This blog post was contributed by Jennifer Arosio, a student in the MSc Leading Innovative Organizations at JKU Linz, and is based on the lecture “CSR and Stakeholder Relations” by Prof. Dr. Nora Lohmeyer (class #8 of Course II)

The concept of corporate social responsibility (CSR) emerged in the 1950s when Howard Bowen advocated for more ethical and responsible businesses and for responsiveness to societal stakeholders (Bowen, 1953). However, the idea has long been relegated to classrooms or to academic debates, and it has only recently gained attention from both corporations and the general public. CSR is a broad concept that includes different theories and meanings and there is no universal consensus on its characterization or a magic formula that will turn an organization into “the responsible organization”. However, it has been noted that CSR’s main theories are focused on one aspect of social reality, namely economics, politics, social integration and ethics (Garriga and Melé, 2004). In this post, I will compare a position that sees companies as purely economic actors with one that recognizes the interconnection between them and society[1]. I will then discuss my thoughts on the topic.

The shareholders’ perspective is probably the most known theory when discussing an organization’s economic responsibility. In 1970, the New York Times Magazine published Milton Friedman’s piece, in which he stated that the primary responsibility of corporations should be to return money to their shareholders and pursue economic growth as long as they remain within the law (Friedman, 1970). This idea had a long-lasting impact on how corporations conducted their daily operations. Even today some scholars and executives agree with this view and business schools continue to stress that the overarching agenda of organizations should be profits maximization. A representative example of this behavior could be the fierce competition for short-term trading, hostile takeovers, and purely financial figures that dominated Wall Street, and the “finance world” in general, up until at least 2008. The financial crisis exposed how faulty the perception of firms as isolated entities with no interests other than their own short-term profits was. It became then apparent (again) that businesses were embedded in society and that their activities could influence it. 

A different perspective emerged in the mid-1980s. It emphasizes the relationship between business and society and acknowledges how diverse stakeholders can affect or be affected by a company (Freeman, 1984). In addition to shareholders, stakeholders include suppliers, governments, communities, employees, non-governmental organizations, etc. According to this perspective, an organization’s long-term success depends on the support of these stakeholders. Therefore, management should actively tend to the interests of all stakeholders in order to develop effective company strategies (Freeman, 1984). However, the interests of organizations and those of society not always align and this is when CSR comes into play. As a result, today’s social responsibility is not only concerned with how businesses spend their money (e.g., donations) but also with how they make that money and in which activities they actively engage to further the common good, even when those activities may not result in a financial benefit. And this view is becoming dominant in modern society.  Organizations are no longer regarded as entities that operate in a vacuum; on the contrary, it is widely accepted that their actions have political, ethical, environmental, and social consequences. We could even take this one step further and say that a rising part of the general public is demanding that corporations take action in response to societal issues. In the past few years, in addition to ongoing concerns about climate change, the world went through Covid-19, the Black Lives Matter movement, Russia’s invasion of Ukraine, and now the overturn of Roe v. Wade in the United States. Businesses were expected to take a stand in all these situations. Let us take a closer look at each of them individually.

I believe that Covid illustrates how society influences corporations and vice versa. On the one hand, businesses were required to put the public health interests above their own, to stop conducting business in person, and to modify their operations for the societal good. On the other hand, some corporations implemented their own policies in addition to the ones imposed by governments. For instance, Walmart introduced flexible schedules, a special emergency COVID-19 leave policy for its employees and opened vaccine clinics in support of the community.

Following the killing of Georg Floyd by a Minneapolis police officer in May 2020, corporations were openly urged by their employees and customers to support the Black Lives Matter movement and join the fight for racial equality. One of the first streaming platforms to release a statement in support of the protests was Netflix. In addition to that, the company pledged $100 million in support of Black communities in the US, and its CEO donated $120 million to historically black institutions and universities. 

