C. Nystrom & W. H. Starbuck (Eds.), Handbook of of Southern Queensland, Toowoomba,
organizational design (pp. 3–27). New York: Oxford. QLD, Australia
Hislop, D. (2004). The paradox of communities of
practice: Knowledge sharing between communities.
In P. Hildreth & C. Kimble (Eds.), Knowledge
networks: Innovation through communities of practice
(Vol. 36–46, pp. 36–46). Hershey: Idea Group. Grassroots; Social activism; Social movements
C 404 Community Activism

Definition as Habermas (1963/1988) have outlined arguments

in support of communicative action in developing
Community activism can have a wide meaning to social groups and personal identities in
include social movements promoting participatory a “lifeworld” of shared meaning about the objec-
democracy or a more limited meaning which tive, subjective, and social world. For Habermas,
focuses on grassroots actions. Activism is generally emancipation entails overcoming and dissolving
associated with some public action designed to systems of distorted communication, and engaging
raise awareness around an issue usually related to in corrective communicative action in the public
matters of social, political or economic importance. sphere. The theory of communication developed by
Community can range from a group of individuals Habermas, based on what he describes as
within a neighborhood or defined region, to the a “systems world” of procedural and accounting
world community. Community activism thus systems language and “lifeworld,” provides
encompasses actions taken by individuals within a useful mechanism by which this process of
a community or group, to bring about change. change can be understood and critiqued.
Often these actions are referred to as “grassroots” The form which community activism takes can
actions denoting ordinary people at a local level lead to both violent and nonviolent participatory
acting against elite power groups seen as distant to methods and outcomes. Early examples of protests
the issue. Social transformation of human society that led to violent upheaval include the storming of
occurs through “grassroots” actions by ordinary the Bastille (1789) and the Boston Tea Party
people motivated, by deeply held values, to achieve (1773), and many subsequent actions have led to
common goals which challenge dominantly held violent outcomes. Nonviolent community activism
power positions. This can arise from one or two has been influenced by philosophers and
individuals creating awareness around an issue change agents such as Henry David Thoreau’s
until it grows to the level of a social movement. (1817–1862) “Civil Disobedience” 1849;
Examples occur throughout human history. In mod- Leo Tolstoy’s (1828–1910) theory of nonviolent
ern history, they range from, but are not limited to, movements; Mohandas Gandhi (1869–1948);
the abolition of slavery, apartheid, civil rights, labor Martin Luther King, Jr. (1929–1968); Nelson
rights, nuclear disarmament, opposition to war, Mandela (1918–current); Mairead Corrigan
homelessness, poverty, health, women’s rights, (1944–current); and Shirin Ebadi (1947–current).
sexual exploitation, multiculturalism, indigenous While all of these individuals suffered as a result of
issues, and the environment. injustices, what unites them is that rather than
Other forms of community activism arising as condemning society for the wrongs perpetrated
we move closer to a consumer-market model against them, they exhorted society to move
include self-help or mutual aid organizations. together toward humanistic goals valuing freedom,
These groups focus their actions on change at the equality, justice, and recognition.
individual level more than outwardly to the political An important aspect of community activism is
community. One of the longest-running such the tactics employed to achieve change. These
organizations is Alcoholics Anonymous (AA). arise from methods used to name issues, to educate
and raise awareness around issues, and to motivate
change in behavior. Examples include petitions,
Introduction letters, media campaigns, sit-down strikes, and
public protest including individual actions through
Social movements since the mid-eighteenth century to mass marches, boycotts, blockades, civil dis-
have aimed to redress social inequalities in obedience, and lobbying. Which methods are
a general movement toward democratic participa- adopted will depend on the catalyst around which
tion by citizens. Community activism arises from motivation for action occurs. All of these activities
the individual becoming engaged in public partici- can occur over a considerable time and often
patory communicative action. Critical theorist such require a prolonged and engaged commitment by
Community Activism 405 C
participants. Saul Alinsky (1909–1972) has been theory (Lipsky 1968; Gamson 1987; Oberschall
credited with creating community organization in 1973; McAdam McCarthy and Zald 1988/
the USA to engage citizens and organizations in 2005); political process (Tilly 1978); new
community-based actions, in particular, revolving social movement theory (Habermas 1981/1985;
around poverty and working conditions. His influ- Offe 1985; Melucci 1989; Laclau and Mouffe
ential work, Rules for Radicals, is stated to be 1985; Touraine 1985); and frame analysis
“for those who want to change the world from (White et al. 1994) to nonviolence (Sharp 1970). C
what it is to what they believe it should be.” The number of theories indicates the area is ripe
A good example of an individual initiating for further investigation.
action to achieve change is the anti-Nike campaign The two key factors of power and conflict oper-
against the use of “sweatshop” foreign female ate within community activism. The competition
labor. This campaign was initiated by Jeff resulting from these brings a tension within social
Ballinger’s article, “Nike, the New Free-Trade relations which plays out through an interconnected
Heel: Nike’s Profits Jump on the Backs of Asian framework at the social, communicative, political,
Workers” in Harper 1992, and it took until 1996 to economic, and market levels of the existing social
evolve and become a publicly recognized and relations within the community. Women’s activism
adopted action against injustice. The activism in is an important aspect of community activism and
the Nike case is an interesting study in the use of provides for insight from the personal perspective
key individuals and organizations, along with of the individual within the community. Critical
strategic use of the media, to overcome what female discourse has, for instance, provided new
at first seemed an insurmountable campaign for ways of viewing society politically, economically
change. This grassroots campaign begun by and socially. Activism around women’s issues, the
an individual is a useful example not only for environment, peace, human rights, and poverty
community activism but also for corporate provides for a balance and readjustment against
social responsibility. Lessons can be learned powerful institutions and corporations that without
by corporations for the need to be responsive to this critical voice would be unchecked, showing
community demands, rather than acting in denial a lack of reflection on the connection between the
and opposition. grassroots ordinary individuals and societal leaders.

Key Issues Future Directions

Moyers has developed a theory of social activ- It would appear that worldwide there is greater
ism named “The Movement Action Plan: MAP” demand for more meaningful forms of democracy
that assists activists by providing an underlying than simply the ballot box. Collectivist values that
theory to social action to enable the mainte- give voice to citizens from the local to the global
nance of energy for activist participation. MAP level are manifest. Overcoming the marginalization
provides guidance on how activists can gain of those who engage in community activism and
acceptance from the majority of ordinary recognizing the important contribution they make
citizens for the need for such change agents to to the advancement of ideas and outcomes for
perform a responsible and integral role in people is still necessary. What is certain is the
society as it adopts social change, or in some phenomenon of community activism will not dis-
cases, resists it. appear. In fact, with the use of technology to link
Theories behind motivation for community ever expanding “communities” through email, the
activism and social movements abound and ability to distribute messages on issues and to raise
range from crowd theory (Le Bon 1895); theory awareness using social networking and other Inter-
of masses (Kornhauser 1959); rational choice net sites is sped up. However, the question of
theory (Olson 1965); resource mobilization whether the Internet has opened a new space for
C 406 Community Giving

political discourse and democratic opportunities is In S. L. Kaplan, & K. M. Baker (eds), Bicentennial
highly debatable, with research showing a tendency Reflections on the French Revolution. Duke University
for the Internet to be a reflection of the world and, if Mattox, H. E., (1998). The Boston Tea Party, 1773. In
anything, perhaps a slightly more conservative J. E. Findling, & F. W. Thackeray (Eds.), Events that
political world. Nevertheless, issues such as changed America in the eighteenth century (Chap. 5,
concern for the environment, since the 1990s, 209 pp.). Greenwood Press.
McAdam, D. J., McCarthy, D., & Zald, M. N. (1988).
have become universal and cut across all Social movements. In N. J. Smelser (Ed.), Handbook
boundaries activating communities around the of sociology. Newbury Park, CA: Sage.
world at the grassroots level and globally. Green McAdam, D. J., McCarthy, D., & Zald, M. N. (2005).
politics is well suited to market consumerism, and Social movements and organization theory. Cam-
bridge: Cambridge University Press.
while it may be driven by self-interest, consumer Meikle, G. (2002). Future active media activism and the
activism in support of environmental protection is Internet. London: Routledge.
undoubtedly on the increase. Melucci, A. (1989). Nomads of the present: Social move-
ments and individual needs in contemporary society.
Philadelphia, PA: Temple University Press.
Moyer, B., McAllister, J., Finley, M. L., & Soifer, S. (2001).
Cross-References Doing democracy. Gabriola Island: New Society.
Naples, N. A. (1998). Community activism and
▶ Affirmative Action feminist politics: Organizing across race, class,
and gender perspectives on gender. New York:
▶ Community Routledge.
▶ Community Relations Oberschall, A. (1973). Social conflict and social move-
▶ Dame Anita Roddick ments. Prentice-Hall.
▶ Enlightened Self-interest Offe, C. (1985). New social movements: Challenging the
boundaries of politics. Political Science Review, 6(4),
▶ Human Rights 483–499.
▶ Social Dialogue Olson, M. (1965). The logic of collective action.
New York: Shocken.
Riano, P. (Ed.). (1994). Women’s participation in communi-
cation: Elements for a framework. Thousand Oaks: Sage.
References and Readings Sharp, G. (1970). Exploring nonviolent alternatives.
Boston: Porter Sargent.
Alinsky, S. (1971). Rules for radicals: A pragmatic primer Shaw, R. (1999). Reclaiming America. Nike, clean air,
for realistic radicals. New York: Random House. and the new national activism. London: University of
Gamson, W. A. N. (1968). Power and discontent. Home- California Press.
wood, IL: Dorsey Press. Tilly, C. (1978). From mobilization to revolution. Addi-
Guber, D. L. (2003). The grass roots of a green revolution son-Wesley/University of Minnesota.
polling America on the environment. Cambridge: The The Bastille and Boston Tea party are historical events – if
MIT Press. source books are required refer to:
Habermas, J. 1988 (original 1963). Theory and Practice. Touraine, A. (1985). An introduction to the study of social
Beacon Press. movements. Social Research, 52, 749–788.
Habermas, J. (1985). The theory of communicative action White, J., Hunt, S. A., Benford, R. D., & Snow, D. A.
(original 1981, 2 vols.). Beacon Press. (1994). Identity fields: Framing processes and the
Hill, K. A., & Hughes, J. E. (1998). Cyberpolitics. social construction of movement identities.
Citizen activism in the age of the Internet. Lanham: In E. Laraña, H. Johnston, & J. R. Gusfield (Eds.),
Rowman & Littlefield. New social movements: From ideology to
Kornhauser, W. (1959). The politics of mass society. The identity (pp. 185–208). Philadelphia: Temple Univer-
Free Press, Glencoe. sity Press.
Laclau, E., & Mouffe, C. (1985). Hegemony and socialist
strategy: Towards a radical democratic politics. Lon-
don: Verso.
Le Bon, G. (1895). The Crowd: A study of the popular
mind. New York: The Macmillan.
Lipsky, M. (1968). Protest as a political resource. Ameri- Community Giving
can Political Science Review, 62, 1144–1158.
Lüsebrink, H.- J., & Rolf, R. (1997). The Bastille: A
history of a symbol of despotism and freedom. ▶ Corporate Giving
Community Relations 407 C
several films of the 1980s and early 1990s (e.g.,
Community Relations Edward Lewis in Pretty Woman, Lawrence Gar-
field in Other People’s Money, Sherman McCoy
Gloria Zúñiga y Postigo in The Bonfire of the Vanities), but its iconic
The University of Texas at Arlington, Arlington, symbol is the cold-blooded corporate raider
TX, USA depicted in the character of Gordon Gekko in
Wall Street and most particularly his signature C
line: “Greed is good.” In response to this negative
Synonyms perception on the part of the public, the corporate
world turned to the development of efforts in the
Associations of trust; Collective intentionality; direction of public relations, such as reporting
Collective responsibility; Common good; Com- their plans and activities to the public, press con-
munity; Edith Stein (on community); Employee ferences, press releases, and image strategies
participation; Intersubjectivity; Labor force; such as charitable donations, legislative lobby-
Management-consumer relations; Management- ing, and socially responsible advertising. How-
employee relations; Management-host commu- ever, public relation efforts “that enhance the
nity relations; Positive Externalities; Social quality of the relationship of an organization
capital; Social collaboration; Social cooperation; among key stakeholder groups” (Clark, 376) are
Social factor of corporate responsibility; Social not necessarily equivalent to developing commu-
object nity relations since public relation efforts do not
amount, in principle, to a burden of responsibility
that extends beyond shareholders. Indeed, public
Definition relations might be at odds with mutual interests
with the community at large.
The matter of community relations is often con- Let us consider the case of British Petroleum
fused with public relations, which is a marketing (BP). According to a report by Adam Ma’Anit in
function of a company. One reason for this con- the October 2010 issue of the New Internationalist,
fusion is that the rise in the 1980s of concerns that BP’s health and safety record included a 2005
we now classify as falling under the heading of explosion at its Texas refinery site that “killed 15
corporate social responsibility preceded our workers and injured over 100” and “record fines
complete understanding of what constitutes cor- over leaks and poor maintenance in Alaska where
porate social responsibility, its scope, and its two major spills in 2006 led to widespread con-
constitutive concepts. Although we are still cern about the expansion of oil exploration in the
demarcating the terrain of corporate social fragile Artic.” Thus in 2007, newly appointed BP
responsibility and this encyclopedia indeed is CEO Tony Hayward reversed “his predecessor’s
a contribution to this end, we now have greater much lauded commitment to end the company’s
clarity of important distinctions such as that financial support of politicians” and “was able to
between community relations and its conceptual secure permits to expand its Artic operations in
neighbor public relations. the Beaufort Sea and become the largest lease-
It is also historically interesting to note that the holder in the Gulf of Mexico.” We could specu-
term public relations also became part of the late that Hayward’s expansion plans may have
corporate language in the 1980s as corporations had the interests of the shareholders of BP in
became aware of the importance of corporate mind as a direct result of increased revenues for
image and managerial transparency due, in part, his company. However, Hayward did not take
to the stereotype of corporate mentality in popu- into consideration the stewardship that profit
lar culture as one of unrestrained greed. Indeed, seeking entails. Profits are not the result of
the perception in popular culture of this negative zero-sum gains. If this were the case, market
image is reflected in the flavor of the characters of exchanges would be unsustainable. Indeed,
C 408 Community Relations

competitive market participants have the incen- other communities such as those spatially imme-
tive to offer what others want and to provide it diate to the operations of the firm (e.g., for BP,
without deception. Those who do not play by these would be the Gulf cities, ecosystems in the
these rules will typically lose. Ma’Anit recalls Gulf) to the most distant though not least affected
that during the presidential campaign, Obama (e.g., consumers of gasoline and other petrol
had been “vociferously against drilling, yet after derivatives, the British society and its reputation,
assuming the presidency he made a dramatic and so on).
u-turn” and announced a massive expansion of This genuine regard for community is not only
offshore drilling. Why the sudden change of subtly presupposed in Friedman’s corporate
heart? Ma’Anit reports that, “Obama had been profit commandment as suggested here, but it
one of the top recipients of BP ‘donations’ in serves as the framework for Adam Smith’s notion
the previous year.” of the invisible hand. Indeed, it is not from the
Indeed, as Milton Friedman reminds us, it is benevolence of the baker that we receive our
the social responsibility of business – “to use its daily bread. Of course, the baker’s fundamental
resources and engage in activities designed to concern is profits, for otherwise, he would be out
increase its profits.” But, let us also recall that of an income. However, if the baker’s only con-
Friedman adds that this must be the case so long cern were profits, say, for example, if he did not
as profit-increasing activities “stay within the take pride in his product and arranged with the
rules of the game, which is to say, engages in local mayor to have the only bakery permit in
open and free competition without deception or town, then this purely self-serving approach
fraud.” And it is this last part which is indeed would not work out well for him or the consumers
community minded. The explanation is simple: of his product in the end. Although Adam Smith
a company can increase profits without the moral did not actually reach the specific articulation of
limitations that Friedman articulates, but if it does the notion of community and it would take more
not consider the interests of shareholders in the than one and a half centuries later before Edith
long run, colludes with government instead of Stein would make her contributions in this
competing genuinely and fairly and sells what it regard, he addressed the need for society, and
cannot deliver, then the company is not meeting the motivation for this need is our need for appro-
its responsibility toward shareholders or bation and sympathy from society. In his Theory
employees, its most immediate communities. of Moral Sentiments, Adam Smith describes sym-
While Hayward’s achievement of expanding pathy as our “fellow-feeling with the sufferings”
BP’s operations indeed was directed at increased of others (43). We strive to better our condition,
profits, this narrow end served as a blinder to he says, in large part to belong in community and
other important considerations. Is BP equipped be “taken notice of with sympathy” (50). Every
with the health and safety precautions that will man “prefers himself to all of mankind, yet he
not put BP employees at risk? Has BP corrected dares not look mankind in the face, and avow that
the problems that affected the operations in Texas he acts according to this principle.” If he wants to
and Alaska? Is BP playing the rules of the game be accepted in community, then man – the parent,
fairly? Can BP compete without manipulating the the baker, the CEO – must temper his actions
American government? The point is that to such that these do not act against the interests of
understand the stewardship that profit seeking others. For otherwise, Smith tells us that “in the
entails is to understand community. When the race for wealth and honours, and preferments, he
long-run effects of business operations are indeed may run as hard as he can, and strain every nerve
mindful of the immediate communities of con- and every muscle, in order to outstrip all his
cern to any corporation – that is, those constituted competitors. But if he should justle, or throw
by employees and shareholders – then playing the down any of them, the indulgence of the specta-
rules of the game of competition fairly, without tors is entirely at an end. It is a violation of fair
deception or fraud, will in the end also benefit play, which they cannot admit of” (83). So while,
Community Relations 409 C
arguably, Smith would agree with Friedman’s with regard to the communities in which the
corporate profit commandment, he would also corporation participates. Such community rela-
add that it is self-regulated by another internal tions are not motivated by profit maximization
mechanism that is even more gratifying than self- ends alone nor guided by narrow strategies that
service and this is the fellowship of community. improve only corporate image. Nonetheless,
For example, Smith argues that community relation efforts are not obstacles to
The product of the soil maintains at all times the the maximization of profits either. In fact, mind- C
number of inhabitants which it is capable of fulness to community relations directs corpora-
maintaining. The rich only select from the heap tions to considerations that are most compatible
what is most precious and agreeable. They con-
with profit maximization in the long run. But in
sume little more than the poor, and in spite of
their natural selfishness and rapacity, though they order to understand the nature of community
mean only their own convenience, though the sole relations more perspicuously, we must now turn
end that they propose from the labours of all the to the task of addressing the notion of community
thousands whom they employ, be the gratification
in greater philosophical depth.
of their own vain and insatiable desires, they divide
with the poor the produce of all their improve-
ments. They are led by an invisible hand to make
nearly the same distribution of the necessities of Introduction
life, which would have been made, had the earth
been divided into equal portions among all its
inhabitants, and thus without intending it, and The most thorough study of the phenomenon
afford means to the multiplication of the species. of community was advanced by Edith Stein
(184–185, italics mine) (1891–1942), a philosopher who studied under
This is the regulatory service of the invisible Edmund Husserl at the University of Göttingen
hand, one which would not work in commercial in Germany. Her contributions to the study of the
pursuits if it were not nested in the notion of phenomenon of community were preceded by
community. a study of the phenomenon of empathy, which
So if they are not the same as public relations, culminated as the subject of her doctoral disser-
then what are community relations? As we have tation in philosophy titled On the Problem of
seen, community relations are not defined by the Empathy. The word “empathy” must be under-
marketing function of a company nor by public stood as Einf€ uhlung, a term belonging to the
relation efforts whose main goal is to serve the tradition of nineteenth-century German phenom-
interests of the company. The reason is that neither enology and brought to notoriety by Theodor
is reconcilable with the compelling partiality Lipps at the University of Munich. Accordingly,
toward fellow members that defines community. empathy (as Einf€ uhlung) means in-feeling or
Thus, to act in community or in communion with inner awareness (Sawicki, 123). This is not an
others is to act in fellowship with those communi- intellectual awareness of our own consciousness
ties that constitute the corporation (the board of but an awareness of our feelings within the con-
directors, employees, shareholders) as well as text of a conscious experience, which opens
those with whom it enters into business relations a bridge to the affective experience of others. In
(suppliers, contractors, consumers, city, and fed- other words, empathy (as Einf€ uhlung) describes
eral governments). Just like individuals, corpora- the capacity that human beings have to recognize
tions enjoy various layers of community relations. and thereby share the emotions that another sen-
The effect that a corporation may have across tient being is experiencing. It is not merely
several layers of communities gives rise to a call a detached agreement with the feelings of others,
for responsible stewardship of the actions and as it is the case with the phenomenon of sympa-
decisions taken by the directors of a company. thy, but, rather, it is the sharing of the lived
In summary, then, community relations are experience of others.
demarcated by actions and communications that The question is this: how is it possible to
are characterized by fellowship and stewardship access the consciousness of another person? Her
C 410 Community Relations

