CSR – An Opportunity for Lawyers to Do Good and Be Well

The legal profession is much maligned in the business community and in society in general, and many lawyers complain of deep dissatisfaction with their choice of career and the day-to-day tasks associated with their roles in the legal system.  Proactively participating in environmental and social responsibility initiatives, either as individual lawyer and as law firm team members or by assisting clients, is a real opportunity for attorneys to change their lives and the communities in which they practice in a positive and impactful manner.  Many attorneys entered law school with the goal of acquiring the tools necessary to help those who needed support from others and, in some small way, to “change the world”.  For those who may have lost their way, for whatever reason, or are looking for ways to do more, corporate social responsibility (CSR) is a welcome and promising platform and this post discusses the various roles that lawyers can play in CSR planning, governance, management and implementation.

While CSR is often described as “going beyond the law”, a good deal of the work relating to social and environmental responsibility involves understanding how to comply with existing laws and regulations and planning for and addressing the risks of misbehaviors in areas generally associated with CSR and sustainability such as human rights and child labor issues in the supply chain, discrimination in the workplace, health and safety issues, environmental practices, and cybersecurity and privacy.  As such, the legal department, particularly the general counsel, has a significant role to play in developing and implementing the CSR and sustainability initiatives of any organization.   The legal department is also a natural contributor to organizational efforts to comply with voluntary standards, some of which will inevitably become hard law, and an experience guide on questions of materiality that arise as organizations expand their disclosure and reporting activities to include social and environmental goals and performance.

Individual attorneys, in-house legal departments and law firms can be affected by CSR in several ways.  First of all, all attorneys, regardless of whether they work on their own or for an organization, are subject to various professional ethics codes with respect to the work that they perform on behalf of their clients and the role that they play in the justice system.  Second, lawyers may be requested by clients as suppliers of services to submit themselves to the client’s CSR policy.  For in-house lawyers this means formally acknowledging and agreeing to the code of conduct and other CSR-related policies of their employers.  Prospective candidates for law firm positions are increasingly asking firms about their own CSR policies (e.g., in areas such as diversity and work-life balance) and activities and those of the clients that have the most substantial economic impact on the firm.  Third, lawyers can receive requests from their clients for advice on development and implementation of CSR and overall compliance plans and, in fact, compliance is an area of CSR in which lawyers are already heavily involved on a day-to-day basis.  Fourth, lawyers are often asked to assist client in performing audits to verify compliance.  Finally, lawyers, either on their own or as part of a group (i.e., other lawyers from their in-house legal department or law firm or legal colleagues from a bar association), may engage in activities intended to have an environmental and/or social impact such as provide pro bono legal services to client otherwise unable to afford a lawyer who have claims based on a violation of their human rights or damage to health and/or property due to environmentally irresponsible actions of others.[1]

Even if a lawyer is not engaged directly in some sort of CSR-related activity, he or she needs to be aware of the role that environmental and social activists are playing in the marketplaces in which their clients are operating and be able to counsel their clients on the litigation and reputational risks associated with failing to adhere to CSR norms and practices.  Lawyers must be familiar with the impact that CSR is having on the type and magnitude of claims based on the negligence of their client, such as the willingness of judges and juries to impose substantial economic sanctions on defendants found to have caused injuries to people and damage to properties due to failure to take their environmental and/or social responsibilities seriously.  Transactional lawyers must be mindful of the impact that development projects and acquisitions may have on local communities and counsel their clients on the social aspects of consolidation of workforces and making changes to workplace practices and benefits.  Lawyers should also expect to be involved in corporate governance and counseling boards about the role that sustainability plays in their oversight responsibilities; monitoring the activities of supply chain partners; and crisis management in the event that a client, either recklessly or accidently, engages in activities that cause harmful environmental and/or social impact.  All of this flows from the growing belief that companies are more than just legal entities and are citizens of the world in which they operate with duties and responsibilities to others and vulnerability to being held financially and criminally accountable for poor citizenship.

Vernon described some of the ways that individual attorneys as well as entire groups within corporate legal departments may become involved in counseling on CSR matters and the manner and consequences of stakeholder engagement.  He noted that attorneys are often called upon to advise their clients on internal policies and procedures, external policies and procedures, supplier contracts, gover­nance, compliance, public relations and contractual obligations with various business partners and each of these are areas in which CSR issues and obligations may be relevant.  Examples may include consulting on the potential impact from a compliance perspective of adoption of a new human rights policy applicable to the company’s own facilities and the facilities of its supply chain partners around the world; advising on the compliance and transparency obligations that would come from the adoption of a corporate-wide wa­ter stewardship policy; and reviewing proposed sustainability reporting to be initiated as part of the company’s efforts to demonstrate more transparency.[2]

A June 2015 publication prepared under the auspices of the UN Global Compact included the following recommendations for general counsels with respect to their role in the corporate sustainability initiatives of their organizations[3]:

  • Embrace the breadth of the role: Reflect on key drivers of change; create “heat” map of drivers against corporate strategy; identify and assess gaps and trends; and develop “legal model” change plan based on corporate priorities
  • Prioritize sustainability: Mirror corporate emphasis on sustainability within strategic priorities for legal; regularize on your agenda; and commit financial and human resources to capacity-build within legal
  • Communicate expectations to third party advisers: Communicate to external advisers about your strategic priorities; reinforce your expectations about the support and engagement needed from them; have an open dialogue about strengths and weaknesses; and discuss specific changes in approach and team
  • Build internal credibility: Create legal SWOT (“strengths, weaknesses, opportunities and threats”) with business and sustainability experts; agree on areas of focus for legal with the business; agree on plan of engagement for legal with relevant constituencies’ operations; and formally reassess progress with business periodically to underscore engagement
  • Redefine career path for legal: Articulate that an increased focus on corporate sustainability is key to career development given underlying trends; and assess progress annually and communicate as part of core role
  • Establish KPIs and rewards: Tie sustainability KPIs to team taking a “broadened” role and engagement; agree objective and subjective elements with business and team; create financial and nonfinancial incentives;
  • Create integrated objectives with business units: Objectives for cross-functional teams should be integrated into annual performance assessment of legal team members
  • Drive change from the top: Proactively engage with C-Suite/Board on sustainability issues; communicate strategic importance of corporate sustainability with legal team
  • Peer-to-peer engagement: Discuss the drivers of change and broadened role with other GCs or “C-Suite” executives; discuss approaches to driving corporate sustainability from legal, including through the use of KPIs; capture and share best practices
  • Embed within legal strategy: Identify aspects of key sustainability issues where legal can engage; embed points of engagement on corporate sustainability within legal department strategy/objectives
  • Engage with third parties: Engage with NGOs to develop expertise and credibility; set the tone within legal that “balanced engagement” is a key corporate strategy; and encourage legal team to be part of stakeholder engagement strategy from earliest stages
  • Communicate initiatives and engagement regularly: Regularize reporting to GC on sustainability/engagement issues; communicate efforts/initiatives of legal team periodically; and use both formal and informal mechanisms to communicate
  • Build familiarity in legal team: Dedicate legal resources to corporate sustainability issues; regularize internal engagement on sustainability issues; focus on practical application of “traditional” legal skills; and engage in skills development and training
  • Build cross-functional teams: Embed legal expertise in key areas; encourage early and regularized engagement by legal team; elevate issues/developments across internal “silos”; and periodic “progress” reports to GC/legal team

For further discussion see Sustainability Governance and Management.


[1] Adapted from Corporate Social Responsibility and the Role of the Legal Profession: A Guide for European Lawyers (Council of Bars and Law Societies of Europe, June 2008).

[2] K. Vernon, “Corporate Social Responsibility: Stakeholder Engagement: Opportunity for Business to Thrive?”, Business Law Today (January 2015).

[3] Guide for General Counsel on Corporate Sustainability (UN Global Compact and Linklaters LLP, June 2015).  See also Corporate Social Responsibility and the Role of the Legal Profession: A Guide for European Lawyers (Council of Bars and Law Societies of Europe, June 2008).

Purpose of the Firm: The Shareholder-Stakeholder Debate

One of the most common descriptions of corporate governance has been the way in which corporations are directed, administered and controlled and the actual activities of the directors and senior executives have been referred to as steering, guiding and piloting the corporation through the challenges that arise as it pursues its goals and objectives. Jamali et al. explained that the “control” aspect of corporate governance encompassed the notions of compliance, accountability, and transparency, and how managers exert their functions through compliance with the existing laws and regulations and codes of conduct.[1]  At the board level, the focus is on leadership and strategy and directors are expected to deliberate, establish, monitor and adjust the corporation’s strategy, determine and communicate the rules by which the strategy is to be implemented, and select, monitor and evaluate the members of the senior executive team who will be responsible for the day-to-day activities associated with the strategy.  In addition, directors are expected to define roles and responsibilities, orient management toward a long-term vision of corporate performance, set proper resource allocation plans, contribute know-how, expertise, and external information, perform various watchdog functions, and lead the firm’s executives, managers and employees in the desired direction.[2]

Setting the strategy for the corporation obviously requires consensus on the purpose of the firm, the goals and objectives of the firm’s activities and the parties who are to be the primary beneficiaries of the firm’s performance.  Traditionally, directors were seen as the agents of the persons and parties that provided the capital necessary for the corporation to operate—the shareholders—and corporate governance was depicted as the framework for allocating power between the directors and the shareholders and holding the directors accountable for the stewardship of the capital provided by investors.  While economists and corporate governance scholars from other disciplines recognized that the governance framework involved a variety of tools and mechanisms such as contracts, organizational designs and legislation, the primary question was how to use these tools and mechanisms in the best way to motivate and guarantee that the managers of the corporation would deliver a competitive rate of return.[3]  All of this is consistent with what has been described as the “narrow view” of corporate governance, one that conceptualizes corporate governance as an enforced system of laws and of financial accounting, where socio/environmental considerations are accorded a low priority.[4]

While primacy of shareholder interests was the dominant theme of corporate governance, at least in the US, for decades, there is no doubt that one of the most dynamic and important debates in the corporate governance arena, as well as in other areas of society, is the purpose of the firm.  Williams described this debate as follows[5]:

“Is it “simply” to produce products and services that create economic rents to be distributed to rights’ holders according to pre-existing contractual, statutory and (possibly) normative obligations? (Given that close to 70% of new companies ultimately fail, that task cannot be taken as too simple.)  Or does the firm also have a social obligation to minimize harm to people and the natural environment in its pursuits of profits, or even a positive duty to promote social welfare beyond its creation of economic rents?  In corporate governance and law, this debate tracks the competition between a shareholder versus stakeholder view of directors’ and officers’ fiduciary obligations.”

