[CSR Public Opinion Brief No. 2] Corporate Social Responsibility: Is the Paradigm Shifting?

[CSR Public Opinion Brief No. 2]

1. The Paradigm Must Shift / The Coming CSR Round / Responsibility to Consumers Takes Precedence Over Perfunctory Philanthropy

2. How is Corporate Social Responsibility Assessed? / Top/Bottom 10 Socially Responsible Corporations Chosen by the Korean Public

Global Corporations Must Practice Socially Responsible Management: The Paradigm Must Shift

Jin-ho Jang, Department of Business Administration, Yonsei University / Jeong-hanul, EAI Public Opinion Analysis Center

In a public opinion survey of 33 countries involving Globescan, EAI, Maeil Business Newspaper, and Korea Research, unique differences in public perception of large corporations' social responsibility emerged, largely dependent on the stage of economic development.

Citizens in developing countries primarily seek the social role of large corporations in economic activities such as job creation, tax payment, and profit generation. Conversely, citizens in developed countries that have experienced or are currently undergoing high growth emphasize ethical management. In developed countries that are members of the OECD, the public's stance is increasingly leaning towards the necessity of balancing profit-making with ethical management, rather than solely demanding ethical management. Furthermore, countries that achieved rapid economic growth under state leadership in the past showed a very high preference for emphasizing state-level regulations and legal frameworks to guide corporate social responsibility, rather than relying on market self-regulation.

Averaging the responses of 36,284 individuals across 33 countries, 29% believed that the social responsibility of large corporations should be found in economic activities like profit generation, tax payment, and job creation. 33% believed that corporations should engage in higher levels of ethical management, and 31% advocated for a combination of economic activities and ethical management.

[Figure 1] The Role of Large Corporations

In developed countries, the emphasis on ethical management is decreasing, while the stance of balancing profit-making with ethical management is strengthening. Compared to the 1999 survey results, the proportion of respondents demanding ethical management has decreased from 35% to 29% in the United States, from 39% to 27% in the United Kingdom, and from 33% to 15% in Japan. Conversely, the proportion advocating for a balanced approach has increased. Even in France, which emphasizes welfare, the proportion emphasizing corporate responsibility in economic activities, including profit generation alongside ethical management, rose by 10 percentage points (from 21% to 31%).

[Figure 2] Changes in the Concept of Corporate Social Responsibility: 2001-2006 (%)

The attitudes of the public in China and India, often referred to as "Chindia" due to their large populations and rapid growth, show contrasting trends. In China, compared to the 1999 survey, the proportion of respondents attributing the role of corporations to profit generation decreased from 44% to 35%, while the demand for high ethical management increased from 31% to 39%. This indicates a growing concern among the Chinese public regarding the unchecked pursuit of profit by corporations during their rapid economic development. In India, which has recently garnered global attention, the demand for profit generation (50%) overwhelmingly surpassed the demand for ethical management (28%). This highlights the growth aspirations of the Indian public, which is attracting global attention due to its high economic growth rate.

South Korea, which is engaged in ongoing debate about escaping economic recession, is witnessing a rapid increase in the demand for enhanced ethical activities by large corporations. The emphasis on corporate ethics has surged by 15 percentage points (from 24% to 39%) compared to the 2001 survey results. However, it is noteworthy that the proportion advocating for a balance between 'corporate profit-seeking activities' and 'ethical management' has also increased from 28% to 37%. This suggests that while the Korean public harbors distrust regarding corporate ethics, there is a growing concern that strengthening ethical management should not be entirely separated from corporations' economic profit-generating activities. This likely reflects the reality in South Korea, which has experienced economic recession in recent years, of rising expectations towards large corporations rather than unconditional antipathy.

Meanwhile, in Asian countries including South Korea, Japan, and China, a majority of the public believes that state-level regulations are the desirable means to enhance the social responsibility of large corporations (Japan 64%, South Korea 63%, China 62%). This stands in stark contrast to Western countries, where the emphasis on market self-regulation is more prevalent, and the proportion advocating for state-level regulations does not exceed a majority. Ultimately, the Korean public is moving away from an attitude that emphasizes the moral standards of ethics while rejecting economic profit-seeking activities, towards a more nuanced view of corporate social responsibility.

