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PROBLEM STATEMENT

The recent spate of corporate failures and accounting scandals
has undermined society’s faith in corporate leadership, in
financial reporting and in the integrity of markets the world
over (Dowling, 2004; Witherell, 2002). In the past years,
internationally and locally, demands have been made by
corporate stakeholders to increase governance practices within
organisations (Hollender, 2004; Paine, Deshpande, Margolis &
Bettcher, 2005; Zadek, 2004) and to include in corporate
strategy, corporate responsibility initiatives that demonstrate
organisational commitment to the greater good of society
(Amalric & Hauser, 2005; Hollender, 2004; Kennedy-Glans,
2005/06; Werther & Chandler, 2004).

The notion of corporate responsibility or corporate citizenship
is not easily defined (Grayson, 2005). Efforts have been made to
translate social responsibility rhetoric into corporate action with
more writers devoting their time to devising tools and methods
of implementing the concept in organisations. 

The range of issues that continue to be added to the ‘corporate
responsibility’ sphere is ever-increasing, making it difficult for
corporations to know what action to take and how to make a
case for action in these areas. Changes in the environment in
which organisations operate and debate around the
accountability of business as a principal actor and motor for
growth and development, opens the debate around the role of
business in society. Defining the boundaries of responsibility of
organisations in the face of failed states, poverty and lack of
economic development is especially challenging in Africa today.

In Africa, Visser, Middleton and McIntosh (2005, p.18) note the
role of business in a tripartite partnership with government and
civil society to be focused at “aiding development towards a
more participative, rule-of-law-based society where basic human
rights and needs are met”. Meeting such human rights involves
povert y alleviation, improving governance, improving
education, tackling corruption, enforcing labour standards,
preventing resource depletion, controlling industrial pollution,
promoting environmental conservation, upholding business
ethics, ensuring the integrity of supply chains and addressing
health issues such as HIV/AIDS (de Jongh, 2004; Visser,
Middleton and McIntosh, 2005). In this regard, Visser, Middleton
and McIntosh (2005) view a corporate citizenship or corporate
responsibility debate as being integral to any debate on the
future of Africa. Hamann, Kapelus, Sonnenberg, Mackenzie and
Hollesen (2005, p. 61) broaden this argument to stress the need

for organisations working in Africa to proactively and creatively
develop local collaborative structures within an “intricate and
dynamic web of interrelated role-players involved in
(un)sustainable development at the local level”.

Hamann and Acutt (2003, p. 255), referring to corporate social
responsibility in the South African context, note that it “is
meant to link the market economy to sustainable development”.
Such sustainable development is arguably complimentary to
economic development. Hamann (2003) notes that such
initiatives necessarily must go beyond philanthropic investment
to embrace developmental initiatives due to the country’s
history of apartheid and concomitant lack of previous state
support for social development. Thus, the unique challenge to
South African organisations is to address broader societal needs
but to continue to generate profit to ensure that this happens
(Middleton, 2005).

Visser (2005) notes the drivers of corporate social
responsibility in South Africa to be legislation, globalisation of
South African companies and concomitant subjection to
international corporate governance requirements, stakeholder
activism and adherence to global standards and codes
including ISO 14001. The King Report on Corporate
Governance (Institute of Directors, 2002) has also had wide-
reaching impact with its recommendation that companies
should report annually on the nature and extent of their social,
ethical, transformation, safety, health and environmental
practices, a recommendation that the Johannesburg Securities
Exchange has made compulsory for companies wishing to list
on the stock exchange. Sustainabilit y reporting is now
commonplace in South Africa with the publication of
organisational initiatives on corporate performance in not
only the economic sphere but also social and environmental
performance, the so-called ‘triple-bottom line’ (Co-operative
Insurance, 2002; Grayson, 2005; Institute of Directors, 2002;
Vermeir, Van de Velde & Corten, 2005; World Business Council
for Sustainable Development, 2003). 

It is advocated that the elements of corporate responsibility
strategy in South Africa and the justification for that strategy
should be studied with a view to comparing these to best
practice and making recommendations to organisations. 

