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Measurement of corporate social responsibility

  • MHCinternational Ltd

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This paper defines corporate social responsibility (CSR) and sets up a framework to measure it. To date, the measurement systems used and the various concepts of CSR have no systematic basis. Indicators seem to be chosen on the whim of the moment. However, at least some data now exist to measure progress on social aspects of corporate behaviour. In fact, it is even possible to use some of the available data that companies now make available in order to hazard a guess at to whether CSR is getting better or worse. Yet, the power of the ''average'' seems to hide a variety of sins, as seen in the short review and comparison of how CSR is measured in six well-known measurement frameworks.
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Int. J. Management and Decision Making, Vol. 6, Nos. 3/4, 2005 213
Copyright © 2005 Inderscience Enterprises Ltd.
Measurement of corporate social responsibility
Michael Hopkins
MHC International Ltd.,
CP22, 1211 Geneva 7, Switzerland
Abstract: This paper defines corporate social responsibility (CSR) and sets up
a framework to measure it. To date, the measurement systems used and the
various concepts of CSR have no systematic basis. Indicators seem to be
chosen on the whim of the moment. However, at least some data now exist to
measure progress on social aspects of corporate behaviour. In fact, it is even
possible to use some of the available data that companies now make available
in order to hazard a guess at to whether CSR is getting better or worse. Yet, the
power of the ‘average’ seems to hide a variety of sins, as seen in the short
review and comparison of how CSR is measured in six well-known
measurement frameworks.
Keywords: corporate social responsibility; concepts of business in society;
measurement; CSR indicators; performance management.
Reference to this paper should be made as follows: Hopkins, M. (2005)
‘Measurement of corporate social responsibility’, Int. J. Management and
Decision Making, Vol. 6, Nos. 3/4, pp.213–231.
Biographical notes: Michael Hopkins is CEO and Chairman of MHC
International Ltd., based in both London and Geneva. This is a research and
service company that specialises in social development issues for the public
and private sectors alike. Hopkins is also a Professor at the Middlesex
University Business School and is Co-founder and Chairman of the
International Centre for Business Performance and Corporate Responsibility.
He holds first and master’s degrees in mathematics and statistics and a doctoral
degree in labour economics from the University of Geneva, Switzerland. He
has published widely including The Planetary Bargain – Corporate Social
Responsibility Matters and co-authored Corporate Social Responsibility: Is
There a Business Case?
1 Introduction
“Lies, damned lies and statistics” stated Benjamin Disraeli. The plethora of measurement
ranking systems of companies, social investment screening methods and examinations of
the link between CSR (and its many variants) and the business case mean that the
indicators used to measure CSR have become crucial to understand what we are talking
214 M. Hopkins
Unfortunately, the measurement systems used (of CSR, corporate responsibility or
corporate sustainability or business ethics or business in society or corporate citizenship)
have no systematic conceptual basis, rarely define concepts and choose indicators based
on the whim of the moment. On the other hand, at least some data now exist to measure
progress on social aspects of corporate behaviour.
In fact, the measurement of CSR has much improved since the late 1990s, as
purported by Hopkins (1997). It is even possible to use some of the data that companies
now make available to hazard a guess as to whether CSR is getting better or worse. Yet,
the power of the ‘average’ hides a variety of sins. However, firstly, it is important to have
a look at what is meant by a conceptual framework and, then, examine some of the major
indicator sets in some detail.
2 CSR: a suggested conceptual framework for measurement
The attraction of CSR, as defined, is that of a systems approach, according to
Clark et al. (1975), which states that the problem is defined and the systems boundary
delineated so that all important influences on resolving the problem are taken into
consideration to the issue of business in society. Many of the criticisms, as seen later,
stem from problems with concepts and definitions. Now business, in general, is more
concerned to stay in business and be profitable than to be concerned with such seemingly
academic discussions. This is unusual since business is usually a stickler for detail – a
company can hardly prepare accounts, sell pharmaceuticals, computer software, copper
tubing or whatever without knowing exactly the definition of the product they are selling.
Yet, somehow, management concepts are manipulated at ease to fit in with some
pre-conceived notion or other that will please the chairman or some shareholders.
This translates into a confusing set of definitions for the same concept. For instance,
some define CSR as a systems approach taking into account both internal and external
stakeholders, while others define it as purely voluntary. This confusion leads to a
proliferation of terminology in the business in society area – corporate sustainability,
corporate citizenship, corporate responsibility, business responsibility, business social
responsibility, business reputation, the ethical corporation, and so on. However, without a
common language, we do not really know that our dialogue with companies is being
heard and interpreted in a consistent way. These flaws lead some companies to consider
CSR as purely corporate philanthropy while others dismiss the notion entirely. But there
are some such as Shell, BP-Amoco, Co-operative Bank, etc., which see CSR as a new
corporate strategic framework.
The definition that is most appealing is the stakeholder definition, as put forward by
CSR is concerned with treating the stakeholders of the firm ethically or in a
socially responsible manner. Stakeholders exist both within a firm and outside.
The aim of social responsibility is to create higher and higher standards of
living, while preserving the profitability of the corporation, for its stakeholders
both within and outside the corporation. (Hopkins, 2003)
Indeed, this definition begs the question what is meant by ‘ethical’ and what is meant by
‘stakeholder’. Without going into a long discourse on ethics, ethical behaviour is clearly
in the eye of the beholder and, like beauty, we know it when we see it but find it difficult
Measurement of corporate social responsibility 215
to define. Who are the stakeholders of a company has also sparked intense debate but, at
minimum, they include those within the company: the board of directors, shareholders,
investors, managers and employees; and outside the company: suppliers, customers, the
natural environment, government, and local community.
