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Corporate Social Responsibility and the Social Enterprise
Author(s): Nelarine Cornelius, Mathew Todres, Shaheena Janjuha-Jivraj, Adrian Woods
and James Wallace
Source: Journal of Business Ethics , Aug., 2008, Vol. 81, No. 2 (Aug., 2008), pp. 355-370
Published by: Springer
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Journal ofBusiness Ethics (2008) 81:355-370 ? Springer 2007
DOI 10.1007A10551-007-9500-7
Corporate Social Responsibility
and the Social Enterprise
ABSTPJVCT. In this article, we contend that due to
their size and emphasis upon addressing external social
concerns, the corporate relationship between social
enterprises, social awareness and action is more complex
than whether or not these organisations engage in
corporate social responsibility (CSR). This includes
organisations that place less emphasis on CSR as well as
other organisations that may be very proficient in CSR
Nelarine Cornelius
Mathew Todres
Shaheena Janjuha-Jivraj
Adrian Woods
James Wallace
ABBREVIATIONS: CSR: Corporate social responsi
bility; CI: Corporate identity; HP^M: Human Resource
Management; HRD: Human Resource Development;
OI: Organisational Identity; SME: Small to medium sized
initiatives, but are less successful in recording practices.
In this context, we identify a number of internal CSR
markers that may be applied to measuring the extent to
which internal CSR practices are being observed. These
considerations may be contrasted with the evidence that
community based CSR activities is often well devel
oped in private sector small to medium sized enterprises
(SMEs) (Observatory of European SMEs, 2002), a
situation which may be replicated in social enterprises
especially those that have grown from micro-enterprises
embedded in local communities. We place particular
emphasis upon the implications for employee manage
ment. Underpinning our position is the Aristotelian
informed capabilities approach, a theory of human
development and quality of life, developed by Sen
(1992; 1999) and Nussbaum (1999) which has been
developed further, in an organisational context, (e.g.,
Cornelius, 2002); Cornelius and Gagnon, 2004;
Gagnon and Cornelius, 1999; Vogt, 2005. We contend
that the capabilities approach offers additional insights
into CSR in social enterprises in general and internal
CSR activity in particular. Our article concludes with
proposals for future research initiatives and reflections
upon social enterprise development from a capabilities
According to the United Kingdom (UK) govern
ment's Department of Trade and Industry (2002: 7)
a social enterprise is: "a business with primarily social
objectives whose surpluses are principally reinvested
for that purpose in the business or in the commu
nity, rather than being driven by the need to max
imise profit for shareholder and owners". Therefore,
social ends and profit motives do not contradict each
other, but rather have complementary outcomes,
and constitute a 'double bottom line'. This implies
that effective financial management for social pur
poses is a key feature of sustainability (i.e. the
financial stability of an organisation to trade over the
long term). Although a policy based definition, it is
consistent with more academic definitions of social
enterprise (see for example, Borzaga and Defourny,
2001) Underpinning this argument is the notion of
the double bottom line (of economic and social
accountability) and increasingly, the 'triple bottom
line' (environmental accountability also). Thus, the
latter term encapsulates how socially responsible
companies aim not only to generate profits and social
benefits, but also positive environmental outcomes
KEY WORDS: capabilities theory, corporate social
(Elkington 1999; see also Henriques and Richard
business, social enterprise
son, 2004). However, the focus of attention among
these scholars is largely the social impact of social
responsibility, human resource management, small
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356 Nelarine Cornelius et al.
enterprises on the communities they serve, plus
external stakeholder responsibilities: there is less
emphasis on internal social responsibility.
In short, in this article we argue in favour of a
stronger focus upon the investigation of internal
CSR policies and practices in social enterprises. Our
reasoning is that the strength of the community
1999; Gagnon and Cornelius, 1999; Vogt, 2005).
We argue that there is potential in the capabilities
approach as an ethics-centred, foundational
approach with regards to the ethical reasoning that
could inform CSR and social enterprise theory and
development in general, and internal CSR in par
ticular. In order to support this position we draw
social mission in many third sector organisations may
upon the research literature to identify a number of
be so embedded in the corporate ethos that less
attention may be paid to internal matters. This view
basic markers of internal CSR practices. In doing
this we suggest evaluation frameworks for CSR
is supported by Foote's work within the charity
practice in social enterprises, in order to evaluate,
sector where she found that "ethical inconsistency in
internally, the degree to which social enterprises
people management...arising from the clear appli
meet the 'triple bottom line' and further, what kind
cation of strong and explicit organisational values to
external client groups influence on
people management strategies within the organisa
tion" (2001: 25).
We therefore draw attention to investment in
employees, over and above financial reinvestment
targeted towards the local community and to de
velop the firm as a whole in terms of its service
provision. We pose the question: what frameworks
might social enterprises employ to ensure that
attention is paid to internal CSR, especially con
cerning employees' organisation and career devel
opment and quality of life needs?
In order to locate our research conceptually we
present first, a brief review of some of the literature
related to CSR, especially regarding its philosophical
underpinnings. We argue that CSR is a crucial
consideration for all social enterprises, including
nascent social enterprises, and such organisations
need to effectively communicate this area to their
stakeholders. Also, we consider the role of employee
management and development in small to medium
enterprises (SMEs). Further, we explore whether
social enterprises may experience similar trends to
SMEs in terms of size and funding, attitudes and
practices regarding employee management and
development and ethical behaviour. We therefore
identify human resourcing issues in SMEs that relate
to these areas and consider their applicability to so
cial enterprises. After a short discussion of the social
enterprise sector, we contend that one option for the
conceptual development of employee management
and development policy and practice is the Aristo
telian-informed capabilities approach (Cornelius,
2002; Cornelius and Gagnon, 2004; Cornelius and
Skinner, 2005, 2007; Nussbaum, 1999; Sen, 1992,
of evaluation frameworks are suggested by the
capabilities approach. The article then concludes
with some final assertions and observations.