teacher Husserl had advanced an answer that far” (38). As Edith Stein puts it, we see the mem-
she did not find completely satisfactory, so she bers of a community as subjects and not as
pursued this investigation in two essays. The first objects. We can grasp this distinction from our
titled “Sentient Causality,” and the second own experience of community in friendships and
titled “Individual and Community.” Together, family, as well as in sports teams bound by cama-
these constituted what would have been her raderie and in classrooms in which the students’
Habilitationsschrift, which is the thesis that learning is also the teacher’s goal. Moreover, we
a scholar submits after years of work following find community also in some working environ-
the receipt of a Ph.D. in pursuit of the Habilita- ments. Google is often hailed as an environment
tion, the highest academic qualification in that fosters community in many respects (healthy
Germany and some European countries. These lunches, gyms, play areas), and since what brings
essays have been published in a book titled workers to Google is the opportunity to take part
Philosophy of Psychology and the Humanities, in innovation, then the goals of the company are
volume VII of the Collected Works of Edith also the goals of each person. Typically, commu-
Stein. It is here that she brings together the nities are small scale, with persons engaged face
notions of empathy (as Einf€ uhlung) and commu- to face, and the role structures of their relations
nity. Stein scholar Mary Catharine Baseheart emerge spontaneously and are maintained by
observes that “For her, the knowledge of empathy custom.
(as Einf€uhlung) was a valuable key to unlock the The second kind of social order is associa-
secrets of personhood and to clarify theoretical tion. This is the relationship in which we support
knowledge not only of the individual person but the goals of the group insofar as this permits us
also of community” (163). And Baseheart adds to pursue our own ends. Hence, the relations of
that the starting points of her investigation on association are typically contractual and entered
community are “real community structures such into by persons who may not share the same
as families, nations, and religious communities, beliefs, but they find an instrumental value in
which we encounter in our surrounding world” cooperating as a group to achieve individual
(164). ends. We pay dues for memberships at the
Stein distinguishes two kinds of social orders. gym, for example, because by supporting the
The first kind is community proper, and it is purpose of its existence, we are also seeking to
characterized by solidarity, which occurs when gain personally. But we do not really care if
we make the ends of the community our own. The every member actually becomes fit. In this
notion of solidarity is often associated with the sense, other people are seen as objects by
views of thinkers such as Durkheim and Marx. means of which we achieve our ends. Political
However, their understanding of solidarity as associations are no different than the gym exam-
mechanical solidarity and socialism, respec- ple. In her writings on the state, Stein makes
tively, do not coincide with Stein’s. Hers is clear that the state is not a community even if
more akin to an older tradition: Catholic social our language sometimes seems to suggest this
thought. (See “▶ CSR and Catholic Social with expressions to describe the state such as our
Thought” entry in this encyclopedia). Accord- nation, national solidarity, or the people’s
ingly, the term solidarity is understood as republic. For Stein, the state is an instrument
a character of a community that is made possible for accomplishing those ends beneficent to indi-
by the recognition of the individuality and viduals that only a political body could bring
interdependence among individuals and the about. We could think, for example, of freedom
resulting duties that emerge from such made possible by the provision of public goods,
a recognition. In Sollicitudo Rei Socialis, John such as roads and the protection against foreign
Paul II explains that solidarity “is not a feeling aggressors.
of vague compassion or shallow distress at the The main difference between these two forms
misfortunes of so many people, both near and of social organization is that in community we
Community Relations 411 C
participate in affective acts with other sentient solidarity that brings a community into being.
beings, which lead to the formation of an experi- An example of this temporal nature of commu-
ence stream shared in common. According to nity is as follows. One person embraces a mother
Edith Stein, this is how we apprehend value. who is in tears in an act of communion when told
She points out that value apprehension is not an that she has just lost a child at war. Although both
intellectual recognition of a moral fact, after are strangers, this act is characterized by genuine
which we adopt an affective attitude about it. empathy (as Einf€ uhlung, per the earlier explana- C
Rather, it is the other way around. It is by means tion). During those brief moments of the
of our affective capacity that we are able to embrace, a community came into being and then
apprehend value, and then we can form an intel- ceased to exist.
lectual recognition and articulation of the value In the context of a corporation, temporal
that we have experienced. We observe, accord- communities are just as frequent. A charity
ingly, members of a community respond with the event participation or donation exemplifies an
same emotional attitude to the same objects, and act of community, as much as a short-term con-
through these experiences of union and cohesive- tract with a corporate partner or supplier, if this
ness in apprehension of things in the world, we is characterized by fellowship and solidarity.
are able to recognize the bonds of solidarity that These temporal communities do not present
tie them together. It is by means of the aesthetic a problem but, instead, are sources of social
quality of the accepted shared values among indi- capital formation. But there are exceptions,
viduals that the collective personality of such as when a corporation moves its operations
a community is formed. Each member is not from one city to another, or from one nation to
only a contributor to the aesthetic of the commu- another, because these leave the constituents of
nity but also shaped by the community. Stein the host city or nation with feelings of loss.
observes that we cannot know ourselves fully Indeed, the most difficult challenges are the sev-
until we are in community. Different levels of ering of the interdependencies previously
community relations shed light on different established and demarcating the boundary at
aspects of ourselves that would go unnoticed to which such interdependencies will cease. Per-
ourselves otherwise. Friends will point out to us haps because of such challenges, there are strong
our eccentricities. Family members will remind pressures against corporate relocation as it is
us of our history of weaknesses and strengths. often judged to be an act that is inconsistent
Although we might find all of this annoying, it with corporate citizenship. The term corporate
helps us see ourselves from a perspective other citizenship is often used by corporations to
than our own. So community can indeed help us describe its commitment to corporate social
in our quest for virtue by showing us more clearly responsibility. But the metaphor of corporate
the task ahead in our character formation. This citizenship indeed supports the image of
task involves practical choices along the way, and a permanent member of the society in which it
toward this end, there are three issues that we has established residence. This is a problematic
need to take into account. expectation in the same way that it would be to
expect that no member of a society should ever
migrate to other lands in search of greater oppor-
Key Issues tunity. After our values for life and procreation,
liberty seems to be a third value that is similarly
The Temporal Nature of Communities shared by all human beings. It would be against
Communities are not necessarily infinitely endur- the idea of community and healthy community
ing entities, and often they have a beginning and relations to force a corporation to stay simply on
an ending with only a brief existence in between. the basis of self-regard concerning employment
It is not the duration that characterizes an act of and income. And it fails to recognize that com-
communion but its quality of fellowship and munities are not always infinitely enduring.
C 412 Community Relations

Community Vis-à-Vis Communitarianism persons and natural persons. The corporation is

In light of the previous issue, we must now turn to a legal person for the purposes of owning prop-
the important distinction between community erty, entering into contracts, suing for breach of
and communitarianism. Community is a social contracts and other liabilities, incurring into debt,
order into which we enter freely, and we find it and shielding its shareholders from personal lia-
rewarding because the interests among members bility. It also has obligations and liabilities under
are mutually beneficent. By contrast, communi- the law, such as the payment of taxes and it can be
tarianism typically demands the sacrifice of indi- sued. But, unlike a natural person, it is difficult to
vidual freedom and individual plans for the sake assign moral blameworthiness to corporations
of the ends of the group. Moreover, such ends are have no independent minds and cannot make
typically established by some ruling member of choices and, therefore, cannot have moral inten-
the group. Let us first consider this arrangement tions. So while BP has legal liabilities with regard
in the context of individuals in a group. A person to the effects of its operations, it cannot be the
is not typically inclined to divide his earnings subject of moral agency or moral responsibility.
among those members of his society. At least, Only individuals at BP can be morally
not if such division is imposed and not voluntary. blameworthy.
Arguably, it would be against the idea of com- This does not mean, of course, that affiliation
munity to expect any person to do this since the to a community such as a corporation has no
ideas of fellowship and solidarity that are char- bearing on the decisions by individuals. Jan
acteristic of community imply a duty not to act Narveson observes that “every group action
against the best interests of any of its members. involves the doings of various things by individ-
This principle applies similarly to corpora- uals who, however much they may be reacting to
tions since the task of corporations is not to the behavior of others, decide to do what they do,
secure the well-being of their communities by and could in principle decide otherwise - though,
distributing its earnings among their members granted, the range of alternatives that will occur
or by sacrificing revenues. The goals of the com- to them is seriously affected by their relation to
pany are not driven by the goals of its member groups” (183). But if the moral responsibility is
communities to which they belong any more than attributed to the group (corporation, institution,
the goals of an individual are driven by the or nation), then we cannot punish individuals
goals of his or her communities. In this way, for their decisions and moral wrong doings.
communitarianism works against the well-being “And that is what is wrong with collective
of communities and does not encourage healthy responsibility,” argues Narveson, “precisely
community relations. because it will not reduce [blameworthiness],
it precludes you from getting at anybody”
The Problem of Collective Responsibility (185, brackets and mine).
If corporations are or can be communities, in But how do we reconcile the notion of com-
principle at least, then it would seem that the munity with individual responsibility? There are
other side of this coin is that they are collectives many instances in which these are in conflict with
capable of collective actions, including morally each other. Suppose that a manager or a worker
relevant actions. This is what we seem to suggest has been asked to carry out actions in the opera-
in ordinary language. When, for example, the tions of the corporation that are risky and unsafe
matter of the 2010 Gulf of Mexico oil spill is for others (as it may have been the case in the BP
raised in ordinary conversation, the blame is scenario) or cruel and inhumane (as it is the case
cast against British Petroleum as a collective of factory farms). On the one hand, the manager
and not as the result of poor judgment or poor or worker is part of the corporate community as
management on the part of its CEO, or any other an employee. It would thus appear contrary to the
individual BP worker. But there are differences smooth flow of community relations to go against
concerning what can be attributed to legal the plan that is presumably for the best interests
Community Relations 413 C
of the corporation. On the other hand, in the underlying characteristic that holds true across
judgment of the manager or worker, the specific Catholicism and all Protestant sects, it is the
acts that he is being asked to do are morally notion of caritas. The English translation is char-
questionable. Edith Stein, anticipating these con- ity, but this word presupposes a broader under-
flicts, points out that the ultimate responsibility in standing of an individual’s role in society than
this scenario falls on the individual manager or merely the act of giving to others borne out of
worker to draw the willpower to reject his orders. a mechanical sense of obligation. Rather, charity C
It is his responsibility to the community in such means love but not as an emotion or as an affec-
a situation to refuse. To do otherwise, would be to tive commitment we have developed toward
succumb to what Stein calls contagion, or some individuals, but as “a vocation for us to
a group-following, nonrational mentality that love others” (Benedict XVI, 1). So for the Chris-
would undermine the well-being of the tian, developing communion with others is a way
community. of life. American culture thus combines a thor-
oughgoing individualism with a commitment to
community development.
Future Directions But are things changing? In a 1995 article
titled “Bowling Alone: America’s Declining
The American culture, though unique as any Social Capital,” Robert Putnam first took notice
other culture, has been the subject of scrutiny of a problematic change in the American culture:
more than most perhaps because of its influence that Americans have disengaged from their civic
on other cultures especially by means of the involvement by evidence of declining voter turn-
products of its corporate ambassadors and out, reduced numbers of people who volunteer
Hollywood films. McDonald’s franchises can be for political parties, and decreasing participation
found in most nations. Coca-Cola products are in public meetings at the local government level.
consumed in every continent. Levi’s and Con- What is worse is that this loss of membership in
verse are well-known trademarks in teen fashion civic organizations did not migrate to other kinds
around the world. These are consumer-based of community organizations. His famous illustra-
global communities that offer a taste of the tion is that although the number of people who
American culture. What is the contribution of bowl has increased, the number of bowling
such communities to other cultures and the for- leagues has decreased. We are thus, he says,
mation of other global communities? Tocqueville bowling alone. Putnam does not present the
wrote that “Americans have no philosophical bowling illustration as a curious phenomenon,
school of their own; and they care but little for a mere shift in cultural preferences. Rather, he
all the schools into which Europe is divided, the sees it as a problem insofar as the decline of
very names of which are scarcely known to them” community is positively correlated to the erosion
(I, 1). Yet in abstracting from their practices, he of what he calls generalized reciprocity, by which
observed that Americans have a philosophical he means the spirit of doing for strangers without
method in common, and its main characteristic expecting anything directly in return. He is refer-
is individualism. ring more explicitly to a decrease in the spirit of
The puzzling question is this: How could community relations and its social benefits, aka
a nation of individualists come together cohe- social capital.
sively as a society? Tocqueville offers an apt But let us consider Putman’s notion of com-
observation. “It must never be forgotten that reli- munity as generalized reciprocity, with Stein’s
gion gave birth to the Anglo-American society.” notion of community as fellowship and solidar-
And, he adds, “Christianity has therefore retained ity that we have set forth in the foregoing.
a strong hold on the public mind in America” Bowling, which is Putnam’s central metaphor,
(I, 5). This observation is as true today as it was indeed exemplifies generalized reciprocity. The
in Tocqueville’s time. If there is one single members of my bowling league do their best for
C 414 Community Relations

the team, and I will do my best for my league. In community, it would seem that Facebook does
Stein’s framework, however, this can be an asso- not, in principle at least, aim at building commu-
ciation and not necessarily a community since nity relations. It is an association in which the
the reciprocity shown by all members of the common end is social networking but the goals of
league could be self-serving. I want to win, and others are not one’s own necessarily.
to do this I need to do my best for the league. What is technology carving out for future
There is a difference, Stein argues, between community relations? Not only corporations but
directing mental states at perceived common universities and retail stores that already have
goals and doing this as part of communal direct contact with their user communities have
sharing. joined the Facebook bandwagon. The goal seems
Nonetheless, let us assume for the sake of to be the cultivation of good will and a modern
argument that bowling leagues are communities public image for the institution. We could
and not mere associations and that Putnam has even speculate that community relations is
indeed identified a worrisome decline in commu- a sophisticated stage in human organizations
nity relations and social capital. In this case, there that might only start as associations. The emer-
is another consideration that Stein anticipates. gence of firms, too, had the character of associa-
She points out that social organizations are not tion insofar as the entrepreneurs benefitted from
purely of one kind or another, but usually some having continuous availability of labor and econ-
combination of both community and association. omies of scale that resulted from the workers
This means that while a bowling league could be know-how of their business, and the employees
a true community, it could also be no more than also benefitted from having steady wages and
an association, or any point in between. Even if other benefits instead of discrete contracts for
bowling leagues are on the decline because they specific tasks and constant bidding for new con-
no longer provide the community relations that tracts. Now, as such associations form into com-
they once offered, this does not mean necessarily munities, then the benefits multiply. So perhaps,
that combined with all other communities that are we are bowling alone but we seem to be also
also on the decline (voters, marriage, and so on), opening new horizons for community develop-
community relations and social capital are on the ment. And perhaps, the benefits of these changes
decline as well. The trend may be that some will spill over into old and decaying communities
communities have ceased to be socially benefi- and give them new life, such as online voting and
cent, even if temporarily so, and others have avatar bowling leagues to replace voting pre-
taken their place. The growing popularity of tech- cincts and traditional bowling leagues.
nologically based social networks, such as
Facebook, suggests that this is at least
a possibility. In today’s digital age, technology
has served both human relations of association Cross-References
and community. But they also present disadvan-
tages for building community. While at one end ▶ CSR and Catholic Social Thought
of the spectrum, we could place iPods on the basis ▶ Economic Sociology on CSR
that they tend to isolate individuals from the ▶ Employee Participation
human social world around them (not to discredit ▶ Externalities
the aesthetic enhancement that they provide, of ▶ Healthcare and Social Benefits
course), at the other end of the spectrum, we ▶ Human Resource Management
could place Facebook because it provides the ▶ Institutes of Directors and CSR
means for any person to engage hundreds and ▶ Outsourcing
even thousands of other people as friends. This, ▶ Social Accounting
however, may be too rushed a judgment. If we ▶ Social Entrepreneurship
apply the distinction between association and ▶ Trust
Company Directors and CSR 415 C
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Benedict XVI. (2009). Caritas in veritate. Città del University of Notre Dame.
Vaticano: Vatican Encyclical, Libreria Editrice Zúñiga y Postigo, G. (2012). Corporate social responsibil-
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Capaldi, et al. (Eds.), Encyclopedia for corporate
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Zalta (Ed.), The Stanford encyclopedia of philosophy
(Spring 2011 Ed.). http://plato.stanford.edu/archives/ It is quite difficult to find a universally accepted
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Smith, A. (1981). An inquiry into the nature and a definition according to his field of research,
causes of the wealth of nations. Indianapolis: Liberty preferences, and understanding of CSR. When
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C 416 Company Directors and CSR

A broader definition refers to it as a means by sustainability; in addition, the top 250 companies
which companies can manage and influence the of fortune 500 has adopted CSR as a mainstream
attitudes and perceptions of their stakeholders, practice (Mitra 2011). The codes of contract
building their trust and enabling the benefits of governing social, environmental, and ethical
positive relationships to deliver business practices were also signed or developed by more
advantage and more effective management of than 1,000 corporations in UK and Europe. Such
risk, helping companies to reduce avoidable companies understand that understanding and
losses, identify new emerging issues, and reporting on CSR is a key component in reducing
use positions of leadership as a means to gain risks. Karen Bergin, the Senior Director of
competitive advantage by influencing new Corporate Affairs and Citizenship, at Microsoft
regulation to strengthen competitive advantage. Corporation states that corporations (Transpar-
CSR could be done on a voluntary or mandatory ency International 2009) have accountability
action. Usually, it is cited as a concept whereby toward their societies in which they work due to
companies integrate social and environmental the following reasons: First, the corporation’s
concerns in their business operations and in most vital asset is its people, all of whom are
their interaction with their stakeholders on part of that society; second, the key stakeholders
a voluntary basis. Within such a broad definition, of the corporation such as customers, partners,
the discussion of how company directors should and investors who expect responsible leadership
understand CSR is not about whether CSR and active participation. And lastly, corporations
activities should be voluntary or not; the debate can vigorously learn through CSR, for instance,
should be about where on the legislation scale the gathering direct feedback from people in
indicator should be set, should it be more toward societies around the world about the corporate
no legislation or more toward total legislation. products.
As Philip Jennings, the General Secretary of Because the world had witnessed chaotic
Union Network international, noted: stock markets, credit crisis, and a global
Companies and governments overwhelmingly economic recession, as a result, climate change
want the public both to believe in the ethical and wider issues of CSR were starting to climb
corporation and at the same time do not want to the corporate agenda. This was clear, at least
provide new legal backing for tighter ethical in a European context, in the supplement
behaviour. But the ethics genie is out of the bottle
and its operational principles are providing difficult accompanying the Observer and Guardian
to control. Another big change is that workers and newspapers’ in March 2004 conference on
citizens as stakeholders can now be involves “Business and Society” (one of a growing
directly with powerful corporations. (Hopkins number of sophisticated conferences supporting
2007, p.27)
the CSR cause). That supplement highlighted
that boards of directors should be capable
of demonstrating that any voluntary action they
Introduction support will eventually improve shareholder
value; in addition, they have to recognize how
Since the beginning of 1990s, corporate social their social and environmental influences can
responsibility has gained an importance as improve or jeopardize shareholder value.
a concept. A lot of corporations have focused In 2005, a CSR salary survey illustrated that
their attention on CSR’s triple bottom line: many corporations are assigning specialist
people, planet, and profit. Corporation’s success officers to develop and implement clear CSR
and influence on its customers as well as the strategies, due to the significant growth of the
world depends on these economic, social, and importance of issues such as governance,
ecological principles. A recent study by KPMG environmental management, social equity,
showed that CSR reporting has changed from and employee and community (Sullivan and
purely environmental to concentrating on Sambunaris 2005). According to Tom Leathes,
Company Directors and CSR 417 C
the director of Acre Resources, “CSR has gone Even though corporations should watch costs
from something that was a bit fashionable to and spending during a recession, a recession
something that is much more broadly accepted. might not be the time to limit corporate CSR
Some companies have whole teams doing this budget. According to Howard, corporations
now—we have just been working with Sky, should put into consideration how they are
which has a team of 20–30 people dedicated to going to keep their staff and their customers.
it” (Hanson 2008). According to Leathes, CSR Identifying the position of the corporation is C
cannot only be found in large companies such as even more relevant in a recession, because such
BT, the Body Shop, and Marks & Spencer, who CSR can create long- and short-term value for
have been hiring CSR specialists for a number of companies. CSR offers an opportunity for
years, but also there have been a growing number corporations of all sizes. According to Leathes,
of smaller companies taking them on. corporations gain competitive advantage through
The chief executive of Business in the developing a strong CSR program and
Community (BITC), Stephen Howard, has also incorporating it into their brand and marketing.
observed that there has been an increase in Customers are much more conscious of
the number of businesses working with that environmental and social issues. They are
organization. BITC gives support and advice to searching for corporations who can make this
help corporations enhance the impression they easy for them. However, Leathes emphasizes
have on society and the environment. According that assigning a CSR officer is more relevant for
to Howard “CSR is getting more boardroom some companies than others. According to him, it
attention; universities now run degree courses is inexperienced to state that any company which
in CSR” and “like the evolution of the HR does this is likely to notice a huge increase in
professional, we are seeing the evolution of the sales. Several oil and tobacco corporations have
CSR professional” (Hanson 2008). an enormous social and environmental influence.
In addition to climate-change agenda, there are In particular, corporations with bad reputations
other factors which are accountable for the rise of like oil and tobacco companies showed an
CSR as a boardroom issue, for instance, the finan- interest in carrying CSR activities to change
cial scandals at Enron and WorldCom and lzately their negative images. Some corporations such
Societe Generale, as well as so-called labor abuses as BP and Shell were able to successfully
at Nike and Gap (Hanson 2008). Corporations are alter their image through emphasizing their
increasingly using CSR as an instrument to deal environmental and social initiatives, while
with risk and reputation: Questions about how the same strategy has backfired for others such
companies are fulfilling their environmental and as Monsanto and Exxon. According to Karen
social responsibilities are asked by wider stake- Bergin, Senior Director of Corporate Affairs
holder groups such as local authorities, public and Citizenship, Microsoft Corporation, the
bodies, customers, and prospective staff. Howard solution lies in making sure that CSR activities
states that “It is an issue that is here and now, so are aligned with the corporation, which will
businesses need to look at how they are going to guarantee its effectiveness and sustainability
respond.” However, Leathes highlighted that areas (Hanson 2008).
like marketing, HR, finance, and IT are considered The responsibility for corporate governance
to be more entrenched compared to CSR and the company’s CSR policies and objective
budgets and team sizes which are still relatively should probably fall in the hands of someone with
underdeveloped. In addition, most of CSR full knowledge of the company’s positive and
heads do not report directly to the chief executive negative influences on society as well as having
or other main board director, although that posi- a proper understanding of present and potential
tion seems to be changing (see – reference to risks faced by the company. We can argue that
“▶ Chief Sustainability Officer” (Bhattacharya such person should be capable of influencing the
et al. 2011). company’s strategic planning, which ultimately
C 418 Company Directors and CSR