As a background to begin to address these issues, a literature
survey has been undertaken, highlighting the reasons why
organisations do or should implement a corporate responsibility
strategy. The literature review is divided into two sections. The

LUCY DA PIEDADE
lucydapiedade@aol.com

ADÈLE THOMAS
adelet@uj.ac.za

Department of Human Resource Management

University of Johannesburg

ABSTRACT
Heightened scrutiny of organisations and ever increasing stakeholder demands for organisations to respond to issues
within broader society, make it imperative that organisational leaders understand why they should undertake
corporate responsibility initiatives. This literature review (part one of a two part study) investigates the issues that
should be addressed by organisations under the banner of corporate responsibility, including the definition of
corporate responsibility, its extent and boundaries and the business case for corporate responsibility. This
background provides a basis for an exploratory study (part two) of how South African organisations should frame
the case for corporate responsibility and how investment in this area can be assessed. 

Key words

Corporate responsibility, review initiatives, literature

THE CASE FOR CORPORATE RESPONSIBILITY: 

ARGUMENTS FROM THE LITERATURE

57

SA Journal of Human Resource Management, 2006, 4 (2), 57-64

SA Tydskrif vir Menslikehulpbronbestuur, 2006, 4 (2), 57-64



first section offers debate on the definition of corporate
responsibility. The second section is an exposition of the theory
relating to the basis for arguments regarding the extent and
boundaries of corporate responsibility and the consequent
implications for the rationale of the business case. 

LITERATURE REVIEW

Defining corporate responsibility 

Corporate responsibility is a diffuse and continually evolving
concept. Various definitions associate corporate responsibility
with notions of governance, stakeholder theory, business ethics,
sustainability, organisational culture and the relationship
between business and society in general terms (Business for
Social Responsibility, 2002; Ferrell, 2004; Grayson, 2005; Matten
& Crane, 2005). Most scholars agree that there is no universally
accepted definition of corporate responsibility or a definitive
framework of how it should be applied (Carroll, 1979; Clarkson,
1995; Wood, 1991; Matten & Crane, 2005). 

Paradoxically, many organisations have embraced the terms
‘corporate responsibilit y’, ‘corporate citizenship’ and
‘sustainable business’ and have taken initiatives in this regard,
although no consensus has emerged as to what the terms
actually mean or imply (Carroll & Buchholtz, 2000; Mirvis &
Googins, 2004).

The various definitions advanced attempt to answer the
questions: 
� to whom does business owe responsibility?
� what is business responsible for?
� who is calling for increased responsibility? (Moir, 2001). 

The definition of corporate responsibility seems to have come a
full circle. Descriptions of the term in the 1950s followed a
philosophical approach in terms of which business is described
as having responsibilities to society in the broadest sense
(Bowen, 1953). Frederick (1994) confirms, in his analysis of the
development of the area of study, that corporate responsibility,
up to 1970, was viewed in normative or philosophical terms as an
obligation to work for social betterment. He refers to this stage
as CSR1. This was followed by a managerial action-based
approach often called corporate social responsiveness or what
Frederick (1994) terms CSR2. By the late 1980s and early 1990s a
return to an ethical or moral basis of informing managerial
action followed, called corporate social rectitude or CSR3 (Moir,
2001). The many conflicting definitions and understandings of
corporate responsibility that have been advanced have led some
authors to recommend the abandonment, altogether, of the
concept of ‘corporate social responsibility’, which is based on a
language of rights and responsibilities. 

Waddock (2002) argues that corporate responsibility is much
more than ‘social’ and that the term ‘corporate social
responsibility’ is inaccurate. “Thinking … in terms of ‘social’
responsibility … may allow companies to gain some positive
public relations fluff, in the short run and will likely benefit
some specific stakeholders. Ultimately, however, this narrow
perspective allows organisations to get off the real responsibility
hook, which has to do with how they are managed, what 
they produce, how they interact with the world” (Waddock,
2002, p. 20).

An argument has persisted in corporate responsibility circles for
some time with regard to the use of the terms ‘responsibility’
and ‘responsiveness’. Some writers have criticised the term
‘responsibility’ for attempting to reduce the argument to one of
pinpointing accountability or obligation. Responsiveness, on
the other hand, connotes a dynamic, action-oriented condition
(Carroll & Buchholtz, 2000). The advantage of the
responsiveness orientation, in many instances, is that it allows
organisations to operationalise their responsibilities without

becoming sidetracked by the difficulty of defining exactly what
the responsibilities of an organisation are in a particular case
(Carroll & Buchholtz, 2000). 

