Contemporary Issues in Corporate Social Responsibility 9780739183748, 9780739183731

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Contemporary Issues in Corporate Social Responsibility

Contemporary Issues in Corporate Social Responsibility Edited by Duygu Türker, Huriye Toker, and Ceren Altuntaş

LEXINGTON BOOKS Lanham • Boulder • New York • Toronto • Plymouth, UK

Published by Lexington Books A wholly owned subsidiary of Rowman & Littlefield 4501 Forbes Boulevard, Suite 200, Lanham, Maryland 20706 www.rowman.com 10 Thornbury Road, Plymouth PL6 7PP, United Kingdom Copyright © 2014 by Lexington Books All rights reserved. No part of this book may be reproduced in any form or by any electronic or mechanical means, including information storage and retrieval systems, without written permission from the publisher, except by a reviewer who may quote passages in a review. British Library Cataloguing in Publication Information Available Library of Congress Cataloging-in-Publication Data Contemporary issues in corporate social responsibility / edited by Duygu Turker, Huriye Toker, and Ceren Altuntas. pages cm Includes bibliographical references and index. ISBN 978-0-7391-8373-1 (cloth : alk. paper) -- ISBN 978-0-7391-8374-8 (electronic) 1. Social responsibility of business. 2. Corporate governance. I. Turker, Duygu. II. Toker, Huriye. III. Altuntas, Ceren. HD60.C6342 2014 658.4'08--dc23 2013039336 TM The paper used in this publication meets the minimum requirements of American National Standard for Information Sciences Permanence of Paper for Printed Library Materials, ANSI/NISO Z39.48-1992.

Printed in the United States of America

Contents

List of Figures

vii

List of Tables

ix

Acknowledgments

xi

Preface

xiii

1 What’s in a Word?: An Exploration of the Changes in Meaning of Corporate Social Responsibility over the Last Century with an Emphasis on the Last Decades João M. S. Carvalho, Jan Jonker, and Nikolay A. Dentchev 2 Corporate Governance and Stakeholder Management Anne Burke 3 Corporate Social Responsibility in European Context Ayselin Yıldız and Gökay Özerim 4 Communicating Corporate Social Responsibility in a Skeptical World Wim J. L. Elving 5 Management System Standards and Other Initiatives for CSR Agata Rudnicka and Janusz Reichel 6 Sustainable Supply Chain Management Ceren Altuntaş 7 Sustainability of CSR Projects in Times of Economic Crises Elmar-Laurent Borgmann and Nadezda Kokareva 8 The Role of Nongovermental Organizations in CSR Huriye Toker v

1 19 43

57 71 89 105 125

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Contents

9 Communicating Corporate Social Responsibility Réka Jablonkai 10 Developing a Social Responsibility Strategy Duygu Türker

143

Index

181

About the Contributors

185

163

List of Figures

Fig. 2.1

Stakeholders of a company.

29

Fig. 2.2

Pyramid of CSR.

31

Fig. 2.3

Wider perspective on stakeholder groups.

33

Fig. 2.4

Mendelow’s Matrix.

36

Fig. 6.1

Integration of SCM and Business sustainability characteristics.

94

Fig. 8.1

Stakeholders of corporate social responsibility.

127

Fig. 9.1

Number of nonfinancial reports published annually.

150

Fig. 9.2

Picture from espell tolerance campaign (2012).

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Fig. 10.1

Multidimensional framework for SRS selection.

171

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List of Tables

Table 4.1

Frequently used greenwashing words in marketing. 62

Table 5.1

The ten principles of global compact.

75

Table 5.2

Exemplary relations between core areas of social responsibility in Global Compact and ISO 26000.

85

Table 6.1

UN Global Compact and SSCM.

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Table 9.1

Number and language of Facebook posts within the time period between January 1 and August 31, 2012.

156

Table 9.2

Posts relating to CSR activities.

157

Table 10.1

Exemplary SWOT and SR-SWOT of a European firm in consumer electronics industry.

169

SRS exemplary implication.

174

Table 10.2

ix

Acknowledgments

We would like to express our deepest gratitude to European Commission’s Erasmus Intensive Programme for their funding support to the project, SOCRESEDU (2011-1-TR1-ERA10-27836), Yasar University’s European Union Center for their support during the formulation and implementation of this project, and, of course, all the lecturers and students in our partner universities, who contributed with their valuable ideas and feedback for the development of this book. Additionally, we would like to thank to our colleagues and students for their support during the whole process: Gözde Pelister, Hürmüz Gizem Ersoy, Osman Kerem Erzen, Merve Aktaş, Ceren Gökakın, Gözde Bahşi, and Deniz Su Pigey. Duygu Türker Huriye Toker Ceren Altuntaş June 2013

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Preface

[CSR] means something, but not always the same thing, to everybody. —Votaw, 1973

The quote above is considered to be valid since 1973 till today and corporate social responsibility (CSR) still has different meaning for different practitioners and academicians. This can easily be seen on the real-life implications of CSR projects and the wide range of academic definitions. However, its share in corporate activity seems to be increasing as the “hard” figures like capital, assets, profitability ratios are no longer enough for explaining a corporate identity. “Soft” figures are the ones influencing brand recognition and reputation, which are very hard to build and very easy to crash. As a result of the industrialisation, urbanization, and population increase during the last two centuries, there has been an irreversible damage on our global landscape. Since these anthropological pressures create lots of problems on the global level, the individuals and organisations start to realize their own ever-increasing responsibility to consider the welfare and interests of all stakeholders as a whole. Although the legal frameworks on the national and international levels are seen important to protect the society and natural environment from the negative impacts of human being, they provide a reactive mode of control—rather than a proactive approach. Therefore, beyond these legal initiatives, the new century needs a more voluntary involvement of all people into the realization of sustainable development principle, stated by World Commission on Environment and Development (WCED) Report of “Our Common Future” in 1987. Considering its proactive approach and voluntarily basis, the concept of social responsibility has become a significant tool of generating a sustainable future for the society since especially the 1990s. xiii

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The European Union (EU) has been aware of the importance of CSR as a part of its sustainable development principle, since the 1990s. As stated in the final goal of the Sustainable Development Strategy for Europe, “Economic growth, social cohesion and environmental protection must go hand in hand” in the long term (CEC, 2001a, 2) and the increasing attention of the EU to CSR is consistent with the realisation of this goal (Tencati, Perini, and Pogutz, 2004, 174). In the “involvement of businesses and social partners” principles of the renewed the strategy for sustainable development (CEC, 2005), CSR is proposed as a way of fostering cooperation and common responsibilities to achieve sustainable consumption and production. During such a paradigm shift, all higher education institutions have also significant roles to shape the future generations. Therefore, in parallel to those movements, today many education institutions include a course on social responsibility to their programs. For example, according to Christensen et al. (2007), the top fifty global MBA programs (as rated by the Financial Times in their 2006 Global MBA rankings) include at least one of the topics of ethics, corporate social responsibility, and sustainability to their programs. However, the studies on the education of social responsibility in the literature show that there are no commonly accepted teaching methods and guiding curriculum of CSR. According to Giacalone and Thompson (2006), despite the increasing attention of scholarly and pedagogical literature to the topics of business ethics and social responsibility education, “the authors argue that the core teaching problem has not been discussed.” Depending on this increasing need for a common curriculum, an Erasmus Intensive Programme (IP) was organised in Yasar University in June 2012, with the contribution of nine European universities (Yasar University, Radboud University Nijmegen, Haute Ecole de la Province de Liège, Corvinus University of Budapest, University of Applied Sciences Koblenz, Polytechnic Institute of Bragança, University of Amsterdam, University of KHLeuven, Letterkenny University). The project was funded by European Commission (Erasmus—Intensive Programme) and executed by Duygu Türker, Huriye Toker, and Ceren Altuntaş in Yasar University. Based on the interactive feedback of participants during the project, an outline was prepared within an integrative framework and each lecturer tried to enlighten a significant aspect of CSR phenomena. Depending on the collaborative study of nine partner universities, this edited book was developed and it aims to shed light on some relatively less-studied areas of CSR from a European perspective. Within this framework, chapter 1 makes an attempt to analyse and evaluate the different meanings of CSR over time and leads the reader to understand the concept together with all of its dimensions first. Chapter 2 contributes to the concept by introducing corporate governance and stakeholder management approaches that are strongly related with CSR governance policies. Chapter 3 underlines the European perspective to CSR. Chapter 4 ex-

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plores the communication of CSR in a world where CSR attempts are perceived to be profit-oriented and insincere. Chapter 5 lists and explains the wide range of management standards and other regulatory policies that companies can be accredited for validating and grading their CSR applications. Chapter 6 extends the boundaries of socially responsible activity from a single corporation to the whole supply chain in a world where supply chains compete with each other. Chapter 7 investigates CSR applications during times of economic crises that have a wide influential area in the highly globalised economy of today. Chapter 8 combines CSR with nongovernmental organisations. Chapter 9 explores the relationship between CSR and the media. Finally, chapter 10 integrates different dimensions of CSR, adopts strategic management methodology to the formulation of CSR strategy, and provides a practical guideline for managers. TARGET AUDIENCES Even the development process of this IP project showed the great need for such an effort among European higher education institutions. After the call for partner search, more than fifty universities applied to participate in the social responsibility IP project. This great interest to the project can show the increasing importance of CSR among European universities. Based on the success of the IP project, this book aimed to develop a common sense of understanding about CSR teaching in European universities. However, the book is designed not only for the students, but also for the academicians and professionals who are interested in contemporary debate on CSR. DISCLAIMER As stated above, this book was published in the framework of the SOCRESEDU Project (Intensive Programme Project), which was financed by the European Commission. This publication reflects the views only of the authors, and the commission cannot be held responsible for any use that may be made of the information contained therein.

Chapter One

What’s in a Word? An Exploration of the Changes in Meaning of Corporate Social Responsibility over the Last Century with an Emphasis on the Last Decades João M. S. Carvalho, Jan Jonker, and Nikolay A. Dentchev

Throughout history, the notion of responsibility and of being responsible has been debated and will be debated time and again. These debates are based on various lengthy strands of literature in sociology, philosophy, medicine, theology, law, and the public domain. This rich theoretical background generated an ambitious goal to capture the changes in meaning of corporate social responsibility (CSR) over the last six decades. Through an analysis of this transformation of meaning, this study aims to gaining better understanding of how responsibility is positioned in organizations and businesses in particular. All kinds of organizations shape (and dominate) our lives and societies. We live in them, we make a living through them, and they determine if the lights can be switched on, if there is bread in the shops, nurses in the hospitals, and money in our pensions. Organizations’ omnipresence in all aspects of our lives is something relatively new, the result of two centuries of organizing on an industrial scale. With the invention of the industrial organization, the classical artisan or craftsman working in a one-man shop became doomed for depletion. Machines, processes, and anonymous legal structures took over. After WWII—and perhaps because of two world wars in a relatively short period of time—this approach to organizing became “taken for granted” and responsibility in an organized environment became an issue. 1

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Ever since, responsibility has been the subject of intense scholarship through its evolution from the 1950s to the present. This chapter describes the various stages of meaning that the concept of CSR has undergone through each decade over a little more than half a century. These stages are: (1) 1950s: Self-evident CSR, (2) 1960s: Discovery of Social Constituencies, (3) 1970s: Social Responsiveness, (4) 1980s: Social and Economic Responsibility, (5) 1990s: The Quest for Measuring, (6) 2000s: Theorizing, and (7) the present decade: Strategizing and Economizing. Of course, other categorizations of the literature are possible; however, an historical approach to the literature provides the necessary background for CSR conceptions through the years. Although these proposed stages cannot be precisely demarcated, they help to make an ongoing relevant debate a bit more transparent. They are a starting point for a crisp description of the development of the debate around responsibility. STAGES OF CSR The roots of CSR can be found in the early environmental concerns of the eighteenth century. Most consider the inventor of the term sustainability to be Hans Carl von Carlowitz (1645–1714), “Chief Project Supervisor” (Oberberghauptmann) in Kursachsen, who was concerned about the use of wood. His book Sylvicultura oeconomica, oder haußwirthliche Nachricht und Naturmäßige Anweisung zur wilden Baum-Zucht (1713) was the first comprehensive treatise about forestry and lay the foundations of sustainable yield forestry. In the twentieth century, sustainability became an issue for industrial organizations and for management. In this context, Mary Parker Follett (1868–1933) is considered a founder of sustainable development in business. As one of the few female management gurus in the early days of classical management theory, Follett also pioneered the establishment of community centers. In 1924, Sheldon wrote that an enterprise should assume not only economic and legal duties, but also social responsibilities beyond these duties. In the 1930s and 1940s, some scholars referred to a concern for social responsibility and social consciousness of managers (e.g., Barnard, 1938; Clark, 1939; Kreps, 1940). These and other works from that period can be considered as theoretical foundations for the first stage of CSR theory with sufficient critical mass of scientific endeavour. Stage 1: Self-evident (1950s) Howard Bowen presented one of the earliest conceptualizations of CSR in his Social Responsibilities of the Businessman (1953). Bowen defined a businessman’s social responsibilities as an obligation to pursue policies with

What’s in a Word?

3

desirable societal objectives and values. In the 1940s, 93.5 percent of the American businessmen accepted social purposes (Fortune, 1946, cited in Bowen, 1953, 44; and Carroll, 1999, 269). Peter Drucker (1954) also included the concept of public responsibility as one of the eight key areas in which business objectives should be set. He maintained that organizations must promote the public good and contribute to society stability, strength, and harmony. He believed strongly that all institutions, including those in the private sector, have a responsibility to the whole of society. In subsequent decades, Drucker (1973, 325) promoted the idea of business responsibility this way: “The fact is that in modern society there is no other leadership group but managers. If the managers of our major institutions, and especially of business, do not take responsibility for the common good, no one else can or will.” Both Bowen and Drucker, renowned management thinkers, considered social responsibility as a natural part of business. Hence, this first stage can be called “Self-evident CSR”; that is, it is self-evident that managers assume social responsibilities, which provides a solid ground for the further development of CSR theories. Stage 2: Discovery of Social Constituencies (1960s) In 1960, William Frederick asserted that businessmen should be concerned with total socioeconomic welfare, taking into account the wider interests of various social constituencies and not simply the narrowly circumscribed interests of private persons and firms. In the same year, Davis (1960) presented a similar definition of social responsibility, adding the notion of “long-term needs and wants of the broader social constituencies.” Corporations’ social responsibility must extend beyond economic and legal obligations and consider the ethical consequences of their decisions and actions on the whole social system. Davis (1960, 70–71) suggested that social responsibility refers to businesses’ “decisions and actions taken for reasons at least partially beyond the firm’s direct economic or technical interest.” Other authors in this decade also expanded the idea of social responsibility beyond economic and legal obligations. The following three citations are examples: The corporation must take an interest in politics, in the welfare of the community, in education, in the “happiness” of its employees. . . . (McGuire, 1963, 144) Businessmen apply social responsibility when they consider the needs and interest of others who may be affected by business actions. (Davis and Blomstrom, 1966, 12) Social responsibility moves one large step further by emphasizing institutional actions and their effect on the whole social system. (Davis, 1967, 46)

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João M. S. Carvalho, Jan Jonker, and Nikolay A. Dentchev

These authors also were also concerned about what is currently called stakeholder’s satisfaction. The emergence of stakeholder satisfaction as a concept stems from the work of Johnson (1971), who stated, “A responsible enterprise also takes into account employees, suppliers, dealers, local communities, and the nation.” About a decade later, Edward Freeman (1984) elaborated on this idea. Also in the 1960s, Nobel-prize winner Milton Friedman (1962, 1970) proposed different ideas. In Free to Choose, he argued that corporations’ only objective is to make money for their shareholders. He contested social responsibility because it can undermine market economy by adding costs that reduce corporation profitability. Among Friedman’s wide range of publications was his notorious article in the New York Times Magazine (September 13, 1970) in which he stated: So the question is, do corporate executives, provided they stay within the law, have responsibilities in their business activities other than to make as much money for their stockholders as possible? And my answer to that is, no, they do not.

This argument was a frontal assault on CSR theory; however, Friedman’s position provided a fortunate opportunity for the debate about whether managers should consider social constituencies in their daily work. Stage 3: Social Responsiveness (1970s) In 1971, the American Committee for Economic Development made an important contribution to CSR theory with its book Social Responsibilities of Business Corporations. This work embedded the concept of social responsibility within the economic and societal context of business and suggested the need for responsiveness to this context. Hence, their definition of social responsibility was based on three concentric circles: The inner circle includes the economic functions related to production, employment, and economic growth. The intermediate circle promotes exercising economic functions with a sensitive awareness of, for example, environmental conservation, relations with employees, and greater attention to customers’ needs. And the outer circle outlines newly emerging responsibilities like poverty, urban problems, and human rights. Many authors in the 1970s reiterated concern for these corporate social responsibilities. Business must help society achieve its basic needs (Steiner, 1971) through voluntary activities (Manne and Wallich, 1972), beyond the requirements of the law (Davis, 1973). Backman (1975) presented a list of programs to improve the quality of life that can be considered in the concept of social responsibility, such as employment of minority groups, reduction in pollution, improved medical care, and improved industrial health and safety.

What’s in a Word?

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Thus, it is important to identify and “solve social problems caused wholly or in part by the corporation” (Fitch, 1976). In his discussion about the dimensions of corporate social performance, Sethi (1975) also stressed this emphasis on corporate responsiveness to social problems (Davis, 1973). Sethi argued that companies have social obligations in response to market forces or legal constraints, and beyond. He described social responsiveness as the adaptation of corporate behavior to social needs. Stage 4: Social and Economic Responsibility (1980s) At the end of the previous stage, Archie Carroll (1979) presented an innovative conceptualization of CSR, which influenced many works presented in stage 4 and beyond. He defined CSR in four dimensions in which the economic and the social responsibilities of managers are complementary: 1. organizations should be productive and profitable and meet the needs of consumers and investors (economic responsibility); 2. organizations are compelled to work within existing legal frameworks (legal responsibility); 3. organizations must follow socially established moral standards (ethical responsibility); and 4. organizations’ voluntary corporate activities (philanthropy) must attempt to help other people and contribute to the well-being of society (discretionary responsibility). In 1985, Aupperle, Carroll, and Hatfield presented the concept of social orientation of an organization, which can be assessed through the importance it places on the three noneconomic dimensions compared with the economic one. This division is artificial because there are also economic impacts with legal, ethical, and philanthropic activities. In the 1980s, new models appeared around corporate social performance (CSP) that gave importance to the notion of process. Wartick and Cochran (1985) presented a framework consisting of principles, processes, and policies; and Epstein (1987) related social responsibility, responsiveness, and business ethics in a definition of corporate social policy process. More important was Drucker’s statement in 1984 that considered profitability and responsibility as complementary notions, going so far as to argue that business ought to covert its social responsibilities into business opportunities. He presented the social responsibility of business as “Taming the Dragon” by turning “a social problem into economic opportunity and economic benefit, into productive capacity, into human competence, into wellpaid jobs and into wealth” (Drucker, 1984, 62). Stroup and Neubert (1987) described social responsibility as an investment, a description that could

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sweeten the shareholder pain of diverted managerial attention from profit generation. Also in 1984, remarkably enough, Freeman published his seminal work Strategic Management: A Stakeholder Approach concerning the roles of stakeholders in strategic management, which has influenced many researchers from thereon. Freeman stated: That’s what stakeholder theory is —it says: business creates value in a responsible way that takes care of the environment, that tries to make the world a better place, that engages employees, and it makes money for shareholders. Those things have to go in the same direction. The idea that business and ethics and sustainability and responsibility are separate is an idea whose time has passed.

Stage 5: The Quest for Measuring (1990s) In the 1990s, some developments appeared based on the models of Carroll (1979, 1991) and Wartick and Cochran (1985). One of these was the CSP model of Wood (1991), who presented the core of CSR, the principles of social legitimacy, public responsibility, and managerial discretion, next to the processes of corporate social responsiveness, and the outcomes of corporate behavior. Meanwhile, Maignan and colleagues (Maignan, 1997; Maignan, Ferrell and Hult, 1999; Maignan and Ralston, 2002) developed an instrument to measure CSR practices. They replaced “society” with “stakeholder expectations” in their definition of CSR, which includes the economic, legal, ethical, and discretionary responsibilities of an organization. In opposition to this mainstream view, Jones (1996) stated that social responsibility makes sense only if it generates more profit to the company. At that time, the quest had begun to for a measurement to prove the arguments of stage 4: namely, social and economic responsibilities go hand in hand. Margolis and Walsh (2003) found that 127 studies in the period 1972–2002 explored the relationship between social and financial performance. In these studies, researchers have used aggregate measures of CSP (e.g., the KLD index) and various ratios of profitability. Although the majority of these studies reported a positive relationship between both variables, reviewers of studies on the CSP-CFP link asserted that the relationship must be regarded as inconclusive, complex, and nuanced (Arlow and Gannon, 1982; Griffin and Mahon, 1997; Margolis and Walsh, 2001; Roman et al., 1999). Such a conclusion is not surprising since the way for causality between one aspect of doing business (responsibility to one issue) and the overall result of this business (profit) is very long and hairy, if not impossible to determine (Dentchev, 2004). Therefore, various attempts were made to operationalize CSR (e.g., Kanji and Chopra, 2007, 2009, 2010); describe a social footprint (e.g., McElroy,

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Jorna, and Engelen, 2008; Henriques, 2010); or present a new interesting approach called “social life cycle assessment,” which addressed the impacts that a product has on people who interact with the life cycle of the product (Dreyer, Hauschild, and Schierbeck, 2010). Measuring remains an issue that is addressed and debated time and again (see, e.g., Eccles, Inoannou, and Serafeim, 2011). The whole idea of “if you can’t measure it you can’t manage it” remains an object for many theorists and practitioners. Stage 6: Theorizing (2000s) In the first decade of this century, there have been many attempts to systematize the CSR research strands (e.g., De Bakker et al., 2005; Dentchev, 2009; Garriga and Melé, 2004; Margolis and Walsh, 2003; Wood, 2000; Windsor, 2001). Garriga and Melé (2004) stated that the theories related to social responsible practices could be divided into instrumentality, political, integrated, and ethical great groups. According to instrumentality theories, companies are instruments to create wealth, and so, social responsibility must only be used to that purpose (e.g., Levitt, 1958; Friedman, 1962, 1970). The origin of instrumentality theories is in the neoclassical economic school, which maintains that managers already perform social responsible actions when they govern their companies profitably. In this research strand, McWilliam and Siegel (2001) described social responsibility as a differentiation to which consumers can give value since they have acknowledged of them. This allows companies to charge more for their goods and services. Thus, social responsibility must be treated as any other investment decision. Porter and Kramer (2002) also took an instrumental view—social responsibility only makes sense if it assures a competitive advantage. Henderson (2001) stated that social responsibility is an enticement because behind that kind of discourse is the constant quest for profit maximization. Furthermore, a social responsible behavior is not free because there are costs to the company and so higher prices. However, some authors insisted that to be social responsible provides sustainability and profit in the long run. In relation to political theories, several scholars took the position that the firm takes responsibility in the political arena using social responsibility as a vehicle of interaction with society. Among those who took this perspective are Bowen (1953), McGuire (1963), Davis (1973), Davis and Blomstrom (1975), and Hay, Gray, and Gates (1976). Altman (1998) talked about corporate citizenship as the basis to corporate community relations, in which companies interact, intentionally, with nonprofit organizations, groups of citizens, and other community stakeholders. Many authors referred to the corporate citizenship concept as related to the impact of corporate activities in society and the way they are managed (Waddock and Smith, 2000); as a marketing instrument (Maignan and Ferrell, 2001); as a result of the pressure

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for better social and environmental performance that moves upstream through the value chain (Warhurst, 2001); as related to ethical values (Wood and Logsdon, 2002); as related to the ethical and philanthropical areas of responsibility (Matten, Crane, and Chapple, 2003); and as a strategic instrument to attract better job applicants, retain them once hired, and maintain employees’ motivation and morale (Peterson, 2004). Some theories implied that the existence and growth of companies depends on society. Thus, social responsibility is a means for companies to integrate society’s demands into their management processes, maintaining their continuity. The works of Sethi (1975) and Carroll (1979) are in this group as well as the works based on stakeholder theory (e.g., Evan and Freeman, 1993; Freeman, 1984; Harrison and Freeman, 1999; Varadarajan and Menon, 1988), in which social responsibility is seen as a consequence of stakeholders‘ pressure imposed on companies. Companies and stakeholders reach an ethical compromise, which has a positive return in the long run. Another author with an integrative perspective is Frederick (1986, 1994, 1998), who proposed sequences that, systematically, address the company’s concerns. At the first level, CSR1, social responsibility imposes on companies an “obligation to work for social betterment.” This concept evolves to level CSR2, corporate social responsiveness, or the capacity to respond to social pressures. The third level, CSR3, embodies the notion of moral (ethical) correctness in actions taken and organizational policies. And the fourth level, CSR4, embodies cosmos (C), science (S), and religion (R). To achieve this level, a firm must be social responsible (CSR1), answer to the social needs (CSR2), and act with moral and ethical integrity (CSR3), integrating societal expectations in management practices to become legitimate. Finally, according to ethical theories, the firm must relate itself with society on the basis of ethical values: thus, social responsibility is based on an ethical obligation (Mulligan, 1986; Wood, 1991). This approach is more oppositional to the instrumental view, and maintains that law is not enough because some laws can be bad. These are other complementary theories, but there is also a gap between academic discourse and the manager’s actual ethical behavior. The existence of an organizational code of ethics does not mean that ethical behavior occurs in the organization. In many situations, ethical codes only serve to enhance the organization’s image, becoming merely symbolic. This observation shows that most of the corporate philanthropic activities are grounded in underlying economic interests (Schwartz and Carroll, 2003) and as a “tool” of legitimization not as a measure of actual CSR (Chen, Patten, and Roberts, 2008). Social responsibility is ethical if it is based on substantive ideas that implicate an array of stakeholders.

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Stage 7: Strategizing and Economizing Nowadays, the scientific literature has moved from a normative argument that firms need to assume social and environmental responsibilities to the argument for knowledge development in how managers can fulfill these responsibilities more effectively and efficiently. Fueling this transition in recent years were business practices that spawned multiple huge scandals (BP, Parmalat, Enron, WorldCom, Arthur Andersen, Nike, among others), prompting management action in this field. CSR managers, social and environmental policies, and reports are tangible outcomes of business attention to the topic. Moreover, corporate attention to social and environmental stakeholders led to tangible business opportunites. For example, innovations and new business models are real opportunities for considering environmental and social issues, even concern to the less privileged among us, or the socalled “bottom of the pyramid” (Hart and Sharma, 2004; Prahalad, 2010). Yet, strategizing and economizing of CSR has never been in conflict with prior conceptions. Business organizations are created as economically driven entities designed to provide goods and services to societal members. The profit motive was established as the primary incentive for entrepreneurship. Before it was anything else, business organization was the basic economic unit in our society (Carroll, 1991, 4). In 1979, Carroll stated, “Economic success is no longer a basis for ‘doing good by doing well.’” In 1991, he elaborated, saying, “The point here (is) that CSR, to be accepted as legitimate, had to address the entire spectrum of obligations business has to society, including the most fundamental—economic.” Four kinds of social responsibilities constitute total CSR: economic, legal, ethical, and philanthropic. Jonker (2010) stressed the evolution of CSR through many perspectives, enriching the concept but also making it difficult to understand. He maintained, “Responsibility implies mastering the art of balancing diverse needs and expectations of various stakeholders at the same time.” This implies organizations must create shared or multiple values for their constituencies (Porter and Kramer, 2006, 2010). Shared value creation achieves economic and social success, simultaneously. Value creation is the result of a set of intentional organizational activities. Managers and society in general are rather confused about the differences between the essence of CSR and mere philanthropy. While the latter is related to donations and doing good, CSR requires the organization’s continuous commitment to social efforts over the long run. The concept of CSR cannot be based on charity and altruism; rather, the association of social responsibility and organizational strategy gives more backbone to economic and legal responsibilities. Lantos (2002) considered ethical CSR to encompass all economic, legal, and ethical responsibilities. He further described altruistic CSR

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João M. S. Carvalho, Jan Jonker, and Nikolay A. Dentchev

as the philanthropic responsibilities of managers and strategic CSR as the fulfilment of those philanthropic responsibilities, which benefits the company through positive publicity and goodwill. As one can see, self-interest is always present, which is completely acceptable. However, strategically, it is more important to society for organizational activities to have an increased social responsibility to stakeholders than to expect philanthropic performance. Recently, Turker (2009) excluded the economic component from her definition of CSR, considering only corporate behavior that goes beyond organizational economic interests and aims to affect stakeholders positively. We cannot agree with this perspective because the economic impact on stakeholders and the use of resources imply in their own right the social responsibility of business. Instead, CSR must be seen as intimately connected to the needs and expectations of a growing array of stakeholders. Philanthropy is positive, but not the core of CSR. In fact, to spend part of a company’s profit in philanthropic activities and simultaneously fail to be responsible and accountable to various stakeholders in economic, legal, social, and ethical performance is rather schizophrenic behavior. Unfortunately, many organizations consider their philanthropic activities as the core of their CSR strategy. A better way to achieve a close link with stakeholders is to be stakeholder-market-oriented. This strategic orientation guarantees a positive social and financial impact on the organization’s performance and can happen naturally only if the approach is integrated into the organizational culture, beyond ethical or moral impositions. If an organization satisfies the human needs of its stakeholders, then it presents a natural social responsibility. Crittenden et al. (2011) developed a framework in which sustainability is a consequence of market orientation. However, to assess the authentic social contribution—the stakeholder impact of each organization—the level of market orientation must be measured as well as CSR or the sustainability outcomes. EUROPEAN POLICIES AND THEIR INFLUENCES In 1997, sustainable development became a fundamental objective of the European Union (EU) when it was included in the Treaty of Amsterdam establishing EU policies. Four years later, at the Gothenburg Summit in June 2001, EU leaders launched the first EU sustainable development strategy based on a proposal from the European Commission. This 2001 strategy was composed of two main parts: the first proposed objectives and policy measures to tackle a number of key unsustainable trends, and the second part, arguably more ambitious, called for a new approach to policymaking that ensured the EU’s economic, social, and environmental policies mutually reinforce each other. The central instrument developed for this purpose was the

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commission’s obligation to submit each new major policy proposal to an Impact Assessment. The EU Sustainable Development Strategy (SDS) added a third, environmental dimension to the Lisbon Strategy of economic and social renewal. The two strategies are complementary. This is how the EU described sustainable development: Sustainable Development stands for meeting the needs of present generations without jeopardizing the ability of futures generations to meet their own needs—in other words, a better quality of life for everyone, now and for generations to come. It offers a vision of progress that integrates immediate and longer-term objectives, local and global action, and regards social, economic, and environmental issues as inseparable and interdependent components of human progress.

