[CSR Public Opinion Briefing No. 1] Social Responsibility Management is Essential to Become a Global Company 1

[CSR Public Opinion Briefing No. 1]

1. Global company executives should be interested in CSR / Social responsibility management is essential to become a global company / Potential pressure for CSR in Korea is high

2. Chinese citizens' perception of corporate social responsibility

Executives of global companies should pay more attention to corporate social responsibility

Comparison of public opinion surveys on corporate social responsibility in six countries

Jang Jin-ho, Department of Business Administration, Yonsei University

Executives of global companies should pay more attention to corporate social responsibility

As social unrest, the gap between rich and poor, and distrust in large corporations increase, the responsibility of corporations to members of society, not just shareholder value maximization, is being emphasized more than ever. As recently discussed at the World Economic Forum, how to achieve corporate social responsibility has emerged as a critical task for management, alongside strengthening corporate competitiveness and improving corporate governance. Social responsibility management specifically refers to management activities that fulfill obligations to corporate stakeholders such as customers, employees, and the community. Of course, there are various perceptions regarding what constitutes corporate social responsibility, and these perceptions differ by country.

According to Globescan's survey of 21 countries, the percentage of respondents who agreed that providing high-quality and safe products to customers is entirely the social responsibility of a company was as follows: USA (77%), UK (72%), Indonesia (70%), Mexico (50%), China (47%), and South Korea (36%). For treating employees equitably regardless of gender, race, or religion, the USA and UK (84%) and Indonesia (76%) showed higher figures compared to South Korea (21%), China (45%), and Mexico (57%).

The percentage of respondents who indicated that solving social problems such as reducing the wealth gap and promoting human rights is an important social responsibility of corporations was: UK (48%), USA (41%), Indonesia (40%), Mexico (34%), China (16%), and South Korea (15%). The percentage of respondents who fully agreed that having an environmentally responsible stance is a corporate social responsibility was lower in South Korea (36%) and China (48%) compared to the UK (75%), Indonesia (72%), USA (69%), and Mexico (59%). The proportion of respondents who viewed volunteer activities for the local community as the sole social responsibility of a company was: Indonesia (39%), USA (31%), UK (25%), South Korea and China (17%), and Mexico (2%).

The Globescan survey results indicate that awareness of corporate social responsibility is high in developed countries such as the USA and the UK. Therefore, for Korean companies, which cannot afford to exclude the US and European markets, it is inevitable that they must pay more attention to corporate social responsibility to enhance their credibility and reputation.

[Figure 1] Solving Social Problems [Figure 2] Environmental Protection

[Figure 3] Fair Treatment of Employees [Figure 4] Product Quality and Safety

[Figure 5] Employee Volunteerism

Note 1. Figures 1-5 are calculated based on a response of '5 - Strongly Agree' among responses measured on a scale from '0 - Strongly Disagree' to '5 - Strongly Agree' for each item.

Note 2. 'Solving Social Problems' is the average of responses to 'Reducing the wealth gap,' 'Solving problems of crime and illiteracy,' and 'Mitigating human rights violations.' 'Environmental Protection' is the average of responses to 'Producing products/operating the company in an environmentally responsible manner' and 'Using parts/materials produced with social/environmental responsibility.' The 'Product Quality and Safety' item is the average of 'Providing high-quality products at low prices' and 'Product safety.'

Changing Paradigm of Corporate Social Contribution Activities

Among the social responsibilities that corporations must bear, the paradigm of social contribution activities is undergoing a significant transformation. That is, it is shifting from the concept of sporadic, philanthropic volunteer activities to a strategic concept (Strategic Philanthropy) that determines the future of the company. In fact, companies can easily fall into a dilemma between the pressure to achieve short-term profit goals and the increasing demands for corporate social contribution activities. This dilemma has led companies to focus on strategic choices in their social contribution activities. Professor Michael Porter of Harvard Business School has defined strategic social contribution as activities that achieve both social and economic goals for a company. In most companies, donation activities aimed at enhancing corporate image and boosting employee morale have generally been conducted sporadically and unsystematically. However, some companies have achieved significant results by concentrating their donation activities in areas related to their business.

Social Responsibility Activities through Human Resource Development Investment: Cases of Cisco and Apple Computer

In the United States, Cisco Systems and Apple Computer are prime examples of companies implementing strategic social contribution. Cisco, which manufactures network equipment and routers connecting computers and the internet, recognized a shortage of network administrators to support the surge in internet users and established a program to train network administrators in economically disadvantaged areas, offering free education. Currently, over 10,000 educational programs are installed and operated in high schools and community colleges across the United States and in 147 countries. More than 50% of the students who graduate from this program have found employment in IT-related industries. In other words, by nurturing talent needed for the IT industry through social education programs, the company has promoted industry growth, which is evaluated as contributing to Cisco's growth in the long term. Furthermore, Apple Computer has long donated Apple computers to schools at all levels, which not only helps schools but also educates potential markets and customers for Apple Computer. As seen in the cases of Cisco and Apple Computer, leading companies are maximizing the impact of their donation activities by concentrating them in areas aligned with their corporate values, business, and capabilities.