For a long time, the most influential voice among academics with respect to the role and primary objective of corporations was Milton Friedman, the Nobel Prize winning economist who famously declared that the exclusive goal of corporate activities was to maximize value for the owners of the corporation (i.e., the shareholders).  As history shows, this view was seized upon by investors and CEOs who often used aggressive tactics to drive up share prices and create large, yet often dysfunctional, conglomerates.  Friedman and others who shared his view maintained that companies did make a positive social contribution by running a profitable business, employing people, paying taxes and distributing some part of their net profits to shareholders.[6]  Another argument often made for the shareholder primacy approach to corporate governance was that requiring management to invest time and effort in devising ways to create additional social benefits beyond the honest pursuit of profits within the boundaries of the law would dilute management’s focus, undermine economic performance, and thereby ultimately undermine social welfare.[7]  Other supporters of the shareholder-oriented perspective cautioned that corporate responsibility was too much responsibility to impose on directors and pursuing social policy goals was a task best left to the state and not to businesses, which should not get themselves involved with political matters.  Another stated concern about expanding the directors’ power beyond shareholder interests is that it would undermine director accountability by allowing them to act in their own self-interest while claiming to act in other constituents’ interests.[8]

Eventually, other members of the academic community, as well as regulators, politicians, activists and even some of the investors that had grown wealthy during the stock market turbulence over the three decades starting with the 1980s, began to question the primacy of shareholder value and called for rethinking the role of the corporation in society and its duties to their owners and other parties impacted by their operational activities and strategic decisions.  Among other things, this meant challenging the long-accepted assumption that the principal participants in the corporate governance framework were the shareholders, management and board of directors.  For example, Sir Adrian Cadbury, Chair of the UK Commission on Corporate Governance, famously offered the following description of corporate governance and the governance framework in the Commission’s 1992 Report on the Financial Aspects of Corporate Governance: “Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals, corporations and society.”

Cadbury’s formulation of corporate governance brought an array of other participants, referred to as “stakeholders”, into the conversation: employees, suppliers, partners, customers, creditors, auditors, government agencies, the press and the general community.  As described by Goergen and Renneboog: “[a] corporate governance system is the combination of mechanisms which ensure that the management (the agent) runs the firm for the benefit of one or several stakeholders (principals). Such stakeholders may cover shareholders, creditors, suppliers, clients, employees and other parties with whom the firm conducts its business.”[9]  The principles of corporate governance of the Organisation for Economic Cooperation and Development clearly state that the corporate governance framework should recognize the rights of stakeholders (i.e., employees, customers, partners and the local community) as established by law and encourage active co-operation between corporations and stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises.

Colin Mayer of the University of Oxford has written and lectured about the need to reject shareholder value primacy and reconceive corporations as being committed to all of its stakeholders including the general economy and the community.[10]  Hart and Zingales have argued that the appropriate objective of the corporation is shareholder welfare rather than shareholder wealth.  While retaining Friedman’s shareholder-centered model, Hart and Zingales elected to focus on the ability of corporations to accomplish objectives that shareholders could not reasonably pursue on their own and called on corporations to consider activities other than wealth creation that enhance the welfare of shareholders as a whole.[11]  This opened the door to considering issues and initiatives relating to sustainability, employee welfare, social concerns and environmental stewardship and, as Hart and Zingales advocated in their proposed “constituency theory” of governance, expanding the beneficiaries of the directors’ fiduciary duties beyond shareholders to other constituencies, or stakeholders, such as employees, customers, members of the local communities in which the corporation operates and society as a whole.[12]

Approval of the constituency theory can often be seen in the statements of institutional shareholder groups such as the Investor Stewardship Group (www.isgframework.org), which has included the following in Endorsement Statement for its Corporate Governance Principles for U.S. Listed Companies: “[I]t is the fiduciary responsibility of all asset managers to conduct themselves in accordance with the preconditions for responsible engagement in a manner that accrues to the best interests of stakeholders and society in general, and that in so doing they’ll help to build a framework for promoting long-term value creation on behalf of U.S. companies and the broader U.S. economy.”[13]  Calvert Asset Management also pointed out that while the fiduciary duties of directors set out by statute do explicitly run to shareholders, the statutes also include similar duties to the corporation itself and thus allows, if not requires, directors to take into account more than just shareholder value when making decisions and be attentive to promoting the welfare of the corporation and the interests of all of its stakeholders.[14]

The focus on interested parties beyond shareholders is the hallmark of a broader view of corporate governance that emphasizes the responsibilities of business organizations to all of the different stakeholders that provide it with the necessary resources for its survival, competitiveness, and success.[15] In this conception, managers remain primarily accountable to the stockholders who have placed their wealth in the hands of those managers; however, managers, particularly the members of the board of directors, are also responsible to groups of stakeholders that have made equally significant contributions to the corporation and these stakeholder responsibilities impose additional constraints on managerial action and the primacy of shareholder rights.[16]  Rahim, noting that the roles and responsibilities of directors have been described as the “board as manager”, pointed out that the duties of board members have been vastly extended as corporate social responsibility has moved from the margins to the center of corporate governance attention, a trend which is discussed in more detail below.[17]

Commentators such as Bower and Paine have written about the fallacies underlying the economic theories used to support the maximization of shareholder value rule and argued that short-termism and hedge fund activism have not actually created value but rather has simply shifted value among a small group of wealthy parties, encouraged corporations to park idle funds offshore and reduce long-term investments in innovation that would benefit future generations, and triggered crises that have drained public funds and harmed workers, consumers and communities.[18]  Bower and Paine advocated an alternative model for corporations based on the health of the enterprise rather than short-term returns to shareholders and encouraged directors and managers to pay more attention to innovation, strategic renewal and investment in projects that ensure future sustainability.

The stakeholder approach to corporate governance arose out of a growing sense that more consideration had to be given to “the whole set of legal, cultural, and institutional arrangements that determine what public corporations can do, who controls them, how that control is exercised, and how the risks and return from the activities they undertake are allocated.”[19]  The impact and importance of corporate governance was emphasized by Gourvevitch and Shinn in the following quotes from their book on the “new global politics of corporate governance”[20]:

“Corporate governance–the authority structure of a firm–lies at the heart of the most important issues of society”… such as “who has claim to the cash flow of the firm, who has a say in its strategy and its allocation of resources.” The corporate governance framework shapes corporate efficiency, employment stability, retirement security, and the endowments of orphanages, hospitals, and universities. “It creates the temptations for cheating and the rewards for honesty, inside the firm and more generally in the body politic.” It “influences social mobility, stability and fluidity… It is no wonder then, that corporate governance provokes conflict. Anything so important will be fought over… like other decisions about authority, corporate governance structures are fundamentally the result of political decisions.  Shareholder value is partly about efficiency. But there are serious issues of distribution at stake – job security, income inequality, social welfare.”

Jamali et al. noted that corporate governance “is also intimately concerned with honesty and transparency, which are increasingly expected of the public both in corporate dealings and disclosure”.[21]  They pointed out that investor confidence and market efficiency has always depended on the disclosure of accurate information about corporate performance and regulators and corporate activists have insisted that companies prepare and disseminate reports that are clear, consistent and comparable.  The growing interest in CSR and the broader view of corporate governance has slowly transformed the concept of disclosure and transparency to include non-shareholder stakeholders of the corporation.  For example, Jamali et al. pointed out that transparency and disclosure of information between managers and employees is essential to earning employee trust and commitment.  As for external stakeholders, such as the members of the communities in which the company operates and society as a whole, transparency has become a fundamental principle underlying the notion that firms need to be “good citizens”.[22]  An additional byproduct of the aspiration for transparency is the creation of reporting systems that provide directors with the information necessary for them to discharge their leadership and strategic duties and ensure that the corporate governance framework works efficiently.

Williams clearly described the rationale for the stakeholder perspective to corporate governance as follows[23]:

“From a stakeholder perspective, successful companies incorporate and rely upon multiple social and natural inputs, such as an educated work-force, the physical infrastructure for the production, transportation and distribution of goods, an effective legal system, and natural capital inputs of water, air, commodities, and so forth. Since some significant portion of the inputs of corporate success, including financial inputs, have been contributed by parties other than shareholders, those parties also have interests to be considered in determining the responsibilities of managers and directors and in distributing the outputs of corporate action.  Some, perhaps many, of those interests will be protected by contractual or regulatory arrangements, but others cannot be specified ex ante, and so must depend on corporate participants to fairly balance multiple parties’ legitimate claims ex post”.

The Australian Parliamentary Joint Committee on Corporations and Financial Services, in its 2006 report on “corporate responsibility”, announced that it endorsed the “enlightened self-interest interpretation” of directors’ duties, which acknowledges that investments in corporate responsibility and corporate philanthropy can contribute to the long term viability of a company even where they do not generate immediate profit.  The Committee felt that it was necessary and appropriate for directors to consider and act upon the legitimate interests of stakeholders to the extent that these interests are relevant to the corporation and noted that addressing some of the driving factors of corporate responsibility (e.g., community license to operate, reputational factors, avoidance of regulation, attraction and retention of staff and attraction of investment from ethical funds) by undertaking activities that contribute to social wellbeing and environmental protection are clearly in the best interests of the company from a commercial perspective (and thus well within the bounds of directors’ duties).[24]

This article is part of the Sustainable Entrepreneurship Project’s extensive materials on Sustainability and Corporate Governance.

