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Introduction: a multi-disciplinary, multi-track approach...
These notes have been drawn up as a result of teaching
a course on the “Social Responsibilities of Business” at the
As the course developed I began to realise that many of the books on the subject took a far too narrow approach. The most narrow (and the most common!) looked at the issue purely from the point of view of managers (a “managerial” perspective). Either they argued that “society” was making new demands on business, and that business, to survive, had to acknowledge (some of) these demands. Or, conversely, they implied that Corporate Social Responsibility meant that managers had a responsibility to decide what is good for society! (Humble 1973; Luthans et al 1976; Frederick et al 1992). Either way, the current power relations would remain unchanged.
felt at this time, as did Donaldson, that the power of business was worrying.
There are notes on this historical background in the next two chapters, and the following chapters deal with each topic in more detail.
My approach is to place the study of what is now called Corporate Social Responsibility (CSR) into both a theoretical and a historical context.
By “theoretical context”, I mean that I draw on several disciplines (politics, sociology, psychology, ethics for example) beyond those traditionally studied as part of “business studies”. Business is, after all, part of society – and business organisations are based on, made out of, people. How then can we begin to understand the social responsibilities of business without drawing on those disciplines that help us to understand society and people?
Moreover, this is not a one-way process, where “business” remains autonomous, responding to the desires of “society” – and then only if it is prepared to do so. Rather, there is a two-way interaction going on all the time. Social forces do have their impact on business, and of course developments in business have changed society. The nature of this interaction changes with the changing balance of forces within capitalism. This is part of what I mean by an “historical context”, and all this is reflected in how views of CSR have changed over the last few decades, which will be discussed below.
You will also find case-studies in each chapter, some recent, some more “dated”: again, noticing what different issues are thrown up at different points in time helps to understand the interactions that are going on between the different “players”.
Finally, I believe the most central question is:“How do we ensure that business becomes more socially responsible?” and I hope that this text will be useful in encouraging the reader to consider a number of different mechanisms for influencing the behaviour of business.
There are after all a number of different viewpoints on the nature of the relation between business and society, ranging from the most conservative to the most radical. Each viewpoint implies different solutions to the “problem”. The “theoretical” and the “practical” are, of course, interdependent, and discussing issues and cases in a theoretical and historical context enables the combining of practical steps with visions of alternatives, from the most reformist to the most radical.
Whilst my own sympathies lie with radical changes to society, and not just to the way business is done, I have come to believe that most of the problems thrown up by considering Corporate Social Responsibility need urgent action. Given this, and perhaps unlike others who write from a “radical” perspective, I advocate a “multi-track” approach. On some issues, at some points in time, government action may be the best approach. For another problem at another time we may have to rely on pressure groups, citizen action etc. Or some problems may be only soluble by new forms of business (workers’ co-operatives, time banks etc).
Aims and Learning Outcomes:
To provide students with an introductory overview of current theory and practice in regard to Corporate Social Responsibility, enabling them to:
- define social responsibility in general and in relation to business.
- describe the main viewpoints for and against “social responsibility” in business, and in regard to what social responsibility of business might mean in practice.
- recount the main features of a range of existing organisations and businesses that are concerned with Corporate Social Responsibility.
- discuss how these organisations and businesses reflect the existence of divergent opinions on the definition of CSR
1. Definitions and Viewpoints: responsibility, and its political, moral, and social dimensions.
2. More thoughts on the definitions: responsibility, power, and society.
3. Some key questions regarding corporate social responsibility: who or what is affected by business? Where does social power lie? (What kind of power does business have?) The question: “to whom should business be accountable?”
4. How to make business more socially responsible? What “corporate social responsibility” is, how it should be exercised (or not!). “The spectrum of views” on CSR:
- the opposition: e.g. Milton Friedman… “ a subversive doctrine…”
- social audit
- pressure from individuals or groups
- stakeholder theories
- regulation: the law or government
- new kinds of company
- a different social system
5. “What is going on?” Some organisations and recent ideas concerned with CSR/social responsibility: the opposition; some organisations to watch out for; stakeholder capitalism; ethical and “alternative” businesses: Body Shop International (BSI) a problematic case...ethical investment companies; the Quaker tradition; Traidcraft; workers' co-operatives.
Notes: Chapter 1: Definitions and Viewpoints:
1. Definitions and controversy.
Note that throughout this course we will stress the controversial nature of the subject of CSR (corporate social responsibility), and you should be warned that even the apparently simple task of defining the words we are using will bring up disagreement!
There are two broad meanings of the word responsibility, in everyday usage:
(a) To have responsibility (be responsible) for something:
to be “in charge” (a head of department is responsible for the people and activities in that department)
to be “accountable” (someone in a position of responsibility almost always has someone “above” them to whom they
are accountable); some would argue that anyone in a responsible position should also be accountable to those
for whom they are responsible, and that “social accountability” is a better concept than “social responsibility” (see also 3 (b), 3 (c), & link to 4 (e))
(b) To show responsibility (be a responsible person):
have some qualities of: being prepared to answer for what you do, being morally aware, adult etc.
Hence we could say that there are two dimensions of “responsibility”:
(i) political i.e. to do with power... “with great power goes great responsibility” - but note that only too often power is exercised irresponsibly… In thinking about business responsibility we would expect to be concerned mainly with large powerful businesses, and with the effects of their activities.
(ii) moral i.e. to do with what is right or wrong, what is “ethical” (note that “business ethics” is a specialised, more philosophical, study of how we decide what is right or wrong in relation to business)
With CSR, we are talking of “social” responsibility, so we need to look at a third dimension:
(iii) social i.e. to do with society, the collective, others…
It should immediately be clear why the subject of business social responsibility is controversial, since people have different and often conflicting opinions about all three of these dimensions. We will deal with these below.
2. More thoughts on the definitions:
2 (a) Responsibility:
The origin of the word “responsible” is – perhaps surprisingly – from the practice in (Christian) church services of “responses”. That is, the priest/minister says something and the congregation responds or answers. Hence, it can be argued, responsibility and accountability (being prepared to account for – that is to answer for - one’s actions etc) are closely linked.