Philosophical underpinnings of CSR
Windsor (2006) indicates that the developmental
history of CSR includes three competing
approaches, namely ethical responsibility theory,
economic responsibility theory and corporate citi
zenship conceptions. The first two viewpoints are
characterised by competing moral frameworks and
political philosophies. For Windsor (2006: 98)
building on the thinking of Rorty (2000) there is an
unresolved debate within ethics itself "where moral
philosophy is trapped between Kant (i.e. duties) and
Dewey (pragmatism)". Swanson (1995) (in Maignan
and Ralston (2002) expresses a similar viewpoint.
He argues that CSR initiatives stem from three
philosophical outlooks, namely utilitarian, negative
approach and positive duty approaches. For the first,
CSR is viewed as a performance objective in terms
of profitability and return on investment. The neg
ative duty approach addresses the adoption of
socially responsible practices, when firms are
required to conform to stakeholder norms. Finally,
the positive duty approach includes socially respon
sible behaviour pursued by firms as a means in its
own right as opposed to it resulting from external
The implication is that CSR practices may be
located in different assumptions and presuppositions:
philosophical and more specifically, ethical. Takala
and Pallab (2000) support this view and distinguish
between 'process' and 'deed'. In the former, this
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Corporate Social Responsibility and Social Enterprise 357
refers to legal constraints or licenses to act in a par
ticular way and this may sanction behaviour on an
conceptualise and pursue CSR. However, occupy
individual, collective and/or organisational level,
while 'deed' describes moral actions resultant from
the voluntarist nature of private companies engaged
with ethical issues, Garriga and Mele (2004) identify
four clusters of ideas. These are instrumental theories
personal choice.
Consequently the lack of consensus means com
paring underpinning ethical Does "means" here
ing a more pragmatic position, understandable given
(where social acts are pursued purely for economic
ends), political theories (and responsible use of
imply "averages", and if so it may be clearer to say
"averages" assumptions and presuppositions may be
power), integrative theories (the corporation focuses
particularly informative. Takala and Pallab (2000)
distinguish between juridical and ethical responsi
ethical responsibilities of corporations to societies).
Indeed, Garriga and Mele (2004) propose that there
bility in business ethics. The latter encapsulates an
active pursuit of morally sound behaviour as a means
in itself (action over and above basic legal require
ments). A firm may initially mimic good behaviour
as these are the 'rules of the game', but over time the
firm "internalises ethical practices... for their
intrinsic value and voluntarily commits itself to
environmentally safe actions" (Takala and Pallab,
2000: 114).
on social demands) and ethical theories (based on
should be 'a new theory on the business and society
relationship, which should integrate these four
dimensions'. (2004: 53)
Takala and Pallab (2000: 109) cite the importance
of firms considering internal aspects of CSR where
"employees have to be socialised into the fact that
along with the firm, they are equally responsible for
morally right, pro-environmental actions". Individ
uals within the firm, then, should be empowered to
Corporate social responsibility (CSR) behaviour
and values may change as a result of the adoption of
actions with implicitly alternative philosophical
underpinnings. Indeed, CSR trends are noted in
Waddock's (2004) extensive overview of CSR
across four decades. He highlights practical applica
tions arising from theoretical developments (e.g.,
how companies have increasingly incorporated
codes of conduct and ethics in their operational
activities, the pursuit of social and environmental
reporting standards, and the increased acceptance of
internationally recognised certification, such as ISO
9000 for product quality and AA 1000 stakeholder
engagement). The adoption of these practices orig
inates in efforts of firms to be more accountable to
stakeholders, and to measure outcome of their
activities in more standard ways. This external CSR
orientation is pursued for concerns of stakeholders
(government, regulatory bodies, customers, pressure
actively evaluate and decide upon ethical issues in
the workplace. With a specific focus upon Aristotle,
Kaptein and Wempe (2002: 77) summarise the
qualities of moral virtues as "desirable...and imply a
moral norm, are expressed in actions...are constantly,
albeit often latently present, and can be influenced
by the subject". Aristotelian, or more broadly, virtue
ethics would seem to have affinities with social
enterprise and organisations in the social economy,
focusing upon addressing moral concerns in society
via various actions (such as outreach projects, social
and public services) to address social inequality and
exclusion (e.g., Moore and Beadle's (2006) work on
the application of Maclntyre's virtue-goods-prac
tice-institutional proposal for the evaluation of the
charity, Traidcraft). The challenge for many social
enterprises is to engender similarly socially respon
sible practices internally, to reflect their external
groups). However, some scholars have questioned
the robustness of both the operational assumptions
and practices associated with CSR. Haigh and Jones
(2006) identify six sets of factors which appear in the
literature as promoting social responsibility; intra
organizational factors, competitive dynamics, insti
tutional investors, end-consumers, government
regulators and non-governmental organisations.
They conclude that instrumental economic benefits
predominate in the decisions made regarding how to
Social enterprise: trends and issues
The history of social enterprise extends as far back to
Victorian England (Dart, 2004; Hines, 2005). The
worker cooperative is one of the first examples of a
social enterprise. Social enterprises prevail through
out Europe, and are most notable in the form of
social cooperatives, particularly in Italy, Spain and
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358 Nelarine Cornelius et al.
increasingly France (Duccie et al., 2002; Mancino
and Thomas, 2005). Front line social enterprises in
the U.K. generate ?18 billion in annual turnover
and employ 775,000 people ( 2002).