In 2004, the European Multi-stakeholder Forum on CSR achieved many important conclusions on the basis of the definition of CSR provided by the European Commission: “CSR is a concept whereby companies integrate social and environmental concerns in their business operations and in their interactions with their stakeholders on a voluntary basis.” The forum concluded, among other things, that (1) CSR contributes to sustainable development, (2) CSR is one means for achieving economic, social, and environmental progress, (3) the dialogue with relevant stakeholders adds value to the development of companies’ CSR practices and tools, (4) the CSR approach is complementary to other public approaches for ensuring high environmental and social performance, (5) CSR involves an ongoing learning process for companies and stakeholders, and (6) the convergence of CSR practices and tools is occurring on a market-led basis through voluntary bottom-up and multi-stakeholder approaches. Against this background and at the conclusion of the review of the EU SDS launched by the commission in 2004 and on the basis of the commission communication “On the Review of the Sustainable Development Strategy— A Platform for Action” from December 2005 as well as contributions from the council, the European Parliament, the European Economic and Social Committee, and others, the European Council has adopted an ambitious and comprehensive renewed SDS for an enlarged EU, building on the one adopted in 2001. The EU sustainability strategy sets out a single, coherent vision for meeting the EU’s long-standing commitment to sustainable development. The strategy reaffirms the need for global solidarity and recognizes the importance of strengthening partnerships with those outside the EU, including rapidly developing countries that will have a significant impact on global sustainable development. After a review in 2009, the EU released in the fall of 2001 a renewed 2011–14 strategy for CSR. The European Commission has previously de-

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fined CSR as “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.” CSR concerns actions by companies over and above their legal obligations towards society and the environment. Certain regulatory measures create an environment more conducive to enterprises voluntarily meeting their social responsibility. What is new is that the strategic approach to CSR is increasingly important to the competitiveness of enterprises and can bring benefits in terms of risk management, cost savings, access to capital, customer relationships, human resource management, and innovation capacity. Also important is the introduction of the notion of creating shared value in relation to strategy. Companies are invited to strategize their value creation processes in such a way that they are encouraged to adopt a long-term, strategic approach to CSR, and to explore the opportunities for developing innovative products, services, and business models that contribute to societal well-being and lead to higher quality and more productive jobs. By giving public recognition to what enterprises do in the field of CSR, the EU helps to disseminate good practice, foster peer learning, and encourage more enterprises to develop their own strategic approaches to CSR (COM, 2011, 681 final, pages, 3, 6, and 8). Theoretical Foundations Many theories have influenced the evolution of the concept of CSR over the past fifty years. Among these are: (1) agency theory, (2) institutional theory, (3) the theory of the firm, (4) the resource-based view of the firm, (5) stewardship theory, (6) contingency theory, (7) systems thinking theory, and (8) stakeholder theory. Following McWilliams et al. (2001, 2006), we summarize the contributions of these theories to several approaches to CSR. Agency theory accounts for the conflict between the interests of managers and shareholders. Assuming that an investment in CSR decisions and activities may reduce the shareholder value, we can suggest that CSR is only a means to promote managers’ social, political, or career agendas (Friedman, 1970). Thus, this theory emphasizes importance of demonstrating that shareholder benefits also emerge from CSR. Stewardship theory (Davis, Schoorman, and Donaldson, 1997) presented an alternative view, maintaining that managers can also be good “stewards” of corporate assets, satisfying shareholders, and stakeholders. Obviously, stakeholder theory assembles all main ideas that defenders of CSR have developed since the 1960s. A stakeholder is any person or group that may influence organizational performance or that is affected by it (Freeman, 1984). Hence, CSR applies to all organizational stakeholders (workers, managers, shareholders, suppliers, clients, consumers, competitors, author-

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ities, community, and so on), and has been a widely used theoretical framework. Stakeholder theory implies that CSR decisions and activities can be beneficial for organizational performance because nonfinancial stakeholders demand them. But prudence is imperative because shareholders have the power to boycott any manager’s decision that soundly harms their financial returns. Thus, the need to measure CSR effects on organizational performance leads to new approaches from scholars, based on other theories of the firm that have been showing mixed results. One of those theories is the resource-based view (RBV) of the firm from the work of Penrose (1959), Wernerfelt (1984), and Prahalad e Hamel (1990). This theory maintains that the organization’s distinctive resources, capacities, and competences establish organizational performance and competitive advantage. Hart (1995) stated that environmental social responsibility could constitute an intangible resource that could confer competitive superiority to an organization, an idea that Russo and Fouts (1997) empirically confirmed. Another theory of the firm assumes that managers try to maximize shareholder value, and their outcomes are controlled by the stock markets. Thus, as CSR decisions and activities may be seen as an investment, they have an impact on financial performance. Based on this theory, McWilliams and Siegel (2001) proposed a cost-benefit analysis to determine the appropriate level of CSR investment that will maximize profit while satisfying stakeholder demand for CSR. Currently, a great number of companies incorporate CSR into their marketing strategies of differentiation and advertising because it helps to build a reputation of reliability and honesty concerning health, safety, ecology, and sustainable issues. Husted and Salazar (2006) showed that CSR decisions and activities lead to better societal quality of life and organizational performance when they are used strategically rather than when they are imposed by regulations or other factors. To be successful, a manager must achieve some kind of organizational consensus around the meaning of CSR decisions and activities. Institutional theory provides insight into how this consensus is developed and diffused among organizations (Jennings and Zandbergen, 1995). Thus, this theory helps explain how definitions of sustainability or CSR are constructed and accepted and which practices are created and adopted over time by organizations, thus becoming institutionalized. Overall, organizations must consider stakeholders‘ needs and wants and, simultaneously, they must be sustainable, minimizing the negative effects of their actions. And managers ought to be “builders of stakeholder relations” rather than only shareholders’ agents (Lantos, 2001).

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CONCLUSIONS CSR is a lively organizational phenomenon at the interface of business and society. This analysis demonstrates how CSR has changed in meaning and form of expression since the concept first appeared. And, a whimsical creature, the CSR concept will continue to change in connotation with time and context. As the business enterprise is transforming, responsibility will transform along with it. Responsibility will follow the development of the contemporary business enterprise. A clear tendency is the enlargement of CSR at different levels of analysis, including environmental sustainability, social sustainability, public responsibility, corporate social performance, social accounting, market-oriented sustainability, sustainable development, social and ecological footprints, business responsibility, corporate governance quality, corporate citizenship, stakeholder shared value, human rights, human capital development, philanthropy, well-being and—why not—happiness! Over the past decades, economic and ecological responsibility has fused with moral and social responsibility under the CSR umbrella. Therefore, delineating the boundaries of CSR is a rather useless endeavour. Inevitably, organizations are likely to develop a strategic orientation aimed at economizing CSR to satisfy their stakeholders. Such an orientation has become a condition for organizational continuity. Scholarly work has led to substantial progress surrounding the conceptualization of CSR —from the initial self-evident understanding to today’s notions in which more numerous and more long-term organizational strategies are intertwined with the idea of creating shared value. REFERENCES Altman, B. (1998). Corporate community relations in the 1990s: A study in transformation. Business & Society, 37 (2), 221–7. Arlow, P., and Gannon, M. J. (1982). Social responsiveness, corporate structure, and economic performance. Academy of Management Review 7 (2), 235–341. Aupperle, K. E., Carroll, A. B., and Hatfield, J. D. (1985). An empirical investigation of the relationship between corporate social responsibility and profitability. Academy of Management Journal, 28, 446–63. Backman, J. (1975). Social responsibility and accountability. New York: New York University Press. Barnard, C. I. (1938). The functions of the executive. Cambridge, MA: Harvard University Press. Bowen, H. R. (1953). Social responsibilities of the businessman. New York: Harper & Row. Carroll, A. B. (1979). A three dimensional conceptual model of corporate performance. Academy of Management Review, 4, 497–505. Carroll, A. B. (1991). The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons, 34 (4), 39–48. Carroll, A. B. (1999). Corporate social responsibility: Evolution of a definitional construct. Business & Society, 38 (3), 268–95.

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Matten, D., Crane, A., and Chapple, W. (2003). Behind the mask: revealing the true face of corporate citizenship. Journal of Business Ethics, 45 (1/2), 109–20. McElroy, Mark W., Jorna, Rene J., and Engelen, Jo van. (2008). Sustainability quotients and the social footprint. Corporate Social Responsibility and Environmental Management, 15, 223–34. McGuire, J. W. (1963). Business and society. New York: McGraw-Hill. McWilliams, A., and Siegel, D. (2001). Corporate social responsibility: A theory of the firm perspective. Academy of Management Review, 26 (1), 117–27. McWilliams, A., Siegel D., and Wright, P. (2006). Corporate social responsibility: Strategic implications. Journal of Management Studies, 43 (1), 1–18. Mulligan, T. (1986). A critique of Milton Friedman’s essay―the social responsibility of business is to increase its profits. Journal of Business Ethics, 5, 265–69. Penrose, Edith T. (1959). The theory of growth of the firm. New York: John Wiley. Peterson, D. K. (2004). The relationship between perceptions of corporate citizenship and organizational commitment. Business & Society, 43 (3), 296–319. Porter, M. E., and Kramer, M. R. (2002). The competitive advantage of corporate philanthropy. Harvard Business Review, 80 (12), 56–68. Porter, M. E., and Kramer, M. R. (2006). Strategy & society: The link between competitive advantage and corporate social responsibility. Harvard Business Review, 84 (12), 78–92. Porter, M. E., and Kramer, M. R. (2010). Creating shared value. Harvard Business Review, 89 (1/2), 62–77. Prahalad, C. K. (2010). The fortune at the bottom of the pyramid: Eradicating poverty through profits (revised and updated 5th anniversary edition). Upper Saddle River, NJ: Wharton School Publishing. Prahalad, C. K., and Hamel, G. (1990). The core competence of the corporation. Harvard Business Review, 68 (3), 79–91. Roman, R. M., Hayibor, S., and Agle, B. R. (1999). Research note. The relationship between social and financial performance: Repainting a portrait. Business & Society, 38 (1), 109–25. Russo, M. V., and Fouts, P. A. (1997). A resource-based perspective on corporate environmental performance and profitability. Academy of Management Journal, 40, 534–59. Schwartz, M. S., and Carroll, A. B. (2003). Corporate social responsibility: A three domain approach. Business Ethics Quarterly, 13 (4), 503–30. Sethi, S. P. (1975). Dimensions of corporate social performance: An analytic framework. California Management Review, 17, 58–64. Sheldon, O. (1924). The philosophy of management. London, New York: Pitman. Steiner, G. A. (1971). Business and society. New York: Random House. Stroup, M. A., and Neubert, R. L. (1987). The evolution of social responsibility. Business Horizons, 30, 22–24. Turker, D. (2009). Measuring corporate social responsibility: A scale development study. Journal of Business Ethics, 85, 411–27. Varadarajan, P. R., and Menon, A. (1988). Cause-related marketing: A coaligment of marketing strategy and corporate philanthropy. Journal of Marketing, 52 (3), 58–74. Waddock, S., and Smith, N. (2000). Relationships: The real challenge of corporate global citizenship. Business and Society Review, 105 (1), 47–62. Warhurst, A. (2001). Corporate citizenship and corporate social investment. Journal of Corporate Citizenship: Drivers of Tri-Sector Partnerships, 1 (Spring), 57–73. Wartick, S. L., and Cochran, P. L. (1985). The evolution of the corporate social performance model. Academy of Management Review, 10, 758–69. Wernerfelt, B. (1984). A resource-based view of the firm. Strategic Management Journal, 5, 171–80. Windsor, D. (2001). The future of corporate social responsibility. The International Journal of Organizational Analysis, 9 (3), 225–56. Wood, D. J. (1991). Corporate social performance revisited. Academy of Management Review, 16, 691–718. Wood, D. (2000). Theory and integrity in business and society. Business & Society, 39 (4), 359–78.

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Chapter Two

Corporate Governance and Stakeholder Management Anne Burke

The purpose of this chapter is to introduce the concept of corporate governance; outline approaches to corporate governance; discuss the link between corporate governance and corporate social responsibility (CSR); explore how an organization can best manage its relationships with stakeholders; and explore the potential challenges for organizations in adapting a stakeholder approach. CORPORATE GOVERNANCE The entirety of corporate governance is discernible from the two words this phrase contains: corporate and governance. A corporate is an entity set up to achieve a specific purpose. From the eighteenth century groups of people invested money for a specific purpose and were allowed to legally “incorporate” and create a structure called a corporate which was then considered as a “legal person” as far as its legal status was concerned and therefore allowed enter into legal contracts and given the same legal protection as any other person. However, the owners or shareholders of the corporate had limited liability and were not liable for the debts of the corporate. In other words, shareholders would not be liable for any of the debts that a corporate might incur beyond the capital they invested. It meant that corporates could raise large amounts of money from many different people. However, this also meant that all these owners would not be directly involved in running the corporate. There are many other words for corporate such as corporations, companies, businesses, proprietorships, or firms. The term company is used in this 19

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chapter. There are many types of companies, for example, public, private, not-for-profit, listed, unlisted, etc. Companies employ people. Company profits are turned into wealth for shareholders in the form of dividends. If the profits are not all distributed to shareholders in the form of dividends they are reinvested in the company. If a company chooses to reinvest some of the profits, they normally carry out research and development to create new products or cut costs. Multinational companies often generate wealth greater than the wealth generated by small individual countries. Governance derives from the Latin gubernare, meaning, “to steer.” Governance is how something is steered or controlled, directed, monitored etc. Governing a company will include putting in place mechanisms to control, direct, and monitor areas such as production, finance, logistics, human resources, marketing, public relations, etc. Governance encapsulates structure, culture, attitudes, and leadership styles. Corporate governance applies to all types of companies. For the purposes of this chapter corporate governance is examined from the perspective of companies where the main objective of the company is to make a profit for its shareholders and the company has many shareholders most of whom are not involved in the day-to-day running of the company. Corporate governance has applied for since companies have existed. Corporate governance has been practiced for as long as there have been corporate entities. Yet the study of the subject is less than half a century old. . . . Present practice is still rooted in the 19th century legal concept of the corporation that is totally inadequate in the emerging global business environment . . . what is needed is a vibrant alternative way to ensure that power is exercised, . . . in a way that ensures both effective performance and appropriate social accountability and responsibility. (Tricker, 2009)

However, as stated by Tricker (2009) above, corporate governance as a subject has only gained prominence in the academic literature in the last number of years. In its simplest form, corporate governance is concerned with the various aspects of how a company is managed. Corporate governance encompasses many overlapping and intertwining areas such as laws and regulations, accounting, finance, economics, management, organizational behavior, leadership, strategy, social responsibility, and ethics. Corporate governance is a global issue and because of its overlapping and intertwining areas, it is a complex area to understand. One of the earliest definitions of corporate governance describes it as “the system by which companies are directed and controlled” (Cadbury Report, 1992). This definition resulted from a report called the “Cadbury Report.” A committee chaired by Sir Adrian Cadbury compiled this report. The London Stock Exchange, the Financial Reporting Council, and the United Kingdom (UK) Accountancy profession established this committee to examine the

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financial aspects of corporate governance following a number of scandals in the UK. These scandals saw the collapse of many different corporations, including the Robert Maxwell Group, Polly Peck, and BCCI, despite having received unqualified reports from their respective auditors. The “Cadbury Report” was “a package of recommendations that had a sweeping impact on corporate governance around the world” (Nordberg, 2010). The Organisation for Economic Co-operation and Development (OECD) in 1999 following a request from the OECD Council to develop corporate governance standards and guidelines published “Principles of Corporate Governance.” These principles were reviewed and revised in 2004. These Principles of Corporate Governance “laid out the need for a framework in law to provide the basis for effective corporate governance” (Nordberg, 2010). One of the broadest definitions of corporate governance is that given by the OECD as part of these Principles of Corporate Governance: Corporate governance involves a set of relationships between a company’s management, its board, its shareholders, and other stakeholders. Corporate governance also provides the structure through which the objectives of the company are set, and the means of attaining those objectives and monitoring performance are determined. Good corporate governance should provide proper incentives for the board and management to pursue objectives that are in the interests of the company and its shareholders and should facilitate effective monitoring.

The term stakeholder is explained further on in the chapter. Both the Cadbury Report and the OECD principles have been influential in the development of corporate governance codes in many countries. For example, the Central Bank of Ireland (2010) uses a definition very similar to the OECD definition when they define corporate governance as: procedures, processes, and attitudes according to which an organization is directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among the different participants in the organization—such as the board, managers, shareholders, and other stakeholders—and lays down the rules and procedures for decision-making.

From these definitions of corporate governance given above, we can infer that corporate governance encompasses relationships between a company’s senior management, its board of directors, its shareholders, and other stakeholders, such as employees, customers, and suppliers. The board of directors act collectively as agents of the shareholders and manage the funds of the shareholders with the intent of increasing the wealth of the shareholders by establishing strategic plans and policies for the company to achieve certain goals and targets and guide the senior/top manage-

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ment of the company to achieve those goals. The directors are accountable to the shareholders and report to them on the performance of the company, provide the audited financial results, make all the necessary disclosures periodically, and take appropriate decisions in the best interest of the shareholders on each issue. The chairperson is the leader of the board whilst the chief executive officer (CEO) is the leader of the executive management team. Directors can be executive directors or nonexecutive directors. Executive directors are officers, executives, or senior managers employed by the company. Executive directors report to the CEO on executive or management issues. Executive directors’ responsibilities include setting the company’s strategic objectives, providing the leadership to put those strategic objectives into effect, supervising the management of the company, and reporting to shareholders on their performance. Nonexecutive directors are normally part-time nonmanagement directors and are often executive directors in other companies. Nonexecutive directors can be independent (having no interest in the company, e.g., not being an employee, creditor of the company) or nonindependent (being an employee, creditor of the company, etc.). Nonexecutive directors are there to monitor the actions of the executive directors and question the decisions made by executive directors. The main role of nonexecutive directors is to ensure that the company is acting in the best interests of the shareholders and other stakeholders. Boards may be unitary (one tier) or two tier. With unitary boards, all directors sit on one board. With the two-tier system there is a management board made up of executive directors and a supervisory board made up of nonexecutive directors. The supervisory board reserves some responsibilities for itself. These include oversight of the management board. The leader of the management board (CEO) reports to the chairperson of the supervisory board. The management board has responsibility for the operational performance of the organization. In some European countries, legislation dictates that certain stakeholders such as employees must be represented on the supervisory board. Irrespective of whether the board is one tier or two tiers it is desirable that there is an equal split of executive directors and preferably independent nonexecutive directors. Corporate governance decides the structure used to define a company’s objectives, as well as the means of achieving those objectives and of monitoring the results obtained. Coyle (2006) posits corporate governances as the “practices and procedures for trying to ensure that an organization is run in a way that achieves its objectives . . . subject to various guidelines and constraints with regard to their stakeholders.” The Audit Commission in the UK (2003) described corporate governance as “the brain as well as the nervous system of an organization, which, when working well, provides clear direction, anticipation of danger, communica-

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tion, movement, and action, all the while transmitting and receiving information to enable remedial action and changes of course.” In addition, the Audit Commission (2004) noted, “Organizations must bring together the ‘hard’ elements of governance, the system and processes, and the ‘softer’ culture elements, such as integrity, openness, and accountability, to provide a robust basis for decision making.” Mallin (2010) notes, “Corporate Governance is concerned with both the internal aspects of the company, such as internal control and board structure and the external aspects, such as the company’s relationships with its shareholders and stakeholders.” Cadbury (2000) recognizes the interests of society, noting, “Corporate governance is concerned with holding the balance between economic and social goals and between individual and communal goals. The corporate governance framework is there to encourage the efficient use of resources and equally to require accountability for the stewardship of those resources. The aim is to align as nearly as possible the interests of individuals’ corporations and society.” At a basic level corporate governance is “fundamental to well managed companies and to ensuring that they operate at optimum efficiency” (Mallin, 2010). Briefly, the aims of corporate governance are to provide assurance that the company achieves its mission, is fit for its purpose, and its directors are held to account to both shareholders and society. Corporate governance is a fundamental component of assuring effective performance and maintaining and enhancing trust and confidence, both internally (through its internal control and board structure) and externally (through its relationships with its shareholders and stakeholders). APPROACHES TO CORPORATE GOVERNANCE There are several approaches to corporate governance. Two of the most common approaches are: • shareholder value approach, and • takeholder approach. A company using the shareholder value approach focuses mainly on maximizing shareholder value as its primary goal whilst a company taking a stakeholder approach will also focus on the varied interests of groups such as customers, suppliers, employees, credit institutions, and the local community. However, there is no one accepted approach. Tricker (2009) states, “Corporate governance, as yet, does not have a single widely accepted theoretical base nor a commonly accepted paradigm. . . . The subject lacks a

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conceptual framework that adequately reflects the reality of corporate governance.” Anglo-American countries generally favor the shareholder value approach, which means having a board comprising totally of executive and nonexecutive directors (unitary board) elected by shareholders, whereas certain European countries such as Germany favor the stakeholder approach, which gives particular stakeholders such as employees an entitlement by law to representation on the supervisory board. However, in light of the latest global financial crisis (2007–2008) and partly in reaction to company scandals (e.g., Enron, WorldCom, Ahold, and Parmalat) and the collapse of financial firms such as Lehman Brothers, there have been suggestions that countries should cooperate and work together more on corporate governance and regulation to restore investor confidence in the markets. SEPARATION OF OWNERSHIP AND CONTROL In a small company, where there is one owner, the owner will be actively involved in the day-to-day running of the company so there is NO separation of ownership and control. However, in the case of many companies where there is more than one owner these owners may not be involved in the running of company. From a practical context, it would not be possible in the case where there are thousands, or more, investors owning a public company, for these investors to make the daily decisions needed to operate a business. This issue has become more and more of a challenge as countries have industrialised and developed their markets. Where this is the case, the shareholders delegate responsibility for running the companies to a board of directors. There is now a separation of ownership and control. Consequently, the shareholders sit outside the boardroom and delegate the decision making to the directors to act on their behalf. Separation of ownership from control effectively means a loss of effective control by shareholders over decisionmaking. This issue was articulated as far as back as 1776 when Adam Smith in the Wealth of Nations made the following rather disparaging comment on company management: The directors of such [joint-stock] companies, however, being the managers rather of other people’s money than their own, it cannot well be expected, that they should watch over it with the same anxious vigilance with which partners in a private copartnery frequently watch over their own. . . . Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company.

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This comment is still valid today and emphasises that management and sometimes the board of directors may have a natural tendency to give themselves preferential treatment where there is separation of ownership and control. PRINCIPAL-AGENT PROBLEM Agency theory describes the agency relationship where the principal assigns responsibility to the agent. From a perspective of a company, the shareowners are the principals and the directors are the agents. In its simplest form, the agency theory suggests, “people will tend to do what is in their own interest” (Nordberg, 2010). Agency problems arise when there is a lack of goal congruence between managers, directors, and shareholders. According to Friedman (1979), the sole objective of a company is to maximize the wealth of its shareholders. In an ideal world, directors and managers (agents) would obey this and make decisions that would primarily benefit the shareholders (principals) of the company. Berle and Means in 1933 recognized the fact that companies are entrusted to a board of directors and the ensuing power the board of directors has: The economic power in the hands of the few persons who control a giant corporation is a tremendous force which can harm or benefit a multitude of individuals, affect whole districts, shift the currents of trade, bring ruin to one community and prosperity to another.

Simply put, agents are capable of maximizing their own personal interests rather than maximizing the wealth of the shareholder. In addition, the development of the modern corporation has increased the risk of agency problems. Company ownership today is often widely dispersed increasing the likelihood of conflicts arising between managers, directors, and shareholders. The question then is how can shareholders (the principal) be certain that the directors (the agent) are acting in the shareholders’ best interests? It can be difficult for the shareholders to verify the performance of the directors. In addition how can shareholders ensure that directors are not: lazy, taking excessive salaries and bonuses, taking excessive perks (company cars, jets, overly plush offices), engaging in insider trading, taking too short a term view, empire building, etc.? Some exaggerated examples reported in the media of where directors have not acted in the best interests of the shareholders are outlined below. “Tyco paid for half of a $2.1 million trip to the Italian island of Sardinia, the highlight of which was a fortieth birthday party for Kozlowski’s wife, Karen, that included a performance by singer Jimmy Buffett” (CNN/Money, 2002). Dennis Kozlowski was the former CEO of Tyco International.

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“During his $1.22 million office renovation, ex-Merrill Lynch boss John Thain reportedly bought a portable toilet at a cost of $35,000” (Chicago Tribune, 2009). The essence of the principal-agent problem is that unmonitored directors will serve their own personal interests ahead of shareholder wealth maximisation. There is also the issue of information asymmetry as the agent has generally more information than the principals do. The principal-agent problem is particularly evident in light of the recent financial worldwide crisis where: • Executive director compensation is not suitably linked to performance measures. Bebchuk and Fried (2004) suggest “managers have used their influence (over corporate boards of directors) to obtain higher compensation through arrangements that have substantially decoupled pay from performance.” • There is concern among governments, investors, and the publics about the generous compensation and pension arrangements of executive directors. • Directors have not taken sufficient account of the risks the company may be facing. It is essential for the nonexecutive directors to minimise any issues arising from the principal-agent relationship and monitor senior managers (executive directors). Because of the above, Blair (1996) argues that agents must be monitored in order to prevent abuse of power: Managers are supposed to be the ‘agents’ of a corporation’s ‘owners,’ but managers must be monitored and institutional arrangements must provide some checks and balances to make sure they do not abuse their power. The costs resulting from managers misusing their position, as well as the costs of monitoring and disciplining them to try and prevent abuse, have been called ‘agency costs.’