Carroll (1979), an early pioneer in this area, developed the
Corporate Social Performance Model, a forerunner to the
Pyramid of Corporate Social Responsibility (Carroll, 1991) as
represented in Figure 1, that integrates early thought on the
three dimensions of corporate responsibility: 1) the social
responsibilit y categories of economic, legal, ethical and
discretionary; 2) the philosophy or mode of social
responsiveness whether reactive, defensive, accommodative or
proactive and 3) the social issues involved, namely
consumerism, environment, discrimination and other issues
which management must address in its corporate responsibility
strategy. The advantage of the model is that it systematised and
clarified the various dimensions and issues that were understood
to form part of corporate responsibility. 

Figure 1: Carroll’s (1991) Pyramid of Corporate Social

Responsibility

This model highlights the necessity for organisations to
simultaneously fulfil economic, legal, ethical and philanthropic
responsibilities. It also indicates philosophical progression in
social responsiveness from a reactive mode (where being
profitable is paramount), through the modes of defensiveness
and accommodation (where obeying the law and being ethical,
respectively, are paramount) to a proactive mode where being a
good citizen is the primary organisational motivator and which
would encompass the previous levels. 

The elements identified by Carroll (1979; 1991) have later been
amplified by Zadek (2004) who advocates an organisational
learning model along the path to corporate responsibility from
the defensive stage through to the civil stage where companies
collectively address societal concerns. 

Wartick and Cochrane (1985) built on Carroll’s (1979) earlier
work by adding three dimensions to the understanding of
corporate responsibility. They envisioned these dimensions as
principles that reflect the organisational dimension and issues
that management identifies as important: philosophical
orientation and processes; the institutional dimension of
applying the philosophy; and policies.

More recently, calls have been made for a shift in the analytical
framework of corporate responsibility to a new paradigmatic
level based on the natural sciences and complexity theory. This
framework seeks to move beyond the economic or corporation-
centred orientation, and to re-introduce the normative or moral
debate around the need for corporate responsibility (Aqueveque,
2005; Frederick, 1998; Hollender, 2004).

DA PIEDADE, THOMAS58



Freeman and Liedtka (1991) suggest three alternative
‘conversations’ about organisations based on the
understanding of the corporation as inextricably linked to
society namely, the stakeholder proposition or the idea that
organisations are connected networks of stakeholder interests;
the caring proposition in terms of which organisations are
understood to be places where individuals engage in caring
activities aimed at mutual support and human achievement
(organisation as communit y); and the pragmatist pro-
position that views organisations as means through which
human beings are able to create and recreate their visions 
for self and community. 

When considering the various ways of concept ualising
corporate responsibility, it is suggested that an addition to the
debate would be the extension of the philanthropic layer of the
Carroll (1979; 1991) Model in the marrying of philanthropic
and business foci. In this regard, organisations that, through
interaction with stakeholders and relevant interaction with
communities, are able to access information regarding
stakeholder interests that may impact their organisations and
who are able to translate this information into market
awareness are equipped to build their competencies in
learning, innovation and risk response (Grayson, 2005; Zadek,
2001; 2004). 

Accordingly, a definition of corporate responsibility that is
advanced is the commitment of organisations to act in the
interest of both business and sustainable economic development
based upon ethical values, compliance with legal requirements,
and respect for and engagement with people, communities and
the environment.

THEORETICAL UNDERPINNINGS

The extent and boundaries of and the business case for

corporate responsibility

The following discussion highlights various evolving perspectives
regarding the nature and extent of corporate responsibility and
forms the basis of how corporate responsibility is embraced, as a
business case, within organisations.

Neo-classical perspective

According to the neo-classical or, what Locke
(http:mitsloan.mit.edu/50th/corpcitizenship) calls, the
minimalist theory of corporate responsibility, the responsibility
of business is to ensure optimal economic performance of
corporations in order to increase shareholder wealth. Those who
adopt the neo-classical view of the organisation advocate that the
only responsibilities to be taken on by business are the provision
of employment and the payment of taxes (Moir, 2001). This view
holds that a society can best determine its needs and wants
through the invisible hand of the marketplace (Carroll &
Buchholtz, 2000). The leading proponent of this view, Milton
Friedman (1970), argues that organisations, as artificial persons,
cannot have social responsibilities. He maintains that the
principal responsibilit y of organisations is towards their
shareholders; to increase their wealth while conforming to the
basic rules of society, both those embedded in law and those
embedded in ethical custom. When corporate executives engage
in socially responsible activities that are not required of them in
terms of prevailing laws and customs, these actions constitute a
tax on the organisation. 