[1] D. Jamali, A. Safieddine and M. Rabbath, “Corporate Governance and Corporate Social Responsibility Synergies and Interrelationship”, Corporate Governance, 16(5) (2008), 443, 444 (citing K. MacMillan, K. Money, S. Downing and C. Hillenbrad, “Giving your organization SPIRIT: An overview and call to action for directors on issues of corporate governance, corporate reputation and corporate responsibility”, Journal of General Management, 30 (2004), 15; and A. Cadbury, “The corporate governance agenda”, Journal of Corporate Governance, Practice-Based Papers, 8 (2000), 7).

[2] K. MacMillan, K. Money, S. Downing and C. Hillenbrad, “Giving your organization SPIRIT: An overview and call to action for directors on issues of corporate governance, corporate reputation and corporate responsibility”, Journal of General Management, 30 (2004), 15; A. Cadbury, “The corporate governance agenda”, Journal of Corporate Governance, Practice-Based Papers, 8 (2000), 7) and J. Page, Corporate Governance and Value Creation (University of Sherbrooke, Research Foundation of CFA Institute, 2005).

[3] H. Mathiesen, Managerial Ownership and Finance Performance (Dissertation presented at Copenhagen Business School, 2002).

[4] K. Saravanamuthu, “What is measured counts: Harmonized corporate reporting and sustainable economic development”, Critical Perspectives on Accounting, 15 (2004), 295.

[5] C. Williams, “Corporate Social Responsibility and Corporate Governance” in J. Gordon and G. Ringe (Eds.), Oxford Handbook of Corporate Law and Governance (Oxford: Oxford University Press, 2016), 34, available at http://digitalcommons.osgoode.yorku.ca/scholarly_works/1784.

[6] Id. at 35.

[7] Id. at 35 (citing H. Hansmann and R. Kraakman, “The End of History for Corporate Law”, Georgetown Law Journal, 89 (2001), 439, 442-443).

[8] Id. at 36-37 (citing D. Engel, “An Approach to Corporate Social Responsibility”, Stanford Law Review, 32 (1979), 1; D. Fischel, “The Corporate Governance Movement”, Vanderbilt Law Review, 35 (1982), 1259; and S. Bainbridge, “Corporate Social Responsibility in the Night-Watchman State”, Colorado Law Review Sidebar, 115 (2015), 39, 49).

[9] M. Goergen and L. Renneboog, “Contractual Corporate Governance”, Journal of Corporate Finance, 14(3) (June 2008), 166.

[10] See C. Mayer, Firm Commitment: Why the Corporation is Failing Us and How to Restore Trust in It (Oxford: Oxford University Press, 2013); and C. Mayer, Prosperity: Better Business Makes the Greater Good (Oxford: Oxford University Press, 2018).

[11] O. Hart and L. Zingales, “Should a Company Pursue Shareholder Value?” (October 2016), available at https://www8.gsb.columbia.edu/leadership/sites/leadership/files/Zingales-Hart–Share_value.pdf

[12] Id.

[13] https://www.isgframework.org/become-an-endorser-internationalorganizations-only/.  The Principles Affirm that boards are accountable to shareholders; however, they also require that boards be responsive to shareholders and be proactive in order to understand their perspectives and that boards develop management incentive structures that are aligned with the long-term strategy of the company.

[14] Board Oversight of Environmental and Social Issues: An Analysis of Current North American Practice (Calvert Asset Capital Management Inc. and The Corporate Library, 2010), 8.

[15] K. MacMillan, K. Money, S. Downing and C. Hillenbrad, “Giving your organization SPIRIT: An overview and call to action for directors on issues of corporate governance, corporate reputation and corporate responsibility”, Journal of General Management, 30 (2004), 15

[16] J. Page, Corporate Governance and Value Creation (University of Sherbrooke, Research Foundation of CFA Institute, 2005); and N. Kendall, “Good corporate governance”, Accountants’ Digest, 40 (1999).

[17] M. Rahim, Legal Regulation of Corporate Social Responsibility: A Meta-Regulation Approach of Law for Raising CSR in a Weak Economy (Berlin: Springer, 2013), 13, 22 (citing M. Eisenberg, “The Modernization of Corporate Law: An Essay for Bill Cary”, University of Miami Law Review, 37 (1982), 187, 209-210).

[18] J. Bower and L. Paine, “The Error at the Heart of Corporate Leadership”, Harvard Business Review, 95(3) (May-June 2017), 50.

[19] M. Blair, Ownership and Control: Rethinking Corporate Governance for the Twenty-First Century (Washington DC: The Brookings Institute, 1995).

[20] P. Gourvevitch and J. Shinn, Political Power and Corporate Control: The New Global Politics of Corporate Governance (Princeton NJ: Princeton University Press, 2007) (as compiled by J. McRichie at https://www.corpgov.net/library/corporate-governance-defined/)

[21] D. Jamali, A. Safieddine and M. Rabbath, “Corporate Governance and Corporate Social Responsibility Synergies and Interrelationship”, Corporate Governance, 16(5) (2008), 443, 444 (citing J. Page, Corporate Governance and Value Creation (University of Sherbrooke, Research Foundation of CFA Institute, 2005)).

[22] Id. at 444.

[23] C. Williams, “Corporate Social Responsibility and Corporate Governance” in J. Gordon and G. Ringe (Eds.), Oxford Handbook of Corporate Law and Governance (Oxford: Oxford University Press, 2016), 38-39, available at http://digitalcommons.osgoode.yorku.ca/scholarly_works/1784 (citing M. Blair and L. Stout, “A Team Production Theory of Corporate Law”, Virginia Law Review, 85 (2003), 248).

[24] Parliamentary Joint Committee on Corporations and Financial Services, Corporate responsibility: Managing risk and creating value (2006), 52-53.  The Committee also found that the then-current version of the Australian Corporations Act, first adopted in 2001, actually permitted directors to have regard for the interests of stakeholders other than shareholders and recommended that no further amendment to clarify directors’ duties in that regard was required. Id. at 63.

Structures and Staffing for Environmental, Health and Safety

In 2012 the National Association for Environmental Management (“NAEM”) issued a report on the results of a survey of the organizational structure, staffing levels and responsibilities of the function that supported a company’s environmental, health and safety (“EHS”) and sustainability goals.[1]  The survey consisted of online questionnaires to full time, “in house” corporate EHS and sustainability professionals and qualitative interviews with senior EHS and sustainability leaders across different industries.  The results reflect the views of 199 senior leaders (i.e., managers, directors and vice presidents) working within combined EHS and sustainability functions at U.S.-based companies with revenues ranging from $250 million to $50 billion.  Among the key findings described in the executive summary to the report were the following:

  • Most of the respondents managed EHS through a single consolidated, centralized function. Two-thirds of respondents reported a governance structure that centralized authority and policies, and one-third also incorporated a centralized budget process.
  • The function generally reported into one of several core areas: legal, operations, human resources or the C-Suite.
  • While there were multiple approaches to organizing the EHS function, the most common department structure tended to be one that integrated EHS at the corporate and facility levels.
  • Staff levels were driven largely by perceived EHS risk, industry and structure. Companies that identified as operating under a high degree of EHS risk (e.g., companies in the utilities, extractives and chemicals industries) tended to have larger staff sizes. Decentralized structures tended to require higher staff levels per total employees, as did small and mid-sized companies; however, companies with higher revenues reported fewer EHS staff per total employees.
  • EHS budgets (normalized by total employees) were largely driven by employee needs such as salaries, benefits, expenses and travel. Because of this interdependence, the same factors that influence staff levels also influenced budgeting.  In other words, high-risk companies, or those with decentralized EHS structures, tended to have more staff and therefore, larger budgets.
  • EHS and sustainability professionals were highly credentialed, seasoned leaders with 79% of the respondents having worked in the field more than 15 years and strong backgrounds in science or engineering.
  • The EHS function generally took the lead in regulatory compliance, auditing and information management and was primarily responsible for setting environmental goals, waste management, pollution prevention, regulatory tracking/compliance/disclosure and due diligence.[2] Data management and EHS management information systems were also key areas of responsibility, likely driven by the growth in external reporting of environmental metrics.
  • EHS professionals also played a key role in sustainability and respondents indicated that the EHS function either led, or shared responsibility for, the majority of activities including establishing sustainability strategy and tracking and reporting the sustainability metrics.
  • Most of respondents reported they were managing sustainability through a cross-functional team with members drawn from corporate communications, operations, legal sales and marketing and EHS. These teams were most often led by the EHS function or a combined EHS and sustainability function. When sustainability was assigned to a stand-alone department, EHS was most often in the lead, followed by stand-alone sustainability department.

In the summer of 2014 NAEM conducted an online survey to identify the skills, knowledge areas and attributes for members of the EHS and sustainability profession.[3]  NAEM collected information from 345 respondents at 197 different companies.  Most of the companies were operating globally and the three most represented industry sectors were manufacturing, pharmaceutical/medical products and chemical.  A majority of the respondents had at least 15 years of professional and EHS experience and respondents tended to be at the leadership level (7% were executive leaders at the vice president level, 22% were at the senior director/director level and 13% were senior managers).  EHS professionals generally were placed in the corporate function as opposed to acting from a site/facility or business unit and most of the respondents worked in a combined EHS or EHS/Sustainability function as opposed to working in an organizational structure in which environmental, safety and/or sustainability issues and activities were treated as stand-alone functions.  Use of a combined function was notable in that illustrated that companies were concerned that stand-alone groups might compete with one another for resources and/or promote conflicting policies.

NAEM found that compliance was a core focus for EHS leaders at all levels, regardless of the size of the company.  The list of the top responsibilities of the respondents, including areas where they took the lead and areas in which they played a role as a strong collaborator, including the following:

Reporting to meet internal and external requirements 91%
Environmental compliance 88%
EHS management information systems 86%
Regulatory tracking 86%
Auditing 84%
Setting EHS goals 84%
Waste disposal 81%
Chemical management 81%
Hazardous materials 80%
Waste recycling 79%
Information management 79%

The survey asked EHS leaders to identify the activities in which they generally acted as leaders and assumed direct and/or shared responsibility and other activities in which they were involved without having responsibility.  The results indicated that while EHS leaders were accountable for a set of core compliance and pollution prevention programs (e.g., reporting to meet internal and external requirements; EHS management information systems; environmental compliance; regulatory tracking and setting EHS goals), they were also involved with, collaborated on, or influenced the management of a broad range of activities within their organizations including employee engagement, emergency management preparedness, corporate annual reports, risk management, supply chain engagement and building energy efficiency.