Thus, in the Oxford Dictionary of Philosophy (1996), Simon Blackburn notes that:
- “socially, people’s responsibilities are those things for which they are accountable
- failure to discharge a responsibility renders one liable to some censure or penalty
- a responsible person behaves in a particular way: mature, adult, aware of the consequences of their actions”
Blackburn also says:
- “the power of an individual or institution is the ability to achieve something, whether by right or by control or by influence (my emphasis)
- (in society) [power] is the ability to mobilise economic, social or political forces in order to achieve a result”
- power can be measured by the probability of a result being obtained in the face of various kinds of obstacle or opposition
- power may be exercised unknowingly
- for some theorists, e.g. Foucault, power is not exercised by individuals, but is a dispersed, impersonal aspect of society – it includes control of the self-definition and preferred ways of living of members of a society.” Such theorists are particularly interested in social “structures” that show the power relationships. “Structuralism” (especially since Althusser) has been an influential way of examining power in society.
Again, much of this is obviously controversial, and the complexity and subtlety of the workings of “power” suggests that all kinds of question will arise about the motives, intentions, and awareness of business in working in certain ways; also about the awareness of those whom business affects.
We will examine in section 3 (b) below a number of different views on power in society: how is it distributed? Who has most power? Etc
In everyday life we probably don’t even question “society” – yet not only are there different views on the actual structure and workings of modern society (including how power is in fact distributed), but there is even some controversy over whether it exists at all! “There is no such thing as society” – said Mrs Thatcher, notoriously, – “there are only individuals and their families.” This is an extreme view, but whether we use the word “society” or not, at least I am sure that we can agree that there is a tension (and potential conflict) between individuals’ rights, responsibilities and freedoms, and those of others. See also my notes on the “other, in: What is imagining other?
There are also, of course, many different views as to what society should be like – what would be the “ideal” society? This is what political scientists and sociologists call a “normative” question – a question concerning values or norms. So there is no end to the controversy, both as to what are the correct descriptive accounts of society, and over what normative views we should accept.
3. Some key questions regarding the social responsibilities of business:
The answers to three questions, outlined first and then discussed below, can help us structure our approach to the subject of CSR:
(a) What is business responsible for - what effects does it have on society? Who or what is affected by business?
(b) What kind of power does business have? How is power distributed in society? It seems to me that we must try to answer this, both to get an accurate picture of what is going on, and to begin to allocate “responsibility”. It may be, after all, that business is blamed for things for which it is not responsible. A related question would be: to whom (if anyone!) is business responsible (or accountable)?
(c) The question: “to whom should business be accountable?” takes us on to the question: whose viewpoint is being considered, or should we consider, at any time?
3 (a) Who or what is affected by business?
To “get a handle” on the material, it is useful to classify those affected by business: (see also “stakeholder theory” in “viewpoints”, below).
These groupings are useful mainly “heuristically”, i.e. as an aid to understanding the subject of corporate social responsibility. In the real world the categories overlap considerably.
A classification showing “who is affected by business”:
1. the worker
2. the consumer
3. the environment
4. the “third world” or developing countries
5. the poor and the powerless
3 (b) What kind of power does business have?
When we try to identify where (social) power lies we come up against different views – it seems that we cannot agree on how the world is, let alone on how it should be! What’s more, these different descriptions may well be the result of the viewer’s own opinions affecting what he/she “sees”..
Nevertheless, it is useful to classify some significant different viewpoints, as this gives us a more rigorous theoretical approach: (this kind of analysis strictly belongs to sociology – see Haralambos 2000 - or politics)
1. the individual, or the market: it is argued that the “consumer is sovereign”, or that what is happening is a result of market forces. The belief-system which argues this is a good thing – this is how society should be organised – is nowadays called “neo-liberalism”. Its best known recent proponent was Mrs Thatcher. Regarding the actual operation of business, the question is: are most businesses subject to “the market”, or are some so powerful that market forces are irrelevant?
2. organisations or groups: in sociology and politics, this is known as a “pluralist” viewpoint, and the argument is that when individuals organise themselves into groups they have more power; moreover, it is argued, the modern world is characterised by people organising in this way. Is business just one of these groups or does it have a special position of relative power?
3. élites: it is often argued that some groups (or maybe just one) have significantly more power than others; the group that is “selected” or “picked” (by social forces) to have more power is called the élite. Some conservatives explicitly argue that elites are a good thing – elitism is generally a reactionary viewpoint (and at the extreme it merges into fascism). Perhaps businessmen, or the executives and managers of large corporations, are an élite?
4. a ruling class: although this view point is not very popular nowadays, it must be taken into account, since some of the most detailed and careful analysis of the nature and consequences of business have been undertaken from this, Marxist, perspective. The argument – briefly – is that ownership of the means of making money (capital) is restricted to a comparatively small section of the population, the capitalist class. This ownership then gives them power over the remainder of society (mainly the proletariat, i.e. those selling their labour-power). Since the whole (capitalist) system operates in order to provide profit for the owners of capital, any damaging effects of business ultimately are a consequence of the system. Marxists would argue that businessmen – and managers - act as agents of capital: whether they actually have as much wealth as the richest capitalists or not, their purpose is to increase the wealth, in the context of a system where ownership is in the hands of a very few.
5. the state, or government; political institutions: each nation-state exists to ensure the well-being of the whole population, and the state has shown that it has considerable power over the institutions within the nation, such as business and commerce. There is more disagreement these days over whether the state still has power over multinational enterprises. It might be that the only institutions that can control or restrain multinational companies are international or trans-national institutions (Europe, the World Bank).
My own answer to the questions in bold in this section is that corporations do have extraordinary power – each section of these notes contains examples of the way in which the worker is exploited, the consumer is manipulated, the environment is damaged, inequalities in society are reinforced, and the third world is impoverished.
Update, 2009: it is striking that since these notes were first written, in the 1970s and 1980s, there has been increasing concern (as there was at the start of the 20th century) over the power of corporations. The current ‘credit crunch’ is attributed to the activities of large banks, whose practise of ‘spreading risk’ has been unsustainable. A related issue is the remuneration of directors of these banks – and the problem of regulation – which is at the heart of these notes - is at last being widely discussed!! See: csrbooks.htm#corporate power
3 (c) To whom should business be accountable? Who or what should have most social power?
The above account of how the world “is” already begins to reflect normative or ideological views (how people think the world “ought to be”) – but it is worth briefly noting that there is no “correspondence” between how someone believes the world “is” and how they think it “ought to be”. That is, you might agree that the nation-state has most power today and that it should do so; or you might think this is not how it should be. Or you might think that individuals actually have most power, but the state ought to have more power. Similarly, presumably a member of the capitalist class thinks that it is a good thing for us all that capital, property, is distributed in the way it is (with the vast majority of us owning none, or at least insignificant amounts)!
