law533-chapter-1
docx
keyboard_arrow_up
School
Toronto Metropolitan University *
*We aren’t endorsed by this school
Course
533
Subject
Law
Date
Jan 9, 2024
Type
docx
Pages
13
Uploaded by AgentRhinocerosPerson991
LAW533 – Corporate Social Responsibility and the Law
Week One – Chapter One
ISO 26000 SR Definition:
•
ISO:
International Organization for Standardization.
o
ISO is the Greek word meaning ‘same.’
o
ISO is an international organization that creates rules (not laws) called standards. ISO is an
international body that brings together businesses, governments, non- government
organizations from around the world to develop standards that assist organizations around the
world in meeting their various different objectives. This could be environmental, social, and
business objectives.
o
ISO has over 1900 different standards, and for each standard that is developed a number and
name is assigned. It makes it easy for organizations to identify what standard is being
referred.
•
SR (Social Responsibility):
The responsibility of an organization for the impacts of its
decisions and activities on society and the environment, through transparent and ethical
behaviour that:
o
Contributes to sustainable development, health and the welfare of society;
o
Takes into account the expectations of stakeholders;
o
Is in compliance with applicable law and consistent with international norms of behavior;
and
o
Is integrated throughout the organization and practiced in its relationships.
▪
After negotiations with companies, countries, non-government organization with
around the world the definition above was created.
▪
International standard organizations can use around the world, it is not a law. Therefore,
it is a voluntary standard.
▪
Voluntary standards have and address severe legal implications.
•
Example of Canadian & Non-Canadian Firm Navigating CSR Landscape:
o
The Body Shop:
Well-known brand. Interesting example of how an individual and firm.
Body Shop has decided to address CSR
▪
Anita Roddick
(deceased) is the founder of The Body Shop. When she was going into her
20’s she was interested in the environment and animal welfare. Wanted to go around the
world an observe people’s living habits. Visited communities in the Global South (Africa,
Asia, Latin America). She saw a harmonious interaction between people, animal and the
environment in comparison to the UK. For instance, she would learn from the local tribe’s
people in the rainforest how ingredients were used that were formed by plants, minerals,
and animal extractive. Particularly, how potions were created to keep themselves happy.
lOMoARcPSD|7984238
lOMoARcPSD|7984238
▪
Anita liked the connection people had with each other and the environment. When Anita
returned to the UK. She wanted to set up a cosmetics company that did not tested on
Animals like other companies in
a harmful way. Anita made a sound commitment and promise to her customer’s that she
would not test on Animals. When the first store was opened in the UK, it was advertised that
organic ingredients were being used, and were committed to no animal cruelty.
▪
The advertisement campaign resonated with a lot of women, and women thanked her, and
therefore gained customer loyalty. Anita was essentially
rewarded for her believes. However, she discovered that a lot of the ingredients sourced by
The Body Shop was soured from rainforests, the rainforests were being damaged in the
process. Anita did not want environmental harm taking place. Therefore, Anita let her
sources know that the ingredients should be harvested in a sustainable way in developing
countries. Again, she gained further customer loyalty for this behaviour.
▪
Anita discovered that women involved in her Supply Chain (the companies that were
harvesting or mixing the ingredients); the women in the developing countries were not
receiving same wages as men or fired
for being pregnant or unhealthy. Unions were not allowed to be formed, because they
would be fired or subject to threat. Anita insisted that all suppliers of Body Shop
products treat women well. Again, she gained further customer loyalty for her behaviour
in the marketplace.
▪
Marketing of Cosmetic:
Anita noticed that particular body shape, colour and size was
featured in marketing. Anita noticed that women who shopped at Body Shop were diverse,
and she wanted to celebrate this with
a reflective advertisement. Again, she gained further customer loyalty for her behaviour in
the marketplace. After the business was sold, the same ideal and principles were still met.
▪
Definition:
The decision of Body Shop concerning treatment of animal, women, and
environment; these were decision and activities that had
negative impacts on society and the environment. Therefore, Anita addressed them. Anita
was transparent in her process of engaging in ethical behaviour. Anita continued to the
ability of the environment and the world to be sustained in terms of health, welfare and the
environment.
▪
However, stakeholder expectations are not harmed. The expectations are taken into
account, but do not have to be met if unrealistic like wages.