One of the interesting outputs of the survey was a set of descriptions of the roles and responsibilities of EHS professionals at various levels of their career progression.  In general, the information confirmed that as EHS professional advanced their roles became more strategic:

Level Top Responsibilities


Specialist Environmental compliance, Reporting, EHS management information systems, Information management, Regulatory tracking
Technical Expert Reporting, Environmental compliance, Regulatory tracking, EHS management information systems, Auditing
Manager Reporting, Environmental compliance, EHS management information systems, Auditing, Setting goals, Identifying KPIs, Regulatory tracking
Sr. Technical Expert Reporting, Regulatory tracking, Auditing, Environmental Compliance, EHS management information systems, Permitting
Sr. Manager Setting goals, EHS management information systems, Reporting, Regulatory tracking, Identifying KPIs, EHS audit training, Auditing
Director Setting goals, Identifying KPIs, EHS management information systems, Regulatory tracking, Auditing Reporting
Executive Leader Identifying KPIs, EHS management information systems, Setting goals, Due diligence

The survey was also an opportunity to explore the skills, knowledge and other competencies that EHS professionals should expect to have to develop in order to be successful and advance.  EHS professionals must not only be knowledgeable about business operations but must also have the interpersonal skills necessary for managing people and processes and being successful as an integrator and influencer including the ability to team build, motivate others and manage without authority. Other important business skills included written communications, interpreting regulatory requirements, oral communications, decision making, program and project management and training.  The most important areas of general and technical knowledge for EHS professional included EHS risks, regulatory compliance systems, waste management, training, environmental science, communications, management systems and budgeting.  As for business acumen, EHS professionals needed to demonstrate knowledge across a number of areas including training, communications, budgeting and business operations and the presenters of the survey results noted that these skills were consistent with the core EHS responsibilities associated with creating a strong EHS culture, communicating its value across silos and collaborating across functions to embed EHS principles into business operations.

Another important issue with respect to the competencies and roles of EHS responsibilities is how they were integrated into the organization’s overall strategies and processes with respect to risk management.[4]  Traditionally organizations have created and maintained separate departments for EHS and risk management and while professionals in each of the departments share many of the same goals there have often been breakdowns in their ability to work together.  For example, risk managers typically see EHS professionals as being a subdivision of the risk management department whose job is limited to compliance (i.e., doing inspections/audits, accident investigations and focused on employee safety) while EHS professionals downplay the role of risk managers as simply being the purchasers and administrators of insurance.  The problem with this situation is that the organization needs to maintain two different budgets and personnel groups, which is inefficient and expensive, and management is confused about the value and purpose of each of the departments.

The solution to the dilemma posited above lies in the transition from the traditional roles of EHS and risk management to a more comprehensive solution referred to as enterprise risk management (“ERM”).  The scope of ERM is enabling all strategic, management and operational tasks of an organization throughout projects, functions, and processes to be aligned to a common set of risk management objectives.  EHS professionals can contribute to this process through their skills with respect to the recognition, evaluation and control of environmental factors or stresses, arising in and from the workplace, which may cause sickness, impaired health and wellbeing or significant discomfort and inefficiency among workers and/or citizens of the community.[5]  At the same time, risk managers can provide their expertise in making and implementing decisions that will minimize the adverse effects of accidental and business losses on an organization.[6]  However, in order for the collaboration to be effective, EHS professionals need to have a new job description that not only includes providing professional knowledge and expertise in the administration, integration, and support of environmental health and safety programs at all levels of the organization, but also working in coordination with risk managers to develop environmental health and safety programs that reduce hazard, financial, operational, strategic, reputational, and compliance risks in support of the strategic objectives and mission of the organization.

For further discussion see the Sustainable Entrepreneurship Project’s materials on Sustainability Governance and Management.

[1] National Association for Environmental Management, EHS & Sustainability Staffing and Structure: Benchmark Report (November 2012).

[2] Specific environmental management areas mentioned in the survey included EPA compliance, hazardous materials, waste disposal, spill prevention/control, permitting, air pollution, storm water, waste recycling, chemical management, carbon foot printing, site remediation and industrial emissions reductions.

[3] The discussion of the results of the survey included herein is adapted from Key Competencies for the EHS & Sustainability Profession: Benchmark Report (NAEM, February 12, 2015).

[4] The discussion in this paragraph and the paragraph immediately below is adapted from Risk Managers are from Mars, EHS Professionals are from Venus: The EHS Professionals’ Role in ERM (California State University Risk Management Authority).

[5] Id. (citing NSC, Fundamentals of Industrial Hygiene, 3rd Edition)

[6] Id. (citing Fundamentals of Risk Management, 3rd Edition, Volume 1)

Fundamental Questions Regarding Founders’ Relations

One of issues that the founders need to consider is the form of legal entity for operation of their new business venture (e.g., corporation, partnership or limited liability company); however, regardless of the form of entity selected the founders need to sit down and carefully discuss the relationship that will exist among the founders with respect to ownership and management of the business before outside investors are brought into the picture.  When properly done, the ownership structure will protect the rights of each founder while creating incentives to make the business grow well into the future.  The structure should always be flexible enough to adapt to future changes, including new employees and capital-raising from outside investors.  Among the questions that need to be asked are the following:

  • What percentage of the company will be owned by each founder?
  • What rights will each of the founders have with respect to the management and control of the company?
  • What tangible contributions (e.g., money, property, contract rights, etc.) will each founder make to the company and how will they be valued?
  • How much time will each founder be expected to devote to the business?
  • What incentives will be used to motivate each of the founders to remain actively involved with the business of the company?
  • What procedures should be followed when a founder dies, becomes disabled, reaches retirement age, or voluntarily leaves the company prior to retirement age?
  • What procedures should be followed to expel a founder from the company?
  • Are there other persons outside the founding group who are likely to become actively involved in the business of the company?

The founders may be more interested in spending time on developing their new products and services than on dealing with what can often be very difficult and divisive issues.  However, if these questions are not addressed at the beginning of the venture, it is likely that trouble will erupt down the road.

Allocation of ownership interests

In general, ownership determines how profits from the business will be shared and management rights will be exercised. Each form of business entity can be adapted so that certain founders enjoy greater economic rights as opposed to voting rights and vice-versa.  In dividing ownership, consideration should be given to all of the actual and potential contributions of the founders to the business.  For example, the founders may ascribe value to any or all of the following: cash and property contributed by the founders at the time that the new business is launched, including the costs to the founders of acquiring or developing the property; the value of anticipated future contributions by the founders, including cash, property, services, business development assistance, and introductions to business partners; and the opportunity costs to the founders of launching the new business.  Obviously, it is difficult to value several of these factors, particularly those which are speculative and depend on performance in the future.  However, it is important for each founder to believe that his or her contributions have been fairly recognized.  Professional advisors working with the founders of an emerging company will likely recommend that weight or credit should be given to discovery or conception of the ideas underlying the business; the time and effort expended in leading and managing efforts to promote those ideas; the level of financial and personal risk assumed in forming and launching the business; the amount of income foregone by forming the company and accepting a nominal or modest salary during the initial development period; the amount of effort spent in writing a formal business plan for the company; the specialized expertise contributed toward the development of new technology and/or products; and the background, training and experience that the founder expects to bring to crucial post-formation activities associated with the actual commercialization of the company’s technology or products.

In some cases, one of the founders of a new business may contribute intangible property and services while the other founders are providing the cash necessary to fund the development and marketing of the products based on the intangibles.  Since the founders may reasonably differ as to the value to be placed on the contributions of the non-cash participant, counsel must proceed carefully to make sure that the assets are fairly valued.  In that situation, counsel is faced with reconciling the following issues:

  • What method(s) should be used to value the intangible property and services be valued for purposes of determining the relative equity ownership of the business?
  • What obligations, if any, will be imposed on the parties to make additional capital contributions?
  • Who will own the rights to trade secrets, patentable, or copyrightable information? Will the founder retain ownership and license them to the entity, or will the entity own all the rights?
  • What obligations will be imposed on the “inventor” with respect to continued development of the intangible property?
  • Who will own the rights to the intangible property in the event the company merges or dissolves?

Another issue to keep in mind is the possibility that the relative ownership interests of the founders will be diluted by future events, such as the need to grant an ownership interest to new managers, key employees, and one or more groups of outside investors.  For example, a founding group looking for venture capital funding may discover that they will need to set aside 5%-10% of the equity for filling out the management team, 10%-20% of the equity for a pool of incentives for new employees, and 40%-60% of the equity for sale to the venture capitalists.

Transfer restrictions

It is typical for the founders to enter into various agreements that impose restrictions on their ability to free transfer ownership interests in the business.  First of all, vesting restrictions may be used to ensure that the founders remain with the company long enough to provide the anticipated value that was implicit in their ownership interest.  If an owner should leave the company before an interest has vested, the company and/or the other owners would have the right to acquire the ownership interest on favorable terms (e.g., at cost payable in installments over a period of time).  Once a founder’s rights in his or her ownership interest have vested, other restrictions would apply that limit the disbursement of control outside the original founder group while at the same time providing the founders with some opportunity to gain liquidity for their interests in the event they become dissociated with the company.

  • A right of first refusal provides the company and/or the owners with the first opportunity to purchase ownership interests that the founder wishes to sell to a third party. Such a provision can prevent the sale of ownership interests to outsiders and generally will substantially limit the transferability of the interests.
  • A buy-sell agreement restricts transfers of ownership interests by granting the company and/or the other owners the right to purchase the interest of an owner upon the occurrence of certain events, such as a proposed sale of the ownership interest to a third party, death or disability of the owner, termination of employment, bankruptcy, or divorce. Buy-sell agreements may also provide liquidity by requiring that the company and/or the other owners purchase the interest of the deceased or disabled owner.  Procedures for determining the value of an interest upon any required purchase and sale will be included in the agreement.
  • Co-sale agreements, which are often used when venture capitalists invest in the company, allow outside investors to sell their ownership interests at the same time that the founders sell their interests. A co-sale right often is coupled with a right of first refusal and thus allows the investors to choose between purchasing the founders’ interests or selling out on the same terms and conditions.