indicates that the participation of the board is incentives must be established. Culturally, that
essential for a successful establishment of the means corporations should focus on long-term
CSR function in corporations. CSR issues are sustainable performance rather than short-term
immediately placed at the core of business strat- cost cutting views. The corporation should
egy, as a result of, having the board administering consider the set of incentives, which will provide
the incorporation and execution of CSR in with the best coordination between profit
a corporation. In addition, legislation in many maximization and CSR performance. To ensure
countries holds the same belief, in which direc- success, corporations should imply the same
tors hold the responsibility for the environmental techniques it uses when it deals with any other
and social consequences of corporate decision. strategic component of a business; measuring and
The combined code on corporate governance assessing the performance are handled according
makes it obvious that CSR is crucial. It states that to a well-known formal strategy (Financial
directors “should set the values and standards of Reporting Council 2003).
the company and ensure that it meets its
obligations to shareholders and others”
(Financial Reporting Council 2003). The board Key Issues
must be in charge of the establishment of
corporate values and standards, looking at The Role of Directors
corporate responsibility in a strategic way, being A company director is a member of the Board of
constructive about regulations, aligning Directors whose responsibility is to add value
performance management, establishing a culture to the corporation through both performance
of integrity, and making use of internal control to (direction) and conformance (control).
ensure accountability. On the other hand, Performance involves establishing the mission,
a board’s role is to administer rather than values, and strategic direction of the corporation;
managing; therefore, they have to delegate. the influence of these on both stakeholders and
Assigning the CSR accountability to an existing the natural environment should be considered
board member and devoting a committee by a socially responsible director. Conformance
completely to CSR, or the entire board can be involves, firstly, accountability through
included in CSR decisions, are examples of establishing internal policy and procedures and
various techniques used by corporations to place devoting to both internal and external rules
CSR role in the board. The same techniques could and procedures such as laws and, secondly,
be applied at the executive level, for instance, transparency through reporting to stakeholders;
the executive committee members could be high levels of each should be supported by
accountable for CSR supervision, a new member a socially responsible director. Ensuring that
could be assigned to the executive committee the corporate’s purpose and values are consis-
with CSR responsibilities and expertise, or tent with or support CSR might be an active
engaging the whole executive committee on responsibility played by the company director.
CSR decisions. The same foundation can be Also, the company director can guarantee that
applied to the whole corporation through central- a socially responsible manner is used in strategy
izing or decentralizing, directing one department creation through establishing policies and
with CSR responsibilities, or allocating them procedures and the implementation of that strat-
according to different criteria such as geographic egy. There is an agreement that the stakeholders
locations and business divisions and deciding on should be taken into consideration when
whether to use cross functional interaction or company directors make decisions. According
not. No matter what structure the corporation to the International Corporate Governance
choice, the dedication from the board should Network (ICGN 1999), “it concurs in the view
be accompanied by responsibilities down the that active corporation between corporations
hierarchy. To achieve this, a set of correct and stakeholders is essential in creating wealth,
Company Directors and CSR 419 C
employment and financially sound enterprises Company directors’ roles and responsibilities
over time.” An executive (or inside) director are highly codified and extensively researched,
and a nonexecutive (or outside) director are the and therefore, the directors’ perspective of the
two categorizes usually used for company place of the CSR within their professional duties
director. The first refers to an employee of the might be developed from a number of sources
corporation such as the chief executive officer such as legislation and case law; international,
(CEO), while the latter refers to an employee regional, and national guidelines; reports on C
from outside the corporation. A nonexecutive CSR and corporate governance; professional
director is hired to add an external opinion on associations (Institutes of Directors); corporate
issues of strategy, performance, resources, constitutions and codes of conduct; and
and standards of conduct and evaluation of professional and academic literature. The
performance to the board. Nonexecutive direc- legislative frameworks within which the
tor is hired based on his/her courage, wisdom, corporation works are the main influences on
and independence. The nonexecutive director how those opinions are formed. Such frameworks
is divided also in two categories: independent not only differ from one country to another, but
directors and nonindependent directors. also they differ between states of the same
The board is an ongoing body that creates country. Other influences include the boardroom
a series of decisions. “The directors’ perceptions demographics and culture, the corporations’
of the success or otherwise of a decision will history of CSR, and the persons’ values and
feedback into the decision-making process, and experiences. Therefore, a director might have,
as such will form part of the information or to some extent, a different perception of CSR
experience that is used in making later when the director acts on multiple board
decisions.” There are two specific characteris- positions. The company directors’ perception of
tics of board decision making: Firstly, acting as CSR is a broad one; the perception of one director
agents, the decision makers are making could fall somewhere inside the whole array of
a decision on behalf of the principles (owners possibilities from seeing CSR inappropriate
of the corporations) rather than making through to a passionate obligation to community
a personal decision. Secondly, two stage pro- and the environment. It is persistent that
cesses are used to reach a decision: The board executive directors perceive CSR differently
papers are read by individuals before meetings than nonexecutive directors. However,
and make an early decision, and then, the group academics did not reach an agreement on what
decision-making processes are used by the board they perceive differently. For instance, Ibrahim
to make last decision through consensus or et al. states that “overall, outsiders are less
majority vote. As such, both individual and economically driven and more philanthropically
group decision-making philosophies are perti- oriented than insiders,” while Wang and Coffee
nent to the directors’ perception of CSR. It is found in their study that “increasing the number
crucial that pathologies do not affect the group of outsiders on the board may actually have little
decision-making process, such as group think- effect on philanthropic behaviour” (Idowu and
ing. That is why the board should have a various Filho 2010).
group of people to expand the range of
experiences, values, and risk perception that Establishing a CSR Strategy
will be carried to the meeting and inform the At times, executives find it difficult to establish
discussion. Board demographics and CSR a CSR strategy; however, social media platforms
research have been done extensively. can be essential resources for corporations looking
For instance, male board members are less likely to contribute to their societies and develop into
than female board members to encourage better corporate citizens. Discovery Communica-
charitable community service and cultural tions, for instance, are relying more on social media
activities (ICGN 1999). in their CSR efforts, in which they use social
C 420 Company Directors and CSR

networks such as Facebook and Twitter; they also Cross-References

launched Discovery Blog a short time ago to raise
public awareness about their CSR efforts through ▶ Business Ethics
generating discussions and providing community ▶ Corporate Governance
for those who want to get involved. ▶ Corporate Responsibility
Anne Charles, the founder and CEO of ▶ Socially Responsible Investment
BRANDfog, provides three crucial guidelines
that corporations should do for better CSR
(Bennett 2010). First, commit and lead; this References and Readings
means that executives should share their vision
through social media channels, which is crucial Aldama, L., Amar, P., & Trostianki, D. (2009). Embed-
so that followers can feel connected to the brand, ding corporate responsibility through effective
give feedback, and become evangelists. Second, organizational structures. Corporate Governance, 9,
listen and learn; through this step, executives will Bennett, A. (2010). Questions for: Ann Charles. Retrieved
be able to find out the greatest areas of need and from http://responsibility-project.libertymutual.com/q-
evaluate the societies where they do business; this and-as/questions-for-ann-charles#fbid¼C_9i28YJ8SF
enables them to decide which social issues to Bhattacharya, C. B., Sen, S., & Korschun, D. (2011). How
to co-create corporate responsibility strategy. Ethical
address. This can humanize the brand while Corporation, November, pp. 35–38.
supporting the society, and lastly, communicate; Bill, T. (2006). CSR policies can lift company profits.
CEOs can comment or post updates about their Caterer & Hotelkeeper, 196(4429), 11.
CSR initiatives and tell people what they are Financial Reporting Council. (2003). The combined code
on corporate governance. Retrieved from http://www.
doing with CSR through social media channels. ecgi.org/codes/documents/combined_code_final.pdf
CEOs can discuss it in board meetings, staff Hanson, S. (2008). Make room for CSR. Director, 61(11),
meetings, and press conference or even broadcast 65–67. Retrieved from http://www.director.co.uk/
it through all marketing channels. magazine/2008/6%20June/CSR_61_11.html
Hopkins, M. (2007). Corporate social responsibility and
Karen Bergin, Senior Director of Corporate international development: Is business the solution?
Affairs and Citizenship, Microsoft Corporation, London: Earthscan.
agrees that exciting new opportunities for ICGN. (1999). Statement on global corporate governance
connecting and engaging with people are presented principles. The annual conference in Frankfurt, July
2009. Retrieved from http://www.icgn.org/icgn-
with social media (Jacques 2010). In particular, it is global-corporate-governance-principles-older.php
applicable to CSR as people love to have direct Idowu, S., & Filho, W. (2010). Professionals’ perspec-
dialogue with the corporation. It allows corporation tives of corporate social responsibility. New York:
to inform exciting and convincing stories in new Springer.
Jacques, A. (2010). Socially conscious: Companies share
ways. On the other hand, corporations should CSR best practices. Public Relations Tactics, 17,
closely incorporate social media with traditional 12–13.
communications and directly align it with core Mitra, R. (2011). CSR as a business strategy in Indian
objectives, rather than dealing with social media context. Business Archives: A Biannual Journal,
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as a separate activity; corporations should think Money, K., & Schepers, H. (2007). Are CSR and corporate
about it holistically. governance converging? A view from boardroom
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companies in the UK. Journal of General Manage-
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Future Directions Owen, D. (2005). CSR after Enron: A role for the
academic accounting profession? European
One of the issues that need to be clarified in future Accounting Review, 14, 395–404.
research is the roles and responsibilities of Prieto-Carrón, M., Lund-Thomsen, P., Chan, A.,
Muro, A., & Bhushan, C. (2006). Critical perspectives
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a social responsible behavior especially the don’t know, and what we need to know. International
company directors. Affairs, 82, 977–987.
Competition 421 C
Sullivan, J., & Sambunaris, G. (2005). Creating Definition
a sustainable corporate environment. In Schaffer, J.
(Ed.), Promoting growth through corporate
governance (Economic Perspectives, Vol. 10, No. 1, Competition according to the classical ideas of
pp. 20–24). Washington, DC: U.S. Department of Adam Smith is the invisible hand that ensures
State, Bureau of International Information Programs. the efficient and fair allocation of goods and
Transparency International. (2009). Global corruption services, i.e., each individual’s self-interested
report: Corruption & the private sector. Retrieved from
http://www.transparency.org/publications/gcr/gcr_2009 actions will lead, on aggregate, to society’s C
Yoon, Y., G€urhan-Canli, Z., & Schwarz, N. (2006). good (Frank 2004). The invisible hand maxi-
The effect of corporate social responsibility (CSR) mizes the welfare of buyers and sellers when all
activities on companies with bad reputations. Journal participants have complete and perfect knowl-
of Consumer Psychology, 16, 377–390.
edge so that consumers make choices and firms
strive to meet their requirements; in this way, the
market allocates goods for the benefit of all. In
Company Mission the real world, these conditions do not exist. Also,
all members of society do not have perfect
▶ Corporate Mission, Vision and Values knowledge or power, so the major question is:
To what extent can we rely on competitive mar-
kets to sustain behavior that maximizes the
welfare of all in society in the long run?
Company Secretary Economists recognize that the pursuit of indi-
vidual short-term goals can be detrimental to the
▶ Corporate Secretaries long-term benefit of the community as a whole. It
is for these reasons that acts which individuals
would pursue for their own benefit are
constrained by laws; for example, the burning or
Company Support for Employee dumping of rubbish would be cheaper to the
Volunteerism individual than the cost of legally sanctioned
disposal but more detrimental to the community
▶ Employee Volunteer Programmes as a whole.
Frank (2004) compares the competitive
behavior of firms to that of natural species; it is
the survival of the fittest. The argument is that
Company-Wide Strategy firms who come closest to profit maximization
are more likely to survive in the long run than
▶ Corporate Strategy those that do not. All firms are not necessarily
maximizing profit at any given time because their
managers, for example, may be lazy or incompe-
tent. This may happen with or without the knowl-
Competition edge of owners. If managers are not striving
for profit maximization, and their competitors
Wyn Jenkins are, they risk the survival of their firm. The
Consulting Teacher, Liverpool, UK important question for firms’ owners and man-
agers is: If they seek to pursue socially responsi-
ble ventures beyond the requirements of
Synonyms regulation, will they risk the long-term prosperity
of the firm, or can such actions lead to competi-
Ethical competition; Green competitiveness; tive advantage? The important question for any
Sustainable competition society is how can it ensure that firms behave in
C 422 Competition

a way such that the long-term destiny of the Earth 3. Producing environmentally friendly products,
and society is optimized, i.e., in capitalist econo- employing ethical work practices, and indulg-
mies, at least how much can be left to the invis- ing in corporate philanthropy always adds
ible hand? costs, and the extra costs of producing such
Since firms make products using resources for “ethical” products do not command increased
the benefits of customers, they have two broad prices from consumers.
strategic challenges: to maximize profitability in The first of these statements is not contentious.
the short run and to remain in existence in the The second is contentious, but an analysis of the
long run by ensuring that the products they pro- literature indicates that management action
duce, and the assets they use to produce them, beyond compliance is necessary for some firms
remain of relevance to society, i.e., if firms wish to remain in business (Kagan et al. 2003; Lynch-
to survive, their assets and/or products must be Wood et al. 2009; Porter and Kramer 2002).
regenerated before they become obsolete Kagan et al. use the concept of the social license
(McGahan 2004). Hence, Kodak moved from which argues that firms are constrained in their
chemically based photography to digitally based activities by the expectations of society. Lynch-
photography. Thus, firms compete in the present, Wood et al. categorized the drivers of the social
but also must make strategic choices about the license as the potential of the impact of a firm’s or
nature of the future and their role in that future. industry’s activities, customer interest and
Competition has both an operational dimension power, and corporate visibility and community
(present orientation) and a strategic dimension pressure. Those firms that have social license
(future orientation). In this section, we explore pressures have to invest beyond legal compliance
the competitive and complementary factors that activities. This investment is part of their com-
affect the corporate social responsible (CSR) petitive behavior. However, as Gunningham and
behavior of firms. his colleagues have observed, the precise bound-
aries of the social license are ill defined. This lack
of definition is confusing to some managers. Por-
Introduction ter and Kramer (2002, p. 57) have noted that firms
feel obliged to give to charity to appease potential
Friedman (1970) publicized his analysis of “the critics but are often unhappy in this giving, “exec-
social responsibility of business” in an article in utives find it hard, if not impossible, to justify
the New York Times Magazine. In this article, he charitable expenditures in terms of bottom line
outlined his concept that the social responsibility benefits.” Thus, there is evidence that firms have
of business in a free enterprise system, including to make judgments, irrespective of altruism, of
providing employment, eliminating discrimina- the extent of their beyond compliance activities
tion and avoiding pollution, was a distraction to remain a viable competitor in an industry.
from the business of maximizing shareholder Thus, observers and managers find it difficult to
wealth. judge the value “of beyond compliance” activity
These ideas can be encapsulated as follows: in terms of actual or perceived rewards. Husted
1. The role of firms is to obey the law, and and de Jesus Salazar (2006) cite the example of
government should legislate to ensure firms’ Merk, who in 1987 made a drug, Mectizan, avail-
behavior is controlled to meet the norms of able to third world counties free of charge, which
society. gained it some reputational benefits and boosted
2. Firms’ managers have no responsibility to employee morale but was judged by analysts to
do more than the law requires or to go “beyond have cost more than any achieved or anticipated
compliance.” Indeed, the argument of payoff. Porter and Kramer (2002, p. 58) criticized
Friedman is that managers have a duty not to “diffuse and unfocused” charitable donations and
carry out activities that reduce shareholder argued that the assertions of Friedman were true
wealth. when “corporations’ contributions are unfocused
Competition 423 C
and piecemeal.” This leads into a discussion of made; this he argues is more effective in terms
the concept of strategic corporate social respon- of process efficiency that “end of pipe” capture
sibility, as a proactive competitive weapon, not as and disposal. He produced evidence that pollu-
a series of activities constrained by formal regu- tion prevention can increase productivity effi-
lation or by the social license. ciency as well as reducing compliance and
Husted and de Jesus Salazar (2006) used eco- liability costs. Product stewardship goes beyond
nomic arguments to demonstrate that strategic pollution prevention in the manufacturing pro- C
behavior by firms to conduct activities that cess and argues that every step of designing,
aligned society benefits with firm benefits pro- producing, using, and disposing of should be
duced more benefits for both the firm and society considered when judging the environmental
than firms that were either behaving altruistically, impacts of products. The drivers for sustainable
but without a strategic focus, or that were behav- development provide firms with the opportunities
ing egoistically and conforming to minimum to innovate with both product and process design
legal compliance. This analysis, however, relies and develop blue ocean strategies (Kim and
on the assumption that there is an alignment Mauborgne 2005), i.e., the opportunity to operate
between both social benefit generation and profit in markets that are free from competition, at least
maximization. The evidence from the literature is in the short run.
that such alignment exists at least within the Porter and Kramer (2002) also emphasized the
context of the USA experience. These ideas are importance of a strategic framework for corpo-
illustrated with a discussion of firm strategic rate philanthropy. Unfocused charity giving
behavior with respect to the natural environment as outlined by Porter and Kramer is analogous
and corporate philanthropy. to employing poor quality control in
Hart (1995) observed that the standard design a manufacturing process; it is an unnecessary
school model (SWOT) developed in strategic waste of money. They discussed a number of
management discusses economic, political, case studies in which they illustrated how firms
technological, and sociological factors as part of can improve their competitive context by the use
its analytical template. However, while the natu- of philanthropy to improve the factors that make
ral environment could be considered within these up their corporate context. Corporate context is
descriptors, Hart advocates that any firm should defined by the variables that make up Porter’s
consider its strategic position in a way that diamond model: demand conditions, related and
explicitly take account of the impact and poten- supporting industries, factor conditions, and firm
tial future impacts of their activities on the natural rivalry.
environment. This is based on the premise that There are a number of case studies that support
the consumers of a firms’ products will expect the strategic opportunities of proactive environ-
that firms behave in ways that are mindful of the mentally focused CSR. Porter and van der Linde
natural environment. It is therefore in firms’ (1995) challenged the idea that environmental
interests to satisfy the desires of their consumers regulation would add costs to products and in
with respect to the tangible and intangible fact suggested that it was a driver for promoting
benefits associated with their products. Hart cost efficiency and a spur for innovative firms to
argued that firms can develop three generic natu- find new ways of differentiating products; their
ral environmental strategies: pollution preven- argument was supported with cases. Orsato
tion, product stewardship, and sustainable (2006) indicated that firms which pursue environ-
development. Pollution prevention has two mental strategies can improve both their relative
aspects: working to make present process more market position and their resource effectiveness.
efficient and hence less polluting and developing For sustainable advantage, it is also important
new process and products that will lead to “zero that the market positions taken by firms are diffi-
emissions.” Hart’s concept of pollution preven- cult to imitate, because, as Orsato (2006) has
tion involves preventing waste materials being observed, a first mover advantage in obtaining
C 424 Competition

ISO 14001 certification, for example, was ini- start on technology development and experience
tially a differentiating feature but was subse- with filters” (p. 145).
quently eroded to become a “license to operate” A survey study conducted by Brammer and
for certain firms as the number of firms gaining Millington (2008) supports the ideas of Porter
certification in particular sectors increased – an and Kramer. They found that the relationship
order-winning criterion becomes an order- between financial performance and level of char-
qualifying criterion (Hill 2000). Berry and itable donations was U-shaped, suggesting that
Rondinelli (1998), again using case examples, these philanthropic initiatives had to exceed
have indicated that firms that adopted ecologi- a threshold value to have any impact, investments
cally sensitive policies became more efficient. below a threshold involving costs but generating
They suggest that no benefits: “this suggests that it is the consistent
Many companies including 3M, DuPont, Allied application of a strategy of social sensitivity that
Signal, Amoco and Monsanto have discovered ultimately pays off in financial terms” (p. 1340).
that environmental costs can be replaced by reve-
nues through sale of waste by-products, clean tech-
nologies or unused pollution allowances (p. 9).
Key Issues
Furthermore, they observe that large firms led
the way in proactive ecologically sensitive strat- In capitalist society, competition is considered to
egies but predicted that small and medium firms be a framework that facilities the allocation of
would follow the lead and will “adopt pollution goods and services in an efficient way that is fair
prevention practices when they can easily obtain to the buyer and seller – the invisible hand con-
information about them, learn to apply life cycle cept. However, the invisible hand principle does
analysis, and get technical assistance.” An anal- not take into account the welfare of those not
ysis by Lynch-Wood et al. (2009) would not seem engaged in the buying and selling transaction
to support this latter contention concerning small- and cannot take into account the drivers for
and medium-sized firms in the UK. A case study socially responsible behavior by corporations.
on five firms carried out by Sharma et al. (1999) The invisible hand is complemented by the social
indicates that Canadian firms in the oil industry license in moderating the behavior of firms so as
who responded early to environmental concerns to protect the welfare of society. The strategic
regarded such concerns as opportunities, whereas behavior of firms can increase both the level and
firms who responded when their identity had been effectiveness of CSR activity. However, there are
defined and established regarded them as threats. some important limitations to these ideas: The
Rugman and Verbeke’s (2000) concluded that lack of perfect knowledge of CSR issues by
firms can deal with government regulation stra- firms, consumers, and society makes the devel-
tegically by adopting policies around ecological opment of effective competitive and social con-
issues that influence to their benefit government straints to firm behavior difficult to quantify; the
policy on legislation. Ng (2006), too, has indi- relative power of the social license to regulate in
cated that by being aware of government policy different kinds of industry; and the applicability
on future regulation, firms that are strategically of the ideas discussed in this article outside USA
aware and suitably resourced are able to antici- contexts to other contexts with varying degrees of
pate and encourage regulation, so that by cultural and economic differences to the USA.
investing in cleaner technologies before any
anticipated regulation is enacted, they can gain
first mover advantages. In her work, Ng (2006) Future Directions
detailed how Peugeot-Citroen’s (PSA) introduc-
tion of filters for diesel engines gave marketing By definition, competition can only work in soci-
and technological first mover advantages: “In eties where competition is a part of the economic
addition to the free publicity, PSA got a head system. In all societies, there is some regulation.
Competition 425 C
This regulation can be environmentally tough or only they would recognize as giving any benefit.
environmentally weak. Equally, nonlegal con- This is an unlikely scenario; it would require that
straints on companies can differ from country to the firm would be the only entity capable of
country. Matten and Moon (2008) have distin- recognizing the advantages of their activities. It
guished between explicit and implicit CSR and would also require the firm to have some sort of
suggest that firm behavior with respect to CSR market domination so that its actions would not
differs in different countries. Their work suggests make it vulnerable to other firms not indulging in C
that the social license and strategic behavior with these activities. In a similar vein, other strains of
respect to CSR will differ in different countries. research could usefully explore whether all firms
This is an area for useful future research. It is can afford long-term strategic CSR behavior that
particularly important to understand the chal- reduces short-term profits for long-term benefits.
lenges facing a world where the competitive
behavior of firms in one culture, or indeed the
different behavior of the same multinational firms
in different cultures, can affect the welfare of the
earth. This understanding is important if ambi-
▶ Business Case for CSR
tious goals to maximize the welfare of all human
▶ Business Strategy
societies are to be met as outlined in the following
▶ Cause-Related Marketing
quote from the Cambridge University-based
▶ Competitive Advantage
Prince of Wales’s Corporate Leaders Group on
▶ Corporate Social Entrepreneurship
Climate Change website: (http://www.cpi.cam.
▶ Corporate Social Responsibility Strategy
▶ Definitions of Social Responsibility
20English2.pdf, accessed 14 September, 2009).
▶ Friedman, Milton
Lifecycle analysis (i.e., the impact of all phases of ▶ Kaizen
the product life on the natural environment, design ▶ Philanthropy
to disposal) will be important in product
▶ Responsible Competitiveness
The goal of sustainable development will be ▶ Strategic Corporate Social Responsibility
promoted by firms having long-term visions related ▶ Unknown Stakeholder
to particular “clean” technologies, but these suc-
cessful technologies will need to be embraced by
the wider community; this is the only way for
world economies to develop and grow without References and Readings
adversely affecting the planet.
Berry, M. A., & Rondinelli, D. A. (1998). Proactive cor-
The motives for firms engaging in CSR behav-
porate environment management: A new industrial
ior remain incompletely understood; indeed, the revolution. The Academy of Management Executive,
multidimensional nature of CSR increases this 12(2), 38–50.
challenge. Do any firms exhibit truly altruistic Brammer, S., & Millington, A. (2008). Does it pay to be
different? An analysis of the relationship between cor-
behavior according to the definition of truly altru-
porate social and financial performance. Strategic
istic corporate behavior given by McWilliams Management Journal, 29(12), 1325–1343.
and Siegel (2001, p. 117): “Here, we define Frank, R. H. (2004). Microeconomics and behavior
CSR as actions that appear to further some social (4th ed.). New York: McGraw-Hill.
Friedman, M. (1970, September 13). The social responsi-
good, beyond the interests of the firm and that
bility of business is to increase its profits. The New
which is required by law?” This would mean York Times Magazine, pp. 122–126.
adopting product designs, processes, and policies Hart, S. (1995). A natural-resource-based view of the firm.
that were of no interest to potential consumers, Academy of Management Review, 20(4), 986–1014.
Hill, T. (2000). Manufacturing strategy: Text and cases
communities, legislators, etc. Thus, firms being
(3rd ed.). Burr Ridge: McGraw-Hill.
truly altruistic would have to be in environments Husted, B. W., & de Jesus Salazar, J. (2006). Taking
where they could sacrifice profits to do things that Friedman seriously: Maximising profits and social
C 426 Competitive Advantage

