David Grealish, Runner-up in the 2024 CoBS Student CSR Article Competition at Trinity Business School, tackles the issue of the Israeli-Palestinian conflict to offer a blueprint on how companies and institutions can address the issue.

Corporate Strategy for Peace: Navigating CSR in the Israeli-Palestinian Conflict by David Grealish.

The conflict between Israel and Palestine is one of the most complex and enduring disputes in the world. Multinational corporations (MNCs) have unique roles and responsibilities in and near the volatile region of Gaza. Due to the conflict, corporations operating in this region or conducting business with entities near the region face various complex ethical, legal, and operational challenges.

The central issue of these problems is the corporate responsibility puzzle: how to operate a profitable and sustainable business while simultaneously upholding human rights and making a constructive contribution to efforts to resolve conflicts. The actions and decisions of MNCs can significantly impact the conflict, the peace process, and the lives of people in both Israel and Palestine. Hence, it is essential to discuss the responsibility of MNCs operating in this region.

Systemic Challenges of CSR in a Divided World

The emergence of Corporate Social Responsibility (CSR) gained prominence after the systems theory of organisations, developed by thinkers like Karl Wick and Ludwig Von Bertalanffy, was added to management theory (Nissi et al.,2018). Bertalanffy’s General system theory 1968 posited that organisations, like biological organisms, are complex, adaptive systems characterised by interrelated and interdependent elements (Bertalanffy, 1968). Single-celled organisms like amoeba exchange substances between their internal and external environment via diffusion.

Similarly, like an amoeba, a business exchanges materials to and from its environment through distribution channels. The basic idea of corporate social responsibility was born from this process, which predicates that business and society are interwoven rather than distinct entities (Wood, 1991). However, some, like Friedman (1970), believe that corporations should prioritise shareholders’ needs as few firms have the expertise necessary to attack problems such as poverty and war being endured by Gaza. Thus, many firms are insensitive to social realities and can end up making a “mess of their journey into the task of helping remedy social ills” (Peel, 1988).

If a stakeholder is “any group or individual who can affect or is affected by the achievement of the organisation’s objectives (Freeman, 1984),” how can their needs be forgotten? Attempting some form of sound reasoning to justify ignoring the needs of stakeholders who are affected by corporations is not a substantial critique. Such an orientation on stakeholders is a view often held by fundamentally self-interested people, as ignoring stakeholder’s needs is more convenient than addressing them; hence, stakeholder theory was born.

Consequently, the idea of integrating CSR initiatives and beliefs into an organisation’s corporate culture can be seen as problematic due to the conflicting nature of CSR initiatives’ effects on an organisation’s operations. So, the question remains: what can organisations do to help address the Israel-Palestinian conflict amidst the CSR dilemma?

Corporate Power and Social Responsibility: A Call for Equilibrium

Those who advocate for shareholder primacy believe that the chosen company’s economic stance determines whether it should engage in CSR and what forms that responsibility should take. This central idea was outlined in value maximisation theory, which says that managers should make all decisions to increase the price of the company’s common stock, increasing the owner(s) wealth to create economic value (Friedman, 1970). This theory was later advanced by Margaret M. Blair in 1995, who stated that a corporation can only partially satisfy its investors, who want maximum profits, and simultaneously satisfy stakeholders.

Social responsibility can unintentionally give corporations too much power, potentially leading to adverse effects due to the corporation’s resources being used for reasons other than the long-term maximisation of the return on capital under their control (Blair, 1995). This view highlights that it is logically impossible to maximise in more than one dimension unless those dimensions are monotone transformations of one another (Jensen, 2001). Once synonymous with profit maximisation, value maximisation posits that MNCs have a choice but are not obligated to actively invest in CSR initiatives promoting social justice and conflict resolution. Making a profit is either essentially incompatible with “social responsibility” or is, at the very least, unimportant to it, according to most of the current discourse on the “social responsibility of business” (Drucker, 1984).

However, the problem with this view is that with growing economic power comes social power. If power and responsibility are to be relatively equal, “then the avoidance of social responsibility leads to the gradual erosion of social power” (Davis, 1967). Corporate Social Responsibility is inextricable in the fabric of fundamental management duties. Instead, it is essential to the modern corporation’s successful strategic management that CSR is integrated rather than dismissed. Meeting the needs of all stakeholders, not just shareholders, in light of current ethical precepts would be part of a more modern-day analysis of corporate social responsibility.

Stakeholder Theory in Action: CSR and the Path to Peace in Gaza

Stakeholder theory, pioneered by Freeman (1984), provides a more inclusive perspective on CSR, outlining corporations’ responsibilities towards those directly affected by the corporations’ operations living within or near Gaza. In contrast to value maximisation, stakeholder theory is a theory of organisational management and business ethics that suggests that managers should make decisions in the best interests of stakeholders to increase social value (Jensen, 2001). It suggests that businesses operating within or near Gaza have obligations towards various stakeholders, including the broader community context.