Management of the new business

Regardless of the consideration they provide for their ownership interests, the founders must consider potentially contentious matters relating to control of the business.  For example, decisions must be made regarding the voting rights of each of the founders and their power to control membership of the board of directors or other management body.  The key issues to be considered include the following:

  • What voice will each founder have in the election of the members of the managing body, such as the board of directors?
  • Who will be responsible for the day-to-day operations of the business (e.g., officers of the corporation)?
  • What level of consensus among the founding group will be required for major transaction, such as sale or merger of the company, major debt financings, and issuances of securities?
  • What are to be the terms of any employment agreements between the company and the founders, including the amount of salary and other benefits to be paid to owners who are to be active in the business?
  • What procedures should be used to resolve any disputes among the members of the founding group?
  • How are the members of the founding group going to participate in the profits generated by the business?
  • What restrictions should be placed on the outside activities of the founder, as well as their ability to transfer their ownership interests in the company?

The founders will often turn to an attorney to assist them in considering these issues and documenting their decisions.  Counsel needs to be aware that the negotiation and drafting of an owners’ agreement will often lead to conflicts of interest such that the attorney cannot represent the founders concurrently.  Even if all sides are properly informed of potential conflicts and grant the appropriate waivers, counsel still walks a fine line since it may be impossible to anticipate all the conflicts that might ultimately arise in the future.  Accordingly, the attorney should be ready to prepare some form of disclosure letter and obtain a waiver of potential conflicts from each of the founders.  If the founders are unwilling to waive the conflicts, separate counsel should be retained.

The members of the founding group should enter into an agreement among themselves as to how the company will be operated.  In the corporate context, such an agreement is generally referred to as a pre-incorporation or shareholders’ agreement.  In the case of a partnership or an LLC, the matters are typically covered in a separate part of the partnership agreement or operating agreement, respectively.  In some cases, the founders will address these issues before the entity is formed in some type of pre-formation agreement.  This can be a useful exercise since it can give the founders a good idea of whether they will be able to live and work with each other before they incur the additional expense of actually forming the entity. Voting agreements are often used to establish procedures for making decisions regarding important matters relating to the business.  In the case of a corporation, voting procedures may be laid out in a separate shareholders’ or voting agreement.  Voting provisions for partnership and limited liability companies are set out in the partnership or operating agreement, respectively.  The founders may elect to cover a variety of matters in the voting agreement, including the vote required to elect the managers of the company and approve fundamental changes in the business, including a sale of the company or its assets, significant borrowings, and admission of new owners.  Transactions between the company and one of the owners may also be subject to special approval procedures.  Whenever an owners’ agreement is implemented, an evidence of an ownership interest (e.g., a share certificate) should include a legend that notifies third parties of the existence of a restriction on the rights of the owners with respect to transfers or exercise of economic or control rights.

Employment agreements

Some or all of the members of the founding group may also enter into employment agreements with the company that describe their duties and responsibilities with the company, the terms of compensation for their services and, perhaps most importantly, the rights and obligations of the company and the founder upon termination of the founder’s employment relationship with the company.  Employment agreements are often valuable to founders who hold a minority ownership interest in the equity of the company who seek protection against the possibility that they will be discharged by some concerted action of the majority owners.  In addition, however, employment agreements can serve a number of purposes beyond merely providing protection to minority owners and setting forth the terms of compensation.  Employment agreements that contain noncompetition provisions serve to protect the other founder in the event that the employee-founder leaves the enterprise and attempts to start a competing business.  The employment agreement also settles issues regarding the ownership and use of intellectual property rights acquired by the entity.

This post is part of the Sustainable Entrepreneurship Project’s extensive materials on  Entrepreneurship.

A New Challenge for Sustainable Entrepreneurs: Responsible Fundraising

An integral feature of sustainable entrepreneurship and corporate social responsibility is ensuring that the resources required to establish and operate the business are sourced in a responsible manner that does not impair the integrity and reputation of the company.  While transparency regarding sources of funding is relatively robust among public companies, which are subject to extensive reporting requirements imposed by governments and securities exchanges, the same is far from true in the startup world and the risks for sustainable entrepreneurs are increasing as rogue investors dangle capital in front of them at the same time as employees, customers and other stakeholders demand that founders be able to explain how their businesses are funded.  As explained below, founders need to understand the techniques they can use to conduct due diligence on prospective investors and ask questions to prospective business partners to determine how they are funded and the pressures they may be under from their own investors.

The robust economic conditions during the mid-2010s have encouraged many fledgling venture capitalists to hit the road to attract capital for their initial funds and, as recently reported in The New York Times, they have often been advised to go after so-called “easy money”: billions of dollars available from sovereign wealth funds managed by Middle Eastern countries such as Saudi Arabia and Abu Dhabi looking to become major players in Silicon Valley and other innovation clusters around the US and in Europe.  The strategy seemed to make sense and, in fact, appeared to have been endorsed by major investment players such as SoftBank, an investor in Uber and other high profile Silicon Valley companies that had accepted a commitment of $45 billion from Saudi Arabia’s Public Investment Fund.  However, even before news of additional repressive political tactics in those countries came to light in 2018, fund managers, increasingly sensitive to calls for responsible investment, were hesitant about taking money tied to those countries and were instead focusing their fundraising on wealthy individuals, nonprofit organizations, universities and pension funds committed to conforming to international standards for investing in an environmentally and socially responsible manner.

More and more investors must now contend with questions from founders and executives of their existing portfolio companies, as well as questions during the courting process with prospective funding targets, about where the money they are investing came from.  In particular, founders are asking investors whether they have received money from sources that are connected to foreign governments with poor human rights records or from foreign investors looking to effectively “launder” profits from illegal and unethical business activities in their home countries.  Another concern is funding from government-supported sources in countries such as China and Russia where there are significant risks that one of the purposes of the investment is to gain access to proprietary technology and strategic business information.  Venture capital firms have traditionally been less than forthcoming about their own investors (they are under no legal obligation to disclose the information, often keep it secret for competitive reasons and may actually refuse funding from public pension funds that publish the results of their investments); however, it is becoming clear they may often not have a clear idea about where the money is coming from because they have failed to ask the right questions themselves and/or investors employ sophisticated schemes such as shell companies to mask where the funds are actually controlled.

Some founders, with the support of their investors, have extended their concerns about financial and business support from repressive regimes beyond investors to include partnerships with customers, distributors and suppliers, announcing that they would not do business with companies that have taken money from such regimes and/or conduct significant amounts of business with affiliates of such regimes.  Companies are also concerned about doing business with firms that have board members designated by “questionable” investors since sensitive details of transactions are often distributed and discussed at directors’ meetings.  In addition, lack of clarity about ownership and control of investment vehicles means that a founder may discover that one of its investors has also provide capital to competitors through affiliates as part of a broader scheme to gain access to the details of all proprietary technology relevant to a particularly promising sector regardless of which companies own that technology or whether any specific company will be most successful.

Investors have always conducted extensive due diligence on the founders of prospective portfolio companies and their proposed business models, seeking information on the company’s governance, management and finances and often meeting with customers, distributions, suppliers and other business partners; however, the founders themselves have rarely asked too many questions about potential investors, perhaps fearing that aggressive “reverse due diligence” would cause investors to back away.  However, experts caution founders about being too timid, noting that the relationship with an equity investor is akin to a marriage that cannot easily be undone and thus must be entered into only if and when there is trust on both sides.  Recommendations for reverse due diligence provide by one experienced adviser to founders include getting a perspective from peer investors; personally visiting another startup funded by the investor; doing research on investor visibility via Google and social media; inviting the investor to dinner or a fun-related activity; and conducting a routine credit and background check.  In addition, founders need to be direct and clear about asking investors to explain the source of the funds that are to be invested and not be satisfied with vague and elusive answers.

Changing Expectations for Board Oversight of Sustainability

A discussion paper on board adoption and oversight of corporate sustainability prepared by The Global Compact LEAD included the following observation[1]:

“Sustainability is increasingly recognized as a strategic imperative for businesses globally. Far more than when the Global Compact was launched in 1999, companies recognize that their sustainability performance affects their strategy, financial performance, resilience, access to essential resources, reputation, and license to operate. Peter Senge, noted strategy theorist and faculty member at the Sloan School of Business at MIT wrote in 2009 that “people are starting to suspect that these are really strategic issues that will shape the future of our businesses.” And as sustainability is being recognized more and more as a strategic business question, Boards are increasingly considering sustainability as part of their core responsibility of guiding and overseeing corporate activities.”