On March 1, 2022, just a few days after Russia’s invasion of Ukraine, Apple issued a press release stating that the company had halted product sales and exports to Russia, restricted access to its services like Apple Pay, and even taken steps to increase safety for Ukrainian citizens by blocking access to real-time events in Apple maps. This is an excellent illustration of how certain major corporations are demanded to intervene in geopolitical concerns because they are seen as having more influence (and longevity) than some governments.

Finally, moving onto an even more recent issue, on Friday, June 24 2022, the US Supreme Court overruled Roe v. Wade, banning the facto the right to abortion in the United States. While, at the time of writing this piece (June 26, 2022), we have not yet seen a fully-fledged response to the issue, some businesses such as Warner Bros., Condé Nast, Google, etc., have already declared an expansion of their health benefits and travel expenses coverage for abortions. Moreover, I think that it will be difficult for businesses to ignore the problem, and that additional responses will follow.

These were all circumstances in which companies got actively involved in sociopolitical matters, demonstrating their obligations to both their community and society as a whole. Obviously, none of these actions are exempt from critique or skepticism. Walmart is known for low pay and below-average working conditions. Netflix pledged its donation only after some of its stakeholders expressed negative emotions toward a mere press release message. Apple and all the other companies pulling out of Russia might be doing so for future gain, to avoid losing the trust of their customers, or just to avoid governmental sanctions. Not to mention all the situations of “greenwashing” or “ethic washing” where corporations’ CSR statements are only a facade for “business as usual”. Moreover, despite the fact that CSR has several components, organizations typically only handle one of them at a time, depending on the urgency of the situation and the general mood of the public. Additionally, CSR’s critics will argue that businesses operate in a capitalistic market and it would be naive to assume that their actions are completely altruistic. They will remark that a company’s primary objective is always survival (if not supremacy), and that CSR could be a strategic tool to obtain public support and sustain a competitive advantage. 

However, the examples prove how inaccurate it is to think that a corporation’s sole responsibility is to return money to its shareholders. This perspective, in my opinion, is based on the wrong assumption that firms can be taken in isolation from society and it is also too limited in its idea of shareholders. Friedman’s doctrine fails to acknowledge that shareholders are also members of society and their individual interests might go beyond mere profit maximization (Datta, 2021). 

In conclusion, I disagree not just with the idea that firms should simply return profits to shareholders, but also with an overly negative interpretation of their CSR efforts. It is important to be aware of CSR decoupling, which occurs when organizations adhere only superficially to the institutional pressure (Meyer and Rowan, 1977), thus creating a discrepancy between CSR reports and actual practice. However, if reports and practices are aligned, should the general public be concerned with the underlying reasons for which companies engage in those practices? Should we agree with Machiavelli’s dictum that “the end justifies the means” in this case? From the outside, it might be impossible to fully comprehend the root causes that push corporations to be more responsible and critiques might be superficial. While it is true that a lack of real commitment might lead to questionable practices, it is also true that actions that have a positive social impact send a powerful message to the broader public which may, in turn, ultimately reinforce mechanisms for more responsible corporate behavior.

This brief excursus shows how times have changed since Friedman’s essay. Today corporations know that they need society for their survival and growth and recognize the importance of social responsibility. This does not mean that CSR will annihilate the shareholders’ view. However, the only approach that can deal with the complexity of contemporary society is one that is more inclusive and takes into account diverse stakeholders.

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[1] Only American corporations have been included in this essay to give a homogeneous overview of companies’ responses to societal issues.

References

Bowen, H. R. (1953). Social Responsibilities of the Businessman. New York: Harper.

Datta, Y. (2021). Friedman Doctrine: Maximizing profits is neither good for society nor even for the shareholders. Journal of Economics and Public Finance, 7(3), 153-191.

Freeman, R. E. (1984). Strategic Management: A Stakeholder Approach. Boston: Pittman.

Friedman, M. (1970). A Friedman doctrine: The social responsibility of business is to increase its profits. The New York Times Magazine, 13(1970), 32-33.