Today, corporate governance mechanisms and corporate governance codes act as an important tool in ensuring that any issues arising from the principalagent relationship are minimised. Shareholders do not directly appoint/fire managers. The board of directors does this. Therefore, shareholders cannot vote to replace the senior management team. Shareholders can influence managers indirectly through the board of directors. Even changing board directors can be difficult for shareholders as senior management control the process and some inactive shareholders will just go along with the wishes of senior management. Whilst some “active” shareholders with large shareholdings may try to influence management or change board directors, they are very rarely successful. The post-crisis reform of corporate governance is very much focused on (Mertzanis, 2011):

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• director remuneration/selection—the level of pay and the manner, in which directors are nominated, are two central issues in the way corporate governance is operated in a company; • risk management; • internal practices; • boards’ abilities to understand and control risk taking; • shareholder concern over long-term value of their investments; and • corporate governance of financial institutions. All of the above reforms are aimed at insuring that the rights of shareholders are protected. Now more than ever there is a need to restore investor confidence. SHAREHOLDER VALUE APPROACH As previously mentioned, the approach to corporate governance commonly adopted in Anglo-American countries (for example Ireland, the United Kingdom, the United States, Australia, Canada, and New Zealand) is the shareholder value approach. This approach puts the shareholder at the heart of corporate governance. The overall objective is to maximize shareholder value in terms of share price and dividends awarded. It is therefore necessary to ensure directors are motivated to act in the interests of the shareholders and not in their own self-interest. In order to maximize shareholder value it is necessary to align the interests of the directors with those of the shareholders. Some ways of doing this include: • giving directors share options (to align their interest with those of the shareholders); • only rewarding directors for sustained long-term results (to discourage directors from taking too short a term view); • ensuring there is a balanced board of executive and nonexecutive (independent) directors; • appropriate audit arrangements; • appropriate monitoring of the board; and • appropriate risk-management strategies. With the shareholder value approach the primary interests served are those of the shareholders, ahead of any other affected stakeholders who might have an interest in the company. “The board’s main role is to keep the actions of managers aligned with the interests of shareholders” (Nornberg, 2010). “There should be a clear division of responsibilities at the head of the company between the running of the board and the executive responsibility for the

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running of the company’s business. No one individual should have unfettered powers of decision” (Financial Reporting Council, 2008). In other words, the chairperson and the CEO should be two different people. In addition, the CEO should not be appointed, after retiring as CEO, to the position of chairperson. The directors should be answerable to their shareholders, who should have the authority to remove them as directors if their performance is below standard, though as mentioned previously this is not always that easy. When a shareholder approach is adopted, corporate governance is mainly about the incentive systems for directors/managers and the monitoring mechanisms designed to protect shareholder interests. However, many feel that in the past frequently the result (adding to shareholder wealth) has been used to justify the means (damaging the environment), and therefore the shareholder approach may not always be the best approach. The maximisation of shareholder wealth has often resulted in damage to communities and the environment. Indeed the shareholder approach has failed in some instances as evidenced during the recent financial crisis “The crisis has shown that managers are often incapable of resisting pressure from shareholders. In their management decisions, the short-term market value counts more than the long-term health of the firm” (Segrestin and Hatchuel, 2011). STAKEHOLDER APPROACH A contrasting perspective by Aoki (2000) is that corporate governance is “the structure of rights and responsibilities among the parties with a stake in the firm.” This view, adopted in many European continental countries, holds that in making decisions the board of directors should consider the interests of all those having a stake in the company, not just those of the shareholders. Therefore, a stakeholder is anyone having a stake in a company or who is affected by the company’s actions. Freeman (1984) defines stakeholders as “any group or individual that can affect or be affected by the realisation of a company’s objectives.” Karmel (1993) posits that the stakeholder approach is “premised on the theory that groups in addition to shareholders have claims on a company’s assets and earnings because those groups contribute to a company’s capital.” Companies affect the lives of a wide range of people either directly or indirectly. Stakeholders (figure 2.1) include both immediate stakeholders (i.e., shareholders/investors, suppliers, customers, and employees) and the wider circle groups such as communities, the government, trade associations, and political groups (Donaldson, 1995). An even wider view of stakeholders is discussed under the section on CSR.

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Advocates of the stakeholder approach suggest that “all persons or groups with legitimate interests participating in an enterprise do so to obtain benefits and that there is no prima facie priority of one set of interests and benefits over another” (Donaldson, 1995). STAKEHOLDERS IN CORPORATE GOVERNANCE From the stakeholder perspective, corporate governance is the mechanism that ensures companies take responsibility for directing their activities in a manner fair to all stakeholders. As mentioned in the previous section stakeholders are normally assumed to encompass customers, suppliers, employees, competitors, and the community, in addition to shareholders and other

Figure 2.1. Stakeholders of a company. Adapted from Donaldson (1995).

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investors. The responsibility of meeting all stakeholder interests is frequently referred to as stakeholder management. Different countries have different perspectives on the rights of stakeholders. In Germany, employees have a legal claim to representation on the supervisory board. In the UK directors have a duty to “have regard to the interests of employees, suppliers, customers and others” in addition to “the impact of the business on the community and the environment” (UK Parliament, 2006, 79) The OECD “Principles of Corporate Governance” (2004) states that “the corporate governance framework should recognize the rights of stakeholders established by law or through mutual agreements and encourage active cooperation between corporations and stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises.” If there is consideration given to stakeholders then the company may allow for some direct representation of various stakeholders in its governance structure. CSR as a concept is not new and has been around for at least fifty years. There are two principal disparate perspectives. One perspective suggests, “There is one and only one social responsibility of business . . . to increase its profit” (Friedman, 1970). In Friedman’s paper, which appeared in the New York Times, he is not suggesting that businesses be horrible to their employees or circumvent the law; rather, they should look after their employees and be good to their customers/suppliers, provided these activities promote increased profits. The other vastly more accommodating perspective is the stakeholder framework and posits that companies operate in a broader society and not just within a corporate vacuum. Dahl (1973) argues, “Business corporations are created and survive only as a special privilege of the state. It is absurd to regard the corporation simply as an enterprise established for the sole purpose of allowing profit-making. One has simply to ask: Why should citizens, through their government, grant special rights, powers, privileges, and protections to any firm except on the understanding that its activities are to fulfill their purposes? Corporations exist because we allow them to do so.” In recent times it has been questioned how companies relate to their broader society. Therefore, companies have a responsibility to society that goes beyond making profits. This responsibility extends to matters of general concern to the society in which it operates. This responsibility has become known as CSR or corporate citizenship, corporate ethics, corporate accountability, stewardship, sustainability, and triple-E bottom line (economical, ethical, and environmental). In this chapter, the term CSR is used. Carroll (1979) conceptualised CSR as “the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time.” The above expectations are echoed in Carroll’s pyramid of CSR in 1991. The four-part model (figure 2.2) identifies the major organizational

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responsibilities that make up a company’s CSR. Carroll was one of the earliest researchers to make a distinction between various kinds of major organizational responsibilities. Carroll (1991) places economic performance at the foundation of the pyramid whilst at the same time expecting that a company should follow the law, act ethically, and be a good corporate citizen. Carroll (1991) defines the economic domain as a company performing “in a manner consistent with maximizing earnings per share, being as profitable as possible, maintaining a strong competitive position and high level of operating efficiency.” The legal domain is described as “obeying or complying with the law” (Carroll, 1979). Whilst there are many definitions of CSR, Buchholz (1991) listed five principal elements found in most definitions: • Companies have responsibilities that go beyond the production of goods and services at a profit. • These responsibilities involve helping to solve important social problems, especially those they have helped to create. • Companies have a broader constituency than shareholders alone. • Companies have impacts that go beyond simple marketplace transactions.

Figure 2.2. Pyramid of CSR. Adapted from Carroll (1991).

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• Companies serve a wider range of human values than can be captured by a sole focus on economic values. In a more recent study, Dahlsrud (2008) conducted an analysis of thirtyseven definitions and identified five key aspects of CSR as environmental, social, economic, stakeholder, and voluntariness. Vogel (2006) defines CSR as “practices that improve the workplace and benefit society in ways that go above and beyond what companies are legally required to do.” Similarly, McWilliams et al. (2006) describe CSR as “situations where the firm goes beyond compliance and engages in voluntary actions that appear to further some social good, beyond the interests of the firm and that which is required by law.” In essence, companies could not exist without society. If there was no society then there would be no customers to sell products/services to. There would be no suppliers or employees. Companies also use environmental resources such as water, etc. They affect either positively or negatively the landscape by their existence. They avail of the travel infrastructure to transport their products by road, sea, air, etc. Companies affect the people who live near their manufacturing outlets and offices. Therefore, companies have a responsibility to protect society and the environment and not just use them to maximize shareholder wealth. Cadbury (2002) states, “The essence of the contract between society and business is that companies shall not pursue their immediate profit objectives at the expense of the longer term interests of the community.” They cannot operate in a vacuum and they must take cognisance of the impact of their actions on various stakeholders. The European Commission (2001) Green Paper defines CSR as “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.” At the same time, they have to maximize their shareholders’ value if shareholders are going to continue to invest further and retain their investment in the company. In figure 2.3, adapted from Rendtorff (2009), it can be seen that the company is not in the centre of the stakeholders, and the company is just one of the stakeholders who collaborate to enhance the well-being of everyone in the community. There are potential economic gains for companies that engage in CSR, which are closely aligned to the shareholder approach as follows: • The company may win extra customers as customers may prefer to buy products from an environmental friendly company. • Existing customers of a company that engages in CSR may be more trusting of that company and be happier with the service they receive from that company. A company needs to serve its customers well if it is to survive and thrive in the long-term.

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Figure 2.3. Wider perspective on stakeholder groups. Adapted from Rendtorff (2009).

• Employees may be more attracted to a company that engages in social causes. • Existing employees may be more committed and motivated. • The voluntary CSR activities may forestall legislation and the ensuing government interference and costs. Davies (2005) argues, “Shareholders are not likely to do well out of a company whose workforce is constantly on strike, whose customers don’t like its products and whose suppliers would rather deal with its competitors”; therefore it is in the interests of companies to keep these other stakeholders satisfied!

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However, the economic gains from CSR outlined above often only come to fruition in the long term; therefore CSR activities may sometimes be perceived by managers/directors (agents) as a hindrance to their personal financial goals, such as bonuses from short-term profits (see discussion on agency theory above). Therefore, it is important to align the interests of managers/directors to the long term as well as the short term. This point of view was encapsulated in the United Kingdom, where changes were made in company legislation and the then–Minister for Industry stated, “There was a time when business success in the interests of shareholders was thought to be in conflict with society’s aspirations for people who work in the company or in supply chain companies, for the long-term well-being of the community and for the protection of the environment. The law is now based on a new approach. Pursuing the interests of shareholders and embracing wider responsibilities are complementary purposes, not contradictory ones” (UK Department of Trade and Industry, 2007). A counterargument to CSR was made by Steve Forbes (2005): “Under the label of Corporate Social Responsibility, firms are to take on a non-wealth producing agenda of goals: profits will be lowered to safeguard labor rights, human health, civil liberties, environmental quality, sexual equality, and social justice. The fact that the corporation already plays its most effective role in these areas by profit maximization is little understood by CSR advocates.” CORPORATE GOVERNANCE AND CORPORATE SOCIAL RESPONSIBILITY There is a growing prominence of elements of the “stakeholder” model and approach to corporate governance. C. M. Daily, D. R. Dalton, and A. A. Cannella Jr. (2003) who give the following view on corporate governance, note this growing prominence: “The determination of the broad uses to which organizational resources will be deployed and the resolution of conflicts among the myriad of participants in organizations,” and note, “This definition stands in some contrast to the many decades of governance research, in which researchers have focused primarily on the control of executive self-interests in settings where organizational ownership and control are separated.” Resolving the conflicts of the myriad of participants in a company is at the centre of corporate governance and CSR. CSR has its origins in the stakeholder approach discussed above. In other words, stakeholders other than shareholders, employees, customers, and suppliers are entitled to consideration from the company. Maier (2005) gives another wider definition of corporate governances: “Corporate governance defines a set of relationships between a company’s

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management, its board, its shareholders and its stakeholders. It is the process by which directors and auditors manage their responsibilities towards shareholders and wider company stakeholders. For shareholders it can provide increased confidence of an equitable return on their investment. For company stakeholders it can provide an assurance that the company manages its impact on society and the environment in a responsible manner.” Many companies are now not just reporting on the traditional performance measures such as financial profit. One alternative approach is the approach known as the “triple-E bottom line.” The triple-E (economic, ethical, and environmental) bottom line assesses a company’s performance relative to the economic, social, and environmental value added or destroyed by the company. Elkington (1999) argues that companies need to account for their activities in more than monetary terms. It is suggested that the interests of their shareholders (in an enlightened and inclusive way) should guide the directors of a company. The directors should follow a long-term as well as a short-term perspective and they should give due consideration to the interests of other stakeholders in the company, and not just the shareholders. Managers should strive to develop and maintain lasting relationships with a variety of stakeholders who have an interest in their company. Birch (2001) developed a conceptual framework outlining “12 generic principles” for socially responsible companies including “making a difference, employee and stakeholder empowerment, transparency, accountability, sharing responsibility, inclusivity, sustainable capitalism, a triple bottom line, longtermism, communication, engagement and dialogue.” A King Committee report published in 2002 described this more inclusive approach to corporate governance: “There is a growing weight of expectation on organizations to operate as good corporate citizens. This is because of the influence they exercise on the lives of so many individuals. Each organization is the sum of its stakeholders, such as its shareowners, customers, employees, suppliers, and the communities within which it operates. It depends on them, individually and collectively, for the goodwill required to sustain its operations” (King Report, 2002). CORPORATE GOVERNANCE AND STAKEHOLDER THEORY An enlightened shareholder view would see the benefit of considering the interests of other stakeholders in order to maximize shareholder value. As outlined previously, by taking cognisance of the interests of other stakeholders, a company may be more competitive. This can be done via training and development of staff, customer relationship management, and supply chain management.

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It is vital for any company to assess the power of its various stakeholders since this will affect how these stakeholders will influence the company’s operations and its strategy. Jawahar and McLaughlin (2001) posit, “The strategy an organization uses to deal with each stakeholder will depend on the importance of that stakeholder to the organization relative to other stakeholders.” The company’s strategies need to be planned to consider the interests and expectations of shareholders who want returns as well as the interests and expectations of a member of the local community, who for example will want the company not to cause pollution in the locality. In managing its relationship with stakeholders, the first thing the company needs to do is identify exactly who its stakeholders are. Then the company needs to identify what particular interests or expectations the stakeholders might have—working conditions, health and safety, financial return, environmental, product quality, etc. Then the company needs to decide how influential each stakeholder is to the company’s strategy and actions. Lastly, then management should decide on the specific approach to be used in managing each of the stakeholder relationships. The company’s attitudes to risk also will be influenced by the interests of their stakeholders and how much power the stakeholders have. Mendelow came up with a matrix that classified stakeholders into groups according to their ability to influence company policy and their relationship with the company (figure 2.4). The different sections of the above matrix represent different categories of stakeholders. A typical mapping of stakeholders is as follows (Mendelow): • Small Shareholders—A (monitor): least influential since they have the least interest in company strategy as well as the least amount of power

Figure 2.4. Mendelow’s Matrix. Adapted from Mendelow (1991).

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• General Public—A (monitor): least influential since they have the least interest in company strategy as well as the least amount of power • Environmental Groups—B (keep informed): high level of interest in the company but have low power • Small Suppliers—B (keep informed): high level of interest in the company but have low power • Local Press and Media—B (keep informed): high level of interest in the company but have low power • Unskilled Non-unionised Employees—B (keep informed): high level of interest in the company but have low power • Institutional Shareholders—C (keep satisfied): high level of power but their level of interest is always very low • Key Customers—C (keep satisfied): high level of power but their level of interest is always very low • National Media—C (keep satisfied): high level of power but their level of interest is always very low • Major Shareholders—D (key players): most influential since their interest in the company and the power they have are both high • Lenders and Creditors—D (key players): most influential since their interest in the company and the power they have are both high • Skill Unionised Employees—D (key players): most influential since their interest in the company and the power they have are both high • Key Suppliers—D (key players): most influential since their interest in the company and the power they have are both high This type of stakeholder classification is beneficial for a company since it helps the company to classify its stakeholder groups into these segments. Once the classification has been made, the company can analyze the power that each category of stakeholders exerts on the company and avoid any unnecessary difficulties in underestimating the influence of a stakeholder group. Stakeholder classifications can help to establish future strategies. This classification can also highlight stakeholders that are most likely to have conflicting interests and expectations. Stakeholder groups may influence the strategy of the company in various ways since the company may need to consider the interests and expectations of its various stakeholder groups whilst making any decisions. The influence on strategy is clear since modern companies are now placing more importance on social accounting and reporting. It should also be considered that individual stakeholders might belong to more than one stakeholder group. For example, an employee may also be a member of the local community.

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CURRENT ISSUES IN ADAPTING STAKEHOLDER THEORY Whilst stakeholder theory would hold that the managers of a company must consider the interests of all stakeholders of the company, little guidance is given how to balance the interests and expectations of each of these stakeholders. Different stakeholders will have different expectations. The interests and expectation of various stakeholders may be myriad and conflicting. Conflicts can emerge between different stakeholders. Stakeholders of the same company can hold diametrically opposed expectations of the company. The European Economic and Social Committee has acknowledged this challenge and states, “The various stakeholders are all entitled to express their expectations but not all stakeholders have the same level of legitimacy. It may thus be considered that internal stakeholders frequently have a higher level of legitimacy than external stakeholders. Furthermore, not all legitimate demands can be taken into consideration by enterprises, since they do not have infinite resources. Deciding between the various demands is a task which may be carried out through negotiation and consultation but, in the final analysis, the decision has to be taken by the enterprise concerned.” Nordberg (2010) notes, “When a company faces a difficult economic climate and sales are falling, the interests of shareholders may be different from those of employees, suppliers and customers. . . . When the company is liquidated, the call on any residual assets will be the subject of a contest pitting each stakeholder against each other. . . . Stakeholder theory provides no guidance.” Another challenge when the stakeholder approach is adopted is that there are no measurable objectives such as share price or dividend; therefore, it is then debatable how managers are to be held accountable for their actions. Indeed companies who engage with CSR generally reference only voluntary codes of conduct. This leads to the question as to whether there should exist a universal charter on CSR that all companies are held accountable to. It can also be argued that it is more efficient if the director’s only objective is maximizing shareholder wealth, as the least cost is expended in having this as the only objective rather than directors focusing on multiples objectives of multiple stakeholders. A challenge for companies then is how they balance the competing demands for: profitability; looking after the interests of suppliers, customers, and employees; and looking after the environment. It could be argued where directors try to balance many divergent interests they make poor decisions. It is questionable whether managers really have the freedom to make socially responsible decisions. In addition, it is arguable how companies can sustain profits over the long term via a business that has sustained relationships with employees, customers, and suppliers whilst at the same time sustaining the environment.

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There is very little doubt that the shareholder approach is easy to administer, especially when compared with the stakeholder approach. It also questionable whether companies should be replacing governments in contributing to social causes especially as a company’s basic objective is driven by economics. Where governments do abdicate their responsibilities to multinational companies it is debatable what then happens to a community that is completely dependent on a multinational for its economic, social, and environmental welfare once the company decides to move its location to, say, another tax haven. PRACTICAL IMPLICATIONS AND DISCUSSION Corporate governance is continuously evolving particularly due to growing societal concern in recent times. This is a result of the lack of board oversight and poor executive decision making, which led to the accounting-related scandals exposed during the first decade of this century, followed shortly thereafter by the 2007–2009 financial crisis. Most companies demonstrate some awareness of social responsibility but most have not embraced the concept of a social purpose as envisaged by the proponents of CSR. “Corporate Governance and Corporate Social Responsibility, can be seen as areas that can help to make lives better, not just the corporate lives, the directors, managers, and shareholders, but the lives of the various stakeholder groups too” (Mallin, 2010). At minimum, companies should seek to minimise any adverse results of their activities on stakeholders (employees, customers, suppliers, communities, the environment, shareholders, and credit institutions). It is debatable whether governments should or could legislate to make companies more socially responsible. There is no doubt that the shareholder approach is the easier to administer but, as can be seen from the recent financial crisis, it may not necessarily be the best approach. However, the stakeholder approach is not without its challenges. REFERENCES Aoki, M. (2000). Information, corporate governance, and institutional diversity: Competitiveness in Japan, the USA, and the transnational economies. Oxford: Oxford University Press. Audit Commission. (2003). Corporate governance improvement and trust in public local services. London: Her Majesty’s Stationery Office Audit Commission. (2004). Corporate Governance Framework. London: Her Majesty’s Stationery Office. Bebchuk, L., and Fried, J. (2004). Pay without performance: The unfulfilled promise of executive compensation. Cambridge and London: Harvard University Press. Berle, A., and Means, G. (1933). The modern corporation and private property. New Brunswick, NJ: Transaction Publishers.

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Birch, D. (2001). Corporate citizenship: Rethinking business beyond corporate social responsibility. In J. Andriof and M. McIntosh (Eds.), Perspectives on corporate citizenship (pp. 53–65). Sheffield: Greenleaf Publishing Blair, M. (1996). Ownership and control: Rethinking corporate governance for the twenty-first century. Washington: Brookings Institution. Buchholz, R. A. (1991). Corporate responsibility and the good society: From economics to ecology. Business Horizons, 34 (4), 19–31. Cadbury, A. (1992). Report of the committee on the financial aspects of corporate governance. London: Gee & Co. Ltd. Cadbury, A. (2000). Global corporate governance forum. World Bank, cited in Hopkins, www.csmworld.org/publiccst-goverance. Carroll, A. B. (1979). A three-dimensional conceptual model of corporate social performance. Academy of Management Review, 4, 497–505. Carroll, A. B. (1991). The pyramid of corporate social responsibility. Business Horizons (July/ August, 1991), 30–48. Central Bank. (2010). Corporate code for credit institutions and insurance undertakings, Central Bank. www.centralbank.ie/regulation/industry-sectors/creditinstitutions/Pages/ requirements-guidance.aspx, accessed in 2013. CNN/Money (2002). Kozlowski, Tyco face more questions. CNN/Money, http://money.cnn. com, accessed in 2013. Coyle, B. (2006). Risk awareness and corporate governance. United Kingdom: Global Professional Publishing. Dahl, R. A. (1973). Governing the giant corporation. In R. Nader and M. J. Green (Eds.), Corporate power in America (pp. 10–24). New York: Grossman. Dahlsrud, A. (2008). How corporate social responsibility is defined: An analysis of 37 definitions. Corporate Social Responsibility and Environmental Management, 15 (1), 1–13. Daily, C. M., Dalton, D. R., and Cannella Jr., A. A. (2003). Corporate governance: Decades of dialogue and data. Academy of Management Review, 28, 371–382. Davies, P. (2005). Enlightened shareholder value and the new responsibilities of directors. Lecture given at the University of Melbourne Law School (the inaugural WE Hearn Lecture), (April 10). Donaldson, T., and Preston, L. E. (1995). The stakeholder theory of the corporation: Concepts, evidence, and implications. Academy of Management Review, 20, 65–91. Elkington, J. (1999). Cannibals with forks. Gabriola Island, BC: New Society. European Commission. (2001). Green paper—promoting a European framework for corporate social responsibility, COM 366. Brussels: European Commission. Financial Reporting Council. (2008). Combined code on corporate governance. London: Financial Reporting Council. Forbes, S. (2005). Welcome to market socialism. National Post. Freeman. E. (1984). Strategic management: A stakeholder approach. Boston: Pitman Press. Jawahar, I. M., and McLaughlin, G. L. (2001). Toward a descriptive stakeholder theory: An organizational life cycle approach. Academy of Management Review, 26 (3), 397–414. Karmel, R. S. (1993). Implications of the stakeholder model. George Washington Law Review, 1156–1171. King Report. (2002). Report on corporate governance for South Africa. Parklands: Institute of Directors of South Africa. Maier, S. (2005). How global is good governance? London: Ethical Investment Research Services. Mallin, C. A. (2010). Corporate governance. Oxford: Oxford University Press. Manker, M. (2009). Chicago Tribune News. http://articles.chicagotribune.com/2009–01–23/ news/0901220879_1_google-earnings-tracked-google-trends. McWilliams, A., Siegel, D., and Wright, P. M. (2006). Corporate social responsibility: Strategic implications. Journal of Management Studies, 43 (1), 1–18. Mendelow, A. (1981). Environmental scanning: The impact of stakeholder concept. In Proceedings of the second international conference on information systems (pp. 299–308).

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Mertzanis, H. (2011). The financial crisis and corporate governance reform. Business, Governance and Ethics, 6 (1): 83–109. Mitchell, R. K., Agle, B. R., and Wood D. J. (1997). Toward a theory of stakeholder identification and salience: Defining the principle of who and what really counts. Academy of Management Review, 22 (4), 853–886. Nordberg, D. (2010). Corporate governance: Principals and issues. London: SAGE. OECD. (1999, 2004). Principles of corporate governance. Paris: OECD. Rendtorff, J. D. (2009). Responsibility, ethics and legitimacy of corporations. Copenhagen: Copenhagen Business School Press. Segrestin, B., and Hatchuel, A. (2011). Beyond agency theory, a post-crisis view of corporate law. British Journal of Management, 22: 484–499. Smith, A. (1796 [1776]). An inquiry into the nature and causes of the wealth of nations, 8th ed. London: Strahan, Cadell, and Davies, the Strand. Tricker, B. (2009). Corporate governance, principles, policies, and practices. Oxford: Oxford University Press. UK Department of Trade and Industry. (2007). Duties of company directors: Ministerial statements on the companies act 2006. London: UK Department of Trade and Industry. Vogel, D. (2006). The market for virtue: The potential and limits of corporate social responsibility. Washington, DC: Brookings Institution Press.

Chapter Three

Corporate Social Responsibility in European Context Ayselin Yıldız and Gökay Özerim

Corporate social responsibility (CSR) has been a vital tool for the European Union (EU) in terms of its pioneering role to foster sustainable development, innovation, and competitiveness in EU’s social market economy. In this context, sustainable and responsible European enterprises are highly promoted by the European Commission (EC) through CSR (EC, 2008). Moreover, CSR is indicated as to reinforce the development of new markets and opportunities for growth and innovation since it requires the enterprises to carefully follow the changing social expectations and ensure the consumer trust through new sustainable business models (EC, 2011, 3). Since the 1990s, the EU has been aware of the importance of CSR as part of its sustainable development strategy (SDS) and as an attempt to improve companies’ accountability to public institutions and citizens. In this regard, it strongly encourages the effective implementation of CSR in European enterprises as a crucial pushing factor that contributes to the EU’s Europe 2020 strategy aiming for sustainable development through smart, sustainable, and inclusive growth. Apart from the controversial concepts of CSR in the literature, the EC—a very active actor in the development of public policy to promote CSR—in its 2001 communication defined it as “a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis” (EC, 2001). As Türker and Altuntaş (2012, 461) state, through this definition the EU identified CSR as a voluntary action rather than a compulsory framework. In 2011, referring to the need for a modern understanding of CSR and a new agenda for action, the EU updated its definition of CSR by including 43

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new elements with a focus on creating a value-based system and increased impact in this field. Accordingly, CSR is defined as “the responsibility of enterprises for their impacts on society.” It is more precisely described as follows: To fully meet their corporate social responsibility, enterprises should have in place a process to integrate social, environmental, ethical, human rights, and consumer concerns into their business operations and core strategy in close collaboration with their stakeholders, with the aim of:

• maximizing the creation of shared value for their owners/shareholders and for their other stakeholders and society at large; and • identifying, preventing, and mitigating their possible adverse impacts (EC, 2011, 6). Recognizing the importance of all these aspects of CSR, this chapter aims to provide a descriptive analysis on how the EU perceives CSR and how the EU’s policy on CSR is evolving. In this context, it tries to focus on the divergences and commonalities of CSR practices occurring in different EU countries within the context of the EU’s attempts to formulate a European framework on the EU’s CSR policy. It also tries to provide a concise comparison between the understanding and implementation of CSR in European companies and U.S. companies in order to demonstrate different impacts and implications of CSR in different contexts. DEVELOPMENT OF EUROPEAN POLICY ON CORPORATE SOCIAL RESPONSIBILITY The EC, since its Green Paper of 2001, strongly promotes the importance of CSR as a route to sustainable development, which should be embedded in EU policy and action. It states that “CSR can contribute to sustainable development, while enhancing Europe’s innovative potential and competitiveness, thereby also contributing to employability and job creation” (EC, 2006). In this context, the commission anticipates European companies and businesses to demonstrate their commitment to CSR with accountable, transparent, and responsible business behavior. The promotion of CSR as part of European policies is followed by the establishment of the European Multistakeholder Forum on CSR in 2002. Hosted and facilitated by the EC, the forum aims to provide a space for dialogue between European stakeholders about the developments in CSR and evolving European policy on CSR. It brings together European representative organizations of employers, business networks, trade unions, and nongovernmental organizations (NGOs), to exchange good practices and encour-

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age innovation, convergence, and transparency in existing CSR practices and tools. The forum has been successful in terms of achieving a measure of consensus among participants, but also highlighting the significant differences of opinion between business and non-business. It has confirmed a common European understanding of CSR and explored its scope and boundaries. However, the issues of company reporting requirements or the need for European standards on CSR remained as topics on which no consensus could be sustained. In 2003, the Directive of the European Council called for the Member States to require business to inform about their environmental and social impacts in their annual reports which is known as non-financial reporting. 1 However, as the Directive did not provide a specific framework for the reporting mechanisms of this information, Member States interpreted it in different ways. As a result, non-financial reporting still remains as a voluntary exercise in most European countries being articulated in a weak manner (Bizarri, 2013, 3) since they lack comparability and consistency. Tschopp mentions that these reports are more likely “greenwash” or a strategic marketing strategy rather than reflecting the company’s actual position (2005, 56).

