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Engineering corporate socialresponsibility: elite stakeholders,states and the resilience ofneoliberalismRobert James Hanlon aa Institute of Asian Research , University of British Columbia ,Vancouver, BC, V6T 1Z2, CanadaPublished online: 10 Mar 2011.

To cite this article: Robert James Hanlon (2011) Engineering corporate social responsibility: elitestakeholders, states and the resilience of neoliberalism, Contemporary Politics, 17:1, 71-87, DOI:10.1080/13569775.2011.552689

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Engineering corporate social responsibility:elite stakeholders, states and the resilience of neoliberalism

Robert James Hanlon∗

Institute of Asian Research, University of British Columbia, Vancouver, BC, V6T 1Z2, Canada

This article aims to introduce corporate social responsibility (CSR) as an ideational conceptthat is being globally and regionally engineered by an epistemic community of elitestakeholders that include business, intergovernmental organizations, non-governmentalorganizations and government. The concept of CSR engineering seeks to address gaps inthe literature that neglect the emergence of a highly integrated network of elite brokerscommitted to neoliberal ideology and the manufacturing of ethical corporate governance.Conclusions are drawn from 60 semi-structured interviews with key CSR stakeholders andwell over 250 ‘off-the-record’ conversations held at six industry-led conferences. Thefindings suggest that when powerbases within the elite networks are exposed, the Westernnation-state is revealed as the most dominant stakeholder.

Keywords: corporate social responsibility; neoliberalism; sustainable development epistemiccommunity; nation-states; business ethics

This article aims to introduce corporate social responsibility (CSR) as an ideational concept that

is being globally and regionally engineered by an epistemic community of elite stakeholders that

include business, intergovernmental organizations (IGOs), non-governmental organizations

(NGOs) and government. The concept of CSR engineering seeks to address gaps in the literature

that neglect the emergence of a highly integrated network of elite brokers committed to neolib-

eral ideology and the manufacturing of ethical corporate governance. Conclusions are drawn

from 60 semi-structured interviews with key Asia-based CSR stakeholders and well over 250

‘off-the-record’ conversations held at 60 industry-led conferences.1 The findings suggest that

when powerbases within the elite networks are exposed, the Western nation-state is revealed

as the most dominant stakeholder. Three explanations suggest why governments are champion-

ing the CSR paradigm. First, CSR can be explained as a state-centric approach to mitigating

domestic political pressure targeting the social and environmental consequences of neoliberal

economics. In an era of global business with minimal regulation, CSR offers a political strategy

for regulating industry by empowering firms to modify their business model without the percep-

tion of governmental interference. Second, CSR encourages industry to self-regulate thereby

allowing governments to reduce domestic activist dissent targeting questionable overseas

state-sanctioned investments such as pension funds. Governments, therefore, have a political

interest in promoting ethical investments thereby benefiting from industries that adopt innova-

tive social responsibility practices. Finally, Western governments have a strategic interest in pro-

moting socially responsible business practice to ensure that home-based brands can compete

against unethical competitors who are able to lower operating costs through illegal and unethical

ISSN 1356-9775 print/ISSN 1469-3631 online

# 2011 Taylor & Francis

DOI: 10.1080/13569775.2011.552689

http://www.informaworld.com

∗Robert James Hanlon is a Post Doctoral Research Fellow at the Institute of Asian Research, University ofBritish Columbia, Canada. He has a PhD from City University of Hong Kong and has previously workedfor the Canadian Chamber of Commerce in Hong Kong and the Asian Human Rights Commission.Email: rjhanlon@interchange.ubc.ca

Contemporary Politics

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agency. Firms that engage in unethical business practices such as forced labour and corruption

while refusing to invest in environment-friendly technologies are undermining Western

competitors subject to home-based activism and strong regulatory regimes. Such entities are

losing bids to actors who benefit from home-based rules governed by authoritarian politics with

neoliberal economics, or what Robison (2004) called ‘hybrid markets’. While these points will

be discussed later, the following section introduces the contemporary CSR movement.

The rise of CSR

The debate surrounding the social responsibility of business has historically been a topic of con-

tention. Andrew (1989, p. 23) noted that ‘Sir Josiah Child’, ‘tyrant’ of the East India Company,

declared ‘that it is our Duty to God and Nature’ to care for the poor, and described neglect of this

duty as ‘one of the great Sins’. In 1886, British activist Bradlaugh (1886, p. 4) equated an ethical

company to how it respects workers’ rights. The 1894 work of Hobson (1894, p. 355) also cau-

tiously warned that industrialization would increase child labour and slavery, suggesting that

regulations needed to be developed to address the social impact of business. Then in 1911,

the first anti-sweatshop movement emerged after a deadly fire exposed poor working conditions

in a New York factory (Zadek and Raynard 2004, p. 35). Other pioneers of the CSR debate

include Sir Ernst Benn, who argued in 1932 that wealth required him to provide employees

with greater wages and offer lower prices to consumers, while Shaw (1927) saw philanthropy

as an attempt by business to engage the community as moral credit for industries that felt

guilty for such prosperity (Benn 1932, pp. 187–95). Shaw (1927, p. 28) famously wrote,

One buys moral credit by signing a cheque, which is easier than turning a prayer wheel . . . But whena millionaire does not really care whether his money does good or not, provided he finds his con-science eased and his social status improved by giving it away, it is useless for me to argue withhim. I mention him only as a warning to the better sort of donors that the mere disbursement oflarge sums of money must be counted as a distinctly suspicious circumstance in estimating personalcharacter.

These commentators were identifying CSR concepts at the tail end of the industrial revolution, a

period that raised fundamental questions on the role of business in society. May et al. (2007)

noted that while commercial enterprises such as the Dutch and British Indies corporations

played essential roles in the creation of Empire, the CSR concept emerged as a by-product of

industrialization and globalization. At the turn of the twentieth century, workers in Western

Europe started to demand better pay, holidays and working conditions (Stohl et al. 2007,

p. 33). The move towards socially responsible industry prompted a wave of business ethics

scholarship.

