[CSR Briefing 1] To Become a Global Company, Socially Responsible Management is Essential 1

[CSR Briefing 1]

1. Global business leaders should be interested in CSR / To become a global company, socially responsible management is essential / Potential pressure for CSR in Korea is high

2. Chinese citizens' perception of corporate social responsibility

Global business leaders 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

Global business leaders 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 towards members of society, not just the maximization of shareholder value, is being emphasized more than ever. As recently discussed at the World Economic Forum, achieving corporate social responsibility has emerged as a critical task for management, alongside enhancing corporate competitiveness and improving corporate governance. Socially responsible management specifically refers to management activities that fulfill obligations to corporate stakeholders such as customers, employees, and the community. Of course, there are diverse perceptions regarding what constitutes corporate social responsibility, and these perceptions vary 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 a corporate social responsibility 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 proportion of respondents who indicated that solving social issues such as reducing the wealth gap and promoting human rights is an important corporate social responsibility was as follows: 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%) than in the UK (75%), Indonesia (72%), USA (69%), and Mexico (59%). The proportion of respondents who viewed volunteer activities for the local community as an entire corporate social responsibility was in the order of 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. Consequently, for Korean companies, which cannot afford to exclude the US and European markets, it is inevitable to pay more attention to corporate social responsibility to enhance corporate 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 score of 5 (fully agree) out of a scale from 0 (strongly disagree) to 5 (fully agree) for each item.

Note 2. 'Solving Social Problems' is the average of responses to 'Reducing the wealth gap,' 'Solving crime and illiteracy,' and 'Mitigating human rights violations.' 'Environmental Protection' is the average of responses to 'Producing products and operating the company in an environmentally responsible manner' and 'Using parts and materials that are socially and environmentally responsible.' 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 change. That is, it is shifting from the concept of sporadic, charitable volunteer activities to a strategic concept (Strategic Philanthropy) that determines the future of the company. In fact, companies are prone to dilemmas between the pressure to achieve short-term profit goals and the increasing demands for corporate social contribution activities. Due to this dilemma, companies have become interested in the strategic selection of social contribution activities. Professor Michael Porter of Harvard Business School has defined strategic social contribution as activities where a company achieves both social and economic goals simultaneously. 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 and Apple Computer are representative examples of companies implementing strategic social contributions. Cisco, a manufacturer of network equipment and routers that connect computers and the internet, recognized the shortage of network administrators to support the surge in internet users and established a program to train network administrators, particularly 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, with over 50% of the graduates from these programs finding employment in the IT industry. In other words, by nurturing talent needed for the IT industry through social education programs, the company aimed to foster industrial growth, which is evaluated as contributing to Cisco's long-term growth. Furthermore, Apple Computer has long donated Apple computers to schools at all levels, which not only helped schools but also educated 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 that align with their values, business, and capabilities.

Environmentally Conscious Company: The Case of Amorepacific Corporation

Amorepacific Corporation is a leading company at the forefront of environmental management. Under the management philosophy that even brilliant ideas and products will not be produced if they go against the environment, Amorepacific practices eco-friendly management at every stage, from product development to disposal. From the design stage, it considers products that can be recycled, and adopts designs that reduce the use of plastic and paper in product packaging. 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 even live in the wastewater discharged from the factory. These efforts not only protect the environment and prevent resource waste but also lead to cost savings in manufacturing, demonstrating the importance of strategic social contribution activities.

These Industries Should Pay More Attention to Socially Responsible Management

When asked, 'What types of products or services should be most socially and environmentally responsible?', Koreans responded first with tobacco (21%), processed foods (11%), and gasoline/oil/petroleum (10.6%). For the same question, Americans mentioned automobiles (11%) and gasoline/oil/petroleum (10.7%), while Chinese 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 ranked highest among industries that should be socially and environmentally responsible, 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 That Should Be Most Socially and Environmentally Responsible

To Become a Global Company, Socially Responsible Management is Essential

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

Introduction

Socially responsible management refers to managing a company by considering the impact of its actions on society as a whole. It is commonly said that there are four levels of corporate social responsibility. The first is economic responsibility, which involves minimizing costs and maximizing profits. This is an area where companies strive on their own without external emphasis. The second is legal responsibility, which involves complying with relevant laws and regulations. The third is ethical responsibility, which involves earning money in a fair and proper manner. The fourth is philanthropic responsibility, which involves becoming a good corporate citizen through active contributions to society. Economic responsibility is inherent to the nature of a company and requires no external compulsion. Legal responsibility is essential and mandatory. However, ethical and philanthropic responsibilities are not mandatory but are desirable expectations for companies, significantly influencing 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.