The paper also noted that: “more and more investors are looking for corporate boards to steward corporate sustainability in order to both adequately manage risks and maximize business opportunities related to sustainability. Indeed, engagement activities are on the rise in many quarters, and like‐minded investors are increasingly pooling resources to create a stronger and more representative shareholder voice and to ensure that company engagement becomes more effective.[2]

Calvert Asset Management, in its 2010 survey of board oversight of environmental and social issues in North America, explained the rationale for the board’s role as follows:

“The question of whether boards of directors should have responsibility for corporate sustainability matters is sometimes debated.  Some critics of the idea argue that social and environmental issues are by their nature managerial and operational issues which makes them inefficient for the board to address. However, many investors have come to believe that these issues have implication for capital investments, corporate strategy, brand and reputation. From this perspective, boards of directors are the appropriate bodies to provide long-term perspective and guidance on these matters, and the absence of board responsibility can raise questions about whether a company is managing these factors appropriately. Conversely, board-level oversight of corporate responsibility can set a meaningful “tone at the top” and provide investors and other stakeholders with a deeper understanding of how the company assesses its challenges and prioritizes issues relevant to its success.”[3]

A March 2014 study of board oversight of sustainability issues among S&P 500 companies commissioned by the IRRC Institute and authored by the Sustainable Investments Institute found that just a little over half of the companies had implemented board oversight of sustainability issues.[4]  The sustainability executives surveyed in a report released by The Conference Board in June 2016 found that 55% of the respondents said that their boards of their companies met only once a year or never on sustainability issues and 69% of the respondents said that their boards spend four hours or less per year on sustainability issues.[5] Identifying, acknowledging and addressing corporate sustainability issues create new and significant challenges for directors and the management team that range from setting high-level goals and adopting strategies to achieve those goals to extensive changes in day-to-day operational activities.  Directors must not only ensure that their companies are conducting full assessments of the entire lifecycle of their products and services but must also provide the resources and incentives to collect, analyze and report information relating to the progress of the company’s corporate sustainability initiatives.  Institutional investors and other stakeholders will not be satisfied with vague promises and aspirational principles from their companies, nor will companies be able to simply continue to adopt a reactive approach to ESG-related concerns (i.e., waiting until a shareholder proposal on an ESG-topic is imminent before engaging with the shareholder to resolve the concern).  In fact, directors should expect that stakeholders demand that companies demonstrate a proactive approach to developing and implementing sustainability strategies, allocating capital to sustainability-related initiatives and managing the risks associated with failure to respond to ESG issues.

Harper Ho suggested that investor activism around ESG issues and investors’ growing demand growing demand for investment-grade ESG information has important implication for how directors should approach corporate governance, investor engagement, compliance and disclosure practices.[6]  First of all, the broadened scope of risks that directors must consider in light of ESG activism means that boards must have new capacities to support oversight of ESG risk.  Second, investors want their companies to integrate ESG performance metrics and long-term benchmarks into executive compensation.  Third, directors should ensure that investor engagement encourages dialogue and learning and confirm that senior management and investor relations personnel are aware of the increasing overlap between corporate governance and environmental and social concerns.  Finally, directors need to improve the quality and formatting of their sustainability-related reporting and ensure that ESG materiality is being considered as part of their company’s financial reporting process.  According to Harper Ho, companies that can improve their practices in these areas are likely to see improved financial and operational performance, improved focus on long-term risk and return, better access to “patient capital” (i.e., investors that are less fixated on quarterly earnings and more supportive of R&D and other investments in the company’s future) and be able to identify and exploit new sources of value for the company and keep ahead of emerging risks and opportunities.[7]

CSR and corporate sustainability are broad and challenging topics and the directors must carefully consider how the board’s duties and responsibilities will be discharged and allocated among board members.  One well-known corporate governance advisor has counseled that directors should begin the process of developing an oversight framework for CSR and corporate sustainability by asking and answering the following questions[8]:

  • How should concerns regarding CSR and corporate sustainability be integrated into the board’s discussions on strategy and risk oversight? Strategy and risk oversight are two topics that all board members should be working on and actively discussing during each board meeting and investors are looking to see whether CSR and corporate sustainability have been formalized as priorities in the board’s governance guidelines and overall goals.
  • To what extent should CSR and corporate sustainability topics be included as standalone agenda items for board meetings?
  • What information should be provided to directors (e.g., data on how the company’s efforts compare to those of its peer companies, leading industry standards, and the CSR-related priorities of key shareholders and proxy advisory firms)?
  • Which metrics should the board and members of the executive team focus on in considering progress against CSR and corporate sustainability goals (e.g., goals involving reduction of water usage and emissions, reducing on-the-job injuries and employee turnover, or improving workforce diversity and employee retention)?
  • What process should be used for drafting and reviewing public disclosures about the company’s CSR and corporate sustainability efforts?

In addition, the board should also consider how the company’s current efforts and activities with respect to CSR and corporate sustainability compare to its peers, how investors and other stakeholders perceive the company’s engagement with and disclosure of CSR and corporate sustainability and whether or not the company has been effectively communicating its CSR and corporate sustainability strategies, goals and actions to investors and other stakeholders.[9]

Recognition of the importance of stakeholders in corporate governance calls on directors and managers of corporations to develop new skills in order to integrate the values and expectations of external and internal stakeholders into the overall strategic management process.  Digman et al. pointed that strategic management is “inseparable from the strategic management of relationships” and Masuku advised: “A strategy should be in place for each stakeholder group their key issues and willingness to expend resources helping or hurting the organization on those issues must be understood.  For each major stakeholder, managers responsible for that stakeholder relationship must identify the strategic issues that affect the stakeholder and must understand how to formulate, implement and monitor strategies for dealing with that group.”[10]

In addition to the steps needed to integrate CSR and corporate sustainability at the board level, including allocating various responsibilities and activities among board committees, the directors need to ensure that the company has an effective internal organizational structure.  Many companies are creating an additional position among the members of the senior executive team that is specifically focused on corporate sustainability.  Appointing these “chief sustainability officers” demonstrates a high level of commitment to the area by the directors and also helps everyone inside and outside the company to identify the person who will likely be the company’s spokesperson on corporate sustainability issues and responsible for managing the resources provided by the board to implement sustainability strategies and satisfy the company’s disclosure obligations.  The chief sustainability officer must be prepared to support the board as it considers CSR and corporate sustainability issues, engage with the company’s stakeholders and, not unimportantly, effectively coordinate the efforts of all of the various departments within the company that should be involved in sustainability initiatives (e.g., investor relations, legal, operating heads and risk management).[11]

Advice for Directors on Meeting Stakeholder Expectations Regarding Sustainability

Kuprionis and Styles suggested that directors ask “How prepared is my company to respond to increased sustainability expectations from investors, customers and employees? and then be prepared to do each of the following seven things:

·         Add sustainability discussions to the board agenda.

·         Focus on what sustainability means for the company.

·         Ask for briefs on industry developments, both in substance and in governance.

·         Engage with the company’s chief sustainability officer and investor relations officer.

·         Establish an effective board oversight approach.

·         Look for balanced perspectives among differing constituencies and stakeholders.

·         Consider the appropriate sustainability disclosures for the company.

Source: D. Kuprionis and P. Styles, “Translating Sustainability into a Language Your Board Understands”, The Corporate Governance Advisor, 25(5) (September/October 2017), 13, 17. 

This article is part of the Sustainable Entrepreneurship Project’s extensive materials on Sustainability and Corporate Governance.

[1] The Global Compact LEAD, Discussion Paper: Board Adoption and Oversight of Corporate Sustainability.

[2] Id.  For further discussion of board oversight of sustainability, see “Board Oversight of Sustainability” in “Governance: A Library of Resources for Sustainable Entrepreneurs” prepared and distributed by the Sustainable Entrepreneurship Project (www.seproject.org).

[3] Board Oversight of Environmental and Social Issues: An Analysis of Current North American Practice (Calvert Asset Capital Management Inc. and The Corporate Library, 2010), 8.

[4] P. DeSimone, Board Oversight of Sustainability Issues: A Study of the S&P 500 (IRRC Institute, March 2014).

[5] The Seven Pillars of Sustainability Leadership: CEO Business Implications (The Conference Board, June 2016), 4 (as cited and discussed in V. Harper Ho, Director Notes: Sustainability in the Mainstream–Why Investors Care and What It Means for Corporate Boards (The Conference Board, November 2017), 15, electronic copy available at: https://ssrn.com/abstract=3080033).

[6] V. Harper Ho, Director Notes: Sustainability in the Mainstream–Why Investors Care and What It Means for Corporate Boards (The Conference Board, November 2017), 13-14, electronic copy available at: https://ssrn.com/abstract=3080033 (based on information available at UNPRI, Signatories, https://www.unpri.org/signatory-directory/).

[7] Id. at 15.

[8] H. Gregory, “Corporate Social Responsibility, Corporate Sustainability and the Role of the Board”, Practical Law Company (July 1, 2017), 3.

[9] D. Kuprionis and P. Styles, “Translating Sustainability into a Language Your Board Understands”, The Corporate Governance Advisor, 25(5) (September/October 2017), 13, 15.

[10] C. Masuku, Corporate Social Responsibility Literature Review and Theoretical Framework, available at https://www.academia.edu/2172462/CORPORATE_SOCIAL_RESPONSIBILITY_LITERATURE_REVIEW_AND_THEORETICAL_FRAMEWORK (citing L. Digman, Strategic management: concepts, decisions, cases (Homewood IL: BPI/Irwin, 1990).

[11] D. Kuprionis and P. Styles, “Translating Sustainability into a Language Your Board Understands”, The Corporate Governance Advisor, 25(5) (September/October 2017), 13, 16.

Descriptions of Corporate Social Responsibility

Masuku briefly described the evolution of thought on the role of business in society, beginning with the observation that the traditional profit centered approach to management originated during the Industrial Age with the presumption that capital formation was the only legitimate role of business and that managers were obligated above all other things to pursue profits to enhance the wealth of their shareholders.[1]  The 1960s and 1970s saw the slow ascendency of the social responsibility approach to management which was based on the assumption that businesses were actors in a broader environment and thus had responsibilities to respond to social pressures and demands and treat their stakeholders in a manner that complied with both law and ethics.[2]  Writing in the 1970s, Davis defined CSR as “the firm’s considerations of, and response to, issues beyond the . . . economic, technical, and legal requirements of the firm to accomplish social benefits along with the traditional economic gains which the firm seeks”.[3]  By the 1980s, the notion that corporations had a duty to behave ethically had achieved broad acceptance and attention then began to turn to what ethical behavior actually entailed, how companies should respond to business-related social issues and how “corporate social performance” should be measured.  Beginning in the 1990s, a new economic theory of the firm, the “corporate community model:, put stakeholders at the center of corporate strategy. Masuku explained: “… the organization is viewed as a socioeconomic system where stakeholders are recognized as partners who create value through collaborative problem solving. It is the role of the organization to integrate the economic resources, political support, and special knowledge each stakeholder offers ‘not to do well’, but because it provides a competitive advantage.” [4]

The ISO 26000 standard for corporate responsibility, which was developed in 2010 by the International Standards Organization, defined “social responsibility as:

“the responsibility of an organization for the impacts of its decisions and activities on society and the environment, through transparent and ethical behavior that contributes to sustainable development, including health and the welfare of society, takes into account the expectations of stakeholders, is in compliance with applicable laws and with international norms of behavior, and is integrated throughout the organization and practiced in its relationships.”