Often referred to as the grandfather of CSR theory, American economist Bowen (1953,

pp. 52–53) called for new responsibilities of business declaring an end to the days of corporate

plunder, exploitation and chicanery. Bowen believed that businesses should produce higher stan-

dards of living, economic progress, economic security, order, justice, freedom and the overall

development of an individual. It was then in the 1970s that businesses began using a corporate

responsiveness approach that asked industry to help the world while at the same time improving

business practice (May et al. 2007). For Davis (1971), CSR referred to an Iron Law of Respon-

sibility that demanded that firms proportionately contribute to the community based on their

social standing. More complex social issues should be left to others in the market that would

eventually step in and take responsibility for issues proportionate to their capacity. Carroll

(1991), on the other hand, argued that ethical corporations must incorporate legal, ethical and

discretionary frameworks that must be directed by a fairly moral management team. While

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theorists continue to develop new approaches for conceptualizing the social responsibility of

business, many industries have adopted pragmatic CSR strategies.

Carrigan and Attalla (2001, pp. 561–563) have noted that the Western concepts of ethical

consumerism have been actively promoted since as early as the 1960s, while globalization

and modern technology have helped mould an emerging civil society that has demanded

more accountability from business. New forms of consumer activism appeared such as aggres-

sive boycotts of products derived from questionable sourcing practices that had been found to

employ child labour and contribute to environmental degradation. They suggested that firms

responded to public criticism and began reforming business models and began appropriating

CSR language and clear codes of conduct in their annual reports. The ‘ethics era’ that had

emerged over the past four decades had evolved into a major debate with governments and

NGOs demanding corporate accountability, regulation and justification for the nature of ques-

tionable business practice that had negative impacts on the developing world. For example, in

1998, consumer activist Marc Kasky filed a landmark lawsuit on behalf of the Fair Labour

Association against the US apparel firm Nike. The plaintiff argued that Nike’s CSR report

had been used for public relation purposes and did not provide any meaningful corporate com-

mitment. On these grounds, Kasky claimed that Nike had engaged in deceitful and unfair com-

petition practices that should be considered false advertising. In 2003, Nike settled out of court

for US$1.5 million (McBarnet 2007, p. 25).While the Nike case demonstrates the legal risk of

CSR non-compliance, the concept is now widely seen as a social auditing mechanism to cut

losses while enhancing profit and brand reputation (Stohl et al. 2007, p. 37).

Social auditing has become synonymous with measuring contemporary CSR (Zadek and

Raynard 2004, p. 131). It can integrate ‘best practice’ policy in sensitive social areas of industry

that often are neglected by business, yet have substantial financial returns if well managed.

Welford (2007) suggested that strong corporate governance is critical to implementing best

practice policy, a view that has been reiterated by many interviewees throughout this research.

Nevertheless, CSR and social auditing do not guarantee ethical business practices or a profit

return (Welford and Frost 2006, Stohl et al. 2007, p. 37). In fact, many firms strategically opt-

out of socially responsible practice. Korten (Zadek and Raynard 2004, p. 75) argued that ethical

business models are often pushed out of the market, since ethics has a cost. As one director

(personal communication, 25 October 2008) of a Bangkok-based NGO noted, if a company

needs to stay competitive, it must do whatever it takes including paying bribes and violating

labour rights. Multinationals can get around regulation while minimizing their reputational

damage through CSR initiatives, especially philanthropy. Welford and Frost (2006, p. 175) also

found that codes of conduct and factory auditing often fail to establish meaningful CSR strategies.

They saw a clear need for capacity building and training in terms of how to implement CSR

practices. Despite such recommendations, sustainable CSR strategies remain elusive, given that

the concept is largely voluntary driven by diverse social and economic pressures (McBarnet 2007).

The United Nations Global Compact (UNGC) is a primary example of a voluntary CSR

scheme focusing on human rights, the environment and corruption that has had difficulty

gaining credibility. Deva (Atkinson and Claude 2008, p. 21) has argued that the UNGC is too

simple and vague while failing to introduce any independent monitoring and reporting pro-

cedures. These shortcomings have allowed the mechanism to evolve into the public relation

tool that has struggled to bridge the gap between NGOs and industry. Evans (2001, p. 71) attrib-

uted this to the lobbying of industry that has exposed the collusion between governments, inter-

national organizations and corporations, signalling the UN’s failure to establish a globally

binding code of conduct. For this to happen, de Jonge (2008, p. 27) argued that MNCs must

become recognized as ‘legal persons’ under the international law in order for an international

mechanism to be developed to hold business accountable. She suggested that if corporations

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were granted the responsibility to help draft international law, managers would engage in long-

term approaches to business and take ownership over human rights, labour and

environmental legislation.

Failure to follow voluntary codes such as the UNGC could also be seen as a liability under

breach of contract. Muchlinski (2001, p. 129) argued that consumers can demand action if they

discover that a business is in breach of a voluntary code that led them to buy the company’s

product. Muchlinski further noted that voluntary codes are how formal rules and legal principles

emerge. Even though business sees human rights and corruption as legal liabilities, international

conventions such as the OECD anti-bribery mechanisms and the UN conventions are often seen

as weak on the implementation side, especially in developing states. Zadek and Raynard (2004,

p. 72) agreed and contended that a global CSR initiative would also provide business with a

much needed mechanism for assessing risk in culturally sensitive areas, giving civil society a

critical responsibility to lobbying industry. Of course, while the ability to implement sustainable

CSR strategy remains contested, there is little disagreement that a ‘modern era’ of CSR has

emerged with a surplus of well-refined definitions that help contextualize how business

should engage society (Carroll 1999).