performance. Journal of Management Studies, 43(1), Definition

Kagan, R. A., Gunningham, N., & Thornton, D. (2003).
Explaining corporate performance: How does regula- Global greenhouse gas emissions continue to rise.
tion matter? Law and Society Review, 37(1), 51–90. Diseases wreak havoc across entire continents.
Kim, C., & Mauborgne, R. (2005). Blue ocean strategy – An entire host of seemingly intractable issues
How to create uncontested market space and make the confront governments throughout the world,
competition irrelevant. Boston: Harvard Business
School Press. which are sometimes unable to effect positive
Lynch-Wood, G., Williamson, D., & Jenkins, W. (2009). changes. With the emergence of companies as
The over-reliance on self-regulation in CSR policy. some of the most powerful institutions for inno-
Business Ethics: A European Review, 18(1), 52–65. vation and social change, more shareholders, reg-
Matten, D., & Moon, J. (2008). Implicit and explicit CSR:
A conceptual framework for comparative understand- ulators, customers, and corporate partners are
ing of corporate social responsibility. Academy of increasingly interested in understanding the
Management Review, 23(2), 404–424. impact of these organizations’ regular activities
Mcgahan, A. M. (2004). How industries change. Harvard upon the community and its natural resources.
Business Review, 82(10), 86–94.
McWilliams, A., & Siegel, D. (2001). Corporate social With the world’s largest 800 nonfinancial com-
responsibility: A theory of the firm perspective. panies accounting for as much economic output
Academy of Management Review, 26(1), 117–127. as the world’s poorest 144 countries, the impor-
Ng, C. B.-K. (2006). Shaping the terms of competition: tance of these organizations in addressing trade
Environmental regulation and corporate strategies to
reduce diesel vehicle emissions. PhD thesis, Massa- imbalances, income inequality, resource degra-
chusetts Institute of Technology. dation, and other issues is clear. While companies
Orsato, R. J. (2006). Competitive environmental strate- are not tasked with the responsibilities of govern-
gies: When does it pay to be green. California ments, their scale and their ability to influence
Management Review, 48(2), 127–143.
Porter, M. E., & Kramer, M. R. (2002). The competitive these issues necessitate their involvement and
advantage of corporate philanthropy. Harvard Busi- create opportunities for forward-looking organi-
ness Review, 80(12), 56–69. zations to exercise great leadership.
Porter, M. E., & van der Linde, C. (1995). Green and
competitive: Ending the stalemate. Harvard Business
Review, 73(5), 120–133.
Rugman, A. M., & Verbeke, A. (2000). Six cases of Introduction
corporate strategic responses to environmental regula-
tion. European Management Journal, 18(4), 377–385. In public opinion surveys, consumers admit that
Sharma, S., Pablo, A., & Vredenburg, H. (1999). Corpo-
rate environmental responsiveness strategies: The they prefer to buy products and services from
importance of issue interpretation and organizational companies they feel are socially responsible
context. The Journal of Applied Behavioural Science, (72%) and that they sell shares of those
35(1), 87–108. companies they feel do not pass muster (27%).
Challenging Nobel laureate Milton Friedman’s
notion that companies’ only responsibility is to
make profit, executives are increasingly seeking
Competitive Advantage ways to combine economic gain with social well-
being in ways that will produce more customer
Ananda Das Gupta loyalty, better relationships with regulators, and
HRD, Indian Institute of Plantation Management, a host of other advantages. CSR practices may, in
Bangalore, Karnataka, India fact, prove pivotal to the success of a company.
Sometimes described simply as “doing well
by doing good,” corporate social responsibility
Synonyms initiatives gained traction in the 1990s as con-
sumer interest in management practices erupted
Better business performance; Developing core in the wake of several substantial incidences of
competence; Positioning, brand enhancement executive malfeasance and of escalating
Competitive Advantage 427 C
environmental challenges. While originally range of companies. It also offers additional mod-
focused on environmental factors, CSR reports ules with distinct metrics for companies,
increasingly include social measures. Likewise, depending on their industry sector and opera-
company leaders today express interest in busi- tions. The price range for producing a report
ness models that weave together explicit goals for spans from $100,000 for a basic GRI to more
profit, environmental performance, and social than $3 million for complex organizations like
factors, at the same time recognizing that these Shell. Other major initiatives and reporting stan- C
efforts will likely yield no short-term financial dards provide helpful guidance and principles;
benefits but rather long-term performance among them are:
improvements. • The United Nations Global Compact
The phrase “corporate social responsibility” • Global Environmental Management Initiative
(CSR) describes both: • International Standards Organization guide-
• A social movement lines (e.g., ISO14000)
• A collection of specific management practices The continued growth of the socially respon-
and initiatives sible investment movement, especially in the
Business leaders, government professionals, United States and Europe, is stimulating compa-
and others use these principles and tools to assess nies’ adoption of GRI and other instruments. In
and report on organizations’ impact on society. the United States alone, capital available to
socially responsible companies reached $2.29
Benefits from CSR trillion in 2005.
The following are the benefits of corporate social
performance reporting spread over an entire
organization: Key Issues
Business area reduce costs create value
License to operate more favorable government There are, however, two opposing views on
Relations; reduced shareholder corporate social responsibility. Firstly, that cor-
Activism; reduced risk of lawsuits porate social responsibility is a distraction from
Traditional rhetoric about “private versus management’s responsibility to increase share-
public” responsibilities is diminishing while holder value and that organizations should con-
companies operate more and more with an under- centrate solely on their business objectives.
standing of an acknowledged (if tacit) role to play Secondly, the alternative view, that organizations
in society. In the United States, many people feel should recognize that the law does not (and
companies should be doing more to improve cannot) contain or prescribe all duties and respon-
society through changing their business practices. sibilities, and therefore organizations should
Although implementing CSR initiatives in mod- exercise an informal and imaginative ethical
ern companies is a daunting prospect because of judgment in deciding what should or should not
their increasingly complex and global operations, be done, taking account of the interests of others
many CSR management frameworks have moved as well as their own, just as an individual good
onto the international stage. Approximately 400 citizen would.
companies – including many of the world’s Sustainable business competitive advantage is
largest – use all or some of the Global Reporting the attainment and maintenance of a superior,
Initiative (GRI), and combined environmental differentiated marketplace position, one that
and social reports are increasingly common creates superior value for the organization’s cus-
alongside companies’ regular sustainability tomers and investors. Corporate social responsi-
reports. Launched in 1997 by the Coalition of bility failures may result in loss of customers and
Environmentally Responsible Economies, the prompt action from the authorities. Although
GRI report contains 50 core environmental, most organizations do keep their marketing activ-
social, and economic indicators for a broad ities within the law, some marketing activities are
C 428 Competitiveness

regarded as socially irresponsible, such as unac- a constraint, or a charitable deed – it can be

ceptable selling techniques, bribery, price dis- a potent source of innovation and competitive
crimination, deceptive advertising, misleading advantage.
packaging, trading in counterfeit products, and Michael Porter and Mark Kramer (2006)
marketing defective products. propose a new way to look at the relationship
Many organizations embrace the additional between business and society that does not treat
costs associated with corporate social responsi- corporate growth and social welfare as a zero-
bility in the expectation of reaping benefits in sum game.
the long term; corporate social responsibility They introduce a framework that individual
marketing activities can result in, for example, companies can use to:
a better understanding of consumer needs Identify the social consequences of their actions
and wants, positive publicity, boosted sales, Discover opportunities to benefit society and
enhanced staff commitment, and improved busi- themselves by strengthening the competitive
ness performance. Corporate social responsibil- context in which they operate
ity in marketing can result in other valuable Determine which CSR initiatives they should
benefits too, including reduced costs. Corporate address
social responsibility in marketing can help an Find the most effective ways of doing so.
organization gain sustainable competitive
advantage. Hence, it is no surprise that many
organizations incorporate and implement ethical Cross-References
and social responsibility programs into their
strategic plans. ▶ Customer Value Creation
▶ Sustainability
▶ Sustainable Development
Future Directions

Governments, activists, and the media have References and Readings

become adept at holding companies to account
for the social consequences of their actions. In http://www.articlesnatch.com/Article/Corporate-Social-
response, corporate social responsibility (CSR)
has emerged as an inescapable priority for Porter, M. E., & Kramer, M. R. (2006). Strategy and
business leaders in every country. society: The link between competitive advantage and
Frequently, though, CSR efforts are counter- corporate social responsibility. Harvard Business
Review, 84(12), 78–92.
productive, for two reasons. First, they pit busi-
ness against society, when in reality the two are
interdependent. Second, they pressure companies
to think of corporate social responsibility in
generic ways instead of in the way most appro-
priate to their individual strategies. The fact is the Competitiveness
prevailing approaches to CSR are so discon-
nected from strategy as to obscure many great ▶ Responsible Competitiveness
opportunities for companies to benefit society.
What a terrible waste. If corporations were to
analyze their opportunities for social responsibil-
ity using the same frameworks that guide their
core business choices, they would discover, as Competitor
Whole Foods Market, Toyota, and Volvo have
done, that CSR can be much more than a cost, ▶ Unknown Stakeholder
Compliance/Legal Compliance 429 C
Governments act as the “elected representative of
▶ Assurance citizens” interests’ (Crane and Matten 2007,
▶ Institute of Business Ethics (UK) p. 459) and, as such, define the conditions under
which a business is licensed to operate. As gov-
ernments are primarily concerned with citizens’ C
rights, many government regulations and laws
Compliance Audit are intended to ensure compliance with
nondiscriminatory behavior (Crane and Matten
▶ Environmental Audit 2007), for example, the Disability Discrimination
Act in the UK. Although governments set regu-
latory requirements, it is the companies that are
solely responsible for ensuring their employees
Compliance/Legal Compliance fully understand and comply with the laws (Frulla
and Rubin 2007). As the laws and regulations that
Jane Claydon businesses need to abide by have been increas-
School of Law, Politics and Sociology, ingly growing in volume and complexity over the
University of Sussex, Brighton, East Sussex, UK last few years, particularly in the wake of numer-
ous scandals portrayed extensively in the media
(Frulla and Rubin 2007) and the global financial
Synonyms crisis, businesses have responded by increasing
their legal and compliance departments and
Legal and ethical responsibilities; Legal implementing compliance-based ethics programs
compliance; Regulatory compliance (Paine 1994) to ensure they comply with these
regulatory requirements. The results is a new
“compliance profession” that has developed
Definition over the last 10 years (Parker 2000, p. 339) to
protect companies from damage to reputation and
In the context of business ethics, it is generally relationships (Paine 1994) and “legal calamity”
assumed that business ethics begins where the law (Collins 2008, p. 22).
ends (Crane and Matten 2007). Using the notion However, compliance has been critiqued as
that a stakeholder of a business is such if it can a façade, with companies giving the appearance
both influence and be influenced by business that compliance matters to them, while they are
(Freeman 1984), government is considered a key simply “making as little real change as possible”
stakeholder as it “is involved in issuing laws reg- (Parker 2000, p. 342). Yet, with the sudden
ulating business practice” (Crane and Matten change in regulatory environment in the Western
2007, p. 456). Regulation can be defined as: world, which has led to increased scrutiny of
companies from regulators, companies can no
rules that are issued by governmental actors and
other delegated authorities to constrain, enable, or longer keep up this appearance without real
encourage particular business behaviours. Regu- action behind it.
lation includes rule definitions, laws, mechanisms,
There are two compelling reasons to install a good
processes, sanctions and incentives. (Crane and
compliance program – to strengthen the company’s
Matten 2007, p. 458)
performance of its legal duties and to generate data
to support oversight. (Collins 2008, p. 23)
Compliance/legal compliance, then, can be
defined as a set of processes and procedures An effective and simple compliance program
within a specific program to ensure adherence to “can help address an array of potential compli-
government regulation and laws. ance issues” (Frulla and Rubin 2007). It can also
C 430 Compliance/Legal Compliance

make employees more committed to the company, ethical uncertainties relating to the industry and
as well as driving innovation, in the knowledge role within which they work (Treviño et al. 1999).
that there is a safety net of an effective compliance Therefore, training is required to ensure all
program, which will “prevent them, from inadver- employees become aware of regulatory require-
tently engaging in impermissible conduct” (Ford ments governing their behavior for them to be
2008, p. 50). Key aspects of an effective compli- able to take responsibility for conducting their
ance program are outlined below. daily business behavior in an ethical and compli-
ant way. Such training will allow them to become
more likely to ask the right types of questions
Key Issues before conducting in ethically ambiguous or
noncompliant behavior (Treviño et al. 1999).
Key Characteristics of an Effective This leads to them being more likely to take
Compliance Program personal responsibility and accountability for
Governance their own understanding and application of ethics
Collins (2008) asserts that an effective compli- and regulation, ultimately allowing them to make
ance program requires a top-down approach better decisions (Treviño et al. 1999).
beginning at board level, to ensure directors It is also more likely that employees will
understand their legal obligations. Only when report noncompliant behavior if they are
directors have compliance on their agenda will aware of the difference between compliant and
managers follow suit and filter their priorities noncompliant conduct. A system of reporting
down to the staff on the ground, who service within any organization is a key component
customers, clients, suppliers and partners on within a compliance and ethics program (Treviño
a daily basis. Treviño et al. (1999) concur with et al. 1999). Yet, it is also important to recognize
this argument, stating that “if executive leaders that it is neither necessary nor practical for
value and pay attention to ethics, so do supervi- employees to be trained as experts on the law
sory leaders” (1999, p. 142). (Frulla and Rubin 2007). Lastly, an effective
The board should be aware of any legal risks in compliance and ethics training program should
the countries in which it operates and subsequent be conducted internally, preferably by the
control measures in place to mitigate those risks company’s compliance professionals rather than
(Collins 2008); have knowledge of ongoing mon- external consultants, as this shows employees
itoring activities, which ensure quality assurance that leadership “really cares about ethics”
and the results of those activities (Collins 2008); (Treviño et al. 1999, p. 147).
and be aware of any compliance violations
(Treviño et al. 1999), which is dependent on an Quality Assurance
awareness of compliance and ethics at all The ultimate objective of an effective quality
employee levels, not just directors and senior assurance program is to prevent any failings and
management, as most daily transactions with violations by, firstly, producing data that provides
stakeholder are conducted at grass roots level. a good foundation for effective oversight and,
This is particularly pertinent for senior managers secondly, providing “reasonable assurance of
and directors as, very often, they are at risk of continuous improvement in quality performance”
criminal liability (Paine 1994). Managers who (Collins 2008, p. 22). Another way to ensure
fail to provide systems that enable ethical con- quality assurance measures are in place is by
duct are as much to blame as those who know- compliance professionals reviewing documented
ingly conduct unethical behavior (Paine 1994). policies and procedures of the business, to ensure
they correctly reflect the activities of the business
Training and are understandable and accessible to all
Employees should not be expected to be naturally employees (Frulla and Rubin 2007). Lack of
aware of all the various laws and regulations or oversight of quality assurance by managers may
Compliance/Legal Compliance 431 C
result in employees resorting to carelessness or and regulatory restrictions around lobbying activ-
even misrepresentation in order to boost their ities, which require such activity to be vetted
sales figures when they are under pressure to before it is pursued (Frulla and Rubin 2007). An
drive performance (Paine 1994). This was cer- important aspect in promoting an ethical business
tainly the case before the subprime mortgage environment is to persuade the business that eth-
crisis, whereby huge numbers of individual loan ical action is consistent with the goals and long-
managers were irresponsibly providing huge term success of the business (Parker 2000; Ford C
mortgage loans to low-income borrowers who, 2008). Promoting a compliant and ethical culture
on paper, were clearly not in a position to ever within the organization is dependent on the com-
pay back the loans. pliance program instilling in its employee’s, at all
It is also important not only for quality assur- levels, personal responsibility and accountability
ance measures to be in place, but that managers (Frulla and Rubin 2007).
testing the controls in place are not discouraged As it has been established that the promotion
or punished for raising issues about any gaps of an ethical culture is important for
identified during the control’s texting exercise implementing an effective compliance program,
(Paine 1994). Lastly, though it can be considered different approaches for invoking an ethical
somewhat extreme, the compliance unit within culture at the organizational and personal level
a business can decide to conduct an internal within a company shall now be explored.
audit “if it has concerns about prior conduct or
simply wants assurance that its activities have Approaches to Compliance Programs
been in compliance with applicable law” (Frulla Principle Versus Rules-Based Compliance
and Rubin 2007, p. 66). Two of the most common approaches to compli-
ance have been identified as the “compliance-
Promotion of an Ethical Culture based” or “rules-based” compliance program,
Perhaps the most important aspect of the compli- which focuses on the punishment of rule breakers,
ance program is the need for the program to instill and the “principles-based” or “values-based” pro-
in the company an ethical culture or climate as gram, which encourages ethical conduct rather than
“ethics/compliance management is first and punishing nonethical conduct with penalties for
foremost a cultural phenomenon” (Treviño et al. wrongdoers (Treviño et al. 1999; Paine 1994).
1999, p. 145). A study conducted by Treviño et al. (1999),
which surveyed over 10,000 employees at six
To achieve desired outcomes, concerns for ethics
and legal compliance must be baked into the large American companies from various industries,
culture of the organization. Therefore, attention found that the implementation of a formal ethics or
to the ethical culture should come first in any compliance program impacted employees’ atti-
corporate ethics/compliance effort. (Treviño et al.
tudes and behaviors less than promoting an envi-
1999, p. 145)
ronment which focused on values and ethics. An
Depending on the type of industry the business environment that enforces strict obedience to
is engaged in, companies may choose to focus on authority damages a company trying to instill
different aspects of regulatory requirements a culture of compliance and ethics (Treviño et al.
within their ethical culture. For example, 1999) and responsibility (Paine 1994) in its
a company that has close business partnerships employees the most. Further, the application of
with governments may choose to focus on “Gift detailed requirements does not encourage firms to
Rules,” which govern conduct for company apply ethical judgment, nor does it tackle compa-
employees providing travel and entertainment, nies who seek to avoid adherence to regulatory
such as business lunches with a government offi- requirements through loopholes (Ford 2008).
cial (Frulla and Rubin 2007). Other companies in These assertions are corroborated by Fiorelli
industries such as the production and sale of (2007) who claims that a rules-based program
alcohol and tobacco may need to focus on legal does not give employees the tools to handle
C 432 Compliance/Legal Compliance

change, fosters a “tick box” mindset, and does not culture” (1994, p. 106) and stresses that it is rare
enable employees to understand the rationale that the actions of a lone individual will influence
behind the rules. Further, strict programs with the company’s decision making. Paine agrees
a checklist approach such as these actually that a principles-/values-based approach is the
allow employees to “play the system” by finding most effective approach to a compliance and
loopholes behind the rules, an aspect that ethics program, as simply “providing employees
a principles-based program focusing on the pro- with a rule book will do little to address the
motion of ethical values would avoid (Fiorelli problems underlying unlawful conduct” (1994,
2007; Ford 2008). Paine (1994) also asserts that p. 106). Further, a rules-based program does not
“overemphasis on potential sanctions can be encourage employees to think for themselves nor
superfluous and even counterproductive” (1994, promote commitment to morally and ethical
p. 111) as employees may rebel against such exemplary behavior (Paine 1994). Treviño et al.
programs that stress discipline and punishment. conclude that it is important to design an ethics
She concludes that “an integrity strategy is program that is founded on shared organizational
broader, deeper, and more demanding than values and encouraging employees to act on their
a legal compliance initiative” (1994, p. 111). “ethical aspirations” (Treviño et al. 1999).
A compliance approach to ethics also overempha-
Such programs motivate employees to be aware of
sizes the threat of detection and punishment in
ethical or legal issues, report bad news to manage-
order to channel behavior in lawful directions.
ment, report ethical or legal violations, and refrain
The underlying model for this approach is deter-
from engaging in unethical or illegal conduct.
rence theory, which envisions people as rational
(Treviño et al. 1999, p. 139)
maximisers of self-interest, responsive to the per-
sonal costs and benefits of their choices, yet indif-
ferent to the moral legitimacy of those choices.
(Paine 1994, p. 110) Autonomy Versus Interdependence
On the contrary, a compliance program that Compliance practitioners identify explicitly with
rewards ethical conduct is important for business and, at the same time, identify with
a broader ethical community of other compliance
employees’ commitment and leads to higher like- professionals, regulators and stakeholders in
lihood employees will report ethical violations order to play a transformative role within the
(Treviño et al. 1999, p. 143). A values or princi- organization. This conception recognizes the
ples-based program, then, “forces agency on interdependence between compliance advisor and
corporate client. (Parker 2000, p. 339)
firms, making them active participants in defining
the compliance processes that will best address The traditional ethical position of corporate
their particular business risks and situation” counsel has been either complete moral indepen-
(Ford 2008, p. 60). Such a program can result in dence from their clients’ compliance or obliga-
increased ethical responsibility and compliance tion to morally connect to their clients
(Ford 2008) and more positive relationships with (Parker 2000). However, these two positions are
employees, whose awareness of ethics and com- inadequate (Parker 2000) as “each assumes
pliance becomes higher, as they are more likely to a conception of professional autonomy that is
report violations to management (Treviño et al. either unattainable or unrealistic” (Parker 2000,
1999). p. 340). A compliance professional can be auton-
a values-based approach should produce better omous in two ways: either they become “adver-
outcomes than an approach that is oriented toward sarial advocate who zealously advances clients’
legal compliance, despite the fact that most com- ends” (2000, p. 342) or they become
panies emphasize a legal compliance approach. an “influential independent counselor” (2000,
(Treviño et al. 1999)
p. 342) who encourages the company to become
Paine (1994) also asserts that a culture of socially responsible. Either way, the compliance
ethics and compliance throughout the whole professional is autonomous and independent
company will “define an organisation’s operating from responsibility (Parker 2000).
Compliance/Legal Compliance 433 C
In reality, however, compliance professionals However, the regulatory environment in which
see themselves as corporate citizens whose businesses operate today is quickly moving away
values are embedded within the culture and pol- from a deregulatory and self-regulatory approaches,
itics of the corporation, while they are tasked with and as such, businesses can no longer afford to take
ensuring the company is legally and ethical com- the risk that any employee is engaging in unethical
pliant (Parker 2000). This position is neither behavior due to increased scrutiny from govern-
autonomous nor independent from the company. ments and regulators (Frulla and Rubin 2007). C
Further, due to the increasing enforcement powers Therefore, a compliance or rules-based compliance
of regulators in the UK, certain compliance pro- program, whereby the legal and compliance pro-
fessionals in the UK, such as the Data Protection fessionals are taking more control for policing their
Officer, must be registered and approved by the businesses, may be more appropriate in a heavily
FSA and can be criminally convicted if their com- regulated regulatory environment.
pany fails to be compliant. Therefore, these pro- Further, Trevino et al.’s study showed that
fessionals can never be autonomous from a rules-based program could also result in posi-
a company’s legal and ethical compliance. tive relationships with employees (Treviño et al.
A compliance professional’s role, then, is to 1999). They also assert that a rules-based pro-
“push legal and ethical values so far down into gram can exist in conjunction with a values-
organizational everyday life” (Parker 2000, based approach. Therefore, the best program for
p. 346) by maintaining a set of interconnected and a compliance and ethics organization to adopt in
loyal relationships with regulators and organiza- the current regulatory environment is one which
tions (Parker 2000). For this reason, the compliance includes both rules-based and principles-based
professional cannot be seen to be autonomous or elements (Ford 2008), embedded within
detached from the business (Parker 2000). a values-based approach, while also being
“backed up with accountability systems and
discipline for violators” (Treviño et al. 1999).
Future Directions

Treviño et al. 1999 assert that governments Cross-References

should influence the future direction of compli-
ance and ethics programs by encouraging com- ▶ Agency and Corporate Governance
panies to cease focusing narrowly on “superficial ▶ Board of Directors
program characteristics” (1999, p. 148) of a rules- ▶ Corporate Citizenship
based approach and instead encourage focus on ▶ Corporate Governance
the “broader ethical culture of the firm” (1990, ▶ Corporate Mission, Vision and Values
p. 148). The approach to values- or principles- ▶ Corporate Reputation
based compliance and ethics programs may be ▶ Culture and Organization Performance
suitable for a regulatory environment of deregu- ▶ Data Protection
lation, light-touch regulation, or self-regulation, ▶ Government (Role in Regulation, etc.)
which was the case when Trevino et al. and Paine ▶ Reputation/Reputation Management
were writing. In this regulatory environment ▶ Tobacco
before the global financial crisis, as long as com-
panies showed they had the right intentions with
their compliance and ethics program, they could References and Readings
avoid legal punishment for regulatory breaches
(Collins 2008). Therefore, it could be taken on Collins, D. A. (2008). Diligent oversight of legal
compliance: A four-step guide. The Corporate
good faith that employees who “have personal
Governance Advisor (September/October).
commitment and appropriate decision processes Crane, A., & Matten, D. (2007). Business ethics (2nd ed.).
will lead to right action” (Paine 1994, p. 112). Oxford: Oxford University Press.
C 434 Comply or Explain

Fiorelli, P. (2007). Beyond compliance? Journal of Health American system in the UK, Australia, and
Care Compliance, July, 21–24, 69–71. Canada. The Australian, UK, and Canadian
Ford, C. (2008). New governance, compliance, and
principles-based securities regulation. American systems are referred to as principles-based,
Business Law Journal, 45(1), 1–60. whereas the USA governance system is referred
Freeman, R. E. (1984). Strategic management: to as rules-based. In this vein, a rules-based sys-
A stakeholder approach. London: Pitman Publishing. tem requires companies to comply, whereas
Frulla, D. E., & Rubin, C. A. (2007). Financial institution
compliance with government ethics laws. Community a principles-based system allows companies to
Banker, March. either comply or explain why they have not. In
Paine, L. S. (1994). Managing for organizational integrity. this way, there is more flexibility in
Harvard Business Review, 72(2), 106–117. the principles-based system compared to
Parker, C. (2000). The ethics of advising regulatory
compliance: Autonomy or interdependence? Journal the rules-based system. The Australian
of Business Ethics, 28(4), 339–351. Stock Exchange (ASX) (2007) guidelines
Treviño, L., Weaver, G., Gibson, D., & Toffler, B. L. explain: “Disclosure of a company’s corporate
(1999). Managing ethics and legal compliance. governance practice, rather than conformity
California Management Review, 41(2), 131.
with a particular model is central to the ASX
Corporate Governance Council’s approach.”