In 2011 the European Commission provided a simple, yet expansive and important, definition of CSR as being “the responsibility of enterprises for their impacts on society” and went on to explain that “[e]nterprises should have in place a process to integrate social, environmental, ethical, human rights and consumer concerns into their business operations and core strategy in close collaboration with their stakeholders.”[5]  The World Business Council for Sustainable Development (“WBCSD”), an organization established and led by chief executive officers of companies focused on sustainability, has defined CSR as “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large”.[6]  This definition recognizes the traditional role of corporations in seeking economic benefits and then expands the responsibilities of corporations to include the voluntary pursuit, as a matter of ethical conduct as opposed to compliance with legal requirement, of wellbeing for a broad range of non-investor constituencies including employees and their families, the local communities in which the business is operated and society as a whole (e.g., environmental responsibility).

The World Economic Forum has identified the concerns for responsible business as follows:

“. . . To do business in a manner that obeys the law, produces safe and cost-effective products and services, creates jobs and wealth, supports training and technology cooperation and reflects international standards and values in areas such as the environment, ethics, labor and human rights. To make every effort to enhance the positive multipliers of our activities and to minimize any negative impacts on people and the environment, everywhere we invest and operate. A key element of this is recognizing that the frameworks we adopt for being a responsible business must move beyond philanthropy and be integrated into core business strategy and practice.”[7]

According to the Australian Parliamentary Joint Committee on Corporations and Financial Services, the concept of CSR should be examined from the following standpoints: (a) considering, managing and balancing the economic, social, and environmental impacts of companies’ activities; (b) assessing and managing risks, pursuing opportunities, and creating corporate value beyond the traditional core business; and (c) taking an “enlightened self-interest” approach to consider the legitimate interests of the stakeholders in corporate governance.[8]

Garriga and Mele´ suggested that it was possible and useful to create a classification of corporate social responsibility (“CSR”) theories based on the perspective of how the interaction phenomena between business and society are focused.  They argued that CSR theories could be classified into the following four groups[9]:

  • Instrumental Theories: Theories placed in this group are based on the assumption that corporations are instruments for wealth creation and that this is their sole social responsibility. If this view is accepted, then CSR or any other social activity undertaken by the corporation is only a means to the end of profits and such activities should not occur unless they are consistent with wealth creation.
  • Political Theories: Theories placed in this group emphasize the social power of corporations and the obligation of corporations to accept social duties and rights and/or participate in certain social cooperation.
  • Integrative Theories: Theories in this group are based on fundamental argument that businesses, including corporations, depend on society for continuity, growth and survival and as such are obligated to integrate the demands of society into their operations.
  • Ethical Theories: Theories in this group see the relationship between business and society as embedded with ethical values and that corporations need to accept social responsibilities, such as CSR, as ethical obligations above any other consideration.
Instrumental CSR Theories: Reconciling Wealth Creation and Doing Good

Instrumental theories of corporate social responsibility (“CSR”) are based on the fundamental assumption that the sole social responsibility of corporations is wealth creation and that only the economic aspects of interactions between business and society should be considered when setting strategy and making operational decisions.  These theories do not necessarily prohibit CSR activities; however, CSR programs and initiatives are seen as a means to the end of profits and thus should not be undertaken unless they are consistent with wealth creation.  The questions below demonstrate how certain of the instrumental theories can be integrated into decision making relating to a particular CSR program or initiative:

·         Does the project involve investment in an activity would produce an increase in shareholder value acting without deception and fraud?  For example, it may be worthwhile for a company that is a major employer in a small community to devote resources to providing amenities to that community or to improving its government if the investment will make it easier to attract desirable employees, reduce the wage bill, lessen losses from pilferage and sabotage or have other worthwhile effects.

·         Does the project involve investment in an environmentally- or socially-responsible activity that will result in long-term maximization of the value of the company and satisfaction of certain interests of people with a stake in the firm (i.e., the “stakeholders”)?  This criterion assumes that “enlightened value maximization” has supplanted the traditional goal of “shareholder value maximization”.

·         Does the project involve a philanthropic activity consistent with the skills and resources that is aligned with the company’s mission and may enhance the company’s competitive advantage?  For example, when a telecommunications company teaches computer network administration to students in the communities where the company operates it not only improves life in those communities and the company’s image in those communities but also provides the company with more skilled workers to choose from in the future.

·         Does the project involve the creation and/or maintenance of social and ethical resources and capabilities which can be a source of competitive advantage?  Competitive advantage can be derived from implementing processes of moral decision-making and capacity for adaptation and the development of proper relationships with primary stakeholders such as employees, customers, suppliers and communities.

·         Does the project involve the development of new capabilities and resources to overcome anticipated constraints and challenges posed by the natural biophysical environment?  Important strategic capabilities include pollution prevention, product stewardship and sustainable development, and critical resources include the capacity for continuous improvement, stakeholder integration and shared vision.

·         Does the project implement strategies that can serve the poor and improve the social and economic conditions at the “base of the pyramid” while simultaneously making profits and creating a competitive advantage for the company?  Companies may attempt “disruptive innovation” through the development of products or services that do not have the same capabilities and conditions as those being used by customers in the mainstream markets and introducing them only for new or less demanding applications among non-traditional customers, with a low-cost production and adapted to the necessities of the population (e.g., a telecommunications company inventing a small cellular telephone system with lower costs but also with less service adapted to the base of the economic pyramid).

·         Does the project involve cause-related marketing that can enhance the company’s brand and reputation for reliability and honesty while helping customers satisfy their own individual objectives?  For example, the company may offer to contribute a specified amount to a designated cause when customers engage in a revenue-providing exchange.  Making such an offer enhances the company’s reputation, causes customers to view the company’s products as being high quality and secures a competitive advantage for the company. 

‌Source: E. Garriga and D. Mele´, “Corporate Social Responsibility Theories: Mapping the Territory”, Journal of Business Ethics, 53 (2004), 51, 53-55 (see text of article for relevant citations for each of the questions above). 

One of the most important byproducts of their extensive survey of the approaches to CSR was the conclusion of Garriga and Mele´ that most of the current theories focus on four main aspects: “(1) meeting objectives that produce long-term profits, (2) using business power in a responsible way, (3) integrating social demands and (4) contributing to a good society by doing what is ethically correct”.[10]  Embedded in all of this are a number of duties and ideas that are finding their way into a new kind of corporate governance framework including long-termism, stakeholder engagement, transparency and disclosure, responsible consumption of natural resources, fair dealings with workers and consumers and attention to the needs of local communities and society as a whole.  In addition, many of the emerging approaches to CSR, particularly those falling within the ethical theories identified by Garriga and Mele´, argue, as referenced in the Caux Roundtable Principles for Business discussed below, that legal and market forces are necessary but insufficient guides for conduct, and that it is also incumbent upon businesses to take ethical and moral values into consideration in their decision making.

Another way to look at CSR was suggested by Jamali et al., who observed that many scholars had conceived of CSR as encompassing two dimensions: internal and external.[11]  On the internal level, companies “revise their in-house priorities and accord due diligence to their responsibility to internal stakeholders, namely employees, addressing issues relating to skills and education, workplace safety, working conditions, human rights, equity considerations, equal opportunity, health and safety, and labor rights”.[12]  On the external level, which has generally received the most attention, companies focus on assumption of their extended duties as “corporate citizens” and afford “due diligence to their external–economic and social–stakeholders and the natural environment”[13] Through initiatives to ensure that the corporate operations have a positive impact on the environment and initiatives to address community issues and foster social justice.[14]   Jamali et al. explained that “[t]he environmental component addresses primarily the impacts of processes, products, and service on the environment, biodiversity, and human health, while the social bottom line incorporates community issues, social justice, public problems, and public controversies”.[15]  Jamali et al. observed that “[a]ddressing these two CSR dimensions often implies difficult adjustments and willingness to consider multiple bottom lines … [and] … requires good communication of CSR objectives and actions, new standards, control and performance metrics, and the successful integration of CSR into the culture of the organization”.[16]

Hopkins argued that treating the stakeholders of the firm ethically or in a socially responsible manner is an economic responsibility of companies.[17]  Similarly, Marsden emphasized that “CSR is not an optional add-on nor is it an act of philanthropy. A socially responsible corporation is one that runs a profitable business that takes account of all the positive and negative environmental, social and economic effects it has on society.”[18]  Andersen’s definition of CSR was also based on a broader societal approach that called for firms to extend “the immediate interest from oneself to include one’s fellow citizens and the society one is living in and is a part of today, acting with respect for the future generation and nature”.[19]  Ward also had a broad understanding of CSR as a commitment by companies to “contribute to sustainable economic development—working with employees, their families, the local community and society at large to improve the quality of life, in way that [is] also good for business.”[20]  In 2013, Rahim summed up the results of a survey of definitions and conceptions with the following:

“. . . [T]here is no conclusive definition of CSR and that it can have different meanings to different people and different organizations as an ever-growing, multifaceted concept. Nevertheless, it may be said that the concept of CSR is consistent and converges on certain common characteristics and elements. More precisely, if CSR as defined above is examined from a practical and operational point of view, it converges on two points. CSR requires companies (a) to consider the social, environmental, and economic impacts of their operations and (b) to be responsive to the needs and expectations of their stakeholders.  These two points are also embedded in the meaning of the three words (i.e., ‘corporate’, ‘social’, and ‘responsibility’) of the phrase ‘corporate social responsibility’. The word ‘corporate’ generally denotes business operations, ‘social’ covers all the stakeholders of business operations, and the word ‘responsibility’  generally refers to the relationship between business corporations and the societies within which they act together. It also encompasses the innate responsibilities on both sides of this relationship. Accordingly, CSR is an integral element of business strategy: it is the way that a company should follow to deliver its products or services to the market; it is a way of maintaining the legitimacy of corporate actions in wider society by bringing stakeholder concerns to the foreground; and a way to emphasize business concern for social needs and actions that go beyond philanthropy.”[21]

