Corporate Social Responsibility as Risk Management: A Model for Multinationals
December 19, 2007 by Brian Butler | Filed under: Literature Review,Purpose of Business and the Role of the Corporation
Kytle, Beth and John Gerard Ruggie. “Corporate Social Responsibility as Risk Management: A Model for Multinationals”. Corporate Social Responsibility Initiative Working Paper No. 10. March 2005.Social risk is a growing area of concern for corporations, especially for those corporations going global. The paper explores and gives a framework for companies on social risks as they become global. Uncertainties in corporate decision making contribute to hidden vulnerabilities that business can and now face. According to the authors, some of the reasons why vulnerabilities exist include 1) Large extended enterprises made up of independent organizations but with tremendous pressures to grow and perform as a unit. 2) Rapid rates of change in technology, connections and information flows as a result of globalization. And 3) Problems in managing scale using methods rooted in controlling all decisions across the entire extended enterprise.
An answer to the issue on how a corporation can avoid the social risks associated with corporations, the authors look at company perspectives on social issues becoming a competitive necessity and fully involved in corporate strategy in order to manage those risks. Corporate social responsibility programs are seen, according to the authors, as a way to understand the dynamics of operating globally and to manage those risks efficiently. The authors present the argument of the way to address social risks is to balance those risks against business decisions, then determining the quality of engagement with the stakeholders and their associated issues. The authors explain two ways of doing this. 1) Identify the empowered stakeholders and their key issues and 2) determining the highest level of engagement and information sharing necessary to address their concerns and reap the mutual benefits from improved accountability and better relations with stakeholders. An example produced by the authors was the fall out of the Nike Corporation after the published article in the New York Times, accusing the company using sweatshops to increase profits. A snow ball effect started to where Nike addressed the “risk” and developed a department for managing its supply chain departments. Nike ultimately recognized that it can only become more profitable and sustainable if it was corporately responsible.
Source: http://www.ksg.harvard.edu/m-rcbg/CSRI/