▪
Socially responsible company must be compliant with the law, then you are not a socially
responsible company.
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
▪
International norm of behaviour – ISO26000 is an example. Codification of what
organizations, and governing bodies and civil society around the world came together and
agreed that organizations should do.
▪
Some people think that employees needed to treated well, and you are a socially responsible
company. Which is true, but you cannot outsource the tricky part of your business, have
them done in a socially or environmental
irresponsible way. Should be practiced in all relationships such as competitors and
government.
o
Ray Anderson (CEO of Interface Flooring):
▪
Companies with office space around the world, banks for example would interact with
Interface Flooring. Interface Flooring would supply rugs.
▪
1980:
Ray Anderson’s company was one of many companies selling rugs for commercial
purposes. Conventional Rugs were made from Petro Chemical’s. One of Ray’s customers
asked him how are you protecting the environment in the making of your rugs? Ray had
never thought of the issue but took a look at the book ‘Limits of Growth’ The book
essentially said that we are running out of natural resources to support businesses. Animals
and humans are being negatively affected by the environmental behaviour. Therefore, Ray
went to the product engineers, and asked what could be done to minimize the environmental
impact. Product designers explained that recycle and reuse could be used to decrease
environmental impact. Product engineers said it would be better to make rugs using organic
materials, and then recycling those.
▪
At first, was not practical because petrochemical is inexpensive. However, Ray had a
thought. Until that moment, if companies would want to buy rugs, they would reach out to
the supplier, and the supplier would install
the rug. If changes needed to be made, the old rugs were thrown out. Some of the rugs could
be recycled, but instead of selling rugs to various companies, he rented rugs to them? If a
company is renting a rug, an ongoing relationship has been created between supplier and
company. At the end of the rent, the rug would be returned. A constant supply would be
there to recycle, and an ongoing relationship would be present with the renting companies.
The customer would essentially get money back, if the rug was brought back, and
exchanged it for a new rented rug. Ray would not have to fight looking for new companies
as well.
▪
Companies that were being pushed to engage in CSR wanted to do business with Ray to
promote their CSR initiatives. Therefore, interface flooring became extremely
successful.
o
Loblaws/ Joe Fresh:
▪
Loblaws owns Joe Fresh. Companies in developing countries are responsible for delivering the
apparel to Joe Fresh. However, an issue rose in Bangladesh. A company in Bangladesh, located
in the Rana Plaza; the building had been
improperly constructed. Loblaws/Joe Fresh had a contract with this company. A batch of Joe
Fresh clothes were being produced, and the Rana Plaza collapsed. It killed thousands of
workers, including workers who had been making clothing for Joe Fresh.
▪
When word went around, it was discovered some of the workers were Joe Fresh contracts.
Galen Weston, CEO of Loblaws had to appear in front of the
press and apologize to the families of the workers. Galen promised he would look into it how
to avoid further occurrences and provide compensation. The company looked into how their
clothing was made and tried to adopt an approach that a Rana Plaza issue would never occur
again.
Canadian CSR Guide Definition:
•
CSR is generally understood to be the way businesses achieve an integration of
economic, environmental and social objectives while at the same time addressing
stakeholder expectations and sustaining or enhancing shareholder value.
•
Compliance with laws is a necessary minimum CSR expectation, but CSR is typically
described as voluntary, non-statutorily required social responsibility commitments.
o
Wording is different from ISO26000 standard. However, the wording is different, it is
fundamentally in complete alignment with the ISO26000 definition.
Canadian CSR Guide – CSR Subject Matters Include:
•
Workers (health/safety/union)
o
Workers are well cared for.
•
Consumer protection – obesity, privacy, safety, customer service
o
Company that has a retail focus with their products.
•
Community – worker-community conflicts, dislocation
o
People in a community are well cared for. A factory should not disrupt them.
•
Environment – air/water/land
•
Human rights – children, communities, workers
o
Are not infringing Human Rights.
•
Corruption – local officials, business partners
o
Not engaging in corrupt practices.
•
Competition/Fair Trade Practices
o
No under handed business to get an advantage over competitors, all work is legal.
Carroll’s CSR Pyramid:
•
Economic Responsibilities:
All companies we have discussed, if you do not make money.