One could argue that Friedman’s (1970) arguments have been
interpreted too narrowly and that reference to the ethical
customs of the time must surely mean that changing
expectations about the roles of business in society need to be
taken into account. However, the most common
interpretations of Friedman’s statements are that in a
democratic society, government is the only legitimate vehicle
for addressing social concerns and that business’ involvement

in this respect should be curtailed (Carroll & Buchholtz, 2000).
Levitt (1958, p. 47) also warned about the dangers of adopting
corporate responsibilit y criteria, noting, “… welfare and
society are not the corporation’s business. Its business is
making money not sweet music”. Similarly Korten (1997) has
argued that ethical organisations are necessarily pushed out of
a competitive market and Zadek (2004) notes that being ‘good’
does not always pay. 

Legal perspective

The neo-classical model evolved further when laws constraining
business behaviour began to proliferate in response to changed
societal expectations from being strictly economic in nature to
encompassing aspects that had previously been left to the
discretion of organisations (Carroll & Buchholtz, 2000). A
formalistic legal interpretation was taken by some scholars who
were concerned with the distinction between those obligations
mandated by law and those that were taken on a discretionary
basis (Davis, 1973; Sethi, 1979). The philosophy of legal
pragmatism developed in opposition to the legal formalistic
approach that establishes that law is not merely those rules that
are formally codified. Laws are instruments of social policy. This
philosophy holds that laws evolve organically and require
managers to exercise discretion in the interpretation of the social
spirit of the law (Foote, 1984; Ostas, 2001). Most commentators
agree, however, that legislation in itself cannot increase socially
responsible behaviour and that organisations should work
towards developing a culture of corporate responsibility
(Caldini, Petrova & Goldstein, 2004; Morrison, 2001; Sarre, Doig
& Fiedler, 2001; Weaver, 2001). 

Philanthropic perspective

This concept is predicated on the notion of charity, requiring
more fortunate members of society to assist the less fortunate,
and stewardship requiring businesses and wealthy individuals to
act as stewards or caretakers of property, holding it in trust for
society as a whole (Frederick, 1994; Freeman & Liedtka,1991).
Philanthropic action is taken on a discretionary basis and is
motivated by moral and/or religious arguments (Carroll, 1991).
Carroll and Buchholtz (2000) note that the adoption of a
paternalistic and philanthropic approach to communit y
involvement was precipitated by the emergence in the late 1800s
of large corporations in America that changed the balance of
power between society and business, and raised the issue of the
responsibility of these organisations to the societies in which
they operated. However, the idea remains rooted in the
economic concept of business as wealth generator and not
societal actor.

Stakeholder perspective

According to this view, the responsibilit y of business
encompasses more than its primary economic dut y to
shareholders; business has a duty to other stakeholders as well.
The ‘narrow sense of stakeholder’ refers to any identifiable
group or individual on which the organisation is dependent for
its continued survival (Ferrell, 2004; Freeman & Reed, 1983).
Freeman (1984, p. 46) defines a stakeholder as “any group or
individual who can affect or is affected by the achievement of
the organization’s objectives”. Primary stakeholders are
generally understood to be shareholders, investors, employees,
customers and suppliers (Clarkson, 1995; Dowling, 2004)
together with what is defined as the ‘public stakeholder group’
namely, “government and communities which provide
infrastructure and markets, whose laws and regulations must
be obeyed, and to whom taxes and obligations are due”
(Clarkson, 1995, p. 106). A high level of interdependence exists
between primary stakeholders and the organisation, since
damage to this relationship affects the survival of the
organisation (Aqueveque, 2005; Dowling, 2004; Werther &
Chandler, 2004). Some writers take a narrower view of the
stakeholder concept as being those stakeholders without whose
continuing participation the organisation cannot survive as a
going concern. 