Environmentally Conscious Company: The Case of Amorepacific Corporation

Amorepacific Corporation is a leading company in environmental management. Under the management philosophy that no matter how innovative the idea or product, it will not be produced if it goes against the environment, Amorepacific practices eco-friendly management at all stages from product development to disposal. From the design stage, products that can be recycled are considered, and designs that reduce the use of plastic and paper in product packaging are adopted. Amorepacific is also known for its strict wastewater quality management. As a result of maintaining the average wastewater quality concentration generated during product manufacturing at one-tenth of the legal discharge limit, fish can live in the wastewater discharged from the factory. These efforts not only protect the environment and prevent resource waste but also reduce manufacturing costs, demonstrating the importance of strategic social contribution activities.

Industries That Should Pay More Attention to Social Responsibility Management

When asked, 'What types of products or services carry the greatest social and environmental responsibility?', Koreans responded first with tobacco (21%), processed foods (11%), and gasoline/oil/petroleum (10.6%). For the same question, Americans cited automobiles (11%) and gasoline/oil/petroleum (10.7%), while Chinese respondents mentioned various electronic products (19.6%) and processed foods (13.2%). Based on a comprehensive ranking of responses from six countries including South Korea, the USA, China, the UK, Indonesia, and Mexico, gasoline/oil/petroleum emerged as the industry requiring the most attention in social responsibility management, followed by tobacco, pharmaceuticals, processed foods, automobiles, fast food, electronic products (including PCs and mobile phones), cosmetics, alcoholic beverages, and electricity/energy.

[Table 1] Products or Services with the Greatest Social and Environmental Responsibility

Social Responsibility Management is Essential to Become a Global Company

Lee Jae-yeol, Department of Sociology, Seoul National University

Introduction

Social responsibility management refers to managing a company by considering the impact of its actions on society as a whole. It is generally understood that there are four levels of corporate social responsibility. The first is economic responsibility, which involves minimizing costs and maximizing profits. Companies naturally strive for this without external pressure. The second is legal responsibility, which involves adhering to relevant laws and regulations. The third is ethical responsibility, which means earning money in a fair and just manner. The fourth is philanthropic responsibility, which involves becoming an excellent corporate citizen through active contributions to society. Economic responsibility is inherent to a company and requires no external compulsion. Legal responsibility is mandatory and enforced. However, ethical and philanthropic responsibilities, while not mandatory, are expected of companies and significantly influence their reputation and credibility.

The issue is that different stakeholders assign different priorities to corporate responsibilities. While business owners prioritize economic responsibility, customers place greater importance on ethical responsibility, employees prioritize legal responsibility, and local communities tend to prioritize philanthropic responsibility. This implies that conflicts of interest regarding corporate social responsibility can arise among various members of society.

Consequently, various issues related to social responsibility management have come to the forefront. These include providing high-quality products and services at low prices (for customers), ensuring product safety, maintaining a safe workplace (for employees), treating all employees and job applicants equitably regardless of gender, race, or religion, preventing environmental damage in product manufacturing and corporate operations (for the community), contributing to the local community, acting with consistently strict ethical standards worldwide (for the general public), and producing products using only materials and components manufactured with social and environmental responsibility.

The response of Korean companies to social responsibility management so far can be broadly divided into two categories. First, there is a tendency to emphasize social responsibility management in response to negative public opinion arising from their own mistakes or accidents. Second, more proactive and autonomous companies go beyond reluctant acceptance and take the lead in identifying and practicing socially necessary issues in advance. The results of this public opinion survey demonstrate that the former passive approach is not appropriate even for corporate survival.

The perception that companies are situated within society as a whole and maintain relationships with various stakeholders both internally and externally is spreading domestically and internationally. Actively developing and practicing corporate social responsibility has now become a matter of imperative, not choice.

Public Opinion Survey Results in 21 Countries

The more developed a country, the more critical it is of large corporations' activities; the more developing a country, the higher the trust and expectations for corporations: 'Large corporations are making society better for everyone.'

[Figure 1] International Public Opinion Distribution by Corporate Evaluation and Interest in Social Responsibility Management

[Note] The horizontal axis represents the percentage of positive responses regarding the social role of large corporations, and the vertical axis represents the percentage of respondents interested in social responsibility management.

Globescan's survey of 21 countries reveals that the concept of 'social responsibility management' is viewed more favorably in developing countries, where people tend to trust and evaluate large corporations positively. In contrast, citizens in developed countries tend to demand stricter ethical standards and higher moral conduct from corporations. Furthermore, developing countries primarily emphasize economic and legal responsibilities, while developed countries show a clear tendency to emphasize strict ethical and philanthropic responsibilities.