To employ this definition, a conceptual framework, first developed in the USA by
Wood (1994), has been applied to many companies; this is described in detail
by Hopkins (2003). In brief, CSR is measured by following a business organisation’s
configuration into three levels.
principles of social responsibility
processes of social responsiveness
outcomes of social responsibility.
2.1 Level 1: principles of social responsibility
The level of application of these principles is institutional and is based on a firm’s basic
obligations as a business organisation. Its value is that it defines the institutional
relationship between business and society, and specifies what is expected of any business.
This level of the CSR model itself is all about the relationship between business and
society at large and it has three major elements.
Legitimacy concerns business as a social institution, and frames the analytical view
of the interrelationship of business and society.
Public responsibility concerns the individual firm and its processes and outcomes
within the framework of its own principles in terms of what it actually does.
Managerial discretion whereby managers and other organisational members are
moral actors. Within every domain of corporate social responsibility, they are
obliged to exercise such discretion as is available to them, towards socially
responsible outcomes.
2.2 Level 2: processes of social responsiveness
Corporate social responsiveness is a business’s capacity to respond to social pressures.
This suggests the ability of a business organisation to survive through adaptation to its
business environment. To do so, it must know as much as possible about this business
environment, be capable of analysing its data, and must react to the results of this
analysis. But the environment of business is not static; it is a complex and ever changing
set of circumstances. This environment can be unchanged for decades, if not centuries,
and then it falls apart and is reformed like a kaleidoscope with increasing rapidity.
The ability to successfully scan, interpret, and react to the business environment requires
equally complex mechanisms. Three elements are identified as basic elements of this
level of the CSR model.
216 M. Hopkins
Business environment scanning indicates the informational gathering arm of the
business and the transmission of the gathered information throughout the
Stakeholder management. A stakeholder is defined as any group or individual
who can affect or is affected by the achievement of the firm’s objectives for
example: owners; suppliers; employees; customers; competitors; domestic and
foreign governments; non-profit organisations; environmental and consumer
protection groups; and others. Stakeholder management refers to mapping the
relationships of stakeholder to the firm (and among each other) whilst finding,
listening and meeting their seeking to balance and meet legitimate concerns
as a prerequisite of any measurement process.
Issues management. Having identified the motivating principles of a firm and having
determined the identities, relationships, and power of stakeholders, the researcher
now turns to the main issues that concern stakeholders.
2.3 Level 3: outcomes of social responsibility
The main focus of measurement is the third level of the CSR model. In order to
determine if ‘CSR makes a difference’, all of the relevant stakeholders to an issue or
complex of issues must be included in any assessment of performance. Again, there are
three main categories.
Internal stakeholder effects are those that affect stakeholders within the firm.
An examination of these might show how a corporate code of ethics affects
the day-to-day decision making of the firm with reference to social responsibility.
Similarly, it can be concerned with human resource policies such as the positive
or negative effects of corporate hiring and employee benefit practices.
External stakeholder effects concern the impact of corporate actions on persons or
groups outside the firm. This might involve such things as the negative effects of a
product recall, the positive effects of community related corporate philanthropy, or
assuming the natural environment as a stakeholder, the effects of toxic waste
External institutional effects refer to the effects upon the larger institution of
business rather than on any particular stakeholder group. Several environmental
disasters made the public aware of the effect of business decisions on the general
public for example. This new awareness brought about pressure for environmental
regulation, which then affected the entire institution of business rather than one
specific firm.
Table 1 summarises as well as illustrates the features of the suggested framework for the
measurement of CSR.
Table 1 Features of the conceptual framework for measurement
Concept used
and definition
Details of methodology
easily available
Indicators and
measures given
Data given
Measurement of corporate social responsibility 217
Ben and Jerry’s homemade ice cream: an example
Ben Cohen, co-founder, explains one aspect of the ethical principles of the firm:
“Businesses tend to exploit communities and their workers, and that wasn’t
the way I thought the game should be played. I thought it should be the
opposite – that business had a responsibility to give back to the community,
that is because the business is allowed to be there in the first place, the business
ought to support the community. What we’re finding is that when you support
the community, the community supports you back.”
This is a clear statement of principles, which belongs to the first level of the CSR model.
As stated, the principle fulfills both the institutional element (it acts to legitimise the
institution of business) and the discretionary element (it directs the firm in a socially
responsible path) and goes well beyond any legal requirements, the element of public
At the level of processes of social responsiveness, corporate social responsiveness is a
business’s capacity to respond to social pressures. Ben and Jerry’s social issues scanning
is accomplished through a number of mechanisms ranging from direct community
involvement through newsletters to special events sponsored by the company.
The effectiveness of the scanning and issues management mechanisms can be seen in
their funding of organisations as diverse as the Native American Community Board in
South Dakota to the Central Massachusetts Safe Energy Project. We can see clear
linkages from Ben Cohen’s principles as stated to concrete corporate action.
Among the many issues raised at Ben and Jerry’s, one specific outcome was carried
out through its purchasing policies. The firm called on the Greystone Bakery in Yonkers,
New York, to bake its brownies, a firm that uses its profits to house the homeless and
train them as bakers. This outcome is very specific and wholly measurable in a number of
ways. One could simply measure the number of homeless people employed by the bakery
and the number of trained bakers graduated by the programme. One might also look at
how many are still employed at the bakery or in another company as bakers.
There is a clear causal linkage back through corporate mechanisms to ethical
principles and the analytical framework can be seen to function. Further research could
be done at Ben and Jerry’s to cross-relate different elements and their indicators to
determine how, for example, profitability is affected by the 7.5% share of pre-tax
earnings given by Ben and Jerry’s to philanthropic purposes. Conversely, one might take
a proposed indicator such as ‘outcomes of community involvement’ and examine its
statistical relationships to other indicators in other elements.