It should be clear by now that my view is that business has so much power that it needs to be accountable to others – many in business believe that it can regulate itself, and need not be accountable.
Update: see Simon Marquis, MediaGuardian, 2/4/07:
Marquis is writing about Baroness Peta Buscombe – lawyer and active member of the House of Lords – who is the new boss of the Advertising Association (the AA). He explains that the AA is the “trade body for all the other advertising trade bodies” and its job is to “represent the interests of all parties involved in the business of advertising… Its paying members include the agencies, the advertisers themselves and, of course, the media – the whole £15bn industry.” It represents the industry to “the regulators, the opinion-formers and, above all, politicians and government.”
To show how good the advertising industry is at regulating itself he describes an instance of a booklet from the NSPCC (containing pictures of babies who had been suffocated): although it had been “passed” by the (self-regulating) Advertising Standards Authority, nevertheless the NSPCC ( = the advertisers) voluntarily decided to withdraw it (after protests from some of the people who read it). “Wouldn’t it be good [Marquis goes on] if other industries behaved with such commendable good sense and without the need for recourse to the statute book?” Apparently Buscombe gets “very hot under the collar” when people have a go at advertising – she agreed to take on the job after hearing Hilary Benn MP talk on the radio about the “awful things like advertising” which contribute to young people feeling depressed… See on advertising in Chapter 5: link.
4. Main viewpoints - on what “social responsibility of business” is, and how it should be exercised (or not!),
i.e. how to make business more socially responsible?
As we have argued, there are a number of different viewpoints as to:
- the extent of any problem of CSR (what problems are we talking about?)
- the causes of any social irresponsibility (does business really do much harm? Or are these problems down to someone
Naturally, then, there are different opinions as to;
- the remedies - how best to ensure that business is socially responsible.
We can set out these opinions in a spectrum, which, roughly, goes from right-wing or pro-capitalist views to left-wing, anti-capitalist ones.
After explaining the background to each viewpoint, I have tried to separate out and summarise, for each:
(i) a suggested way of ensuring business is socially responsible,
(ii) the reason why this solution is suggested (in terms of where power is seen to lie in society)
(iii) the possible weakness(es) of each view, (focussing on the issue: would the given solution make business genuinely socially responsible?)
This section focuses on “views” or theories. Further details of actual individuals and organisations representing these positions are given in the following section (“What is going on?”).
“The spectrum of views” on SRB:
4 (a) The opposition.
There are some economists – notably those from the Chicago School, and “monetarists” – who believe very strongly in the market, and who argue that the state
should only play a minimal part in the economy. Their views tend to lead them to oppose the idea of “social responsibility” of business, on a number of grounds:
first they are convinced that freedom of the individual in the market will lead to optimal growth of business and therefore of wealth. Consequently they resist
notions of “society”, and any beliefs they see as “collectivist”. Second, they associate collectivism with socialism and therefore with “un-freedom” (in Friedrich von
doctrine…”. His main point was that business legally belongs to the shareholders, and if managers decide to use a corporation’s money or resources for purposes
other than the main commercial aim of the business, (e.g. to support charity) this is tantamount to robbery. Hence:
(i) The social responsibility of business is to make a profit.
(ii) Business must stick to commercial goals, and is not entitled (or qualified) to assume “social” goals – if it does, this will detract from making a profit.
(iii) However, this seems to me to “duck” a whole host of questions: surely it matters how a profit is made? Do market forces – i.e. individual choices – always lead
to the social good? Can we trust business executives to be always honest and constructive? Is there not an excessive gap between the wealth (and power) of
shareholders on the one hand, and the workers or customers on the other? Finally, don’t workers, customers and others (“stakeholders” – see below) have a right at
least to object if a business causes harm to them, if not to some say in how a business is run?
“Philanthropy” means “love of humankind” – which can lead to a way of life if interpreted in the broadest way. Usually, nowadays, and especially in the context of
SRB”, it means generosity, or doing things to help others. Charity in its original meaning was also “love” – again, we seem to have simplified this complex attitude
so that all “charity” means now is giving to the needy!
(i) The simplest and least controversial way (excepting Milton Friedman’s views!) for a business to contribute to society is through giving.
who made his money from oil – the Rockefeller Foundation claims now that it exists to “enrich and sustain the lives and livelihood of the poor and excluded” (see
democratic values, reduce poverty and injustice, promote international cooperation, and advance human achievement”.
(ii) The reasoning behind this was sometimes the belief that “wealth brings obligations” – or it was a way for the rich to express their gratitude for the rewards of
(iii) However, critics point out that the important question is how these people made their money: if it was through exploitation of the workforce (Ford was anti-
union, and had his own private security guards who even fired on strikers on one occasion!) – or using production methods that polluted the environment or
damaged the health of people in the local community – then the company was hardly being socially responsible by giving some of its gains to education or the
After all, the car is one of the main causes of death and injury to others, as well as filling the air with chemicals that damage our health and contribute to global
warming! Nor is the car industry known for supporting moves to reduce pollution or global warming! (see e.g. Neale, in Fairweather 1997).
A further criticism would be that these gestures are simply “PR” – attempting to give the company a good image despite, or to cover up, dubious practices. In their
debate (The Ecologist, March 2005) over CSR, Tom Burke and Joel Bakan agree that philanthropy is not the same as corporate social responsibility.
It is worth noting Tom Burke’s position: that adopting CSR is a means for companies to put off the threat of regulation…
August 2007: Updated December 2007, with notes from New Philanthropy Capital, who research charities, their effectiveness etc, to guide donors. Their full report: “Charity Begins At Home” can be found via: http://www.thinknpc.org/
In response to critics who felt that it is not enough for a business to make and sell goods regardless of wider issues, some writers (see Frederick et al 1992, p 6) have pointed out that business holds “in trust” the resources it owns, and that to retain a relationship of trust with society the business should take care to manage these resources in a constructive and socially beneficial way.
(i) Given this argument, there is no need for a business to take any particular action to be socially responsible: all it needs is an awareness of its “trusteeship” position. In terms of how to maintain social responsibility, defenders of this view talk of “self-regulation” by business. For example, businesses could adopt codes of conduct, or managers could be trained in business ethics.
