Prof. Chen Taotao

Director of Tsinghua University Latin America Center

Director of Center for China-Latin America Management Studies，School of Economics and Management, Tsinghua University.

Professor of School of Economics & Management, Tsinghua University

Xin-Yu Gong

Ph.D. Candidate, Tsinghua University School of Economics and Management

Ph.D. Researcher, China-Latin America Management Research Center, Tsinghua University School of Economics and Management

In the previous article, we explored the question of "whether enterprises should undertake social responsibility" and concluded that it has become a consensus that enterprises should bear social responsibility. Corporate social responsibility (CSR) directly stems from the impacts of corporate behaviors on society, and fundamentally originates from the social contract of enterprises. The extent to which enterprises should undertake social responsibility—namely, the boundaries of CSR—is the theme of this paper.

Currently, there are discussions related to the boundaries of CSR, yet there is still no clear and consistent answer directly addressing this issue itself. This is inseparable from the lack of a unified and standard definition of the concept of CSR. Therefore, some scholars argue that a key challenge in constructing CSR theory is the failure to reach an agreement on the boundaries of CSR (Blowfield and Murray, 2008). The subjects and objects of responsibility in the term "corporate social responsibility" are "enterprises" and "society" respectively. Therefore, this paper will discuss the boundaries of CSR from the enterprise perspective and the social perspective separately.

(1) Enterprise Perspective

I. The impacts generated by enterprises form the boundaries of their social responsibility

Based on the impacts generated by enterprises, Preston and Post (1975) put forward some thoughts on the boundaries of CSR. The two scholars defined two areas of corporate engagement in society: (a) the primary sphere of engagement, which directly derives from the firm’s specialized functional role; (b) the secondary sphere of engagement, which mainly includes some impacts and effects arising from its primary engagement activities. Thus, although enterprises are not responsible for solving all social problems, they are still obligated to address problems caused by their own activities, such as social issues related to their business operations and interests. Enterprises therefore bear dual responsibilities—responsibilities to the market (similar to economic responsibilities) and responsibilities to public policy. According to the principle of public responsibility, enterprises are obliged to take positive actions for social welfare, and the content of CSR varies by company, as each company is responsible for repairing what it has damaged and helping solve social problems that affect the firm. Evidently, under this view, CSR is bounded by the impacts enterprises exert on society.

II. Corporate social power influences the scope of social responsibility

Davis (1960) argued that corporate social responsibility should match their social power: the greater the power, the greater the responsibility. Thus, corporate social power is correlated with the scope of social responsibility. According to Parkinson (1995), corporate social power mainly refers to decision-making power—that is, the ability of enterprises to make choices with significant social consequences, such as factory location selection, employee recruitment, and supplier cooperation. When enterprises exercise such decision-making power, they inevitably exert certain impacts on society. Since each enterprise possesses different social power, the main aspects and magnitude of their social impacts also differ. For example, mining enterprises obviously affect surrounding communities and thus bear corresponding social responsibilities to them, while the banking industry generally does not have such impacts; the social impacts of large multinational enterprises and small and medium-sized enterprises cannot be generalized. Under this view, corporate social power influences the scope of social responsibility.

Whether bounded by corporate social impact or social power, the two are essentially integrated. Corporate social impact directly forms the boundary of social responsibility, while corporate social power is linked to corporate decision-making and determines the scope of impact.

(2) Social Perspective

I. Different social actors influence the formation of CSR boundaries

In reality, enterprises’ fulfillment of social responsibility depends not only on their social impact or power, but also on social pressure and the need to meet social expectations. In fact, with social development, governments, social organizations, and the public in society also exert corresponding external pressures that practically shape the boundaries of CSR.

First, the government is the most central and authoritative social actor. In the entire social system, the government formulates market rules and promulgates laws and regulations, which enterprises must abide by. Current research has reached a basic consensus on the government’s role in CSR: the government’s functions in the CSR field include regulation, promotion, cooperation, and support (Fox et al., 2002; Schneider & Scherer, 2019). Taking regulation as an example, the government can set minimum standards for CSR through relevant legal systems, such as establishing emission limits for specific types of industrial facilities (Fox et al., 2002), which constitutes a mandatory external boundary for CSR.