You will not be in business. As a business you must find a product that can sufficiently sell
in order to stay in business. For profit corporations cannot stay in business if you do not
make money. Cannot be socially responsible if you do not have good products or services. If
workers, environment and community is well treated, but the product is not good. What good
is that for the community, worker and environment because the company is out of business.
•
Legal Responsibilities:
When companies come up with a good product or service, if they are
not complying with the law, they are not socially responsible (Canadian and ISO26000
definition)
•
Ethical Responsibilities & Philanthropic Responsibilities:
Should be integrated
throughout the corporation and its relationship (ISO26000 Definition) The pyramid
suggests its one on top of the other, but you should integrate this all at once.
o
Philanthropy:
A company gives labor or money to a third party; to assist people. This is
outside of company’s day to day business activities.
o
You cannot be philanthropic and cannot be a good corporate citizen if you do not comply with
the rest of the pyramid. Company must integrate into their day to day operations (products)
what their social (workers and community) and environmental impacts are, how are they
addressing them, and complying with law while meeting stakeholder expectation.
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
CSR Stakeholder Perspective:
•
In society, corporation is not a central actor, but individuals are. Corporations are in the centre
with respect to Stakeholder’s. Surrounding the corporation there are a diversity of
stakeholders.
•
The arrow points outwards to stakeholder’s, and back to corporation. This depicts that it is a
two-way relationship between the corporation and stakeholder. Stakeholder’s are affected by
corporation’s action but can also affect what corporations do.
•
Stakeholder’s are simultaneously affected by the activity of Corporation but can also
impact the activities of the corporation. Corporation’s need to be attentive to, and sensitive
to ‘expectations’ of stakeholders (ISO26000 Definition)
•
Legal Framework:
To emphasize that all that is done by corporation is done by
complying, exceeding, or not complying with a law; Against a backdrop of law.
o
A corporation is a legal creature, a legal creation.
o
The law influence and structure corporate behaviour.
Why is CSR “on the Radar Screen?”
•
Rise in importance of global supply chains
o
The Body Shop was sourcing ingredients from developing countries. Joe Fresh
was outsourcing their apparel from workers from developing countries. ISO26000 demands
companies to behave socially responsible within company and integrate through supply chain,
the relationship.
o
Supply Chain Partner (Stakeholder’s): What actions are the partner’s taking? Companies
are concerned that it could have a negative impact on them. (Joe Fresh)
•
Inadequacy of public international law
o
Cannot rely on intergovernmental bodies to protect workers and the environment,
when companies have global supply chains. However, we can rely on government agencies and
laws within Canada.
•
Inadequacy of conventional domestic regulatory approaches
o
Within Canada, things are not too bad but could be improved. However, nations in
developing countries, have weak governments that are not well funded.
o
Governments in developing countries face corruption, and try to pull themselves from
previous situations, such as colonial subsets of UK. Because the domestic regulatory structure
and approach is weak, there is potential for considerably greater harm for the worker,
community, and environment.
•
Perceived hypocrisy:
Western-based corporations meeting high standards of
environmental, worker, human rights in developed countries, but not in developing
countries
o
Companies sourcing from countries where the environment and workers are not protected.
Human rights are very weak. (Joe Fresh Example)
•
Pressure for action from consumers, workers, investors, shareholders, lenders, governments,
supply chain partners, certification bodies, civil society organizations (Environmental
Organizations Exposing Issues, Not Corporation or Governmental Body)
•
Rise of internet, rise in importance of transparency and accountability for all
organizations
o
Difficult for corporations to ‘get away’ with not socially responsible incidents or practices.
•
Has led to proliferation of environmental, employee, human rights, community-oriented
voluntary codes, standards, guidelines, certifications approaches, with multiple audits, etc.
o
For Example, ISO26000 Standard
o
A way for corporation to let their stakeholders know that they are taking action.
CSR, Ethics & the Law: Introducing the Key Concepts – 1
•
Business Ethics:
Individuals within business organizations possess and are driven in their
decision-making by an internal set of values, reflecting concern for welfare of others and of
society: conceptions of justice, compassion, common good, others.
o
An individual’s decisions have impacts on others: do to others what you would like to have
done to you.
o
Business ethics codes not uncommon: honesty, integrity, accountability, respect
o
Example:
Body Shop & Anita Roddick. Anita had a preexisting ethical
foundation/point of view, therefore she reflected it in her business decision making
through equality for women, not harming animals, and creating a sustainable supply
chain.
o
CSR, Ethics, & Law
: Connection is the proposition of ethics, and then company was built
around that to comply with CSR.