(ii) It is worth noting that the assumption being made here is that business knows best what its social responsibility is. This after all is the position of a trustee – for example when appointed to look after the interests of a child. “Outsiders” – the public, government, pressure-groups etc – are not welcome should they try to steer a business’s social responsibility in a particular direction! The other argument used here is that business needs to have a good relationship with its wider environment, in order to succeed. This is, of course, an appeal to business’s self-interest in being socially responsible.
(iii) The weaknesses of this argument should be evident: can we trust business always to know what is best for society? Does self-regulation always work without e.g. the law to enforce certain standards? And we can again ask some of the questions raised above, such as the concern over market forces – since this position says nothing about the problems arising from the “unfettered market”. Stewardship also, as stated, excludes others who might be affected by a business from any part in regulating its behaviour.
achieved. As in accounting an “audit” is produced, weighing up gains (profits) and losses (costs), so it was felt that an audit could be produced on the social
costs and benefits of the activities of a given concern. In the 1970s in the UK an organisation called “Social Audit plc” began to publish social audits of a number
of businesses. Since this organisation was outside the businesses it was reporting on, it often ran into difficulties as businesses would claim commercial
confidentiality, or simply resent being “investigated” by outsiders. However, the idea that businesses should produce their own social audits, or environmental
audits, did catch on, and such reports are now widespread.
(i) A social audit, which may be conducted internally or externally, forces a business to make precise measurements of its social impact.
(ii) This approach recognises that we live in a pluralist society: business has to interact with the wider public and be to some extent accountable to them.
(iii) An externally conducted social audit is a definite step towards accountability, though the question remains as to what consequences would follow a negative report. Clearly the business would suffer a loss of image, but this can often be countered with good PR. Then there is the question: exactly who should carry out a social audit (if it is not done internally)? The crucial point is that – apart perhaps from shareholders – no-one in this model has the power to make the business improve its standards.
Other questions that arise are: Who is best placed to carry out such an audit – government? Other businesses? A consultancy? A pressure-group?
Also, simply because a company has agreed to a social audit, does this mean that it has a genuine commitment to ethical behaviour? Finally, is it possible to
measure social costs and benefits? The problem with business is surely that it wants (has?) to measure everything in money terms – the notorious episode involving
the Ford Pinto showed the weakness of this reliance on purely monetary costing
Update: the organisation is now called Public Interest Research Centre, and there is a website (see web references below) which explains that PIRC now focuses on pharmaceuticals – in the past, Charles Medawar, Ralph Nader and Michael Young have all been involved in the organisation.
4 (e) Social accountability. When a business is “accounting” for its social impact, is it not likely that it will be (maybe unintentionally) biased in its own favour? In order to bring some objectivity to bear, it is argued that assessments or evaluations should be made by people who are not part of the business being reported on.
(i) Thus, a business will become more socially responsible in response to pressure from individuals or groups outside itself
(ii) This viewpoint reflects a strongly pluralistic position, i.e. that in society there are (and should be) many different centres of power, of which business is one; government, trade unions, pressure groups, charities etc. are also entitled to have an influence.
(iii) This seems a more secure way of ensuring business becomes socially responsible, but it still raises a host of questions: primarily of course the big question is: who has a right to influence over the activities of business? On a deeper level, the objection is sometimes made that even if a business responds to outside pressure, the only reason for doing so may be to avoid conflict, rather than because the business has accepted the validity of the criticisms made.
In an attempt to bring logic and order into what otherwise might be a chaotic situation with all sorts of interest groups making demands of business, we might adopt the Stakeholder Approach. Here, all who have a stake in a business would be entitled to a say in regulating its social impact. In the literature, this is quite a popular approach.
In an early text, which in fact pre-dates the recent popularity of the stakeholder approach - James Robertson: Profit or People? (1978) – the author suggests that profit for shareholders should not be main goal of the business any more: rather they should operate in the interests of stakeholders. He went on to argue that business must move in this new direction, since none of the existing models (unchecked free enterprise, state socialism, or corporatism) is viable in the long term. Given the arguments over control of business, and the battles between capital and labour on this front, Robertson argues that businesses will only remain autonomous if they recognise the demands of stakeholders. Hence there is a strong self-interest component to this approach!
Will Hutton (author of The State We’re In, 1995) went so far as to suggest that we are now moving into a new phase of capitalism called stakeholder capitalism. This remains debatable!
For a brief time, it looked as if the Labour Party would advocate the stakeholder model, but this did not happen.
(i) Firms should identify their stakeholders (management, workers, customers, suppliers, perhaps the local community…) and devise a way of ensuring that their voices are heard. Firms then are responsible and accountable to all those likely to be affected.
(ii) Here it is recognised that business is not – or rather should not be - run simply according to the interests of shareholders (a view that is in direct conflict with Milton Friedman). Rather, all the groups affected by the business’s activity – or all those with an “interest” or a “stake” in the business should be consulted. After all, surely the long-term success of a business depends on its meeting the needs of all its stakeholders?
(iii) Again, some of the difficulties are obvious: who decides on the list of stakeholders? The danger is that managers or executives could manipulate the process so that effective control still lay in their hands (and we will deal with the issue of “pseudo participation” when examining the question of responsibility to workers). It is also debatable as to how far to spread the list of stakeholders – what about customers or suppliers in other countries? Who speaks for the natural environment? Finally, we might conclude, especially given the mixed messages associated with this viewpoint, that it is not really about social responsibility at all: put simply, wouldn’t each group of stakeholders be concerned about their own interest first? Would bringing them together and giving them more influence necessarily bring the diverse interests together?
that restrain business activity. Examples are: the Health and Safety at Work Act, Sale of Goods Act, Clean Air Act.
A realistic view then, accepts that laws are sometimes a necessary evil, since unfortunately not everyone in business can be relied on to behave well without legal
sanctions against misdemeanours!
(i) If there is a danger that business may misuse its power, then laws can define acts that are not acceptable, and sanctions can be drawn up.
(ii) Government represents, in a neutral fashion, the interests of the whole community, and will protect the interests of the more vulnerable.
(iii) The most common objection to this position concerns the effectiveness (or otherwise!) of the law: laws are complicated, and the clever know how to get round
them; the legal process is slow to work, and may be costly; the law is a blunt instrument, since it cannot predict detailed cases in advance; many of the “limits” set
e.g. in pollution laws, are contested – from both sides sometimes (as being either too high or too low!). Finally, there is the question that has already been touched
on, of whether a business has “internalised” a sense of social responsibility: if it does something, or refrains from doing something, simply because it is compelled
by law, does that say anything about a company's intentions or morality?
has taken years to draw
up, but is subject to an agreement between government and unions (the
2005, on legislation that the government undertook to pass.