CSR is clearly a global phenomenon.  Rahim surveyed steps that had been taken around the globe to integrate the core principles of CSR into the policy objectives of different economies and global companies.  Global companies in Europe have been guided by the EU Commission’s Green Paper on Promoting a Framework for CSR and the European Code of Conduct Regarding the Activities of Transnational Corporations Operating in Developing Economies.  A number of individual countries in Europe have also taken action driven, at least in part, by a series of resolutions adopted by the European Parliament to facilitate the development of the incorporation of CSR principles in its member economies: the UK established a post of CSR Minister to encourage greater social responsibility in UK companies and the UK’s Companies Act of 2006 included specific reporting requirements on environmental and social issues; Belgium passed legislation requiring pension fund managers to disclose the extent to which they consider ethical, social and environmental criteria in their investment policies; France required listed companies to disclose their impact on social and environmental issues in their annual reports and accounts; and each of the Scandinavian countries mandated environmental disclosures.  There have also been a number of important quasi-legal initiatives for the promotion of CSR at the national level throughout Europe including the International Business Leaders Forum, the Ethical Trading Initiative and Partnership for Global Responsibility.[22]

Rahim noted that, in contrast to Europe, the US has been slower in using formal regulation to incorporate CSR into the business strategies and operations of corporations, an approach that is consistent with the preference in the US for minimal legislative control of business.  According to Rahim, the US has emphasized developing specialized organizations that set rules and standards, and provide enforcement regimes, for certain aspects of CSR including the Occupational Safety and Health Administration, Equal Employment Opportunity Commission, Consumer Product Safety Commission and the Environmental Protection Agency.  A variety of industry and other non-governmental organizations have also contributed guidelines that can be referenced for the self-regulatory initiatives of individual companies including the US Model Business Principles and the work of the Center for Corporate Ethics and the Fair Labor Association.  Trade associations in specific sectors, such as automobile manufacturing and paper products, have promulgated guidelines for their members on environmental management practices for themselves and their suppliers.[23]

Principles of CSR have been important in Japan since the post-war reconstruction period, during which the resolution “Awareness and Practice of the Social Responsibility of Business” was adopted and stated the fundamental principal that businesses should not simply pursue corporate profit, but must seek harmony between the economy and society, combining factors of products and services, and that social responsibility is a better way to pursue this goal.[24]  Various cabinet ministries have undertaken initiatives to promote and achieve CSR including the Cabinet Office;, the Ministry of Agriculture, Forestry, and Fisheries; the Ministry of Health, Labor, and Welfare; and the Ministry of Environment.  For example, the Cabinet Office issued its “Corporate Code of Conduct” in 2002 to build consumer confidence in businesses and set guidelines to promote the establishment and implementation of corporate codes of conduct.[25]  The influential Ministry of Economy, Trade and Industry collaborated with the Japanese Standards Association on the creation of a working group to develop CSR standards in Japan and Japan has been an active participant in the development of intergovernmental initiatives relating to CSR.  The result of all this activity has been that Japanese companies have been global leaders in disclosures of CSR activities, investment in internal resources to oversee CSR commitments and adoption of codes of conduct based on international standards.[26]

A 2017 article in The Economist succinctly described the evolution of CSR up to that time as follows:

“Between the 1950s and 1970s, CSR took shape in the form of pre-corporate philanthropy, a largely disparate approach involving support for domestic nonprofits at the discretion of CEOs with little transparency or oversight. In the 1980s, intense foreign competition and a greater focus on shareholders led many publicly traded corporations to adopt more stringent quality and cost controls. This created greater demands to tie corporate philanthropy to financial performance through efforts like cause-related marketing and practices more aligned with a company’s business. Throughout the 1990s, CSR became more international in scope, but was typically reactive in nature and often a response to negative publicity. During this time, a holistic, triple-bottom-line accounting framework of sustainability also began to emerge. Since the 2000s, CSR has grown increasingly strategic, and a broader concept of sustainability has gained ground.  Public pressure to address negative corporate externalities, and pressing social, economic, and environmental issues drove the evolution of these practices. Over time, they have blurred the lines between the public, private, and civil sectors, and redefined traditional roles and structures in the process.”[27]

This article is part of the Sustainable Entrepreneurship Project’s extensive materials on Sustainability and Corporate Governance.

[1] C. Masuku, Corporate Social Responsibility Literature Review and Theoretical Framework, available at https://www.academia.edu/2172462/CORPORATE_SOCIAL_RESPONSIBILITY_LITERATURE_REVIEW_AND_THEORETICAL_FRAMEWORK

[2] For further discussion of the evolution of corporate social responsibility and the various definitions and descriptions of the concept that have been suggested, see “Introduction to Corporate Social Responsibility” in “Corporate Social Responsibility: A Library of Resources for Sustainable Entrepreneurs” prepared and distributed by the Sustainable Entrepreneurship Project (www.seproject.org).

[3] K. Davis, “The Case For and Against Business Assumption of Social Responsibilities”, American Management Journal, 16 (1973), 312.

[4] C. Masuku, Corporate Social Responsibility Literature Review and Theoretical Framework, available at https://www.academia.edu/2172462/CORPORATE_SOCIAL_RESPONSIBILITY_LITERATURE_REVIEW_AND_THEORETICAL_FRAMEWORK (citing W. Halal, “Corporate community: a theory of the firm uniting profitability and responsibility”, Strategy & Leadership, 28(2) (2000), 10).

[5] European Commission, A Renewed European Union Strategy 2011-14 for Corporate Social Responsibility, COM (2011) 681, ¶ 3.1.

[6] World Business Council for Sustainable Development, Corporate Social Responsibility: Meeting Changing Expectations, 3, available at wbcsd.org.

[7] World Economic Forum, Global Corporate Citizen: The Leadership Challenge for CEOs and Boards (2002) http://www.weforum.org/pdf/GCCI/GCC_CEOstatement.pdf at 21 February 2009.

[8] Australian Parliamentary Joint Committee on Corporations and Financial Services, Inquiry into Corporate Responsibility and Triple-Bottom-Line reporting for incorporated entities in Australia (2005). http://www.philanthropy.org.au/pdfs/advocacy/pa_jpicr_0905.pdf at 31 October 2013.

[9] E. Garriga and D. Mele´, “Corporate Social Responsibility Theories: Mapping the Territory”, Journal of Business Ethics, 53 (2004), 51, 52.

[10] E. Garriga and D. Mele´, “Corporate Social Responsibility Theories: Mapping the Territory”, Journal of Business Ethics, 53 (2004), 51, 65.  The various CSR approaches are described, including key references, in Table 1 (“Corporate social responsibilities theories and related approaches”) included in the article at 63-64.

[11] D. Jamali, A. Safieddine and M. Rabbath, “Corporate Governance and Corporate Social Responsibility Synergies and Interrelationship”, Corporate Governance, 16(5) (2008), 443, 446.

[12] Id. (citing P. Jones, D. Comfort and D. Hillier, “Corporate social responsibility and the UK’s top ten retailers”, International Journal of Retail and Distribution Management, 33 (2005), 882).

[13] Id. (citing L. Munilla and M. Miles, “The corporate social responsibility continuum as a component of stakeholder theory”, Business and Society Review, 110 (2005), 371).

[14] S. Deakin and R. Hobbs, “False dawn for CSR: Shifts in regulatory policy and the response of the corporate and financial sectors in Britain”, Corporate Governance: An International Review, 15 (2007), 68.

[15] D. Jamali, A. Safieddine and M. Rabbath, “Corporate Governance and Corporate Social Responsibility Synergies and Interrelationship”, Corporate Governance, 16(5) (2008), 443, 446.

[16] Id. (citing D. Jamali, “Insights into triple bottom line integration from a learning organization perspective”,   Business Process Management Journal, 12 (2006), 809; J. Hancock (Ed.), Investing in Corporate Social Responsibility: A Guide to Best Practice, Business Planning & the UK’s Leading Companies (London:,Kogan Page, 2005); G. Lantos, “The boundaries of strategic corporate social responsibility”, Journal of Consumer Marketing, 18 (2001), 595; and J. Elkington, “Governance for sustainability”, Corporate Governance: An International Review, 14 (2006), 522).

[17] M. Hopkins, Corporate Social Responsibility: An Issue Paper (Working Paper No. 27, Policy Integration Department, World Commission on Social Dimension of Globalization, 2004).

[18] C. Marsden, “The Role of Public Authorities in Corporate Social Responsibility” (2001) in A. Dahlsrud, “How Corporate Social Responsibility Is Defined: An Analysis of 37 Definitions”, Corporate Social Responsibility and Environmental Management, 15(1) (2008), 1, 9.

[19] K. Andersen, The Project (2003) in A. Dahlsrud, “How Corporate Social Responsibility Is Defined: An Analysis of 37 Definitions”, Corporate Social Responsibility and Environmental Management, 15(1) (2008), 1, 11.

[20] H. Ward, Public Sector Roles in Strengthening Corporate Social Responsibility: Taking Stock (2004), 3.

[21] M. Rahim, Legal Regulation of Corporate Social Responsibility: A Meta-Regulation Approach of Law for Raising CSR in a Weak Economy (Berlin: Springer, 2013), 13, 24 (citing A. Gill, “Corporate Governance as Social Responsibility: A Research Agenda” (2008), 464).

[22] Id. at 34-38.

[23] Id. at 38-39.

[24] Id. at 40 (citing M. Kawamura, The Evolution of Corporate Social Responsibility in Japan (Part 1)—Parallels with the History of Corporate Reform (NLI Research institute, 2004), 156).

[25] Id. (citing Asian Productivity Organisation, Policies to Promote Corporate Social Responsibility (Report of the Asian Productivity Organisation Top Management Forum, 2006)).

[26] Id. at 41-42.

[27] J. Cramer-Montes, “Sustainability: A New Path to Corporate and NGO Collaborations”, The Economist (March 24, 2017), http://www.economist.com/node/10491124