CSR as a Product of Interactions between Market, Political and Civil Institutions

Corporate Social Responsibility (CSR) is supposed to be a link that connects the market economy to sustainable development. It is believed that it is in business’ enlightened self-interest to mitigate its negative impacts and to contribute to social development.

Although there is extensive literature dedicated to development of theories explaining CSR, it still remains a poorly defined phenomenon. Obviously, CSR is an inevitable stage of development of a liberal market economy: CSR strategy incorporated into corporate governance can positively influence a share price or, in case of failures in implementation of CSR practices (we all remember BP oil spill in 2010), this influence can be almost fatal; CSR activity can strengthen a brand perception or destroy it forever etc. In other words, the more sensitive, demanding and educated a particular market, society or government is, the higher the chance that CSR programs are developed, implemented and monitored.

Differences in levels of incorporation of CSR practices into overall corporate strategies appear mainly because in some countries, companies tend to be involved in closer relationships with governmental institutions, in some – a market has a stronger impact, and in other states, where there is a strong developed civil society, companies also have to take into consideration interests of this particular group of institutions. However, it is worth noting that the third group, the group of civil institutions, is unlikely to be well developed in those countries, where the first two groups of institutions are developed poorly. Thus, generally speaking, institutional theory is concerned with an organizations’ pursuit of legitimacy within a given environment and attempt to match by structure and shape with these environments.

Let’s take post-Soviet states with still forming market economies, remaining close relationships with governments (including corruption issues) and weak civil institutions as an example. To what extent do local businesses engage in social or ecological activity? And what is the difference between their activities and those of companies from Western Europe, Australia, or the USA? Undeniably, such things as stimuli for CSR and forms of CSR will differentiate, and, what is more important, the speed of CSR development will vary as well, which means globally we will witness multiple speed CSR.

Therefore, focusing on the institutional drivers of CSR is important because companies are interlinked with a wide range of political, economic and social, formal and informal institutions that affect their behaviour. At the same time, it is also necessary to take into consideration that companies not only adapt to institutional contexts, but also frequently play an active role in shaping those contexts, which means that the only feasible way to make business all over the world conscious and responsible is further liberalization and closer collaboration between companies, governments and societies.

Still, one question is what tools to choose in order to minimize these gaps between regions and adjust business attitudes. Should they be new types of taxes, stricter forms of regulations and punishments, strengthened blaming and shaming activities of NGOs and media, or better social education? And another question: is it possible at all?