The stakeholders in this process are first external to the company and are the
homeless who take part in the training programme. A second group of stakeholders can
be identified as the community from which the homeless are taken. Clearly, the bakery
itself profits as a supplier to Ben and Jerry’s and it, in turn, provides benefits to the
stakeholders, which are possible because of their business with Ben and Jerry’s. As one
aspect of a very successful social programme, this also benefits shareholders as the
success of the firm grows. This is a classic case of new avenues of thinking leading to
better profits, reputation, employment as well as a real improvement in the quality of life
in the society in which Ben and Jerry’s are operating.
What indicators to use?
An example is provided in the appendix.
218 M. Hopkins
3 The main measurement systems
Six main systems, with indicators applied to companies around the world, have been
chosen for comparison. Unless otherwise stated, the source of information in this section
comes from the various websites that each index generator maintains. The date was
correct as at 30th June 2004.
The format of presentation chosen for each system, other than an introductory
paragraph, is identical to that put forward for the suggested framework, in Table 1, that is
concept used, definition, conceptual framework, indicators defined and measures given.
The sections are necessarily brief because of space limitations and so, for instance, the
section how indicators are defined only states whether they have been defined or not
rather than go into specifics.
3.1 Business in the Community (BiTC)
The Corporate Responsibility Index is a voluntary, self-assessment survey that provides
an annual benchmark of how companies manage, measure and report their corporate
responsibility. The index is open to all companies in the FTSE 100, FTSE 250 and the
Dow Jones Sustainability Index (DJSI) and to Business in the Community member firms
that have a significant economic presence but are not listed in the UK. This year,
500 companies were invited to take part. Of these, 139 companies completed the
index – 14% more than in the first year.
The UK-based Business in the Community’s (BiTC) Corporate Responsibility Index
is in its second year. Changes were made to the Index in 2003, and so the two are not
directly comparable. Also, the Index was completed by 139 companies – many of whom
are leaders in this field, so it is not necessarily a cross-section of business in society.
Nevertheless, BiTC saw the overall index average scores rise from 68% to 81% and one
thing that could be deduced was that companies were coming to grips with the
development of high level strategy on corporate responsibility as reflected in a rise in
average scores from 81% to 91% this year. So, BiTC concluded that corporate
responsibility was now part of a company’s thinking but not fully operationalised within
the business – a task that was going to take much longer.
Concept used
Corporate responsibility.
The concept used is ‘corporate responsibility’. Business in the Community defines it as
“a company’s positive impact on society and the environment, through its
operations, products or services and through its interaction with key
stakeholders such as employees, customers, investors, communities and
Conceptual framework
The index is based on a framework of four components.
Measurement of corporate social responsibility 219
Corporate strategy that looks at how the nature of a business’s activities influences a
company’s values, how these tie into strategy and how they are addressed through
risk management, development of policies, and responsibilities held at a senior level
in the company.
An integration section looks at how companies organise, manage and integrate
corporate responsibility throughout their operations. Is it part and parcel of the
company culture? Is it integrated into the strategic decision-making processes of the
company and linked through into internal governance and risk-management systems?
The integration is assessed through the management section, where processes are
reviewed for how they manage different stakeholder relationships. The management
section looks at the key issues for the business, the objectives and targets set to
manage these issues and how it communicates, implements and monitors its policies,
objectives and targets. In turn, management has four further areas defined as:
community that relates to the interface between business and society, which can be
both positively or negatively affected by a project, product or investment on a local
or global level. Environment that looks at how the world’s ecosystems and natural
resources are affected by a company’s operation, products and services. Being
responsible means safeguarding both the systems and resources for future
generations. Responsibility in the marketplace that means maintaining the highest
standards of business practice when developing, purchasing, selling and marketing
products and services. Responsibility in the workplace that is the creation of a
working environment where personal and employment rights are upheld.
The performance and impact section that looks at the companies’ performance across
a range of social and environmental areas. Each company is asked to complete a total
of six impact areas. All companies make mandatory reports on two environmental
impacts: global warming (or energy and transport together) and waste management.
In addition, companies are asked to select two social impacts drawn from product
safety, occupational health and safety, human rights in the supply chain, diversity in
the workplace, and community investment and an additional two self-selected impact
areas material to the business.
Indicators defined and measures given
Not given
3.2 FTSE4good
The FTSE (Financial Times Stock Exchange) Group produces the FTSE4Good index
series, which gives investors an opportunity to invest in companies meeting globally
recognised corporate social responsibility standards. Even though it requires a large
amount of data and the index has been significantly changed over time to allow for
human rights and environmental requirements, the majority of companies managed to
meet the new selection criteria. Moreover, the number of companies in the index series
has risen from just over 700 at launch in 2001 to 857 by March 2004 review – out of an
eligible universe of over 2,200 companies globally.
220 M. Hopkins
Concept used
Good corporate responsibility practice globally.
Not defined.
Conceptual framework
To qualify for inclusion in the FTSE4Good Index Series, companies must be in one of the
following starting universes: the FTSE-All Share Index (UK) or FTSE All-World
Developed Index (Global). Then, companies must meet criteria requirements in
three areas.
working towards environmental sustainability
developing positive relationships with stakeholders
upholding and supporting universal human rights.
Companies that have been identified as having business interests in the following
industries are excluded from the FTSE4Good Index Series.
tobacco producers
companies manufacturing either parts for, or whole, nuclear weapons systems
companies manufacturing whole weapons systems
owners or operators of nuclear power stations
companies involved in the extraction or processing of uranium.