THE CASE FOR CORPOR ATE RESPONSIBILITY: ARGUMENTS FROM THE LITERATURE 59



A broader view of stakeholder is based on the premise that
organisations have a responsibility to society beyond their
primary stakeholders. Opinions regarding the extent of this
responsibility vary. Freeman (1984) subscribes to a ‘wide sense of
stakeholder’, which includes any individual who can affect or
who is affected by the achievement of an organisation’s
objectives. Other theorists believe that companies are forced
into a broader notion of stakeholders due to increasing pressure
being put on companies by secondary stakeholders such as
activists, non-governmental organisations, communities and
other governments (Amalric & Hauser, 2005; Mirvis & Googins,
2004; Waddock, Bodwell & Graves, 2002). Most organisations
and corporate responsibility proponents appear to define
corporate responsibility from a stakeholder perspective based on
analysis and engagement (Epstein,1987; Frederick,1998; Jones,
1980). Managers are faced with the challenge of determining
who their stakeholders are and to which of their demands or
needs they should respond. Mitchell, Agle and Wood (1997)
developed a model of stakeholder identification and salience
based on stakeholder attributes of power, legitimacy and
urgency. Based on this model organisations would be expected
to pay the most attention to legitimate stakeholder groups who
have power and urgency (Moir, 2001).

Ferrel (2005), Hall and Vredenburg (2005) and Zadek (2001) also
distinguish between ‘negotiated boundaries’, in terms of which
organisations determine the stakeholders with whom they
should negotiate; ‘evolving boundaries’, which are dependent
on constant learning and re-evaluation; ‘standard boundaries’,
which refer to the host of international reporting standards and
guidelines that prescribe the extent of corporate responsibility
and, ‘committed boundaries’, which are those elements of
corporate responsibility that are integral to a particular
direction to which the organisation has committed itself.

Broad societal perspective

In terms of this perspective, the boundaries of corporate
responsibility are extended beyond those groups directly
affected by organisational decision-making. The premise is that
organisations have a moral or ethical duty to enhance broader
societal goals. Mahon and McGowan (1991, p.81), in accordance
with other more recent writers on the topic (Werther &
Chandler, 2004; Zadek, 2004), hold this broader understanding
of stakeholders and conclude: “ … it is clear that most authors
mean corporate social responsibility to include behavior and
actions beyond mere profit making that serve to improve the
conditions of society and individuals within that society”.
Corporate social responsibility in this instance is motivated by a
recognition that long term viability of organisations depends
upon the prosperity of the environment in which they operate
(Mahon & McGowan, 1991; Werther & Chandler, 2004; Zadek,
2004). This view is reflected in Zadek’s (2001; 2004) Third
Generational Theory of Corporate Responsibility that seeks to
address the question of the extent of business responsibility for
addressing social and environmental problems.

Moir (2001), and later Grayson (2005), remark that corporate
responsibility covers an ever-increasing range of issues such as
plant closures, employee relations, human rights, corporate
ethics, community relations and the environment to which can
be added the aforementioned issues pertinent to South Africa
such as HIV/AIDS, environmental protection and sustainability.
Hall and Vredenburg (2005) and Zadek (2001; 2004) argue that
traditional and legal obligations are increasingly inadequate
bases for defining the extent and boundaries of organisational
responsibility. They distinguish between the legal, financial and
operational methods of defining the boundaries of corporate
responsibility and the more recent methods of characterising
corporate boundaries in terms of strategy, risk, value chains,
information, knowledge and values. 

The following three theories emerge from the broad stakeholder
and societal perspectives.

Social contracts theory

Viewing society as a series of social contracts presents an
alternative view of why organisations need to act responsibly
(Gray, Owen & Adams, 1996; Grayson, 2005). Organisations that
adopt the social contract view explain their involvement in
responsibilit y projects in terms of societal expectation.
Donaldson and Dunfree (1999) have developed an integrated
model based on the theory of social contracts for manager
decision-making in an ethical context. They distinguish
between macro and micro social contracts. The macro social
contract will determine in which areas organisations need to get
involved, whereas the micro social contract indicates the specific
involvement and responsibility programmes. Moir (2001)
remarks that although social contract theory may explain the
initial motivation of organisations in becoming involved in
corporate responsibility, it probably does not explain the totality
of its involvement and has to be understood in the context of the
other theories such as legitimacy theory.

Legitimacy theory

Organisations often seek to legitimise their activities through
communicating the benefits of their involvement and
changing perceptions about their business. Zadek (2004)
equates this to an organisation being at a ‘strategic’ stage of
learning. Suchman (1995) identifies three challenges to
legitimacy management namely: gaining, maintaining and
repairing legitimacy. The success or failure of legitimacy
management initiatives relies heavily on communication and
the effectiveness of corporate communications. Lindblom
(1994) notes that organisations do not have to follow a passive
approach in seeking to gain legitimacy, but can employ four
broad legitimating strategies when faced with threats: 1) seek
to educate stakeholders about the intentions of the
organisation to improve performance; 2) seek to change the
organisation’s perceptions of the event; 3) distract attention
away from the issue of concern; and 4) seek to change external
expectations about its performance.