[Figure 3] Public Opinion "Favoring" Regulation for Large Corporations' Social Responsibility (%)

The Coming CSR (Corporate Social Responsibility) Round Requires a Systematic Program

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

According to a "Survey of Anti-Corporate Sentiment Worldwide" conducted by the multinational consulting firm A.T. Kearney in 2001 among 880 CEOs in 22 countries, 70% of Korean CEOs responded that 'there is a negative perception of businesspeople among the public,' ranking South Korea as having the highest anti-corporate sentiment globally, followed by the UK (68%), Japan (45%), the US (23%), and Taiwan (18%).

Is this true? The recent survey of 36,284 individuals in 33 countries conducted by Globescan, EAI, Maeil Business Newspaper, and Korea Research, which asked 'Are large corporations creating a better society for everyone?', revealed that 51% of Koreans responded affirmatively, contradicting the perception of CEOs five years prior. Furthermore, the proportion of positive responses has increased by 12% compared to three years ago. Interestingly, citizens in countries with a higher per capita income than South Korea universally hold a more negative view of large corporations' activities.

Contrary to common sense, positive evaluations of corporate activities were relatively high in developing countries such as Indonesia (89%), Saudi Arabia (80%), Nigeria (73%), Kenya (67%), India (59%), China (59%), and Brazil (57%). Conversely, they were relatively low in OECD member countries like Italy (27%), Switzerland (31%), the UK (33%), Japan (38%), the US (38%), and Canada (41%).

[Figure 1] Relationship Between Per Capita Income and Positive Perception of Large Corporations' Role

The 33 countries can be broadly categorized into three groups. In high-income OECD countries, public perception of large corporations' roles is generally negative. Citizens in developing countries in Asia, Africa, and the Middle East hold a very positive view of large corporations' roles. In contrast, citizens in Latin American countries hold a very negative view of large corporations' roles.

Compared to the 2003 survey, Japan, which has begun to emerge from a severe recession, saw an increase in positive evaluations from 21% to 38%. South Korea, which experienced a foreign exchange crisis, saw an increase from 31% to 51%. However, in the US, the figure decreased from 43% to 38%, and in the UK, it decreased from 40% to 33%. This indicates that the perception among CEOs regarding the highest level of anti-corporate sentiment in South Korea is significantly exaggerated.

However, South Korea is in the process of evolving from a developing Asian country model to an OECD-type corporate environment. Therefore, as South Korea's economic growth continues and national income increases, it is anticipated that corporations will face increasingly stringent public opinion demanding greater social responsibility. This foreshadows that socially responsible management (CSR) will emerge as a highly significant issue for South Korean corporations in the future.

Meanwhile, in Western countries, socially responsible management originated from thorough monitoring and evaluation of corporate activities by civil society and stakeholders prior to government intervention. In contrast, developing countries show a strong tendency to demand state monitoring and intervention regarding corporate social responsibility. Similarly, in South Korea, there is a relatively high demand for state regulation of corporate misconduct.

[Figure 2] Agreement with Government Regulation for Corporate Social Responsibility and Positive Perception of Large Corporations' Role

The most striking aspect of the evaluation of South Korean corporations is the strong perception that 'corporations fulfill their social responsibilities primarily for image improvement rather than for contributing to society.' Conversely, the perception that corporations are doing their best in environmental protection or local community support is weakest in South Korea.

This reflects that corporations are not receiving adequate recognition despite returning substantial wealth to society. As socially responsible management becomes increasingly emphasized, it suggests that corporations are at a critical juncture where they must systematically develop and continuously enhance their CSR programs, rather than giving the impression of 'reluctantly' paying substantial quasi-taxes in the form of donations.

Furthermore, global trends indicate that South Korean corporations can no longer afford to ignore social responsibility. Since 2001, the International Organization for Standardization (ISO) has been developing international standards to quantify CSR activities such as environmental protection, labor, human rights, and community contributions. A CSR round is scheduled to commence in 2008. Consequently, it is expected that financial institutions will use these standards as key indicators for investment and inter-corporate transactions, with the participation of international organizations such as the World Trade Organization (WTO) and the Organisation for Economic Co-operation and Development (OECD). Corporations that fail to fulfill their social responsibilities are likely to be excluded from investment opportunities and face disadvantages in international trade.