Another main initiative to promote CSR as European policy was the launch of the European Alliance for CSR in 2006, which has invited enterprises of all sizes to express their support and act as a political umbrella for new or existing CSR initiatives. The commission aims to encourage the further takeup of CSR amongst European enterprises through this alliance, which is not a legal instrument but more likely a vehicle for mobilising the resources and capacities of European enterprises and their stakeholders. The Alliance is proposed to act as to contribute to the eight new priority areas for EU action in promoting CSR: awareness-raising and best-practice exchange; support to multi-stakeholder initiatives; cooperation with member states; consumer information and transparency; research; education; small and medium-sized enterprises; and the international dimension of CSR (EC, 2006). The policy initiative was successful in terms of reinforcing the progress in the field of CSR among European enterprises through a number of actions taken that promoted CSR (EC, 2011, 4–5). Since 2000s, triggered with the changing economic conditions, the weakening of the European welfare models, and the global external reasons such as increasing awareness on global environmental problems, the EC became more active in encouraging CSR activities of the business in Europe by stating that CSR “can play a key role in contributing to sustainable development while enhancing Europe’s innovative potential and competitiveness” (EC, 2006). In this regard, it has attempted to provide a more legal and institutional set-up by aiming to create a model of corporate social responsibility based on European values.

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However, there were remaining important challenges against the development of the EU’s CSR policy and its expected wide impact in member states. Firstly, the rapid transition of new members of Central and Eastern European countries from a socialist economy to a competitive market economy pushed the unplanned growth of many companies and business organizations, which has created several societal and environmental problems (Türker and Altuntaş, 2012, 460). Adapting the highly demanding EU framework of economic, environmental, and social standards was a challenging task for the businesses in the enlarged highly competitive Europe. Thus, the understanding and involvement of businesses in new member states to the CSR policy of the EU as a part of the EU’s integrated sustainable development principle has been lagging behind when compared with their counterparts in old member states. This creates huge gaps between the divergent implementation and understanding of CSR among European companies, which makes the development of EU policy on CSR slower and difficult. Secondly, the global economic crises since 2008 have created serious economic and social problems in many European countries, which have weakened the effective functioning of the European welfare systems. In this context, the active participation of businesses is addressed as crucial to compensate the lack of resources of the weakened European welfare states. Besides, it seems that the slow recovery process of the economic stagnation period will result with long-range tightly controlled solutions, which indeed leave the new members states to perform more by themselves to close the gap of their economic development with the old member states and satisfy the economic criteria and standards of the EU. This eventually increases the pressure on business communities in Europe to develop and implement more innovative and growth-oriented strategies in a competitive market without expecting a strong economic support of the EU. Moreover, the EU’s growth model on the principle of sustainable development puts another pressure on the fırms that they should perform their economic growth as integrated with the EU’s sustainable growth strategy against the indicated seven key challenges: climate change and clean energy, sustainable transport, sustainable consumption and production, conservation and management of natural resources, public health, social inclusion, demography and migration, and global poverty (Türker and Altuntaş, 2012, 463–64). Thirdly, the economic crises and its social consequences have also diverted the focus of citizens to the social and ethical performance of enterprises as a result of the loss of trust and consumer confidence in businesses (EC, 2011). The increasing environmental and societal concern of people put the firms under the pressure of satisfying the expectations of its consumers concerning the companies’ contributions in solving ethical, social, and environmental problems. On the other hand, many European companies have not yet integrated social and environmental concerns into their operations and

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core strategy. Besides, failure to respect core labor standards and human rights harm has been persisting on a small scale in European enterprises (EC, 2011). As a result, the EC underlined the need for a new policy on CSR in its communication on industrial policy issued in 2010 (EC, 2010). Concerning the need for a best possible legislative framework, many multi-stakeholder workshops were arranged and participated by the representatives from business, trade unions, governments, civil society, and consumer organizations. In October 2011, the EC adopted a new strategy that marked an important milestone in the development of the EU’s CSR policy. In this context, CSR is perceived as an important tool to build and improve more sustainable organizations in Europe where the companies function on a new form of valuebased models addressing societal challenges with an increased consumer trust in them. The new strategy puts a strong focus on a core set of internationally recognized CSR guidelines and principles as part of an evolving and strengthened global framework. These internationally recognized principles and guidelines include the OECD Guidelines for Multinational Enterprises, the ten principles of the United Nations Global Compact, the ISO 26000 Guidance Standard on Social Responsibility, the ILO Tri-partite Declaration of Principles Concerning Multinational Enterprises and Social Policy, and the United Nations Guiding Principles on Business and Human Rights. As part of this strategy, the EC invited all large European enterprises to make a commitment by 2014 to take account of at least one of these sets of instruments while developing their own policies on CSR. EU’s action agenda for the period of 2011–2014 highlighted eight priority areas concerning the revision of the CSR policy of the EU: enhancing the visibility of CSR and disseminating good practices, improving and tracking levels of trust in business, improving self- and co-regulation processes, enhancing market reward for CSR, improving company disclosure of social and environmental information, further integrating CSR into education, training, and research, emphasising the importance of national and sub-national CSR policies, and better aligning European and global approaches to CSR. Through this agenda, the commission expects from the European businesses an open and accountable commitment to promote CSR, in close cooperation with public authorities and their other stakeholders with clear targets for 2015 and 2020. As one of the main features of this strategy that addresses the EU policy on CSR, it strongly pushes for the mandatory reporting system for social and environmental information; however, it is mostly resisted by the large companies, which favor for voluntary reporting by highlighting the voluntary nature of CSR. Particularly the large companies insist on having flexibility to consider which international frameworks are most proper for their business and which information they should disclose (Bizzarri, 2013, 7). As a result,

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the strategy brought the requirement that companies operating within the EU with more than one thousand employees should report on their social and environmental impacts. Although this is strongly welcomed by the human rights and environmental campaigners, it is resisted by some sectors of the conservative business communities who were supporting a laissez-faire approach to CSR, which favors voluntary action rather than binding rules (Bizzarri, 2013, 2). 2 The EuroChambers, a lobby group representing the interests of Europe’s national chambers of commerce, stressed that pushing the social and environmental impact reporting as mandatory would bring additional administrative and financial burdens on companies. They underlined that the burden would be even bigger for the small and medium-sized firms (SMEs), many of which operate as subsidiaries or subcontractors of large multinational companies. As another main contribution of the new strategy, it has promoted a further increase in government activity around corporate transparency. It encouraged the public authorities to take steps to improve the companies’ disclosure of social and environmental performance and pushed an important role for the governments to get involved with a clear and redirect interest in sustainability reporting. In these terms, the strategy marked a promising progress in implementing a policy for CSR as part of the EU agenda. However, a recent study prepared for the EC demonstrates that the EU’s policy on CSR needs to be supported and improved more in order to reach its targets (Schimnaski, 2013). According to this study, only 33 percent of the EU sample companies make reference to at least one of the UN Global Compact, the OECD Guidelines, or ISO 26000. Seventy-five percent of the Danish companies in the sample and more than half of the Spanish and Swedish sample companies refer to internationally recognized CSR instruments more often than the average EU sample company. Dutch, French, and Italian companies were about average for the sample, whereas only less than 15 percent the Czech, German, and Polish companies in the sample refer to CSR instruments (Schimnaski, 2013, 6). The number of sample companies referring to the UN Guiding Principles on Business and Human Rights is also found be very low since only 23 percent refer to the Universal Declaration of Human Rights. DIVERGENT IMPLEMENTATION OF CSR WITHIN THE EU MEMBER STATES: ONE SIZE DOES NOT FIT ALL The divergences concerning the implementation of CSR in Europe stems not only from the lack of common global definition but also from the different contexts and understandings that shape the perception and practices of CSR. As Dahlsrud (2006) mentions, “The confusion is not so much about how

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CSR is defined, as about how CSR is socially constructed in a specific context.” In this framework, different historical, economic, and social backgrounds in different EU countries lead to companies having different understandings of CSR perceptions and implementation. Thus, in order to understand the divergences among CSR practices of different countries, one should ask whether (1) there is a common conceptualization of CSR, (2) corporate social involvement is driven by the same principles across borders, and (3) CSR principles and guidelines translate into similar initiatives and practices. There is an absence of consensus on a single, unique, and precise definition of CSR in the literature. According to the famous definition of Carroll (1979, 500), “The social responsibility of business encompasses the economic, legal, ethical, and discretionary expectations that society has of organizations at a given point in time.” The practical categorization of Carroll (1979) on three types of responsibility—economic, social, and environmental—in fact helps to provide a basis for identifying CSR; however, it does not properly represent what CSR can entail in its wider terms (Argandona and Hiovik, 2009, 1). Matten and Moon (2008, 405) precisely stress the heterogeneity of the definitions of CSR by stating: “CSR is an umbrella term overlapping with some, and being synonymous with other, conceptions of businesssociety relation.” According to the International Chamber of Commerce (2002) CSR is “commitment by businesses to manage their roles in society.” The EC (2001) expresses CSR as “to contribute to a better society and a cleaner environment.” Departing from this moral aspect, CSR is indeed an ethical duty of a firm that must be formulated as an outcome of the reflection of its owners, managers, and all other stakeholders. Carroll (1979) formulates it as the response by the firm to the society’s demands and expectations by putting the emphasis on the role of the society in defining the firm’s CSR. In this context, CSR develops as the consequence of dialogue between the firm and its internal and external stakeholders that arises within a community. This makes the CSR’s interpretation and perception as conditional and relative since it develops over time, in different contexts, and diverges from one community to another. A common European framework or a definition of CSR is lacking since the developments and implementation in the member states are diversified depending upon the different historical, cultural, political, and socioeconomic factors that play a decisive role in conceptualization of CSR (Argandona and Hiovik, 2009, 2). Furthermore, differences in institutionalization of the welfare state significantly shape the approaches toward identifying responsibilities and duties of the public and private sector. Through this perspective, it should be underlined that there is not a single European social model but several—Anglo-Saxon, Scandinavian, Mediterranean, Central and East-

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ern European—with significant differences in context (Argandona and Hiovik, 2009, 9). As a result, the national models on promoting and implementing CSR activities develop upon the different settings of dialogue structures in each country between the companies and other social actors. For example, the traditional Swedish model is based on the provision of the welfare services by the state and the companies postulate their main responsibility as the financing of those services by taxes (De Geer, 2009). Therefore, the issues and problems that do not exist in Sweden such as human rights, environment, or deregulation, do not also constitute a priority in a company’s CSR agenda, which is more focused to respond to the needs and interests of their welfare state’s traditional actors (government, employers, and unions). However, in Germany CSR is defined more as a result of discussions and negotiations between relevant actors of power rather than the direct exercise of power. Thus, the CSR activities in Germany are implicitly a matter of firms’ perception, which has been established on a historical cultural consensus that private interests can be made responsible for the common good. Another study on the practices of CSR in different EU countries also concludes that the governments and businesses in Europe have different perceptions of CSR and in fact the European Union is characterized by a high diversity of combinations of CSR models such as a CSR model based on shareholder strategy, altruistic strategy, reciprocal strategy, and citizenship strategy (Iamandi, 2011). In this context the study mainly identifies two different sub-models in the EU: (1) CSR integrated sub-model (CSR integrated in different national public policies), which is observed in Bulgaria, Cyprus, Denmark, Finland, France, Germany, Portugal, and Sweden, and (2) CSR voluntary sub-model (CSR freely assumed by the European companies and just supported by public authorities), which is mostly observed in Estonia, Greece, Ireland, the United Kingdom, the Netherlands, and Slovenia. Among the EU member states, the United Kingdom is considered to be the leader in CSR due to several reasons such as being home to a number of big global enterprises, having strong awareness and NGOs on environmental engagement with business, and experience on privatization processes and industrial revolution (Mullerat, 2013, 7). The government also enforces companies to improve disclosure and produce social and environmental reports. It even appointed a minister for CSR and published several laws and regulations to complement voluntary initiatives to encourage CSR. France is also observed to perform a moderate development on CSR issues since the state regulations governing labor relations is strong in France. It is seen that many important developments in managing the legal aspect of CSR are taking place together with the voluntary initiatives of the French cooperation. France has also launched several actions to support

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SMEs’ CSR initiatives. SMEs are also important actors in Italy, which drives the CSR movement together with the financial and banking sectors. The perception, understanding, and practices of CSR are also very different in the old and new member states, which drives the companies to follow diverse CSR strategies. For example, CSR in the new member states of Central and Eastern Europe is generally perceived as corporate philanthropy, sponsorship, or marketing rather than a responsibility to stakeholders (Elms, 2006, 204). Referring to the socialist heritage in the new member countries, social responsibility and welfare are more likely perceived as the primary roles of government (Line and Braun, 2007). According to the survey of the World Bank on the private sector views and practices of CSR, the business executives in Estonia, Latvia, and Lithuania perceive the social responsibility as ethical conduct, environmental protection, transparency in operations, and compliance with regulations rather than stakeholder partnership, or public relations (Mazurkiewicz, Crown, and Bartelli, 2005). COMPARISON OF CSR IMPLEMENTATION BETWEEN EUROPE AND THE UNITED STATES As Argandona and Hiovik (2009, 13) argue, “There is no set of universal best practices in CSR.” There are commonalities and also unique differences between Anglo-Saxon and European approaches in addressing CSR issues. The development and vision of CSR in the United States and in Europe has been different due to the diversity of conditions, distinct features, and perception of firms’ “responsibility” for social and environmental issues. In a comparative manner, CSR in the EU is addressed to be developed and implemented in a stronger and regulated manner than in the United States although the idea of CSR was born on the American continent in the middle of last century (Tschopp, 2005). This points out that while the EU is seeking for a standardization of the corporate social implication through a more regulated and legislative way, CSR policies in the United States remain more as voluntary action and strategies. The firms in the United States perceive CSR as a voluntary action in an unregulated market whereas in Europe, firms consider CSR more as also employed by laws and government polices (Argandona and Hiovik, 2009). However, it should be underlined that CSR has traditionally been framed in voluntary terms within EU policy as well as being an integral part of a European company’s strategy and competitiveness. In these terms European companies can be considered to demonstrate more of a commitment to CSR than U.S. companies by embedding CSR in their corporate strategy (Hurst, 2004, 2). As Hurst indicates in his study, 50 percent of the European companies had CSR embedded in their corporate strategy while only 20 percent of U.S. companies did.

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To an extent, this is also related with the fact that while American culture might be described as more individualistic and pragmatist and perceives rights as freedom from state intervention, continental European culture is more community-oriented and perceives rights as freedom to participate in social goods and decisions (Argandona and Hiovik, 2009, 9) Therefore, as Hurst mentions, “European companies and government systems seem to be quicker to adopt CSR policies and take the necessary steps to accept them into their culture” (2004, 36). The study of Echo Research Inc. indicates significant findings concerning the comparison of CSR practices between United States and European firms. As one of the findings it illustrates that U.S. investment firms give less attention to socially responsible investment criteria than their counterparts in Australia, Europe, and South Africa. It reports that 88 percent of U.S. financial institutions do not consider CSR activities as a factor in analyzing company performance and value, and only one-third believe that CSR contributes to stronger risk management (Business for Social Responsibility, 2004). However, as reflecting a big difference, 68 percent of European investment firms believe CSR can improve a company’s risk management. Another comparative study analyzing the introduction of CSR in companies’ strategies notes that European firms tended to introduce CSR as a response to stakeholders’ scrutiny through a stakeholder-driven perspective, whereas only 11.3 percent of U.S. firms consider the stakeholder perspective (Maignan and Ralston, 2002, 507). It is observed that while the value-driven approach dominates in the United States, the performance-driven perspective (sometimes mixed with the stakeholder-driven view) prevails in the EU. Concerning the reporting of their environmental and social programs and impacts, both in the United States and in the EU, the reporting of CSR remains voluntary (Tschoop, 2005, 57). However, although the GDP of the United States exceeds that of the combined EU, individual EU countries perform more in numbers than the United States in terms of environmental and social reporting. A survey of PriceWaterHouseCoopers (2003) conducted to top executives from large multinational businesses demonstrates that businesses based in Europe are just far more aggressive in reporting their CSR practices (Hurst, 2004). However, there is there is a significant difference between companies’ actions to prioritise environmental and social performance. It is observed that European companies are more eager to act and increase funding for environmental and social impacts than their counterparts in the United States. As the last remark, the U.S. companies are also observed to implement the internationally accepted standards slower and at lower rates than the EU companies, which supports the fact that corporate environmental and social responsibility is taken more seriously by EU companies. The study of Sotor-

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rio and Sanchez (2008) also confirms this observation by indicating that European firms have a higher level of CSR. CONCLUSION CSR is addressed as a crucial tool to encourage and push European firms to contribute to the EU’s sustainable economic growth as it is denoted by the EC: “CSR offers a set of values on which to build a more cohesive society and on which to base the transition to a sustainable economic system” (EC, 2011, 3). In this regard, the effective use of CSR would allow the EU to better pursue its 2020 strategy of “smart, sustainable and inclusive growth,” and create conditions that help shape a more transparent and better-functioning economy. In comparison to other areas of the world, along its history in fact the European corporations have been traditionally more aware and consistent with CSR values, norms, and perceptions (Mullerat, 2013). However, eventually it is observed that the conceptualization, understandings, and practices on CSR differ among EU member states as the scope and content of CSR changes with time and context. Referring to these divergent implementations on CSR activities, the EU attempts to provide an overall European framework aiming at promoting quality and coherence of corporate social responsibility practices. In this context, it tries to develop broad principles, approaches, and tools, and promote best practice. The development of a European framework on CSR actions seems more progressive since the strong initiatives of the EC contributes to the institutionalization of the CSR policy at the EU level by putting its emphasis on voluntary measures for business. On the other hand, European Parliament, NGOs, and trade unions push for mandatory regulation and seek for the legislative initiatives in promoting CSR. However, the contribution of various sectors to build a collaborative context has not seemed to achieve a satisfactory level yet. As one of the challenges, although the European firms are relatively addressed to perform better in terms of their increasing awareness and actions on CSR practices, in particularly when compared to U.S. companies, the main problem remains in disclosing information and reporting of the companies of their environmental and social impact. The EU has several mandatory instruments for all member states, such as the Modernisation Directive, the European Pollutant Release and Transfer Register, the EU Emission Trading Scheme, and the Integrated Pollution Prevention and Control Directive. However there is no consensus on the common format and content for reporting on nonfinancial information. The implementation of a harmonized CSR policy within a European framework might increase the

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consistency and comparability of reporting between member nations and having an EU standard practice could have a positive impact. NOTES 1. CSR reporting focuses on a company’s performance on such factors as pollution, health and safety, human rights, child labor, and other social and environmental issues. 2. The opposition from conservative business communities and a powerful industrygovernment coalition in Germany has resulted in providing exemption to many of Europe’s major transnational companies in complying with the rules of reporting on social and environmental impacts.

REFERENCES Argandona, A., and Hoivik, H. W. (2009). Corporate social responsibility: One size does not fit all collecting evidence from Europe. Working Paper 834. IESE Business School. Bizzari, K. (2013). Refusing to be accountable. Corporate Europe Observatory. http:// corporateeurope.org/sites/default/files/publications/refusing_to_be_accountable.pdf, accessed on 05.06.2013. Business for Social Responsibility. (2004). News monitor summary of articles from ethical corporation. www.ethicalcorp.com, accessed on 05.06.2013. Carroll, A. B. (1979). A three dimensional conceptual model of corporate performance. Academy of Management Review, 4 (4), 497–505. De Geer, H., Borglund, T., and Frostenson M. (2009). Reconciling CSR with the role of the corporation in welfare states—the problematic Swedish example. Journal of Business Ethics, 89 (3), 269–283. Dahlsrud, A. (2006). How corporate social responsibility is defined: An analysis of 37 definitions. Corporate Social Responsibility and Environmental Management, 15 (1), 1–13. Elms, H. (2006). Corporate (and stakeholder) responsibility in Central and Eastern Europe. International Journal of Emerging Markets, 1(3), 203–211. European Commission (EC). (2001). Green Paper. Promoting a European framework for Corporate Social Responsibility. www.jussemper.org/Resources/Corporate%20Activity/ Resources/greenpaper_en.pdf, accessed on 07.06.2013. European Commission (EC). (2006). Implementing the partnership for growth and jobs: Making Europe a pole of excellence on corporate social responsibility.(COM 2006/136). http:// eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2006:0136:FIN:en:PDF, accessed on 05.06.2013. European Commission (EC). (2008). European Competitiveness Report 2008. (COM 2008/ 774). http://ec.europa.eu/enterprise/newsroom/cf/_getdocument.cfm?doc_id=4058, accessed on 07.06.2013. European Commission (EC). (2010). An Integrated Industrial Policy for the globalisation era. (COM 2010/614). http://ec.europa.eu/enterprise/policies/industrial-competitiveness/ industrial-policy/files/communication_on_industrial_policy_en.pdf, accessed on 07.06.2013. European Commission (EC). (2011). A renewed EU strategy 2011–14 for Corporate Social Responsibility. http://ec.europa.eu/enterprise/policies/sustainable-business/files/csr/newcsr/act_en.pdf, accessed on 04.06.2013. Hurst, N. E. (2004). Corporate ethics, governance and social responsibility: Comparing European business practices to those in the United States (pp. 1–68). www.scu.edu/ethics/ publications/submitted/hurst/comparative_study.pdf, accessed on 06.06.2013. Iamandi, I. (2011). The application of corporate social responsibility models in Romania in the context of the post-accession to the European Union. Economy Transdisciplinarity Cognition, 14 (1), 25–46.

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International Chamber of Commerce (2002). Business in society: Making a positive and responsible contribution. ICC Paris. http://www.iccwbo.org/Advocacy-Codes-and-Rules/ Document-centre/2002/Business-in-society-Making-a-positive-and-responsiblecontribution/, accessed on 06.06.2013. Line, M., and Braun, R. (2007). Baseline study on CSR Practices in the new EU member states and candidate countries. UNDP and the European Commission. http://europeandcis.undp. org/uploads/public1/files/BASELINE_STUDY_ON.pdf, accessed on 06.06.2013. Maignan, I., and Ralston, D. (2002). Corporate social responsibility in Europe and the U.S.: Insights from businesses' self-presentations. Journal of International Business Studies, 33 (3), 497–514. Matten, D., and Moon, J. (2008). “Implicit” and “explicit” CSR: A conceptual framework for a comparative understanding of corporate social responsibility. Academy of Management Review. 33 (2), 404–424. Mazurkiewicz, P., Crown, R., and Bartelli, V. (2005a). What does business think about corporate social responsibility? Part I: A comparison of attitudes and practices in Estonia, Latvia and Lithuania. World Bank. Mullerat, R. (2013). Corporate social responsibility: A European perspective. The Jean Monnet/Robert Schuman Paper Series, 13(6), 1–22. www.as.miami.edu/eucenter/papers/ Mullerat_CSR%20Europa.pdf, accessed on 05.06.2013. Sotorrío, L. L., and Sánchez, J. L. F. (2008). Corporate social responsibility of the most highly reputed European and North American firms. Journal of Business Ethics, 82 (2), 379–390. Tschopp, D. J. (2005). Corporate social responsibility: A comparison between the United States and the European Union, Corporate Social Responsibility and Environmental Management, 12 (1), 55–59. Wiley InterScience, John Wiley & Sons Ltd., West Sussex, UK. Türker, D., and Altuntaş, C. (2012). Corporate social responsibility: A framework for the sustainable future of enlarged. Mustafa Kemal Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, 9 (18), 459–477.

Chapter Four

Communicating Corporate Social Responsibility in a Skeptical World Wim J. L. Elving

Organizations need good reputations among their stakeholders. One way of creating a better reputation might be the engagement in corporate social responsibility (CSR) or corporate responsibility (CR) programs. However, since several organizations were greenwashing their communication (suggesting a responsible attitude without actual backing in behavior) stakeholders have become skeptical when confronted with CR communications. In this chapter, several ways of greenwashing will be described and research and variables that increase or decrease skepticism among stakeholders are presented. In the first part of the chapter we will introduce greenwashing and second we will give insights on CR communication. In order to do so, (1) we describe the dynamics of skepticism, (2) we will give examples of greenwashing, and (3) we suggest ways to avoid the impact of greenwashing, and give a fair hearing to real CR programs and strategies. A strong reputation is an important asset for organizations. Favorable reputations enable firms to charge premium prices, enhance their access to capital markets, and attract better applicants and investors (Fombrun, 1996). The reputation of an organization can be defined as “a perceptual representation of a company’s past actions and future prospects that describe the firm’s overall appeal to all its key constituents when compared to other leading rivals” (Brammer and Pavelin, 2006, 436). Barnett and colleagues define reputation as: observer’s collective judgments of corporation based on assessment of the financial, social, and environmental impacts attributed to the corporation over time (Barnett, Jermier, and Lafferty, 2006). Moratis et al. (2006) state that reputation relies on the perceptions stakeholders have of an organization. In general the general assessment of the reputation is built upon 57

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six pillars: emotional attractiveness, products and services, financial performance, vision and leadership, working environment, and CSR (Gardberg and Fombrun, 2002). The pillars, like a temple (the Reputation Temple, Gardberg, and Fombrun, 2002), are built on the fundaments honesty, reliability, responsibility and trustworthiness. The perception of organizations is the reputation, and is built upon the corporate identity of an organization. Just like personality, or personal identity, every organization has an identity; an organization can do several things in order to strengthen its reputation. For example, research has shown that the greater a firm’s contribution to social welfare, the better its reputation (Fombrun and Shanley, 1990). In that sense, is seems logical to link corporate (social) responsibility (CR) to reputation—and ultimately to overall corporate performance. However, a reputation reflects the perceived success of an organization in fulfilling the expectations of multiple stakeholders (Bronn and Vrioni, 2001; Freeman, 1984; Fombrun, 1996). A reputation refers to what people think of an organization. But reputations can also lead to several potential problems: first, the expectations can be too high to be fulfilled. Second, the organization could be successful, but stakeholders do not know it. Third, something might be perceived as successful, but this success is not reflected in the actual policy of the organization, let alone behavior of its members. Especially in the latter case, knowing the importance of a good reputation, organizations can be tempted to present their reputation higher than it actually is. They provide a better-looking picture of the organization than actual feasible. Especially in times of crises, an organization can be tempted to engage in window dressing and portfolio pumping to save its face and try to gain shortterm advantages. In CR contexts, this type of window-dressing is called “greenwashing.” According to the Concise Oxford English Dictionary, greenwashing is disinformation disseminated by an organization so as to present an environmentally responsible public image. GREENWASHING Greenwashing is the use of marketing or public relations practices to create a misleading impression of an organization’s environmental performance. Greenwashing often exaggerates good practices while downplaying or ignoring harmful activities. Broadly, greenwashing aims to deflect criticism and build reputational capital while allowing an organization to conduct business in ways that might be viewed as unacceptable if people knew about them. Specifically, companies use greenwashing in hope of alluring eco-conscious consumers, allaying protests of activist stakeholders, enhancing their corporate reputation, increasing shareholder value, and circumventing government