Organisations not only earn legitimacy but are expected to use
the power granted to them responsibly or such power will be
withdrawn by society (Zadek, 2004).  

Enlightened value maximisation theory

Amalric and Hauser (2005) and Jensen (2001) argue that the
maximisation of the long-term value of the organisation is the
criterion for making the necessary trade-offs among various
stakeholder interests. In Jensen’s analysis, value maximisation
provides managers with a single objective that is necessary for
purposeful behaviour. His criticism of stakeholder theory is that
it contains no conceptual specification as to how to make trade-
offs between the competing, and often conflicting, interests of
various stakeholders. The basic premise of enlightened value
maximisation is that “we cannot maximize the long-term market
value of an organisation if we ignore or mistreat any important
constituency” (Jensen, 2001, p.16). Value maximisation gives
management a way to assess trade-offs and demands and it
allows for principled decision-making independent of personal
preferences of managers and directors. In terms of this theory,
managers and employees are motivated to seek value by
instituting those changes and strategies that are most likely to
increase organisational value. 

Grayson and Hodges (2001) comment that organisations are
often confused about where to draw the line on their external
involvement and should be guided by cultural and societal
norms about the role of business in the community in particular
regions. They recommend that managers focus on community
issues where there is a direct link to business needs, an interest
among employees, relevant corporate expertise and other
resources that can be deployed. As Moir (2001, p. 17) states:
“whether or not a business should undertake CSR, and the forms
that responsibility should take, depends upon the economic
perspective of the firm”. 

DA PIEDADE, THOMAS60



The business case for corporate responsibility

Although the concept of corporate responsibility has received
significant support, it has proven difficult to quantif y in cost-
benefit and other traditional financial terms what the
contribution of corporate responsibilit y practices to
profitability is (Martin, 2002; Vogl, 2003, Zadek, 2004).
However, supporters of corporate responsibility standards often
point to the fact that most business decisions are taken without
an explicit cost-benefit analysis (Vogl, 2003). According to Zadek
(2001) it is an insistence on a ‘win-win’ proposition that lies at
the heart of the confusion over the role and impact of business
in society. 

Research regarding the relationship bet ween corporate
responsibility and financial performance appears inconclusive.
Some researchers have found a positive relationship between
these two variables (Almaric & Hauser, 2005; Anderson &
Frankle, 1980; Aqueveque, 2005; Bowman & Haire, 1975;
Bragdon & Marlin, 1972; Chiang & Chia, 2005; Hall &
Vredenburg, 2005; Ingram, 1978; Klein, Smith & John, 2004;
McKinsey, 2002; Moskowitz, 1972; Orlitsky, 2005; Preston, 1975;
Spicer, 1978; Sturdivant & Ginter, 1977; Vermeir et al., 2005).
Others have found no link between the variables (Abbott &
Monsen, 1979; Aupperle, Carroll & Hatfield, 1985). Questions
are, however, raised regarding the methodology applied in these
studies, particularly with regard to the measures of financial
performance and corporate responsibility respectively. Some
researchers have found corporate responsibility to be inversely
linked with profitability in the short run (Vance, 1975). Some
have pointed to the fact that organisations that are good
corporate citizens also tend to do well financially since good
corporate responsibility management is often an indicator of
sophisticated management throughout the organisation
(Ringger, 1999). 

Aupperle et al. (1985) conclude that the issue of whether
corporate responsibility is related to financial performance will
never be completely resolved. 

According to Grayson and Hodges (2001) a business case is
normally articulated as a positive or negative argument for
action or inaction, as a cost or loss, or as a saving or a gain in
relation to something of value to the organisation. Value can be
measured in terms of market share, reputation, employee morale
and performance, relationships with business partners and the
cost of capital. Most writers and practitioners agree that there is
no single business case for corporate citizenship (Grayson &
Hodges, 2001; Zadek, 2004). In many instances the corporate
responsibility strategy will depend on where the organisation is
in its life cycle (Grayson & Hodges, 2001), whether there are
cost-benefit advantages, what the risks are to the organisation
that need to be managed and whether the organisation has
considered the strategic long term viability of the organisation
and the linkage of its competitive advantage to the
understanding and management of its various stakeholders.

