[CSR Public Opinion Brief No. 5] Corporate Social Responsibility in an Era of Economic Crisis 1

[CSR Public Opinion Brief No. 5]

1. Corporate Social Responsibility in an Era of Economic Crisis / International Comparison: Diversity in CSR Perceptions

2. Changes in CSR Perceptions in Korea and the Potential for Strategic CSR / [Appendix] Characteristics of CSR Survey Results in China, the US, and Japan

Corporate Social Responsibility in an Era of Economic Crisis

Economic Crisis, Expanding Perception of "Corporate-Friendly CSR"

Trust in the Free Market Economy Remains Strong, "The Free Market Economy is the Best System" 80.5%

The economic crisis that began in 2008 is spreading a corporate-friendly perception of corporate social responsibility in Korea. First, despite pessimistic perceptions of the economy, trust in the free market economy remains intact. In a survey conducted three months after the outbreak of the economic crisis in 2008, Koreans reported the global economic situation as dire, with 89% (29% slightly worse, 60% much worse) and the Korean economy as well, with 93% (34% slightly worse, 59% much worse).

Nevertheless, trust in the free market economy remains. Regarding the statement 'The free market economy is the best system that will serve as the foundation of society in the future,' 37% of respondents answered 'strongly agree,' and 44% answered 'somewhat agree.' This means a total of 81% positively evaluated the free market economic system. Those who generally disagreed were 13%, and only 4% 'strongly disagreed.'

[Figure 1] Global and Korean Economic Conditions Compared to One Year Ago (%)

[Figure 2] "The Free Market Economy is the Best System for the Future" (%)

[Figure 3] If a company faces financial difficulties, it can reduce its social contribution expenses (%)

Economic Crisis: Survival is CSR. "Understandable for Companies Facing Financial Hardship to Reduce Philanthropy" 62.5%

As the economic crisis deepens, public understanding of the difficulties faced by corporations is broadening, leading the public to adjust their expectations for corporate social responsibility (CSR). When asked if it is understandable for companies to reduce support for charities and local communities during financial hardship, 63% responded 'yes' (18.1% strongly agree + 44.4% somewhat agree). Conversely, 37% responded 'no' (11.5% strongly disagree + 25.6% somewhat disagree). This indicates a form of partnership has been established, considering the company's situation. In other words, the high level of awareness regarding corporate social responsibility suggests that it is not a binary perception of company versus consumer or company versus public, but rather that understanding and cooperation with companies are also increasing.

Need for Legal Regulation of CSR in Korea Decreased by 19%p in Two Years, Largest Drop Among 11 OECD Countries

In Korea, surveys in 2003 and 2006 showed a tendency for the public to emphasize corporate responsibility for corporate ethics and environmental issues beyond core profit-generating activities. However, by the 2008 survey, this had shifted towards emphasizing profit and job creation. In terms of implementation, public opinion favoring self-regulation over government regulation has significantly increased. Although this survey was conducted before the global financial crisis, the discourse of economic crisis had already emerged in Korea around the 2007 presidential election. Furthermore, the proportion of people arguing for strengthening legal or government regulations for corporate social responsibility, which was 63% in 2006 (the second highest among 11 OECD countries), decreased to 44% in the 2008 survey, a significant drop of 19%p, showing the largest decrease. This is at the same level as in the United States (44%), lower than in the United Kingdom (57%), Australia (55%), and Canada (54%), which favor government or legal regulation, and has settled at a mid-level, higher than in Italy (33%), France (35%), and Germany (5%). This serves as direct evidence that a corporate-friendly CSR concept is spreading in Korea.

[Table 1] "The government should enact laws to enforce the social responsibilities of large corporations" (%)

Ultimately, the public is realistically lowering its expectations for corporate social responsibility through the economic crisis. Rather than demanding excessive corporate management based on stricter ethical standards or comprehensive social responsibility activities, the emphasis is strengthening on the order for companies to perform their core duties well, such as profit generation and job creation. In an era of economic crisis, survival itself becomes social responsibility.

Korea's SR Evaluation: NGOs 49% > Corporations 43% > Public 35% > Government 21% > Unions 18%

Social responsibility is not solely the burden of corporations. Building a sustainable society and, in particular, overcoming an unprecedented economic crisis is a social responsibility that all members of society must share. While there has been a significant focus on corporations, the social responsibility of other societal members has been overlooked. Although the proactive role and responsibility of corporations are important, the unity and shared sense of responsibility among government, NGOs, labor unions, consumers, and other societal members are becoming crucial.