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regulation through preemptive, voluntary campaigns. If greenwashing is found out, it has negative consequences. It creates cynicism among stakeholders, reducing credibility and trust in all corporate communications, making it more difficult for well-meaning corporations to communicate their real CSR achievements. Greenwashing distorts markets by depriving consumers of the ability to make informed purchasing decisions, and it damages corporate governance, because shareholders cannot make informed investment and voting decisions. However, greenwashing has had some positive reaction effects on CSR—it has created an increase in the demand for independent certification bodies, increased the knowledge and sophistication of consumers, and increased the expectation of transparency and candor concerning corporate communications and behavior. This is shown in the rising number of companies that publish annual CSR or sustainability reports that aim to communicate a full picture of a corporation’s social and environmental performance. As more information on all aspects of corporate behavior becomes available, greenwashing will become more risky and less effective (Ivey, 2007). While in the short run greenwashing can seem to be profitable for organizations, it can have serious negative consequences in terms of trust. An audience that becomes aware of the misleading attempts by organizations can become skeptical and even cynical toward this organization, and toward all reports on environmental performances. As an influential blogger suggests: “Be suspicious of all environmental claims. Don’t trust anything unless you have verified them yourself” (Unsuitablog, 2008). DILEMMA A good-willing company faces a dilemma in the rise of skepticism: disinformation is in the eye of the beholder. A skeptical audience will see more greenwashing: good practice will be seen as an exaggeration. Any good initiative will be received with questions about which harmful activities are downplayed or ignored. And this will become stronger every time. Skepticism breeds cynicism. Unsuitablog again: “Use your common sense and your instincts. If it doesn’t feel right then it probably isn’t” (Unsuitablog, 2008). Although skepticism might be seen as justified when a company is making claims that are not true, companies who are honest, and who put an effort of being a responsible company also have to deal with this skepticism. This presents a real dilemma for companies, who would like to present what they are doing to create or sustain a favorable reputation, but this might have a contrary effect because of the skeptic responses of stakeholders. The corporate communications of companies orchestrate the various forms of internal and external communication. This orchestration, or coordi-

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nation on CR communication is very complex, considering that on various stakeholder levels interests and stakes differ. Corporate communications includes the presentation of the organization and its CR programs to employees (of course), shareholders (obligatory), and other stakeholders. Since most companies are present on the web, the websites almost all (Birth et al., 2008) include separate pages on the CR programs of the companies. Besides the presence on the web, many companies issue annual reports, which almost all have chapters on their CR activities. Other companies issue separate annual CR reports. All these communications can create accusations of greenwashing, even when a company is not actively using marketing strategies to promote itself by its CR activities. In a skeptical environment, you cannot afford yourself clumsy corporate communication. The perception of greenwashing is easily attached. Corporations, who do not want to run this risk, might even refrain from communicating their green efforts, or even stop investing in green activities as it costs a lot of money while the harvest of a cynical public will be suspicion! It might work contra-productive. Therefore it is of utmost importance to understand greenwashing and cynicism in order to certify the positive consequences of honest good work. We want to stress that we do not aim for facilitating greenwashing in any way. If a company lies to its stakeholders about its efforts in taking responsibility for our earth, they have to be punished. A bad reputation is only a first step in that. However, greenwashing companies give rise to skepticism in society. For a cynical audience, clumsy communication is easily framed as miscommunication, hence greenwashing. SKEPTICISM When a company communicates about its CSR initiatives it is very likely that the initial response of the consumers will be one of suspicion (Bae and Cameron, 2006). Suspicion is a state of mind of the individual, in which one actively considers different and possible contrary assumptions on the motives or the honesty of the behavior of someone else (Fein, 1996). Individuals get suspicious when the real motives are not clear or when there are more or contradictory motives are possible (Szykman, Bloom, and Blazing, 2004). Consumers might get suspicious about the motives of a company when this company is donating money for a good cause (Bae and Carmeron, 2006). The main target of a company will still be gaining as much profit as possible, while donating money to a good cause is usually motivated by a willingness to help society. These contrary motives are not easily linked in the cognitive process of an individual, so the real motives or intention of the company are not easy to unravel. This heightens the possibility of suspicion, which in

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itself will enhance the change of attributing the motives of the company externally (Bae and Cameron, 2006; Becker-Olsen, Cudmore, and Hill, 2006). Skepticism is defined as a tendency toward disbelief (Obermiller and Spangenberg, 2001; Pirsch, Gupta, and Grau, 2006). Skepticism is frequently used in combination with the term cynicism (Mohr, Eroğlu, and Ellen, 1998). Cynicism is perceived as a distrust in others that occurs when an individual thinks that the behavior of others is mainly based on egoistic motives. This distrust is almost always present. Cynicism can be viewed as a personality trait, whereas skepticism is not always present and is situation dependent (Mohr, Eroğlu, and Ellen, 1998). Cynical people might react with more skepticism in certain situations. Heider’s attribution theory (1958) can be used to analyze skeptic responses. Individuals give internal or external attributions concerning their own or others’ achievements and/or behavior. Consumers could understand CSR activities of the organization by attributing the motives of a company. Within this framework, internal attribution will have consumers focus on the honest, intrinsic motives of the company’s CSR activities; whereas external attribution will focus on the external motives, like profits, improving the reputation, or the pressure of public opinion or from stakeholders (Forehand and Grier, 2003). When consumers make an external attribution for the motives of the company and perceive them as profit-driven, this would mean the consumers are skeptic about the (sincerity of the) motives of the company for initiating the CR activity. The effects of skepticism have been tested before and it has showed that the levels of skepticism on the motives of the company to be engaged in CR are a main predictor of the ultimate success of a CR campaign. CR activities have a positive influence on the attitude toward the company when the motives are attributed as sincere (Bae and Cameron, 2006; Becker-Olsen et al., 2006; Forehand and Grier, 2003; Yoon, Gürhan-Canli, and Schwarz, 2006). A negative effect was found when there was much skepticism, which also has an effect on the purchase intentions of consumers (Becker-Olsen et al., 2006; Ellen, Webb, and Mohr, 2006). When consumers think that a company solely initiates CSR activities for profit reasons, then ultimately the purchase intentions will be lower. GREENWASHING STRATEGIES To give an impression of greenwashing strategies, we will show some examples of three indicators of greenwashing: vague words, suggestive pictures, and communication that aimed for superficial impressions without the absence of proof. The first strategy is the use of buzzwords, and vague or fluffy language. Take, for example, the word eco-friendly, or environmentally friendly. Without insights in how the product is friendly for the environment,

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this remains an empty statement. Savedge (2009) lists other words frequently used in marketing campaigns (table 4.1). A second strategy for greenwashing is using suggestive pictures. Again, the message is fluffy or vague, but here a picture says more than a thousand words. For example, Shell ran a campaign with flowers coming out of smoking chimneys with the text: don’t throw anything away, there is no away

Table 4.1. Frequently used greenwashing words in marketing. Greenwashing term

Description

Biodegradable

In reality it means nothing. Most products will biodegrade, or break down, eventually, but that doesn’t mean they are eco-friendly. In addition, there are no independent agencies that certify this label as accurate.

Cruelty-free

Unless this label is accompanied by an certification it does not mean a thing, is not legally defined, and there is no agency that verifies the claim.

Free range

The label brings to mind animals roaming free in an open pasture, grazing in clean fields, and drinking from fresh, cool streams. Unfortunately, this is rarely the case. For a start, the U.S. Department of Agriculture has only defined the term for labeling poultry, not beef or eggs. So a “free range” label on eggs is meaningless. The vague wording of the definition makes it meaningless for poultry as well. According to the regulations, in order for poultry to be labeled “free range,” the chickens must “have access to the outdoors for an undetermined period each day.” This means that having the door opened for a mere five minutes each day is good enough to get a stamp of approval from the USDA (even if the chickens never saw that it was open).

Nontoxic

Another pointless label that is neither legally defined nor certified.

Recyclable

Just because a product is labeled “recyclable,” does not mean that you will actually find a place to recycle it. Contact your local recycling center to find out what products and materials are accepted in your area.

Recycled

The term recycled is legally defined by the U.S. Federal Trade Commission (FTC); however, the FTC or any other agency does not verify it. So what’s the point? Another problem with this label is that the FTC does not distinguish between pre-consumer and postconsumer waste. Post-consumer waste has already been used at least once and returned to the waste stream (i.e., yesterday’s newspaper). Pre-consumer wastes, such as shavings from a paper mill, have never been used. Your best bet is to look for products that the highest percentage post-consumer waste possible.

Based on Savedge 2009.

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(EOI blogs, 2012). Especially in a skeptical environment, these suggestions give rise to serious doubts about the sender of the message. A third typical indicator for greenwashing is the absence of proof. In a skeptical environment suggestions will work counterproductive. In a similar vein, suggestions that your company is “relatively green” (compared to the rest) are problematic. Such claims are superficial without evidence backing the statements of the company. Scientific jargon may look like evidence, but is also problematic. Two complex examples of CR communication stem from the oil companies. The circumstances the oil companies are working under are very complex; especially drilling oil is a high-risk operation, with a high risk of casualties and errors. The oil spill in the Gulf of Mexico of BP in 2010 is an example of the high risks involved. After an explosion on April 20, 2010, eleven workers were killed and seventeen wounded after a blowout. For three months oil was flowing into the sea, until on July 15, 2010, the spilling was stopped. Estimations of the amount of oil leaked into the sea varied a lot, from 11 million liters per day to 16 million liters. In BP’s communications the following phrase remained on their website, months after the oil spill: “BP’s strategy is to create value for shareholders by producing energy in a way that is affordable, secure and doesn’t damage the environment. To meet growing world demand, BP is committed to: Exploring, developing and producing more fossil fuel resources. Manufacturing, processing and delivering better and more advanced products. Enabling the transition to a lower-carbon future. We aim to do this while operating safely, reliably and in compliance with the law” (BP, 2010). A second example of the complex nature of CR communication comes from another oil company, Shell. In its drilling operations in the Niger Delta in Africa, reports have been issued of a spill of a total of 546 million gallons of oil (gallon = 3.7854 liters) in the last five decades. Still on Shell’s website the company claims, “Safety is our top priority. Our goal is to have zero fatalities and no incidents that cause harm to our people and neighbours and put our facilities at risk” (Shell, 2010). Both examples show how easy it is to present a CR attitude on the website, but how hard it is to operate in lines with the principles of what is actually said. Both BP and Shell present themselves as caring organizations, highly involved with society, safety, and the environment. The incidents presented above might have been unaffordable incidents, although in the case of the Niger Delta the spill had already started fifty years ago. In the next part we will discuss and present ways for organizations to organize and communicate in a sustainable way about CSR.

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CR—COMMUNICATION STRATEGIES Given the importance of a good reputation and the skepticism in society toward CR communication, what can you do? We propose the following strategy: 1: Check Your Motives and Stakeholder Involvement In an age of skepticism, you will have to be very careful in your communication. If your motives of CR communication are not fundamentally embedded in your organization, you better stay away from it. In order to look good, you have to be very good—and deserve the credits that you are claiming. If shortterm image success is your hidden goal, think again. Other companies get in trouble for just clumsiness, so half-hearted greenish activities will bring you into real trouble. Check your motives: don’t get involved with greenwashing. A way of doing so might be the involvement of stakeholders in your ideas about CSR. Morsing and Schultz (2006) describe three ways of communicating about CR, stakeholder information strategy, stakeholder response strategy, and stakeholder involvement strategy. The stakeholder information strategy is similar to Grunig and Hunt’s (1984) one-way public information model. It is basically viewed as telling, not listening. The purpose of the stakeholder information strategy is the dissemination of information, not necessarily with a persuasive intent, but rather to inform the public as objectively as possible about the organization. The stakeholder response strategy is based on a two-way asymmetric model as opposed to the two-way symmetric model. The two-way asymmetric assumes an imbalance from the effects of public relations in favor of the company, as the company does not change as a result of the public relations (Morsing and Schultz, 2006). Finally the stakeholder involvement strategy, in contrast, assumes a dialogue with its stakeholders. Persuasion might occur, but it comes from stakeholders as well as from the organization itself, each trying to persuade the other to change. Ideally, the company as well as its stakeholders will change as a result of engaging in a symmetric communication model, that is, progressive iterations of sensemaking and sensegiving processes (Morsing and Schultz, 2006, 338). In fact many nongovernmental organizations (NGOs) are involved in current times with organizations and help them to be sustainable or responsible. That is not strange, because stakeholders are more connected than ever with (social) media. Everything an organization claims or does is checked. 2: Find a Fit between Your Business Goals and Your CR A logical link between the company and the CSR domain is of utmost importance. In a recent experiment in which fit was manipulated, we found less

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skepticism among consumers in the fitting condition compared to a nonfitting CSR domain (Elving, 2012). The company has to be aware of the links of the company with various CSR domains. Fit is in many cases obvious (an energy company delivering green energy; a diapers company supporting pregnant women in the third world), but sometimes it is harder to find the fit between the company and the good cause. This fit has to be communicated in these cases, and probably should be the start of CSR communication. Why does this good cause fit with the company? One could argue that with a good story everything can fit the business goals of a company, but on the other hand, that story should be available for every stakeholder, and ideally every stakeholder should know the story. Although fit showed reduced levels of skepticism (Elving, 2012), companies need to be careful with fit. A tobacco company that is supporting a society of cancer patients might be seen as a perfect fit, but probably will not lead to less skepticism from the stakeholders, because the fit is focusing on the unhealthy or damaging aspects of the product, which seems to be controversial. 3: Start Looking Inside before Going Outside When companies start thinking about adopting a CSR policy or strategy they normally start with an inquiry within the company to see what already is done. Especially large organizations normally find out that they are already supporting various local initiatives, like supporting a sport club, support of various environmental groups, and so on. Those were initiated from local employees or managers, without the knowledge of top management. But don’t be naïve in communicating local initiatives as company policy. Skeptical stakeholders will check whether this is really policy or just a local incident. Further, a CSR program needs to be started inside the company. The reputation the company has among stakeholders is also based upon the behavior and communication of the employees of the organization (Cornelissen, 2008; Elving, 2012; Van Riel, 1995). A company that is advertising that service is of high quality, but where the servicepersons act not in line with this slogan, will face reputation damage. CR can be used for motivational reasons as well. Employees will find extra motivation in doing good, and will be more proud of the company. Employees can act as brand ambassadors, and in the war for talent, a solid CR program can attract the key talents for the company (Elving et al., 2012). Furthermore, since CR involves people, planet, and profit (Carrol, 1999), the working conditions, wages, and compensation are among the issues to be tackled when companies create an integrative CR policy. Corporate responsibility has to do with the various responsibilities of organizations, which includes economical, legal, ethical, and philanthropic responsibilities (Carrol, 1999). For a global operating com-

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pany, these responsibilities might be complex to handle, because, for instance, law in most Western societies, but not in developing countries regulates working conditions. It is interesting to see whether working conditions in developing countries need to follow these in the Western world, when a company is operating in both worlds. Also, the compensations and bonuses of the top managers should ideally be part of the CR policy and/or strategy of a company, because this might interfere with CR communication, when the company is compensating its managers on a way that stakeholders find extraordinary, and result in skeptical responses. In many Western countries CEO and board compensation and bonuses have been under large interest of the public opinion. An interesting discussion is whether and how the actors of the company should act in line with their own policies. For instance, should the CEO of a self-claimed sustainable organization get rid of his or her sports car and switch to a hybrid or electrical car to be consistent with the companies policies? In a recent experiment (Elving and Kartal, 2012) we did not find differences in trustworthiness and attitude toward the CEO when we tested a condition in which there was consistency between personal behavior and the (sustainable) CR program of the company, but one could argue that acting what you preach will include behaviours of the figureheads of the organization, what the CEO is. An organization that starts with CR programs should realize that there is a thin line between acting as a good corporate citizen and being seen as a greenwashing entity. Adopting a CR program might involve more of an organization than just donating sums of money for charity. 4: Communication with External Stakeholders: Be Clear and Have Your Proof Ready When someone does well, he or she probably will like to tell that to the outside world. The same counts for companies; if you are having a CR program that helps society in a way, the company will start communicating about that. As we concluded above, a CR program can motivate employees and attract key talent for the organization, but then the results of the CR program need to be told. Companies have adopted various forms of CR communication. All are communicating to their employees, and a recent study showed that more than 80 percent of Fortune 500 companies report on CR on their websites (Sen and Bhattacharya, 2001). As we have discussed before, companies need to be clear about their CSR. Buzzwords, jargon, scientific formulas, and other greenwashing elements should be avoided. Companies can only benefit from their CR communication when they prove their claims and the success of their CR programs. In that sense, CR communication should not be dominated by marketing principles. Corporate responsibility has the function to show the “human” face of organizations to the

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stakeholders, not an increase in market share or finding new consumers, although this might be a long-term effect. CONCLUSION In this chapter, we aimed for a better understanding of the challenges organizations face to avoid the impression of greenwashing in skeptical environments. We need more research to find out exactly what kind of CR communication will inhibit or create skepticism. Does a choice for policies to reduce the carbon footprint always enhance good behavior of the organization and its members on the whole spectrum of energy consumption? Does the CEO of a windmill company also needs to drive a car that supports this choice, or will (s)he be able to drive the environmentally unfriendly sports car? Does a company who is operating globally need to pay the same wages in Bangladesh as it does in the United Kingdom or the United States? Does a company need to reduce all its compensations and bonuses to be a real CR company? To limit the amount of skeptical responses from stakeholders our initial response would be yes; but we need more empirical studies on the effects of CR on stakeholder attitudes to be sure. The consequences of greenwashing activities of organizations have led to skeptical reactions from stakeholders to any CR-related activities. In order to get what you deserve, good projects need good communication in order to achieve a good reputation. In an age of skepticism, none of these three “goods” can be taken for granted. Therefore we stressed that good projects are important—you don’t get away with greenwashing anymore, and rightly so. Organizations cannot afford themselves clumsy communication, and taking your responsibility in business deserves a crystal-clear message. Given the skeptical audiences, organizations have to be very aware of their public relations activities. It has to be better than just good in order to convince your stakeholders of your good intentions. REFERENCES Bae, J., and Cameron, G. T. (2006). Conditioning effect of prior reputation on perception of corporate giving. Public Relations Review, 32 (2), 144–150. Barnett, M. L., Jermier, J., and Lafferty, B. A. (2006). Corporate reputation: The definitional landscape. Corporate Reputation Review, 9 (1), 1–26. Becker-Olsen, K. L., Cudmore, B. A., and Hill, R. P. (2006). The impact of perceived corporate social responsibility on consumer behavior. Journal of Business Research, 59 (1), 46–53. Birth, G., Illia, L., Lurati, F., and Zamparini. (2008). Communicating CSR: Practices among Switzerland’s top 300 companies. Corporate Communications: An International Journal, 13 (2), 182–196. BP. (2010). Our business principles. www.bp.com, accessed on 20.08.2010. Brammer, S., and Pavelin, S. (2006). Corporate reputation and social performance: The importance of fit. Journal of Management Studies, 43 (3), 436–45.

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Brønn, P. S., and Vrioni, A. B. (2001). Corporate social responsibility and cause-related marketing: An overview. International Journal of Advertising, 20 (2), 207–222. Carroll, A. B. (1999). Corporate social responsibility: Evolution of a definitional construct. Business & Society, 38 (3), 268–295. Concise English Dictionairy. (2011). Oxford, UK: Oxford University Press. Cornelissen, J. (2008). Corporate communication: A guide to theory and practice. London: SAGE. Ellen, P. S., Webb, D. J., and Mohr, L. A. (2006). Building corporate associations: Consumer attributions for corporate socially responsible programs. Journal of the Academy of Marketing Science, 34 (2), 147–157. Elving, W. J. L. (2012). Scepticism and corporate social responsibility communications: The influence of fit and reputation. Journal of Marketing Communications, [DOI: 10.1080/ 13527266.2011.631569]. Elving, W. J. L., and Kartal, D. (2012). Consistency in behavior of the CEO regarding corporate social responsibility. Corporate Communications: An International Journal, 17 (4), 449–461. Elving, W. J. L., Westhoff, J. J., Meeusen, K., and Schoonderbeek, J. W. (2012). The war for talent & quest; The relevance of employer branding in job advertisements for becoming an employer of choice. Journal of Brand Management, 20 (5), 355–373. EOI blogs. (2012). Retrieved August 24, 2013, from www.eoi.es/blogs/aitanaleret/2011/12/16/ dp2–cradle-to-cradle-waste-food. Gardberg, N. A., and Fombrun, C. J. (2002). The global reputation quotient project: first steps toward a cross nationally valid measure of corporate reputation. Corporate Reputation Review, 4, 303–307. Grunig, J. E., and Hunt, T. (1984). Managing public relations. Holt: Rinehart & Winston. Fombrun, C. J. (1996). Reputation, realizing value from the corporate image. Boston, MA: Harvard Business School Press. Fombrun, C. J., and Shanley, M. (1990). What is in a name? Reputation building and corporate strategy. Academy of Management Journal, 33 (2), 233–259. Forehand, M. R., and Grier, S. (2003). When is honesty the best policy? The effect of stated company intent on consumer skepticism. Journal of Consumer Psychology, 13 (3), 349–356. Freeman, E. (1984). Strategic management: A stakeholder approach. New York: Basic Books. Heider, F. (1958). The psychology of interpersonal relations. New York: Wiley. Ivey, J. (2007). Greenwashing. www.mnn.com/, accessed on 09.12.2009. Mohr, L. A., Eroğlu, D., and Ellen, P. S. (1998). The development and testing of a measure of skepticism toward environmental claims in marketers’ communications. The Journal of Consumer Affairs, 32 (1), 30–55. Morsing, M., and Schultz, M. (2006). Corporate social responsibility communication: Stakeholder information, response and involvement strategies. Business Ethics: A European Review, 15 (4), 323–338. Obermiller, C., and Spangenberg, E. R. (1998). Development of a scale to measure consumer skepticism toward advertising. Journal of Consumer Psychology, 7 (2), 159–186. Pirsch, J., Gupta, S., and Grau, S. L. (2006). A framework for understanding corporate social responsibility programs as a continuum: An exploratory study. Journal of Business Ethics, 70 (2), 125–140. Savedge, J., (2009). Don’t get greenwashed. www.mnn.com/, accessed on 09.12.2009. Sen, S., and Bhattacharya, C. B. (2001). Does doing good always lead to doing better? Consumer reactions to corporate social responsibility. Journal of Marketing Research, 38 (2), 225–243. Shell. (2010). Company Website. www.shell.com, accessed on 20.09.2010. Szykman, L. R., Bloom, P. N., and Blazing, J. (2004). Does corporate sponsorship of a socially-oriented message make a difference? An investigation of the effects of sponsorship identity on responses to an anti-drinking and driving message. Journal of Consumer Psychology, 14 (1–2), 13–20. Unsuitablog. (2008). http://thesietch.org/mysietch/keith/2008/04/10/how-to-spot-greenwash/, accessed on Novermber 15.11.2009.

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Van Riel, C. B. M. (1995). Principles of corporate communication. London: Prentice Hall. Yoon, Y., Gürhan-Canli, Z., and Schwarz, N. (2006). The effect of corporate social responsibility (CSR) activities on companies with bad reputations. Journal of Consumer Psychology, 16 (4), 377–390.

Chapter Five

Management System Standards and Other Initiatives for CSR Agata Rudnicka and Janusz Reichel

The concept of corporate social responsibility (CSR) did not evolve in a vacuum. It is linked to other issues related to the market (e.g., quality of products and services, competitive advantage, environmental impacts, the value of the company, etc.) or other broader concepts discussed in the context of the future of the society as a whole (e.g., sustainable development). It is also discussed in the context of the existing institutional order and tools and methods of organization. And like in the field of quality or environmental management also for CSR guidelines for complex management systems were created. There is a certain logic behind that: if a development in a given field leads to the emergence of good practices they are usually used as a basis for different standards, for example, in the particular industry (like Responsible Care in the chemical industry) or for any type of organization (e.g., philosophy of Total Quality Management, Cleaner Production, ISO9000 Quality Management System Standard Series, ISO14001 Environmental Management System Standard Series or Eco-Management, and Audit Scheme). These are examples of the standardization only for certain aspects of the responsibility of an organization (e.g., for delivering a high-quality product or for minimizing environmental impacts). Below the reader will find the examples of initiatives and standards relevant to comprehensively understood CSR that tries to address the broader spectrum of CSR issues. Understanding and meeting the needs of customers who demand the fulfilment of certain social and environmental criteria led to the development of numerous initiatives, documents, procedures, and management systems that can help organization to improve its operations in the context of the expected economic, social, and environmental effects. These initiatives and standards 71

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include among others: the Global Compact, the OECD Guidelines for Multinational Enterprises, the Global Reporting Initiative (GRI), the documents of the International Labour Organisation (ILO), SA8000 standard, AA1000 standards, and Guidance on Social Responsibility ISO 26000. The latter standard published in 2010 is of our special interest—Guidance on Social Responsibility ISO 26000 is now probably the most comprehensive guide to the area of social responsibility. The essence of presenting these initiatives and standards below lies in their description rather than a discussion about their effectiveness. CHANGES An evolution in the area of quality management can be shown as an example of changes in currently existing standards caused by the CSR debate. These developments led to inclusion of typical aspects for social responsibility to standards from the quality field. These changes could be observed for example in the ISO 9004 standard. In this document, which was updated in 2009, sources of an organizational success are identified with, “consistently meeting the needs and expectations of its interested parties, in a balanced way, over the long term” (ISO 9004: 2). The next important element introduced to ISO 9004 is the concept of interested parties (equivalent for stakeholders) which, add value to the organization, or are otherwise interested in, or affected by, activities of the organization (ISO 9004: 3). To achieve sustained success, an organization should manage stakeholder relations and respond to needs and expectations from an external environment. Such understanding of excellence in the quality management is consistent with the CSR concept where the stakeholders and their needs and requirements play a central role. This way a contemporary approach to quality is not limited only to (mainly technical) parameters of utility, but is extended to ethical, social, and environmental criteria that help to make market choices. Changes in the way quality management is perceived are only an example of broader trend. These changes in the ways we look at a company’s activities and behaviours are connected with more conscious management system generation. Exceeding an approach based exclusively on financial indicators led to development of many new different standards that can help an organization to manage its social and environmental impacts. The examples are: an idea of Cleaner Production and Eco-effectiveness, European Eco-Management and Audit Scheme (EMAS), or Environmental Management Standard ISO 14001. They apply to environmental aspects of organizations’ activity like: waste minimisation, pollution prevention (source reduction), promotion of best available environmental techniques, identifying and managing of environmental aspects, etc. These standards should help organizations to man-

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age their environmental impacts. It is also worth to mention other standards like: OHSAS 18001 (management of health and safety aspects), an information security management system, business continuity management systems, security management systems for the supply chain, etc. Although they are not strictly connected to the CSR concept they all relate to stakeholder relations management and can support a process of development of socially responsible management system of an organization. CSR concept development has gone through several transformations but from the very beginning it was based on the assumption that a business has moral obligations to society, for example: personal obligation of a manager (Bowen, 1953), respecting needs of stakeholders (Freeman, 1984), integrating different kinds of responsibilities (Carroll, 1991), or management of its impacts on society and the environment (COM , 2011, 681, final, 6, ISO 26000). Social responsibility standards and initiatives try to catch a complexity and multidimensionality of the CSR concept. They are an attempt to bring order and serve as a guide for possible action in this regard. They allow assessing a current strategy and policy of the company and can help to indicate possible areas where an improvement is necessary. CSR STANDARDS AND OTHER INITIATIVES Managing organizations in a socially responsible manner has been of great interest for a long time. The result of the debate about the role of business in society is taking a number of international efforts for the promotion and development of CSR. The Davos Manifesto (1973), the Caux Round Table’s Principles for Business (1986), and the Global Sullivan Principles (1999) are among the first documents that comprehensively raise the issues of accountability and responsibility in business. They all promote management guidelines that express respect for others (individuals and companies), create conditions for the development based on both economic efficiency and social equity. The importance of the topic is confirmed by the initiatives and documents developed by the United Nations (UN), the Organisation for Economic Cooperation and Development (OECD), or ILO. The common characteristic of their activities is the promotion of social responsibility as a kind of management model. This is not about organizations that have undertaken single action in the field of social engagement but have developed well-grounded policy based on responsibility in every aspect of an organization’s activity. These initiatives advocate CSR as an inherent part of economic activity like maintaining and developing relationships with suppliers, ensuring the wellbeing of workers, respecting human rights, and cooperating with the govern-

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ment and other business organizations. The most important one is briefly described in the following sections. UN GLOBAL COMPACT INITIATIVE Global Compact (GC) was established in 1999 by the former UN Secretary Kofi Anan during the World Economic Forum. The main idea behind the initiative was to create the opportunity for business and other actors to take challenges related to globalization including: unsustainable division of resources, poverty, environmental pollution, etc. The program is based on ten principles that address the most important issues when thinking about sustainability and responsibility. In a broader sense GC supports the UN Millennium Development Goals (UN Global Compact website). Millennium Development Goals are eight international development goals that were established in 2000 during the UN Millennium Summit. All countries associated with the UN declared to achieve those goals by the year 2015. The goals consist of a commitment to improve the quality of life of people all over the world, including the reduction of poverty, increasing gender equality, ensuring universal access to primary education, fighting against AIDS, striving for sustainable development, and the creation of global partnerships for development (UN, 2013). The Global Compact initiative allows looking at contemporary problems from the business perspective. Business as a powerful actor plays a huge role in achieving sustainable development and for this reason the ten Global Compact principles are addressed mainly to companies. Organizations that access the initiative voluntarily commit to comply with rules related to social responsibility. The principles are grouped within key areas where certain violations can happen: human rights, labor, environment, and anti-corruption (table 5.1). They emphasize the role of human and worker rights as key elements of the responsible business. Such an approach is particularly important in the context of multinational enterprises that operate in developing countries, where the problems associated with the respect of fundamental rights are very urgent. Environmental responsibility is also treated as a very important part of global responsibility and sustainable development. The tenth principle was added to the list later as a response to the escalating problem of corruption in the globalized world. All of the principles derived from other universal documents such as: the Universal Declaration of Human Rights, the ILO’s Declaration on Fundamental Principles and Rights at Work, the Rio Declaration on Environment and Development, and the United Nations Convention against Corruption.