In addition, recent research conducted by the Social
Enterprise Unit (working under the DTI) suggests
that there may be more than 15,000 social enter
prises in the U.K., registered as either companies
training, translating and interpreting services for
non-native Standard English speakers, counselling
and training for those with mental health problems
and drug abuse issues. Social enterprise offers several
advantages. Spear (cited in Borzaga and Defourny,
2004) draws attention to how social enterprises
combat social exclusion, revitalise deprived areas,
communities and locales. Social enterprises further
hmited by guarantee (88%) or as industrial and
more, provide work for the unemployed and
provident societies (12%) ? three quarters of which
are based in London alone (Small Business Service,
generally offer innovative products and services
previously overlooked by the private and public
sectors, especially for hard-to-reach groups. The
potential of social enterprises to enhance the com
munity capacity and quality of life has been recog
DTI, July, 2005).
Social enterprises offer a range of contributions to
local economic development "providing goods and
services which the market or public sector is
nised by governments, including the U.K.
unwilling or unable to provide, developing skills,
government, who have sought to both encourage
creating employment... creating and managing
workspace...and enhancing civil public involve
ment" (Smallbone et al., 2001: 5). As a result of
and fund the activities of many social enterprises.
these contributions, recent legislation passed by the
DTI (in 2005), recognises the Community Interest
Company (CIC). This new legal form enables vol
Interest in the development of front-line social
enterprises is exemplified in the work of Jan-Khan
(2003), who highlights institutional failure to address
racism and ethnic tensions, particularly in the wake
of the Bradford Riots in the north of England (1995
untary organisations to register as a company with
hmited liability, generating profit for the benefit of
and 2001). He points towards the existence of "a
strong and vibrant black and minority ethnic vol
the community ( This new
form of incorporation ensures that should the
untary sector which has served the specific needs of
organisation cease, assets will be preserved for the
benefit of the community, as opposed to being dis
tributed to individual members. Further, social
enterprise 'brokers' have now emerged in this sector.
[these] communities in their own geographically
based areas" (Jan-Khan, 2003: 33). Even where
government agencies have been involved in com
munity capacity building projects (through regen
eration budgets), Banks and Shenton (2001) caution
These organisations develop, support and provide
knowledge exchange and networking arenas for
against agendas not in line with the community and
social enterprises that deliver front-line services, and
distribute government and other agencies funds to
297) assert that "we need to question whose purpose
social enterprises (e.g., Social Enterprise London
(2001,, the Social Enterprise
its substantive needs. Consequently, they (2001:
capacity building is serving and ensure that local
residents are not mere 'puppets' in the regeneration
game played out by large national, regional and local
agencies". Some social enterprises address local
Coalition (1999, the
Community Action Network (founded in 1998, and the various Regional
Development Agencies (PJDAs).
In the U.K., the Labour government, through
community concerns more effectively, serving to
remedy micro socio-environmental issues at grass
roots level, through local knowledge.
Social enterprises are a welcome answer to
such bodies as the DTI and the Regional Devel
addressing human development issues that other
opment Agencies (RDAs), has sought to support the
development of the social enterprise sector. This is
based upon the view that social enterprises fill service
sectors and government agencies cannot (or will not)
tackle. Bennet and Iossa (2005: 1) draw attention to
how "it has become common for the government to
provision gaps overlooked or neglected by the pri
contract out the provision of public services" to both
for profit and non-profit firms. Importantly, in a
vate and public sectors. Social enterprises address a
gamut of human development and empowerment
concerns such as homelessness, employment skills
comparison of both sectors, they assert that even
where non-profit organisations care more about
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Corporate Social Responsibility and Social Enterprise 359
social benefits, this does not necessarily translate to a
responsive to social issues, and "need to understand,
more favourable social benefit than that generated by
to anticipate and to respond to the emerging social
issues prior to their becoming legal issues" (Carby
Hall, 2005: 224). This not only highlights the legal
requirements for enterprises to treat their employees
in a socially responsible way, but also echoes Takala
for-profit firms.
Since many social enterprises exist predominantly
to address social ends (one key feature of the triple
bottom line), it could be argued that the prevalence
of their CSR policy and practice require close
and Pallab, that politico-legal compliance and
investigation. Emanuele and Higgins (2000) con
governance issues are necessary, but insufficient with
tribute to this agenda by challenging the assumption
that non-profit organisations can offer comparatively
lower wages, because they are more pleasant places
regards to internal CSR.
Some researchers, reflecting on the ethical chal
lenges within human resource management (HRM),
to work. The authors emphasise that employees in
suggested that an exploitative element has charac
this sector are often second income earners, and
tericstised some of the predominant approaches, in
therefore are less concerned with lower wages and
terms of the strategies, policies and procedures for the
reduced benefits more characteristic of the private
sector. They highlight how the voluntary sector is
often a job entry point for new employees, who later
management of employees, especially within the
context of some developments over the past two
move on to other sectors offering more fringe
benefits, better financial security and healthcare
include greater insecurity and risk (less secure
employment), deregulation of decision-making
(contravening procedural norms of justice) and
decline in management integrity. Sennett (1999)
programmes. They conclude with the assertion that
"we must begin to exert the same pressure for
'corporate responsibility' among non-profit
employers, as we demand in the private sector"
decades (Winstanley et al., 1996). The developments
emphasises further aspects of the modern organisa
tion, where labour is seen as purely contractual and
(Emanuele and Higgins, 2000: 92), implying that the
social enterprise sector needs to treat its employees
better. Distinguishing between external and internal
workers are shed or added in response to market
demand. Within this context, Greenwood (2002:
CSR may be beneficial, with social enterprises
clearly focusing upon serving communities and
ethical theories [towards HRM] are not made
overlooking crucial internal human resource issues.
