Corporate Social Responsibility (CSR), Sustainability and Environmental Social Governance (ESG)

The Three Levels of Strategy, developed by Gerry Johnson and Kevan Scholes along with other major managerial thinkers, are a way of defining the different layers of strategy which, in tandem, orient the direction of the organisation and define its success (Johnson et al., 2017). The Three Levels are:

Corporate social responsibility (CSR) is also known by a number of other names. These include corporate responsibility, corporate accountability, corporate ethics, corporate citizenship or stewardship, business ethics, responsible entrepreneurship, and triple bottom line, to name just a few. As CSR issues become increasingly integrated into modern business practices, there is a trend towards referring to it as “responsible competitiveness” or “corporate sustainability.” CSR is understood to be the way firms integrate social, environmental and economic concerns into their values, culture, decision making, strategy and operations in a transparent and accountable manner, and thereby establish better practices within the firm, create wealth and improve society. A key point to note is that CSR is an evolving concept that currently does not have a universally accepted definition. Generally, CSR is understood to be the way firms integrate social, environmental and economic concerns into their values, culture, decision making, strategy and operations in a transparent and accountable manner and thereby establish better practices within the firm, create wealth and improve society. As issues of sustainable development become more important, the question of how the business sector addresses them is also becoming an element of CSR. It is necessary to integrate CSR principles and values across the value chain from the own company towards suppliers and customers (Helmold & Terry, 2021). The World Business Council for Sustainable Development has described CSR as the business contribution to sustainable economic development. Building on a base of compliance with legislation and regulations, CSR typically includes “beyond law” commitments and activities pertaining to:

The Procurement function and Supply Side is the function, which secures that inputs are available for the transformation process as shown in Fig. 3.1. Transformation is any activity or group of activities that takes one or more inputs, transforms and adds value to them, and provides outputs for customers or clients. Inputs, for which the Procurement is responsible, are mostly products and services coming from suppliers in the upstream side of the value chain. These products or services are directly involved in the transformation into end-products to customers. However, inputs can be also indirect categories or services, which are not directly included in the transformation process (desks, machines, training services etc.).

Operations management is the process and activity of planning, designing and controlling the process of production and redesigning business operations in the production of products or services. t involves the responsibility of ensuring that business operations are efficient in terms of using as few resources as needed and effective in terms of meeting customer requirements. Operations management is primarily concerned with planning, organizing and supervising in the contexts of production, manufacturing or the provision of services. It is concerned with managing an entire production or service system which is the process that converts inputs (in the forms of raw materials, labour, consumers, and energy) into outputs (in the form of goods and/or services for consumers). Operations management involves the systematic direction and control of the processes that transform resources (inputs) into finished goods or services for customers or clients (outputs) as shown in Fig. 4.1 Operations Management in the Context of the Input-Transformation-Output Process. Operations produce products, manage quality and create services. Operation management covers sectors like banking systems, hospitals, companies, working with suppliers, customers, and using technology. Operations is one of the major functions in an organization along with supply chains, marketing, finance and human resources. The operations function requires management of both the strategic and day-to-day production of goods and services. In managing manufacturing or service operations several types of decisions are made including operations strategy, product design, process design, quality management, capacity, facilities planning, production planning and inventory control. Each of these requires an ability to analyse the current situation and find better solutions to improve the effectiveness and efficiency of manufacturing or service operations (Slack et al., 1995).

The Marketing promotes all activities of a company, sales through customer care, advertising, observation and control of the market as well as through appropriate control of own production as Fig. 5.1 Marketing Function in the value chain shows (Kuerble et al., 2016).

“Innovation” comes from the Latin word “innovare” and stands for renewal or reformation. From an economic point of view, innovation is something complex and new that brings economic benefits for an organization or and for the company. Innovation management includes elements such as ideas, inventions and diffusions (Müller-Prothmann & Dörr, 2019). Innovations include the generation of ideas and the constant validation and review of these ideas as part of a structured innovation process (Nelke 2016). Innovation Management comprises three levels, as shown in Fig. 6.1. In addition to the operational level, the working level, there are the strategic and normative levels (Stibbe, 2019). Innovations are decided on the normative and strategic level and put into practice on the operative level (Helmold & Samara, 2019). Terms that are often used in connection with innovation are ideas, collections of ideas and inventions. An invention or invention must be differentiated to the extent that it has not yet been exploited and used as a creative achievement of a new problem solution compared to innovation. It is the same with the idea, which is a creative thought of something new. In all cases, “new” can always be seen relatively. It can be new for this situation, the company or the world. In particular new developments such as New Work, Industry 4.0 or increasing globalization have an important impact on innovations and innovation management (Granig et al., 2018). Of central importance are the collection of ideas, the selection and the decision which ideas are implemented. This process must be managed by the higher management (Helmold & Samara, 2019).

The term ethics is derived from the Greek language (Greek ἔθος = habit, custom; ἦθος = an accustomed place) (Liddell Scott Joines Greak-English Lexicon, 2021) and means in modern English “a study of what is morally right and wrong, or a set of beliefs about what is morally right and wrong” (Cambridge Dictionary, 2021a, b). In practice, the terms “moral” and “ethical” are often used anonymously. According to Cambridge Dictionary, “morals” are “standards for good or bad character and behaviour” or “relating to the standards of good or bad behaviour … that each person believes in” (Cambridge Dictionary, 2021a, b).

Despite the worldwide overwhelming interests for the social role of business organisations, there is no generally accepted definition for the term Corporate Social Responsibility (CSR). In this chapter, we will introduce a few theories relevant to the CSR strategy and Ethical Management in the real-world business practice.

This section compares the similar concepts of Corporate Social Responsibility (CSR) and Environmental Social Governance (ESG) from the perspective of business practitioners. Both concepts have become common in business practice, not only for the large multinational corporations (MNCs), but also for the small to mid-sized enterprises (SMEs).

In context of economic theories, the term “stakeholder” was used as early as 1963 in an internal memo of the Stanford Research Institute (SRI), defined as “those groups without whose support the organization would cease to exist”) (Freeman, 2010). In the classic form of stakeholder theories, the typical stakeholders in a business organisation are especially the financiers, the customers, the suppliers, the employees and the society, to whom the business owes its success (see Fig. 10.1 Stakeholders in the classic stakeholder theory. Interpretation of (Freeman et al., 2007, S. 3)).

The government is the highest political institution of a state. In the economic context, the objectives of governmental regulations for the market are mainly seen in the following fields (Benz et al., 2007, S. 74 ff.):

Stakeholders are the challengers and drivers of a corporate organisations from inside (Executives, Managers but also labour representatives in workers councils) and outside (Governments, Non-profit organisation NGOs, Regulators, Competitors, and others). For public-traded companies, shareholders are as the same time stakeholder from an outside point of view.

Customers are the starting point of company’s success. On the other hand, customer protection is part of the CSR and ESG approaches (Gupta, 2021; PRI Association, 2021).

The business relationships could be business-to-business (referred to as “B2B”) or business-to-consumer (referred to as “B2C”). The global B2B relationships make up a complex supply chain network (see Fig. 14.1 supply chain network). The companies are suppliers to their own customers, and customers to their suppliers. In addition to existing business partnerships, the companies often maintain relationships with a plethora of potential customers and suppliers. These contacts are sources for business growth and solution for delivery bottlenecks.

Employees are the driving force behind corporate innovations and the value creation process. In times of globalization, the business organizations rely largely on the employees’ commitment to obtain competitive advantages for sustainable business growth.