Globalization and CSR - Scherer & Palazzo, 2008

Scherer, A. G. & Palazzo, G. 2008. Globalization and CSR. In: Crane, A. McWilliams, D., Moon J. & Siegel D. (eds), The Oxford Handbook of Corporate Social Responsibility. Oxford: Oxford University Press.

Key issue: Globalization weakens the nation state and causes the rise of global problems. The political solutions are not limited to the traditional institutional actors, but include also non-state actors, such as NGOs and corporations.

The article’s introduction opens with the observation that globalization intensifies the impact of corporation and the consequent call for CSR. But corporations themselves can become a solution to global problems. Globalization poses an additional responsibility to corporations: the need to make a political move to contribute to the development of the fragile and incomplete global governance framework.

The first part reviews the key aspects of globalization, defined as “the process of intensification of cross-area and cross-border social relations between actors from very distant locations, and of growing transnational interdependence of economic and social activities”. One of the main consequences of globalization is the loss of political steering capacity of the nation state (bound to its boarders) to face transnational actors and problems: new forms of governance from below, above and beyond the nation state are born.

Then, the dimensions of globalization are investigated:

• Political: GATT (later WTO), privatizations, collapse of the communist iron curtain;
• Technological: ICT, transports;
• Socio-cultural: new values, migrations, heterogeneity, new social movements, civil society and NGOs;
• Economic: growth in FDI, international trade and intra-firm trade, global supply chains, power of MNEs (huge resources + mobility), pressure for profits from the global financial market;
• Transnational risk (Beck 1992, 1999): environment, diseases, social problems.

In the third part, the traditional CSR paradigm and its limits in the light of globalization are described. The traditional CSR approach is based on a neoclassical assumption of division of labour between state (political sphere) and business (economic sphere). The corporation as a private actor has no license to interfere in political processes and must concentrate on profit seeking (Friedman, 1962). The ongoing debate about the CSR-profitability link is rooted in this view. The only responsibility of corporations is to follow the established framwork of game rules: law and moral customs. In this view, the firm is reactive to external expectations. In the liberal model of democracy, corporations are private and non-political actors: they deal with politics in case of self-interested lobbying or for voluntary and discretioanry acts of philatropy (Carrol, 1979) and they are not held accountable by the polity. On the contrary, the state is accountable for polity and gains legitimacy by maximizing freedom and minizing regulation and by elections. Private actors play in the democratic fields of markets and the “inivisible hand” drives their self-interested behavior towards social welfare.

The global changes lead to the birth of post-national constellations (Habermas, 2001). In the liberal democracy, solidarity (people), power (state) and money (corporations) are the pillars of stability. The weakening of national hard law effectiveness creates are race to the bottom and a regulatory vacuum. International law was developed to be applied between states, not directly to non-state actors. International conventions (UN Human Rights and ILO) cannot be enforced. The US courts started to apply their law outside the national boarders (Foreign Corrupt Act, Alien Tort Claim Act, Sarbanes-Oxley Act), but this weakens other national governments. In this situation, the vacuum left by national governments is partly filled by civli society (“globalization from below”, Beck, 2000: 68). The new CSR paradigm sees corporations to take steps to become political actors too. They contribute to global governance (definition and implementation of standards of behavior with global reach – Habermas, 2001), having an elarged sense of responsibility and cooperating with states and civil society to solve political problems. Moreover, they submit their power to democratic processes of control and legitimacy and they participate to “cosmopolitan” or “high-order” debate (Teegen, Doh, Vachani, 2004: 471).