CSR, Ethics & the Law: Introducing the Key Concepts – 2
•
CSR:
Centrally concerned with idea that firms have responsibilities to society/environment
and are accountable to society for their actions. Therefore, engage in:
o
Proactive risk management/reputation management
▪
Try to anticipate problems, and let’s address this environmental or worker issue so we do
not run into problems.
o
Animated by idea that firms try to respond to external stakeholders while maximizing
shareholder value
▪
Anita was pushed by internal motives, but Roy and Galen were pushed external motives
▪
Becoming accountable by recognizing they have a responsible to society and the
environment.
o
Often, firms sign on to external standards, certification: proxies for “the
market”/society
▪
Ways that business can say that we have signed onto such things, therefore the market and
society can trust the business to be accountable and
responsible.
CSR, Ethics & the Law: Introducing the Key Concepts – 3
•
Law:
Externally imposed rules and decisions that articulate societal norms
o
legislatures and courts acting as proxy voicing mechanisms for society
o
law may codify and elaborate ethical obligations
o
ethics and CSR may shine spotlight on limitations of law
o
law constrains, facilitates, prescribes CSR
o
Connection:
Law’s represent/embody societal expectations, concerning the environment,
treatment of workers, or various different consumer protection law.
▪
Laws are an attempt to codify societal expectations and businesses. Businesses are
required to meet any codified societal expectation that
takes the form of law.
▪
Legislatures and courts are acting as proxy voicing mechanims for society. Codify and
elaborate basic ethical, and societal obligations (Like CSR.)
▪
However, society expects businesses to do more than just comply with the law. For
example, it is not illegal in Canada for Loblaws/Joe Fresh to have a contract with someone
in a developing country, and not look into the
working condition of that company. However, ethics and CSR shine a spotlight on the
limitations of the law, particularly international law.
▪
The law constrain, facilitates and prescribes CSR.
•
Constrains:
Constrains or restricts companies when in Canada it tells companies
you cannot put your workers in a dangerous work
site. Companies cannot make false claim that they do, as it is false and will open them
up to misleading advertising prosecution.
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
•
Facilitates:
Best example is Contract Law. Anita works with suppliers in the
marketplace that meet her ethical conditions through a contract. Contracts Law
(Private) can be used to facilitate CSR, through various clauses that
incorporate social issues. Does not have to!
•
Prescribes:
o
Example:
Imagine if all students in the class are to report on a publicly
accessible Facebook Page on weight, what they ate, and how much exercise
was done. Individuals would firstly track this information; however, student
would not necessarily monitor this beforehand. This may force students to
reflect on their selves. Secondly, you would track at what other people are
doing. This will lead people to change their behaviour. However, professor
himself did not ask you to make these changes, but simply report.
o
Self-reflection
(information
inductance),
the
mere existence of the
information forces you to change your behaviour. And then looking at other
peoples (isomorphism) will affect/shape your behaviour. Corporations and
individuals are concerned with what other people are doing and will align.
o
Law will ask company to publicly report on how much environmentally
toxic substances are used, but not change behaviour necessarily. (CSR
Prescriptive Law – induce behavioural change). Information law will reveal
ethical code, etc…
CSR, Ethics & the Law: Introducing the Key Concepts – 4
•
Changing rule systems landscape:
o
Law now expanding to address previously “voluntary” ethical/CSR activity (CEO
sign-off on ethics codes, SR disclosure laws, pension fund SR reporting obligations)
o
The nature of the new obligations
•
Clashing ethics/CSR/legal rule systems…
o
For example, a company addressing animal cruelty, but the law does not deal with
that, therefore a conflict.
•
Mutually supportive rule systems…
•
Making sense of the three rule systems…
CSR and Legal Risk Management:
•
Risk Management:
The process of identifying, evaluating and responding to the
possibly harmful events.