The results of this survey provide an opportunity to reflect on the social responsibility activities of societal members other than corporations, which have received little social attention in Korea. In this survey, when asked 'how well each group—corporations, civic organizations, the government, labor unions, and individual citizens—is fulfilling its social responsibilities,' no group received a majority positive evaluation. Civic organizations and corporations received relatively high evaluations, with 49% and 43% support, respectively. Individual citizens followed with 35%. The government received only 21% support, and labor unions received 18%, indicating very negative evaluations.

[Figure 4] Evaluation of Social Responsibility Activities by Societal Member (%)

* The blank space in the middle represents 'don't know/no response' ratio.

Social Responsibility is a Shared Responsibility of All Societal Members

The perception that corporations, along with civic organizations, are relatively good at fulfilling social responsibilities is likely due to an evaluation of their contributions to Korea's economic development. It also reflects the public's expectations of corporations' roles in the unique situation of an economic crisis. Meanwhile, the lukewarm evaluation of individual citizens' social responsibility implies that there is considerable self-reflection among the public.

The Korean government is indeed evaluated as relatively weak in public investment in social policy and welfare policies among OECD developed countries. Moreover, since the beginning of its term, the current government has faced persistent questions regarding its fairness, with allegations of representing the interests of specific groups. The fact that the public is not experiencing the benefits of the Lee Myung-bak administration's strengthened response to the economic crisis, despite its election promise to revitalize the economy, may also be reflected.

The critical public opinion regarding the social responsibility activities of labor unions is also a point that the labor sector should deeply consider. In fact, public rejection of uncompromising labor movements, along with recent corruption scandals and internal divisions, has frequently been reported in the media. Ultimately, this can be seen as a result of the perception that unions have transformed from their past reputation of representing the socially vulnerable or leading democratization in the 1980s into large interest groups or entities that undermine the rule of law.

In conclusion, this survey suggests that Korean society is moving from a stage of unilaterally demanding responsibility from corporations to a stage of serious self-reflection on the social responsibilities of all societal members.

International Comparison: Diversity in CSR Perceptions

Whether the perceptions of consumers and stakeholders regarding CSR are converging or diverging significantly creates a crucial difference in establishing fundamental CSR strategies. In the former case, priority should be given to a standardization strategy that meets agreed-upon standards, while in the latter, customized strategies tailored to the demands of each country and stakeholder become important.

Differences in Understanding the Concept of CSR

As shown in the analysis of the 2008 survey results, there are significant national variations in how corporate social responsibility is understood and pursued. If we categorize the concept of corporate social responsibility along two axes—the content of responsibility and the method of implementation—we can see that perceptions are evenly distributed across countries worldwide. A concise summary of the 2008 report is as follows:

CSR can be divided into the 'stakeholder model-based CSR' concept, which emphasizes corporate ethics and responsibility for environmental issues, poverty, education and training, and health, affecting the interests of all societal stakeholders, and the 'shareholder model CSR' concept, which emphasizes core corporate tasks such as profit and job creation and minimal legal compliance. Furthermore, significant national differences are evident in whether CSR should be pursued through government regulation or left to corporate autonomy.

In OECD developed countries such as the United States, the United Kingdom, France, and Japan, there is a strong tendency to favor the stakeholder model, which emphasizes corporate responsibility for the environment and society as a whole. However, regarding implementation, public opinion strongly favors corporate autonomy in the US and France, while voices emphasizing government regulation are louder in the UK and Australia. In emerging economies like China, Russia, and India, which have experienced rapid growth until recently, public opinion favoring 'stakeholder-type CSR' is increasing. However, in China and India, public opinion favoring government regulation is growing, while in Russia, public opinion favoring corporate autonomy is strong.

In Korea, the 2006 survey showed a tendency to emphasize corporate ethics and environmental issues, but the 2008 survey shifted towards a pragmatic CSR that emphasizes profit and job creation. Public opinion also increasingly favors autonomy over government regulation in implementation methods. This appears to be the result of a widening spread of the corporate-friendly CSR concept amid the deepening economic crisis.” - From EAI CSR Brief No. 4 (2009)

Differences in Perceptions of CSR Priorities

There are also variations in the specific CSR activities that citizens of each country expect. Across all 32 countries surveyed, the proportion demanding investment in human resources, such as education and skills training, was the highest at 25%, followed by demands for poverty alleviation at 22%. Public opinion demanding corporate responsibility in healthcare was 16%, and preference for responsibility in environmental issues, which is often emphasized in CSR, was only 13%.

Differences in CSR Priorities Between Developed and Developing Countries

In 14 OECD countries, 26% emphasized investment in human resources such as education/training, 19% prioritized poverty reduction, and 18% cited environmental issues as corporate responsibilities to be prioritized. In contrast, among the 18 developing/underdeveloped countries, 26% cited poverty alleviation, followed by investment in human resources at 24%. Only 7% cited environmental issues, while 17% cited healthcare issues.