The FTSE4Good criteria have been designed to reflect a broad consensus on what
constitutes good corporate responsibility practice globally. Using a widespread market
consultation process, the criteria are regularly revised and updated to ensure that they
reflect developments in corporate responsibility thinking and trends in socially
responsible investment as they evolve. Since FTSE4Good was launched in July 2001, the
environmental criteria were raised in May 2002, and the Human Rights criteria were
raised in March 2003. In 2004, FTSE planned to announce new criteria relating to labour
standards in the supply chain.
Indicators defined and measures given
The indicators are defined in each of three areas, but no measures given.
social and stakeholder
human rights.
Measurement of corporate social responsibility 221
3.3 Dow Jones Sustainability Index (DJSI)
The Dow Jones Sustainability Indexes (DJSI) were established to track the performance
of companies that lead the field in terms of corporate sustainability. The Dow Jones
Sustainability Indexes consist of a global and a European set of indexes. The global
indexes, the Dow Jones Sustainability World Indexes (DJSI World), consist of a
composite index and five narrower, specialised indexes excluding companies that
generate revenue from alcohol, tobacco, gambling, armaments and firearms or all of these
industries. This set of indexes was first published on 8th September 1999. The European
indexes, the Dow Jones STOXX Sustainability Indexes (DJSI STOXX) were first
published on 15th October 2001. For each of the Dow Jones Sustainability Indexes, a
guidebook is published outlining the Corporate Sustainability Assessment methodology,
index features and data dissemination, periodic review and ongoing review, the
calculation model and the management and responsibilities.
All indices of the DJSI family are assessed according to the same Corporate
Sustainability Assessment. The DJSI measures the financial performance of companies
that are selected based on sustainability criteria. Ten per cent of the 2,500 top companies
are selected for the main index. Like FTSE4good, the figures were based on a
methodology, which has been constantly evolving to capture best-in-class performance.
Concept used
Corporate sustainability.
Corporate sustainability is a business approach to create long-term shareholder value by
embracing opportunities and managing risks deriving from economic, environmental and
social developments. Corporate sustainability leaders harness the market’s potential for
sustainability products and services while at the same time successfully reducing and
avoiding sustainability costs and risks.
Conceptual framework
The DJSI indexes are handled by the Zurich based company, SAM (Sustainable Asset
Management). Their assessment identifies the leading sustainability companies from the
DJSI STOXX investable stocks universe for each industry group. The methodology is
based on the application of criteria to assess the opportunities and risks deriving from
economic, environmental and social dimensions for each of the eligible companies in the
DJSI STOXX investable stocks universe. These criteria consist of both general criteria
applicable to all industries and specific criteria applicable to companies in a certain
industry group. The criteria are derived following identification of global and industry
A sustainability score is used to identify the leading sustainability companies in each
industry group. For each company, the input sources of information for the Corporate
Sustainability Assessment consist of the responses to an online questionnaire, submitted
documentation, policies and reports, publicly available information and SAM research
analyst’s direct contact with companies. Information provided in the questionnaire is
verified. Verification includes cross-checking answers with documentation provided by
222 M. Hopkins
the company, verifying a company’s track record and incidents and crisis management
with media and stakeholder reports and, if necessary, direct interaction and clarification
with the company. To ensure quality and objectivity, an external audit and internal
quality assurance procedures, such as cross-checking of information sources, are used to
monitor and maintain the accuracy of the input data, assessment procedures and results.
Since the DJSI inception in 1999, SAM Research’s Corporate Sustainability Assessment
has been verified by PriceWaterHouseCoopers.
Indicators defined and measures given
The indicators are based on a questionnaire sent out and cover.
sustainability reports
environmental reports
health and safety reports
social reports
annual financial reports
special reports, such as on intellectual capital management, corporate governance,
R&D, employee relations
all other sources of company information; such as internal documentation, brochures
and websites.
Specific indicators are not given but can be inferred from the questionnaire that is
available on the DJSI website. Sectoral aggregates are given but not data for individual
3.4 Business Ethics 100
The US-based Business Ethics magazine’s widely quoted ranking of US companies, the
100 Best Corporate Citizens, has been produced since 1999. Service to a variety of
stakeholders is the essence of good corporate citizenship. That’s what the 100 Best
Corporate Citizens listing is about. While traditional measures of success focus on
stockholder return, this list defines success more broadly. Using social ratings compiled
by KLD Research & Analytics of Boston – plus total return to shareholders – the
Business Ethics list ranks companies according to service to seven stakeholder groups:
stockholders, community, minorities and women, employees, environment, non-US
stakeholders, and customers.
In 2004, 24 new firms were included in the list, among them Agilent Technologies,
which skyrocketed into the No. 9 slot by virtue of its diversity practices and superior
treatment of the community. Newcomer Trex Co. (No. 50), which manufactures building
products from recycled wood and plastic wastes, brought in stellar return to shareholders.
Other newcomers include Pixar (No. 36) and AFLAC (No. 72), as well as household
names like Weight Watchers International, Inc. (No. 68), Kellogg (No. 82), and Pepsi
Bottling Group (No. 95).
Measurement of corporate social responsibility 223
In terms of excellence within specific categories, Motorola (No. 24) was far ahead of
its peers in service to customers – thanks to its status as a pioneer in the field of bionics,
where everyday products are inspired by the simplicity, efficiency, and beauty of nature.
Bringing in top honours in service to overseas stakeholders were two firms: No. 1-ranked
Fannie Mae and Green Mountain Coffee Roasters (No. 5). With farmer cooperatives in
Peru, Mexico, and Sumatra, Green Mountain pays Fair Trade prices for coffee beans.
Fannie Mae created a Native American Conventional Lending Initiative to help finance
US$ 75 million in loans on trust land for the Navajo Nation of Arizona, Oneida Nation of
New York, and Menominee of Wisconsin.
Concept used
Corporate citizenship.
Not defined.
