Different Approaches to Corporate Social Responsibility

The philosophy behind western approaches to CSR

Western approaches to the formulation of Corporate Social Responsibility strategy are overwhelmingly secular. They tend to flow out of one of a number of paradigms. We can perhaps categorise these paradigms as follows:

  1. Classical
  2. Social Contract
  3. Instrumental
  4. Legitimacy
  5. Stakeholder

1. The “classical” view is best expressed in terms of the work of the economist Milton Friedman who believed it was wrong for corporate officials to extend their social responsibilities beyond serving the interests of their shareholders. Friedman said:

There is one and only one social responsibility of business – to use its resources and to engage in activities designed to increase its profit so long as it stays within the rule of the game, which is to say, engages in open and free competition without deception and fraud.”

2. The “social contract” paradigm would argue that CSR policies are a necessary part of the process whereby a business relates to society. This paradigm would say that CSR policies are necessary because society expects businesses to do it.

3. The “instrumental” approach would say that CSR is a tool in the process whereby the interests of its prime stakeholders are preserved.

4. The “legitimacy” approach regards CSR as part of the process whereby a firm gains legitimacy in the eyes of the public, and thereby a Social License to Operate.

5. Finally, “stakeholder” theory regards CSR as no more than the process whereby a business fulfils its responsibilities to its stakeholders.

Corporate Social Responsibility and Islam

Let us now consider a fundamentally different approach to CSR from the ones outlined above. I wish to use the example of Islam. Islamic approaches to CSR are based on an existential understanding about what it means to be a human being, about man’s true identity.

A commitment to certain values

For Muslims a man, over the course of his earthly life, has to strive to make a commitment to certain moral standards as well as social norms. Although it is certainly the case that many in the west also strive to make such commitments in the course of their daily lives, it is undeniably the case that there are many in the west who respect, or accept the view that a man’s individuality can be based around his identity as a utility maximising economic agent alone. This is just not possible in Islam.

The fact that the mosque is centred in the bazaar is a vivid symbol of the Islamic tradition that effective business flows out of moral conduct. It was not so long ago that such a view prevailed in western Europe. One of the key reasons that the City of London was able to achieve its status in the nineteenth century as the centre of the world’s financial markets was due to the effects of the various religious revivals in Victorian England, especially the evangelical one.

People came from all over the world to do business in the City because the Victorian gentleman’s word was his bond. This meant, therefore, that effective business deals were possible in London in a way which was not possible elsewhere in the world. Effective business is inevitably closely allied to the matter of trust, and moral capacity.

Rights versus duties, individual versus community

Secondly, Islam expects each person’s conduct in life to show a proper balance between the rights and duties of himself as an individual, and his rights and duties in respect to society as a whole. So, immediately, the Islamic code of behaviour requires an individual to make a commitment to CSR, i.e. to society as a whole rather than just to himself.

I have picked four key points out of Islam which I believe are relevant to our consideration of CSR strategies. These are:

Islam is not opposed to the principle of profit making. However, there are certain principles which Islam believes over-rides the matter of profit making. These principles can be summed up as follows:

This concludes my survey of different philosophical foundations that underpin contemporary CSR policies. In my next blog I will look at a specific example of where an extractive operation lost its Social License to Operate as a result of poor CSR policies. This resulted in a dramatic escalation in the level of security risk faced by the operation, and significant financial loss.

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