First, regarding the question 'Are large corporations making society better for everyone?', the percentage of people agreeing is higher in developing countries, while it is lower in developed countries. In developed countries such as Germany, France, the UK, and the USA, only 33%, 38%, 41%, and 42% respectively responded positively to the social contribution of large corporations, whereas high support was shown in developing countries like Indonesia (84%), China (82%), and India (63%). The percentage of Koreans who strongly agreed with this question was a mere 3% (20th out of 20 countries, excluding Switzerland), and when including passive agreement, it was 48%, ranking 8th.

[Figure 2] Evaluation of Large Corporations' Social Responsibility Activities

Meanwhile, regarding 'Assisting in solving social problems such as crime, poverty, and illiteracy,' over 50% of respondents in many countries agreed. However, in the case of social problems related to poverty, people in developing countries with greater disparities between rich and poor tend to emphasize the responsibility of large corporations more than those in European or OECD countries. In South Korea, the percentage emphasizing the full responsibility of large corporations for this issue was only 17% (20th out of 21 countries), and even when considering partial responsibility, the total was 55%, ranking 11th.

In addition, when asked, 'Are companies transparently disclosing how much they have fulfilled their social and environmental responsibilities?', only 5% of Koreans responded affirmatively (16th out of 18 surveyed countries), rising to 11th place when including the 27% who responded with passive agreement. For the question, 'Would you like to know what efforts companies that fulfill their social responsibilities are making?', only 21% of Koreans responded affirmatively, ranking 15th out of 18 surveyed countries, and even with passive agreement at 47%, it remained 13th.

[Figure 3] Large Corporations' Social Responsibility: Solving Social Problems

[Figure 4] Evaluation of Corporate Transparency

On the other hand, when asked, 'Should companies be legally compelled to fulfill their social responsibilities if it helps create a better society?', in developed countries like Germany (34%), France (34%), and the USA (41%), far less than half of the respondents answered affirmatively. In contrast, developing countries such as China (70%), Russia (61%), and Indonesia (58%) showed strong support for legal enforcement of social responsibility.

In conclusion, the public's perception of the social responsibility of large corporations in South Korea can be interpreted as being in a transitional phase from a typical developing country model to a developed country model. That is, it is moving from a developing country model characterized by high expectations and favorable evaluations of large corporations to a developed country model where various stakeholders demand strict ethical standards and high moral conduct, thereby seeking to transform corporate behavior.

The reason why leading global companies consistently publish social responsibility management reports and communicate broadly with society is their empirical understanding that doing so enhances corporate credibility and social legitimacy. In other words, social responsibility management ultimately becomes a shortcut to high-level management that achieves high profits and efficiency.

[Figure 5] CSR Regulation for Corporations

In Korea, the overt pressure for corporate social responsibility is low, but the latent pressure is high.

Han Jun, Department of Sociology, Yonsei University

The increasing awareness of corporate social responsibility and the recognition of the need for responsible management are often triggered by pressure from the surrounding environment rather than by the companies themselves. Globescan, in collaboration with research institutions from various countries, surveyed 21 nations to assess the degree of social pressure regarding corporate social responsibility. When asked, 'In the past year, have you considered not purchasing products from a company you believe is not fulfilling its social responsibilities, or criticizing that company to others?', significant differences were found between countries.

In developed countries with high awareness of corporate social responsibility, the proportion of respondents who have engaged in boycotts or criticism of companies exceeds 40%, whereas in South Korea, this proportion is only 15%. Countries such as Indonesia (3%), India (6%), Russia (7%), Nigeria (14%), and Chile (14%) showed lower percentages than South Korea, while China (18%), the Philippines (18%), and Brazil (15%) showed higher percentages of taking action. The low rate of action in South Korea regarding corporate social responsibility does not necessarily indicate low awareness of it. This is because the percentage of respondents who answered that they have never considered taking active measures against companies not fulfilling their social responsibilities is 36% in South Korea, which is lower than Australia (31%), Canada (35%), and the USA (35%).

In South Korea, 46% of respondents indicated that they have considered sanctioning companies for not fulfilling their social responsibilities but have not yet acted upon it, representing the highest proportion. When combining those who have directly sanctioned companies for not fulfilling their social responsibilities and those who have considered but not acted, South Korea ranks fourth among 22 countries in terms of pressure for social responsibility, following Australia, the USA, and Canada.

In conclusion, while the overt social pressure for social responsibility management in South Korea is not high, there exists widespread latent pressure demanding corporate social responsibility. These survey results indicate that Korean companies need to pay more active attention to social responsibility and strive for responsible management. If the public expresses their awareness of corporate social responsibility through more active behavioral demands, the pressure for corporate social responsibility in South Korea could rapidly increase to a high level, even among developed countries. Companies that anticipate and actively respond to these changes by proactively implementing social responsibility management will be able to lead in future competition.

[Figure 1] Experience of Sanctioning Companies Unable to Fulfill CSR: Boycott