•
In complex and constantly changing marketplace, often difficult to eliminate risk, but risk can
be managed through strategies such as:
o
Risk avoidance
o
Risk reduction
o
Risk shifting (Joe Fresh shift legal risk)
o
Risk acceptance
•
What may be “possible” from a legal risk management standpoint, might not be the best
action, from a CSR standpoint
•
Companies are adopting a proactive approach, to get ahead of the curve and not wait for harm
to occur.
•
Legal mechanism, like supply chain contract to insist suppliers comply to third party
voluntary standards (mandatory in relation to CSR)
Layers of CSR:
•
Deep vs. shallow CSR
o
Example:
A company engaged in digging out gold, processing, and selling that. I
have a tower located in Toronto and start a recycling initiative in Toronto. This is shallow
because a mining company should mind the social and environmental impact of the actual
mining and processing process. (Deep.) Shallow is related to CSR but not related to day to day
basis product or service, but minor.
•
Economic vs. non-economic stakeholders/interests
o
Direct economic interconnection is to do with shareholder investing.
o
Do not have a direct economic interconnection with the community where factories are
located. Companies tend to neglect these, as direct can effect on going activities.
•
“first order” and “second order” consumer/community/worker interests in CSR
o
First Order: Consumer issue in relation to CSR, any hormones or antibiotics in
fast food? (affect you directly)
o
Second Order: If environment in developing countries is treated well. (not affect you directly)
•
Where does philanthropy fit in CSR?
o
Address social and environmental impact in all day to day activities, products and
services. Cannot not address this, and then donate to a good, irrelevant cause.
o
Deemphasize philanthropy.
Theoretical Explanations Relevant to Understanding SR Behavior:
•
Principal – agent issues
o
A parent (principal) says to their neighbor’s (agent) to babysit their kid. The agent
often time is not perfect or faithfully (fail to carry out instructions or report back) when acting
on behalf of the principal.
o
A big issue in CSR. Employees are agents of the management of the corporation; however,
employees are not perfect as they could go on strike.
•
Moral hazard
o
An individual or institution does not take full responsibility of its doings, someone
else will have to take the responsibility.
o
Example: people are less likely to take care of their cars when insurance comes in to play.
•
Tragedy of the commons
o
Example: Climate change, as no one country or individual owns the atmosphere.
Therefore, everyone misuses and overly uses as there is no direct consequence.
•
Transaction costs
o
‘Search Cost’ The transaction cost of smart phones these days are low, because of
the internet.
o
The transaction cost for sharing information about countries a company has reduced due
to the internet. Organizations are in a position to collect and distribute information, and
campaigns against bad companies due to low transaction costs.
•
Bounded rationality
o
Most people do not have access to full information, but base judgement on small
set of information. People are always looking for short cut to make decision due to wealth of
information but cannot be smart.
o
CSR: Look for logos, and certifications to determine if it a good or bad company.
•
Logic of collective action
o
If a small group of people have a deep issue with a new environmental law, the
group can act tightly and be effective against the Government.
o
Certain laws are titled in the benefit of certain groups.
Friedman’s Position re: CSR & Mulligan’s Response:
•
What is Friedman’s basic position?
•
What are the main points underlying Friedman’s position?
•
What is Mulligan’s response?
•
Are there any counterarguments to Mulligan’s response?
•
Where is “the law” in Friedman and Mulligan?
o
Friedman:
If you are a manger of a corporation, you should just listen to what
owners want (make profit) if you are doing anything other than that, you are going against
interest of owner and should not do that. It is about making money while complying with law,
and ethical custom (signing onto certification standard for example)
o
Mulligan:
Friedman has adopted an overly simplistic idea of how a modern company
operates. Managers are not lone rangers; they are constrained by the corporate structure.
CSR: A Third Way?
•
What are the main points made in the interview with Sir Geoffrey Owen re:
o
Origins of CSR
o
Sustainability of CSR
o
Variations of CSR from one part of the world to another
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
o
Role of universal standards
•
The interview with Owen was conducted in 2007. Is there anything said by Owen that
perhaps needs revisiting, in light of “recent events”?
Questions Arising from Chapter:
•
What is “the mischief” that CSR is addressing?
•
In what ways does CSR supplement law?
•
In what ways does law supplement CSR?
•
What are the roles, motivations and incentives for governments, businesses, and others in
encouraging SR behavior and discouraging irresponsible social behavior?