Garriga, E., & Melé, D. (2004). Corporate social responsibility theories: Mapping the territory. Journal of Business Ethics, 53(1), 51-71.

Meyer, J. W., & Rowan, B. (1977). Institutionalized organizations: Formal structure as myth and ceremony. American Journal of Sociology, 83(2), 340-363.

This blog post was contributed by Birgit Plöchl, a student in the MSc Leading Innovative Organizations at JKU Linz

The Russian invasion in Ukraine has a lot of impact on day-to-day life all around Europe. Millions of Ukrainians are fleeing the country, infrastructure is being destroyed, and people are lacking basic needs, such as food or hygiene. Hence, Europe is facing one of the biggest crises in recent years. In comparison to other wars in European history, this one is also waged online. Soldiers do not only fight over territory, but hackers attack governmental systems, or media platforms. The goal is to get as much internal information of the opponent as possible to accumulate leverage. In addition, social media channels are used to share information about current happenings. People also use it to organise themselves to provide humanitarian aid, to show their lives at the frontiers, or to share their personal opinions. In this essay, I will argue that digital platforms contribute as much to creating as to solving crises. In the next paragraphs, I will display three main aspects of digital platforms and explain how and why those not only help solve the crisis but also enhance it. While there are various kinds of crises, this essay addresses the specific crisis of a war with the example of the current Russian Invasion in Ukraine. My focus will lie on social media platforms. It is of utmost importance to state that I only address problems with regards to the social media platforms, however, knowledge-, media sharing-, and probably service-oriented platforms, such as Quora, Spotify, and AirBnb are areas of interest too in order to understand the importance of digital platforms with regards to the contribution to crises. I will use an inverted pyramid approach and will state an argument per aspect that is then supported by facts and examples.

First, social media platforms are super spreaders for fake news. Since everyone can post anything at any time, people often misinterpret personal opinions as facts. This allows people without sufficient knowledge about a topic to share unverified information with their followers. Various content creators use their social media channels to show their own lifestyle, values, and beliefs. Most content consumers follow influencers because they value those or even because they aim to be like them too. This is a problem, once content creators use their reach to convince people of questionable opinions based on fake or only partial true information. In addition, they often have hidden agendas or get paid in order to share particular information. Online profiles are very opaque, and it is often not clear who the manager of the specific accounts is. For example, David Gilbert, a VICE news reporter, states that Russian Tik Tok influencers were paid to share Russian propaganda. Based on his article, an anonymous administrator shared detailed plans on how and what to post on the individual Tik Tok channels via a Telegram chat group (Gilbert, 2022). Especially critical are channels of state-owned enterprises, governmental association or state-affiliated media (HRW, 2022). By now many globally known social media platforms have taken actions to counter the spread of propaganda and incorrect news. However, it takes too much time to control and identify wrong information and delete them. Both governments and social media platforms are too slow to ban fake news (Susi et al., 2022). However, there is not only news that is fake on social media platforms.

Another significant way social media can be problematic is that people can create fake profiles online to stay anonymous. Those profiles are mostly used to share socially unacceptable ideas, ask embarrassing questions, or to spread hate speech and abusive comments, or conspiracy theories (Wani et al., 2017). Coscia & Rossi (2022) state that the use of social media increases ideological segregation and enhances polarisation. In case of the Russian invasion in Ukraine, people were able to transmit their own ideologies, even if those were based on low quality news or personal opinions instead of facts. Consequently, people in and outside the war zone adapted more extreme opinions for either party. Researchers have identified that the Kremlin used social media to radicalise individuals way before they invaded Ukraine. In addition, BBC reporters discovered that a  pro-russian network steals and uses pictures of famous influencers to create fake profiles where they then share posts linked with hashtags such as #IStandWithPutin or #IStandWithRussia (Gragnani et al., 2022).  To reach as many people as possible, the algorithms of digital platforms are crucial. This brings me to the next main aspect why digital platforms contribute as much to creating as to solving them.