[Table 1] Priority Social Responsibility Activities for Large Corporations

US, UK: "Human Resource Support Priority Type": US 38%, UK 33%, Germany 30%

Amid high demand for unemployment and poverty alleviation measures due to the economic crisis, developed countries prioritize education and environmental issues, while developing countries place relatively more emphasis on poverty and healthcare. However, significant perceptual differences can be observed even within developed countries. In the US, 38% prioritized educational investment and 19% environmental issues. In the UK, 33% prioritized educational investment and 17% environmental issues, generally emphasizing corporate responsibility for human resource development. Following these were responses citing responsibility for crime prevention/maintaining safety, with 7% in the US and a relatively high 17% in the UK. Responses citing support for poverty issues or arts/culture were the lowest, at 2% and 1%, respectively.

[Figure 1] Human Resource Support Priority Type: US and UK

Korea, Japan: "Environment Priority Type": Different from Western Developed Countries

Korea, along with Japan, is characterized by a high proportion emphasizing environmental issues. Unlike other countries that emphasize human resource investment, Korea and Japan recorded the world's highest rates for citing environmental problem-solving as a responsibility for large corporations, at 33% and 44%, respectively. Poverty reduction followed, with 28% in Korea and 25% in Japan. In contrast, responses citing investment in human resources such as education/skills training were relatively low in priority, at 15% in Korea and 19% in Japan. Responses citing corporate responsibility for crime/safety and support for arts/culture recorded the lowest figures. However, the proportion citing responsibility for arts/culture in Korea was 11%, which is relatively high compared to Japan.

[Figure 2] Environment Priority Type: Korea, Japan

China, France: "Complex Type": China's Environment (22%) = Human Resource Investment (22%) ≑ Health (21%) Demands Similar

In contrast, China and France are characterized by demands for corporate social responsibility that are not concentrated in specific areas but are expressed diversely across education, environment, health, and poverty alleviation, excluding support for arts and culture. These countries, compared to other developed nations like the US and UK, tend to define the scope of public responsibilities, such as social welfare, more broadly for government and corporations.

[Figure 3] Complex Type: China and France

Consumer Pressure on CSR and the Commercialization of CSR

Differences in Consumer Influence on CSR Pressure by Country

In most countries, there is a general increase in confidence that individual citizens, as consumers, can influence corporate social responsibility activities. Out of 32,912 respondents across 32 surveyed countries, 65% answered that they 'can influence corporate social responsibility activities as a consumer.' The figure was 67% for citizens in 14 OECD countries and 63% in the 18 countries classified as developing/underdeveloped, with only a slight difference, being slightly higher in developed countries. However, there are significant differences between individual countries.

[Figure 4] Consumer Confidence in Corporate Social Responsibility Activities: "Can Influence" (%)

Note: * indicates OECD countries

In Canada (84%), the US (76%), Australia (75%), and the UK (74%), consumers show strong confidence in their influence. Korea (67%) is also slightly above the average. While the figure was only 58% in the 2002 survey, it increased by about 9 percentage points to 67% in this survey. However, among OECD countries, citizens in Japan (52%), France (51%), and Germany (38%) perceived their consumer influence as relatively weak.

Among developing countries, China and Brazil, emerging economic powerhouses, are particularly noteworthy. 81% of Chinese respondents and 74% of Brazilian citizens answered that they can exert influence on CSR. However, among BRICS countries, confidence in consumer influence is perceived as relatively weak in India (45%) and Russia (36%). Latin American countries like Chile (63%) and Argentina (49%) also fell below the average.

Ethical Consumerism

There were also significant differences in the social pressure exerted on CSR through consumer behavior. While consumer behavior related to CSR activities is active in developed countries, consumer pressure, despite recognition of its necessity, is not substantial in developing countries. Regarding positive consumer behavior, such as purchasing or recommending products from companies with good CSR practices, an average of 35% in 14 OECD countries reported having done so, which is double the average of 17% in 18 developing/underdeveloped countries. The overall average across 32 countries was 25%, or one in four people. Regarding negative consumer behavior, such as boycotting products from companies with poor CSR practices and criticizing them, the figure was 40% in developed OECD countries, compared to only 15% in developing/underdeveloped countries.