261-262) observes that the "assumptions underlining
explicit... [where]... the role of stakeholder theory in
this debate has been overlooked". Greenwood
(2001) also notes that in the few instances where
Employee welfare and business ethics
Ethics and human resource management
Those working within a social enterprise model
require the necessary business know-how to gener
ate financial surpluses for social ends. However, we
question whether there is sufficient focus upon, for
example, investment in employees, which could be
ethical concerns of HR are studied, this is usually
at the micro-level of selection fairness, ongoing
evaluation and compensation systems. Through a
discussion of utilitarian and Kantian approaches,
Greenwood (2002) asserts that stakeholder theory
requires greater application to studying HPJS4 and
ethics, by virtue of the fact that it adopts a wider
(macro) perspective. The author also cautions that
'softer' HR practices (whilst appearing more ethical
than 'harder' HR practices), result in greater diffi
regarded as an important marker of internal CSR
practice. Carby-Hall (2005) investigated internal
CSR practices in commercial companies, consider
ing common law applications of employer's corpo
practices (treating employees as a means to a profit
employees, "confidence, trust and consideration to
in sheep's clothes because we know to approach with
caution". The implication here is that both forms of
rate social responsibility of respect towards
enable the contract of employment to be carried out
effectively" (Carby-Hall, 2005: 208). He (2005)
concludes that corporate lawyers need to be more
culty in identifying the unethical nature of such
able end). He (2002: 272) observes this point in
stating, "surely a wolf provides less threat than a wolf
HR (hard and soft) may be enacted unethically: the
latter may simply be more active in employing ethical
rhetoric, but without the associated practices.
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360 Nelarine Cornelius et al.
Bartels et al. (1998: 799) adopt a comparatively
more optimistic stance. Through a survey of 1078
Wilkinson (1999) argues that the ambiguity sur
rounding HR policies in small businesses derives
human resource managers, they found a statistically
from the start up process. Often, as business evolves
significant negative relationship between the
around the founder in a largely incremental manner,
strength of an organisation's ethical climate and the
HR practices will follow in the same vein. The
personality and experiences of the owner will
seriousness of ethical violations. Here they distin
guish between ethical climates as a part of the wider
organisational culture. In those instances where it is
necessary to improve the ethical responses of
employees, they highlight the importance of
changing the wider ethical climate via training,
ethics codes and reward systems.
Bartels et al. (1998) examined the relationship
between ethical climate and HRM. Their approach
focuses predominantly upon large private sector
organisations: over 45% of respondents worked in
therefore have the most significant influence on HR
policy development in business (Mazzarol, 2003).
Previous attempts to understand HR practices in
small businesses have oscillated between polarised
views of the 'small is beautiful' position creating
harmonious working relationships (Bird, 1989) to
'bleak house' scenarios (Rainnie, 1989; Wilkinson,
1999) emphasising poor (and even exploitative)
working conditions.
companies with over 1000 employees. It is therefore
SMEs face further emotional challenges in
creating HR practices. The 'small is beautiful'
necessary to gain a stronger sense of these issues
approach has led to researchers applying familial
within smaller organisations including those in the
analogies when describing human relations in
third sector. The literature addressing human
resource management and development yields some
interesting findings that support our contention for
the importance of addressing the weakness of HRM
policy and practice in smaller organisations. This
matters, as many social enterprises are small
(Department for Trade and Industry, 2002 and
discussed more fully later in this article). Hill and
Stewart (2000: 105) observe, "there is a substantial
body of evidence to suggest that SMEs do not have
the human resource development (HRD) expertise,
infrastructure and general resources which larger
organisations more frequently enjoy".
The growing research attention on HR and SMEs
has arisen out of criticisms highlighting the focus
on large organisations at the expense of smaller
businesses (Williamson, 2001). Researchers have
increasingly found that smaller businesses are less
smaller businesses (Ram and Holliday, 1993). This
seems to indicate harmonious and close emotional
relationships between employer and employee. In
reality, experiences in small firms are far more
turbulent, with positive experiences equally
balanced with often cited examples of high levels of
staff turnover, emotional exploitation of staff, and
informal support from family members. This
behaviour invariably emerges in smaller organisa
tions where HR policies are often under-developed
and sporadically applied. The emotional entangle
ment of the founder and the business often creates
difficult working conditions for individuals in small
business. As founders are central to business, they
are firmly embedded at the core and the source for
business values. Their commitment to the business
will be overwhelming, and they can unknowingly
transfer these expectations onto other members of
likely it is to have a formally developed and
staff. The emotional proximity between the em
entrenched HRD practice, due to a combination of
ployer and employee creates difficulties for staff to
assert their independence in the business, further
factors described by Cassell et al. (2002) as 'resource
poverty'. Woodhams and Lupton (2006) support this
complicated by the presence of informal HR
view, but argue that the size and 'take up' is mod
practices. Notions of reciprocity amongst employee
and employer relations combined with the input of
informal support from other sources of social capital
erated by further factors, namely the presence or
absence of an HR practitioner, ownership of the
firm (small businesses are often family owned) and
location of the industrial sector. This is further
compounded by difficulties defining SMEs and the
further complicate the scenario, creating feelings
of dissatisfaction, fear of exploitative behaviour
combined with a sense of obligation and personal
recognition of the heterogeneity of small firms
commitment to individuals and the business
(Kotey and Sheridan, 2004; Reid et al., 2002).
(Janjuha-Jivraj, 2003, 2004).
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Corporate Social Responsibility and Social Enterprise 361
cannot be simplified to singular issues, The nature of
and 49% with 10 or less. Indeed, recent work on
social entrepreneurs and social entrepreneurship
the owner will have a significant influence on
suggests that they share many of the challenges faced
employment issues and further development will
largely depend on whether an individual in senior
by commercial entrepreneurs (Bornstein, 2004;
Dees, 1998a, b). The research field is increasingly
acknowledging the relationship between CSR and
SMEs (supported by the DTI, Castka et al, 2004).