Comply or Explain
Key Issues
Suzanne Young
La Trobe Business School, Ongoing debate about which system is better is
La Trobe University, Melbourne, VIC, Australia evident and increasingly seen with the advent of
the GFC. Clarke (2007) criticizes the rules-based
system in arguing that rules can set a lower base
Synonyms level as they require all members to act according to
minimum standards of practice, which to gain
Governance principles; If not why not; Voluntary broad acceptance however become minimum
acceptable practice. In setting minimum standards
of practice he claims, it simply leads to the creation
Definition of new and imaginative ways to get around the
rules, whereas a principles-based system, in not
The comply-or-explain governance approach setting standards, encourages improvement over
is a system where governance principles are time in order to meet the expectations of the stake-
codified and companies listing on respective holder community at large.
stock exchanges are expected to comply with The right mix of rules and principles is still up
them and if not provide full explanations about for debate along with whether principles could be
why not. Principles are general guidelines of broadened to include more direction on behav-
best practice, rather than exact provisions that iors, culture, leadership, values, and ethics.
must be adhered to. It is also referred to the In Australia in 2002 (revised 2007) to enhance
“principles-based” approach or “if not why not” and strengthen the principles around governance,
approach. the Australian Securities Exchange (ASX)
introduced guidelines – notwithstanding that
these are not mandatory, listed companies must
Introduction disclose the extent they are followed. These
The comply-or-explain approach is used by • Statements of matters reserved to the board
listed companies that operate within the Anglo and delegated to senior management
Comply or Explain 435 C
• Disclosure of directors’ performance • Structures for shareholder dialogue such as
evaluation investor relations departments, meetings
• Independence of directors and chair between independent directors and major
• Separation of CEO/chair shareholders, and the AGM
• Nomination committee to be comprised of • Institutional investors to use a considered
three directors with majority independent approach to voting, attendance at AGMs,
• Establishment of code of conduct and and making available voting choices to clients C
disclosure of practices (including trading in The Financial Services Authority Listing
company securities) Rules (UK) obliges companies listed on the UK
• Establishment of audit committee (mandatory stock exchange to comply with the Combined
for top 300 listed companies) Code, or explain why it is not complied with. In
• Audit committee be comprised of only explaining the approach, the preamble of the
nonexecutive directors, with the majority Code states:
independent, an independent chair and be at
The Code is not a rigid set of rules. Rather, it is
least three persons (mandatory for top 300
a guide to the components of good board practice
listed companies) distilled from consultation and widespread experi-
• Safeguarding of integrity of financial ence over many years. While it is expected that
reporting companies will comply wholly or substantially
with its provisions, it is recognized that
• Making balanced and timely disclosure of all
noncompliance may be justified in particular cir-
material matters effecting company cumstances if good governance can be achieved by
• Disclosure of communications strategy with other means. A condition of noncompliance is that
shareholders, encouraging participation at the reasons for it should be explained to share-
holders, who may wish to discuss the position
general meetings, and use of electronic
with the company and whose voting intentions
communication may be influenced as a result. This ‘comply or
• Establishment of policies on risk oversight explain’ approach has been in operation since the
and management Code’s beginnings in 1992 and the flexibility it
offers is valued by company boards and by inves-
• Remuneration to be sufficient and reasonable
tors in pursuing better corporate governance.
and disclosure of structure
• Remuneration committee be established Flexibility is apparent in the principles-based
The UK Combined Code (2008) similarly pre- system with companies able to adapt their gover-
scribes best practice governance in structural nance system to suit their own situations. Hence,
areas such as: this points to the evolving nature of governance
• CEO/chair separation and need for customization by the firms. It is
• Balance of independent executive important that firms understand their environment,
directors (with 50% independent and both internal and external, and map the implica-
nonexecutive) tions of environmental change on their governance
• Director appointment frameworks. As emphasized clearly in the ASX
• Board committee structures corporate governance principles and recommen-
• Delegation procedures dations (2007, p. 3), “corporate governance prac-
• Board information provision and induction tices evolve in the light of the changing
• Board evaluation procedures circumstances of a company and must be tailored
• Director reelection and board refreshing to meet those circumstances.” It goes on to state:
• Director remuneration including linking
performance to rewards and remuneration Effective “if not, why not” reporting practices
• Identifying the Recommendations the company
• Responsibility for financial information and has not followed;
internal control systems • Explaining why the company has not followed
• Relationship with auditors the relevant Recommendation;
C 436 Compulsory CSR Regulatory Framework

• Explaining how its practices accord with the 2008 financial turmoil seeming to originate in
‘spirit of the relevant Principle, that the company the USA under the regulatory approach, questions
understands the relevant issues and has consid-
ered the impact of its alternative approach. continue to arise as to whether more regulation is
the answer.
The comply-or-explain approach is a voluntary In moving the debate beyond the principles
approach which Solomon (2007) in talking about versus rules approach, governance advisors and
the UK principles-based approach links improved regulators need to look at how firms can be pro-
practices. She argues that there is a persisting vided with more guidance in operationalizing the
belief that genuine changes in corporate ethicality key principles that underline governance effec-
and attitude can only be achieved through tiveness, such as disclosure, remuneration,
a voluntary framework, which allows individuals independence, stakeholder involvement, and
to think about issues at hand. transparency.
But we often find that companies tend to use
boilerplate explanations in explaining why they
differ from the principles. With the advent of the
GFC, we have seen calls for better disclosure in References and Readings
explaining variations to the application of the
principles of governance codes, in explaining Australian Stock Exchange (ASX). (2007). Corporate gov-
risks, and in how decisions are made, to assist in ernance principles and recommendations (2nd ed.).
Australia: ASX Corporate Governance Council.
increasing trust and shareholder dialogue and Cadbury, A. (1992). The financial aspects of corporate gov-
knowledge. As the Combined Code states in its ernance: The code of best practice. London: Gee
preamble: Publishing.
Clarke, T. (2007). International corporate governance:
Whilst shareholders have every right to challenge A comparative approach. Oxon: Routledge.
companies’ explanations if they are unconvincing, DiMaggio, P. J., & Powell, W. W. (1983). The iron cage
they should not be evaluated in a mechanistic way revisited: Institutional isomorphism and collective
and departures from the Code should not be auto- rationality in organizational fields. American Sociol-
matically treated as breaches. Institutional share- ogy Review, 48, 147–160.
holders should be careful to respond to the Fama, E., & Jensen, M. (1983). Separation of ownership and
statements from companies in a manner that sup- control. Journal of Law and Economics, 26, 301–325.
ports the ‘comply or explain’ principle and bearing Greenbury, R. (1995). Directors’ remuneration: Report of
in mind the purpose of good corporate governance. a study group chaired by Sir Richard Greenbury.
They should put their views to the company and be London: Gee Publishing.
prepared to enter a dialogue if they do not accept Hampel, R. (1998). Committee on corporate governance -
the company’s position. Institutional shareholders final report. London: Gee Publishing.
should be prepared to put such views in writing Robins, F. (2006). Corporate governance after Sarbanes-
where appropriate. Oxley: An Australian perspective. Corporate Gover-
Companies and shareholders have a shared nance, 6(1), 34–48.
responsibility for ensuring that ‘comply or explain’ Solomon, J. (2007). Corporate governance and account-
remains an effective alternative to a rules-based ability (2nd ed.). England: Wiley.
system. Satisfactory engagement between com- Sundaramurthy, C., & Lewis, M. (2003). Controls and
pany boards and investors is therefore crucial to collaboration: Paradoxes of Governance. Academy of
the health of the UK’s corporate governance Management Review, 28(3), 397–415.
regime. Although engagement has been improving Young, S. (Ed.). (2009). Contemporary issues in interna-
slowly but steadily for many years, practical obsta- tional corporate governance. Melbourne: Tilde Univer-
cles necessitate a constant effort to keep the sity Press.
improvement going.

Future Directions Compulsory CSR Regulatory

Because of conflicting opinions and ongoing debate
about the benefits of both systems, and with the ▶ Mandatory CSR
Confucian Ethics 437 C
Ethics is a set of moral rules and guidelines for an
▶ Right to Privacy individual to deal with fellow people and the
given setting/environment. And Confucian
ethics belongs to one of the moral philosophies
Confidence in guiding the people on how one should strive C
for perfect virtues in one’s living, and using
▶ Trust these virtues that one has acquired, one would
be able to behave in an orderly manner and par-
ticipate positively in a group relationship such as
in a family, in an organization, in a community,
Confidentiality and in a country.
Similar to Cicero’s “the function of wisdom
▶ Right to Privacy is to discriminate between good and evil,” in
applying Confucian ethics, one gains the wisdom
of knowing what is right and what is wrong.
The aim and purpose of Confucian ethics are
Confucian Business Ethics to encourage people to carry out a proper life and
livelihood and have good relationships with the
▶ Confucian Ethics people around oneself so that when more people
would attain similar good virtues; and if this is so,
there would be fewer frictions in relationships
and this thus create positive energies in group
Confucian Ethical Philosophy dynamics and teams. All would then be working
toward a peaceful and harmonious society, and
▶ Confucian Ethics since everybody behaves in a socially responsible
way by adopting Confucian ethics, the people in
business, when relating with their stakeholders
(community and society) would be able to
Confucian Ethics prosper in doing their businesses and further-
more, there would be fewer problems in business
Kim Cheng Patrick Low dealings and transactions in the wider society and
Universiti Brunei Darussalam, Gadong, Brunei country.
Darussalam One key concept in Confucian ethics is
University of South Australia, Adelaide, that of jen which means human heartedness, benev-
Australia olence, a dignity for human life as well as a sense of
respect for fellow human beings and oneself. And
therefore to be ethical, one is to act according to
Synonyms jen. Jen is dearer than life itself, and in fact, it is the
virtue of all virtues. A believer in Confucian ethics
Confucian business ethics; Confucian ethical phi- would also give away or sacrifice his or her life to
losophy; Confucian foundations on ethics; Con- defend jen, and equally, it is what makes life worth
fucian morality in business; Doing business, the living, or being a worthy person. And a worthy
Confucian way; Foundations of CSR in Confu- person is a benevolent person.
cianism; Morality in the Confucian context; Prin- Another key concept in Confucian ethics is the
ciples of Confucian ethics; Practices and ethics of reciprocity. Confucius was once asked
applications of by his student, Zi Gong, “Is there a word that one
C 438 Confucian Ethics

can use as a life guidance to follow and practice Introduction

in one’s daily doings?” Confucius replied,
“Yes, the word is shu (forbearance), what one Chinese, Japanese, Korean, even Singaporean
would not desire oneself, do not impose on (Low 2006) and Vietnamese cultures are strongly
others” (Analects of Confucius, Chapter 15 influenced by Confucius, and also elsewhere in
verse 24). This ethics of reciprocity (shu) is better the Western world (Yang 1993 cited by Low
known as the Golden Rule – “do unto others what 2008a). Confucian ethics has deeply embedded
you want others to do unto you.” The Reverse in the culture of these countries over the
Golden Rule is that of “do not do unto others what centuries, and it has an impact on the people
you do not want others to do unto you.” and their livelihood.
The ethics of reciprocity further expresses that
one has the right to just and fair treatment and the Who Was Confucius?
responsibility to ensure justice for others. And Confucius is the Western term or the Latinized
a person attempting to live by this rule treats name made popular by Matteo Ricci, the Italian
all people with consideration. Therefore, in Jesuit priest who first introduced Confucianism
an organization or nation where everybody is to Europe in the sixteenth century. Confucius
considerate, treating each other and the environ- (Kong fu tzu – traditional Chinese or kungfuzi –
ment well, there would be less conflict in all Hanyu Pinyin) or Master K’ung (551–479 BCE)
dealings. was a thinker, political figure, educator, and
Yet another important concept in Confucian founder of Ru school of Chinese Thoughts
ethics is filial piety which describes the duties, (儒家思想). He was honored as Exemplary
feelings, or relationships that exist between a son Teacher of All Ages (萬世師表) and Sage of
or daughter and his or her parents. (Here, perhaps the Orient (東方聖人) by the later generations
one can also extend filial piety to include the (Low and Associates 1995).
employer-employee relations.) Confucius said, According to Confucius, one can develop
“One should remember one’s parents’ birthdays and improve oneself through self-discipline,
for on the one hand, one is happy to congratulate self-cultivation, and self-growth and hence, in
and celebrate with them for their longevity and on his teachings, he introduced the principle of
the other hand, one is to worry about their getting great learning (大學) with the presumption that
older by a year” (Analects of Confucius, each of us is motivated to seek for “natural virtues
Chapter IV verse 21父母之年,不可不知也,一 given by heaven.” He explained that one of the
則以喜,一則以懼). Therefore, a son is said to key sources of human motivation is perfect virtue
be filial if he makes his parent happy at all times; (至善) and this virtue has to be made very clear so
he cherishes them. It is of human nature that one’s that the will of a person can be set to attain it.
parents would feel that they have not been for- Only when a person’s will is firmly set that (s)he
gotten and that they are still being loved by their will be calm and in tranquility (focus) in pursuing
families. In a society where more children are for his or her goals. This state of mind would help
filial, and respect their parents and the elders, him or her in deliberating and judging all matters.
the elderlies and the seniors would be less lonely. When (s)he can judge all matters, (s)he will
Besides, there would be fewer homeless old achieve his or her goal that is the desired state
people living in the streets since the aged will of perfect virtue. Striving for these virtues would
naturally be taken care of by their own children, enable a society or an organization to be more
families, and relatives. As more and more socially responsible.
children become filial, they become socially
more responsible, and consequently, the country Learning, Self-cultivation, and Confucian
would be alleviated from the burden, if Ethics
not, responsibility of taking care of its aged By adopting Confucius ethics, one first has to
population (Low and Ang 2012a, b). self-cultivate oneself before one can participate,
Confucian Ethics 439 C
contribute, and help in a group such as the family, reciprocity (or the way of the measuring square)
the organization, the society, and the country. in which one can use oneself as the measuring
With regard to self-cultivation, one has to go square of how one should treat others, hence
through a constant process of learning to acquire regulating one’s behavior constantly.
knowledge in depth and in breadth and when For example, if an individual expects or wants
in carrying out a task, one should be clear in one’s superior to treat one in a respectable and
thinking and sincere in intention to work on kind manner, one should also display the same C
a task or a job. To complete a task effectively, respectable and kind treatment to those below
one should work diligently with much concentra- oneself; this applies and extends as well to one’s
tion (one-mindedness). This process can be friends and neighbors. This principle is very
useful in business for the fact that the employees much enabling a person to be socially responsible
would be performing in a positive and most in whatever one is doing. Hence by adopting
responsible manner. By practicing Confucian Confucian ethics, one would be socially respon-
ethics, one would be encouraged to learn, sible to the society at large.
cultivate, and discipline oneself in all stages
of life. Confucian Ethics and the Stakeholder Theory
Confucius also stressed the importance of con- Low (2008b) has argued that in Confucian ethics,
tinuous learning and he once said to his disciple the overall anchor is the Golden Rule as Confu-
that, “To love cleverness without loving learning cius empathetically stressed. That Golden Rule is
may lead to misconduct” (好知不好學,其蔽也蕩) “not to do unto others what one does not want
(Analects of Confucius, Chapter 17, p. 8). To be others to do unto oneself.” It is also called shu or
socially responsible in one’s doing, one has to reciprocity as a principle of the conduct for life
improve oneself with the best knowledge and tech- (Lin 1994). Incorporating the Golden Rule,
nology to prevent one from irresponsibly applying the stakeholder theory becomes relevant. One
any outdated knowledge and technology which moves away from oneself and becomes less
may have an adverse effect to the society at self-centered, and in fact, more altruistic. All
a later date. With self-cultivation, one would be businesses should recognize their responsibilities
able to regulate one’s family in a proper way. It is to their stakeholders and make decisions that
said that unless there is a cultivation of self, reflect these responsibilities (Low and Ang
a person will not be able to regulate his family 2011). Here, the business can then engage the
nor bring them into a state of ordered harmony stakeholders moving from inactive to reactive to
(Low 2009). In order to govern a state well, it is proactive to interactive. The basic point is that
necessary for an individual to have the capability one can argue that business cannot avoid but has
first to regulate his or her family. In other words, to enter into dialogue, do something, and engage
it is not possible for him or her to discipline others with its stakeholders – market or non-market – in
when (s)he is not able to discipline his or her own an ongoing relationship.
family. Therefore, a leader does not need to com- It is axiomatic that the firm should be
plete his learning on managing a state without his responsible to all its stakeholders. The
or her knowing in regulating his or her own stakeholder theory is very attractive in
family. The good government of the states will that the stakeholders can also be expanded to
help in stabilizing the world, and hence providing any party(ies) and all an individual or business
a peaceful and harmonious environment for peo- (“the (Confucian) measure of man is man”; Lin
ple to live in. Confucius propounded some good 1994, p. 183, italics/emphasis added) needs to do
virtues for self-cultivation, such as filial piety, is to think of the party(ies) and be responsible to
respect the elders, fraternal brotherhood, loyalty, act or satisfy the needs and interests of the party
trust, rites, integrity, benevolence and compas- (ies) involved. Besides, the normative value of
sion to the lonely and weak, for achieving the the stakeholder theory should be appreciated;
objective. He also proposed the principle of stakeholders are seen as possessing value
C 440 Confucian Ethics

regardless of their instrumental use to manage- responsibility to their creditors by providing