[Figure 5] Consumer Behavior Towards Companies with Strong CSR: Experience of Purchase or Recommendation to Others (%)

[Figure 6] Consumer Behavior Towards Companies with Weak CSR: Experience of Boycott or Criticism (%)

National Variations in Ethical Consumer Behavior

Countries such as the United States, Australia, and Canada, which are Anglo-Saxon capitalist nations, along with countries with strong consumer behavior, emerged. Among those who had experience with incentive-based consumer behavior, such as purchasing products or recommending companies with strong CSR, the United States (59%), Australia (54%), and Canada (52%) were the only countries to record a majority. The proportion of citizens in most developing countries, as well as emerging economic powerhouses like the BRICS nations, who had positive consumer behavior experiences related to CSR was significantly lower. China reported 25%, India and Brazil 18%, and Russia 11%. South Korea recorded 44%, ranking fourth highest after the United States, Australia, and Canada. Among OECD countries, Japan and Germany showed relatively low consumer incentives for companies with strong CSR. Japan stood at 20%, and Germany at 16%.

Conversely, for consumer behaviors such as criticism or boycotting companies with weak CSR, the United States (62%), Australia (61%), and Canada (57%) were ranked as the top three countries. The United Kingdom (46%), Greece (46%), and Spain (40%) followed, with South Korea ranking seventh highest among 32 countries at 32%. Japan and Germany also appeared lukewarm towards sanctions through consumer action against companies with weak CSR. Only 31% of Japanese citizens and 16% of German citizens reported having criticized or boycotted companies with weak CSR. Among BRICS nations, China showed a relatively high rate of 34%, while India was 26%, Brazil 12%, and Russia only 11%.

[Figure 7] Consumer Behavior Towards Products from Companies with Strong CSR: Experience of Product Purchase and Recommendation (%)

Note: * denotes OECD countries

[Figure 8] Consumer Behavior Towards Companies with Weak CSR: Experience of Product Boycott or Criticism (%) Note: * denotes OECD countries

Note: * denotes OECD countries

Comparison of Supply Levels for CSR-Related Products/Services

Reflecting consumer pressure for CSR, the supply of CSR-related products and services also appears to have increased considerably. From the supply side, consumers assess that the supply of products and services produced with consideration for social responsibility is sufficient. In 29 out of 32 surveyed countries, a majority responded that they can sufficiently encounter products and services that consider social responsibility in their country. This accounts for 63% of the total 32,912 respondents. In other words, people in various countries are now accustomed to encountering products or services produced in compliance with corporate social responsibility principles. The supply of products and services considering CSR is reported as sufficient not only in advanced OECD countries but also in developing and less-developed countries. The average response from 14 advanced OECD countries was the same as the average response from developing/less-developed countries, at 63%. This is a 7 percentage point increase compared to the survey average of 56% in 2002.

[Figure 9] Supply of CSR-Considered Products/Services: "Sufficient" (%)

Note: * denotes OECD countries

Significant National Variation in CSR Product Supply

However, there were differences in intensity depending on the economic development level of each country and its specific characteristics. Among advanced OECD countries, Anglo-American capitalist countries such as the United Kingdom (71%), Australia (70%), Canada (68%), and the United States (63%) showed above-average responses regarding the sufficiency of CSR-related products and services. In contrast, countries where the government plays a significant role in solving social problems, such as Germany (49%) and France (60%), or advanced Asian countries like Japan (58%) and South Korea (52%), fell below the average. However, South Korea also shows an increasing trend compared to 2002. In 2002, only 38% of respondents answered that the supply of CSR-related products and services was sufficient, indicating an increase of 14 percentage points.

Among developing countries, it is perceived that products and services based on CSR are rather active in Asian countries such as the Philippines (82%), China (75%), and Indonesia (67%). Among developing countries, Latin American countries like Chile (57%) and Argentina (48%), and Russia (46%) fell below the overall average. This suggests that the proportion of consumers experiencing corporate CSR activities is relatively weak in these regions. Ultimately, not only the differences in perception of CSR but also the considerable national variations in the actual level of corporate responsibility considered in the production and service provision processes are variables that must be considered when promoting CSR activities in each country.

Prioritize Customized CSR Strategies Tailored to National Demand

As the analysis results show, there are inter-country differences in perceptions based on economic development levels and national characteristics regarding the concept of corporate social responsibility, implementation methods, the content of social responsibility activities expected from corporations, and the actual level of CSR application in production and distribution areas.

In addition to national variations, in reality, perception gaps also exist within a country due to the differing stances of stakeholders such as corporations, labor unions, governments, and consumers. Considering this, the CSR strategies of companies operating domestically and internationally must differ. First, for companies expanding overseas and exporting, it becomes crucial to develop CSR strategies that meet the demands of the local population while also preparing for the proposed ISO standard for social responsibility (ISO 26000).

Specifically, companies entering developed countries need tailored strategies focusing on educational investment, the environment, while developing countries require focus on education, poverty, and health issues. Domestically, understanding the points expected by members of society is more important than simply increasing the scale of charity or donations. This is why communication about what CSR South Korean consumers expect and in what manner they wish it to be pursued is crucial■.