Conceptual framework
The basic data come from KLD Research & Analytics in Boston – data and indicators are
available free for academics and for a small fee for private concerns. The methodology
has evolved slightly over the past five years. Initially, the list was drawn from 650 firms
used in the socially screened Domini Index: the S&P 500, plus 150 other firms selected
for industry balance and social performance. In 2003, it was expanded to cover the
Russell 1000, the 1,000 largest public traded firms (for consistency the 150 Domini firms
were also used). The year 2003 also saw a switch from using three-year average scores to
one-year scores. The stakeholder list was also expanded from four stakeholder groups
to seven.
The seven stakeholder groups are shareholders, community, minorities and women,
employees, environment, non-US stakeholders, and customers. In each category, KLD
notes where companies have ‘strengths’ and ‘concerns’. For example, in the employee
category, a firm might get three strengths for profit sharing, retirement benefits, and
employee involvement, while it gets two concerns for union relations and workforce
reductions. To arrive at a net score in this category, we take three strengths and subtract
two concerns. The same is done in each category. Environmental strengths, for example,
might include beneficial products, pollution prevention, and recycling, while concerns
would include emissions, climate change, and regulatory problems.
Since all seven variables have different scales, they are standardised to determine a
standard deviation from the mean, which indicates performance relative to peers.
The scores arrived at represent the number of standard deviations a firm fell above or
below the mean. For the shareholder performance measure, the one-year total return to
shareholders is used (stock appreciation plus dividends), standardised in the same way.
Next is taken an unweighted average of all seven stakeholder measures, to arrive at a
single score per company. The fact that the scale is unweighted means that all
stakeholders are accorded equal status. In the final step, a selection committee does
additional research on social scandals, or other issues possibly missed, and recommends
firms to be pulled. Firms were removed for accounting fraud, for example, or if
they lost money two or more years in a row. Data analysis was prepared by Graves and
Waddock (1999).
224 M. Hopkins
Indicators defined and measures given
Indicators are given in each of five areas but no measures given although the aggregate
scores for each company is available.
community relations
employee relations
customer relations.
3.5 AccountAbility (AA) Rating®
The Accountability Rating® was launched on 23rd June 2004 to coincide with
The United Nations Global Compact Leaders Summit in New York, where many of the
G-100 companies covered by the index – world’s 100 highest-revenue companies were in
attendance to discuss business leadership in a global society. The index has been
developed by the NGOs, AccountAbility and csrnetwork. It measures the state of
corporate accountability by ranking individual companies on their global sustainability
In terms of results, AA found that scores varied widely from 67% for BP, and 60%
for Suez, (1st and 2nd, respectively) to a low of only 1% for the lowest scoring company.
The top ten features seven European companies, two Asian companies, and only one
US company, Hewlett-Packard.
Concept used
Central to the rating is its assessment of companies’ progress in establishing an approach
to accountability that embeds responsible practices at the core of the business.
Not defined.
Conceptual framework
A comprehensive understanding of the underlying links between accountability, strategy
and performance is a crucial element of the rating. This envisions companies
progressing by:
engaging in learning that enables them to evolve strategies aligned to society’s wider
interests and needs
establishing governance and management processes that deliver against these
providing public disclosure that delivers credible, material information to enable
stakeholders to take informed decisions and actions.
Measurement of corporate social responsibility 225
This assessment of learning and innovation has been applied by measuring the three
‘internal’ domains of strategic intent, governance and performance management and the
three ‘external’ domains of stakeholder engagement, assurance and public disclosure.
It draws on key developments in this area over the last decade, most notably the
United Nations Global Compact, the Global Reporting Initiative, the AA1000 Series, the
insights provided by other ratings and the experiences of companies undertaking the
difficult task of becoming accountable.
Indicators defined and measures given
Indicators are not discussed and the measures not given.
3.6 Global Reporting Initiative (GRI)
The Global Reporting Initiative carried out an extensive consultation of specialists to
define indicators to measure progress on social reporting. It recognises that developing a
globally accepted reporting framework is a long-term endeavour. It notes that, in
comparison, financial reporting is well over half a century old and still evolving amidst
increasing public attention and scrutiny. The methodology is extensively and clearly
presented in their report The 2002 Guidelines from which the observations herein have
been drawn.
Concept used
Sustainability reporting.
Sustainability reporting refers to an organisation’s public account of its economic,
environmental, and social performance in relation to its operations, products and services.
The 2002 Guidelines state that
“the GRI uses the term ‘sustainability reporting’ synonymously with
citizenship reporting, social reporting, triple-bottom line reporting and other
terms that encompass the economic, environmental, and social aspects of an
organisation’s performance.”
Conceptual framework
The lack of a clear definition of what the GRI is trying to do continues into the lack of a
clear concept. We read that the Guidelines do not:
“provide instructions for designing an organisation’s internal data management
and reporting systems; nor, offer methodologies for preparing reports, nor for
performing monitoring, nor verification of such reports.”
Nevertheless, a useful distinction in GRI work is the use of ‘core’ and ‘additional’
indicators where the former are:
relevant to most reporting organisations
of interest to most stakeholders.
226 M. Hopkins
Thus, designation as ‘core’ signifies general relevance to both reporters and report users.
In designating an indicator as ‘core’, however, GRI exercises some discretion. For some
core indicators, relevance may be limited to many, but not most, potential reporters.
Additional indicators are defined as those that have one or more of the following
represent a leading practice in economic, environmental, or social measurement,
though currently used by few reporting organisations
provide information of interest to stakeholders who are particularly important to the
reporting entity
are deemed worthy of further testing for possible consideration as future core
A topic covered by GRI in some detail, unlike many of the other measurement sets, is the
question of ‘boundaries’ or the footprint of a corporation’s core activities. To resolve this
knotty problem, the GRI framework emphasises the importance of extensive interaction
with stakeholders to determine appropriate reporting boundaries.