ment. The normative view is often perceived as good financial reporting. As in the case of Enron
the moral or ethical view because it stresses on by hiding some debt, Enron was able to more
how stakeholders should be treated; hence, the easily borrow funds and ultimately, it went bank-
importance of the principle of stakeholder rupt because it could not cover the payments on
fairness. all of its debt. Specifically Enron did not disclose
It appears that many often overlooked that the some of its debt, and indeed, its creditors would
essence of Confucianism is the “idea of being have been concerned about extending more credit
true to oneself in this world” (interestingly, if they had fully understood how much debt
there is an intrinsic or inside-out approach) Enron already had.
when fulfilling obligations to family and others To its customers, the company should adopt
in society (Wang 2004, p. 51). That is the key responsible production practices and dutiful sales
strength of the Confucian ethics when applied to practices. Customers should receive fair
the stakeholder theory/others in society. What- exchange: value and quality for money spent. In
ever, even very little that each of us, individuals this regard, the firm, in establishing a code of
and businesses can do for our respective universe responsibilities, can monitor customer com-
that would be great. After all, it would contribute plaints and make full use of customer feedback
to the overall goodness, similar to the late Indian to better serve the customer.
nationalist leader, Mohandas Gandhi’s “Be the Sweatshops characterized by child and women
change you want to see in the world.” And what labor; worker exploitation; labor abuses; low pay;
is critical, individuals do make a difference in and improper, unsafe working conditions as well
ethical actions. as health and safety violations have existed for
As Mencius said, men are inherently good decades, and indeed these (such practices are
(Lin 1994). Individuals have ethical attributes treating people below their human dignity and
that can be cultivated and extends outward. Cur- respect) should be stopped, if not marginalized.
rently, there is an urgent need for ethical renewal Applying Confucian ethics and the stakeholder
by applying an inside-out approach. Mother theory, the business should instead take care of its
Earth is sick; there should be ethical concerns, employees by providing stable employment, fair
not to say, the many environmental concerns, by pay, safe and decent working conditions as well
all. China and India are growing but “the vast as ensuring employees are treated properly by
majority of Asia’s poor are rural,” “millions other employees. Here, not only satisfying
more are barely getting by (surviving)” employees, but the key issues in modern busi-
(Wehrffritz 2008; italics mine, cited in Low nesses also include diversity, equal opportunity,
2008b), there are problems of income gaps and the prevention of sexual harassment, and promot-
other issues. Technologies are also changing and ing creativity as well as overall employee well-
with it, various ethical issues such as, just to name being.
a few, Internet pornography and e-scams, are The company needs to ensure its responsibil-
emerging. ity to the community. It should be socially
In the stakeholder theory, to its stockholders/ responsible, avoiding corruption as well as
investors, the firm and/or its managers should accepting and giving bribes. It needs to also
monitor employee decisions to ensure that they take care of and protect the environment. Firms
are made in the best interests of the owners and need to prevent air, water, and land pollution.
stockholders. Employee compensation may be Automobile and steel firms have reduced air pol-
directly tied to the firm’s performance. The lution by changing their production processes so
firm’s financial reporting should also be accurate; that less carbon dioxide escapes into the air. It is
it should give complete financial statements, said that China, for example, has admitted that it
those that are more understandable and more has failed badly; the country has not made much
readily interpreted. Firms need to fulfill their headway in improving the environment, says its
Confucian Ethics 441 C
Government Report. In this aspect, present-day name may be, a business today would receive no
China needs to apply the Confucian Ethics in quarter if it shows incompetence or inadequacy in
conjunction with the stakeholder theory – partic- its performance (i.e., fulfilling the needs of
ularly in terms of the firm’s responsibility to the its customers and stakeholders), and it would
environment – to make Mother Earth a healthier eventually go under. Matsushita (1994)
and a more pleasant place for all to live. highlighted that the company or one should not
The Chinese need to realize that in traditional be resting on one’s laurels – after all, the C
Chinese/Confucian mind, men exist in harmony company’s reputation is developed after constant
with nature (One with Nature), and unlike in and steady efforts exerted over many years of
the Western mind, traditionally, nature is to be treating each customer as an important patron.
conquered; there is a dominance orientation. In The company should, while keeping abreast of
this light, the Chinese have to do something, if times, continue (continuous improvement) to do
not more, for the environment and Mother Earth. good for the society and the setting/environment
The support for the Confucian ethics in its in which it operates.
relationship with the stakeholder theory can also
be strengthened by the Confucian argument of Built-In Strengths of Confucianism
the Rectification of Names. Here, a father (Confucian ethics) and CSR
acts as a father, a mother acts as a mother, a son Confucianism is based on humanistic principles.
acts as a son, and so on. Each has a role to play, And being benevolent (jen), businesses/business
each is also involved in doing (a) focused goal(s) owners and individuals can become increasingly
and role, and when these roles are fulfilled (social conscious, make happen and practice more
responsibility will also be duly fulfilled) and humanistic policies which are equally important
played well, better human relationships ensue, as that of making profits and seeking monetary
and peace and harmony exist. In other words, gains. Businesses can not only provide employ-
the Rectification of Names in the Confucian ment to people but also do more good, alleviate
doctrine certainly means to know one’s roles in poverty, contribute to charities, extend help, and
the web of relationships that create community, shape the communities and societies and improve
and to behave accordingly would ensure and the surrounding environment in which they are
promote social harmony. cooperating.
Filial piety or respect for parents and clan
Trust (xin) and Doing Business elders has been a cornerstone of Chinese culture
When applying Confucian ethics to doing for thousands of years, part of a defining social
business, for Confucians, the company or contract in which parents care for their children
a person should not be resting on one’s laurels. while they were young and the children
For the Confucian adherents, trust (xin) is very then supported their parents in their old age
important when doing business. As a Confucian, (Low and Ang 2012c).
the late Konosuke Matsushita, the founder of Prudence and thriftiness are some core values
Matsushita Electric Company, now Panasonic, embedded in Confucianism, and these help as
believed in building customers’ trust. Customers’ guideposts not to overuse or overexploit and in
trust, with quality company’s delivery of goods fact, to save and conserve nature and resources;
and services, can ensure the growth, if not the there is a need to smartly reduce, reuse,
survival of the company in terms of its customers, and recycle resources. As Confucius said,
markets, and overall business. “Extravagance will lead to thing/situation going
Merchants normally work hard to create too extreme and out of control, thriftiness will
a respected name for their shops or companies; lead to pettiness, I rather be petty than be in
they seek to sell goods whose quality lived up to a position where I am not in control” (Analects
that name. Confucian in his ways, for Konosuke of Confucius 7, p. 35). Hence in Confucian ethics,
Matsushita, no matter how old and esteemed its thriftiness is very much encouraged and to be
C 442 Confucian Ethics

practiced by everybody. When generally there is who later committed suicide. In 2003, a man, who
thriftiness and dislike of wastefulness, business refused to support his parents, struck them during
people would create products that are economic a fight and he landed in jail for a year.
in production and of quality and reliable in use. In modern Singapore, the Maintenance of
This would also lead to a more careful economy Parents Act which has been around since 1996,
with robust finances and consequently profitable allows parents to go to the Family Court and sue
businesses and nations. A high level of savings and their children for financial maintenance. How
reduced borrowing leads to more financially stable best to use this act to get children who dump
organizations and nations (Ang and Low 2012). their elderly parents in hospitals or nursing
homes to do their filial duty and help pay for
their parents’ care? The law is a very blunt instru-
Key Issues ment. Can the law really be used to enforce filial
piety? Can the law alone be used to address the
The key issue here is how to effectively, hence underlying problems that cause some children to
successfully, pass on or transmit the Confucian abandon their parents to begin with? The children
ethics and values so that these become common may argue that housing prices has risen as high as
practices, each individual/business person would ever, and medical costs too as well as the general
be socially responsible in their business transac- living costs are going up all the time, is it any
tions and to their business associates/partners/sup- wonder that some children end up dumping their
pliers and customers and to the society at large. parents in nursing homes and hospitals? Instead
In this modern society, it is very difficult for of trying to find ways to tackle the root of the
people to adopt Confucian ethics because so problem, can the Government use other way
many things have changed over a period of resolve this filial piety issue?
2,000 years. For example, filial piety and respect- Another related issue is how to make Confu-
ing the elders are now a very difficult thing to cian ethics appealing and attractive to the youn-
practice even in Asia for reasons that most par- ger generations so that these values and practices
ents are working, and that most often they are – seen as refreshing and relevant, and not seen as
both not at home with the children due to work. archaic or irrelevant – can be applied, and busi-
The time the parents spend with the younger nesses be more socially responsible. Perhaps,
children are not enough to create strong bond educating the younger generation in Confucian
among family members. The children are mostly ethics can also be done, say, through the Chinese
looked after by maids, child care centers and nurs- clan associations (as in the case of Taiwan and
eries, in-laws/family members or relatives. This Singapore) with support and/or even funds from
means that parental guidance and direct coaching the Government. Businesses can also sponsor and
are becoming lesser and have been replaced by run training courses in Confucian ethics and cor-
some other people available at the time. porate social responsibility to promote such con-
China is promoting piety on the airwaves such cepts, applications, and practices.
as televised ads that show the crestfallen face of
an elderly woman waiting to have dinner with her
grown children as each one of them calls to say Future Directions
they are just busy. If carrots and model citizen
campaigns do not work, then there is always the Current literature and books in Confucian ethics
bamboo rod. Adults who do not support their are not many, if not rare, not completed, and very
parents face the prospect of several years in jail much fragmented in many ways. More literature
under Chinese law, although courts prefer and books should be written about Confucian
a mediated solution when possible. For example, ethics in such a way that the benefits of applying
a woman was sentenced to 8 months in prison in these ethics can be better understood and
2000 for refusing to support her mother-in-law, realized.
Conscious Consumption 443 C
However, expansion in the study linking Con- Low, K. C. P. (2009). The way of Dragon – Some strategic
fucian ethics and the stakeholder theory is a good leadership ways. Leadership and Organisational Man-
agement, 2009(2), 40–59.
start. Besides, the Rectification of Names can also Low, K. C. P., & Ang, S. L. (2011). Confucian ethics and
be extended to discuss CSR roles and responsi- the stakeholder theory in business. i-manager’s Jour-
bilities of the various stakeholders. There should, nal on Management, 5(4), 8–20.
nonetheless, be more research on how Confucian Low, K. C. P., & Ang, S. L. (2012a). Filial piety and
corporate social responsibility. In S. O. Idowu (Ed.),
businesses operating in China, Japan, Korean, Encyclopaedia of corporate social responsibility. Hei-
Singapore, Vietnam, and other Confucian coun- delberg/New York: Springer.
tries, can practice Confucian Ethics and CSR. Low, K. C. P., & Ang, S. L. (2012b). Ageism. In S. O.
Understanding the foundational concepts that Idowu (Ed.), Encyclopaedia of corporate social
responsibility. Heidelberg/New York: Springer.
construct Confucian ethics and CSR is vital for Low, K. C. P., & Ang, S. L. (2012). Filial piety and good
businesses. In time to come, more and more peo- leadership’ e-leader. In Chinese American Scholars’
ple would get to know more about Confucianism Association: CASA conference, 4–6 June 2012 Berlin.
and Confucian ethics and with this, more and Low, C. C., & Associates (Edited and Trans.: 1995).
Confucius-sage of orient. Singapore: Canfonian.
greater understanding of Confucian ethics and Matsushita, K. (1994). Not for bread alone. New York:
CSR can be achieved. Then, more convincing Berkley Books.
CSR practices in accordance to Confucian ethics Tsai, C. C., & NG, E. T. (1992). Da Xue, the great
and practices can be applied. learning. Singapore: Market Point Design.
Wang, G. (2004). Confucianism. In F.-J. Richter & P. C. M.
Mar (Eds.), Asia’s new crisis: Renewal through total
ethical management (pp. 51–62). Singapore: Wiley.
Yutang, L. (Ed.). (1994). The wisdom of Confucius.
Cross-References New York: The Modern Library.
Yutang, L. (Ed.). (1994). The wisdom of Confucius. New
York: The Modern Library.
▶ Ageism
▶ Filial Piety and CSR
▶ Gender Equality
▶ Stakeholder
▶ Stakeholder Theory
Confucian Foundations on Ethics
▶ Trust and CSR
▶ Confucian Ethics

References and Readings

Ang, S. L., & Low, K. C. P. (2012). The Chinese and their Confucian Morality in Business
motivation-The Brunei case study. Journal of
Research in International Business Management,
2(2), 039–050. ISSN: 2251-0028. Available online ▶ Confucian Ethics
@http://www.interesjournals.org/JRIBM Copyright
#2012 International Research Journals.
Chai, S. C., Lai, P., & Sia, Y. H. (1994). Analects of
Confucius. Beijng: Sinolingua.
Lin, Y. (Ed.). (1994). The wisdom of Confucius. New Connected Reporting
York: The Modern Library.
Low, K. C. P. (2006). Father leadership – The Singapore
▶ Integrated Reporting
case study. Management Decision, 44(2), 89–104.
Low, K. C. P. (2008a). Value-based leadership: Leading,
the Confucian way. Leadership & Organisational
Management Journal, 2008(3), 32–41.
Low, K. C. P. (2008b). Confucian ethics and social
responsibility – The golden rule and responsibility to
Conscious Consumption
the stakeholders. Ethics & Critical Thinking Journal,
2008(4), 46–54. ▶ Responsible Consumption
C 444 Consensus

Consensus Consumer Movement

▶ Social Dialogue ▶ Consumerism

Conservation Consumer Organizations

▶ Consumers’ Protection
▶ Greenpeace (NGO)

Consumer Product Safety

▶ Consumers’ Protection
▶ Greenpeace (NGO)

Consumer Protection

Consolidation ▶ Consumers’ Protection

▶ Mergers and Acquisitions

Consumer Protection Laws

Constitution ▶ Consumers’ Protection

▶ Mission Statements (Credo, Way, Vision)

Consumer Rights

▶ Consumers’ Protection
Constitutional Dialogues

▶ Partnership
Consumer-Driven Corporate

Consumer Activism Jane Claydon

School of Law, Politics and Sociology,
▶ Consumers’ Protection University of Sussex, Brighton, East Sussex, UK

Consumer Advocacy Groups
CDCR; Model of Consumer-Driven Corporate
▶ Consumers’ Protection Responsibility
Consumer-Driven Corporate Responsibility 445 C
Corporate Increase
d consum
Responsibility, demand er
for CSR
Fig. 1 The Model of
Consumer Driven = CSR ad
Corporate Responsibility by the co
mpan y

CSR being adopted by = increasing numb
of co ns um er s
company leads to increa demanding CSR
customer base
er base
= profitability Increased custom

Profitability from CSR

leads to a greater
= increased
customer base

Definition base, the company is then obligated to uphold

its CSR policies to maintain its customer base
The Model of Consumer-Driven Corporate and profitability. The most likely way for
Responsibility (CDCR) (Fig. 1) demonstrates a company to implement CSR successfully,
that in order to remain profitable, consumer then, is by responding to customer demand for
demands for Corporate Social Responsibility it. Hence, the name “Consumer-Driven Corpo-
(CSR) must be met. As a result, the company rate Responsibility” encapsulates the reason for
achieves profitability along with other positive corporations to act in socially and environmen-
outcomes in a cyclical pattern of behavior. By tally responsible ways, as a direct and prompt
engaging in socially and environmentally respon- response to consumer demand. Further, this new
sible behavior, this allows the company to obtain model allows for CSR to be adopted at any stage
a better reputation in the public sphere. This of the life cycle of a company, whether its cus-
results in an expansion in its customer base, tomer base is established or emerging. If the
which contains more consumers who demand customer base is not yet established, the company
socially and environmentally responsible behav- can adopt CSR in order to attract customers from
ior from the company. Hence, the company con- its competitors who have not yet adopted similar
tinues to embed CSR within its core business business practices. If the customer base of
model, which attracts more customers and a company is already established, the existing
makes them more profitable, and so it continues. customers of the company will begin to demand
This model creates a win-win situation for all: CSR, for reasons that shall be explored later in
The consumers have their demands met; the this entry. Thus, the company will need to
requirements of other stakeholders and the envi- respond to the demand from its already acquired
ronment are met; and the company increases in customer base in order to retain such customers.
value as it becomes more profitable. Further, Therefore, CDCR is applicable to and can be
through increased profitability and enhanced rep- adopted by all types of companies regardless of
utation, which leads to an increased customer their size or scope.
C 446 Consumer-Driven Corporate Responsibility

Introduction allow a comprehensive insight into the reasons

for the ineffectiveness in each model and demon-
In a response to issues such as climate change and strate ways in which the model of CDCR fills in
corporate greed, which have recently been put these gaps.
under the spotlight on a public scale, consumers
are increasingly concerned with social and envi- Pyramid of CSR
ronmental issues while at the same time having Through the creation in the 1970s of many
a greater expectation for a company to be socially government bodies such as the Environmental
responsible (Frederick 2006). This is demon- Protection Agency and the Consumer Product
strated in several recent studies of consumer Safety Commission to protect the environment,
behavior: A 2005 Cooperative Bank survey employees, and consumers, it became apparent at
found that 60 % of consumers had bought a prod- the time that the government was aligning with
uct because of the company’s responsible reputa- the social enterprise and stakeholder theories, as
tion (Crane and Matten 2007); a recent survey by the business world was under criticism for not
the Boston Consulting Group found that more being accountable enough to their stakeholders
consumers purchased green products in 2008 and society in general. The perception of social
than in 2007 and were willing to pay a higher “responsibility” during this time shifted to social
price for green products and further found that “responsiveness” by some writers who argued
73 % of consumers believed companies should that there was not enough attention being paid
have high ethical standards and treat their to the actions of the corporation. This was
employees fairly (www.socialfunds.com); a necessary reorientation as it emphasized the
finally, a recent report conducted by management importance of corporate action and implementa-
consultants Ernst and Young asserted that “Retail tion of a social role; yet the question still
consumers are pressuring businesses to act in remained as how to reconcile the economic ori-
socially and environmentally responsible ways” entation with such a role. From this, a four part
(www.suite101.com). This demonstrates the comprehensive model of the “Pyramid of CSR”
increasing consumer demand for socially and was proposed by Carroll (1991), which empha-
environmentally responsible products and behav- sized the importance of businesses responding to
ior from companies (hereafter referred to as all aspects of the social world: economic, legal,
CSR), even during a time of economic downturn. ethical, and philanthropic.
According to Carroll, all business responsibil-
ities are predicated upon the raison d’etre of
Key Issues a firm, to create profit for its shareholders from
supply and demand of society. This feature of the
As an overview of the model of CDCR has now Pyramid is positioned at the bottom as the foun-
been provided, a comparison of this new model to dation and only after this principle has been sat-
three commonly referred to existing models of isfied can other responsibilities occur. At the
CSR shall be drawn. These models emphasize the second tier lie the legal responsibilities, whereby
importance on the bottom line in determining the corporation must adhere to the law and all
whether a company is likely to adopt socially rules and regulations that it is governed by to
responsible business practices (Carroll 1991; ensure it maintains responsible business prac-
Aras and Crowther 2009; Visser 2010) but do tices. The third tier is the ethical layer, whereby
not address how the bottom line is driven (i.e., corporations are obliged to do what is right, just,
by consumers). Hence, they do not recognize that and fair for their stakeholders. The last tier, the
consumer demand for CSR is the most likely way philanthropic level, ensures that the corporation
that a company can achieve both profitability and is a good citizen to the community, contributing
social responsibility. A comparison between resources where needed (Carroll 1991). The Pyr-
CDCR and other existing CSR models will amid of CSR, then, rests on the notion that the
Consumer-Driven Corporate Responsibility 447 C
raison d’etre of the firm is economically defined environmental management and corporate sus-
as the foundation of the Pyramid. All other tainability, which is particularly pertinent as cor-
responsibilities (legal, ethical, and philanthropic) porate managers are more likely to adopt CSR
come after or from this, meaning that the com- using the triple bottom line approach (Visser
pany will only ever be socially responsible if it 2005). Developing this argument, Aras and
fits in with the economic goal of maximizing Crowther (2009) have focused specifically on
profit. the development of the models surrounding C
The Pyramid of CSR importantly outlines that CSR, specifically those concerned with sustain-
economic factors are vital in providing a good ability. They assert that most analyses of sustain-
foundation for the company so that the other ability are inadequate as they concentrate solely
factors (social and environmental) can be on the environmental and the social while finan-
achieved thereafter. However, this suggests that cial performance, which is also imperative to the
the other levels (legal, ethical, and philanthropic) success of sustainability, is overlooked. It is
are dependent on the economic level of the Pyr- likely this is so because as the authors see
amid and the economic level is independent of a conflict between financial performance of
the other levels. This is problematic in ensuring a corporation and its social and environmental
CSR is implemented as the company can ignore performance (Aras and Crowther 2009). As
the three other levels, as it has no economic such, most work on corporate sustainability
motivation to pursue them. Furthermore, this does not recognize the need for understanding
assertion is erroneous as the economic level is the importance of financial performance as an
actually dependent on the other levels. essential part of sustainability. They offer, then,
A company will struggle to maintain the bottom a more comprehensive model, which looks at all
line under three conditions: It fails to adhere to four aspects of CSR (environment, society, finan-
regulation and so suffers massive legal monetary cial performance, and organizational culture) in
penalties; it fails to act ethically toward its both the short- and long-term context. Further-
employees, therefore suffering a loss of work- more, they assert that to achieve sustainable
force and productivity; and it fails to act philan- development, it is necessary to first achieve sus-
thropically toward its locally community and tainability, which can occur via four actions:
environment, therefore suffering brand damage maintaining economic activity (as this is the
and loss of esteemed reputation. raison d’etre of the company); conserving the
According to the model of CDCR, however, environment (as this is essential for the mainte-
the legal, ethical, and philanthropic layers would nance of future generations); ensuring social jus-
be necessary to the economic foundation of the tice which includes elimination of poverty and
company. In accordance with this model, the the ensuring of human rights; and developing
bottom line would be directly impacted if the spiritual and cultural values, where the corporate
company did not respond to consumer demand and societal values align in the individual (Aras
for companies to act socially and environmen- and Crowther 2009). Thus, they argue that sus-
tally responsibly. Further, in the Pyramid model, tainable development involves more than just
the philanthropic activities of the company are managing the interest of the stakeholders versus
placed at the top, suggesting that they are the the shareholder.
piece de resistance of the socially responsible Sustainability focuses on ensuring that the
achievements of the company. However, philan- resource utilization of the present does not affect
thropy is not the most successful way in which the future. This creates concepts with which the
CSR can be achieved. corporation must engage to become sustainable
(such as renewable energy resources, minimizing
Model of Sustainable Development pollution, and using new techniques of manufac-
Yet another criticism of Carroll’s Pyramid ture and distribution), and thereby accepting the
observes its lack of consideration of costs involved in the present for ensuring
C 448 Consumer-Driven Corporate Responsibility