Writing within predominantly a European context
Understanding the nature of HR in small firms
management will implement policies, taking on the
role of'champion' (Cassell et al., 2002). There are
situations where HR policies are imposed on small
firms, typically, when they are embedded in supply
(but drawing also upon research in North America),
chains required to develop these policies to work
with larger partners (Cassell et al., 2002). Despite
Government initiatives such as Investors in People
(aimed to encourage small firm to focus on their
researchers acknowledge the paucity of business
staff) research based on hundred firms in the U.K.
has shown reactions have been mixed (62% declared
little or no involvement with IIP). Investing in
ethics applied to small firms (Quinn, 1997; Spence,
1999; Vyakarnam et al., 1997). Spence (1999) con
tends that business ethics research focuses largely on
large-scale organisations, and findings from these
studies are assumed to fit the SME context without
human resource programmes moves down the list as
modification or understanding of the particularities
of smaller organisations. Within the context of CSR
founders and owners deal with financial performance
activities it is somewhat ironic that SMEs are per
of the business. Cassell et al. (2002) examined the
ceived to be less active in this area, as many of them
impact of implementing human resource policies in
small firms, and identified these problems: increased
costs of maintaining initiatives (e.g., dealing with
reward structures), initiatives creating more harm on
do engage with members of the local community
morale than good (appraisal systems) and lack of
awareness about how to implement programmes
when they are committed to policies (e.g., equal
opportunities). The final situation, often cited
anecdotally by small firms, is the fear of investing in
programmes that improve their employee's capabil
ities and employers find these individuals move to
other jobs, transferring the benefits (and sunk costs)
of training to another company. These experiences
create challenges in encouraging formal HR policy
implementation in small firms. This is combined
with a lack of suitable models in applying policies to
match the highly centralised and informal manage
ment structures and decision-making processes
operating in numerous SMEs. There are notable
exceptions, such as the 'open systems' approach
suggested by Harney and Dundon (2006: 50),
allowing for flexibility and dynamism by being
sensitive to the particularities of specific cases.
and work on a social-welfare basis with employees
and families. Indeed the history of numerous SMEs
is a combination of profit maximisation along with
being firmly embedded in their local communities.
Habisch (2004) argues the lack of research relating to
CSR activity and SMEs originates from the practices
of small firms, with owners not investing time in
reflecting on their own social practice. Instead,
much of this behaviour is covert and often tacit. This
creates further problems in terms of sustainability of
CSR practice and capacity building. Much of this
experience is embedded in the tacit knowledge of
the organisation and much of this is lost with the
change of ownership and management. Exceptions
are seen when businesses are firmly embedded in
networks based on social and/or ethnic ties (Janjuha
Jivraj, 2003).
Policy makers and business support agencies have
increasingly recognised this void in provisions and
policies aimed at SMEs. The European Commission
adopted a position on CSR engagement amongst
SMEs in 2002; "Many SMEs already practice social
and ecological responsible management even if
they are not familiar with the CSR concept of
Ethical behaviour, CSR and the social enterprise
The majority of social enterprises registered as CICs
are likely to be small or micro (according to EU and
DTI definitions), 89% with less than 49 employees
regularly communication about their practices. For
many SMEs such practices are simply a consequence
of responsible entrepreneurship" (Observatory of
European SMEs, 2002). The fragmentation between
SMEs practising social responsibility and recognising
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362 Nelarine Cornelius et al.
and subsequently accruing benefits of these activities
was considered important enough to be registered as
a key commitment in the EC 2002 Green Paper
(entitled A European Framework for Corporate
Social Responsibility'; To stimulate CSR practices
among SMEs).
Foote (2001) addresses ethics and HRM in the
U.K. and Irish Charity sectors. The central thrust of
her argument is that whilst charitable organisations
have a clear external emphasis and applied values in
addressing socio-environmental concerns, they tend
to overlook the well-being of their employees. Via
primary qualitative research interviews with six and
four HR managers in England and Ireland respec
CSR practices. It is therefore pertinent to identify
the various aspects that comprise internal CSR.
Features and markers of internal CSR
Castka et al. (2004) highlight the plurality of char
acteristics contributing to these respective areas. In
internal CSR, they observe that this dimension is
comprised of human capital management, health and
safety standards, quality of management, adoption to
change and innovation, managing environmental
impacts, natural resources and managing finances.
Welford (2005) reports upon the findings of a survey
conducted in the comparison of CSR among 450
large listed companies operating in Europe, North
tively, Foote (2001: 33) notes that respondents spoke
of the "tendency among employees to expect
charitable treatment from the organisation for
America and Asia. A central finding is that internal
themselves as well as client groups manifesting itself
in excessive expectations about flexibility of treat
Europe and to a lesser extent, North America
employees expected more flexible treatment, this
was not seen as a priority or viable from manage
enterprises, Welford (2005) nevertheless articulates a
clear set of CSR markers (i.e. internal and external
ment's perspective. This is despite the fact that some
volunteers "were working much harder than many
aspects, accountability and citizenship). We contend
that these internal aspects, as well as accountability
employees for no remuneration and were having to
comply with certain laid down standards of hours
and citizenship may have applications to the smaller
and attendance" (Foote, 2001: 34). These findings
lead to the consideration that social enterprises
themselves may also lack appropriate emphasis upon
available resources). The following tables summarise
these respective areas (Table I).
In reference to the above table, Welford (2005)
good ethical HR practices and effective internal
highlights several internal codes ranging from
ment and enforcement of rules". Thus whilst
aspects of CSR are well-developed companies in
(Welford, 2005). Focusing upon large multinational
social enterprise (with modifications based on
Internal aspects of CSR (adapted from Welford, 2005)
Internal aspects of CSR Source of guidance Code/Theme
Non-discrimination policies in the workplace UN Universal Declaration Non-discrimination
of Human Rights
Equal opportunities Statements ILO Conventions 100,110 and 111 Equal Opportunities
and implementation plans
Statement on normal working hours, maximum ILO Conventions 1, 30, & 47 Fair Wages
overtime & fair wage structures
Staff development, in-house education UNESCO project on Technical and Vocational Education
and vocational training Vocational Education (UNEVOC)
The right of freedom of association, ILO Convention 98 Association
collective bargaining
& complaints procedures
Protection of human rights within the UN Global Compact Human Rights
company's own operations
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Corporate Social Responsibility and Social Enterprise 363
non-discrimination through to human rights pro
tection. These internal aspects can be applied to as
sess the extent to which internal CSR practices are
observed within the social enterprise. The following
table summarises the respective CSR elements
associated with accountability and citizenship.