By addressing the needs and expectations of the diverse groups within these communities, companies can create value that transcends beyond economic gains, fostering an enriched societal ecosystem predicated on peaceful co-existence (Donaldson & Preston, 1995).According to stakeholder theory, even if there is a possibility of profit, MNCs should avoid activities that directly or indirectly support or enable human rights abuses, discrimination, or violations of international law. This includes refraining from establishing business operations in illegal settlements in the occupied Palestinian territories, exploiting natural resources, or providing products and services that contribute to the perpetuation of the conflict. Instead, MNCs should communicate with stakeholders, including local communities, civil society organisations, and human rights groups, to ensure that their operations are conducted ethically and responsibly and how they can help promote mutual understanding, tolerance, and peaceful coexistence among their members.

Aligning with global standards: Strategic CSR for Sustainable Development

The perception among small and medium-sized enterprises (SMEs) is that CSR initiatives are the luxury of large, affluent corporations, given their extensive resources. However, the notion that corporate social responsibility is a luxury only wealthy businesses can afford is beginning to slip. CSR is now perceived as a business requirement rather than a luxury, forcing small and medium-sized enterprises (SMEs) by this trend due to the rise of the conscious consumer, who favours goods and services from businesses that practice social responsibility (Sundström et al., 2020). Businesses prioritising CSR, ensuring that their operations, irrespective of location, align with principles of non-discrimination and respect for human dignity, outperform their competitors over time because not only can they uphold a better rapport with stakeholders, but societal considerations are also seen as being intrinsic to creating long-term shareholder value (Scherer & Palazzo, 2008). The documented advantages of CSR include improved customer loyalty, improved corporate reputation, and reduced risk(Porter & Kramer, 2006). It’s essential to recognise that while large corporations may have more resources to allocate towards CSR, social responsibility should be seen as a scalable strategy adaptable to any business’s size and capabilities.

A strategy is the determination of an enterprise’s primary long-term goals and objectives, the adoption of courses of action and the allocation of resources necessary for carrying out these goals (Chandler, 1962). CSR can be perceived as a business strategy incorporating self-control into an organisation’s operations to guarantee that its actions have a positive social and environmental impact (Carroll, 1999).According to Carroll’s Pyramid of CSR, companies are accountable on four levels: philanthropic, legal, ethical, and economic. Beyond what is required by law, corporations operating within or near Gaza must have moral and philanthropic responsibilities, which involve contributing to the community’s welfare (Carroll, 1991).International standards and best practices are now expected of businesses in corporate governance, as MNCs must adhere to international regulations, including human rights and humanitarian principles when conducting business (Valentzas & Broni, 2017).

As global actors, these corporations must respect the principles outlined in international agreements, such as the Universal Declaration of Human Rights, The Geneva Conventions and The United Nations Global Compact. The United Nations Global Compact outlines ten human rights principles. It offers a standard framework companies can use to match their operations and strategies with society’s objectives, further contributing to Israelis and Palestinians’ overall stability, development, and peaceful coexistence.

Economic Development as Peace-building: The Role of MNCs in Israel and Palestine

Creating shared value (CSV) is a business concept that Porter and Kramer (2011) advocate, highlighting the synergy between economic and social progress. They argue for integrating social welfare into business operational frameworks, showcasing that companies can advance economic and social conditions simultaneously. Companies remain stuck in a social responsibility mindset where societal issues are at the periphery, not the core. Their solution is creating shared value (Porter & Kramer, 2011). The CSV concept would advocate that MNCs must actively contribute to sustainable and inclusive economic development that benefits Israel and Palestine by promoting job creation and economic growth. Economic growth can help alleviate poverty, reduce inequality, and enhance social cohesion, creating an environment conducive to peace (Pritchett & Klein, 2020). By prioritising sustainable development initiatives, MNCs can foster a sense of hope and optimism among the population, reducing tensions and contributing to the conflict resolution efforts in Gaza.

In the context of stakeholder theory, businesses’ acknowledgement of their broader obligations has led to strategic approaches to social responsibility. Companies engaging with local stakeholders, such as affected communities and civil society organisations, gain insights into understanding how their operations, distribution channels and business relationships might affect human rights, informing corporate strategists, leading to products, services, and initiatives that are responsive and of social relevance (Morrison & Olofsson, 2022).The modern interpretation of value maximisation theory aligns with this social responsibility stance, recognising that businesses that operate ethically and responsibly are more likely to endure and prosper (Eccles, 2014).A classic example of creating shared value is Unilever’s Sustainable Living Plan, which aims to decouple its growth from environmental impact while increasing its positive social impact (Unilever, 2020).

The Power of CSR in Bridging Divides

The Israeli-Palestinian conflict supports the belief that multinational corporations play a significant role in using corporate social responsibility to address moral, legal, and practical issues. Corporations can use corporate social responsibility and the creation of shared value principles to promote social welfare and economic growth at the same time.

Thus, long-term corporate success can be improved while balancing profit with the obligation to protect human rights and aid in conflict resolution through synergising the business’s operations with social progress and encouraging CSR. Companies of all sizes can promote sustainable development and peace in conflict areas by establishing positive change whilst playing an equitable social role in settling international conflicts by incorporating CSR into their strategic frameworks. This shows that meeting corporate obligations and advancing a peaceful world, both morally and strategically necessary, can simultaneously be achieved by corporations amidst the Israeli-Palestinian conflict.

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Useful links:

• View the award-winning book by Trinity Business School professor Daniel Malan: Power and Corporate Responsibility: Dimensions, Purpose and Value
• Read a related article: Armed Conflict in the Global South: Why development banks may be part of the problem 
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