When preparing to make a business case for corporate
responsibility, Grayson and Hodges (2001) recommend one of two
approaches, namely, building the argument from an ‘emerging
issues’ perspective or from a ‘business needs’ perspective.
Emerging issues are normally presented as either risks or
opportunities. Emerging management issues include: ecology and
the environment, health and well-being, diversity and human
rights and communities. A ‘business needs’ perspective includes
the building of people such as recruiting and retaining employees,
building the organisation in terms of reducing risks and costs and
finally building reputation. Reputational issues include building
goodwill and a licence to operate. 

Organisations are often required to adopt corporate
responsibility practices in order to be recognised as trustworthy
partners in long-term strategic relationships (Pearson, 2000)
and because the society within which they operate expects this

(Mirvis & Googins, 2004). Heightened interest on the part of
investors, consumers and other stakeholders in the issues
encompassed in corporate responsibility means that failure to
address these issues may result in a number of negative
outcomes. A st udy by the World Business Council for
Sustainable Development (2000) points to several actions that
may seriously damage corporate reputation and also translate
into negative financial repercussions. These include, consumer
boycotts, attacks on fixed assets, loss of employee support,
unanticipated spending in order to remedy mistakes, diversion
of management attention from core activities and barriers to
raising finance or insurance. Increasingly these issues are
becoming more important to investors (Co-operative
Insurance, 2002; Dowling, 2004). A study conducted by
McKinsey and Company (2002), found that institutional
investors in emerging markets are willing to pay a premium for
investments in companies that maintain good governance
practices. Regional trading blocs are including Social Impact
Assessments in their trading policy with other nations in order
to ensure that corporate responsibilit y principles are
incorporated into trade and development agreements
(European Commission, 2003). 

Zadek (2001; 2004) breaks the business case down into four
broad (and interrelated) categories namely: defence or pain
alleviation (the defensive stage), the traditional or cost-benefit
case (the compliance stage), the strategic case and the new
economy business case (the civil stage). In the first two stages,
the organisation is reactive, taking only those measures that
comply legally or that may satisf y basic stakeholder
requirements. Such compliance may be able to be measured (e.g.
an absence of safety-related accidents or an absence of legal
penalties). Where an organisation makes a strategic business
case, corporate responsibility becomes an integral element of the
broader strategic approach of the organisation to long-term
organisational performance. Unlike the defensive or traditional
case, the strategic approach cannot easily be subjected to a
standard financial cost-benefit analysis. The new economy
business case or civil stage involves learning, innovation and risk
management of acquiring and acting on stakeholder information
in a way that builds new competencies or products in the
organisation, and provides innovative ideas about how to
manage risk and increase profits (Waddock & Smith, 2000;
Zadek, 2001; 2004). De Jongh (2004, p.28) highlights the
challenges of managing social risk in South Africa and states that
“… in a country such as South Africa, where the socio-economic
and socio-political landscape is transforming at an ever-
increasing pace, sound judgement, stakeholder engagement and
cross-sector partnership seem to be the only workable solutions
to managing social risk”. In line with adopting a new economy
business case, innovative business ideas have arisen from
initiatives to service the poor and there is an increasing
realisation that sustainable business need not be unprofitable
business (Handy, 2002; Hart, 1997; Prahalad & Hart, 2002).

Roberts, Keeble and Brown (2002) report eight areas of business
benefit associated with corporate responsibility, namely, sound
reputation management particularly in view of the fact that
value derived from intangible assets is high and reputation is
often the most valuable of these assets; risk management;
employee recruitment, motivation and retention; investor
relations and access to capital; learning and innovation in that
corporate responsibilit y objectives encourage creativit y;
competitiveness and market positioning; operational efficiency
by means of reductions in waste and negative environmental
impact, and maintaining a licence to operate which may be in
jeopardy when an organisation develops a reputation as a bad
corporate citizen.

Grayson and Hodges (2001) point to an alternative way of
developing the organisation by basing it on building people, the
business and the corporate reputation. Under building people
they refer to attracting, retaining and developing talent and

THE CASE FOR CORPOR ATE RESPONSIBILITY: ARGUMENTS FROM THE LITERATURE 61



assert that people increasingly wish to work for organisations
that share their personal values. Investing money in response to
issues such as protection of the environment ultimately saves
costs associated with litigation and clean up operations. In the
same way, a well-planned promotion of a diversity programme
can avoid legal challenge.     