As illustrated in Table II, we find a number of
CSR performance indicator areas ranging from
stakeholder engagement, through to education and
promotional campaigns. In addition Graafland et al.
(2003) identify the varied instruments that may be
applied by SMEs to ensure CSR practices. These
include a clear code of conduct (communicating
ethical standards throughout the organisation),
auditing (to measure, evaluate and report environ
mental and ethical impact) and annual social reports
(thus improving accountability). The respective tools
are used to address external CSR practice. Graafland
et al. (2003) then consider other tools of use in or
ganising the responsibility to internal stakeholders
(i.e. the employees). They emphasise the importance
of appointing a confidential and impartial person to
address any labour concerns, but overall, "the pres
ence of an ethics committee is a clear signal to the
organisation's members [of instilling an ethical
workplace environment]" (Graafland et al., 2003:
49). A final internal practice is that of staff training,
which may serve to improve ethical awareness
within the firm.
This final point raises the centrality of providing
employees with the freedom and ability to respon
sibly engage with ethical issues. If the firm is to
effectively engage in external CSR practices, it will
need the support of its internal stakeholders.
Capabilities theory and capabilities building
- towards an integrated approach to CSR?
One approach which is likely to be particularly
useful in bringing together internal and external
aspects of CSR is capabilities theory. The capabilities
approach has been developed by Amartya Sen (1992;
1999) and Martha Nussbaum (1999), where
capabilities refers to individual's freedom to achieve
what they have reason to value. The right to fully
function and flourish, to develop the capacity of
individuals and communities - built on explicit
ethical principles that promote dignity and quality of
life - are central features of capabilities approach.
Applying more recently to the professional work
environment, Vogt (2005) demonstrates how capa
bilities theory is congruent with Csikszentmihalyi's
(1997) theory of 'work flows'. The latter theory
considers the importance of creating a work envi
ronment conducive to creative work outputs
(architectural design, the availability of work
creches), while Vogt) demonstrates how capabilities
building is a more robust approach to the develop
ment of human potential and the enhancement of
social capital in the workplace, because it considers
wider influences (the socio-cultural context) outside
of work. Vogt's (2005: 119) central concluding
assertion is that "capabilities theory...entails more
CSR accountability and citizenship indicators (adapted from Welford, 2005)
Accountability Source of guidance Code/Theme
Commitment to reporting CSR and/ Global Reporting Initiative Reporting
or sustainable development
Policies & Procedures for engaging Industry best practice, AA1000 standard Stakeholder Engagement
in two-way dialogue
Citizenship Source of Guidance Code/Theme
Direct support for third-party social and/or Industry best practice Third parties
sustainable development
Educational programmes for the Industry best practice Education
promotion of corporate citizenship
External campaign programmes for raising social Activities of 'leading edge' companies Campaigns
and sustainable development issues
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364 Nelarine Cornelius et al.
than providing an optimal work environment; it
functionings may vary from elementary ones, such as
requires also affording employees the opportunity to
being adequately nourished and being free from
flourish away from the workplace". This implies that
avoidable disease, to very complex activities or per
sonal states, such as being able to take part in the life
of a community and having self-respect' (1999: 75).
development needs to be considered in its totality.
Whilst the capabilities approach addresses devel
tions upon human development, Hill (2003:117)
Robeyns however, observes that: 'Given that we
have little direct information about people's capa
asserts from a Marxist-feminist perspective that as an
evaluative framework, "it does not analyse the role
bility levels, we could start by taking group
inequality in achieving functionings as indicative of
of institutional power in causing or perpetuating
inequalities in capabilities'. (2003: 85). To restate,
opment by considering the impact of social institu
For Hill (2003) democratisation is a crucial process
Sen (1992) argues that freedom consists in the
expansion of the capabilities of persons to lead
contributing to the development of capabilities, but
that meaningful changes in the distribution of power
He also makes the distinction between realised
disadvantaged groups often rests ultimately upon
institutional frameworks available for resolving
functioning (what a person actually does) and the
capability set she has (her real opportunities). The
two give different kinds of information: '...the
inequalities in individual opportunities to achieve".
often meet substantial resistance. The success of
conflict. Hill (2003: 131) concludes that we can
"develop an approach to human empowerment that
ties social outcomes to actual institutional arrange
ments". This consideration may be applied specifi
cally to social enterprises, where a newly emerging
sector may ask to what extent do social enterprises
enable human empowerment but also, do social
enterprise structures and their interaction with
institutions such as government enable the
enhancement of capabilities for client groups and
One suggestion is that capacity building - which
remains core to the development of social enter
prises, and largely focuses on business and com
mercial skills ? is necessary to enable greater
likelihood of commercial survival. However, deep
ening and enhancing a social enterprise's under
the kind of lives they value and have reason to value.
former about the things a person does and the latter
about the things a person is substantially free to do.
The growth and development in terms of achieved
functioning of both employees, and of the clients
and communities, and how CSR is configured by a
social enterprise to enable this, would be one useful
start point.