Digital platforms such as Facebook or Instagram rely on algorithms for an individual adapted news feed of their customers. Artificial intelligence, also called AI, is used to identify a person’s preferences, and optimise their news feed or home pages of their social media accounts. By drawing on digital traces, the algorithms can detect personal preferences and create a personalised loop of information shown to the person (Calice et al., 2021). The technology creates an information bias that causes people to reach conclusions quicker. Hence, people form opinions before having enough knowledge to establish a well-informed decision. The above-mentioned fake news, or conspiracy theories, can be distributed easier based on the algorithms. For example, if a person already doubts the media or is vulnerable to conspiracy, they might seek out certain keywords or hashtags online. AI recognises a pattern in the person’s digital footprint and the news feed shows more similar content. This creates a certain “bubble” social media consumers live in and clearly shapes their values and points of view. In addition, there are software robots, also called bots, that work either fully automated or with little intervention of humans. While some of them are used for public good, a lot of them spread malware or spam. The social bots are newer and are very critical as the software interacts with people and it is very hard to detect them. They aim to adapt the people’s behaviour (Himelein-Wachowiak et al., 2021). The researchers have found that bots were supporting and spreading conspiracy theories and misinformation during the Covid-19 crisis. This means, it is possible that bots are used to interact with people during the Russian Ukraine war too. Hence, AI and bots can enhance crises as the sharing of wrong information is very easy.

This essay has explored the effects of social media platforms on the current Ukrainian crisis. Moreover, there are more general implications in which these platforms can potentially harm individual lives and behaviours. One aspect of why digital platforms contribute to crises is the general information overload we face nowadays. Wherever we go, and whenever we want, we can surf online and get information about certain topics. This also means that we are more aware of the bad things happening globally. In his book “Humankind”, Bregman (2021) clarifies that the world has never been as peaceful as today. Nevertheless, people all over the world think that there is more crime and violence happening than ever before. A big part of this misperception is the media coverage of crime rates (John Howard, 2019). Crime is often the most covered topic in the news. As stated in the blog entry of John Howard (2019), Harper & Hogue (2017) discovered that 2% of the crimes in UK were sex offenses but had a media coverage of 20%. This clearly shows a disproportionate coverage. Further, people tend towards a “hometown favouritism” (Duffy & Wake, 2008), meaning that they perceive their own social community as better than others. Hence, people are biased towards their known society bubble, and get more and more information about negative incidents in different areas of their home country or globally. Consequently, the media shapes their opinion about the global state of peace that is misleading. The more news about crime is consumed, the more people fear that they will be victims to crime (Näsi et al., 2021). This increasing fear leads them to look for comfort and seek stricter rules or authoritarian leadership (Gelfand, 2020).

If we look once again at the Russian Ukraine war, this can clearly explain how people who do not have a supportive surrounding or fear the future are easily manipulated by conspiracy theories or fake news they consume on digital platforms. As stated before, the Russian government has used social media to mobilise individuals towards pro-russian beliefs years before they invaded Ukraine. I trust that if there was not such an information overload that impacts the mental health of a lot of people, that would not have been possible to the extent it was. Further, the so-called weltschmerz, which stands for the pain that living people feel towards other people that suffer because of their empathy, increases by the tremendous sources of news available.  To conclude, I have stated three main aspects that clearly show that digital platforms contribute as much to creating as to solving crises. First, I addressed the problem of fake news, followed by the complexity of the algorithms that enable all the digital platforms we use, and lastly, the overall mood worldwide caused by an information overload. While digital platforms surely have great positive contributions to solving crises such as enabling humanitarian aids, it is very important to also understand their negative impact. Governments and social media companies must solve the problems of fake profiles, bots, and misinformation as soon as possible to help to deescalate the current situation or at least to stop intensifying it. During the process of writing this essay, I realised that there are still various areas to discover to understand the specific implications of digital platforms better.