sustainability in the future. This is beneficial not can also be achieved. They further address the
only to the environment, but also to the organiza- long-terms versus short-term focus and consider
tion, for it cannot operate tomorrow without the both the internal and external aspects affecting
resources it has today. As this is directly relevant the sustainability performance of a company.
to the performance of the bottom line, then, there This certainly leads to a more comprehensive
is no dichotomy between the environmental and model of CSR and sustainability than those seen
financial performance of the company as they are before. However, the model is still solely norma-
mutually exclusive; the environmental perfor- tive; it focuses on why a company should act in
mance of the company in the present day ensures relation to its social and environmental responsi-
the financial performance of the company tomor- bilities but does not provide a pragmatic enough
row and vice versa (Aras and Crowther 2009). approach of how a company can achieve sustain-
The bottom line is further impacted by the envi- ability. Further, though it does address to some
ronmental aspect, firstly, in that the company has extent how sustainability can be achieved, it is
to make sure that the company is not prohibited not representative of the current drivers for CSR
by large monetary fines from government bodies as evidenced in the contemporary practices of
for not complying with environmental regulation companies, which ultimately relates to the ways
and, secondly, by the consumption practices of in which CSR can achieve short-term profit for
the ever-increasing “green” consumer base. This the company. The model of CDCR, then, is more
assertion corroborates the principles of the Pyra- successful in addressing both how a company can
mid of CSR, which also stresses the importance achieve short-term profit by implementing
of the bottom line of financial performance as socially and environmentally practices (i.e., by
a prerequisite for ethical behavior thereafter. producing ethical products and demonstrating
However, though the Pyramid stresses the finan- ethical behavior that appeals to consumers) and
cial aspect as integral to a concrete model of long-term sustainability (i.e., by conducting its
CSR, it does not provide an explanation of how business in an environmentally friendly manner
financial performance can actually lead to the in response to consumer demand for CSR).
corporation’s sustainability by ensuring that
money is invested in socially responsible behav- CSR 2.0
ior and sustainable behavior, i.e., by investing in “CSR 2.0” (Visser 2010) outlines five principles of
renewable energy resources and other socially the “DNA” of (C)(S)(R)(2)(0). (C)onnectedness
responsible activities (Aras and Crowther 2009). urges company practice to break the hegemony of
Instead, the Pyramid merely asserts that the busi- shareholders and instead embrace a multi-
ness must stay profitable only because it is the stakeholder approach to business relations;
raison d’etre of the corporation to do so and not (S)calability critiques the pilot projects and best
because it has a direct impact on ensuring sus- practice programs of CSR and sustainability that
tainability. Further, the Pyramid asserts that the many companies often demonstrate, as they are
corporation can always achieve profitability, often very small scale over a small duration of
despite relying on the other factors of CSR in time, rather than being cross-market, long-term
the other tiers, as the financial layer is the foun- goals; (R)esponsiveness calls for a bolder response
dation of the Pyramid. However, Aras and to the community needs, which replaces simple
Crowther’s model asserts that profitability is philanthropy programs that are based on their
predicated upon the other factors of CSR and so own terms to drastic response to climate change,
the financial success of the company and its such as the Prince of Wales’ Corporate Leaders
actions of CSR exist in a continuum. Group on Climate Change (The Prince of Wales
Aras and Crowther (2009) stress the Corporate Leaders Group on Climate Change is
importance of the financial performance of the a campaign for carbon emission reduction of
company in ensuring that the social and environ- 50–85 % by 2050.); Duality (2) challenges the
mental goals (and sustainability on the whole) notion of “either/or,” i.e., having to make the
Consumer-Driven Corporate Responsibility 449 C
choice between being either socially responsible or of how Visser claims CSR should be
not and instead CSR 2.0 affirms there can be both implemented, it is still too normative in its
economic responsibility and social responsibility; approach. It lacks the capability of providing
and lastly Circularity (0) is founded upon a pragmatic tool that companies can use to imple-
Hawkens’ (1994) model of sustainability, which ment CSR into its everyday practices. Yet, there
assumes three basic rules of sustainability, that are many similarities in the approaches taken by
waste equals food, nature runs from current solar CSR 2.0 and CDCR, as both encourage a multi- C
income, and nature depends on diversity. Using stakeholder approach to business relations; call
this notion, CSR 2.0 would depend on businesses for the company to respond more to its stake-
constantly feeding and replenishing its own social holders; abolish the notion that companies have
and human capital through education, training, to make the choice between being either socially
community nourishment, and employee well- responsible or profitable; encourage a shift from
being. The shifting of CSR 1.0 to 2.0, then, will specialized CSR aspects of the company to CSR
move from being paternalistic to collaborative, risk being fully integrated into the company; and
based to reward based, image driven to perfor- allow for ethical behavior to be at the core of
mance driven, specialized to integrated, standard- the company’s business values (Visser 2010).
ized to diversified, marginal to scalable, Western to However, the model of CDCR provides a more
global, and from a luxury product to an affordable evocative model, which specifically demon-
solution for those who most need improvements to strates the business model that the company can
their quality of life (Visser 2010). Visser further adopt, at any stage of its life, to ensure all of the
asserts the future of ethical business will not above is achieved.
include CSR departments or ethical products
which consumers choose over another less-ethical
product as the core business values of the company Future Directions
and its products will be ethical, socially responsi-
ble, and sustainable. Therefore, the mission state- Making a comparison between the model of
ment and the company goals will be founded upon CDCR and other well-known CSR models is an
ethical behavior within the triple bottom line, so important step in assessing the credibility of
the future model of CSR will cease to resemble CDCR and its importance in addressing the gaps
Carroll’s Pyramid which is “no longer fit for pur- within other CSR models. Yet, only further
pose” (Visser 2010, p. 10). Instead, this new model research on the model of CDCR will enable
will, firstly, change from “Corporate Social a full assessment of its applicability and further
Responsibility” to “Corporate Sustainability and development of the model, which should be pur-
Responsibility” and, secondly, change in appear- sued in two ways.
ance from a rigid pyramid structure to something Firstly, the model should be examined in light
akin to DNA structure; a of the recent global financial crisis, to assess
spiralling, interconnected, non-hierarchical levels, whether consumers continue to demand and are
representing economic, human, social and envi- prepared to pay for CSR in times of economic
ronmental systems, each with a twinned sustain- recession. An example of where this could be
ability/responsibility manifestation: economic
sustainability and financial responsibility; human
contradicted is the success of Ryanair, an Irish
sustainability and labour responsibility; social sus- low budget airline operating within Europe,
tainability and community responsibility; and envi- which is notorious for its lack of consideration
ronmental sustainability and moral responsibility. for its employees, community, environment, and
(Visser 2010, p. 10)
even treatment toward its customers. Its chief
The underlying message behind CSR 2.0 is executive, Michael O’Leary, famously declared
that CSR should be an integral part of the change during the UK recession in 2009 that he wished to
that is needed to enable sustainability of our charge passengers for using the toilet onboard the
planet (Visser 2010). Though I agree with much aircraft (BBC News Online 2009). Yet, it has
C 450 Consumer-Driven Social Justice

remained profitable in a tough economic environ- Campbell, J. L. (2007). Why would corporations behave
ment because the consumer demand within the in socially responsible ways? Academy of Manage-
ment Review, 32(3), 946–967.
travel sector during the recession was solely for Carroll, D. (1991). The pyramid of corporate social respon-
low cost, regardless of the social and environ- sibility: Toward the moral management of organisational
mental reputation of the company. Further, con- stakeholders. Business Horizons, 34(4), 39–48.
sumer demand for CSR is dependent on a number Crane, A., & Matten, D. (2007). Business ethics (2nd ed.).
Oxford: Oxford University Press.
of factors, including national economic stability Frederick, W. C. (2006). Corporation, be good!
and the social and financial circumstances of the Indianapolis: Dog Ear Publishing.
individual consumer. For example, Sabapathy Freeman, R. E. (1984). Strategic management:
(2007) asserts that ethical consumption is A stakeholder approach. London: Pitman Publishing.
Sabapathy, J. (2007). Ethical consumption. In W. Visser
a phenomenon most associated with those who et al. (Eds.), The A to Z of corporate social responsi-
have high levels of income, education, and polit- bility. Chichester: Wiley.
ical awareness in post-industrialized countries. Stieb, J. A. (2009). Assessing Freeman’s stakeholder
Secondly, the success of model can only theory. Journal of Business Ethics, 87(3), 401–414.
Visser, W. (2005). Business frontiers: social responsibil-
really be comprehensively assessed once it has ity, sustainable development and economic justice.
been implemented in a company. This will allow Hyberabad: ICFAI University Press.
an examination of its pragmatism and identify Visser, W. (2010). CSR 2.0: The evolution and revolution
areas of opportunity in which the model can be of corporate social responsibility. In M. Pohl & N.
Tolhurst (Eds.), Responsible business: How to manage
further developed and enhanced, before it is a CSR strategy successfully. Chichester: Wiley.
more widely adopted. As yet, this assessment
cannot be made as it is not known that Other Resources
the model has been implemented within BBC News Online. (2009). Ryanair mulls charge for
a company, and its potential success can only toilets,27 February 2009. Available at http://newsvote.
be conceived theoretically. bbc.co.uk/mpapps/pagetools/print/news.bbc.co.uk/1/hi/

Consumer-Driven Social Justice
▶ Business Case for CSR
▶ Fair Trade
▶ Carroll, A.B.
▶ Climate Change
▶ Consumerism
▶ Corporate Social Responsibility Consumerism
▶ Normative Versus Instrumental Corporate
Responsibility Ioanna Papasolomou
▶ Philanthropic CSR Department of Marketing, School of Business
▶ Philanthropy Head, University of Nicosia, Nicosia, Cyprus
▶ Pyramid of CSR
▶ Stakeholder Theory
▶ Sustainability and Sustainable Development Synonyms

Consumer movement; Materialist society

References and Readings

Aras, G., & Crowther, D. (2009). The durable Definition

corporation. Surrey: Gower Publishing.
Arvidsson, A., Bauwens, M., & Peitersen, N. (2008). The
crisis of value and the ethical economy. Journal of Undoubtedly, the term “consumerism” has
Futures Studies, 12(4), 9–20. evolved over time and has acquired meanings
Consumerism 451 C
which tend to be conflicting and contradictory. The Second Definition: Protecting
These meanings coexist in the literature and Consumers’ Rights
have their own advocates. Yani-de-Soriano and In an effort to counteract the excesses of manip-
Slater (2009) provide three different definitions ulative or wild marketing, governments
which characterize the evolution of consumerism have enacted legislation for the protection of
over time. The original definition refers to consumers’ rights and consumers have formed
manipulative advertising and marketing practices associations to protect themselves, giving the C
to encourage consumers to buy and consume foundation for the emergence of the second
more (Packard 1957). The second definition definition of consumerism. According to this
refers to the consumer movements to protect notion, consumerism is defined as: “organized
their rights against the excesses of marketing group pressure which has become a set of values
(Kotler et al. 2008). The third definition interprets held not only by the consumers of a company’s
consumerism as a consumer ideology which products but also written by the wider society”
postulates that consumers’ happiness and well- (Gilbert 1999). Kotler et al. (2008) described
being can be achieved through consumption consumerism as: “an organized movement of
(Murphy 2000). citizens and government agencies to improve
the rights and powers of buyers in relation to
sellers.” Kotler et al. (2008) state that consumer-
Introduction ism in this context has its origins in the United
States. President Kennedy’s 1962 call for
The First Definition: Use of Manipulative a “Bill of Consumer Rights” initiated the
Techniques so-called consumer movement which focused
This definition was coined by Vance Packard on promoting and protecting consumers’ rights
(Day and Aacker 1997, p. 44) who “linked to safety, to be informed, to choose, and to be
consumerism with strategies for persuading heard. Massive consumer groups’ protest
customers to quickly expand their needs and marches and frequent boycotts generated media
wants.” Packard associated consumerism with attention which eventually forced the govern-
the overuse of advertising and selling and ment to enact legislation protecting consumers
claimed that advertising is detrimental to the (Kotler et al. 2008). This view highlights the
society, accusing organizations of being manipu- need for corporations to behave in a more socially
lative in their marketing practices. In supporting responsible way toward their consumers and the
Packard’s view, Lambin (1997) contemned the society at large.
exploitation of the society through advertising
and hard-selling techniques that he termed
as “manipulative” or “wild” marketing instead Third Definition: The Consumer Culture
of naming these practices “consumerism” as The underlying principle of this definition is that
Packard did. Activities which characterize consumption is the means for happiness and well-
consumerism in this context are: encouraging being. In this context, consumerism is defined as:
people to overconsume; exploiting people’s “the doctrine that the self cannot be complete
insecurities and sufferings; using promotional without a wealth of consumer goods and that
techniques that exploit impulsive consumer goals can be achieved and problems solved
behavior; and exaggeration of a product’s content through proper consumption” (Murphy 2000,
through packaging design (Lambin 1997, p. 20). p. 636). This view provides the foundation for
According to Packard (1957), consumerism the emergence of a consumer culture. From
refers to the overuse of advertising and selling a social perspective, the notion of the consumer
to create customers and encompasses practices of culture is widely discussed since the end of the
manipulative marketing that are self-destructive nineteenth century. Today in the twenty-first
for the organization in the long run. century, people buy products that are “status
C 452 Consumerism

symbols.” Products are used as devices by people efforts appear to have tracked each other for the
to communicate to others their social standing, last three centuries.
wealth, and power. Therefore, the literature suggests that there is
an apparent parallel growth in both marketing and
consumerism although this does not necessarily
Key Issues demonstrate causality. There is a possibility that
the growth of materialism emerged as a natural
Marketing and Consumerism development from the increase in human prosper-
The discussion in this section is based on the first ity which encouraged the growth in the use of
definition of consumerism according to marketing and consumerist behavior.
which, consumerism is associated with an If consumers appear to choose excessive mate-
overemphasis of advertising and selling aimed at rial consumption, then there is a need to educate
manipulating consumers and enticing them into them in relation to the fact that this does not nec-
overconsuming. In relation to the benefits or not essarily lead to higher levels of satisfaction. There-
of consumerism and the development of the con- fore, enhanced levels of communication and
sumer society, there are two opposing perspectives. education with consumers may lead to changes in
The first is based on the belief that marketing is not consumer behavior and, hence, consumerism.
responsible for the emergence of a materialistic
society. The second is that consumerism has Empirical Evidence on Consumers’ Attitudes
a detrimental impact on consumers and the society Toward Consumerism
at large (Abela 2006). Abela (2006) claims that Many studies have been conducted in order to
consumerism is associated with reduced personal understand consumers’ attitudes toward marketing
well-being and that the rise of consumerism paral- and consumerism and the degree to which con-
lels the rise of modern marketing to a remarkable sumers have expressed dissatisfaction with market-
extent. This view is congruent with Packard’s ing activities. For the discussion in this section,
(1957) argument that consumers are manipulated consumerism is defined as “a multitude of group
by business. The existing literature also suggests actions concerned with such issues as consumer
that there is a causal relationship between advertis- protection laws, the availability of product and
ing and materialism (Zinkhan 1994), and several price information, fraudulent and deceptive busi-
studies have drawn a relationship between watching ness practices and product safety” (Cravens and
television and television advertising with high Hills 1973, p. 164). Hence, consumerism deals
levels of materialism especially among children with consumer issues regarding a range of market-
(Kinsey 1987). Even though it is possible that ing-related areas. Due to the fact that marketing is
humans have a tendency toward materialistic a function that is reflected more vividly on organi-
behavior whenever they are given the opportunity, zational activities and practices, these in turn are
it cannot be ignored that the growth of consumerism seen as clues by consumers as to how ethical and
is in parallel to the growth of modern marketing. socially responsible marketers and their companies
O’Shaughnessy and O’Shaughnessy (2002, are. Consumerism issues usually relate to the mar-
p. 545) argue that “marketing does not create or keting mix elements. For example, an organiza-
invent wants.” Instead they posit that “material- tion’s product policy is often under scrutiny in
ism became part of the human condition relation to safety, labeling, and obsolescence
long before the first advertising executive.” issues. Pricing policies are often under intense crit-
The historical evidence indicates that the growth icism usually in periods of economic recession or
of consumer culture is paralleled to a remarkable inflation. Promotional tools, especially advertising,
extent by increases in the sophistication and is often attacked for using false and misleading
intensity of marketing efforts over a 300-year information, exaggerating the product’s benefits,
period. The rise of consumerism and the increase using psychological positioning to differentiate
in the quantity and sophistication of marketing products, using deceiving claims, puffery, and
Consumerism 453 C
emphasizing materialism. Finally, the distribution identified some degree of discontent among con-
policy is usually criticized for aggressive in-store sumers in Singapore, India, Nigeria, and Kenya
merchandising and the lack of quality information in relation to marketing and consumerism.
to evaluate price/quality relationships between Recently, a study carried out in New Zealand
brands and, finally, for giving too much power to revealed that marketing managers should con-
distributors to the detriment of consumers. tinue to remain proactive in their responses to
Several studies conducted over the last 20 years consumer discontents. C
aimed at revealing consumers’ attitudes toward
marketing and consumerism issues. These studies Consumerism and Corporate Social
have been carried out to both developed and devel- Responsibility
oping nations. A common characteristic is that they The consumer movement has evolved into
all showed a high level of consumer discontent a powerful force in many developed countries.
with various aspects related to marketing. In gen- Organizations in these countries are under
eral, the studies showed that consumers feel that constant pressure to demonstrate social responsibil-
organizations do not deal effectively with cus- ity in addressing the needs of the society. The term
tomers’ complaints which are associated with the “consumerism” is linked to the behavior of organi-
quality of products, their reliability, and safety zations and the expectations of the society. Corpo-
aspects. One study carried out identified that there rations should identify and define their purpose and
are significant differences in the attitudes held objectives in a way that align with the expectations
toward advertising and consumerism of those of society. If businesses are not meeting the cus-
born from 1946 to 1964 to those born from 1965 tomers’ and society’s expectations then the cus-
to 1974 in the USA. The latter group had more tomers and the society at large may lose trust
favorable attitudes and considered marketers to be subsequently leading to the firm’s loss of market
more socially responsible. The focus of subsequent share, market position and customer loyalty.
studies on consumerism shifted to cross-cultural Heightened corporate responsibility emerged
comparisons of the USA with other countries. as a phenomenon in the 1980s and early 1990s
These studies revealed that there are common pat- when corporations such as Cadbury’s, Brook
terns of concern about marketing and consumerism Bond, and Co-operative were increasingly
among respondents in the USA, Venezuela, Nor- adopting ethical consumerism in their purchasing
way, England, and other countries. Among the and supply policies. In addition, food retailers such
problems highlighted by these studies are: high as Tesco, Sainsburys, and Safeway have played
prices, lack of product quality, lack of adequate a crucial role in the green consumer revolution.
repair and maintenance services, deceptive adver- Consumers of the 1990s are claimed to be
tising, and inadequate handling of complaints. caring, environmentally and socially aware, and
A cross-national study investigating consumer atti- demand a say in the production, processing, and
tudes toward marketing practices, consumerism, resourcing of the products they regularly
and governmental regulations in Australia, Canada, purchase. The increasingly well-informed con-
England, Israel, Norway, and the USA uncovered sumer exercises pressure upon marketers for
negative attitudes toward marketing. fairly traded products, for guarantees of the eth-
A number of cross-cultural studies also found ical claims marketers make about their products,
mixed views about consumer attitudes regarding for safe products, for concern about the potential
marketing and consumerism. For example, one damage of manufacturing processes on the envi-
study showed that consumers in Hong Kong were ronment, and for the careful disposal of waste.
more favorable in their attitudes toward market- This awareness demonstrates a concern for Third
ing than those in the USA. Another study World issues which come into the spotlight as
revealed that Australian consumers were unfa- a result of the media coverage, from the work of
vorable in their attitudes toward marketing special interest groups, from the increased
except for retailing. Darley and Johnson (1993) amount of information available, and an
C 454 Consumerism

emphasis on human rights and the quality of life about health, animal welfare, environmental
of the people living in third world countries. protection, and ethical trading. At the same time,
Ethical Consumerism: According to Strong green consumerism motivates consumers to
(1996), ethical consumerism is a marketing con- become more actively ecologically and ethically
cept which has emerged only recently in the UK, aware. As a result, an increasing number of con-
but like green consumerism, it is a source of sumers move away from leading a life of excessive
gaining a competitive advantage for organiza- consumption and materialism toward more endur-
tions that are socially and ethically conscious. ing values such as respect, compassion, and empa-
The emergence of ethical consumerism has been thy. At the same time, the business sector has
supported by a number of features: the evolving become more responsive to consumerism. This is
caring consumer of the 1990s; pressure group manifested in the wide acceptance and practice of
support for Third world countries; fair trade societal and sustainable marketing across the busi-
issues endorsed by media interest; heightened ness sector. The increasing acceptance of consum-
corporate responsibility; and supplier power. erism by managers and corporations is founded on
These factors have led to wider availability of its positive role on society and the economy. Con-
fair trade products and increased quality of sumerism has the potential to play a constructive
alternative products. In addition, studies have role in building a sustainable business environ-
shown that an increasing number of consumers ment by emphasizing, for example, consumer
of the 1990s were exhibiting a caring, environ- awareness, fair trading, codes of conduct, and
mentally and socially caring attitude. These envi- ethical business practices. It encourages managers
ronmentally and ethically conscious consumers to think beyond the narrow boundaries of generat-
have shown increased demand for fairly traded ing short-term sales and profits. It motivates them
products, which constitutes a challenge for to adopt a sustainable approach to production
producers who claim to be producing such prod- which is not at the expense of the standard of living
ucts. The increased demand for fairly traded of future generations. An underlying factor of such
products was conducive for the development of provision includes fair trading, providing for the
the “Fair Trade Label” introduced by the Fair needs of the least advantaged in society,
Trade Foundation, an independent fair trade and adopting a people-orientated marketing
validating body that is supported by many approach.
charities. Strong’s study revealed that consumers
were not solely interested in price, quality,
delivery, and environmental issues but were also Cross-References
concerned about the ethical dimension of the
marketing exchange. This finding highlights the ▶ Communicating with Stakeholders
importance of managers realizing the power of ▶ Consumers’ Protection
ethical consumerism which drives consumers ▶ Corporate Codes of Conduct
toward brands with an ethical marketing focus, ▶ Corporate Social Marketing
if they do not want to lose market share. ▶ Corporate Social Responsibility
▶ Sustainable Consumption

Future Directions
References and Readings
Undoubtedly the consumers of the twenty-first
century is becoming more caring and socially Abela, A. (2006). Marketing and consumerism:
aware, moving toward a more responsible and A response to O’Shaughnessy and O’Shaughnessy.
European Journal of Marketing, 40(½), 5–16.
responsive attitude to issues which do not directly
Ahuvia, A. C., & Wong, N. Y. (2002). Personality and values
concern them such as Third World exploitation. based materialism: Their relationship and origins. Jour-
There is evidence of increased consumer concern nal of Consumer Psychology, 12(4), 389–402.
Consumers’ Protection 455 C
Cravens, D. W., & Hills, G. E. (1973). The eternal triangle: Definition
Business, government and consumers. In B. B. Murray
(Ed.), Consumerism (pp. 37–54). Pacific Palisades:
Goodyear. As a critical facet of social policies, any society
Darley, W. K., & Johnson, D. M. (1993). Cross-national must promote, and as a basic component of pro-
comparison of consumer attitudes towards consumer- tection programs, consumer protection (CP) is
ism in four developing countries, The Journal of a set of regulations and laws regarding the public
Consumer Affairs, 27(1), 37–54.
Day, G. S., & Aacker, D. A. (1997). A guide to consum- and private initiative designed to ensure and con- C
erism: What is it, where did it come from, and where is tinuously improve consumer rights. In its com-
it going? Marketing Management, 6(1), 44–48. plexity, the definition emphasizes the correlation
Galbraith, J. K. (1969). The affluent society (2nd ed.). between two main issues. On one hand, the com-
London: Heinemann.
Gilbert, D. (1999). Retail marketing management. prehensive set of “Consumer Protection Laws,”
Harlow: Financial Times, Prentice Hall. which were conceived to guarantee the right
Kinsey, J. (1987). The use of children in advertising competition and unrestricted stream of ethical
and the impact of advertising aimed at children. data in the marketplace, to forbid activities that
International Journal of Advertising, 6(2), 169.
Kotler, P., Armstrong, G., Wong, V., & Saunders, J. attempt in fraud, forgery, or other specific unjust
(2008). Principles of marketing, Fifth European edn. businesses and to deliver additional protection for
Essex: Pearson Education Ltd. all types of consumers. On the other hand, the
Lambin, J. J. (1997). Strategic marketing management. individuals as consumers and, particularly, as
Maidenhead: McGraw-Hill.
Murphy, P. (2000). The commodified self in consumer customers facing various matters related to prod-
culture: A cross-cultural perspective. The Journal of ucts, prices, quality, information networks to
Social Psychology, 40(October), 636–647. ensure market transparency and trade systems.
O’Shaughnessy, J., & O’Shaughnessy, N. J. (2002). Given this complexity, CP term covers aspects
Marketing, the consumer society and hedonism.
European Journal of Marketing, 36(5/6), 524–547. of “Consumer rights” (consumers have rights as
Packard, V. (1957). The hidden persuaders. London: initiators of consuming activity), “Consumer
Longman. interests” protected on the markets through com-
Strong, C. (1996). Features constributing to the growth of petition among businesses, “Consumer activism”
ethical consumerism – A preliminary investigation.
Marketing Intelligence and Planning, 14(5), 5–13. acknowledging CP through NGOs and individ-
Yani-de-Soriano, M., & Slater, S. (2009). Revisiting Drucker’s uals, and nonetheless “Consumer organizations”
theory: Has consumerism led to the overuse of marketing? created to protect and support consumers as deci-
Journal of Management History, 15(4), 452–466. sions’ makers on the market.
Zinkhan, G. M. (1994). Advertising, materialism, and
quality of life. Journal of Advertising, 23(2), 1–4.


