Nowadays we are very use to hear and work with the term “Corporate Social Responsibility”, but this has not always been like this. How has this term evolved? Where does it come from?
Well, there are different theories about the beginning of this concept and its specific meaning. However, all of them comes from the United States. The CSR was born as a part of the different North American business management theories that were booming in the 50s and 60s.
In the very beginning, Corporate Social Responsibility, or CSR, seemed more like a moral obligation of the businessman than a code of the company itself. But little by little, this changed as social awareness did.
But what does Corporate Social Responsibility mean as a concept?
According to the European Commission, CSR is the "responsibility of companies for their impacts", because every company has an impact as a consequence of its activities. CSR is about making companies minimise its possible negative impacts and maximise the positive ones.
Thus, in the 1950s and 1960s, the US private sector started to promote social causes, which is why the first tax mechanisms were born to encourage companies to carry out charitable actions. So, at that time, American companies began to pay less tax for helping certain sectors of society in need.
All theories attribute the origin of CSR to the North American economist Howard Bowen, who, in 1953, first used the term "Social Responsibility of a Businessman", not of a company, but of an individual. For Bowen, it was the businessman who had the responsibility for making decisions in his company in accordance with the goals and values of society.
That was something. At least someone, even if it was only the entrepreneur, had the responsibility to make decisions that would preserve social values. But this concept evolved. Thus, years later, Archie Carroll defined corporate responsibility as something legal.
He already implied a certain business ethic, no longer directly assumed by the entrepreneur. So, philanthropy and morality should be born voluntarily by the organisations. This concept allows the inclusion of the CSR, as defined by Bowen, within the framework of the organisation itself.
Carroll himself defined the "Pyramid Theory", where four kinds of social commitments of companies are framed in a pyramid. Responsibilities at the base serve to support those found in higher strata.
Milton Friedman, winner of the Nobel Prize in Economics, argued in his 1962 work, “Capitalism and Freedom”, that there was only one social responsibility that companies had, and that was to use available resources to increase profits in an open and competitive market, without fraud or deception.
He popularised this idea in an article he wrote years later in the New York Times, under the title "The Social Responsibility of Business is to Increase its Profits".
This article, which was highly controversial, as it seemed to be a step backwards, was a milestone in the evolution of the concept of CSR, as it succeeded in popularising it. Indeed, it made it familiar and known to the US business sector. Thus, from the 1960s, great American businessmen of the time, such as Thomas Watson, from IBM, or David Rockefeller, from Chase Manhattan Bank, raised and explored the idea of Corporate Social Responsibility in their own organisations.
This, obviously, had an effect and a reaction among the academic groups of the time, which began to study the obligations of companies towards their different stakeholders.
It was in this decade when the term stakeholder first appeared, from a study by the Stanford Research Institute in 1963. This concept became the core of CSR theories from then on.
In the 1970s, numerous scientific journals appeared, including the Business and Professional Ethics Journal and Business Ethics, specialising in CSR as a growing reality.
The fact that there were already specialised publications on this subject and that it was being more and more studied and applied by experts and businessmen, meant that Europe echoed everything that was being developed in the American business world.
Thus, during the 1980s, international bodies started regulating to preserve social and environmental values.
In 1983, the World Commission on Environment and Development was set up by the United Nations General Assembly. This body issued a report in 1987, the Brundtland Report, which defined "sustainable development" as follows: "meeting the needs of the present without compromising the ability of future generations to meet their own needs".
Since then, numerous bodies, instruments and agreements have emerged one after the other to try to curb the negative effects of humans, and more specifically of business practices, on the environment and society in general.
The 1990s was an explosion in terms of CSR. The Rio Summit in 1992 or the famous Kyoto Protocol in 1997 are important milestones in the environmental field.
The year 1997 also brought a very important milestone for CSR. The GRI - Global Reporting Initiative - was established as an internationally operating non-profit organisation. It introduced sustainability reporting as standard practice among companies and organisations that wish to measure and report their economic, social and environmental performance.
The year 1999 also brought with it another fundamental milestone, the creation of the Global Compact - a body of the United Nations.
The 2000s have brought a number of key instruments, mainly focused on measuring the impact of corporate social responsibility actions. One example is the famous Green Paper, which was born to meet the objective of the Lisbon Summit of 2000. It tries to make Europe a competitive economy capable of achieving sustainable economic growth with greater social cohesion. This Green Paper of July 2001 sets out the outlines of European government policy on CSR.
The next step in regulating was to give responsibility to Boards of Directors.
At the European level, EU Directive 95/2014 requires, for the first time, that companies include in their reporting environmental aspects, such as carbon emissions; social aspects, such as respect for labour rights; and good governance, such as the establishment of anti-corruption policies.
In Spain, Law 31/2014, amending the Capital Companies Act, included an article stating that both corporate social responsibility policy and dividend policy are non-delegable powers of the Board of Directors.
In February 2015, the Code of Corporate Governance of Listed Companies was created by the National Securities Market Commission.
And finally, the most recent legislative milestone in our country took place in 2018, when Law 11/2018 of 29 December, the Non-Financial Information and Diversity Act, came into force. For the first time, a law obliges certain companies (depending on their turnover and number of employees) to generate the so-called Non-Financial Information Statements, which must be signed by the Board of Directors and filed with the Commercial Registry as part of the Annual Accounts.
This law has led many non listed companies that were not previously obliged to explore corporate social responsibility, to begin to do so. They have realised that alocating time and resources to social and environmental issues, also benfits its employees and its stakeholders.
All this journey has made CSR to be considered as another way of doing business. Today, CSR must be embedded in the very DNA of the company. It does not make sense to be a satellite. It needs to be absolutely integrated within the entire organisation so that all the company’s areas can be seen through the prism of social responsibility. Today, 80% of the world's 250 largest companies actively report on Corporate Social Responsibility.
This is already a great achievement, but there is still a big challenge, which INYON is trying to meet.
There are many companies that are not yet obliged by law to work on CSR issues, but they wish to do so anyway. There are many committed companies full of desire and power but with fewer resources than large corporations. Companies that, in Spain, represent 99% of the business fabric. These companies need help to allocate their aid towards real social investment.
We need to help these companies to address their aid into a real social investment. We need to helpt them report what they do, so that their stakeholders are involved and aware of the actions undertaken by these companies in terms of social responsibility. We must make visible the millions and millions of entrepreneurs in medium-sized companies who want to change the world, who want to be part of a spiral of aid that reaches more and more people, who want to be, in short, agents of change.
Because the future is in the medium and small companies, in the innovative ones that think and act different. It is the next step. We have started with large corporations, but smaller companies are even more necessary. Because there are more of them. Because in a large non-profit organisation, donations from small and medium-sized companies can represent almost 2/3 of its corporate donations.
Because being an agent of change is not directly related to the size of your company, nor to the number of employees or your turnover data, but to your desire to change the world, your innovative ideas, your social investment strategy, and the way you get your stakeholders involved. And this is what INYON offers to you.
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