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Table 5.1. The ten principles of global compact. Issue

Principles

Human Rights

Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights Principle 2: make sure that they are not complicit in human rights abuses

Labor

Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining Principle 4: the elimination of all forms of forced and compulsory labour Principle 5: the effective abolition of child labour Principle 6: the elimination of discrimination in respect of employment and occupation

Environment

Principle 7: Businesses should support a precautionary approach to environmental challenges Principle 8: undertake initiatives to promote greater environmental responsibility Principle 9: encourage the development and diffusion of environmentally friendly technologies

Anti-corruption

Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery

UN Global Compact website.

Organizations that have signed the declaration of joining are also obliged to communicate on progress. Communication on progress is an annually published report where companies inform public opinion about their goals, initiatives, and challenges related to social responsibility. All companies that have applied those principles manifest their contribution to the sustainability. The initiative since 2000 has over 10,000 signatories including more than 7,000 businesses from 145 countries—last update 29 May 2013 (UN Global Compact website). Based on the experiences of first signatories the management system model was created to facilitate the process of implementation. The model is supported by the methods and terminology adapted from total quality management and business excellence (Wynhoven, 2006, 64). The model presents six steps to follow in the process of implementing and improving the corporate strategy based on the described initiative. It helps to develop an action plan including assessment related to all ten principles, define main directions of further actions, implement planned goals, measure the results, and communicate with stakeholders (UN Global Compact).

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Organizations that participate in the initiative are obliged to demonstrate continuous improvement of their CSR efforts. The result will be a definite influence on the company, its value chain, employees, and society. It gives the opportunity to monitor social, economic, and environmental performance. The main reasons why companies decide to engage in the GC are: increase trust in company, integration of sustainability issues, universal nature of the principles, networking with other organizations, address humanitarian concerns (Hall, 2010, 13). Documents of International Organizations (OECD and ILO) International and intergovernmental organizations join the debate on CSR, which may confirm their willingness to collaborate on solving social problems that modern society has to cope with (Nakonieczna, 2008, 151). Their efforts, documents, rules, and guidelines can help to realize in how many areas the impact of the economic sphere can be observed and what the importance of economic development to maintain social order is. OECD Guidelines for Multinational Enterprises The OECD is one of the biggest intergovernmental organizations working for global economic development that make effort to build awareness of social responsibility. The OECD Guidelines for Multinational Enterprises (OECD, 2011) is a document prepared for enterprises that operate in many countries. The OECD Guidelines should be treated as a voluntary code of conduct that does not constitute a legal regulation. They consist of recommendations for responsible business conduct. The first version of the guidelines was adopted in the 1970s. It is one of the most recognized documents governing the issues related to CSR in a transnational context. The document “aims to promote positive contributions by enterprises to economic, environmental, and social progress worldwide” (OECD, 2011, 5). It stimulates positive socioeconomic changes and creates an environment that supports the achievement of sustainable development. The recommendations are related to such issues as: human rights, employment and industrial relations, environment, combating bribery, consumer interests, competition, etc. The role of national governments is to promote provisions of this recommendation among business organizations. It is possible thanks to the National Contact Points organized in adhering countries. National Contact Points disseminate the knowledge about the guidelines and provide assistance in their proper understanding and usage.

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Documents of the International Labour Organisation The ILO is engaged in shaping the relationship between the employee and the employer, and plays an important role in the promotion of responsible management. One of the most important documents that support the idea of social responsibility is the Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy first adopted in 1977 and revised in 2000. The document was the ILO’s response to the activities of multinational companies that increasingly locate their factories in developing countries, where respecting labor standards and the health and safety of workers are not common practices. Involving different stakeholders in the process of creation of the document has also added value. The principle of the tripartite agreement, which is promoted by the ILO, is a valuable example of an open social dialogue and for partners involved is the starting point for building social responsibility. The target groups of the declaration are: multinational corporations, governments, employers, and workers. The main covered areas are: employment, training, conditions of work and life, and industrial relations. Guidelines presented in the declaration correspond to other conventions and recommendations adopted by the ILO. The regulations of the ILO can successfully be used to create a CSR strategy (see, for example, the publication by Jenkins et al., 2002, which is entirely devoted to the problems of integrating issues related to compliance with the rights of employees and CSR). Guidelines and rules of conduct proposed by these regulations can help businesses to review the existing management practices and incorporate elements of social policy with provision of adequate working conditions and employee development. The Declaration of Fundamental Principles and Rights at Work was adopted in 1998. The document, like the Universal Declaration of Human Rights, contains the universal rights of any person regardless of the level of economic development of the country in which she/he operates (ILO website). Fundamental principles and rights described in the above documents include among others: • • • •

the right to freedom of association and collective bargaining; the principle of the elimination of all forms of forced or compulsory labor; the effective abolition of child labor; and the elimination of discrimination in the workplace. GLOBAL REPORTING INITIATIVE

Communication with stakeholders seems to be a crucial issue in legitimization of CSR action undertaken by the company. It is the reason why social

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reporting is widely discussed and more companies decide to reveal information about their social, environmental, and economic performance. These data are published in the so-called social reports, which then are publicly available. There are many different forms of reports: environmental (ecological), social responsibility or CSR, sustainability, or social reports. All of them aim at presenting information that could be important for business partners, local society, suppliers, and other interested parties. Social reports are getting to be, next to commonly used financial or environmental reports, a more and more popular form of communication with stakeholders. The Global Reporting Initiative (GRI) is a non-profit and network-based organization which is oriented on a promotion of sustainable development. The organization was established in 1997 in Boston (GRI website). The GRI is also one the most recognizable models for developing a sustainability reporting. It provides reporting framework that could be used by every organization around the world that is going to share publicly information about its sustainability performance. The Reporting Framework, which includes the Reporting Guidelines and Sector Guidelines, helps the organizations to develop their level of transparency. The GRI encourages organizations to measure their impacts and disclose information that is facilitated by the ready-touse set of indicators. Reports should be published annually. Reporting organizations are expected to disclose information about their profile, management approach, and indicators (GRI, 2013). There are three main categories of indicators: economic, environmental, and social (including subcategories: labor practices and decent work, human rights, society, and product responsibility). The indicators allow presenting tangible and clear information about key aspects of organizational performance that is not limited only to narrowly understood economic data. From the stakeholders’ point of view who read the reports the important issues are: human rights, eco-efficiency, health and safety, climate protection, corporate governance standards in developing countries, corruption and bribery, management of social issues in supply chain, and environmental issues (Accounting for Good, 2005, 9). They find it very useful and crucial in communication about social responsibility. Main reasons for using a sustainability report expressed by stakeholders are: to understand the specific sustainability issues of the company, general understanding of the company, benchmarking, to know how the company performs, etc. (Bartels, Iansen-Rogers, and Kuszewski, 2008, 11). The organization interested in publishing the social report can decide to what extent the GRI’s framework will be applied. There are three application levels: A, B and C. When “+” is added to the application level it means that the organization has been independently audited. Level A covers the largest number of disclosure issues proposed by the GRI and level C is the most modest scale of reporting (GRI, 2013).

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Social reporting is a good starting point for social dialogue . Public access to information is an important element in building public trust and openness. Thanks to the reports companies have an opportunity to justify the decisions they make. SA8000 STANDARD The model proposed in the SA 8000 standard refers to the quality management system ISO 9001 and other international regulations concerning the rights of workers (such as the conventions and the recommendations of the ILO, the Universal Declaration of Human Rights, or the Convention on the Rights of the Child). It contains requirements that may be a subject of certification. These requirements relate to several areas of managing relationships with employees, such as child labor, health and safety in the workplace, or remuneration issues. Managing relationships with employees to ensure their satisfaction and at the same time being still economically efficient requires from the top management to introduce the management system that allows planning, implementation, and monitoring of the undertaken activities. SA 8000 Standard can be a starting point for the improvement of the system of CSR especially in its internal dimension. Main elements of the management system and its requirements are as follows: child labor, forced and compulsory labor, health and safety, freedom of association and right to collective bargaining, discrimination, disciplinary practices, working hours, remuneration, and management systems (based on SA 8000). Exemplary issues for child labor are: the prohibition of child labor, adequate conditions for young workers, policy and producers in that respect, and ensuring the health and safety of young workers. Criteria for forced and compulsory labor includes the prohibition of forced labor, providing conditions that will not foster to start or continue forced labor practices, respecting one’s right to leave the workplace after completing the working hours, respecting freedom to terminate the employment. Health and safety requirements ensure health and safety in the workplace, designate the person responsible for the area of health and safety in the workplace, provide updated instructions and equipment to ensure the work in a safe and healthy environment, create a system of analysis of potential threats, and ensure the provision of an adequate sanitation. Freedom of association and right to collective bargaining should not experience interference from organization’s authorities and the right to choose the representative of workers’ interests when the right to freedom of association is restricted under the law ought to be respected. An organization is obliged to provide working conditions free from discrimination because of

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any condition and while using disciplinary practices it should treat employees with respect and dignity. The crucial issue is the compliance with regulations governing the maximum number of working hours and time off and the remuneration ensuring decent living conditions. Management system requirements are the most important part of the SA 8000 model, which should consist of the following elements: formulation of the policy in the field of social responsibility and working conditions, planning and implementation, determination of management responsibilities and appointment of a representative responsible for the operation of the system, evaluation of the management system, responding to problems and taking corrective action, creating a system of communication with stakeholders, controlling suppliers, and maintaining records to demonstrate conformance to the requirements of this standard. Implementation of the standard requires strict compliance with labor law. Companies that revise the current method of managing human resources and follow this path of development will more easily follow future changes in employment legislation. This could also lead to better cooperation with trade unions and institutions responsible for the supervision and control of the compliance with the labor law (Marciniak, 2006, 82). There are also other benefits of the SA 8000 implementation mainly in the area of human resource management. The standard allows creating clear and understandable principles and procedures that can finally reflect the attractiveness of the workplace for existing workers and for future candidates. Respect for the employers pays. AA1000 STANDARDS The AA1000 process standard series was developed in 1999 by the Institute of Social and Ethical Accountability and is different in nature than SA 8000. The standard’s task is to enable auditing of processes with a focus on social and ethical issues. The construction of the standards is prepared in a way to facilitate implementation in any kind of organization, regardless of the type or nature of the business (SMEs, NGOs, educational centers, etc.). Three main principles are the basis: inclusivity, materiality, and responsiveness. The principle of inclusivity implies the inclusion of different groups of stakeholders in the development and implementation of the social and environmental strategy of an enterprise. The materiality relates to the determining the significance of the problem for the organization and its stakeholders. Then the meaning of the issue will determine the approach that will be applied to solve it. The responsiveness principle refers to responding to stakeholder issues. The AA1000 series consist of three parts:

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1. the AA1000 Accountability Principles Standard (AA1000APS); 2. the AA1000 Assurance Standard (AA1000AS); and 3. the AA1000 Stakeholder Engagement Standard (AA1000SES). The AA1000 Accountability Principles Standard is addressed to organizations that want to improve its processes in terms their sustainability and accountability. A company should create a strategy that includes stakeholder issues and determine goals and norms. This will facilite the assessment and following of the chosen directions of action. There is also the commitment to disclose the relevant information that is a basis for the decision-making processes in the stakeholder relations management (AA1000APS). Another part of the standard is designed to help organizations to publish in the financial reports also the information about the measures and results taken to improve the social and environmental performance of the organization. Standard requirements go beyond just the verification of the data and refer to the method of reporting. The aim is to provide stakeholders with information relevant to the understanding of the processes and actions for sustainable development. The document places a strong emphasis on credibility as a prerequisite for reporting on social and environmental issues (AA1000AS). The purpose of the AA1000 Stakeholder Engagement Standard is to improve the quality of activities related to engaging stakeholders. Engaging stakeholders covers together issues such as customer service, human rights, and even the involvement in the management of the organization (e.g., reporting on the results). This includes both internal and external stakeholders and the relations between internal and external issues (AA1000SES). The AA1000 series is designed to prepare organizations for a more effective dialogue with stakeholders, and to help develop a strategy that will be the subject of the assessment for social responsibility criteria. It is also used to improve the quality of ethical auditing and more reliable reporting (Rok, 2001, 174). GUIDANCE ON SOCIAL RESPONSIBILITY ISO 26000 The International Organisation for Standardization (ISO) published Guidance on Social Responsibility ISO 26000 on 1 November 2010. This is the first document that in a comprehensive way covers the area of social responsibility. It was also expected with great hope, especially by the business community. The document is the result of several years of work of experts from ninety-nine countries and a broad consensus among stakeholders. An important novelty in relation to the current discussion about CSR is that social responsibility within the meaning of the ISO 26000 guidance

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refers to any type of organization from all sectors (all information about ISO 26000 based on ISO 26000, 2010). Every organization, without exception, has social and environmental impacts. Thus, social responsibility is not only about business organizations but also about NGOs and the public sector organizations as well. It was decided that the standard will not be treated as a typical management system standard, which sets requirements for the application. It presents only a set of comments, recommendations, suggestions, and ideas to consider voluntarily by organizations. For this reason, the standard cannot be used for certification purposes. ISO 26000 content suggests that it cannot serve as a reference for the regulatory activities of the public sector and should not be the basis for forming conditions, between the various parties in the agreements. Since the guidance is not intended for certification purposes it should also not be used to assess compliance, audits, and implementation. Organizations can only follow the recommendations of ISO 26000 and use them in building their own approach to CSR. The standard was established in accordance with the relevant declarations and conventions (including the UN and the ILO documents). The ISO signed a memorandum of the latter organization to ensure that the provisions of the guide will be in accordance with the standards of work developed by the ILO (Jonker, Rudnicka, and Reichel, 2011, 123). Standard describes the principles of social responsibility, the core subjects and how to integrate social responsibility with the activities of the organization. The appendix presents numerous examples of the various initiatives and tools to support the implementation of CSR and in this sense it can serve as a good supplement to this chapter. Principles of social responsibility are as follows: • • • • • • •

accountability; transparency; ethical behavior; respect for stakeholder interests; respect for the rule of law; respect for international norms of behavior; and respect for human rights.

In accordance with the principle of accountability, an organization is responsible for its impact on society and the environment as well as for an appropriate way to respond to the consequences of its actions. Organizations should report to interested parties especially on the activities that may have a significant impact on the environment. This principle refers in particular to responsibility for the negative effects of activities, including taking appropriate

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corrective action (if negative impacts will occur) or preventive action (to avoid a similar situation occurring in the future). The principle of transparency implicates the provision of information about the activities undertaken by the organization and their consequences. It is expected that dissemination will include, for example, the organization’s objectives, actions taken, the way the decision-making process is organized, standards and evaluation criteria for their own actions and their effects, and how the organization identifies stakeholders and their needs. It does not mean of course an obligation to disclose information protected by trade secret and personal or other information, the disclosure of which would have negative consequences for the organization and its stakeholders. Organizational activity that is in accordance with the moral principles of the society is called ethical behavior. The result of an application of the principle is to promote ethical behavior, both within the organization and outside it, and implement solutions that help improve sensitivity in this area. The principle of respect for the interests of different groups of stakeholders is the basis for action in the area of social responsibility understood as the management of their own impacts on the society and environment (see also COM, 2011, 681, final, 6). Following this principle requires the systematic identification and analysis of the impact of the organization, the stakeholders, and their needs. This requires an ongoing relationship with the environment. Respect for the rule of law is usually, in the philosophy of different management standards published by ISO, a minimum prerequisite. Respect for the rule of law is a precondition for the fulfillment of other voluntary commitments towards society and the environment. The principle of respect for international norms of behavior is particularly important when the organization or its subsidiaries operate in a country where there are no minimal rules governing such areas as environmental protection or occupational safety. In this case, the organization should comply with the applicable regulations and other international standards. Respect for human rights is one of the key principles of social responsibility. It focuses on respect for fundamental human rights and avoiding engagement in situations that may lead to their violation or infringement. The other standards and initiatives described above the basic principles of social responsibility are also formulated. However, it seems that no matter which approach we are talking about, they all move around the common area, and sometimes, despite the different wording, ultimately they have the same or very similar meaning. The text of ISO 26000 draws attention to the core subjects that socially responsible organizations should take into account in the course of their business. In these areas, it recommends specific solutions, actions, and improvements. The standard states the list of these areas and their division into specific issues, reflects their current importance, and does not exclude future

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changes in this part of the standard. Exemplary relations between core areas of social responsibility in GC and ISO 26000 are presented in table 5.2. Core subjects of social responsibility described in ISO 26000 standard are: • • • • • • •

organizational governance; human rights; labor practices; the environment; fair operating practices; consumer issues; and community involvement and development.

Organizational governance is a system that enables an organization to define goals and making and implementing decisions. Thanks to its existence the organization can take responsibility. Decision-making processes and structures play the key role and should facilitate the implementation of CSR in all other areas. In the area of human rights main issues include: assessment of impacts of the organization and analysis of the risk of an infringement of human rights, the issue of avoiding of complicity in such violations, effective grievance mechanisms, a possible discrimination against vulnerable groups, violations of civil, political, and other human rights, and relations with the rights in a workplace. Working conditions, social protection, health and safety, training and development of employees, and social dialogue are the most important issues in the area of labor practices. The environment subject is focused on the preventive approach, sustainable use of resources, environmental protection, and biodiversity. A separate issue is a climate change associated with greenhouse gas emissions. Fair operating practices include the following issues: anti-corruption, fair competition, and respect for property rights. The issue of political commitment of the organization has been described (e.g., influencing the legislative process through lobbying and promoting a responsible approach in the supply chain). Consumer issues are a wide range of possible problems arising in relations between organizations and consumers of its products and services. The organization should pay attention to deliver consumers true and objective information, fair contractual practices, health and safety of consumers, and the protection of data and their privacy. Issues of sustainable consumption and education and awareness-raising in this area are also described. The last subject, community involvement and development, refers to this kind of responsibility that the Carroll’s model called philanthropic or discre-

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Table 5.2. Exemplary relations between core areas of social responsibility in Global Compact and ISO 26000. Main areas of social Exemplary areas of responsibility in Global social responsibility in Compact ISO 26000

•

Exemplary issues related to social responsibility in ISO 26000

Human rights

•

Situations that threaten human rights Due diligence Discrimination and vulnerable groups Civil, political and other rights Fundamental principles and rights at work

Human rights

• • • • Labor

Labor practices

• • • • •

Environment

Environment

• • • • •

Anti-corruption

Fair operational practice

• • • • •

Employment and labor relations Working conditions and social protection Social dialogue Health and safety Training and development of employees in the workplace Prevention of pollution Sustainable use of resources Mitigating the effects of climate change Protecting the environment Protection of biodiversity Anti-Corruption Responsible political involvement Fair competition Promoting social responsibility in the supply chain Respect for property rights

Own elaboration in A. Rudnicka (2012), CSR—doskonalenie relacji społecznych w firmie (Warszawa: Wolters Kluwer, 213).

tional responsibility (see Carroll, 1979, 497–505, and Carroll, 1991, 39–48). This area is a matter of social involvement of the organization and its social investments. The type of the organization’s involvement may depend on the specific issues and concerns of local communities in which the organization is rooted or, in the case of virtual communities, through the thematic relationship with such a community. The subject focuses on creating the right conditions for community development and support in solving its problems. The primary objective of the development of CSR organization according to ISO 26000 is to contribute to sustainable development.

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CONCLUSIONS CSR is increasingly being considered as part of the management system and that is why social and environmental goals are referred in such documents as strategy, policy, and procedures of the organization. The CSR concept is also seen as a market opportunity and this is the reason why enterprises decide to implement and apply its principles in their business practices. For companies that have already implemented sector management systems (e.g., quality or environmental management) the guidelines presented in ISO 26000, SA 8000 standard, and AA1000 seem to be a natural consequence of the improvement of their management system and their implementation is a sign of organizational maturity. Documents developed by the international organizations (e.g., UN, ILO, or ISO) offer companies a wide range of possibilities to adapt them to their own needs and expectations. They are usually written in a way that any company, regardless of the scale of operations or sector, could take advantage of them. They are available even for micro organizations that significantly extend the groups of their signatories or users. Described standards and initiatives are an attempt to present a model, including scale and scope that can help to introduce the concept of CSR into the organization’s everyday actions. Standards and initiatives described in this chapter can be very helpful for organizations that are interested in having a socially responsible approach to management. This applies to both the relationship with the immediate environment as well as other stakeholders who are of interest to the enterprise. In the context of CSR the key areas can be assessed and continuously reviewed by the organization. This does not mean that every enterprise is obliged to achieve the best results in all areas at the same time. Standards are just the starting point to enable analyzing the scope of all impacts of organization and to concentrate on minimization of those that are the most negative at the moment. This allows defining what CSR is and how it should be implemented within the organization. REFERENCES AA1000APS. AA1000 Accountability Principles Standard 2008. www.accountability.org/ images/content/0/7/074/AA1000APS%202008.pdf. AA1000AS. AA1000 Assurance Standard 2008. www.accountability.org/images/content/0/5/ 056/AA1000AS%202008.pdf. AA1000SES. AA1000 Stakeholder Engagement Standard. Final Exposure Draft. www. accountability.org/images/content/5/4/542/AA1000SES%202010%20PRINT.pdf. Accounting for Good: The Global Stakeholder Report 2005, The Second World-wide Survey on Stakeholder Attitudes to CSR Reporting. www.gppi.net/fileadmin/gppi/Pleon_GSR05_en.pdf. Pleon Kohtes Klewes.

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Bartels W., Iansen-Rogers, J., and Kuszewski, J. 2008. Count me in, The readers’ take on sustainability reporting. KPMG, SustainAbility. www.globalreporting.org/resourcelibrary/ Count-Me-In-The-Readers-take-on Sustainability-Reporting.pdf. Bowen, H. R. (1953). Social responsibilities of the businessman. New York: Harper&Row. Carroll, A. B. (1979). A three-dimensional conceptual model of corporate performance. Academy of Management Review, 4 (4). Carroll, A. B. (1991). The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons, 34 (4): 39–48. COM. (2011). 681 final. Communication from the Commission to the European Parliament, the Council, the European Economic, and Social Committee and the Committee of the Regions. A renewed EU strategy 2011–14 for Corporate Social Responsibility. Brussels. Freeman, R. E. (1984). Strategic management a stakeholder approach. Boston: Pitman. GRI. (2013). GRI Application Level Check Methodology. www.globalreporting.org/SiteCollectionDocuments/ALC-Methodology.pdf. GRI. (2013). www.globalreporting.org, accessed in 2013. Hall, C. (2010). United Nations global compact annual review: Anniversary edition. United Nations Global Compact Office, New York, www.unglobalcompact.org/docs/news_events/ 8.1/UNGC_Annual_Review_2010.pdf. ILO. (2013). www.ilo.org/declaration/lang—en/index.htm, accessed in 2013. ISO 26000. (2010). Guidance on social responsibility. ISO. (9004, 2009 [E]). Managing for the sustained success of an organization—A quality management approach. Jenkins, R., Pearson R., and Seyfang, G. (2002). Corporate responsibility and labor rights. USA: Earthscan Publications Ltd. Jonker, J., Rudnicka, A., and Reichel, J. (2011). Nowe horyzonty. Przewodnik po społecznej odpowiedzialności i rozwoju zrównoważonym. Łódź, Centrum Strategii i Rozwoju Impactoraz ODE Źródła. Marciniak, J. (2006). Standaryzacja procesów zarządzania personelem. Kraków: Oficyna Ekonomiczna. Nakonieczna, J. (2008). Społeczna odpowiedzialność przedsiębiorstw międzynarodowych, Warszawa: Difin. OECD. (2011). OECD guidelines for multinational enterprises, 2011 Edition. Rok, B. (2001). Audyt etyczny według reguł AA 1000 jako narzędzie edukacji menedżerskiej [w:]Gasparski W., Lewicka-Strzałecka A. (red.) Etyka jako przedmiot nauczania, WSPiZ im. Warszawa: L. Koźmińskiego. Rudnicka, A. (2012). CSR—doskonalenie relacji społecznych w firmie, Warszawa: Wolters Kluwer. SA8000. (2008). Social Accountability 8000. www.sa-intl.org/_data/n_0001/resources/live/ 2008StdEnglishFinal.pdf. UN. (2013). www.un.org/millenniumgoals/, accessed in 2013. UN Global Compact. (2013). UN Global Compact management model, Framework for Implementation. www.unglobalcompact.org/docs/news_events/9.1_news_archives/2010_06_17/ UN_Glbal_Compact_Management_Model.pdf. UN Global Compact. (2013). www.unglobalcompact.org, accessed in 2013. Wynhoven, U. (2006). Global Compact performance model. In J. Jonker and M. de Witte (Eds.), Management models for corporate social responsibility (pp. 63–71). Berlin: Heidelberg, Springer.