Indicators defined and measures given
From the GRI framework, an extensive set of indicators are used and grouped in terms of
the three dimensions/issues of the conventional definition of sustainability: economic,
environmental, and social. For each area, the GRI defines a category, then an aspect, and
then the indicators. No measures are given.
4 Short review of the six indicator systems
Table 2 below summarises the six main indicator systems together with some short
comments, as well as the suggested framework already discussed. It is not easy to get in
behind the methodologies and indicator sets used by these analysts and one can wonder
what is really being measured. It seems that, in the last five years, the amount of analysis,
thinking and data has progressed by leaps and bounds. This is obviously encouraging.
But given that each of the six cases studies is essentially commercially oriented, data are
not given making it difficult for other analysts to build upon the approaches undertaken.
Perhaps, in the future, each of the six may wish to publish their indicators and data in a
clear and easily accessible version after a period of time, say two years, at which point
the commercial value has been significantly reduced.
What can be seen from the table is that the basic concept being used is not always
defined, and nor is a conceptual framework on which to base a measurement system.
The lack of a conceptual framework leads to a rather ad hoc approach to the choice of
key issues, components and indicators. Surprisingly, one of the worst offenders on
conceptualisation is the GRI, which purports to provide a map for companies to draw up
indicators and then social reports based upon them. One can only imagine the headaches
that companies have in trying to adhere to the guidelines. Finally, it can be seen that
detailed indicators are rarely given and, worst of all, data are not generally available.
This latter instance means that companies will continually be pestered from different
sources for the same data. Clearly, some consistency is required here – a gap that the GRI
has unsuccessfully filled to date.
Measurement of corporate social responsibility 227
Table 2 The main measurement systems: a comparison
used and
Details of
given Comments
GRI X X Useful ideas
of which
indicators to
Accountability X X X X Indicators not
given on web
must buy
FTSE4good X X X X X Complicated
set of criteria
for who is ‘in’
and who is
‘out’ yet most
companies are
BiTC X Components
given but not
details on
DJSI X X Extensive
Ethics 100
? X Conceptual
framework is
Can be
given better
In comparison, Hopkins (1999) propounds a clear definition and concept, with a relevant
conceptual framework. He also furnishes easily available details of the methodology, as
well as data, and utilises these to provide rankings for the top companies in the UK and
Switzerland. However, conceptual frameworks can, and should, be elaborated as better
date become available – Hopkins work is no exception. Nevertheless, as the table shows,
Hopkins framework is more complete than the six examples examined.
5 Conclusion
Although data are not generally available for many companies at once – individual
companies often present comprehensive sets – no consistent pattern of data collection and
presentation has emerged. As the CSR community has become more watchful and social
investment funds more demanding, the need for an overall index of progress on CSR has
emerged. Several of the above-mentioned data systems have attempted to provide indices
and rankings of companies. Initial attempts to measure progress on CSR based upon these
228 M. Hopkins
indices have also emerged. However, the indices that have emerged measure averages
across companies. And, as noted in this paper, consistency of application remains a
problem. Moreover, the challenge that is more and more being presented is how to embed
the ideas of CSR throughout an organisation. This is the problem that many companies
face. It is possible to obtain indicators that show a good record ‘on average’ but difficult
to embed the ideas of CSR throughout an organisation and no one to date has produced
disaggregated indicators across the company. The lack of indicators of a consistent and
disaggregated level leads to poor monitoring and evaluation systems. That is probably
why scandals will continue to erupt in supposedly ‘clean’ organisations such as Shell,
Enron or Worldcom.
The famous aphorism by Lord Keynes insinuates that “practical men, who believe
themselves to be quite exempt from any intellectual influences, are usually the slaves of
some defunct economist”. The same seems to be true for data. For organisations to have
relatively good data on the economic aspects but very poor information on the social
dimensions implies that the basic conceptual model has been weak. Hence, for the future,
a better model of social data, to be based upon hard or interval scale data is a necessary
requisite. Much of today’s information is founded upon weaker nominal or, at best,
ordinal scale data and the proposed framework is no exception. Therefore, in order to
ensure the same type of robust yardsticks found in economics, such as profit, sales, costs
and so on – though problems can arise with these – it is important to develop, through a
significant effort for the social arena, new conceptual models from which harder data can
be derived. For corporate social responsibility, it is still the early days of relevant
performance measurement and ‘metrics’ in societal terms.
Thanks to Catherine Vaillancourt-Laflame for her assistance with this paper.
Clark, J., Cole, S., Curnow, R. and Hopkins, M. (1975) Global Simulation Models, John Wiley,
New York.
Graves, S. and Waddock, S. (1999) Beyond Built to Last … Stakeholder Relations in ‘Built-to-Last’
Companies, Boston College Carroll School of Management, Chestnut Hill, MA.
Hopkins, M. (1997) ‘Defining indicators to assess socially responsible enterprises’, Futures,
Vol. 29, No. 7, pp.581–603.
Hopkins, M. (1999) The Planetary Bargain – Corporate Social Responsibility Comes of Age,
Macmillan Press, Basingstoke.
Hopkins, M. (2003) The Planetary Bargain – Corporate Social Responsibility Matters,
Earthscan, London.
Wood, D. (1994) Business and Society, Harper Collins, New York.
Measurement of corporate social responsibility 229
Appendix: CSR measurement: elements, indicators and measures
Elements of conceptual framework Indicators Measures
Level 1: principles of social responsibility
Code of ethics Published?
Code of ethics Distributed to employees?
Code of ethics Independent group does
Litigation involving
corporate lawbreaking
Amount, size?