References

Bregman, R. (2021). Humankind: A Hopeful History. Bloomsbury.

Calice, M. N., Bao, L., Freiling, I., Howell, E., Xenos, M. A., Yang, S., Brossard, D., Newman, T. P., & Scheufele, D. A. (2021). Polarized platforms? How partisanship shapes perceptions of “algorithmic news bias.” New Media & Society, 14614448211034160. https://doi.org/10.1177/14614448211034159

Coscia, M., & Rossi, L. (2022). How minimizing conflicts could lead to polarization on social media: An agent-based model investigation. PLOS ONE, 17(1), e0263184. https://doi.org/10.1371/journal.pone.0263184

Duffy, B., & Wake, R. (2008). Crime and Public Perceptions, 76.

Gelfand, M. (2020, January 2). Authoritarian leaders thrive on fear. We need to help people feel safe. The Guardian. https://www.theguardian.com/commentisfree/2020/jan/02/authoritarian-leaders-people-safe-voters

Gilbert, D. (2022, March 11). Russian TikTok Influencers Are Being Paid to Spread Kremlin Propaganda. Vice. https://www.vice.com/en/article/epxken/russian-tiktok-influencers-paid-propaganda

Gragnani, J., Medhavi, A., & Seraj, A. (2022, May 9). Ukraine war: The stolen faces used to promote Vladimir Putin. BBC News. https://www.bbc.com/news/blogs-trending-61351342

Harper, C. A., & Hogue, T. E. (2017). Press coverage as a heuristic guide for social decision-making about sexual offenders. Psychology, Crime & Law, 23(2), 118–134.

Himelein-Wachowiak, M., Giorgi, S., Devoto, A., Rahman, M., Ungar, L., Schwartz, H. A., Epstein, D. H., Leggio, L., & Curtis, B. (2021). Bots and Misinformation Spread on Social Media: Implications for COVID-19. Journal of Medical Internet Research, 23(5), e26933. https://doi.org/10.2196/26933

HRW. (2022). Russia, Ukraine, and Social Media and Messaging Apps: Questions and Answers on Platform Accountability and Human Rights Responsibilities. Human Rights Watch. https://www.hrw.org/news/2022/03/16/russia-ukraine-and-social-media-and-messaging-apps

John Howard. (2019, January 7). Media portrayals of crime create problems. The John Howard Society of Canada. https://johnhoward.ca/blog/media-portrayals-crime-create-problems/

Näsi, M., Tanskanen, M., Kivivuori, J., Haara, P., & Reunanen, E. (2021). Crime News Consumption and Fear of Violence: The Role of Traditional Media, Social Media, and Alternative Information Sources. Crime & Delinquency, 67(4), 574–600. https://doi.org/10.1177/0011128720922539

Susi, M., Benedek, W., Fischer-Lessiak, G., Kettemann, M. C., Schippers, B., & Viljanen, J. (2022). Governing Information Flows During War: A Comparative Study of Content Governance and Media Policy Responses After Russia’s Attack on Ukraine. GDHRNet Working Paper. https://doi.org/10.21241/SSOAR.78580

Wani, S. Y., Wani, M., & Sofi, M. (2017). Why Fake Profiles: A study of Anomalous users in different categories of Online Social Networks. International Journal of Engineering, Technology, Science and Research, 4, 320–329.

This blog post was contributed by Hannah Schneller and Mario Stich, both students in the MSc Leading Innovative Organizations at JKU Linz, based on class #8 of Course II, “CSR and Stakeholder Relations“.

Discussing the shareholder vs. stakeholder approach in CSR strategies in class was great, and we concluded that Friedman’s shareholder value approach from the 70s would actually harm shareholders in today’s business environments due to its short-term focus and missing out on essential stakeholders. Especially in a global business environment, where social and environmental tragedies and disasters are common, it is even more critical that corporations change their perspective.