Chapter Six

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Sustainable supply chain management (SSCM) 1 is a term that is widely used in the literature with other similar concepts like responsible supply chain management (RSCM), responsible procurement or purchasing, supply chain social responsibility, green purchasing, or green supply chain management (GSCM) (Ahi and Searcy, 2013; Young, Fonseca, and Dias, 2010). The term refers to the adoption of sustainability practices into supply chain management processes and thus is accepted as a wider term that covers all standalone dimensions like the environmental responsibility or responsibility to society. SSCM theory and practice stemmed from the introduction of sustainable development principles to country-level policies and from there to corporatelevel policies. Although corporate sustainability (CS) has a short history in the related business literature, it is not new for business community’s concern for the overall society surrounding itself (Carroll, 1999). However, the formal attention to the concept, scientific research, and the introduction of management tools or strategies have a history of approximately sixty years. Corporate social responsibility (CSR) debate started with the different approaches defended by the shareholder theory of the firm and the stakeholder theory of the firm. The former defends that a firm is only responsible to its shareholders in terms of increasing its profits (Friedman, 1970), where the latter defends that the firm is responsible for balancing the needs of all stakeholders that affect or that are affected by a company’s actions (Freeman, 1984). Today, CSR has been widely accepted by companies and the society and is being practiced through various strategies by companies in order to fulfill their responsibilities to their stakeholders. However, as business opera89

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tions evolved from vertically integrated single company manufacturing and selling globally to multi-supplier and multi-party supply chains working together in order to manufacture and sell globally, the CSR or CS implications transformed to a wider scope (Andersen and Skjoett-Larsen, 2009). SSCM refers to the adoption of sustainable business practices throughout the different tiers of supply chains. The concept relies on the triple bottomline approach of sustainable development, which covers economic, social, and environmental dimensions and attains goals from all three facets (Hutchins and Sutherland, 2008). It perceives the product as a combination of valuegenerating activities that are being practiced by different companies. If this product wants to be positioned as a sustainable product, it should be manufactured and serviced in a sustainable manner throughout the whole steps of its lifecycle. The companies taking part in this value-generation process should take economic, social, and environmental goals at the same time and achieve them while producing the final product. Therefore, it brings a different perspective to supply chain management (SCM) concept. SSCM is also being affected by the pressure of employees, customer groups, nongovernmental organizations (NGOs), media, unions, and other internal and external stakeholders who attack global brands by emphasizing their unpleasant sourcing practices especially at developing countries (Amaeshi, Osuji, and Nnodim, 2008). These practices generally harm the widely acknowledged brand name much more when compared to individual suppliers. As a result, the concept keeps gaining extra attention both by practitioners and by scholars. SSCM strategies, conceptual frameworks, and components are being studied in order to manage the concept in a better way. More recently, metric development, measurement scale generation efforts are being introduced. In light of these developments, the aim of this chapter is to evaluate the theoretical approaches to SSCM, explore the practical implications to the concept, discuss the current issues and future directions, and develop suggestions. In order to achieve this aim, in the first section the theoretical roots of SCM and SSCM will be discussed to provide an interface between the terms. After that the existing SSCM models and definitions will be explored. Some metric development efforts and practical implications will follow this part. In the last section, future directions will try to be forecasted in order to develop suggestions for scholars and researchers. THEORETICAL AND CONCEPTUAL APPROACHES TO SSCM SSCM is a relatively new concept in today’s business world and also for the related literature. The systematic literature reviews exploring the concept’s occurence in academic journals states that the related concepts with the term,

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like environmental or social dimensions, have been studied since 1994 (Seuring and Mueller, 2008a). However, the coverage of the term sustainability in a holistic manner starts in 1997 with only a few examples. The definition efforts for SSCM can only be seen as of 2003 again with fewer attempts and it was only in 2008 that the term was explored with much more depth (Ahi and Searcy, 2013). Supply Chain Management In order to understand the SSCM concept, it is essential to explore the fundamentals of SCM, which has a highly interdisciplinary nature that takes inputs from transaction cost economics, systems thinking theory, information theory, industrial dynamics, production economics, social theory, game theory, production engineering, and many more (Croom, Romano, and Giannakis, 2000). Ellram (1991) supports the SCM concept with the literature of industrial organization and suggests that SCM is a new form that combines the advantages of vertical integration among firms and the obligational contracts between them. Cooper, Lambert, and Pagh (1997) link the concept with the channels research that explores the interorganisational relations, systems integration research, and exchange of information and inventory studies. These different perspectives all state a scope that exceeds the boundaries of a single organization and aims to integrate different business processes among companies. The business processes to be integrated are proposed as customer relationship management, customer service management, demand management, order fulfillment, manufacturing flow management, procurement and product development, and commercialization (Cooper, Lambert, and Pagh, 1997). Exploration of different definitions for SCM can also be helpful in defining the concept of SSCM. According to Ahi and Searcy’s (2013) analysis of SCM definitions in the literature, the common terms that are referred to when defining SCM are flow, coordination, stakeholder, relationship, value, efficiency, and performance focus. Christoper (1992) defines the supply chain as the “network of organizations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services, in the hands of the ultimate consumer.” Mentzer et al. (2001, 18) defines SCM as “the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole.” So SCM has a flow focus due to its scope ranging from raw material producers to end-users and the processes that produce value throughout this chain. Strategic coordination is required in order to align business processes among individual organ-

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izations that constitute the supply chain. The relationship focus is emphasized by Stock and Boyer (2009), who included the management of networks of relationships within and among firms to the SCM concept. The stakeholder emphasis covers the existence of different tier suppliers and customers within the supply chain. Value, efficiency, and performance focus are referred through efficient management of related supply chain processes in order to gain profits for the whole supply chain while achieving competitive advantage. Effective SCM is essential for the achieval of competitive advantage in today’s highly competitive business world where the actual competition takes place not among individual companies but rather among different supply chains (Ketchen and Guinipero, 2004). Considering these different dimensions prevalent in SCM and the performance pressures, it can be stated that traditional supply chains need to evolve in accordance with the global business and macro requirements. With the introduction of terms like responsiveness, agility, or adaptability, the proactive supply chains transform from traditional structures toward best-value supply chains (Ketchen and Hult, 2007). Flat hierarchies, cross-boundary organizations, outsourcing, increasing importance of intangible assets like know-how or brand name, postponement of production, virtuality, shorter product life cycles, volatile customer demand, and customization are among current trends affecting SCM (Storey et al., 2006). Until recently, the evolution in SCM was limited to these concepts. However, these driving forces also have different impacts on supply chain operations. Especially the shifting of operations to low-cost developing countries for outsourcing purposes, the increased sensitivity regarding the negative impacts of supply chain activities on the natural environment have led to a different perspective of interest toward supply chains. Green supply chain management, reverse logistics, green procurement, and SSCM are among these new issues (Andersen and Skjoett-Larsen, 2009). SUSTAINABLE SUPPLY CHAIN MANAGEMENT Sustainability is a widely recognized concept that is influential in international and national policies, business operations, and, recently, the supply chain. Its emergence as a policy and spread to business management is dated back to the Brundtland Report (WCED, 1987), which defined the concept as: “The ability of meeting today’s generations’ needs without compromising the ability of future generations meeting their own needs.” Formerly, the negative impacts of business on the natural environment or society were underrated by the general public. However, with the widely increased recognition of distortion in the natural environment, accelerating concern on global warming, abuse of human rights, and unacceptable working conditions in developing

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countries have caused public eyes to carefully monitor business activity causing these negative outcomes. Businesses took the measure by adopting socially responsible actions within their boundaries but soon it was not enough. Well-known global brands have started to be claimed for irresponsible operations of their offshore suppliers so expanding the responsible action to the whole supply chain became a necessity. According to Carter and Easton (2011) CSR and sustainability in the supply chain, initially, were only considered in a fragmented manner by taking action in environmental issues, philantrophic business activity, human rights, diversity, and such. However, the concept has a much more integrated structure that takes components from three main facets, which is also called the triple bottomline approach (Kleindorfer, Singhal, and Van Wassenhove, 2005). These three facets are the environment, society, and economics. The early efforts in theoretizing SSCM in a holistic manner came from Carter and Jennings (2002) and Murphy and Poist (2002). The former study integrated the supply chain activities with Carroll’s (1979, 1991) pyramide of CSR and incorporated economic, legal, ethical, and philantrophic levels of CSR activity with SCM processes. Murphy and Poist (2002) also take a social responsibility view to SCM and state that economic goals should be achieved in accordance with social goals. The CSR reference in these studies covered both environmental and social corporate action. After the adoption of sustainability concept by businesses and the extension of business sustainability to the whole supply chain, the first definitions of SSCM were introduced. It was basically defined as the “integration of sustainable development and SCM in order to take environmental and social dimensions into consideration throughout the supply chain” (Seuring, 2008, 132). However this definition lacked the economic dimension of the triple bottomline. The wider emphasis on the environmental and social aspects causes managers to think that being sustainable does not result in profits, rather it generates costs (Walley and Whitehead, 1994). A sustainable supply chain should make profits and avoid loss as a traditional business goal while performing high on the dimensions of society and the environment as well (Pagell and Wu, 2009). A broader definition with a wider scope followed just after and it actually combined the SCM concept with the triple bottomline. According to this definition SSCM is “the management of material, information and capital flows as well as cooperation among companies along the supply chain while taking goals from all three dimensions of sustainable development i.e. economic, environmental and social, into account which are derived from customer and stakeholder requirements” (Seuring and Mueller, 2008a, 1700). Ahi and Searcy (2013) generate a new definition for the term after reviewing the existing definitions of SSCM in the literature and combining them with different characteristics of SCM and business sustainability. The integration of these characteristics is shown in figure 6.1.

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As represented by the figure, business sustainability consists of the triple bottomline characteristics combined with a stakeholder focus that evaluates all the parties affecting or are affected by an organization’s activities (Freeman, 1984). The volunteer focus indicates that corporate sustainability has a voluntary rather than compulsory structure. Resilience focus refers to ability to adapt to change or negative outcomes. Finally, all these sustainable corporate activities should take a long-term focus. Carter and Rogers (2008) support the triple bottomline approach with four additional facets, which are risk management, transparency, culture, and strategy. The risk of production caused by environmental damage or employee health and their results in terms of harmful disruptions, resource scarcity, and fragile demand should be managed throughout the supply chain. If a company is able to manage the economic, environmental, and social risks in its supply chains, proactive action for possible negative results can be taken easily. Transparency is the result of a flat world (Friedman, 2005) that is covered with underwater fiber cables and is connected via the fast linkages of internet. Undercovering a negative impact caused by a corporate of supply chain action is very dangerous for the reputation of a brand. Transparency should not only be used for communicating SSCM activities with stakeholders but

Figure 6.1. Integration of SCM and Business sustainability characteristics. Adapted from Ahi and Searcy (2013) by the author.

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also be used for involving them in sustainability decisions and actions throughout the supply chain. In addition to these two facets, companies need to align sustainability into their core business strategies and integrate the concept of sustainability into the corporate culture. The triple bottomline issues should be considered as company values and different tools should be used in order to make employees, suppliers’, or customers’ employees adopt these values for a wider sustainable supply chain culture establishment. As a result, “the strategic, transparent integration and achievement of an organization’s social, environmental and economic goals in the systemic coordination of key inter-organizational busines processes for improving the long-term economic performance of the individual company and its supply chains” (Carter and Rogers, 2008, 368) defines SSCM by combining the triple bottomline with the four supporting facets. To conclude, the concept of SSCM has a highly interdisciplinary nature and, therefore, there is not a single theory that explains it. Instead, it is operationalized through the triple bottomline lens and the integration of sustainability concept into SCM practices. However, if new product development process is taken as basis for defining the scope of SCM process integration among companies (Cooper, Lambert, and Pagh, 1997), SSCM’s scope should extend these processes in order to cover “product design, manufacturing by-products, by-products produced during product use, product life extension, product end-of-life, and recovery processes at end-of-life” (Linton, Klassen, and Jayaraman, 2007, 1078). Current Issues Among the current issues in SSCM, the majority of research efforts concentrate around specifying the acitivities that compose the SSCM concept as a whole and developing metrics for the measurement of sustainability performance throughout the supply chain. Seuring and Mueller (2008a) divide the total concept into two main headings, which are SSCM for developing sustainable product and supplier evaluation for sustainability risk and performance. The former requires life cycle assessment from cradle to grave and coordination among suppliers and customers in order to develop sustainable products. The latter refers to the evaluation of suppliers with certain sustainability metrics that belong to all three dimensions of the triple bottomline. It has already been mentioned that some theoretical approaches extend the scope of SSCM farther from the boundaries of traditional supply chains. Svensson (2007) extends the scope of SSCM with a horizontal approach, in opposition to the vertical perspective in traditional SCM, and defends that the coverage of SSCM practices should extend the classical point of origin and the point-of-consumption boundaries of supply chains. The exploration of

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SSCM practices should be undertaken across different supply chains belonging to different orders that are prior to the traditional point of origin or traditional point of consumption like the raw material supply chains or disposal markets after end use. In a Delphi study, the current issues related with SSCM were asked to researchers, practitioners, and NGOs and four main domains covering the main issues were found (Seuring and Mueller, 2008b). These are: 1. Pressures and Incentives for SSCM: The market pressure can be considered the most powerful driver for developing sustainable products. Lack of customer demand or sensitivity for such products would negatively impact the efforts for SSCM. Following these, government regulations, political agendas, and pressures from NGOs facilitate the adoption of SSCM practices by companies. Government regulations can also generate some incentives for sustainability practices carried out by companies. One other driving force is competition. As competitors engage in SSCM practices and communicate these to the public, other organizations need to keep up with this pace in order to stay in the game. 2. Identifying and Measuring the Impacts on SSCM: The impacts of sustainable practices on economic, environmental, or social performance need to be measured. However, there are few tools that can be used for mesuring these indicators. Also it is hard to compare among supply chains as some of them are very large in size and some of them operate only on a local basis. 3. Supplier Management: This issue refers to including social and environmental metrics in supplier evaluation indices and selection of suppliers not only on a cost basis but also on their performance in social or environmental dimensions. The certification of suppliers with international standards is also a method to audit and monitor supplier performance in terms of sustainability. 4. Supply Chain Management: This issue covers the whole supply chain, instead of a single interface between a supplier and the customer. At this level, issues like life cycle assessment, risk management, learning and innovation, common sustainability culture across the supply chain, and cooperation and communication between the members are debated. The main debate in SSCM results due to the lack of consensus in terms of the definition, strategic importance, scope, metrics, and implication guidance both in the literature and in practice. Halldorsson et al. (2009) define six main components for SSCM as reverse supply chains, product stewardship (refers to the efforts in manufacturing for reducing the environmental foot-

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prints of products), triple bottomline, green SCM, CSR, and carbon footprint in supply chains. The authors review the existing research in the area of SCM and conclude that none of these components are fully considered in all stages of the supply chain like design, sourcing, production, distribution, consumption, and disposal. So the field requires extended research covering a wider scope of the supply chain and new efforts for theory building and metric development. THEORETICAL/PRACTICAL IMPLICATIONS SSCM literature is developing day by day in the academic literature as well as its implications in the real business world. The majority of global companies are publishing sustainability reports in the format of the Global Reporting Initiative (GRI), which is a reliable and standard sustainability reporting framework (GRI, 2013), in order to communicate to the public and their stakeholders the SSCM practices they adopt. In the academic literature, the theory and concept development efforts are continued (e.g., Ahi and Searcy, 2013; Carter and Easton, 2011; Carter and Rogers, 2008; Pagell and Wu, 2009; Seuring and Mueller, 2008a; Winter and Knemeyer, 2013). Also empirical evidence is explored through case studies both at the policy makers level (Opijnen and Oldenziel, 2011) and researchers level (e.g., Andersen and Skjoett-Larsen, 2009; Hassini, Surti, and Searcy, 2012; Lee, 2011; Lee and Kim, 2009; Svensson, 2007). Metric development studies are also undertaken for SSCM performance measurement. Hutchins and Sutherland (2008) made an effort for metric development for measuring social sustainability throughout the supply chain. Hassini et al. (2012) also suggests some performance indicators for SSCM evaluation. Labuschagne et al. (2005) developed a framework for measuring the sustainability of manufacturing industries in developing countries. Due to the ongoing debate about the SSCM concept and its coverage, a standard framework is highly required for practitioners in order to adopt and develop sustainability practices throughout their supply chains. One of the most widely covered implications related with SSCM is undertaken by the United Nations’ Global Compact, which is a strategic policy initiative and an internation CSR network that aims to develop, communicate, and share sustainability practices among countries and companies all over the world (UN Global Compact, 2013). The UN Global Compact has ten main principles to which all engaged organizations need to adhere. Now, the UN Global Compact aligns these ten principles with supply chain sustainability and provides a framework for companies that aim to develop SSCM practices. The ten principles and their implications for SSCM are listed in table 6.1.

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There are some other implications that try to measure the sustainability of the consumers, who are the very important members of global supply chains. According to the Socially Responsible Purchase and Disposal Scale developed by Webb et al. (2008), there are three dimensions for customer sustainability. These are (1) purchasing behavior based on firms’ CSR performance, (2) recycling, and (3) avoidance and usage reduction of products based on their environmental impact. The study is also tested and confirmed theoretically. Exploration and clarification of sustainable actions affecting purchas-

Table 6.1. UN Global Compact and SSCM. Ten Principles

SSCM Implications

1. Businesses should support and respect Businesses should respect and promote the protection of internationally the realization of human rights at all levels proclaimed human rights; of their supply chains and make sure that 2. Businesses should make sure that they the working conditions at the offices, are not complicit in human rights abuses. farms, mine extraction cites are in accordance with human rights at all times. 3. Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; 4. Businesses should work for the elimination of all forms of forced and compulsory labor;

Businesses should make sure that the labor employed in different stages of their supply chains are treated fairly, hold their collective bargaining and unionization rights, do not work over-time, do not face with any form of discrimination, have fair and healthy working conditions.

5. Businesses should work for the effective abolition of child labor; 6. Businesses should work for the elimination of discrimination in respect of employment and occupation. 7. Businesses should support a precautionary approach to environmental challenges;

Businesses should eliminate the negative environmental impacts of their supply chains like toxic waste, water pollution, 8. Businesses should undertake initiatives loss of biodiversity, deforestation, long term damage to ecosystems, hazardous to promote greater environmental air emissions as well as high greenhouse responsibility; gas emissions and energy use. 9. Businesses should encourage the development and diffusion of environmentally friendly technologies. 10. Businesses should work against corruption in all its forms, including extortion and bribery.

UN Global Compact (2010, 8–9).

Businesses should avoid illegal practices at all levels of the supply chain and monitor their suppliers’s activities in terms of fraud or other forms of corruption.

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ing behavior have important implications for marketing strategies of companies. Segmentation of customers depending on their sustainability sensitivity, new product development according to customer sustainability preferences, and customer training and involvement in SSCM practices are all possible practical implications for marketers. The Vancouver Regional District (2009) generated a road map for SSCM by taking the Supply Chain Operations Reference (SCOR) Model as basis. They take the planning, sourcing, producing, storage, transportation, and reverse logistics functions in the SCOR model and develop best practices for planning, storage, transportation, and reverse logistics functions. For the planning function, optimization of the logistics network, planning third-party logistics (3PL) activities, designing for sustainable logistics like reduced packaging, unit sizes, transportation conditions are listed as proactive measures. Storage function, optimization of warehouse layout, handling hazardous materials safely, reduction of inventory obsolescence, and increasing energy efficiency of warehouse operations are among practical implications. Today many organizations are getting special certification for green warehouses and are selected as 3PLs for this special certification. Transportation is the activity of supply chain that has the most harmful impact on the environment due to its dependence on fossil fuels. Shifting the transportation activities within the supply chain to environmentally friendly modes, optimization of transportation routes and selecting close suppliers, consolidation of cargo for capacity optimization, using recyclable pallets or other transportation material are among SSCM implications in this area. Finally reverse logistics has positive impacts on the environmental performance of the supply chain through recycling, refurbishing, reuse, or safe disposal. It decreases the nonrenewable resource utilization of the supply chain and also involves the consumer to the returning process of finished goods as a best practice. The ongoing policy development process and new legislation would force companies to engage in sustainability practices at a larger extent and beyond their own boundaries. Market pressures coming from sensitive customers to supply chain sustainability will require companies to focus on social and environmental performance of their supply chains. Reputation concerns and cost considerations are among the other drivers of SSCM. These issues will result in further practical implications in the corporate world and theoretical efforts developing in parallel with business action.

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FUTURE DIRECTIONS, SUGGESTIONS, AND DISCUSSION To summarize, with the pace of globalization in supply and demand markets, the supply chains of our age will keep their distant and complex structure. There are efforts to centralize the supply chain activities in closer districts due to cost and time-to-market constraints (Simchi-Levi et al., 2012) but the existing outsourcing activity seems to be continued for a long time. The outsourcing activities are mainly located in low-cost developing countries where the working conditions, environmental considerations, social rights are overlooked. This causes a risk for global supply chains that are branded in developed countries. Therefore, corporate sustainability policies within the organizational boundaries is no longer adequate for staying sustainable. Expanding them to the whole supply chain is necessary. In order to achieve sustainability through the supply chain, the overall objective can be supported by three sub-objectives such as risk management, achieving efficiency, and sustainable design. The potential risk areas in the supply chain should be identified and classified in terms of economic, social, and environmental risks. Any disruptions that could rise due to these risks should be proactively managed and thus the supply chain reputation should be protected. Efficiency is essential in terms of optimization considerations and reduction of nonrenewable resource consumption. Sustainable design requires life-cycle analysis for products starting from the raw material extraction process until the reverse cycles that they are travelling after consumption. These three sub-objectives should be supported with operational activities, close monitoring and auditing of suppliers, innovation, best practice sharing within or across industries, and performance measurement. SSCM involves a wider range of issues and therefore the scope should extend to a longer part of the supply chain (Seuring and Mueller, 2008a). However, it is more effective to manage a large problem by dividing it into smaller and managable parts. So segmenting the supply chain into different tiers and targeting different tiers according to their environmental, social, or economic risks would be a better solution to apply SSCM in a supply chain. After that, the adopted policies and procedures for SSCM should be established and communicated to all stakeholders. Once the segments and the procedures are clarified, new supplier selection or existing supplier evaluation should be based on certain sustainability criteria. CSR in the supply chain, green procurement, green marketing, green supply chain management, reverse logistics, sustainable labeling, life-cycle assessment, resource reduction, and waste management are all examples of SSCM applications (Svensson, 2007). These applications may be utilized in different segments of the supply chain. For instance, during raw material extraction and production, attention should be paid to protecting biodiversity, green fields, waste management, and working conditions. During inbound

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transportation to supply chains, nodes like factories, distribution centers, ports or warehouses, vehicle efficiency, and carbon emission levels should be closely monitored. The introduction of sustainability criteria, by the shippers, for logistics service provider selection process would be a motivator for various tiers of supply chains to engage in SSCM activities (Kudla and Klaas-Wissing, 2012). During manufacturing of any kind, either in house or offshore, the working conditions, protection of human rights, life-cycle assessment and sustainable product design, elimination of excess packaging, and waste management are among critical control points. During the secondary distribution of finished goods to the markets, again consolidated distribution and closed-loop supply chain designs are essential in order to establish and manage reverse channels. SSCM trends are also visible at a retail level especially due to final consumer demand. New labeling requirement showing the carbon footprints or water footprints of consumer products is a new trend in retailing. Consumers want to know the life cycle of the products they use and they want to prefer brands that respect the environment and society. Actually, consumers are the strongest member of global supply chains and their demands would be much more effective in accelarating sustainability adoption in supply chains. They should support sustainable supply chains through recycling at the household level, prefering refurbished or reusable products, and monitoring brands they prefer in terms of their societal relationships and labor policies. Although the existing examples of SSCM implications come from global brands, small and medium-sized enterprises (SMEs) should engage in sustainability practices as they are generally the third- or fourth-tier suppliers of long supply chains. Initially the sustainability awareness in SMEs should be established and they should be convinced that engaging in such activities won’t harm the profitability levels; on the contrary they will positively affect the financial performance of these companies (Newell and Moore, 2010). There is also a comparison problem regarding establishing sustainable supply chain standards, indices, or metrics. Different industries have different impacts on the environment or society. They have different competencies to protect their financial performance and maintain economic sustainability. For example, the environmental impacts of steel production or fossil fuel production are totally different from the environmental impacts of toy production or food production. The difference is not related to the severity of the impacts but the critical segments of these supply chains, the structure of the supply networks, their nonrenewable resource requirements, or the consumption types. So as Hassini et al. (2012) suggest, industry-specific research is highly required for the exploration of different SSCM implications in different industries. Industry-specific metric development studies would also support the adoption of SSCM practices in different industries.

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The existing research on SSCM largely studies the environmental dimension of sustainability (Seuring and Mueller, 2008a). This is also related to the legal regulations and NGO pressures focusing on the negative environmental impacts of supply chain activity. In parallel with these practices, the social and economic dimensions of the triple bottomline should not be overlooked. The standard measures, auditing processes, supplier evaluations should all be balanced on the three legs of the triple bottomline. NOTE 1. Corporate social responsibility (CSR) and corporate sustainability (CS) have been referred to as synonyms while explaining the voluntary actions of corporations toward their stakeholders with the aim of achieving social, environmental, and economic goals. Van Marrewijk (2003) makes an attempt to differentiate the terms with a historical and philosophical approach from agency and communion capacities. Accepting that CSR and CS are two sides of a coin that need to operate together, he claims that CS has an agency perspective by value creations and a bias toward environmental protection and CSR has a communion perspective with transparency efforts and stakeholder dialogue. Thus, this study adopts the overall literature’s approach and uses CSR and CS synonymously, acknowledging the philosophical and historical distinctions between these terms. Therefore, the study uses SSCM synonymously with RSCM or social responsibility in supply chains.

REFERENCES Ahi, P., and Searcy, C. (2013). A comparative literature analysis of definitions for green and sustainable supply chain management, Journal of Cleaner Production. http://dx.doi.org/10. 1016/j.jclepro.2013.02.018 Amaeshi, K., Osuji, O., and Nnodim, P. (2008). Corporate social responsibility in supply chains of global brands: A boundaryless responsibility? Clarifications, exceptions and implications. Journal of Business Ethics. 81 (1), 223–234. Andersen, M., and Skjoett-Larsen, T. (2009). Corporate social responsibility in global supply chains. Supply Chain Management: An International Journal, 14 (2), 75– 86. Carroll, A. B. (1979). A three-dimensional conceptual model of corporate social performance, Academy of Management Review, 4 (4), 497–505. Carroll, A. B. (1991). The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons, 34 (4), 39–48. Carroll, A. B. (1999). Corporate social responsibility: Evolution of a definitional construct. Business and Society, 38 (3), 268–295. Carter, C. R., and Easton, P. L. (2011). Sustainable supply chain management: evolution and future directions. Emerald Case Studies, 41. Carter, C. R., and Jennings, M. M. (2002). Logistics social responsibility: An integrative framework. Journal of Business Logistics, 23 (1), 145–80. Carter, R. C., and Rogers, D. S. (2008). A framework of sustainable supply chain management: Moving toward new theory. International Journal of Physical Distribution and Logistics Management, 38 (5), 360–387. Christoper, M. (1992). Logistics and supply chain management. London: Pitman Publishing. Cooper, M. C., Lambert, D. M., and Pagh, J. D. (1997). Supply chain management: More than a new name for logistics. International Journal of Logistics Management, 8 (1), 1–14. Croom, S., Romano, P., and Giannakis, M. (2000). Supply chain management: an analytical framework for critical literature review. European Journal of Purchasing & Supply Management, 6 (1), 67–83.

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Ellram, L. M. (1991). Supply-chain management: The industrial organization perspective. International Journal of Physical Distribution & Logistics Management, 21 (1), 13–22. Freeman, R. E. (1984). Strategic management: A stakeholder approach. Boston: Pitman Publishing. Friedman, M. (1970). The social responsibility of business is to increase its profits. New York Times Magazine, 13 September, 173–178. Friedman, T. L. (2005). The world is flat: A brief history of the twenty-first century. New York: Farrar, Straus, and Giroux. Global Reporting Initiative (GRI). (2013). www.globalreporting.org/information/about-gri/ Pages/default.aspx, accessed on 09.04.2013. Halldorsson, A., Kotzab, H., and Skjott-Larsen, T. (2009). Supply chain management on the crossroad to sustainability: A blessing or a curse? Logistics Research, 1 (2), 83–94. Hassini, E., Surti, C., and Searcy, C. (2012). A literature review and a case study of sustainable supply chains with a focus on metrics. International Journal of Production Economics, 140 (1), 69–82. Hutchins, M. J., and Sutherland, J. W. (2008). An exploration of measures of social sustainability and their application to supply chain decisions. Journal of Cleaner Production, 16 (15), 1688–1698. Ketchen, D. J., and Guinipero, L. (2004). The intersection of strategic management and supply chain management. Industrial Marketing Management, 33 (1), 51–56. Ketchen, D. J., and Hult, G. T. M. (2007). Bridging organization theory and supply chain management: The case of best value supply chains. Journal of Operations Management, 25 (2), 573–580. Kleindorfer P. R., Singhal, K., and Van Wassenhove L. N. (2005). Sustainable operations management. Production and Operations Management, 14 (4), 482–492. Kudla, N. L., and Klaas-Wissing, T. (2012). Sustainability in shipper-logistics service provider relationships: A tentative taxonomy based on agency theory and stimulus-response analysis. Journal of Purchasing and Supply Management, 18 (4), 218–231. Labuschagne, C., Brent, A. C., and Erck, R. P. G. (2005). Assessing the sustainability performances of industries. Journal of Cleaner Production, 13 (4), 373–385. Lee, K. H. (2011). Integrating carbon footprint into supply chain management: The case of Hyundai Motor Company (HMC) in the automobile industry. Journal of Cleaner Production, 19 (11), 1216–1223. Lee, K. H., and Kim, J. W. (2009). Current status of CSR in the realm of supply management: the case of the Korean electronics industry. Supply Chain Management: An International Journal, 14 (2), 138–148. Linton, J. D., Klassen, R., and Jayaraman, V. (2007). Sustainable supply chains. An introduction. Journal of Operations Management, 25 (6), 1075–1082. van Marrewijk, M. (2003). Corporate sustainability conference 2002: The impact of CSR on management disciplines. Journal of Business Ethics, 44 (2/3), 89–93. Mentzer, J. T., DeWitt, W., Keebler, J. S., Min, S., Nix, N. W., Smith, C. D., and Zacharia, Z. G. (2001). Defining supply chain management. Journal of Business Logistics, 22 (1), 1–25. Murphy, P. R., and Poist, R. F. (2002). Socially responsible logistics: An exploratory study. Transportation Journal, 41 (4), 23–35. Newell, C. J., and Moore, W. B. (2010). Creating small business sustainability awareness. International Journal of Business and Management, 5 (9), 19–25. Opijnen, V. M., and Oldenziel, J. (2011). Responsible supply chain management: Potential success factors and challenges for addressing prevailing human rights and other CSR issues in supply chains of EU-based companies. Report of a study prepared for the European Commission by CREM, PPRC, SOMO, and ICLEI. Pagell, M., and Wu, Z. (2009). Building a more complete theory of sustainable supply chain management using case studies of ten exemplars. Journal of Supply Chain Management, 45 (2), 37–56. Seuring, S. (2008). Assessing the rigor of case study research in supply chain management. Supply Chain Management: An International Journal, 13 (2), 128–137.