In contrast, CSR is not without its critics, given its predominantly Western religious, econ-

omic and political framework (Bowen 1953, Englander and Kaufman 2004, Blowfield and

Murray 2008, Spector 2008, Fukukawa 2010). When critically assessed, there is a risk that

the rise of CSR may be interpreted as a neo-imperialist strategy tied to embedding liberalism,

as will be discussed below. On the other hand, a common business critique argued that CSR pro-

grammes are unsustainable and financially irresponsible (Blowfield and Murray 2008). For

example, when firms face financial crisis, social responsibility programmes are generally the

first to be removed. As has been repeatedly witnessed by the author at industry-led CSR confer-

ences, brands are quick to freeze or reduce funding to community projects on account of under-

performing business operations. Kazmi and Macfarlane (2003, pp. 185–195) have also shown

how the Atlanta Partnership, an anti-child labour campaign led by major sports apparel compa-

nies, demonstrated how misguided CSR in Pakistan adversely affected livelihoods. While the

initiative was successful in ending child labour, the programme significantly lowered the house-

hold incomes for many families that depended on the practice. MacDonald and McLaughlin

(2003, p. 236) further pointed out that companies can create security problems when they

mismanage CSR projects. For example, if the community is not properly consulted, it could

lead to civil unrest as often experienced by the extractive sector. Businesses are also institution-

ally accountable to stakeholders that may have diverging views towards CSR. For example,

some shareholders may perceive CSR as wasteful and therefore anti-business, while managers

may continue to believe the age-old mantra that the business of business is business (Blowfield

and Murray 2008, pp. 338–361). As Friedman (1970) argued, CSR is a ‘fundamentally subver-

sive doctrine’, since it steals profit from shareholders. This holds true for many free market

advocates who see CSR as morally irresponsible.

Even more problematic is that some firms also benefit from socially irresponsible practice

such as weak environmental regulation and poor labour standards. Crouch (2007, p. 267)

argued that managers who ignore social arguments are acting rational, since they are hired

and expected to deliver business growth. He further contended that while some businesses

may financially benefit from socially responsible initiatives, it does not mean that CSR is an

advantage for all businesses. In fact, many companies are able to capitalize by disregarding

social institutions. Crouch rightly argued that it is a fallacy to assume that all corporate

leaders can serve as community role models, especially, since so many have little desire or

job description to achieve such a position. Regional managers also struggle with the organiz-

ational structure of corporations that are designed for profit maximization and resource

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exploitation. Despite one director’s good intentions, he or she may be driven to act socially

irresponsible, given the design of a corporation and the capitalist system (Dine 2008, p. 189).

Moreover, a regional director may not have the authority from headquarters to launch socially

responsible initiatives throughout the company’s local marketplace. Not to mention that CSR

strategy designed at the headquarters may be conversely conflicting in terms of the local

dynamics where such a policy is to be implemented.

Moral and ethical arguments associated with CSR may also be contrived through a specific

cultural bias (MacLennan 2005 quoted in Dine 2008, p. 191). Corporate executives may have

contending views among each other when it comes to implementing CSR programmes or sub-

scribing to ethical corporate behaviour. While managerial challenges to CSR implementation are

far from exhausted here, the intention is to highlight some of the more mainstream realities of

corporate leaders. Managerial challenges throw CSR perspectives into controversy, exposing the

lack of clear consensus on how social responsibility can be a business issue. A 2005 article in the

Economist went as far as branding CSR a victory for NGOs over business concerns, suggesting

that the demand for the social responsibility of business was essentially an anti-business

movement (Blowfield and Murray 2008, p. 342). Interestingly, there is a clear conflict

between the critical theorists who suggest that CSR is a neoliberal pro-capitalist strategy and

the CSR sympathizers who are often accused of being anti-business by conservative neoliberals.

The irony is that both liberal and conservative neoliberals remain highly suspicious of CSR

while accusing the other of holding sinister agendas found within its practice. Yet regardless

of the critics, many MNCs remain committed to CSR initiatives. A final controversy worth

addressing is the role of the consumer.

Ethical consumerism can have a positive impact on industry practice as Gulbrandsen and

Moe (2007, pp. 815–827) argued by suggesting that this may pressure firms to develop CSR

strategies that address macro-development issues such as poverty alleviation and good govern-

ance. Nonetheless, while consumers play a critical role in the motivation of CSR, they are far

removed from the design of voluntary principles, codes of conduct and corporate regulations.

While acknowledging the vital role of consumer activism, the drafting of CSR policy is largely

an elite process carried out at the invitation of only stakeholder engagements. Stakeholder

engagements are designed to tap into expert knowledge bases, with prominent NGOs often

being portrayed as the voice of an ethical consuming civil society. However, NGOs lack a

broad understanding of consumers and consistently revert back to promoting narrow campaigns

that reflect the organization’s objectives. Yet, the argument can also be made that elite stakeholders

are consumers in their own right. This again becomes controversial since each member attends

stakeholder engagements as a non-independent participant, since he or she is operating in an offi-

cial capacity for his or her given agency. Ethical consumers continue to remain a weak link during

the actual CSR design stage, since the majority of the key stakeholders in the room represent

diverse organizations with narrow and self-serving interests that do not always reflect consumer

society. Therefore, CSR engineering is primarily a dialogue between elite stakeholders. Despite

such dissent, the concept continues to be heavily endorsed by the Western political and business

leaders. While many theorists continue to present the dynamics of CSR as an organic relationship

between the community and industry, few have conceptualized the nation-state as the primary

driver of social responsibility. The article addresses this gap by introducing an alternative approach

for conceptualizing the contemporary rise of CSR.

Dynamics of CSR engineering

This article argues that the contemporary rise of CSR can be grouped into four distinct stake-

holder quadrants, namely, (1) the corporate sector, (2) IGOs, (3) NGOs, and (4) governmental

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agencies. Elite networks within each group are entrenching new social norms on transnational

business through dynamic accountability mechanisms such as CSR. While the four primary

drivers codify and implement CSR, they work in close collaboration with expert advisors

who can be classified as a group of influential scholars and business practitioners. They are

the consultants to the CSR engineers, and can be referred to as an ‘epistemic community’.