The bill aims to toughen penalties for companies that cause deaths of workers by negligent management, including fatalities and injuries to the passengers on
public transport. Current legislation specifies that it is a senior director or manager that must be prosecuted. This has proved difficult because such individuals
often delegate. There has also been opposition to such prosecution of a company, on the basis that you cannot place blame on a “company” since it is a different
kind of legal entity to an individual. Attempts have been made to prove negligence in the cases of P & O Ferries, Great Western Trains, Network Rail and Balfour
Beatty – but all have failed.
John Reid is said to have threatened to withdraw the whole bill if parliament insists that it must cover police and prisons as well as corporations – but the Lords
4 (h) Alternative Approaches. More radical critics would argue that the causes of social irresponsibility lie in the fundamental organising principles and values of the (capitalist) system, with its emphasis on profit, growth and private ownership. One response then would be to change the system (see next category) but some would argue that It is possible to set up new ways of running a business which avoid the dangerous values and tendencies of traditional business.
(i) Only new kinds of company (e.g. ethical business, social enterprise, time banks and workers’ co-operatives) which would be established on ethical principles can guarantee that they will always be socially responsible. (For examples, see the next section: What is going on? - 5 (d) ).
(ii) The structure of businesses (shareholder capitalism), and the values of growth, profit and private benefit are causing social irresponsibility.
(iii) Such “experiments” are all very well, it might be said, but: can they avoid competition with larger businesses – that is, will the "system" let them flourish? Won’t they remain a minor part of the economy?
(i) Radical Alternatives to the “System”. As has been said, this is not a popular viewpoint since the collapse of the Soviet Union, but its proponents would argue that their position is more logically consistent than the one just described, since if it is the basic features of capitalism that are to blame then there can be no “tinkering” with it.
(i) Only an end to capitalism, and the establishment of socialism or communism can bring business into the control of the whole community. In such a system all capital would be owned collectively, and production would be managed in the interests of the whole society.
(ii) The capitalist economy prevents social responsibility because it is profit-driven, and will always work in the interests of the capitalist class. Goods/services should be produced for peoples needs, not for private profit. This is a view shared by Marxists and by the anti-capitalist/anti-globalisation movement.
(iii) Given the dreadful history of “communism” many would now object to proposals to put control of the economy in the hands of the state. However, some (e.g. Castoriadis 1955-57, in ed. Curtis 1997) would argue that a state-controlled and centralised system is not the only way to put socialism into practice. The weakness of this argument is that no-one can point to a society that has successfully set up a different system.
5. “What is going on?” A brief guide to some organisations and recent ideas concerned with CSR/social responsibility of business:
Note: I will introduce a range of activities here, but we will need to return to them when we have examined more closely the specific issues and problem-areas we have used to structure this course.
5 (a) The opposition:
mentioned, that social responsibility would detract from the pursuit of profit and the avoidance of loss, it was also argued that the aims of “social responsibility” are vague and conflicting. (Undoubtedly, since
this was a new idea, the aims were not yet clear or agreed). An interesting further point was made, revealing the right-wing basis of the IEA’s standpoint, and that was that social responsibility in practice
amounted to a covert form of government control. (See the web references below).
The IEA has – along with the Adam Smith Institute – received money from the tobacco industry:
5 (b) Some organisations to watch out for: (what do they really stand for?)
This is an interesting organisation: it was registered as a charity in 1967 (according to Hansard 1991-12-20) in order to promote education in industrial and commercial affairs. You will also find in Hansard (debates for 14th may 1996) a statement by Frank Dobson to the effect that the charity was used by Westminster Tories as part of their election campaigning in the late 1980s, and that it provided over £98,000 to a Tory marketing organisation. Donations to this fund, Dobson said, came from the Duke of Westminster, Trusthouse Forte, Taylor Woodrow, Allied Lyons, Rank Hovis McDougall, Brooke Bond OXO, Dewhurst, Whitbread and Grand Metropolitan – all undeclared contributions which had to be repaid.
Key to the affairs of Westminster Council at the time was Dame Shirley Porter (heiress of Tesco fortunes) who was only very recently finally forced to pay back money to the Council. You may remember that she was found guilty of “gerrymandering” i.e. buying Tory votes by selling council houses in order to move into the Borough middle class families that would vote for her. The working class council house residents ended up in asbestos-infested slums according to Frank Dobson. Although she owed the council £42 million in surcharges interests and costs she finally (in 2004, after nearly 20 years of legal wrangling!) agreed to pay back £12.3 million.
I note that the Foundation is still active, having, for example, sponsored a website devoted to Business Ethics, launched by the Open University Business School (see web reference below),
This is a more openly pro-business (and therefore pro-Conservative) organisation. In a publication of the Foundation for Business Responsibility in the early 1970s Michael Ivens argued that he preferred the term 'business responsibility' (presumably the dislike of notions of “society” comes into play here!). He adopted a more moderate tone than some right-wing writers, advocating a “stakeholder” approach, and pointing out that the interest in social responsibility did not always come from outside business. He saw that there was a need to meet public perceptions in order to maintain capitalism. Amusingly he characterised some opposition to SRB as 'romantic brutalism'. He resigned from the Foundation for Business Responsibility when it was implicated in the Dame Shirley Porter/Westminster Council affair.
Aims of Industry, like the National Association for Freedom, took an anti-union line, and were supporters of Rupert Murdoch’s 1986 actions against the print unions, which are remembered as the Wapping dispute. Murdoch tried to cut manpower and change working practices at his printing plants. 6,000 workers went on strike in response to his high-handed tactics, so he moved the whole printing operation for his newspapers from Fleet Street to Wapping, employing EETPU members to replace those who had gone on strike and getting agreements from them on reduced manpower, new technology and above all a non-strike contract!
Although some key figures in Aims of Industry, like Ivens, took an apparently moderate stance in what they said, we have to ask, in the light of the activities of groups like Aims of Industry, if this sort of organisation is not just a "front", behind which the only-too-usual self-interest and corruption of some quarters of business can go on.
(iii) Institute of Business Ethics: This is a more recently established organisation, which produces a journal Business Ethics. It describes itself as a 'forum for the study and research of ethical questions, and to promote a positive approach to wealth creation.'
