[CSR Briefing 1] For global companies, socially responsible management is essential 1

[CSR Briefing 1]

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

2. Perception of corporate social responsibility among Chinese citizens

Global corporate executives 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 corporate executives should pay more attention to corporate social responsibility

As social unrest, wealth disparity, and distrust in large corporations increase, the responsibility of corporations towards members of society, in addition to maximizing 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 executives, alongside enhancing corporate competitiveness and improving corporate governance. Socially responsible management specifically refers to management activities that fulfill the obligations towards 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 customers with high-quality and safe products is entirely a corporate social responsibility was as follows: USA (77%), UK (72%), Indonesia (70%), Mexico (50%), China (47%), and 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 Korea (21%), China (45%), and Mexico (57%).

The proportion of respondents who indicated that solving social issues such as reducing wealth disparity and promoting human rights is an important corporate social responsibility was as follows: UK (48%), USA (41%), Indonesia (40%), Mexico (34%), China (16%), and Korea (15%). The percentage of respondents who fully agreed that having an environmentally responsible stance is a corporate social responsibility was lower in 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%), 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 in order 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 Volunteer Activities

Note 1. Figures 1-5 are based on responses where 5 points represent 'fully agree', measured on a scale from 'not at all' (0 points) to 'partially agree' (3 points) and 'fully agree' (5 points).

Note 2. 'Solving social problems' is the average of responses to 'reducing wealth disparity', '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 friendly manner' and 'using parts/materials that fulfill social/environmental responsibilities'. The 'product quality and safety' category 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, in particular, is undergoing 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 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 become interested in the strategic selection of social contribution activities. Professor Michael Porter of Harvard Business School has defined strategic social contribution as activities that enable a company to achieve 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 focusing their donation activities on areas related to their business.

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

In the United States, Cisco and Apple Computer are representative examples of companies implementing strategic social contribution. Cisco, which manufactures network equipment and routers that connect 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, 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. More than 50% of the students who graduate from this program are employed in the IT industry. In other words, by nurturing talent needed by 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. Apple Computer has also 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 maximize their impact by concentrating their donation activities in areas that align with their values, business, and capabilities.

Environmentally Responsible Company: The Case of Amorepacific Corporation

Amorepacific Corporation is a leading company at the forefront of environmental management. Under the management philosophy that no matter how brilliant the idea or product, it will not be produced if it goes against the environment, Amorepacific Corporation practices eco-friendly management at all stages, from product development to disposal. From the design stage, it considers recyclable products 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 at one-tenth of the legal discharge limit during product manufacturing, fish can even 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.

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 cited automobiles (11%) and gasoline/oil/petroleum (10.7%), while Chinese mentioned various electronic products (19.6%) and processed foods (13.2%). Based on the combined responses from six countries—Korea, the USA, China, the UK, Indonesia, and Mexico—the industries that should be mindful of socially responsible management were ranked as follows: gasoline/oil/petroleum first, 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 Requiring the Most Social and Environmental Responsibility

For global companies, socially responsible management is essential

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

Introduction

Socially responsible management means 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. 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 an excellent corporate citizen through active contributions to society. Economic responsibility is inherent to the nature of a business and requires no external compulsion. Legal responsibility is essential and mandatory. However, ethical and philanthropic responsibilities, while not mandatory, are expected as desirable actions from corporations 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.

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 local communities), contributing to the local areas where the company is located, acting with consistently strict ethical standards anywhere in the world (for the general public), and producing products using only materials or 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 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 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 the country, the more critical of large corporations' activities; the more developing the country, the higher the trust and expectations towards corporations: 'Large corporations are making society better for everyone'

[Figure 1] International Public Opinion Distribution by 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.

Une enquête menée par Globescan auprès de 21 pays révèle que, concernant le concept de « gestion socialement responsable », les pays en développement font davantage confiance aux grandes entreprises et les évaluent de manière plus favorable. En revanche, les citoyens des pays développés exigent des entreprises des normes éthiques plus strictes et une moralité plus élevée. En outre, les pays en développement mettent principalement l'accent sur la responsabilité économique et juridique des entreprises, tandis que dans les pays développés, on observe une tendance marquée à souligner la responsabilité éthique et philanthropique stricte.

First, regarding the question 'Are large corporations making society better for everyone?', the proportion of respondents 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 contributions of large corporations, whereas developing countries like Indonesia (84%), China (82%), and India (63%) showed high support. The proportion of Koreans who strongly agreed with this question was only 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, for '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 disparity tend to emphasize the responsibility of large corporations more strongly than those in European or OECD countries. In 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, 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), and when including the 27% who responded with passive agreement, it rose to 11th place. Regarding the question 'Do you want 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 in 13th place.

[Figure 3] Corporate Social Responsibility: Solving Social Problems

[Figure 4] Evaluation of Corporate Transparency

On the other hand, for the question 'Should companies be legally compelled to fulfill their social responsibilities if it helps create a better society?', a significantly less than majority of respondents in developed countries like Germany (34%), France (34%), and the USA (41%) responded positively. In contrast, developing countries such as China (70%), Russia (61%), and Indonesia (58%) showed strong support for legal compulsion of social responsibility. In Korea, only 47% of all respondents reacted positively, with 8% expressing strong agreement, which is closer to the developed country model.

Synthesizing these results, the perception of the Korean public regarding the social responsibility of large corporations 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 attributes.

The reason why leading global corporations consistently publish socially responsible management reports and communicate broadly with society is based on the 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

While the overt pressure for corporate social responsibility in Korea is low, the potential pressure is high.

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 surrounding environment rather than by the companies themselves. Globescan, in collaboration with research institutions from various countries, surveyed 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 buying 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 action such as boycotting or criticizing companies exceeds 40%, whereas in Korea, this proportion is only 15%. Countries such as Indonesia (3%), India (6%), Russia (7%), Nigeria (14%), and Chile (14%) showed lower rates than Korea, while China (18%), the Philippines (18%), and Brazil (15%) showed higher rates of action than Korea. However, the low rate of action in Korea 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 not fulfilling their social responsibilities is 36%, which is low, following Australia (31%), Canada (35%), and the USA (35%).

In Korea, the proportion of individuals who have considered sanctioning companies for not fulfilling their social responsibilities but have not yet acted upon it is the highest at 46%. When combining those who have directly sanctioned companies for not fulfilling their social responsibilities and those who have considered it but not acted, 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 socially responsible management in 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 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 proactively respond to these changes by leading in socially responsible management will be able to gain a competitive edge in the future.

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