Fines resulting from
illegal activities
Contribution to
R&D expenditure
Public responsibility
Job creation Number of net jobs created
Code of ethics Managers and employees
Managerial discretion
Managers convicted of
illegal activities
Number, amount?
Level 2: processes of social responsiveness
Business environment scanning Mechanism to review
social issues relevant to
Analytical body for
social issues as integral
part of policy making
Social audit exists?
Stakeholder management
Ethical accounting
statement exists?
Issues management Policies made on basis
of analysis of social
Firm’s regulations and
230 M. Hopkins
Appendix: CSR measurement: elements, indicators and measures
Elements of
Stakeholder groups
Indicators Measures
Level 3: outcomes of social responsibility
Profitability/value Share value, return on
investment, etc.
irresponsibility or
illegal activity
Fines, number of product
recalls, pollution
performance measured
against some industry
Community welfare Amount of giving,
programmes as % of
Amount of pre-tax giving
as % of earnings
Code of ethics Published, distributed,
trained 0 or 1
Trained in code of ethics and
apply in demonstrable and
measurable ways
Managers Code of ethics
Rank of manager responsible
for applying code
Union/staff relations Evidence of controversy,
good relations
Safety issues Litigation, fines
Pay, pensions and
Relative ranking to similar
firms (measuring % spent on
employee benefits,
programmes, etc.)
Layoffs Percentage, frequency,
individuals chosen
Employee ownership Amount by per cent
Women and
minorities policies
Existence, rank with similar
firms, litigation and fines
Code of ethics Evidence of application to
products or services
Product recalls Absolute number, seriousness
demonstrated by litigation or
fines, percentage of total
Litigation Amount of fraud, price
fixing, antitrust suits
Public product or
service controversy
Seriousness, frequency
False advertising Litigation, fines
Measurement of corporate social responsibility 231
Appendix: CSR measurement: elements, indicators and measures
Elements of
Stakeholder groups
(assumed) Indicators Measures
Level 3: outcomes of social responsibility
Pollution Performance against index,
litigation, fines
Toxic waste Performance against index,
litigation, fines
Recycling and use
of recycled products
Natural environment
Use of ecolabel on
Corporate giving to
Amount, percentage
Direct involvement
in community
Number, outcomes, costs,
controversy or
Number, seriousness,
Firm’s code of ethics Applied to all suppliers
Supplier’s code of
Litigation/fines Number, amount, outcomes
Public controversy Amount, outcome
Code of ethics Published and applied
Generic litigation Amounts, number, outcomes
Class action suits Amounts, type, number,
Business as a social
Public policy and
legislation improved
due to pressure from
Yes or no
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... Sustainability reporting is used as a tool to achieve legitimacy, which can be used to educate people about the change that organization adapt to sustainability or only to change the thinking of people without actually adopting any sustainability practice or to distract the public from the issue that needs to be considered(Lindblom 1994). There exist various standards to measure the sustainability practices being implemented by the company (Hopkins 2005),such as DJSI, FTSE4good, GRI.However, Global Reporting Initiatives (GRI) is an internationaland most accepted standard for sustainability reporting(Farneti and Guthrie 2009). ...
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... of organizations (Preston & Sapienza, 1990: Clarkson & Deck, 1993: Jones, 1995, thus corroborating with SHRM, CSR, and CS. Organizations that invest in sustainability are concerned with their impact on society and consider their responsibilities to their stakeholders (Hopkins, 2005). ...
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Corporate scandals and lack of confidence in our largest institutions mean that corporate social responsibility (CSR) now matters more than ever. Encroaching on CSR are concepts such as corporate sustainability and corporate citizenship, and older concerns with business ethics, business in society and the ethical corporation. This significantly revised and updated version of The Planetary Bargain explains the relations among these concepts and reflects the author's new ideas and their new context. Enterprises across the world are waking up to the need for social responsibility towards shareholders and potential investors, managers and other employees, customers, business partners and contractors or suppliers, the natural environment and the communities within which they operate, including national governments and non-governmental organizations. Drawing on case studies of international companies and analysis of research from the past two decades, The Planetary Bargain shows how corporations can preserve their profitability while treating all stakeholders ethically and responsibly. It suggests a cooperative CSR strategy which creates prosperity for corporations and for the people they serve. It presents the case for a worldwide agreement, or 'planetary bargain', between private and public sectors, arguing that it is good for business and essential for future prosperity and stability.
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Abstract: This paper defines corporate soci al responsibility (CSR) and sets up a framework to measure it. To date, the measurement systems used and the various concepts of CSR have no system atic basis. Indicators seem to be chosen on the whim of the moment. Howeve r, at least some data now exist to measure progress on social aspects of corporate behaviour. In fact, it is even possible to use some of the available data that companies now make available in order to hazard a guess at to whether CSR is getting better or worse. Yet, the power of the ‘average’ seems to hide a variety of sins, as seen in the short review and comparison of how CS R is measured in six well-known measurement frameworks. (7) (PDF) Defining indicators to assess socially responsible enterprises. Available from: [accessed Nov 07 2018].