Its President: Lord Lang, Chair of United Biscuits has argued that 'business ethics are not negotiable: a well-founded reputation for scrupulous dealing is itself a priceless company asset.' This is the 'good business is good for business' argument, which you will often meet from those in business who are concerned about CSR. In other words they see that CSR brings such pay-offs as: a positive corporate image, goodwill, the pre-empting of legislation or controls, and even cost-savings in the long run (e.g. by economising – in the name of environmental friendliness – on the use of energy).
Other large businesses involved in IBE (with executives on the Board) are: Burton, Lloyds Bank, Esso, BT, and the Post Office. Your view of how effective or sincere IBE is will be no doubt coloured by your view of the social responsibility of these businesses!
Business in the Community: claims to
bring together 700 leading
the actual companies involved: Rio Tinto (which has a very bad record of
exploiting the mineral resources of developing countries),
Digby Jones, Director General of the CBI, said in 2002: “BITC has shown that voluntary action by business is the most sustainable way in which companies can build trust with their key stakeholders.” This provokes two thoughts: doesn’t the word “voluntary” reveal the motivation for CSR is often fear of regulation? And hasn’t the word “sustainable” been degraded being used in statements such as this!
5 (c) Stakeholder Capitalism
The rationale for this approach was given above (section 4 (f)), and it was noted that a number of organisations and individuals inside businesses have advocated it. However, here the question is whether a business that is structured this way will be more socially responsible. This is not so easy to answer… Perhaps the idea remains theoretical?
Robertson (1974) in fact argued that enterprises would need to have new structures in order to represent the interests of 'stakeholders.' In fact he went so far as to say that they should dominate the Boards of such businesses. This seems to me to be entirely logical, but I know of no businesses that have gone this far!
There is a similarity between this hypothetical new structure and some employee-owned enterprises such as the John Lewis Partnership. I will return to the question of worker/employee-ownership below (section 5 d (v) ). However, a glance at John Lewis’s statements about its social responsibility (see the web references below) does not reveal any difference between this declaration of principles and a host of other such statements – emanating sometimes form the least socially responsible companies!!
Sep 2016: Katie Allen in Guardian Financial discusses whether the main aim of a
company should be to promote the interests of its shareholders – the UK
Companies Act section 172 says: ‘a director of a company must act in the way he
considers, in good faith, would be most likely to promote the success of the
company for the benefit of its members.’ A number of people, including Andy Haldane,
the bank of
Deepwater Horizon disaster shows where this can lead. She goes on to quote the
charity B Lab
Under this heading I would include a number of businesses that share the view that it is possible to be socially responsible, or ethical, within the current commercial environment, mainly by adopting a set of values that reflect a concern for society, the workers, the environment etc.
There are several businesses of Quaker origin: e.g. Cadbury’s, Fry, Barclays. Quakers call themselves the Society of Friends to reflect their basic beliefs and their opposition to institutionalised religion. Their beliefs are that their personal lives should be influenced by their religion, which is pacifist and opposed to materialistic ways of life.
In the early days of capitalism, Quakers (a non-conformist Christian group with a simple, practical approach to religion – no rituals, no priests or other hierarchy etc) were trusted to be honest and fair in their dealings. This meant that a number of Quaker families established successful businesses e.g. Fry and Cadbury whose chocolate production grew out of care for people in prison. As regards social responsibility these businesses had what could be called a paternalistic outlook: they took care of their workers by providing clothing and even housing (Bourneville village was set up for the workers). To this day the Cadbury family have been quite involved in SRB issues – for example Adrian Cadbury produced a report (1992) on corporate governance, and chairs the Cadbury Committee on Corporate Governance.
Link: this report was published in the wake of scandals such as Robert Maxwell’s raiding of pension funds, and the collapse of BCCI. I deal with these issues in my article “The Social Politics of Business Ethics”. Go to: Business Ethics article
Probably the best-known example of a “new kind of business”. The Body Shop aimed to provide natural products (cosmetics and toiletries) that had not been tested on animals, were kind to the environment, and if sourced from a developing country the workers there would be paid a better than usual wage. Set up by Annita Roddick, Body Shop soon became very successful, with franchise operations throughout the UK and in America.
However, the Body Shop has not been without its critics, and in many ways can be described as a problematic case. The most telling criticisms came from a journalist, Jon Entine, writing in the journal Business Ethics in 1994. (See web references below).
Entine had been approached by people who ran some of the franchised shops in America. Originally they were mainly concerned about the franchise arrangements themselves, but on investigating further Entine came up with a long list of criticisms. He had these published in a magazine called Business Ethics in America. However, BSI soon stepped in, threatening legal action against the journal and Entine. The magazine should have appeared in the UK but did not owing to fear of prosecution!
Here is a summary of Jon Entine’s original allegations:
1. The Roddicks stole the ideas from an already existing shop in America – the name Body shop and even the names of some of the products were not original.
2. The products are actually very mediocre: in the trade the shop is known as "shoddy bop" because of the excessive use of petrochemicals in the so-called “natural” products. Moreover the company ha been raided by the Federal Drugs Authority three times!
3. The claims about non-testing on animals were exaggerated: products use materials that had not been tested in the previous five years – there was not an outright ban on testing.
4. Workers in the "third world" were not in fact paid well.
5. BSI’s trade with the third world was only a very small part of its operations: = 0.16% of BSI total turnover.
6. Despite its claim to contribute to society, BSI had made no donations to charity in the first 9 years of its operations.
7. There were accusations of franchise fraud.
8. The business was anti-union, and had been sued for sex-discrimination
9. The Roddicks had built up excessive personal wealth from BSI: Mr Roddick hired a plane to take his polo ponies abroad to play!
10. The legal actions taken by BSI against Entine and Business Ethics Journal (Entine claimed he had been followed by private detectives) were hardly what one would expect from an ethical company!
There has been a rapidly growing awareness that one way of ensuring business is socially responsible is to withdraw investment funds from places which carry out unethical activities. One of the most striking examples of this was when the National Union of Students withdrew its funds from Barclays in order to protest at the bank’s support for the apartheid regime in South Africa. This led eventually to changes in the bank’s policies, and started a trend. Churches, pension funds, trade union funds etc have all been examined by supporters of social responsibility to ensure that they are not invested in businesses that their members would object to.