As a result, various issues related to socially responsible management have come to the fore. 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 local community), contributing to the local area where the company is located (for the general public), acting with consistently strict ethical standards worldwide, and producing products using only materials and components manufactured with a socially and environmentally responsible approach.

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

The perception that companies are located 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 creating a better society for everyone'

[Figure 1] International Public Opinion Distribution on Corporate Evaluation and Interest in Socially Responsible 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 socially responsible management.

Globescan's survey of 21 countries reveals that the concept of 'socially responsible management' is viewed more favorably in developing countries, where large corporations are trusted and evaluated positively. In contrast, citizens in developed countries tend to demand stricter ethical standards and higher moral conduct from corporations. Furthermore, developing countries tend to 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 creating a better society for everyone?', the proportion of citizens in developing countries who agree is higher, while the proportion in developed countries is lower. 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 developing countries like Indonesia (84%), China (82%), and India (63%) showed high support. The proportion of Koreans who actively 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 'Helping to solve 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, citizens in developing countries with greater wealth disparities tend to emphasize the responsibility of large corporations more strongly than those in European or OECD countries. In South Korea, the proportion emphasizing the full responsibility of large corporations for this issue was only 17% (20th out of 21 countries), and even when considering partial responsibility, it was 55% in total, ranking 11th.

In addition, when asked, 'To what extent do companies openly disclose 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 gave a passively affirmative response. Regarding 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 a passive affirmative response of 47%, it remained at 13th place.

[Figure 3] Corporate Social Responsibility: Solving Social Problems

[Figure 4] Corporate Transparency Evaluation

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 responded affirmatively. In contrast, developing countries like China (70%), Russia (61%), and Indonesia (58%) showed strong support for legal enforcement of social responsibility. In South Korea, only 47% of the total respondents reacted positively, with 8% expressing strong agreement, which is closer to the developed country model.

Synthesizing these results, the public's perception of the social responsibility of large corporations in South Korea is 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 from corporations, seeking to change corporate behavior through these demands.

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

[Figure 5] CSR Regulation for Corporations

En Corea, la presión explícita sobre la responsabilidad social corporativa es baja, pero la presión latente es alta.

Han Jun, Department of Sociology, Yonsei University

The perception of corporate social responsibility and the realization of the need for responsible management are often triggered by pressure from the environment surrounding the company, rather than by the company itself. Globescan, in collaboration with research institutions in various countries, conducted a survey on the degree of social pressure regarding corporate social responsibility in 21 countries. A significant difference was found between countries 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?'

In developed countries with high awareness of corporate social responsibility, the proportion of respondents who have taken actions such as boycotting or criticizing companies exceeds 40%, whereas in South Korea, this proportion is only 15%. Countries with lower rates than South Korea include Indonesia (3%), India (6%), Russia (7%), Nigeria (14%), and Chile (14%). In contrast, countries like China (18%), the Philippines (18%), and Brazil (15%) showed higher rates of taking action. The low rate of action in South Korea regarding corporate social responsibility does not necessarily mean low awareness of corporate social responsibility. This is because the proportion of Koreans who responded that they have never considered taking active measures against companies that do not fulfill their social responsibilities is 36%, which is low, following Australia (31%), Canada (35%), and the USA (35%).

In South Korea, 46% of respondents indicated that they have considered sanctioning actions against companies for their social responsibility, 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 surveyed countries in terms of pressure for social responsibility, following Australia, the USA, and Canada.

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

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