A Planetary Bargain to Promote Social and Economic Development as We Move into the Next Millennium Corporate Social Responsibility (CSR) now matters and has taken root at an even faster pace than envisaged when the hardback version of this book was written some four years ago. Encroaching on CSR are other concepts such as corporate sustainability, corporate citizenship as well as the older concerns with business ethics and the ethical corporation. I devote sections of the book explaining the main differences and similarities between these concepts. This significantly revised version of the earlier book updates the material with some of the most important developments since that time and also reflects the author’s new ideas since these have also evolved with time. It also reflects the change from 'CSR comes of age', the sub-title of the earlier book, to a broader concern with 'CSR matters '. As unemployment remains stubbornly high in most of the richest nations of the world, poverty persists in the developing nations, globalisation protests are more and more directed at large transnational corporations, and many are wondering where it will all end. The social protection gained for people in Europe over the fifty years since the end of World War II is under continual threat as costs rise. And the richest nation in the world, the US, struggles to keep its more meagre than Europe, social protection provisions. Will it all end with the world’s production going to the lowest com-mon denominator, that is the country with the lowest social costs, the most paltry wages, the poorest working conditions, and those with the lowest pensions for the old? The trend seems to be heading this way as inequalities deepen, yet this is in no-one’s interest. Poor consumers in developing countries would very much like higher living standards, and the sorts of social protection accorded to workers in Germany (say). Transnational cor¬porations need customers for their goods, something not helped by the rising unemployment associated with downsizing or impoverishment in developing countries. To reverse these negative tendencies, the book’s main thesis is that there is a need for a worldwide compact, or planetary bargain, between the private and public sectors. In this bargain, the public sector will help private organisms to operate with clear ground-rules, and the private sector will pay more attention to longer-term social development issues than ever before. What such a bargain could include, why it is necessary and who should be involved are the themes that run throughout the book. NOTE: This was the first time anyone had mentioned a worldwide compact...I was the first through this book to do so and as you know, it was the forerunner for the UN Global Compact. I am pleased that Kofi Annan acknowledged my work as the first to suggest a Global Compact, that Kofi Annan announced himself in the year 2000. A planetary bargain will mean more socially responsible enterprises (SREs). In time, it will not be possible to conduct business without being socially responsible. This is inevitable, so, contrary to conventional wisdom, the book does not propose a new set of rules for businesses to adhere to, as, for instance, is argued by those pushing for more corporate social accountability or social audits. The book will argue that new rules or corporate laws in this area may well be unnecessary, because cor¬porations will see for themselves, and many have seen this already, the need to behave more responsibly in the social area. The book does argue for a 'level playing field' in which a minimum set of rules for corporate behaviour is required. However, it does not argue for new sets of complex rules simply because these would make it even more difficult for corporations to operate and, in turn, would encourage further hopping from one advant¬ageous country to another. If the same rules could be applied universally many corporations would accept corporate social responsibility since a level playing field would apply for all. But, despite halting steps in this direction by such bodies as the EU and countries such as France, an agreed set of rules for CSR activities is unlikely and hence a world consciousness of stakeholders such as consumers, employees, local communities etc. will be better placed to create this level playing field. Can the private sector do more other than just be good at business? It is the underlying thesis of this book that being a socially responsible enterprise is not only good for business; it is actually better for business in terms of long-term profits and stability. It will not be my job here to suggest areas where the private sector can make profits through helping social development directly – they are their own masters at this. For instance, the private sector has been helpful in housing projects for low- income groups, providing credit through the banking system, promot¬ing education through private educational institutions and so on. But corporate social responsibility is not just about corporate philanthropy, as the book argues, it is about a new management and strategic philosophy for companies large, medium and small. The field of corporate social responsibility, of which this book forms a part, has a burgeoning literature in published form in books, articles, newsprint and increasingly on the Internet. Where possible I have indicated the Internet web pages that I have used, as well as suggesting others that provide useful reference points. There have been few attempts at quantification of what is meant by corporate social responsibility in the literature, and what does exist, mainly through the social screens of ethical investment companies, is largely subjective. When I started research in this area, I had intended to rank the Fortune 500 companies from 1 to 500 on a HDI index (human development index following the United Nations Development Programme’s work). This task proved beyond my resources but launched me, nevertheless, some eight years ago into this field. This book captures my efforts at determining a conceptual framework for these indicators and then examines how I calibrated them for the UK. There, I was fortunate to be able to use the good services of the Univer¬sities of York and London through my friendship with Professor Roy Carr-Hill to collect the necessary information for the 100 largest com¬panies in the UK – here I only report on the top 25 to keep the book a reasonable length. But I could not present indicators without first looking at what others have done in the field of corporate social responsibility – and there is a lot. So I have critically reviewed this in the first seven chapters. In these, I also develop the elements of an economic theory of socially responsible enterprises when I show, mainly through case studies and anecdotal examples, that social responsibility not only has strong philanthropic undertones, but, as important if not more so, it has sound economic reasons too. By this, I mean that it is increasingly in the economic inter¬est of business, and consequently of societies, to engage in socially responsible activities. If it is not in the fabric of companies today then these companies, more than likely, will not exist tomorrow. This is why, in the book, I argue the need for a planetary bargain.
Concern for the social responsibility of business by both the public and enterprises themselves has been growing since the fall of the Berlin Wall. The private sector's relative unconcern with Apartheid in South Africa, poor and dangerous products, and environmental disasters have all led concerned people to question the relative social autonomy of business. As Government's tire of social expenditures and the public become weary of paying taxes, the future corporation will have to take its share of responsibility for social concerns more than ever before. Globally, the worlds' production cannot eventually end up going to the lowest common denominator, ie the country with the lowest social costs, the most paltry wages, poorest working conditions, and those with meager pensions for the old. In practice this means that beggar-thy-neighbor rent-seeking by enterprises whereby production is allocated to the poorest but cheapest working conditions must come to an end. Consumers, too, will insist that the enterprises of the future must be more socially responsible both within and outside their workplaces. What sorts of indicators to measure what will be a ‘socially responsible enterprise’ of the future is the subject of this paper.
Global Simulation Models
  • J Clark
  • S Cole
  • R Curnow
  • M Hopkins
Clark, J., Cole, S., Curnow, R. and Hopkins, M. (1975) Global Simulation Models, John Wiley, New York.
Business and Society
  • D Wood
Wood, D. (1994) Business and Society, Harper Collins, New York.