Haas (1992, p. 3) has defined this community as a ‘network of professionals with recognized

expertise and competence in a particular domain and an authoritative claim to policy-relevant

knowledge within that domain or issue-area’. He identified four defining features of the episte-

mic community. First, it comprises experts who are consulted by governments to grasp new

policy ideas. Second, it has the ability to establish direct and indirect communication channels

with high-profile policy-makers. Third, the epistemic community can narrow the scope of policy

options by eliminating weak propositions. Finally, once the community has advised policy-

makers, the group’s influence is diminished at the final policy-negotiating stage, where govern-

ment implements the expert advice (Haas 1992, p. 41). Haas’ criteria are entrenched within the

CSR policy networks where experts regularly provide advice through consultation and have the

authority to publicly endorse or reject general theories of CSR. Experts also have the authority

to recommend best practice policies, which are then publicly marketed by clients as a unique

commitment to socially responsible business.

Haufler (1999) has argued that epistemic regimes have been vital in propagating corporate

norms such as CSR through business school curriculum and management journals. She wrote:

‘Particular industries also construct and propagate their own sets of principles and norms

through extensive contacts within their communities; in fact, we can refer to them as forming

an “epistemic community” . . . Through industry associations, journals, and other forms of com-

munication, information and knowledge about industry “best practices” can be transferred

throughout the industry and become a standard for behavior’ (pp. 201–202). There is consider-

able evidence that this group engages with each driver at various stages of the CSR discourse

with the assistance of CSR brokers. CSR brokers are well connected and design new concepts

in direct consultation with other experts. The community has intimate knowledge of other’s

expertise, which it accesses through networking and information exchange. This group can

shift between the epistemic community and the key drivers of CSR. It works closely with influ-

ential organizations that serve as direct social consultants to industry. This includes organiz-

ations such as AccountAbility, Business for Social Responsibility, the Global Reporting

Initiative (GRI), the International Business Leaders Forum and SustainAbility. There are also

numerous consulting firms such as Control Risk, Maplecroft and Trace International. Communi-

cation firms also can provide CSR solutions for businesses looking to expand community

engagement such as APCO, Edelman and Hill & Knowlton. Such organizations generally

play a controversial role in CSR engineering, since their knowledge is often derived from

other experts to be repackaged and sold on the open market.

Business schools and academics play a key role as expert advisors. Spector (2008, pp. 315–

27) argued that there is a correlation between the rise of socially conscious firms during the Cold

War and CSR training at the Harvard Business School. Today, there are countless business

schools offering CSR and sustainable development (SD) course options for business majors.

In 2009, Bloomberg’s BusinessWeek magazine published an article on ‘Green MBAs’, com-

menting: ‘Today, business schools are continuing to ramp up their efforts for green curricula,

but for a much different reason. In a world beset by economic woes as well as environmental

problems – from the scarcity of natural resources to climate change – sustainability represents

one of the few potential bright spots in an otherwise dismal recruiting environment’ (Business-

Week 2009). In 2009, the US-based Aspen Institute published its list of top 100 business schools

offering CSR programmes. The study ranked 149 schools in 24 countries that ‘spotlight

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innovative full-time MBA programmes leading the way in integrating social and environmental

stewardship into their curriculum and scholarly research’ (Aspen Institute, 2009). Overall,

the epistemic community plays an important guiding role in shaping CSR through direct

consultation with CSR engineers. One area notably influenced by the epistemic community is

the corporate sector.

The private sector remains the most prominent public face of the global CSR movement

especially since the concept entered the mainstream business discourse. Community engage-

ment has remained at the heart of the CSR concept, which has also served as a strategic risk

management mechanism (Newell 2008, p. 122). Referred to as ‘reputational capital’, such

risk has the potential to cause heavy economic and legal consequences if not managed

appropriately (Monshipouri et al. 2003, p. 967). These can include environmental degradation,

labour disputes, corruption, theft and social unrest that may have been indirectly or directly

instigated through the MNCs’ local actions. CSR can then be used as a tool that can mitigate

non-traditional risk (Blowfield and Murray 2008, pp. 120–121). This provides a strategic

return for companies that integrate socially responsible practices and compliance policies into

their business model.

Institutional realities in emerging economies also play a significant role in driving companies

to integrate CSR practices. Monshipouri et al. (2003, p. 967) claimed that the ‘rights based view’

of CSR promotes transparency and good governance, two key strategies in protecting assets

throughout institutionally corrupt and non-transparent markets. Nonetheless, serious questions

are raised whether CSR can bring meaningful socially responsible business practice to many

emerging economies. For example, can ethical businesses function in unethical business

environments that require actors to engage in corruption? Indeed, foreign corporate governance

strategies often clash with local market realities, a challenge that may drive business to behave in

a socially irresponsible or negligent manner. Goodpaster (2007, p. 21) argued that real-life job

stress, rationalization and a drive to win pressure managers to make work-related decisions that

they would not normally conceive in their home life. John Ladd (Konrad 1982, pp. 196–197)

had earlier identified this phenomenon as ‘moral schizophrenia’. CSR offers protection

against such behaviour by micromanaging sensitive compliance issues such as labour rights,

environmental protection and anti-bribery.

CSR can also provide public relation gains with many firms advertising their community

engagement initiatives (Manokha 2004, p. 60). CSR strategies are often written and adminis-

tered by business entities as defensive and offensive communications techniques. Defensive

techniques are used retroactively to maintain reputation when corporate behaviour has caused

public discontent, while offensive attempts are used to address future community grievances

before they occur (Blowfield and Murray 2008, pp. 102–103). For example, in 2004,

Newmont Mining Corporation was accused of polluting Buyat Bay in South Sulawesi,

Indonesia. NGOs argued that the firm was responsible for dumping mercury into the water,

which eventually led to the spread of diseases. While Newmont adamantly denied and was

subsequently cleared of the charges, the event was a public relation disaster. The firm’s top

executive in Indonesia was brought up on criminal and civil charges, all of which were later

dismissed (CSR Asia 2004, The Age, 2007). Whether Newmont was responsible or not, the

local community perceived the firm as guilty. In cases such as this, CSR strategies can assist

through image-building techniques while offering strategies on how to remedy the situation.