The other side to ethical investment is when investors choose businesses that are pursuing socially positive activities – e.g. environmentally friendly sources of energy: you can now pay your electricity bill to companies that only invest in “green” electricity.
You can now get advice from a number of ethical investment companies, who will promise that your money only goes into things you approve of. Some of the best-known of these are:
Friends Provident (originating with the Quakers)
Target Global Opportunities (supported by the Save the Children charity)
Fidelity Famous Names (supported by BMA)
Skandia Life: ethical selection fund
N.M. Schroder: Conscience Fund (supported by David Bellamy)
Shearson-American Express (merchant bankers)
However, it should be clear that there is no widespread agreement as to what is 'ethical'. There are differences among these companies over what they will or will not invest in:
Calvert: supports: companies with good personnel relations, equal opportunities; opposed: apartheid, opposes pollution, the arms industry, nuclear power.
Fidelity: will not invest in: alcohol, pornography, oppressive regimes; supports: positive contributions to environment, equal opportunities.
Differences also appear over other criteria, for example: should ethical investment oppose all animal testing or 'unnecessary animal exploitation'?
There are deeper criticisms that have to be acknowledged, since the most unlikely institutions claim to have ethical policies nowadays: even the Bank of America is for 'social investment' & 'progress of society' & has: a public policy committee, a social policy department, and a code of conduct. It claims to support sustainable development, and non-interference with politics.
Also: ethical investments are still investments in the capitalist system, and some people advocate them for reasons of self-interest primarily, and not altruism: they represent a development of the market in a new direction, a new “niche”, and are likely to be more profitable in the long-term - because ethical investment companies perform well. Remember: good business is good for business!
Update, Sep 2013. a speech by Terry Smith, at the Institute of Directors, criticising ethical investment was answered by Simon Howard, of the UK Sustainable Investment and Finance Association, accusing Smith’s argument of being ‘simplistic and naïve’:
http://www.theguardian.com/business/2013/sep/18/terry-smith-criticises-socially-responsible-investments? – article on Terry Smith’s speech
http://www.theguardian.com/money/2013/sep/20/terry-smith-attack-ethical-funds-ill-informed - reply by Simon Howard.
Update: January 2016: http://www.theguardian.com/money/2015/oct/17/ethical-funds-green-investments-coal-oil-gas funds that have steered clear of controversial sectors such as oil and gas are prospering.
(iv) Traidcraft (See the web references below).
Aims to assist the poor in the third world - see chapter 7 - by assisting in setting up small businesses there, getting third world producers access to trade, and selling products from the third world in shops in UK, through a catalogue and now on line. They have approx. 130 staff in the UK, and support thousands of jobs in the third world. Since this is a business with a social mission, we would expect to find this reflected in their working practices etc.
Traidcraft say they were the first PLC to produce a Social Account, in 1990. They have a current maximum wage ratio of 1:5 (in 1986 it was 1:2.7). They claim to have an open information policy to employees; and to support production in third world only if meets the criteria of acceptable wages and work practices. Their original policy statement said they had an educational and political role, to promote: 'peace, reconciliation, justice and wholeness'.
Some Examples: Scott-Bader, Suma Wholefoods, Mondragon Corporacion Cooperativa, Spain
The workers own the co-operative, and no-one else does, therefore decisions on wages, profits, investment, products etc are taken by the whole workforce, in the interests of the co-operative, and not just in order to maximise shareholder value for a group of outside shareholders.
[Note, and Update: in
owned co-ops. Briefly, the Labour Party has not welcomed workers co-ops. The Webbs, and the Fabians mistrusted the workers, believing they would not
have the required managerial skills, but they did believe that consumers would benefit from having a “stake” in a retail outlet, and this is what was intended.
The o-op went through a bad patch in the last few decades – competition with traditional supermarkets hit them, and it is only recently that the “dividend”
which represented the consumer’s share of profits, has been restored.
The most recent development (Dec. 2006) is that the two largest cooperative societies are talking about merging. These are: the Co-op Group and United Co-
operatives. This would be “the largest merger of such a consumer-owned retailer since the modern co-operative movement was founded in Rochdale in
1844” (Simon Bowers, Guardian Financial, 12/12/06). A merger would bring together 2,300 grocery stores, 800 funeral parlours, 660 chemist shops, and 450
travel agency branches. The enlarged society would employ 85,000 people. Combined turnover would be over £10 billion. ]
According to Patrick Kingsley (see below) there are some 6,000 co-operatives in Britain today (2012).
It seems to me that such an ownership structure must have a profound effect on the whole outlook and operation of the company. Of course, individual co-operatives still have to compete in a capitalist or market economic context, and individual co-operatives might end up simply trying to be successful in order to protect jobs. (For example, Kalamazoo office systems originally had characteristics of a co-operative, but I believe it has now been taken over by a traditional business).
However, when such a co-operative is set up in the first place it has to be as a result of a conscious decision, and it is usually only done by a group of people who have other aims in mind than simply to find work, notably a belief in a fully democratic organisation, and in sharing decision-making, and sharing risks.
In addition, many co-operatives (e.g. Scott Bader) make a conscious decision not be involved in production of goods that they disapprove of – viz. armaments. Scott Bader make plastics and resins, and it would have been easy for them to find contracts in the arms industry, but since their founder (Scott Bader, who gave the company to the workers) was a Quaker, their founding principles exclude this.
Suma produce wholefoods, including vegetarian and vegan foods, introduced Ecover brands (environmentally friendly washing powder etc) and they also believe in fair trade (see further below).
Thanks to a democratic co-operative structure, the potential conflicts of interest (shareholders vs. workers, customers etc) that exist in traditional companies, are removed, and the aim of being socially responsible is not “muddied” by needing to increase value for shareholders. Given the principles on which most co-operatives are based, it seems to me most likely that they would be socially responsible in all their activities.
Central general characteristics of all co-operatives:
- control is vested in all the workers (at Scott Bader in a General Council, which is the highest decision-making body)
- management are appointed by and accountable to the general council
- there is a fixed and narrow ratio of wages (3 or 4.5:1 at Scott Bader when it was set up, in 1921)
- there is a maximum size (around 400 - 500), in order to ensure democratic control is practicable – co-operatives that need to grow beyond this usually split and form new co-operatives
- the constitution insists on only socially responsible products (so no arms contracts): “it must encourage a spirit of co-operation and help to eliminate social injustice and waste – making the world a better place to live.”