The case for responsible corporate practices may only be
discernable when a longer-term view of business is applied and
the sustainability of an organisation is evaluated. Zadek (2001)
refers to the corporate citizenship ‘Mecca’ in terms of which
organisations adopt a corporate responsibility strategy as part of
their overall organisational strategy aimed at increasing their
competitive advantage and changing the way in which
organisations do business. 

While it may be possible to gain financially by adopting
corporate responsibility practices through, for example, its
impact on employee retention and productivity, customer
loyalty and effective risk and reputation management, the
business case is not always easy to make since it is possible to do
good and not see benefits, or for such initiatives to detract from
core business operations. 

Zadek (2001) raises a further dilemma in that ‘viable well-doing’
will not be sufficient to meet the world’s challenge of
sustainable development. He questions whether corporate
responsibility should stretch only as far as the limits of the
business case, the so called ‘Oasis’ of responsibility, or whether
there is an underlying moral or ethical imperative for
organisations to become more responsible. Currently in most
organisations, business strategies and operations are aligned
with certain sustainable development objectives such as the
addressing of HIV/AIDS or the provision of social housing to
employees, but do not attempt to tackle broader societal issues
that would change the business environment (Zadek, 2001) or go
beyond the business case to fundamentally change society
(Hollender, 2004). Forstater (2002) notes the difficulty of
making a business case ‘below the breadline’ in poor regions
where the traditional business case arguments fall apart in the
face of endemic poverty. She concludes that the challenge of
poverty in Africa demands that one should go beyond corporate
responsibility ‘as usual’. 

DISCUSSION AND RECOMMENDATIONS 

In recent years pressure has been placed on organisations,
internationally and in South Africa, to focus on good corporate
citizenship. Diffuse concepts have emerged such as ‘corporate
citizenship’, ‘corporate social responsibility’ ‘corporate social
investment’ and ‘corporate responsibility’, with little agreement
on definitions or what initiatives fall, ideologically, within the
ambit of the respective concepts. 

This paper advocates a definition of corporate responsibility that
goes beyond philanthropy to combine a focus on business and
sustainable development based on values, legal compliance and
stakeholder engagement. This thinking is in line with what can
be thought of as some of the challenges to South African
organisations in the area of corporate responsibility.

Emerging issues such as povert y alleviation, improving
governance, improving education, tackling corruption,
enforcing labour standards, preventing resource depletion,
controlling industrial pollution, promoting environmental
conservation, upholding business ethics, addressing health
issues such as HIV/AIDS, building human capital and promoting
economic development are now growing in topicality in South
African debate. These issues, it is suggested, are those that
organisations operating in emerging markets, such as South
Africa, need to focus upon in order to demonstrate that they are
adding value in their business environments. 

Determining the extent and nature of corporate responsibility in
South Africa begs answers to the questions: What is the role of
business in this regard? and, what can and should society expect
from the business community in addressing the imperatives and
aspirations underpinning sustainable development? Once it is
established what organisations should be doing, an equally
important question is: how should these expectations be realised
in practice?

Based on the preceding discussion, and given the increasing
South African debate on ‘triple bottom line’ organisational
reporting on economic, social and environmental issues
(Institute of Directors, 2002), the following propositions are
posited for further study:

� Proposition No 1:
South African companies do not incorporate into their
corporate responsibility strategies, issues that are critical to
sustainable business such as HIV/AIDS, economic
development and education (de Jongh, 2004; Hamann, 2003;
Hamann and Acutt, 2003; Visser, Middleton and McIntosh,
2005).

� Proposition No 2:
South African companies base their case for corporate
responsibility mainly on defensive or cost-benefit arguments
(Zadek 2001; 2004). 

� Proposition No 3:
South African companies develop corporate responsibility
strategies in order to promote innovation and learning and
risk management (de Jongh, 2004; Waddock & Smith, 2000;
Zadek, 2001; 2004). 

Although there is a lack of consensus with regard to the extent
of corporate responsibility and where the responsibility of
business ends and that of government begins (World Business
Council on Sustainable Development, 2003), the potential
benefits that can be gained from an effective corporate
responsibility strategy are such that this area warrants further
research attention, especially with a view to delineating those
aspects or corporate responsibility that should command South
African business attention.

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