Consumers’ Protection Playing a major role in the market mechanism,

consumer is the benchmark for all actions taken
Catalina Soriana Sitnikov by both the manufacturers and the retailers. Tak-
Faculty of Economics and Business ing into account consumers’ interests and needs,
Administration, University of Craiova, Craiova, they face imbalanced relations on the market,
Dolj, Romania imbalances that influence them in many ways –
economic, educational, health safety, etc. The
historical imbalance between businesses and con-
Synonyms sumers has grown more with the shift to mass
production. Later, the imbalance widened
Consumer activism; Consumer advocacy groups; through the impact of technological and scientific
Consumer organizations; Consumer product revolution, providing the market with products
safety; Consumer protection; Consumer protec- and services producers know everything about,
tion laws; Consumer rights; Product liability while consumers have no means to control or
C 456 Consumers’ Protection

evaluate their quality. Furthermore, since involves numerous aspects as well as responsibil-
a product life-cycle research and development ities incumbent on sides, the State and any trader
stages, through various marketing techniques and/or producer. Concluding, consumers’ infor-
and means, consumers are continuously “per- mation represents one basic objective of CP
suaded” by creating them needs, expectations, programs.
desires, and tastes. The experience gathered in this field allows
Therefore, the issues that stand to be the sub- mapping information for consumers into four
ject of CP programs are extremely diverse, and major categories:
could refer to many economic, social, and even – Information on products consumers are made
political matters. Also, given the problematic aware of the nature of the product, its price,
nature of consumption and, especially, of its man- origin, provenience, periods, packaging sys-
agement, it is obviously that inclusion of such tems and features, storage and keeping sys-
programs aiming consumer protection is State’s tems, etc.
responsibility, which should ensure, through its – Information of the market – referring, in par-
social policy, terms and means of achievement. ticular, to the various actors and theirs rela-
This objective’s fulfillment requires solving the tions on the market, the agents involved,
following problems: prices’ systems, provided services, bonuses
– Ensure the balance between supply and in the acquisition area.
demand, and further, purchasing activities – Information on distribution channels –
– Businesses focus, through various means and concerning the structure and frame of goods
appropriate policies, toward production of circulation, goods networks, operating units
demanded goods, thus contributing to the localization and schedules, etc.
smooth functioning of market mechanisms – Information on consumers’ needs – aiming to
– Import of goods which support the balance clarify, both in terms of quantity and quality,
between needs and resources consumers’ needs and requests.
– Providing the market with qualitative goods On the market, consumers are provided with
and services – activity involving all businesses information on goods and services through adver-
participating in goods’ circuits tising and labeling systems. Given the way con-
– Ensure a prices’ system according to market sumers’ information unfold, in most countries are
requirements and product quality, which brought up serious misgivings related to the
proved to be the most controversial and above-mentioned systems and their usage. This
discussed area both in terms of time specific- matter is because advertising purposes, with no
ity, as well as the social protection programs regard to its form or content, is focused solely on
Including such issues in social protection pro- selling the good or providing the service, which,
grams, and implicitly in CP programs, involves unfortunately, is incompatible with fair and just
solving both fundamental matters related to pric- information of consumers. Very often, advertis-
ing, financial policies, and the impact of costs’ ing and labeling to have sole aim sales’ enhanc-
trends on consumers’ needs and requests. In ing and strengthening, doing nothing but
terms of market transparency, good information aggressively seeking to inoculate with prefer-
for consumer, as a potential customer, are ences for the good or service a company is inter-
involved. Unfortunately, this normal market fea- ested in.
ture can often be avoided or restricted using var- From this perspective, by its very nature, CP
ious methods related to certain interests. movement has two aspects: first, CP is sensed as
Therefore, designing and implementing informa- a “battle” urging consumers to express their dis-
tion systems for consumers and defending tools satisfaction with goods and services they are
and techniques against aggressive trade policies offered, and second, CP can be envisaged as an
promoted by the economic bidders on the market action or a set of actions springing from
is another complex area of CP process, which awareness abusive practices on the market.
Consumers’ Protection 457 C
Consumers’ Protection,
Fig. 1 Factors influencing GOVERNMENT
consumers’ protection Legislation and Institutions
(Source: Dinu 1999) Laws and Regulations
Checking and control
Punitive measures

Quality Health protection
Reliability Security
Factors Safety
Maintainability influencing
Cost Affordable prices
consumers’ Environment protection
Warranties protection Quality of life

Social monitoring Information
Support actions Education
Promoting activities Training

Concluding, all these relationships among busi- is the use, manufacturer being subordinated to
nesses and consumers are subject to CP pro- user’ needs.” In a modern form, it can be said
grams. In terms of the complex issues involved that the purpose of economic activity is to allo-
in an effective system of protecting consumer cate resources as efficiently as possible in order to
rights, Government bodies or NGO’s should con- meet and fulfill consumer needs. Such action
sider coherent policies. Both governments and leads directly to the idea of consumer sover-
other bodies active in CP determine their specific eignty, for consumer is the individual ultimately
structures and areas for the protection programs: deciding resources’ allocation. This idea has,
• Improving people’s spending and consump- nonetheless, political, moral, logical, and even
tion through State’s social policies economical support. Moreover, the literature
• Ensuring qualitative goods and services sold states that, as in politics, democracy means
on the market voters’ sovereignty, in economy and business,
– Providing prices’ system according to mar- democracy means consumers’ sovereignty based
ket demands and products quality on their capacity and possibility of choosing.
– Developing a useful information system for The concept of “consumer rights” has its ori-
consumers gin in the “Charter of Consumer Rights” deliv-
– Protecting consumers against aggressive ered by the former president of USA, J. F.
commercial practices and fake advertising Kennedy, in March 1962, as an address to the
As depicted in Fig. 1, responsible for con- American Congress. Although the Charter has
sumers’ protection are public institutions (govern- not been finalized, it remains important through
ments) and, due to the complex nature of CP, other shaping the fundamental rights of consumers (the
factors that influence it by various means and ways. right to choose freely, the right to information,
A glimpse in the history of CP brings us to the right to petition and hearing, the right to
Smith’s words “the final product unique purpose protection). It also serves as a reference model
C 458 Consumers’ Protection

in developing CP laws that occurred in the sev- – Establishing national priority systems
enth and eighth decades in the USA and other according to economic and social circum-
countries of the American Continent (Canada, stances specific to level of development, pop-
Mexico) and Europe (Belgium, France, ulation characteristics, and needs
Germany, Sweden). – Promoting and protecting consumers’ eco-
For the last decades, consumer protection nomic interests
issues represent the focus of economic and judi- – Ensuring consumer access to accurate infor-
cial world theories and practices. The issues, mation, allowing them to choose according to
more complex in content and especially through their personal desires and needs
the solutions claimed, relate research on the the- – Developing and providing consumers’ educa-
ory of CP in various international and global tion systems
communities, Governments and NGOs, to the – Mandatory complying with laws and regula-
practice of establishing the measures and guide- tions of the countries all companies,
lines needed to create the necessary and appro- manufacturing or commercial, do business
priate legal and institutional frameworks, hence with
providing consumers’ protection. Into such – Obligatory complying with the international
a context, the global community, through its standards of CP
highest forum – the United Nations (UN) – – Establishing nationally organizations able cre-
found it necessary to discuss the issue of struc- ate and apply CP policies according to the
tures inferred by consumer protection, adapted by country’s laws
the resolution no. 39/248, on April 8, 1985, – Ensuring consumers and other representative
“Guidelines on Consumer Protection.” groups or associations the freedom of
According to this important document, “Gov- organizing and appointing leaders in order
ernments of all countries should develop, to express their views in the decision-
strengthen, and maintain a strong CP policy, tak- making processes and to represent their
ing into account the guidelines stated.” The final interests
document is the result of an extensive research, By their nature, the principles outlined by the
consultation, and collaboration of various UN UN and recommended to the member states gov-
bodies with national institutions. ernments are subject of states’ public
The guiding principles of the United Nations administration.
are intended to provide all countries with “Guiding principles” for consumer protection
a framework that can be used in CP. From this are the result of international efforts of the World
viewpoint, the main objectives each country Consumers Organization, created in 1960.
must focus on, both at governmental and Currently, the World Consumer Organization
nongovernmental levels are: consists of 220 member organizations in almost
– Facilitating manufacture and delivery of all countries. These organizations have met in
goods suitable for consumers’ needs and Santiago in November 1997 as part of the 15th
requests World Congress, under the motto “More powers
– Encouraging high level ethics of employees for consumers in the twenty-first century. Con-
working in manufacturing and delivery sumers in civil society.” Congress’ message has
– Controlling, through national and interna- been very clear: in all countries, people in their
tional laws and regulations, abusive trade capacity of consumers, play a crucial role in
practices affecting consumers developing institutions arising from the ongoing
– Promoting international cooperation in con- process of democratization and economic
sumer protection areas liberalization.
– Encouraging development of market condi- Organizing consumer’s protection as
tions providing consumers with a wide range a complex process, which involves both public
of products and advantageous prices power and consumer himself, focuses on:
Consumers’ Protection 459 C
– National and international laws and regula- regulations. Along with IOCU, the European
tions to underpin the consumer protection Committee for Standardization mandated CRC
– Public institutions created to watch over con- to develop Consumers Institutions and Consum-
sumer protection in each country (Offices of erism Policy Program (CICPP), both being also
Consumer Protection) appointed to manage the Phare Program for CP.
– Ministries, departments, or other governmen- In Germany, the governmental bodies
tal bodies that act in branches which, besides involved in CP are yet to be established, con- C
the sector-specific objectives, take the respon- sumers’ rights being defended by the civil
sibility of consumer protection society. Generally, CP is concerned with two
– National research institutes and scientific primary services, namely, the information and
centers councils, provided by Ordnungsamt and Central
– Organizations and consumer associations Advisory Council of Consumers. Ordnungsamt’s
– Consumer Advisory Committees office is responsible for monitoring laws’
– International organizations for consumer application in CP areas, both at federal and
protection Lands’ level. Specialized inspectors are
In defending consumers’ rights, particular empowered to carry it out, to impose fines or,
roles get international organizations. Thus, in sometimes, to seize certain suspected assets. Pen-
1960, was founded the International Organization alty system is applied following a procedure,
of Consumers Unions (IOCU), a body which which includes three phases: alert, application
represents and supports consumer organizations fines, and drive trial. In each province, there is
worldwide organized as a nonprofit foundation, a CP council, while at local level consumers’
the International Organization of Consumers counseling offices act as an independent organi-
Unions (IOCU) currently gathers 180 organiza- zation, which tries to resolve disputes among
tions from 70 countries. IOCU provides support consumers and manufacturers on one hand, as
in three directions: well as importers, traders, and services providers,
– Promoting collaboration among members on the other hand.
through various means In Italy, the General Economic Inspection is
– Enhancing consumerism movement and concerned with fulfilling the laws regarding CP,
supporting newly emerged organizations primarily those relating to prices, restricting from
– Representing the consumer interests in inter- activity those businesses found guilty, including
national institutions drafting the required documentation in criminal
The IOCU leadership is provided by the Gen- investigations, where appropriate.
eral Assembly, Board and an Executive body. In Belgium, the General Economic Inspector-
Operational, the IOCU is organized as follows: ate, Department in the Ministry of Economic
– Central Office, headquarter in London Affairs coordinates all activities in CP area,
– Regional Office for Asia and the Pacific including two special units responsible for inves-
(ROAP) tigations, at national and European level, and
– Regional Office for the Latin America and seven regional directorates, which operates in
Caribbean (ROLAL) country’s provinces.
– Regional Office for Africa (ROAF) The Swedish consumer policy has a long tra-
– The Program for Transition Economies dition; in 1986, Parliament has performed
(PROTEC) a partial revision. National Council for Consumer
– The Program for Developed Economies Policies is the main body concerned with CP, its
(PRODEC) activities being focused on family savings, prod-
In Europe, Consumers Rights Center (CRC), ucts safety, traditional marketing, and contract
created in 1978 in the University of Louvain- terms.
Neuve, Belgium, participate in research pro- In Greece, the main responsibility in CP is
grams focused on consumers’ laws and legal assigned to Directorate for Technical Control
C 460 Consumers’ Protection

and Consumer Protection, its organizational and international consumer protection policies.
structure comprising five departments with activ- Finally, with adoption of guidelines, consumer
ities covering areas of goods and services, rights were as well internationally recognized,
research and studies, inspections and analysis, legitimized, and acknowledged by most of the
as well as consumer protection and information. countries. However, and unfortunately in many
In Luxembourg, consumer protection is assigned given deeds, they are ignored or trivialized by
exclusively to central government, the responsi- governments, producers, or various interests
bility of adopting and implementing the legisla- (political or economic). Therefore, establishing
tion in the field is shared among several good consumer protection legislation is funda-
ministries. mental to the global development of consumer
In UK, the main responsibility of consumer rights, covering areas as campaigns on providing
protection programs is assigned to local authori- essential services, to better standardization and
ties. Therefore, the local authorities in England fair labeling.
and Wales, responsible for consumer protection
are Metropolitan Districts and Counties
Committees. Future Directions
In Scotland, the legal enforcement on con-
sumer protection is the responsibility of Regional The assertions made by customer protection
Councils while in Northern Ireland, Governmen- organizations and associations must be thought
tal Department for Economic Development leads over as reasonable claims as they come under the
the specific activities. consumer protection guidelines which have been
Provided that many more voices believe that adopted by the United Nations. No doubt the
community bodies, Council of Europe and Euro- most important principles included in the con-
pean Commission have created an over-in con- sumer protection guidelines stands for
sumer protection, which becomes a real a structure or guide for states and governments,
impediment, it was created EFLA, with five especially in building and popularizing policies
members (Norway, Denmark, Sweden, Switzer- and legislation to certify consumer protection.
land, and Luxembourg), thus conceiving a new This is necessary in many countries, where the
economic space. Consisting of economically matter of consumer protection is the topic to
important countries, which do not necessarily relevant deficiencies, and most are, however, in
need community support, this organization sup- need of new legislation in this scope, functioning
ports the Council and Commission efforts, noting to build and improve the existent legislation to
the consumer protection actions of those bodies, encounter the demands of recent developments in
but without engaging in their implementation and spending, business activity and production at the
application. local, regional, and international level. The prin-
ciples must also contribute to the promotion of
global partnership in the field of consumer pro-
Key Issues tection within the structure, where the states and
governments are committed to providing at more
On April 9, 1985, the United Nations’ General than a minimum of these principles.
Assembly adopted the UN Guidelines for Con- These principles provide a set of points and
sumer Protection, following more than 10 years guidance to governments that should be brought
of hard lobbying by Consumers International, out to provide a perfect protection for consumers,
then known as IOCU as well as other consumers’ while considering that each government must
organizations. As the basis of CI’s work on con- acknowledge urgencies for consumer protection
sumer protection and law (CPL), the guidelines complementing with the setting of the country’s
embrace the principles of consumer rights and economic and social circumstances. In this con-
provide a framework for strengthening national text, the matters that face citizens, economies,
Continual Improvement 461 C
and societies influence consumer protection laws Cross-References
and policies more. Markets’ globalization is
increasing the role of consumers while con- ▶ Consumerism
sumers’ authorization led to new and critical ▶ Health and Safety (EHS)
responsibilities for them in managing their own ▶ Responsible Consumption
statements and decisions. In this environment ▶ Transparency
many can benefit, however children and elders ▶ Unethical Products C
(statistically growing in consumption) increasing
the number of vulnerable consumers not so much References and Readings
instructed. In these years, the need for assured
consumers to appeal to economies had never been Dinu, V. (1999). Goods standardization and certification.
Economica. Economica Publishing House, 147.
bigger. Globalization of manufacturing and com-
European Commission.com. (2007). EU consumer policy
merce will continue leading to more import strategy 2007–2013 empowering consumers,
goods consumed in various countries. Traders enhancing their welfare, effectively protecting them.
will sell to global consumers through Brussels: Commission of the European Communities.
Evans, P. (2005). Unwrapping the WTO: What consumers
e-commerce means. This act will increase the
need to know. London: Consumers International.
challenge as well as the need to effective market Evans, P. (2006). Consumers and the future work of WTO
surveillance. Therefore, in the future, the govern- – where do we want to go from here? London:
ments, institutions, and any other stakeholders Consumers International.
Sitnikov, C., & Bocean, C. (2010). New approaches of
must aim to achieve three main objectives at the
consumers’ protection in terms of management
national, regional, and global level: systems’ international standards evolution. Amfiteatru
– To empower consumers for putting customers Economic Journal, 12, 360–372.
in the first place will benefit them and encour- United Nations, DESA. (2003). United Nation guidelines
for consumer protection. New York: United Nations.
age competition considerably. Empowerment
will be fulfilled through better monitoring the
markets and national consumers’ protection
policies. Authorized and enforced consumers Contamination
will call for real choices, precise data, market
transparency, and the faith that comes from ▶ Pollution (Separate Entries on Carbon,
efficient care and strong rights. e-Waste, Ecoefficiency)
– To increase consumers’ prosperity in terms of
price, quality, diversity, and safety because
their well-being and welfare are by the core
of well-functioning markets. Continental European Model
– To defend consumers efficiently from the acute
risks they cannot intercept as people. A high ▶ Relationship-Based Systems
level of protection against these menaces is
necessary to customer trust through better con-
sumer protection regulation and through contin-
uously consumers’ information and education. Continental Model
In order to reach these objectives a high level
of consumer protection must be ensured through: ▶ Relationship-Based Systems
– Easy legal frames, enhanced evidence, fair
dialogue, and better representation of con-
sumers’ concerns
– Efficient implementation of regulations par- Continual Improvement
ticularly by way of enforcement partnership,
knowledge guidance, and amendment ▶ Kaizen
C 462 Continuous Improvement

Continuous Improvement Conversion of Goods

▶ Kaizen ▶ View on the Ground: CSR from a Capabilities

▶ TQM Approach

Contractarian Ethics Co-operation Between NPOs and

Companies in Germany
▶ Social Contract
Holger Backhaus-Maul and Martin Kunze
Philosoph. Fakult€at III-
Erziehungswissenschaften/Fachgebiet Recht,
Contractarianism Verwaltung und Organisation, Martin-Luther-
University Halle-Wittenberg, Halle, Germany
▶ Social Contract


Contractual Ethics Cross-sector collaboration; Cross-sector interac-

tion; Cross-sector partnerships; Partnerships of
▶ Social Contract NGOs and companies

Until now, there is no common definition of the
▶ Social Contract intersectoral cooperation between nonprofit orga-
nizations (NPOs) and companies. One reason
might be the broad variety of scientific disci-
plines and institutional actors dealing with this
Conventional Cheap Oil topic. Another reason is the huge variety of
characteristics of such cooperation, as the phe-
▶ Sustainable Primary Energy Production nomenon evolves in different fields, related to the
involved sectors, the number of involved organi-
zations, the aim, the concrete conditions, and the
circumstances of the cooperation. Furthermore,
Conventional Oil there are no common instruments to initiate and
manage such cooperation, and there are no spe-
▶ Sustainable Primary Energy Production cific legal guidelines. In practice, intersectoral
cooperation exists within a wide range, beginning
with a very informal way with loose connections,
to contractually specified long-term relation-
ships. As a result of this heterogeneous situation,
Conversations there is a huge variety of terms for these types of
organizational interaction across sectors, such as
▶ Social Dialogue strategic collaboration between nonprofits
Co-operation Between NPOs and Companies in Germany 463 C
and business (cf. Austin 2000), cross-sector In this entry, we would like to offer
(social-oriented) partnerships (cf. Selsky and a classification for a differentiated view on such
Parker 2005), or civil-private partnerships. intersectoral cooperation. Since the last couple of
With a very broad understanding, intersectoral years, cooperation between companies and
cooperation can be defined as a constellation, NGOs have gained huge attention, especially
“organisations from different economic sectors – within the debate on CSR and CC (cf. Austin
public, nonprofit, and business – co-operate to 2000; Seitanidi and Lindgreen 2010). Within C
address social issues by providing society with this debate, there are at least two major mutually
‘public goods’” (Seitanidi and Lindgreen 2010: exclusive dimensions of how this new evolving
1; cf. Selsky and Parker 2005). intersectoral cooperation should be assessed.
“Instruments” such as social sponsoring, cause-
related marketing, or corporate volunteering are
Introduction on the one side described as a way of greenwash-
ing, where notorious underfunded NPOs are
The increasing debate on corporate social “sleeping with their enemies” (cf. Crane and
responsibility (CSR) and corporate citizenship Matten 2007: 440; CorporateWatch 2006: 19)
(CC) since the 1990s illustrates a new perspec- and thereby run the risk of losing credibility and
tive on the societal role of companies. Compa- independency as fundamental resources of socie-
nies are not closed entities producing services tal legitimacy. On the other hand, cooperation of
and goods but rather societal actors, which are companies and NPOs is assessed as drivers of
influenced by and influencing societal develop- innovation, and is a part of a new form of gover-
ment. One crucial aspect is the changing rela- nance, whereby actors of the civil society sector,
tionship between companies as representatives the business sector, and the political sector work
of the economic sector on the one hand and together in a productive way to deal with societal
organizations from the political and civil society problems, instead of adversarial stakeholder
sector on the other hand (cf. Selsky and Parker strategies – a real win–win situation (cf. Sustain-
2005). Among the main reasons are societal Ability 2003). From our point of view, both
processes related to globalization, which under- perspectives are realistic, and we want to illus-
mine the scope of action for national states and trate this.
open spaces for new organizational constella-
tions at different levels. The whole debate on
multilevel governance illustrates this develop- Key Issues
ment. On the one hand, companies get involved
in challenges, such as basic social questions. As mentioned before, the terms CSR and CC
Companies act, for instance, as providers of highlight the role and influence companies have
social services or as purchasers of social ser- on society in general, besides producing goods
vices provided by NPOs. On the other hand, and services and providing jobs. As companies in
NPOs gained more importance as stakeholders Germany have not much expertise in dealing with
for companies in the past years and are these societal issues like poverty, education, and social
days important players in the business sector. services, in most of the cases they are relying on
This can be illustrated by several campaigns NPOs to develop instruments corresponding to
against companies by NPOs. In general, NPOs the concrete social situation. According to litera-
gain importance for companies and vice versa. ture, this could lead to a win–win situation, that
Although cooperation between both actors is is, the involved organization gains (business
becoming more likely, the specific circum- case) and as such cooperation meet social prob-
stances and processes of these partnerships lems, the society benefits (social case). The busi-
remain unclear, as only companies are in the ness case describes expected advantages of
focus of the debate until now. intersectoral cooperation from an economical
C 464 Co-operation Between NPOs and Companies in Germany

point of view. Core elements of the business case range of organizations with different goals,
are human resources, marketing, organizational, notions, legal status, and structures (cf. Anheier
and local development. The business case for the and Seibel 2001). From a functional perspective
NPOs is on the other hand expected in terms of on NPOs, four ideal types of NPOs can be
funding and such new projects, organizational differentiated (cf. Sachße 2001: 17ff.):
developments, and management know-how 1. Membership-based organizations (e.g., sports
(cf. SustainAbility 2003). The case for the clubs)
society – the social case – is again assumed to 2. Interest groups (e.g., economic or political
occur by implication. Empirical evidence of these interest groups)
assumptions has not yet been assessed. Instead the 3. Service organizations (e.g., welfare
contribution of companies – as organizations with organizatio