- a number of
business units form the
- the companies’ principles are:
equality (of opportunity)
respect (human dignity)
- equality of wages for all jobs
- multi-skilling and job variety
- personal development within the company
- ethical business and employer
- 100% employee owned and managed
- democratic decision making processes
- equal opportunities
- environmentally friendly products
- common ownership (members own assets, but may not benefit from liquidation)
An article by Patrick Kingsley, G2 09.10.12 describes Suma as ‘a business with no bosses’ – it has a management committee of 6 workers (each replaced after two years), but they base their decisions on ‘prolonged consultations with the rest of the company’, and anything contentious is referred to a bimonthly general meeting. Workers take on a variety of tasks. In 2011 Suma had 150 employees, a turnover of £30 million, and 8% growth.
- a co-operative is set up when a group of workers, who are friends (friendship is seen as a “natural bond which creates a
building block for successful ventures”, according to the IIS) come together and invest the necessary money, they then receive a share of any surplus that is generated
- it is worth noting that the Spanish government also helps with finance to set up co-operatives – and this was the case even under Franco! So you don’t have to have a left-leaning government – in fact the British Labour Party has always been hostile to producer co-operatives, whilst supporting the much less radical idea of consumer co-operatives (The Co- op)
- the first co-operative was set up in 1956, the idea of a Catholic priest, Father Jose Maria Arizmediarrieta. Such ideas blend the Catholic worker tradition, with the socialism of Robert Owen..
- 10% of annual profits are donated to charity; 40% retained in the collective internal account for the benefit of members – if the co-op closes down this goes to charity; 50% is for use e.g. as capital, or as collateral for bank loans
- Mondragon is in the Basque area of Spain (an area with its own language and culture, that is struggling for autonomy) so there is a sense of communal identity and support. There is therefore a whole network, with 160 trading co-ops (23,000 members), whose sales grossed US $3 billion in 1991.
The Mondragon co-operatives include:
- a co-operatively owned bank, advising on co-operative ownership, assisting with loans etc
- service co-ops (hospital, social security)
- housing co-ops
- over 40 co-op schools and a technical college (training workers for co-ops and bank etc).
(See also (copied to): ioalternatives)
Updates on Co-operatives See csr8inequalityupdates.htm#coops
May 2013: Ed Mayo, secretary-general of Co-operatives UK - http://www.guardian.co.uk/profile/ed-mayo (lists several articles as well as a brief profile) - has a useful piece in 4th May Guardian, drawing distinction between co-operatives and mutuals (the ‘nudge unit’ is going to be turned into a public service mutual) – there will be 25% of shares owned by staff, but no vote for them. http://www.guardian.co.uk/commentisfree/2013/may/03/nudge-unit-mutualisation-but-not-as-we-know-it
Initial Bibliography, especially useful for Chapters 1 & 2. [See also: Booklist on CSR]
Acton, Prof.H.B. (1972): The Ethics of
Capitalism. Foundation for Business Responsibility,
Baumhart, R. (SJ) (1968): Ethics in Business, Reinhart and Winston, New York; also Harvard Business Review, (Vol 39, 1961).
Birchall, J. (1994): Co-op: the People's
Blackburn, S. (1996), Oxford Dictionary of
Cadbury, A. (1992) The Financial Aspects of Corporate Governance (Report of the Cadbury Committee on Corporate Governance) . See also: (2002), Corporate Governance and Chairmanship, Oxford University Press.
Cannon, T., Corporate Responsibility - F.T./Pitman (1992)
Carmichael, S. and Drummond, J. (1989): Good
Business. Business Books,
Curtis, D (ed) (1997): The Castoriadis Reader, Blackwell.
Clutterbuck D. and Snow D. (1992): Actions
Speak Louder Than Words. Kogan Page, with Kingfisher,
Clutterbuck, D. and Snow, D. (1990): Working
With the Community. Weidenfeld and Nicholson with Kingfisher,
Cockett, Dr R, (1994), Thinking the Unthinkable: think-tanks and the economic counter-revolution, Harper Collins.
Donaldson, P. (1973): Economics of the Real World. Penguin, Harmondsworth, Middlesex.
Ecologist, The (March 2005) Corporate Social Responsibility, pp 28 – 32.
Frederick, W.C., Post, J.E., Davis, K. (7th edition 1992), Business and Society, McGraw-Hill
Friedman, M (1970) The Social Responsibility of Business is to Increase its Profits, in New York Times Magazine, Sep. 1970.
Gamble, A. (1988) The Free Economy and the
Haralambos, M. (2000), Sociology: Themes and Perspectives, Harper Collins.
Hayek, F (1944) The Road to Serfdom, Routledge.
Hoffman, W.M. et al (4th edition 2001), Business Ethics, McGraw-Hill.
Humble, J. (1973), Social Responsibility Audit, Foundation for Business Responsibility
Hutton, W. (1995), The State We’re In,
Ivens, M., (1970) Industry and Values, Harrap, with Foundation for Business Responsibilities.
Luthans, F, Hodgetts, R.M., Thompson K.R. (1976), Social Issues in Business, Macmillan, New York.
Neale, A, Take my Breath Away, in Fairweather, B et al (1997) Environmental Futures, Macmillan.
Robertson, J., (1978) Profit or People? The new social role of money. Calder and Boyars.
Roddick, A (1991) Body and Soul, Ebury Press (Random Century)
Shaw, W.H., Barry, V. (6th edition, 1995): Moral Issues in Business. ITP/Wadsworth, Belmont (California).
Wood, J. and Ivens, M. (1973): Is a Preoccupation with Business Responsibility a Betrayal of Capitalism? Foundation for Business
On the web:
Business in the Community: www.bitc.org.uk
Ford Foundation: www.fordfound.org
Hansard (reports on
parliamentary debates): www.parliament.uk/hansard see reports for 1991-12-20, & debates for
Institute of Business Ethics: www.ibe.org.uk
Institute of Economic Affairs: www.iea.org.uk
Mondragon Corporacion Cooperativa, Spain: www.iisd.org/50commdb/desc/d13.htm - website connected to the International Institute for Sustainable Development
John Lewis: www.johnlewispartnership.co.uk
Open University: website on Business Ethics: www.open.ac.uk/business-ethics/
Rockefeller Foundation: www.rockfound.org
Social Audit: www.socialaudit.org.uk
Suma Wholefoods: www.suma.co.uk
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