The company may then develop an extensive community engagement campaign to restore

public trust. On the other hand, a company that has already used CSR strategies to court

the local community may likely have less community backlash or have even averted such a

disaster through rigorous and transparent environmental audits. A second driving source of

CSR is IGOs.

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IGOs play a key role in the strategic direction of global CSR guidelines and corporate stan-

dards, while there has been a long history of IGOs interacting with business (Jerbi 2009, p. 300).

Organizations such as the United Nations Conference on Trade and Development (UNCTAD),

the Organization for Economic Co-operation and Development (OECD), the World Bank’s

International Financial Corporation (IFC), the International Labour Organization (ILO), the

International Organization for Standardization (ISO) and the UNGC make significant contri-

bution to the CSR dialogue through the promotion of international regulatory frameworks

(Richter 2001, Robins 2005, Barkemeyer 2007, Blowfield and Murray 2008, Jerbi 2009).

These organizations facilitate and draft organizationally unique approaches and recommen-

dations for socially responsible business practice (Newell 2008, p. 125). This has not always

been the case.

The past four decades have seen a volatile relationship between corporate–IGO partnerships.

Throughout the 1970s, the UN had raised calls for the adoption of international codes of conduct

only to have major initiatives derailed a decade later by neoliberal governments such as the

Reagan and Thatcher administrations (Richter 2001, pp. 8–15). The corporate–IGO partnership

did not fully emerge until the late 1990s when the International Chamber of Commerce (ICC)

approached the UN officials to establish a dialogue. Unstable financial markets in Asia had

led to the 1997 financial crisis as well as to the collapse of the Mexican economy. Richter

(2001, pp. 13–15) suggested that these events had served as a catalyst for transnational industry

to think more critically about the risk of weak regulation, a process that later would clear the way

for the adoption of the UNGC. Richter (2001, p. 14) wrote, ‘In exchange for UN support of free

trade, Annan [Kofi, the UN Secretary-General] asked the ICC member companies to “make sure

that in your own corporate practices you uphold and respect human rights; and that you are not

yourselves complicit in human rights abuse”’. Strategically, the ICC became the primary driver

of the Global Compact on condition that the UN agreed to publicly endorse international trade.

Kofi Annan’s public support of the ICC has also placed new pressure on the UN agency to

support global trade. Therefore, businesses that engage in unethical behaviour are not only

damaging their corporate reputation, but they are also undermining the UN’s claim that ‘by

partnering with companies in this way, and leveraging the expertise and capacities of a range

of other stakeholders, the Global Compact seeks to embed markets and societies with universal

principles and values for the benefit of all’ (UNGC 2009). This statement not only promotes

CSR, but it also lays claim that the UNGC’s principles are universal and functional in all

markets. The Compact thus acts as a platform for promoting ethical trade while suggesting

that the UN is a significant driver of neoliberal market strategies including CSR.

Other key multilateral CSR mechanisms include the IFC’s Performance Standards on Social

& Environmental Sustainability and Policy on Disclosure of Information, the Equator Principles,

the Voluntary Principles on Security and Human Rights, the GRI, the ISO 26000, the ILO’s Tri-

partite Declaration on Principles Concerning Multinational Enterprises and Social Policy, the

OECD’s Guidelines for Multinational Enterprises and Asia-Pacific Economic Cooperation’s

(APEC) project on CSR in the Global Supply Chain. While these initiatives are well worth

researching in their own right, the purpose here is to highlight the diverse CSR mechanisms

that have been championed by IGOs. Despite the non-binding nature of many multilateral

CSR schemes, they have significant potential to shape how the private sector engages in socially

responsible business practice. As Vives (2004, p. 51) rightly argued, ‘MDIs [multilateral devel-

opment institutions] can play a powerful role in fostering CSR practices in business, enhancing

the good work of corporations, civil society and governments. From their position as honest

brokers, they can relate to all parties in the CSR market . . . In so doing they can enhance the

credibility and reduce the risks of those businesses, thereby creating a win-win situation’.

A third driver of CSR is NGOs.

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The influence of NGOs has increased dramatically over the past four decades. They are now

considered dynamic stakeholders in virtually all public–private dialogues while representing a

diverse range of civil society concerns (Manokha 2004, Blowfield and Murray 2008, Newell

2008, Jerbi 2009). Ketata and McIntyre (2008, p. 160) argued that MNCs can no longer

afford to ignore NGOs. For example, the Burma Campaign UK (2009) compiled a ‘Dirty

List’ that currently has over 170 companies doing business in Myanmar. The list seeks to

expose businesses that are profiting in a market where the government is widely perceived as

a systemic human rights’ violator. Many experts argue that campaigns such as this can

impact corporate behaviour, while others remain unconvinced finding it difficult to quantify

true motivations behind corporate decisions (Monshipouri et al. 2003, pp. 986–989). While

some NGOs are quick to blame MNCs for exploiting social and environmental resources,

many are now seeking engagement with the business community. Yamamoto and Ashizawa

(1999, pp. 14–15) argued that strategic engagement and funding are two primary reasons for

NGOs starting to embrace the CSR paradigm.

First, CSR is often perceived as a potential tool to address social injustice. CSR provides a

platform for NGOs to approach business and present arguments on social issues that would not

otherwise present themselves. NGOs have latched on to business by using the language of

human rights to hold companies accountable to an international standard in accordance with

legal and ethical norms (Sullivan 2003, pp. 305–309). The principle of engagement over con-

frontation has proven to be a successful strategy for organizations struggling to monitor

corporate behaviour (Monshipouri et al. 2003, p. 984). Engaging businesses through a CSR

framework is also an effective means of promoting social change, and can serve as a strategic

public awareness campaign. These campaigns are generally high profile and target well-

known brands. Barkemeyer (2007, p. 5) argued that NGOs are more likely to lobby market

leaders rather than the companies that are committing the worst offences. By lobbying high-

profile MNCs, NGOs have a greater chance of gaining publicity than they would from lesser

known firms, since exposing the unethical behaviour of a well-known brand has strong public

interest. NGOs are essentially able to ‘free-ride’ off a firm’s public image to raise campaign

awareness while increasing the NGOs’ profile through media exposure. CSR provides activists

with an essential platform and strategy to engage MNCs (Monshipouri et al. 2003, p. 987).