Nussbaum (1999) and Sen (1999) have identified
different levels of capabilities which operate as an
ensemble and are in essence, indivisible. These are
basic capabilities (which put simply, are the innate
abilities individuals possess) which can be developed
into internal capabilities (through education and
training for example) and combined capabilities. This is
where factors such as the law or organisational policy
enable the exercise of internal capabilities.
awareness and community oriented values, and
Further, key to the capabilities approach is voice
and agency, explicitly political dimensions, where the
opportunity to be heard is seen as key to enabling
individuals and groups to help to shape the agendas
especially from a capabilities theory perspective. The
that in turn will shape their futures. The linkages to
standing of its commercial mission and ability could
to be mirrored by equal effort that centres on social
scope of the capabilities approach with regards to
understanding development, well-being and quality
of life is enormous, and some ideas within capabil
ities theory may be particularly useful with regards to
the development of coherent internal and external
CSR development. These include functioning, basic,
internal and combined capabilities, instrumental freedoms,
and economic and non-economic goods.
HRM policy and practice have been made by
management scholars (Cornelius, 2002; Cornelius
and Gagnon, 2004; Gagnon and Cornelius, 1999;
Cornelius and Skinner, 2005, 2007; Vogt, 2005).
Further, the capabilities approach points towards the
facilitation of a humane, dignity centred environ
ment that enhances the well-being of employees,
which may be interpreted as enhancing the
The concept of functioning, Sen argues, 'has dis
formal and informal social environment, within the
tinctly Aristotelian roots, (and) reflects the things a
workplace and well as allowing employees space to
person may value doing or being. The valued
nurture home and community life.
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Corporate Social Responsibility and Social Enterprise 365
The development of capabilities is enabled
We suggest that if Garriga and Mele's call for more
through instrumental freedoms (1992, 1999). They
have a dual purpose, as both the ends and means of
development, and can be regarded as what helps to
bridge the aspirations of capabilities with action to
enable change. The instrumental freedoms are the
balanced CSR theory and practice is to be met, it
requires a theory that is multidimensional, but
sufficiently parsimonious in its account to range
between these elements, and capabilities theory is
likely to meet these requirements. Importantly, a
principal determinant of individual initiative and
similar rationale and language can be applied for both
internal CSR and external CSR: functioning, basic,
social effectiveness: they are central to the achieve
ment of reasoned choices. (Sen, 1992, 1999).
internal and combined capabilities instrumental
Examples of instrumental freedoms include rights
freedoms and distribution of goods are important for
and agency (collective and political action) and
the communities served by social enterprises and the
transparency guarantees (clarity of process).
Ethics audits - a necessary pre-cursor to effective CSR?
Garcia-Marza (2005) highlights the importance of
ethics audits 'as a catalyst for company dialogue and
in general, for management of the ethics of a
company'. (2005: 57). Indeed, professional bodies
such as the Chartered Institute of Management
Accountants in the U.K. have developed principles
based rather than rules-based codes of ethics for its
members as these 'may be circumvented' (Coghlan,
employees within social enterprises and evaluation
within these capabilities areas undertaken also. By
implication, HRM policy needs to be scrutinised in
terms of whether the capabilities of employees are
enhanced or diminished by them.
But what might this mean in terms of HRM
policy and practice development? Given our earlier
discussions of the diversity of small organisations, a
one size fits all approach is unlikely to be fruitful.
Although there are areas that if paid attention to are
likely to add value to any organisation, it is likely
that focusing on the constraints of a small organisa
tion (such as resources that may be made available
2001: 1 and
Therefore from both an academic and a practice
for formal people management purposes), the nature
perspective, development of responsible practice is
built on clear ethical principles. By extrapolation, for
social enterprises in particular which have defined
social missions, ethical policy and ethical principles
small organisation, are likely to constitute critical
design features. However, a core organising feature
is a clear ethical position and policy with regards to
are the bedrock upon which CSR policy should be
developed: ethical policy and mission should precede
CSR policy and practice. In this way, the capabilities
approach provides a clear philosophical and ethical
position, from which both ethical policy and CSR
policy can then be developed. In other words, an
ethical policy is key to building social responsibility
of ownership as well as the evolving needs of the
the formal and informal management of people.
Further, this ethical position should be further
encapsulated within clear, CSR principles with
regards not only of the conduct of employees
towards client groups and the core ethos of the
organisation, but also the responsibilities of the
organisation towards employees, and employees to
each other. This presents the most challenging aspect
Further, Garriga and Mele's (2004) proposal for
the need to develop approaches that integrates
for social enterprises due to limited resources and
opportunities to reflect on deeply embedded values
instrumentality, politics, social demands and ethical
agreements reflecting employment practices may be
responsibilities, could, be met through the applica
resisted as a natural reaction by entrepreneurial
tion of the capabilities approach. Like Takala and
Pallab, we support the importance of a clear ethical
position, but argue that both juridical (politico-legal)
and ethical reasoning and responsibility should and
will be regarded as important by all organisations
(albeit that the former is compromised without clar
ity regarding the latter), including social enterprises.
such as ethical frameworks. Furthermore, formalised
management. However, there is the opportunity to
encourage these practices through external contracts
and business development partnership. For small
businesses wanting to operate in supply chains (pri
marily within the public sector) they are required to
develop and implement formalised HR policies as
part of their practice, the same conditions may be
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366 Nelarine Cornelius et al.
applied to social enterprises in terms of internal CSR
activities. Much of this may, in practice, require
We would encourage research from a range of
paradigmic positions. For example, Froggett and
systematic documentation as policy of existing good
practice, as an important starting point.
Chamberlayne (2004) illustrate the capacity of
interpretive biographical methods to enhance
Concluding Remarks
understanding of the intersection of personal and
organisational social enterprise narratives, In this
context they identified competing discourses of
We have contextualised our article within the cur
rent U.K. government's agenda for pursuing CSR in
SMEs, but have sought to develop this agenda by
highlighting the need to pursue internal CSR
practices in social enterprises. Our reasoning has
been underpinned by Aristotelian philosophy as well
as capabilities theory. We have identified a number
of important issues facing SMEs with regards to their
HR practices, and further indicated that such issues
may also be relevant in social enterprises.