<Table 1> Agreement Rate by Purpose of Corporate Social Responsibility Activities (%)

Corporations Neglecting Social Responsibility Will Be Sanctioned by the Market

Responsibility to Consumers Takes Precedence Over Perfunctory Philanthropy

Jun Han, Department of Sociology, Yonsei University

Corporate social responsibility has become not an option, but a necessity. Furthermore, social responsibility has become intrinsically linked to a corporation's economic activities. Recently, a growing number of global citizens believe that corporations failing to fulfill their social responsibilities should face market-based sanctions, not just extra-market ones. The survey of 36,284 individuals across 33 countries revealed that respondents are willing to impose various forms of market sanctions on corporations that do not fulfill their social responsibilities.

Regarding investment in the capital market, the proportion of respondents strongly agreeing with the statement 'Do not invest or subscribe to fund products in companies that do not properly fulfill their social or environmental responsibilities' was highest in the US at 47%, followed by South Korea (41%), Indonesia (40%), China (39%), and the UK (38%). When including those who somewhat agree, Indonesia had the highest proportion at 76%, followed by South Korea (72%), China (65%), the US (65%), and the UK (545%). Only Mexico showed a low agreement rate of 14%.

[Figure 1] Sanctioning Companies Lacking CSR: Refusal to Invest or Purchase Funds

The intention to boycott companies that do not fulfill their social responsibilities by 'not using their products or services' was even higher. This boycott intention showed little variation across countries and remained high. The proportion of strong agreement was highest in the US at 50%, followed by the UK (42%), China (40%), South Korea (38%), Indonesia (35%), and Mexico (25.6%). However, when including those who somewhat agree, China (78%), South Korea (77%), Indonesia (76%), and the US (76%) showed similarly high levels, followed by the UK (72%) and Mexico (57%).

[Figure 2] Sanctioning Companies Lacking CSR: Boycott

Sanctioning intentions against companies that do not fulfill their social responsibilities extend beyond capital and product/service markets to the labor market. The proportion agreeing with the statement 'Do not work for such companies' was highest in the US at 50%, followed by the UK (43%), China (33%), South Korea (31%), and Indonesia (31%). Mexico showed a relatively low rate of 20%. Including weak agreement, China had the highest proportion at 69%, followed by the US (68%), Indonesia (63%), the UK (62%), and South Korea (61%). Excluding Mexico, a significant majority, ranging from two-thirds to three-quarters, in most countries expressed an intention to impose market sanctions on companies that fail to fulfill their social responsibilities.

Meanwhile, the willingness to participate in more active, non-market sanctions, such as 'campaigning against the company,' was lower than for market sanctions. Mexico, which showed less inclination towards market sanctions, was the most active in non-market sanctions, with 30.2% expressing strong agreement and 65% including weak agreement. South Korea and Indonesia showed similar levels, with 21% and 21% expressing strong agreement, and 55% and 56% including weak agreement, respectively. The US, China, and the UK showed lower levels, with strong agreement rates of 12%, 12%, and 11%, and proportions including weak agreement at 37%, 33%, and 29%, respectively.

This trend of linking corporate social responsibility to the market is also reflected in how people perceive the best way for corporations to contribute to society. The response 'Develop safe and healthy products and services' was the majority opinion in most countries regarding the best method of social contribution. This trend was highest in China (66%), while South Korea (55%), Indonesia (51%), the US (50%), and the UK (49%) showed slightly over half or similar proportions. Mexico was an exception with a low rate of 22%.

These results imply that the perception that corporations operating with consumers' interests in mind are socially responsible is dominant in many countries. Consequently, the idea that companies failing to do so should face market disadvantages to ensure they fulfill their responsibilities to consumers, and by extension, shareholders and employees, has become widespread. The proportion expecting 'donations to charities' as a method of realizing broader social responsibility, rather than corporations being responsible to consumers in the market, was generally low and similar across South Korea (16%), the US (16%), China (14%), and the UK (18%), with Indonesia and Mexico showing higher rates of 23% and 31%, respectively.

[Figure 3] Methods of Corporate Social Responsibility Activities: Developing Safe and Healthy Products and Services (%)