Second, NGOs see CSR as a possible funding source on two levels. On the one hand, many

NGOs are dependent on government funding and personal philanthropic donations. CSR pro-

vides a third option for NGOs to professionally appeal for corporate philanthropy (Yamamoto

and Ashizawa 1999, p. 27). On the other hand, NGOs can provide subcontracted services for

MNCs that are unable to perform the task themselves such as independent labour audits

(Monshipouri et al. 2003, p. 970). NGOs have become so commonplace that MNCs and

governments have drafted rules of engagement strategies for dealing with them. For example,

the World Trade Organization (WTO) has drafted a guidebook that clearly acknowledges

NGOs as a key stakeholder throughout trade negotiations (Newell 2008, p. 127). NGOs are

now actively engaging business through multilateral platforms and are the key players in the

CSR movement (Monshipouri et al. 2003, Manokha 2004, Barkemeyer 2007, Jerbi 2009).

The final driver on how CSR is designed is governments.

Governments are using public policy initiatives to bridge the gap between investment, trade

and SD (Albareda et al. 2008, p. 348). As Moon (2002, p. 388) argued, ‘BSR [business social

responsibility] is becoming increasingly institutionalized within and among firms; and govern-

ments are encouraging greater business involvement in wider governance issues as well as in

sector-specific policy areas’. This is expected considering the deep nexus between industry

and government. Yet, the disparity between public and private sector policy agendas has

become increasingly blurred (Stohl et al. 2007, Dine 2008). While businesses rely on

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governments for sound economic policy and infrastructure projects, governments rely on industry

for economic growth, international trade and job creation. The current neoliberal economic order is

what Wade and Venerosa (1998) called the ‘Wall Street–Treasury–IMF complex’, which has

developed close economic collaboration between business and government. Critics identify this

relationship as a corrupted ideal of economic systems. Dine (2008, p. 187) argued that the West

is responsible for developing hybrid economic systems that have seen the de-democratizing

process in developing states at the expense of global commerce. She suggested that introducing

neoliberalism to developing economies while failing to integrate social movements has thereby

undermined trust for corporations and capitalism. The growth of CSR in such economies can

partially be attributed as a response by industry, backed by neoliberal institutions, to gain

market access to emerging economies by contributing corporate resources to national development

goals. Industry is also able to mitigate a possible community backlash towards investors by

positioning the firm as a responsible corporate citizen committed to understanding local needs.

Not only does this reduce the non-financial risk of the corporation, but it also improves

community relations with local governments that have approved such ventures while signalling

a community benefit for embracing capitalist markets. In this sense, governments from both

economically advanced and developing economies have considerable interest in the social

responsibility movement to improve community relations (d’Aquino 1996, Blowfield and

Murray 2008, Spector 2008). While this section has sought to introduce the CSR engineering

concept as an alternative framework for conceptualizing key stakeholders, the following section

aims to establish the economic reasoning behind a politically backed CSR paradigm.

Neoliberalism and the future of CSR

Grounded in the economic theory drafted by Fredrick Hayek and Milton Friedman, Connell

(2010) described neoliberalism as a historic project engineered to reform social structures and

institutions. Braedley and Luxton (2010, p. 7) argued that neoliberal convictions see human

freedom as inherently tied to capitalist systems through the promotion of wealth creation.

Hay (2007, p. 54) outlined eight defining features of neoliberal ideology, which include the

belief in (1) the free market, (2) a global free trade regime, (3) minimal to zero market interven-

tion by the state, (4) the state as a facilitator or steward of free market economies, (5) individual

liberty as inherent, (6) rejection of the welfare state, (7) support for free competition and labour-

market flexibility and (8) confidence in private sector management of public goods. Such tenets

are being systematically applied globally through the Western economic ideology and capitalist

mechanisms such as the World Bank and the International Monetary Fund (Harvey 2007, Dine

2008, Arnold 2009, Manzetti, 2009, Braedley and Luxton 2010, Connell 2010). While neoliber-

alism appears to have consolidated its values through the globalized order, there remains a sharp

division within the ranks on how such a historical process can be managed, most notably, in

the role that government should play in regulating international business ventures.

Arnold (2009, pp. 125–135) highlighted the divergent views towards regulation between

classic liberals and modern liberals. While classic liberals reject regulation and demand little

to no government intervention in the market, new liberals argue that some level of government

regulation is necessary to counter the many social costs of capitalism. For example, non-

financial regulation is frequently applied to morally questionable business practices such as

discrimination and labour abuse. Arnold suggested that the contemporary debate between neo-

liberal ideologies is largely focused on the regulatory framework as means to address issues such

as labour, consumer products and services, as well as the environment. He then introduced three

methods that liberal proponents of the regulatory regime may employ to strengthening their

argument. First, they may appeal to common ground in areas where it can be agreed that

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government involvement may be necessary when solutions fall outside the sphere of the private

sector. Second, new liberals may use a convergence argument to persuade conservatives that

regulation is necessary to preserve certain freedoms and privacy, thereby petitioning conserva-

tive values while introducing a regulatory mechanism as a sound solution. Finally, Arnold

suggested that calls for regulatory ‘exception’ may appeal when moral arguments that align

with conservative ideology are presented.

Arnold’s three liberal appeals for regulatory blessing align with current CSR engineering

trends. CSR policy-makers are able to structure regulatory arguments via legally non-binding

frameworks based on voluntary principles. With politically sanctioned guidelines outlining

ethical industry, private sector actors are able to align corporate strategy with governmental

social policy. These directions compliment the deep relationship between the nation-state and

home-based MNCs. Business can continue as usual for industries that embrace SD practices

that are imperative for improving, or at least masking, the social implications of capitalism

allowing corporations to become powerful non-state actors benefiting from political patronage.

