Foreword by the Director
Since the concept of Corporate Social Responsibility (CSR) was formally proposed in the 1950s, it has been intensely debated in international academic circles. Nevertheless, in the business community, practitioners generally hold doubts about this concept, and its implementation is particularly challenging in cross-border practices. In today’s world fraught with global challenges, if scholars fail to explore issues from an enterprise’s practical perspective, enterprises—the main actors of CSR—cannot derive useful insights from academic discussions. For Chinese enterprises, especially Chinese multinational enterprises (MNEs), if they do not view CSR from the perspective of global development and the social progress of host countries, they will never truly fulfill their social responsibilities in host countries, integrate into local societies, and become welcomed and respected investors.
Against this backdrop, the China-Latin America Management Research Institute at the School of Economics and Management, Tsinghua University, will soon join hands with academic and business partners to discuss CSR issues of MNEs investing in developing countries. We aim to explore the following topics (but are not limited to them):
1. Should enterprises assume social responsibility?
2. How to define the boundaries of corporate social responsibility?
3. How to understand the connotation and extension of corporate social responsibility?
4. What capabilities are required to fulfill CSR in host countries? And how to build CSR implementation capabilities overseas?
Meanwhile, we will also share best practices of CSR fulfillment for enterprises’ overseas investments.
Discussion on Corporate Social Responsibility (Part 1)
Should Enterprises Assume Social Responsibility?
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
The question “Should enterprises assume social responsibility?” is the most fundamental issue in CSR research. If enterprises are not inherently obligated to undertake social responsibility, all subsequent discussions on the connotation, measurement, strategies, and capabilities of CSR will be meaningless.
After years of debate, the international academic community has reached a definitive consensus: enterprises should assume social responsibility. Even so, clarifying the reasons for CSR is critical, as these reasons largely determine the connotation, boundaries, and other related dimensions of CSR.
In discussions by Chinese and foreign scholars, we identify two core justifications:
First, corporate social responsibility directly stems from the social impacts of corporate behavior;
Second, corporate social responsibility is fundamentally rooted in the social contract between enterprises and society.
These two rationales coexist and evolve progressively with the times.
1. Responsibility Arises from Social Impact
In the late 19th and early 20th centuries, the negative social impacts of rapid industrial development after the Industrial Revolution became prominent. Large corporations such as American Tobacco, Standard Oil, and United States Steel gained attention for their profit-driven, unethical practices that lent a brutal character to economic activities (Zhang Youlun & Li Jianming, 1992). Environmental pollution emerged as a major negative externality of corporate behavior.
In the United Kingdom, coal consumption surged after the Industrial Revolution, and urban expansion coupled with population growth sustained high coal demand, causing severe air pollution in cities and surrounding areas (Cui Yanhong, 2015). In the United States, rampant resource waste and energy consumption led to escalating environmental pollution and ecological degradation, prompting scholars to call for a halt to large-scale resource extraction and energy use to protect the environment (Yu Shan, 2022).
Within enterprises, labor problems prevailed. Large firms aggregated massive numbers of workers, who faced job insecurity, low wages, child labor, and unsafe working conditions (Li Yuetao, 2005), straining labor-capital relations. This placed American society in a dilemma: how to protect corporate efficiency while mitigating social harm—a longstanding concern of thoughtful observers (Zhang Youlun & Li Jianming, 1992).
Against this backdrop, the idea of corporate social responsibility began to take shape. In 1916, J. Maurice Clark of the University of Chicago wrote in The Changing Basis of Economic Responsibility: “The world is very familiar with the concept of social responsibility, but the fact that a large part of it is corporate responsibility has not been understood.” Clark (1916) further noted that people were beginning to realize that business transactions had far-reaching impacts beyond common perception—this is the earliest verifiable literature proposing the idea of CSR (Chen Zhiwu, 2008).
In 1923, British scholar Oliver Sheldon put forward the concept of “managerial social responsibility” in The Philosophy of Management. He argued that management is responsible because industry consists not only of material factors but also human elements; thus, industrial management bears responsibility not only to people within the industry but also to those it serves (Sheldon, 1923).