Second, social organizations such as non-governmental organizations (NGOs) and industry associations can exert pressure on enterprises to influence CSR boundaries. At the international level, international organizations such as the International Organization for Standardization, labor organizations, and human rights organizations influence CSR globally by issuing a series of conventions or codes of conduct. At the industry level, industry associations have promoted the development of CSR. For instance, the China National Textile and Apparel Council launched China’s first standardized industry CSR management system in 2005 to promote CSR practices in the textile industry. At the national level, NGOs operating within a country participate in publicity and lobbying, organize or lead protests, commission reports, and collaborate with companies on projects (Sagebien et al., 2008). For example, in Latin American countries, local NGOs often organize or participate in community protests against enterprises, or form public opinion pressure through news reports, forcing enterprises to respond to community expectations.

Third, the public is also an important component of society. On the one hand, the public can negotiate with locally operating enterprises through community participation mechanisms to prompt enterprises to consider community needs and expectations. On the other hand, irresponsible corporate behaviors often face public boycotts; the public exerts pressure on enterprises through protests, lawsuits, and other means to demand responses—such as the consumer rights movement in the 1960s and 1970s and the anti-sweatshop movement in the 1990s—thereby influencing CSR boundaries.

II. The level of social development also shapes CSR boundaries

CSR varies across countries (Frynas & Stephens, 2015), and this difference is related to the level of social development. Countries with different levels of social development differ in economic development, institutional completeness, and government governance capacity, which in turn shape different CSR boundaries. In terms of economic development, compared with developed countries, developing countries have lower economic levels and face widespread poverty. In this context, CSR is often associated with issues such as poverty alleviation and narrowing social gaps. In terms of institutional completeness and government governance capacity, developing countries are often characterized by "weak institutions and weak governance" (Matten et al., 2008), and governments at all levels may not be able to fully perform their due duties nationwide. This may lead to functions previously considered state responsibilities being partially transferred to private operators (Campbell, 2012), further affecting CSR boundaries. For example, host countries expect multinational corporations (MNCs) to act as "vehicles for development" through their CSR practices (Idemudia, 2011), providing social services such as roads and education. In terms of NGO completeness, developed countries usually have a larger number and wider variety of NGOs, forming a relatively dense social organization network (Jia Xijin, 2016). In contrast, developing countries have relatively incomplete NGOs. Coupled with weak government governance capacity, the public often hopes that enterprises operating nearby will respond to their needs, thus protesting directly against resource-rich and influential enterprises through demonstrations and other means to expect them to fulfill social responsibility.

Conclusion

In summary, we argue that CSR has clear boundaries. From the enterprise perspective, since CSR directly arises from enterprises’ social impacts, corporate social impact is the most direct boundary, and corporate social power influences the scope of social responsibility. Meanwhile, from the social perspective, key social actors in the external social environment—namely governments, social organizations, and the public—profoundly influence the formation of CSR boundaries. In addition, countries at different stages of social development 赋予 CSR boundaries phased characteristics.

The CSR boundaries formed from the enterprise perspective are clear and acceptable, while those from the social perspective are broader, often involving enterprises contributing to solving social problems through CSR. In practice, we need to understand the impact of the social environment on CSR boundaries in light of the actual context. In the context of cross-border investment, understanding CSR boundaries from the two perspectives becomes more challenging due to vast differences in institutions, culture, and society between home and host countries. From the enterprise perspective, the impacts of MNCs extend beyond a single country to multiple nations, making the CSR boundaries formed by corporate impacts more complex. From the social perspective, social actors and environments in host countries are unfamiliar to MNCs, meaning the external boundaries of CSR are also unfamiliar to them. Therefore, enterprises need to continuously understand and learn about the social environment of host countries and the external CSR boundaries formed within this context.

It should still be noted that the boundaries of CSR cannot be infinitely expanded. Fulfilling CSR requires doing what should be done and refraining from what should not (Li Yanlong, 2011); enterprises cannot be expected to solve all social problems (Aßländer & Curbach, 2017). Enterprises are established primarily to make profits. Only by earning profits can the main body of CSR survive and develop in society, and further implement CSR practices.

References

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