CSR and the Global Market

The market has become increasingly globalised, in the sense that product and services are bought and sold in a global context. As value chains span over border, often several borders, regulating it becomes more difficult and a single state is not enough to ensure responsible business practise. This shows a need for other actors to help promote CSR, in the form of companies or international organisations,. Thus CSR work is perhaps even more important in the globalised world of today.

However, some countries with developing economies are critical to international CSR standards, for example India. In this case CSR is considered a concept developed and defined by developed countries and not fit for developing countries. In the global market place developing countries generally have their main advantage based on the low costs of labour, and by implementing a CSR standard this advantage is believed to diminish due to the cost of CSR. Therefore a standard giving companies importing from developing countries incentives to choose suppliers that are compliant with the standard, could give developing countries a disadvantage, at least at first. If this would force business out of the developing countries, investments would decrease and the standard of life would likely decrease; what would be beneficial for workers on the surface, could lead to adverse effects.


The (economic) reasons for CSR work are often stated by a few assumptions:
• Customers favour product and services by responsible companies
• Investors favour investments in responsible companies
• Potential employees would rather work in a responsible company
• Engaging the stakeholders of the business leads to larger opportunities for innovation
• Reduction of risks in regard to environment, labour and society

However, according to Knox and Maklan these assumptions seem to be hard to measure and the results so far seem to be ambiguous at best. To get a clear idea on the relationship between CSR and beneficial results further research is needed, in doing so new ways to measure and explore this issues need to be developed.

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CSR and the firm

An important issue in CSR (Corporate Social Responsibility) is what a company should do and what is the purpose of it. Some, like the widely recognised economist Milton Friedman, would argue that CSR is not what a company should do; a company should instead focus on maximising returns for the shareholders, and abide the law and general ethical principles in doing so. Thus instead leaving the work of forming standards to ensure a responsible behaviour to the government, and if this is done well there would be no room or need for CSR in the companies, rather what is best for the shareholders would be best for the society. This is well in line with classical economics going back to Adam Smith and the invisible hand regulating the market.

However, this view is disputed. The assumption made here is that an efficient market, including an efficient state apparatus, will make sure that business is conducted in a responsible way. Obviously, this is not the case in reality, thus there is an important role for CSR work to play in filling the void between the real market and the ideal market. In this context it seems CSR work has an important role to fill and it should be something important for companies in catering to the interests of the stakeholders in regards to the interaction with the market, society and externalities. Actual it could be assumed that CSR has developed from a liberal market view, where not enough regulations are present to ensure commitment to responsible business principles. In this context it is not surprising to see an increase in CSR activities of companies, some argues that companies have taken over some of the responsibilities of regulating the market, which was earlier an activity exclusively conducted by the state. Not only are many companies conducting CSR activities in their own organisation, but also in their extended value chain containing several tiers of suppliers.

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