As Dine (2008, p. 18) argued, nation-states are ‘on the side’ of the multinational corporation,

consequently blurring the line between public and private power with governments compromis-

ing democratic process to accommodate transnational non-state actors. CSR has come to rep-

resent a compromise between governments and industries committed to neoliberal economics,

yet conceding to social and environmental consequences of an unregulated global free market

economy.

For example, the United Kingdom’s Company Act has given new responsibilities to man-

agers by forcing UK business leaders to consider the social and environmental impact of their

firm. According to the Corporate Responsibility Coalition (2007, p. 14), the new law requires

directors to manage ‘the interests of the company’s employees; the need to foster the company’s

business relationships with suppliers, customers and others; and the impact of the company’s

operations on the community and the environment’. Governments can use CSR arguments to

motivate companies to promote sustainability. CSR, therefore, allows policy-makers to

engage in a common dialogue on business and society while advocating rule of law and regu-

lation (Moon 2002, Albareda et al. 2008). A similar take could be interpreted through inter-

national initiatives such as the United Nations Framework Convention on Climate Change

(UNCCC 1992). Article four of the framework demands that all parties ‘promote sustainable

management, and promote and cooperate in the conservation and enhancement, as appropriate,

of sinks and reservoirs of all greenhouse gases not controlled by the Montreal Protocol, including

biomass, forests and oceans as well as other terrestrial, coastal and marine ecosystems’ (p. 5). In

other words, governments have a responsibility to promote environmental sustainability. CSR

can then serve as a transparency mechanism for governments to monitor the environmental

impact of firms and direct industry through a range of regulatory measures (Jerbi 2009,

p. 305). Implications are profound with governments remaining the most powerful CSR stake-

holders considering their ability to legislate. The future of CSR will likely be dependent on

politically sanctioned regulatory regimes. Another driver behind politically backed CSR

policy concerns political risk management.

Governments from high-income countries are known to promote CSR initiatives of home-

based industries to further trade and investment opportunities (d’Aquino 1996, p. 109).

Expansionist capitalism and the push for global free trade are also driving governments to use

CSR as a political liability measure. Government can act as a facilitator with non-state actors

on strategic issues such as corruption, governance and transparency (Jerbi 2009, p. 303). Of

course, there is significant political baggage when MNCs from economically advanced states

invest in emerging economies, which would explain a push for government to engage business

and promote ethical corporate behaviour. This dialogue helps shape voluntary principles that

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demand certain expectations of firms to enact codes of conduct, transparency procedures and

anti-bribery tools (Haigh and Jones 2006, Albareda et al. 2008, Detomasi 2008, Dobers and

Halme 2009). Governments are not only encouraging ethical business, but they are also mini-

mizing the political impact of home-based corporations conducting controversial operations

abroad. Industry is driven to seek out new and emerging markets that often have weak regu-

lation, endemic corruption and authoritarian political structures. This creates an institutional

constraint for governments from high-income countries that support business entering such

economies while still rejecting the political baggage of trade and investment.

For example, the recent corruption case involving the Australian mining giant Rio Tinto in

China has been perceived as politically damaging (Australian Broadcasting Corporation 2010a).

Immediately after the Rio Tinto executives were sentenced to lengthy jail terms, the Australian

Foreign Minister Stephen Smith was quoted as saying ‘Whilst we don’t condone bribery in any

way, I think the sentence by any measure is harsh’ (Australian Broadcasting Corporation 2010b).

While Minister Smith claimed that the sentencing would not stain Australia–China relations, it

was deemed a challenging case for the government and prompted an official response. At one

point, the Australian Prime Minister Kevin Rudd commented that the world would be watching

the trial (Australian Broadcasting Corporation 2010b). This case, which involves a foreign

private sector firm, demonstrates how the actions of MNCs can have political fallout. CSR

can thus act as a check-and-balance mechanism for home-based industry that must function

in a global market economy that financially engages weak states. CSR can then act as a

neutral platform to design strategies that can pre-emptively defuse negative publicity that

would emerge from such risky partnerships. This has significant implications for the implemen-

tation of a global CSR framework, and can explain why Western governments are starting to

endorse socially responsible business practice.

Political endorsement of CSR can be seen as an attempt to ensure a level playing field of

global trade. There is now evidence that firms from emerging economies are winning contracts

throughout the developing world on account of cost-cutting through unethical or illegal labour

and environmental standards. As Brautigam (2009, p. 12) noted, this has become especially

apparent with recent IMF and World Bank contracts being lost to Chinese firms that can offer

financially lucrative ventures on account of ignoring social and environmental principles. The

Western firms remain bound by the domestic activist lobby and strong regulation that may pro-

hibit certain activities abroad. For example, the U.S. Foreign Corrupt Practices Act (FCPA) is a

unique legislative mechanism with a mandate to prosecute any corrupt firm that is traded on the

US markets and frequently targets the US industry abroad. The FCPA has been instrumental in

guiding major crackdowns on industry that has engaged in bribe paying such as the German

engineering firm Siemens (United States Department of Justice 2008). As a result, Siemens

was found guilty of corruption and was ordered to pay the German and US authorities a

record US$1.6 billion in fines (Boyle 2008, p. 51). These examples demonstrate the long

reach of the US Department of Justice while sending a strong message to other firms that

choose to engage in corruption. These developments may potentially have great implications

for the American business abroad and any foreign firm traded on the US markets in terms of

competitiveness. It is, therefore, in US interest to ensure that all transnational firms regard cor-

ruption not only as illegal, but also as socially irresponsible in order to bring contending actors in

line with the American jurisprudence. While the promotion of CSR may be of benefit to the

West, developing states also have a strong economic interest in promoting such an activity.

