Is corporate social responsibility primarily a legal issue? What role should the law play in promoting CSR behavior in Australia?
Introduction and thesis statement
Corporate social responsibility (CSR) falls as one of the most debated topics in most world economies. That said, the concept of CSR, which is conservatively understood to be a voluntary undertaking by corporations in society and environmental welfare, has been caught up by some form of regulation through legal instruments. This thesis argues that a clear distinction between a company’s legal responsibilities and the concept of CSR is important. Moreover, while it is important to allow companies to engage in improving society welfare, the law should meddle in CSR only when environmental degradation and human rights violations are imminent.
Research Questions
• Is corporate social responsibility primarily a legal issue?
• Regulatory or voluntary CSR measures?
• What role should the law play in promoting CSR behavior in Australia?
Justification of the Study
Some Companies’ CSR undertakings affect human rights and the environment. In addition, companies engage in philanthropic activities with an objective of making profits and creating a good relationship with the public. Answers whether these activities are legal questions would be important in determining the role laws would play in CSR. This would give companies a guideline on how its CSR duties may be accommodated within its core business.
Methodology
This thesis is a desk-based research. It will borrow ideas from both primary and secondary sources like books, newspapers, journals, reports, statutes and scholarly articles. The thesis will also apply case study approach. This approach will inject essential information on how other countries are making use of legal instruments to promote CSR.
Literature Review
Different scholars and researchers have written volumes of literature on CSR. However, not many of these literatures conclusively focus on whether CSR is a legal question or the role law should play in CSR. The following literatures have important insights on the issue.
Plessis, Hargovan, Bagaric and Harris provide a useful insight in the issue in their book Principles of Contemporary Corporate Governance. The book addresses the role of law in guiding the behavior of companies with an objective of safeguarding the rights and interests of stakeholders who include the society and the environment. Their acknowledgement of the role of law in such CSR activities can only be taken to mean that CSR is a legal issue.
In a submission towards an inquiry by the Parliamentary Joint Committee on Corporations and Financial Services in Australia, Brotherhood of St Laurence addressed itself on whether CSR should be a subject of regulation. In responding to this concern, the submission lays emphasis on the impact that company activities have on different stakeholders. The paper suggests that the Corporations’ Act of Australia should broaden corporate reporting especially for international companies in an attempt to enforce ethics and responsibility to the environment and the society.
The Corporations have supported this view and Markets Advisory Committee (CMAC) of Australia in a report presented on request to the Parliamentary Secretary to the Treasurer, the Hon. Chris Pearce, in 2005. CMAC implies that CSR is a legal question and should be regulated due to social, environmental, and economic impacts of CSR activities. As such, law should take part in shaping companies’ behavior though to a limited extent. Constantina Bichta intimates that CSR is a legal issue owing to the fact that it touches on environmental issues, human rights, and welfare of workers. She argues that depletion of scarce natural resources or rights of workers to equal pay and good working conditions would not be adequately dealt with if CSR was left to be a voluntary activity.
While the literatures above paint CSR as a legal issue, there are literatures, which argue that CSR is exclusively a voluntary undertaking and therefore should not be regulated by any law. Milton Friedman is one such critic of CSR regulation. He argues that mandatory requirement to engage in CSR would undermine the principle of free society. A company should make profits for its shareholders and not the society. He points that while human beings have responsibilities towards the society, business do not and can only participate on their own free will. From the available literature, it is conspicuous that the question of whether CSR is a legal issue has not been covered and one can only speculate. The literature does not provide comprehensive answers on the scope of state regulation on CSR. The two areas form the gaps that this thesis wish to fill.
Bibliography
Alessia D’Amato, Sybil Henderson & Sue Florence. Corporate Social Responsibility and Sustainable Business: A Guide to Leadership Tasks and Functions (CCL Press, 2009) 1.
Brotherhood of St Laurence. ‘Corporate Social Responsibility’ Supplementary material to the Australian Government Corporations and Markets Advisory Committee (February 2006).
Constantina Bichta. Corporate Social Responsibility A Role in Government Policy And Regulation? The University of Bath.
Corporations and Markets Advisory Committee, ‘The social responsibility of corporations ‘(2006)
Du Plessis, Hargovan, and Bagaric, Harris. Principles of Contemporary Corporate Governance. (Cambridge University Press 3rd ed, 2014)
Friedman, Milton. The social responsibility of business is to increase its profits. springer berlin heidelberg, (2007).
Helen Anderson and Ingrid Landau, ‘Corporate Social Responsibility in Australia, (2006).
Hoffman, W. M., Frederick, R. E., and Schwartz, M. S. (Eds.). (2014). Business ethics: Readings and cases in corporate morality. John Wiley & Sons.
Shapira Roy, ‘Corporate Philanthropy as Signaling and Co-optation.’ (2012) Fordham Law Review 80.5
Taylor, Mark B., Luc Zandvliet and Mitra Forouhar. ‘Due Diligence for Human Rights: A Risk-Based Approach.’ (2009) Corporate Social Responsibility Initiative Working Paper No. 53. Cambridge, MA: John F. Kennedy School of Government, Harvard University.