Our ideas are propositional and conceptual and as
such, would benefit from further elaboration. We
social enterprise, where personal narratives are less
evident as a result of the preferred organisational
narratives, also reporting how biographical methods
help to identify previously unrecognised contradic
tions and tensions within social enterprise employ
ees. Research on social entrepreneurship is limited
(though see Bornstein, 2004; Dees, 1998a, b), and
understanding the development of social enterprises
would benefit from further research in this area,
extent to which social enterprises address internal
especially concerning the relationship between
approaches to social entrepreneurship, associated
leadership and governance approaches and their
implications for CSR.
enterprises need to consider internal features of
approach, Vogt (2005) poses questions encouraging
CSR, as well as external CSR, so that they can fully
address external community concerns in a sustainable
organisations to consider how successfully they are
propose future research avenues to identify the
CSR. Our central assertion has been that social
(socially and economically) manner and address
internal ethical issues and moral obligations. Future
From a more explicitly capabilities oriented
applying capabilities building to the workplace.
These include questions such as 'does our company
provide adequate health insurance to all employees?
research along these lines would be a useful step in
further clarifying the issues raised above. However, a
sizable gap in the literature needs to be addressed,
Are adequate safeguards in place to protect
namely the extent to which internal CSR policies
the starting point for assessing the extent to which
and practices are evident in social enterprises. With
particular reference to the above frameworks, we
instrumental freedoms within the organisation, not
employees from harassment, sexual assault or other
forms of violence?' These very questions could mark
social enterprises build capabilities and embed
therefore propose that one research question of
interest would be to what extent are social enter
only within its HRM policies and practice but also
within its corporate governance. Research devel
prises more or less 'CSR robust' when compared
oped in studies of large-scale enterprises could also
with commercial enterprises of comparable size?
More specifically, that future research could apply
be adapted to SME social enterprises. Maignan and
Ralston (2002) compare the extent and content of
business communications about CSR in France,
Welford's (2005) and Graafland et al. (2003) internal
Holland, the U.K. and the U.S. They propose four
the frameworks identified earlier, including
CSR measures, as well as consideration of whether
this framework may be elaborated from a capabilities
perspective, given the surface level resonance be
tween these measures and the capabilities approach.
The implication of these applications is that further
research can be respectively informed empirical
findings, thereby furthering our knowledge of social
enterprise perceptions of CSR and also the extent to
which the above markers of CSR are met in social
questions, centring on the extent to which business
discusses CSR in their websites; which principles are
employed to justify CSR initiatives; which mana
gerial principles are used as CSR initiatives and
which stakeholder issues are presented as the main
targets for CSR practices? A number of potential
research avenues are therefore suggested. Prior
interpretive research could generate themes to be
applied to survey questionnaires that measure the
extent to which CSR practices, and of what kind,
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Corporate Social Responsibility and Social Enterprise 367
are observed in social enterprises. Particular CSR
gaps can be identified, where social enterprises may
reputation given its range of stakeholders. Reputa
tion is not something that can be created through
prove lacking in specific CSR practices. Findings
clever marketing and image manipulation, but
obtained from an extensive CSR survey would help
to inform government policy in the move to help
develop social enterprises that truly observe socially
responsible practices inside and outside the organi
resides in the culture and behaviour of the organi
sation and its members. Thus, the effective man
agement of CSR, both internal and external, is an
important component within the development of
corporate reputation. And the Cooperative Bank
Further question concerns the extent to which
social enterprises effectively balance internal and
example highlights how this corporate identity can
external CSR and related to this, how explicitly is
ponent, especially for third sector organisations.
the CSR agenda communicated (if at all) to all
Finally, there are scholars within the field of
measurement of CSR that are concerned with the
employees within the organisation. These questions
are posed and need to be addressed, because we
hypothesise that social enterprises may overlook the
centrality of internal CSR practice. From a capa
bilities perspective, this then has direct implications
for the extent to which employees have the means to
fully function and flourish. The wider implication of
this is that social enterprises will then be curtailed in
their ability not only to build the capabilities of the
communities that they serve but also their staff who
deliver their services.
and indeed needs to contain a strong ethical com
robustness and balance of what is being measured in
terms of a double or triple bottom line (Graafland
et al., 2004; Van Marrewijk et al., 2004; Van der
Woerd and Van den Brink, 2004) and mainly, the
focus is on the external measurement of CSR. Much
has been written in the field about capabilities and
the challenges for measurement but a review of this
extends beyond the scope of this article. An obser
vation is that Sen (1992) recognises that 'much of the
debate on the alternative approaches to evaluation
Further, an important link that may be missed by
relates to the priorities in deciding what should be at
many social enterprises is the impact of their CSR
the core of our normative concern' (1992: 85) and
that 'some capabilities are harder to measure than
others and attempts at putting them on a 'metric'
may sometimes hide more than they reveal'. (1998:
81). For us, there is therefore not only scope in
exploring CSR, from a capabilities perspective with
regards what could determine the normative con
cern of social enterprises, in terms of internal and
external CSR, but also what the implications of a
capabilities approach would be for evaluation and
measurement of social justice in workplace settings.
practice on how the organisation is perceived. There
is a growing literature on corporate identity and
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2002; Wilkinson and Balmer, 1996). Although
much of this literature has been developed in a
conventional commercial context, Balmer has also
undertaken research on organisations such as the
Corporative Bank and the Corporative Society of
the U.K. (Wilkinson and Balmer, 1996). This is an
interesting case, as the Cooperative Bank needs be
seen as competent, trustworthy and credible as a
bank, while also being true to its roots in coopera
tion: an interesting lens on the double bottom line
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