Governments from medium- to low-income countries can use the CSR concept to fund

community development projects. Frost and Ho (2006, p. 45) found that the government of

Cambodia was using CSR to position itself competitively as a ‘selling point to apparel buyers

and retailers’. Moreover, Detomasi (2008, p. 810) wrote, ‘[I]n many host markets, the central

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government lacks funds or administrative capacity to deliver basic social services: CSR efforts

can help bridge the governance gap between what local regulations require, what local govern-

ments can deliver, and what cognitive and normative legitimacy demands’. In some developing

economies, the social responsibility of industry has entered the legal dialogue with CSR having

recently been legislated in Indonesia’s national parliament, a move that has also been considered

by India and the Philippines (CSR Asia, 2009). In 2007, Indonesia became the first country in the

world to legislate CSR. According to Article 74 of Indonesia’s company law, businesses must

establish CSR budgets or face significant fines (Jakarta Post 2009). Arguably, legislated CSR

is becoming an alternative measure for governments to tax industry.

Another incentive for developing country governments to use CSR is to ensure long-term

commitment from MNCs through corporate–community integration. The Organization for

Economic Co-operation and Development (2002) has argued that foreign direct investment is

an important catalyst for economic development; however, MNCs are quick to leave jurisdic-

tions when economic and social conditions deteriorate. This has left many developing states

with minimal bargaining power when it comes to large MNCs (Monshipouri et al. 2003,

p. 966). When developing governments promote CSR, they can pressure foreign business to

establish deeper community roots that otherwise would not have evolved. Finally, CSR can

improve the brand reputation of firms from emerging economies. This is especially the case

with industry originating from China with many of the country’s state-owned enterprises

‘going global’ and increasingly being confronted with community-based resistance (Garrison

2009, Taylor 2009, Brautigam 2009). Such reputational damage can weigh heavily on firms

from developing economies attempting to engage global markets. Governments then have a stra-

tegic interest to encourage home-based brands to compete through the promotion of international

best practice standards. While CSR has generated much support, there is nonetheless a growing

discontent towards the concept.

As one Thai government official has pointed out, companies with strong CSR programmes

are often aggressive tax evaders (personal communication, 29 October 2008). Governments may

then perceive CSR as a smokescreen for unethical behaviour. CSR can be construed as a product

of deception especially since the overall social and economic development brought into devel-

oping states by MNCs is often uneven and disproportionate (Monshipouri et al. 2003, p. 974).

Projects can be used to create an illusion of widespread community commitment when the

actual benefits are narrow and limited (Blowfield and Murray 2008, pp. 350–353). Moreover,

CSR has often been referenced as a public relation exercise that has negative effects on commu-

nities and SD. International organizations have been quick to point out the inconsistent attitudes

of business towards regulation, transparency and rule of law. As Richter (2001) observed that

while the ICC raises CSR awareness, the organization continues to fiercely advocate for the

deregulation of trade law (p. 14). Regardless, governments from both economically advanced

and developing economies have considerable interest in the social responsibility movement

(d’Aquino 1996, Blowfield and Murray 2008, Spector 2008).

Conclusion

This article has attempted to introduce an alternative approach for conceptualizing the rise of

contemporary CSR. It has presented CSR as a highly sophisticated political mechanism to

promote and protect the global trading regime. The concept is being engineered by elite stake-

holders including business, international organizations, NGOs and government. This is called

CSR engineering, a process established on the close relationship of each driving sector. These

actors are directed by an epistemic community of CSR brokers who draft, design and manipulate

the social responsibility narrative. CSR strategy is then disseminated throughout the corporate

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consultancy industry where it is packaged and sold on the open market. This article has also

offered three explanations for why Western governments and neoliberal institutions remain

the primary endorsers of socially responsible business practice.

First, CSR offers a voluntary approach to regulation that targets unethical business practice

responsible for the many social and environmental consequences of a globalized free market

economy. Neoliberal ideologies are coming to terms with the systemic market failures

brought on by capitalism. In order to maintain confidence in such a system, amendments

must be endorsed that allow the continuation of liberal economics while introducing a tool to

address sustainability issues. Even free market advocates will agree that economic growth has

its limits, yet SD is not often endorsed by this group. Politically backed CSR has thus

become a sophisticated governmental response to address the consequences of global trade

without regulation. Second, governments have a domestic political interest to ensure that

home-based brands are behaving ethically abroad. CSR allows administrations to covertly

pressure business to regulate, allowing the concept to stand in solidarity with neoliberalism

since it is not received as a political endeavour. This enables governments to ensure the

behaviour of home-based activists, voters and investors in national industry. Finally, govern-

ments have a considerable interest in designing a global CSR regime to ensure that the

Western brands can compete against industries willing to act illegally or unethically in tendering

processes. A globally agreed-upon CSR framework can enhance fair competition for the

Western brands bound by strong regulation and activist home jurisdictions.

Overall, political endorsement of ethical business and the promotion of best practice policy

should be considered a positive development. However, it is not without controversy, especially,

since such an ethical shift will favour the Western MNCs since financially robust firms are more

able to absorb costs associated with industry innovation. However, it places significant pressure

on developing economies to bypass a controversial phase of industrialization that the Western

economies intended. The CSR concept provides the Western powers with a mechanism to main-

tain a structural grip on the global economy. This is why voluntary CSR principles should be

considered the beginning of a strategic regulatory movement designed to preserve neoliberal

economics.

Acknowledgements

The author would like to thank Stephen Frost, William Case, Graeme Lang, Michael Connors,

Doreen McBarnet, Nick Pisalyaput, Lee Jones, Richard Welford, Ian Holliday and two anon-

ymous reviewers for their invaluable comments and suggestions on earlier versions of this

work. He also thanks Paul Evans for inviting him to expand on this research at the Institute

of Asian Research, University of British Columbia.

Note

1. Interviews were held in Cambodia, Canada, Hong Kong, Singapore, Mainland China, Thailand and theUK between June 2007 and January 2010. Conferences include the 2008 CSR-Asia Summit in Bangkok,the 2007 CSR-Asia Summit in Hong Kong, the 2009 Anti-Corruption Asia Congress in Hong Kong, the2008 Anti-Corruption South Asia Summit in Singapore and the 2009 Prime Source Forum in HongKong, as well as the International Seminar on Business and Human Rights in Paris.

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