In our discussion, it has become clear that long-term shareholder value can be created with a holistic CSR approach, including a corporate strategy that attends to all company stakeholders. The triple bottom line concept, for example does not value the profitability of societal or environmental impact but rather treats these dimensions as separate and competing (Miller, 2020). However, today companies can also financially benefit by committing to the triple bottom line with sustainable business practices since financial market instruments, green bonds, and sustainability indices have become popular on the financial market.

Hence, we want to extend our in-class discussion in this blog post and discuss if sustainability indices are about sustainability or are used as a market(ing) instrument.

For this reason, we will focus on the Dow Jones Sustainability Index. S&P Global’s Corporate Sustainability Assessment indicates that the Dow Jones Sustainability World Index contains the “world’s top sustainability leaders”. Based on long-term economic, environmental, and social criteria, it reflects the top 10% of the top 2,500 firms in the S&P Global BM (S&P Global, 2022). Therefore, the Dow Jones Sustainability Index is a perfect example that profit orientation and narrowed shareholder focus are no longer applicable in today’s business settings to be financially attractive as a company on the market.

Many companies, like big industry giants and oil companies, are known as the biggest CO₂ emitters in their country but are still included in the Dow Jones Sustainability Index. The question we want to discuss is if sustainability indices are actually contributing to more sustainable practices or if they are just attractive for financial institutions to list performant companies and sell them to shareholders in the end.

From the Austrian viewpoint, we criticize the inclusion of organizations such as the Austrian steel company voestalpine or the oil company OMV. These industry giants have been the highest and second-highest CO₂ emitters in Austria in the year 2020 (Dauer, 2021).

However, they are listed in the Dow Jones Sustainability Index ranking, and we argue that the corporation’s core motivation concerning CSR is to be financially attractive to shareholders and use its CSR additionally as a market(ing) measure. It can be seen as a marketing instrument because an organization’s commitment to CSR (proven by sustainability indices) can attract shareholders – since they value and invest in organizations that operate socially and environmentally responsible. That, in turn, will maximize the profits in the long-term, which allows a better position in the market. Nevertheless, these two mentioned companies show responsibility in their company plans by really targeting to lower CO₂ emissions in the future. (OMV, 2022; voestalpine, 2022).

Another example can be seen in the Higg Material Sustainability Index (MSI). The recent development of companies ranked in this index shows that it could also be of risk for investors to invest in companies that are not 100 % transparent. Major fashion brands such as H&M were misleading customers by stating incorrect manufacturing data regarding their environmental impact (e. g. saved water, global warming impact, etc.). To go into more detail, brands could manipulate the numbers by adding data from a small best practice example while they will not disclose data from their mass production (Britten, 2022). Misrepresentation of a company’s CSR KPIs is a target for investigation. Greenwashing or other types of falsification for marketing purposes have the opposite effect and rob authenticity and trust in companies.

Even though the stakeholder approach fails to minimize the complexity of the business-society relationship (Barnett, 2019), we support the shift from the shareholder to the stakeholder perspective. For this purpose, it is crucial to promote those companies that are sincerely committed to their CSR. Thus, we request, first, stronger audits before and after including a company in a sustainability index. Second, transparency of the organization’s figures must be a new standard for sustainability indices. Finally, it can also be a threat for investors who truly believe in investing in sustainable companies if financial institutions promote sustainability bonds and “green” indices.

After our argumentation and outlined examples, we are interested in your opinion and insights. Please let us know in the comments what you think about the question: Are sustainability indices sustainable, or are they just a marketing instrument? And what measures may be possible to promote the CSR of companies? Can you find other questionable members in the mentioned indices?

Additional references

Barnett, M. L. (2019). The business case for corporate social responsibility: A critique and an indirect path forward. Business & Society, 58(1), 167-190.

Friedman, M. (1970.) The social responsibility of business is to increase its profits. New York Times Magazine, 13, September 1970.