This context shows that awareness of CSR largely emerged directly from corporate social impacts: with impact comes accountability, a logical principle. In the 1950s, Howard R. Bowen’s landmark work Social Responsibilities of the Businessman formally defined CSR for the first time.
Bowen (1953) stated: “By virtue of their strategic positions and considerable decision-making power, businessmen have an obligation to consider social consequences when making decisions, and thus bear social responsibilities beyond their duties to owners or shareholders.” He further defined “businessmen’s social responsibility” as “the obligation of businessmen to set policies, make decisions, and take actions in accordance with social goals and values.”
We argue that Bowen (1953) not only formally introduced the CSR concept but also extended it to managerial decision-making. Early on, people observed and called for ex-post remediation of corporate negative social impacts; by the 1950s, Bowen’s framework shifted CSR to ex-ante, proactive management—enterprises anticipated social impacts and integrated them into decision-making, guided by social goals and values. For this reason, Social Responsibilities of the Businessman is regarded as the first academic monograph on CSR, and Bowen is hailed as the “Father of Corporate Social Responsibility” (Carroll, 1999).
2. Responsibility Arises from the Social Contract
The idea of contract originated with the ancient Greek philosopher Epicurus in the 5th century BCE. Epicurus held that individuals seek mutual agreements to avoid harm from one another; justice and law derive from such covenants, and the state is founded on these social contracts (Li Chaoping & Xu Shiyong, 2019).
With the emergence of enterprises, scholars applied social contract theory to corporate research. In 1937, Ronald H. Coase proposed the theory of the firm as a social contract, introducing social contract theory into corporate studies. His assertion that “the firm is a nexus of contracts” became a core tenet of modern firm theory.
In 1982, Thomas Donaldson applied social contract theory to explain CSR, arguing for a contractual relationship between enterprises and society: enterprises owe responsibility to the society that provides the conditions for their existence, and society in turn bears responsibility for corporate development. Under this view, enterprises and society are the two parties to the social contract, resolving conflicts of interest through coordination to form a mutually agreed social contract—a dynamic relationship.
In 1971, the U.S. Committee for Economic Development (CED) published Social Responsibilities of Business Corporations. The book described the prevailing context: the general public believed that enterprises paid insufficient attention to pressing social issues (including not only corporate-caused problems like environmental pollution and consumer rights violations, but also broader issues such as poverty and urban decay). The public expected enterprises to contribute more to advancing social good.
The CED (1971) emphasized that this reflected new societal expectations of enterprises: businesses were called to assume broader social responsibilities and serve wider human values, not merely produce goods and services. Since enterprises exist to serve society, their future depends on management’s responsiveness to evolving public expectations.
In this view, CSR is shaped by societal expectations. As societal expectations change with the times and gain rational consensus, they evolve toward a new social contract. Broadly speaking, the corporate-social contract reflects multifaceted relations between enterprises and society; only by meeting contractual obligations can society foster a sound economic and external environment for corporate growth.
Notably, societal expectations of enterprises stem from two sources:
1. Direct/indirect corporate causation of social problems (e.g., labor issues, environmental pollution);
2. Enterprises’ substantial resources and expertise to address critical social issues (e.g., poverty, urban decay) without bearing full blame for their origin (CED, 1971).
For example, when enterprises invest overseas—especially in developing countries—weak institutions and low governance capacity in host countries lead local populations to place expectations on resourceful, capable organizations like large MNEs to help solve social problems. This is a complementary expectation that forms a de facto contractual relationship in local contexts.
Failing to meet this contractual obligation may cause enterprises to lose the social foundation for normal operations in host countries—this is the issue of the Social License to Operate (SLO). Thus, enterprises may need to fulfill certain CSR obligations to secure a Social License to Operate, a concrete manifestation of the social contract in specific contexts.
Conclusion
In summary, enterprises should assume social responsibility, whether due to the social impacts of their behavior or the social contract with society.
Responsibility for negative social impacts is a visible, readily acceptable rationale for enterprises. However, the social contract represents the more essential and profound foundation of CSR.
For Chinese multinational enterprises, a deeper understanding of CSR’s essential characteristics is critical to accurately grasp genuine CSR needs in a changing reality, and to fulfill CSR sincerely and appropriately in specific host country environments.
References
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