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Chapter Seven

Sustainability of CSR Projects in Times of Economic Crises Elmar-Laurent Borgmann and Nadezda Kokareva

The concept of CSR is sometimes rephrased as “Doing Well by Doing Good”; what this means is that a company will gain a strategic advantage over competitors by contributing to the social and ecological environment of their community and creating an added value for their stakeholders, including their own staff. Does this mean that CSR is simply a new buzzword for the well-established concept of charity? And if it is, what happens to all the good intentions in times of crisis? When companies have to make their own employees redundant, can they still be seen to give money to nongovernmental organizations (NGOs) to support the environment, social welfare, or the arts? The phenomenon that corporations are inclined to reduce or stop their CSR work during difficult times raises an ethical dilemma. The projects that have traditionally been supported by CSR do not, after all, have an on and off switch; they cannot be started and then stopped as soon as a financial crisis hits the company. What will eventually happen to the swimming club that encouraged five-year-old children to start a swimming career if the financial resources are no longer available? What will happen to students who have received a scholarship for the first year of their studies at university but cannot continue because the company that offered the scholarships has recently decided to reduce their involvement? If and when CSR takes over important and relevant social obligations in society, the companies that assume responsibility must ensure that their support does not stop when times get difficult. This leads to the question of whether we can imagine an approach to the concept of social responsibility that might be less dependent on the current financial situation of a company. 105

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The success of such a concept ought to be independent of an altruistic attitude or the idea of benevolence on the part of the company. If management and employees of a company shared the understanding that the well-being of their company depended on CSR, this activity would be seen as essential for business, it would gain more weight within the company, and it would be more reliable because it could not be discontinued in times of crises. CHARACTERISTICS OF CSR Dynamic Character of the CSR Concept In our times most people seem to support the idea of CSR and few have the courage to voice really fundamental reservations against it (Friedman, 1970). One of the reasons may be that CSR seems to have an inbuilt capacity to adapt to changing environments and situations, so it does not easily fall out of fashion. The classical definition of CSR by A. B. Carroll emphasizes the dynamic character of the CSR concept: “The social responsibility of business encompasses the economic, legal, ethical and discretionary expectations that a society has of organizations at a given point in time” (Carroll, 1979, 500). Thus, as societal expectations change, so do the CSR concepts. The aspects of time and continuity are also addressed in the more modern definition of CSR by the World Business Council for Sustainable Development: “CSR is the continuing commitment by business to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society at large” (Watts et al., 1998, 3). A crisis like the global financial crisis as a period of changes and challenges influences society with its expectations and needs and, as a consequence, it also changes the implementation of CSR along with it. Thus, CSR is changed and adapted as a function of external influences that change the sensibilities of a society. However, CSR is also influenced by internal factors. It shows extraordinary adaptability to the specific parameters of a company, for example, the size of the work force or the composition of the population around the company. More importantly, the implementation of CSR principles will, itself, have an impact on the economic environment of the company (Sun, Stewart, and Pollard, 2010, 5): CSR is likely to be reflected in the mission statement of the company and consequently in its attitude to the customers and other stakeholders. What is true for one company is also true for the wider economy. CSR as the sum of CSR concepts implemented by separate companies around the world has the potential to influence the global economic situation. While the authors of this article want to make sure that in times of crisis CSR should not completely be dropped from the company’s agenda, some

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experts go as far as turning around the relationship of cause and effect. For them the origin of the current financial crisis can be found in the general failure of proper CSR implementation in the countries that are most afflicted. They argue that sustainable CSR produces a business climate that prevents such crises. Argandoña writes: “CSR could have created a different climate in the business world” (Argandoña, 2012). His central point is that if enterprises around the world fulfilled their social responsibility in the first place, we would not have seen the global financial crisis. When analyzing the role of CSR in times of crisis, it may be helpful to consider these two CSR characteristics: firstly the ability to adapt and secondly the ability to have an impact. This chapter concentrates mostly on how CSR adapts to both internal and external influences. The aim is to speak up for truly sustainable CSR projects especially during times of financial instability. Internal Structure of CSR In order to determine how social responsibility can be made more sustainable in times of crisis it is important to split it up into several aspects and prioritize them in order to see which responsibilities seem to be absolutely essential for a business and which seem to be nice to have. According to C. Keinert (2008, 69), “The single most valuable theory concerning the actual content of a firm’s social responsibility is Carroll’s pyramid of CSR.” In 1991, Carroll (1991, 39) formulated his understanding of CSR as a pyramid with several layers. According to his theory the components are not mutually exclusive but it “helps the manager to see that the different types of obligations are in a constant tension with one another.” Historically, the economic and legal aspects appeared first and only at the beginning of the twentieth century did researchers start discussing the ethical and philanthropic aspects of business activity. It makes sense to look at the different layers of the pyramid from the essential bottom layers to the optional tip: • Economic Responsibilities: The basis of the pyramid is formed by the economic responsibilities of the company, that is, the old and well-known principle of profit maximization. The company produces goods or delivers services to make profit and guarantee its future existence and growth (Keinert, 2008, 69). So the most important principle the company must comply with, is to be profitable as this is the logical foundation of all business endeavours. • Legal Responsibilities: At the same time the company is obliged to play according to the established rules, it will avoid fraud and generally obey the law while making profit. According to Carroll’s Pyramid (2012, 38) “the law is society‘s codification of what is right and wrong” and as a

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result a company’s illegal activity can easily lead to business termination. Only when the economic basis founded in the compliance with the legal framework is secure can there be movement up the pyramid. • Ethical Responsibilities: The third level is defined by the expectations of society regarding the ethical behavior of the company. Ethical responsibilities mean “the obligation to do what is right and fair and avoid harm” (Carroll, 2012, 38). These expectations are not explicitly stated in the law (Keinert, 2008, 69). However, modern developed societies increasingly expect corporations to respect ethical values in the same way as they expect individuals to act ethically. • Philanthropic Responsibilities: The fourth layer and highest realization a company can reach is philanthropic behavior. This means for the whole company to behave like a “good corporate citizen.” This highest level of social responsibility promises optimal satisfaction for all stakeholders, in particular for the customers and employees of the company. The two upper layers (above the economic and legal responsibilities) are aims that can be achieved only when all the lower segments are stable and under control. The tip of the pyramid (philanthropic responsibilities) is perceived to be a voluntary goal, which does not really seem to influence the primary economic performance directly. The CSR pyramid helps understand the workings and the hierarchy of CSR. However, it also illustrates nicely the potential impact of a crisis on the company and on CSR activities within the company, as any crisis will appear to shake the very basis of the pyramid and thus put all upper layers at risk. Without the economic stability of the company, all the upper segments may face termination. A financial crisis such as the global financial crisis endangers the very foundations of the CSR activities. Anybody who has ever worked in the CSR department of a company will have been the first to have noticed the shockwaves of an approaching crisis. Instinctively, upper management often make hurried decisions in order to appear proactive and to avoid any extra expenditure by cutting the budget for anything that does not look essential for the core business. The instinct is understandable as it appears to secure corporate survival. “The main purpose of savings made by businesses in times of crisis is initially to ensure the survival of the organization, then maintain profitability, and minimize the damage, which may occur due to the crisis” (Yelkikalan and Köse, 2012, 297). CSR in the Crisis: “Threat or Opportunity”? Fortunately, the tradition of global crises is comparatively short. As a consequence, the concrete experience and reports about strategies in times of crisis are still limited. Yelkikalan and Köse (2012, 295) state that “the literature

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examining the effects of the crisis on CSR does not have an extensive scope yet.” On the other hand, the prevailing popular perception seems to be that implementing CSR causes additional costs and requires additional budget, so that, even while it is desirable in times of economic growth it must be seen as an inexcusable luxury in bad times. How should a company explain that they cannot pay their bills and their paychecks but are still seen donating money for a good cause? Thus, the potential cost is believed to be the most important challenge to CSR activities in companies. According to Grigore, in times of crisis, “companies tend to cut down their funding, to postpone or cancel their social programs or even to reconsider their basic commitments to supporting society“ (Aras and Crowther, 2011, 54). These reactions may appear instinctive and plausible but do not seem to be natural laws. There are those who say that ethical values should not be given up during a crisis. There are even those who advocate that a financial crisis offers huge potential and new opportunities for companies and even that CSR may be the only key to companies’ survival in times of crisis (Aras and Crowther, 2011, 55). First of all, a crisis creates circumstances in which society needs much more support from companies. Secondly, it is a time when the customers themselves are forced to save money and take their buying decisions more carefully. “Customer sensitivity is much more likely to break out in crisis periods” (Belen, 2009, 43). As a consequence, the crisis may provide a competitive advantage to companies with a reputation for responsibility: if a company runs CSR projects and supports the local community, the community may be inclined to be supportive in return, purchasing goods from the local and trustworthy company. Apparently, society’s expectations of CSR are higher in times of financial instability. So, it is easier to reach the target audience with CSR-rich communication as it is already warmed-up to the discussion of responsibility. Paradoxically, at the peak of a financial crisis, when money is shortest (also for companies), society expects companies to be most generous. The GlobeScan Salon Briefing on CSR in the Economic Crisis in 2009 reported that “expectations of corporate CSR are on the rise again, and have reached a new high point since tracking started in 2001” (GlobeScan Salon Briefing: CSR in the Economic Crisis, 2009). As a consequence, if companies have well-established and well-communicated CSR programs, a crisis may be the time when they will see the biggest competitive advantage and can expect customer loyalty.

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CURRENT TENDENCIES IN CSR First Results of CSR Projects In their report for 2011, GlobeScan stated that the gap between what society expects and what companies actually deliver in the area of CSR is gradually closing. This is not because society’s expectations decreased but because CSR industry performance has increased over the last years especially during the crisis (Mountford, 2011a). This may mean that companies have noticed their shortcomings in the eyes of the public and turned their attention and energy to implementing CSR in order to turn a challenge into an opportunity. In a fifteen–country chart (Mountford, 2011a), the author illustrates that the gulf between the CSR expectations by the public and actual CSR performance of companies is still substantial, but there are first signs of an improvement from 2009 to 2011. This observation is rather surprising, as the improvement of CSR performance has happened at the height of the financial crisis. Perhaps the big multinationals quickly noticed the opportunities for CSR right in the middle of the crisis. “But this year’s data shows that, at least in industrialized nations, companies’ investment and focus on communicating a responsible message to the public over the last decade may be starting to pay dividends. Continued improvement will very likely depend on companies’ ability to deploy their corporate brands in a credible and holistic way in their CSR messaging” (Mountford, 2011a). Development of Consumers’ Expectations There seems to be a shift in consumers’ expectations. In 2009, it was reported that there was a clear tendency in paying more attention to CSR and even punishing irresponsible employers and business partners: • Consumers are increasingly punishing irresponsible companies and rewarding responsible ones, most markedly in the USA and Canada, but also in large developing economies (GlobeScan Salon Briefing: CSR in the Economic Crisis, 2009). • Employees increasingly value CSR orientation in the companies they work for. Large and steadily growing majorities say that “CSR increases my motivation and loyalty” (GlobeScan Salon Briefing: CSR in the Economic Crisis, 2009). • Investors, too, begin to appreciate the value of CSR. Over half of respondents believe it is “less risky to invest in socially responsible companies than socially irresponsible companies” (GlobeScan Salon Briefing: CSR in the Economic Crisis, 2009).

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While companies are getting active and putting more thought and effort into implementing CSR, the public has stopped increasing their expectations in this area. A recent report states that “despite the ever-increasing attention being paid by many companies to developing and communicating a responsible approach to business, there is little evidence that consumers are connecting with the CSR and sustainability efforts being made by the corporate world” (Mountford, 2011b). This must be a warning sign that apart from stagnated expectations, the public doesn’t seem to recognize and appreciate the CSR efforts and the improvements already made by companies. The number of people who consider themselves well-informed about CSR activities has slightly dropped since 2009 while the number of uninformed people on the contrary has slightly increased. Mountford (2012) assumes that “this may reflect greater focus on companies’ financial performance (and job losses) during the recession, [but also] the disconnect that continues to exist in many companies between marketing and communications functions and CSR/sustainability functions.” Furthermore, there seems to be a serious problem with the credibility of companies’ CSR activities. The public seems to increasingly doubt the motivation of companies to do good. As the latest tracking by GlobeScan has revealed “in the ten countries tracked by GlobeScan over the past decade, fewer than two in five (38 percent) now say they believe companies communicate honestly about their social and environmental performance“ (Mountford, 2012). CSR activities are frequently perceived as attempts to improve the image of a company rather than genuine commitment to the community. This mistrust could prevent companies from reaching out to “an increasingly receptive public” (Mountford, 2012). There is even a concrete danger that badly communicated CSR might produce negative effects such as disappointment and distrust on the part of the public. While fewer people blindly trust the good intentions of CSR activities, more people are keen to find out more about specific CSR activities of companies: “An average of 72 percent in the same countries say they are ‘very interested’ in learning more about what companies are doing to be socially and environmentally responsible—a figure that has risen sharply in many countries over recent years” (Mountford, 2012). Building a trustful and open relationship with the company’s stakeholders is a serious challenge that has to be considered in order to achieve the main goals of CSR. Any lack of trust and faith in the genuine goodwill of companies implementing CSR may easily turn into a feeling of being deceived unless the public is given a better insight into decision processes and real motivations behind CSR. GlobeScan points to the critical assessment by third parties as a potential way forward and suggests embracing social media and frank communication about the company’s motivations and challenges (GlobeScan Salon Briefing: CSR in the Economic Crisis, 2009).

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Motivation for CSR At the briefing on “CSR in the Economic Crisis” in 2009, conclusions revealing the true intentions of CSR were drawn: “Companies not fully committed to CSR face growing risks” (GlobeScan Salon Briefing: CSR in the Economic Crisis, 2009). Less honest players, that is, insincere companies that only want to improve their name without really serving the community, could suffer much more in time of crisis and finally get “knocked out” of the market. The crisis will sharpen the picture and distinguish between those companies that have really installed genuine CSR at the core of their business and those that do not really behave responsibly or that have failed to integrate CSR into their core business activities. “We will see who the leaders are: their responsibilities will be at the core of their business model“ (GlobeScan Salon Briefing: CSR in the Economic Crisis, 2009) said Cameron and suggested replacing the term corporate responsibility with core responsibility (GlobeScan Salon Briefing: CSR in the Economic Crisis, 2009). This emphasis suggests that genuine CSR activity cannot be an added extra or an activity that is nice to have but needs to be integrated into the mission and the vision of a company. Activities that are only loosely linked to company values and look like an add-on seem to raise suspicion and may be counterproductive. From Marketing Strategy to Corporate Strategy Rather than preventing CSR activities, the crisis seems to be both an opportunity but also a test to see which activities have been strategically integrated into a company’s orientation and which ones merely look like add-ons that will be dropped. In this situation, companies reveal their true intentions and the public will see whether their responsible commitment is sustainable or simply a screen to hide unethical behavior in other areas. “The crisis should be an opportunity to dissolve the short-term oriented view of profits, and encourage marketing activity to develop a long-term optic by supporting social concerns, caring about environment and genuinely desire to improve the overall health of the society“ (Aras and Crowther, 2011, 56). In other words, the crisis provides the opportunity for the company to reconsider any short-term and short-sighted approach to CSR and guide the company to turn CSR from being a marginal part of their marketing strategy into an indispensable part of their corporate strategy. “In their CSR implementation process, organizations must redefine their essential business objectives. These objectives must be aligned with the strategy of the company and have to be coherent with the change in organizational culture that CSR represents. The new attitude, forms and perspectives should be the result of a deep internal reflection that will increase the core value of the firm” (Belen, 2009, 46).

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Increased Pressure on CSR During the GlobeScan Salon Briefing in 2009, the experts also paid attention to the increased pressure on CSR in times of crisis. Lack of time for nonprofit-making activities and short-term orientation were named as challenges. In times of crisis, many companies seem to be focusing on more urgent issues and are often prone to “short-term decisions, ‘cash-thinking’, and demands for returns within months” (GlobeScan Salon Briefing: CSR in the Economic Crisis, 2009). This is a natural but not well-thought reaction, which can save some money in the present, but will lead to more dangerous losses in future. “Another pressure on CSR activities was seen to be a more cautious approach to CSR in companies” (GlobeScan Salon Briefing: CSR in the Economic Crisis, 2009). Extensive staff reductions led to the concentration on essential parts of the business, that is, to a narrow way of thinking that is often negative for CSR decisions, which require a company-wide perspective. The practitioners who participated in the briefing went on to analyze the opportunities that have opened to CSR as a result of the crisis. Grayson said that “in this crisis, there are very substantial opportunities for businesses which take [CRS] seriously to find new business opportunities” (GlobeScan Salon Briefing: CSR in the Economic Crisis, 2009). Recommendations for CSR in times of crisis Grayson recommends the following measures in a company in order to make sure that CSR will be beneficial also in times of crisis: • to reconsider costs: “for instance to replace energy and travel costs with innovative IT solutions” (GlobeScan Salon Briefing: CSR in the Economic Crisis, 2009). • to “deliver functional and inspirational goods and services”: too many companies failed to “hit the sweet spot”: for example the Toyota Prius (the first mass-produced hybrid electric car), was left unnoticed for too long because of low advertising budgets and an unattractive pricing policy (GlobeScan Salon Briefing: CSR in the Economic Crisis, 2009); and • to develop new collaborative models: when the whole system is shaken, it is often preferable to establish a completely new system with new partners and new rules. The disorder that was brought by the crisis offers opportunities that come with a new freedom of thought, which was unthinkable in a financially stable situation (GlobeScan Salon Briefing: CSR in the Economic Crisis, 2009). The practicing experts confirmed the idea that the crisis “gives the opportunity to companies to redirect CSR from a threat to an opportunity” (Giannar-

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akis and Theotokas, 2011, 6). Considering CSR as a danger to economic and financial stability appears to be an old-fashioned and short-sighted point of view. It is, of course, the individual decision of each single company how to deal with CSR, but practice seems to demonstrate that it is no longer wise to avoid this topic. PILOTING NO-COST CSR PROJECTS FOR SMES Conclusions drawn during an international project in Izmir Internal factors such as the size of the company have a great impact on embracing and implementing CSR projects. It is worth investigating the challenges that small and medium-sized enterprises (SMEs) face while taking their decision to run CSR projects. The most common obstacles for SMEs engaging in CSR were revealed by the participants of the International Intensive Programme Project (http://socresedu.yasar.edu.tr) in May 2012 at Yasar University, Turkey: • perceived and/or actual costs of the activities, • lack of awareness of business benefits, • conflicting time and other resource pressures (some SMEs struggling to stay in business), • lack of know-how and know-who (to incorporate CSR as a mainstream issue, to make the business case, and to provide technical support), • reluctance to seek external help and expertise, • lack of strategic embedding of CSR in the overall company strategy, and • lack of expertise in communicating with stakeholders about CSR activities. As a general tendency “it was observed that following the global financial crisis of 2008 enterprises pursued a variety of cuts and saving strategies in order to maintain their existence. CSR activities were also influenced by these strategies exercised by enterprises due to the crisis” (Yelkikalan and Köse, 2012, 292). It is interesting to observe the different approach of large companies regarding CSR implementation in the time of crisis: despite the fact that some large companies continued their CSR activities “without interruption even in times of crisis, supporting various social and artistic activities” (Yelkikalan and Köse, 2012, 295), they chose a different way to reduce costs by reducing their staff. Yelkikalan seems to confirm that CSR is not primarily a financial burden; it is the way to secure and even strengthen financial and market position in times of crisis (Yelkikalan and Köse, 2012, 297). How do the managers of

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companies view CSR: as an act of philanthropy or rather as a well-calculated strategic investment? How do companies change their CSR strategies during a crisis? Is it possible to continue implementing CSR and if yes, should the CSR strategies remain the same or be altered? One goal of this chapter is to provide real-life examples of low-cost or nocost CSR activities that have the potential for being carried out in small and medium-sized enterprises. CSR Projects at RheinAhrCampus The main challenge that unites both small and large companies in their approach to CSR projects run during times of crisis is the concrete investment necessary for CSR implementation. However, in reality, CSR projects may not necessarily require a massive investment of money. In order to develop and demonstrate this point, RheinAhrCampus (University of Applied Sciences Koblenz, RheinAhrCampus Remagen, Germany) representatives piloted examples of CSR activities that do not really involve any direct costs (but rather rely on the time and energy of the employees of a company) and thus appear to be less contentious and more sustainable in times of crisis. Students and lecturers worked on the assumption that while money may be scarce in small companies in the middle of a financial crisis, person-power might, in fact, be more available because the order situation may be low and production is likely to be much slower than in boom times. During this difficult period it may be easier for management to give up working time of the employees than actual money for a CSR project. As a consequence the students developed and piloted activities which depend less on financial input and rather require the staff of a company to give time for the benefit of the community. The good-practice pilot projects run by RAC students as examples of low-cost or no-cost CSR projects could perhaps be easily adapted to be carried out by local SMEs. The RheinAhrCampus projects followed some simple guidelines: (a) Act locally: defining the target group. As the project group consisted of employees and students of RheinAhrCampus and they were acting as the campus representatives, it was plausible to concentrate on educational aspects, linking the planned activities in the community with the core business of the university. That is why the first target group was the pupils of local schools. In order to broaden the scope of the action it was decided to work with two distinctive age groups: small children from third grade (Group A: eight to nine years old) and teenagers from seventh grade (Group B: twelve to thirteen years old). The third group was chosen from the opposite age range: senior residents of a local nursing home (Group C: sixty-five to ninety-three years old). The educational aspect was

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strategically planned as a two-way process: the idea was not only to teach but also be taught by the target group so as to create some real communication during the social activities. All participants (pupils and senior citizens) and also their institutions (schools, the nursing home) were very appreciative of the activities and the projects received considerable attention on Facebook and by newspapers and regional television in the community. The pupils also shared their extraordinary experiences on campus with their parents and the elderly with their relatives. As a consequence the projects reached a large cross-section of society and were talked about widely by all age groups in the local community. (b) Money is not everything: looking at non-monetary contributions. As there was a very limited budget and the whole aim of the projects was to prove that CSR is possible even if options such as donating money for charity are excluded from the very beginning, the students quickly learned they had a lot to give to the community. There are many valuable contributions that cannot be measured in money and yet may be appreciated even more. Among the perceived resources that seemed most promising there were time, attention, interest, and sympathy. These contributions are usually very much appreciated, especially if they are unexpected and come from institutions or companies. (c) Avoiding mine fields—identifying the potential danger of an activity. In the planning stage of CSR activities it is important to make informed and plausible choices. The themes and goals of the planned projects must never be controversial, ambiguous, or misleading. Unfortunately, there have been bad practice examples that have given the companies and even CSR in general a rather bad reputation. One example was a children’s sports event in Germany sponsored by a famous soft drinks producer in a German school. The day was designed to promote a healthy living for young people. However, afterwards the parents protested that their children had been offered large quantities of what they called unhealthy drinks that they were not even allowed to drink at home. As a consequence the whole event received bad press for several days after the event and the discussion about sugar in drinks completely distracted from the original children’s sports event. So the choice of project and sponsors is critical and needs to be viewed from all angles before decisions are taken. As the projects at RheinAhrCampus were run as part of an academic course within the module international competencies, it was decided to take enough time, to evaluate good and bad practice of existing CSR projects carefully, and to discuss such topics as intercultural diversity and tolerance but also the perceived expectations of all stakeholders, both within and outside the university.

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Inviting Pupils from Local Schools It was decided to invite pupils from various local schools to visit the university campus for the International Day, an annual event of celebrations that usually only attracts university personnel and students. The idea was to open up this celebration of internationalization and diversity to other groups from outside the university in order to promote it in the region. The project group developed customized programs for the younger and the older school children. The program for the younger children included games, competitions, and prizes whereas for the older school children the group planned some more thought-provoking intercultural discussions and quizzes. As the project activity was tagged onto a bigger event that was taking place on that day anyway, it was possible to put it into practice at very low cost. The main costs were connected to buying some traditional sweets from different countries that were presented to the children by exchange students from those countries on that day during the tea break. The total budget required for the two projects was less than €100, that is, only about €2 per pupil who had visited the campus. As planned, the main input for this particular CSR project was not money, but students’ and lecturers’ time, attention, and energy. Establishing an appropriate program took several meetings during two weeks and the students were surprised how much planning and preparation was needed for an event that in the end looked so playful and improvised. In the evaluation the students concluded that this type of activity has a high potential to be transferred to a company. It would only cost €100 to invite about fifty school children into the company and entertain them. It would, however, also mean that a handful of employees would have to plan this and would not be able to work fully on their regular projects during this week. From their own experience the students concluded that such a program is likely to not only produce an increased visibility of the company in the local community, but also motivate the company’s employees who feel that their company is doing something good for society and is worth spending eight hours a day five days a week working for. Visiting Senior Citizens in a Nursing Home The second project, visiting senior citizens in the local nursing home, produced no direct costs at all, as it was integrated into the Visitors’ Day traditionally organized within the nursing home. The idea and the principle of choosing a target group that would spread the news into the community stayed the same: senior citizens sharing their experience of the world with young students was expected to create a powerful story, both for newspapers but also for conversations of the elderly and the students within their families. A group of international students (Hungarian, French, Russian, and Mongolian) from the university visited the elderly people in the nursing

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home and joined them in the activity of asparagus peeling, which had been planned as the main activity for the Visitors’ Day. The mixed-age groups peeled the asparagus together as a joint dinner preparation. There was a short introduction before the university students joined the residents at their tables. The students had not prepared a special program but tried to engage the elderly in conversations about table manners in different countries as this was deemed to be a good conversation starter. Sitting side by side with the much older residents, they joined the conversations and shared some information about themselves and their different home countries while they helped peeling the asparagus for a joint dinner. The most important assets the students brought to the tables were the sympathy and readiness to listen. They learned that the elderly don’t have so many visitors and, as a consequence, appreciated an open ear from the students. The students felt that out of the ten different CSR activities they had put into practice during the semester, this particular event was the real highlight. While some situations and conversations were rather challenging for the students as they were subjected to more tragic stories than they had expected, they also felt that with this activity they had effectively reached a group in society that really deserves more attention. In their evaluations, the students stated that it could be an effective opportunity for companies to organize similar visits to local nursing homes. As the story is sure to attract the attention of the media, and above all, as the experience is so gratifying for everybody involved, it would be easy to find sponsors for such an evening (e.g., a local shop that would donate the groceries for the dinner). This kind of event that is mostly about listening and giving attention to the elderly, who do not have as many social contacts as they would like to have, would be definitely appreciated by the elderly participants, their relatives, and the community as a whole. Encouraging Intercultural Discussion The third project was also run during the International Day and was aimed at the university students. The two main motors of internationalization for the students are the opportunity to study and work abroad but also to get in contact with international students who have chosen to study at RheinAhrCampus. The university, like many other German institutions and companies, welcomes more and more representatives from various cultures. For these guest lecturers and international students there are many aspects of German life that are very different and sometimes cause questions and even misunderstandings. However, in everyday life and in particular in the middle of classes there are not so many opportunities to discuss these intercultural matters. On the other hand, this discussion is highly important and sometimes crucial, especially for successful cooperation at work or with fellow students.

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This lack of communication on intercultural topics was also diagnosed at RheinAhrCampus. It was felt that international guest lecturers and students needed more opportunities to talk about their intercultural experiences and share their situation in the host country. The project aim was formulated as “initiating deeper intercultural discussion and inviting university staff and students to join it.” The main challenge was to create the event and to attract the participants, so that the conversation would have a casual and pleasant character. The task force for this activity came up with the idea of baking waffles during the annual International Day and inviting the representatives of different nationalities to eat them while talking about intercultural experiences. There was one trick: either students had to pay money for the waffles or they had to find a person with an international background, bring them to the waffles stand, and present themselves as an international pair to get two waffles for free. This led to a queue of generally one German with one international person who first collected their waffles and then sat down together at the “international table” to discuss the situation and intercultural experiences of the guest. The task force was amazed how gladly the participants took the initiative and searched for international representatives. Not much money was made at the stand on that day as most waffles were handed out to international pairs for free. However, it was a very successful activity with lots of talking, laughing, and joking. Most of the pairs who queued up together had not known each other before the activity and enjoyed meeting new friends in a conductive atmosphere where they were able to express their own points of view, ask some questions, and clarify potential misunderstandings. FOLLOW-UP: “DO GOOD AND TALK ABOUT IT” While CSR has spread considerably over the last twenty years, there still seems to be a lack of visibility of CSR because the public does not have access to the communication and reporting. There are numerous companies that run successful CSR projects (even if they don’t refer to them as CSR), but they fail to communicate them properly. While the efforts and investments are laudable, they often don’t manage to get the attention of the target audience. All three described projects were documented in local newspapers, on local TV, and on the Facebook page of the Department of Languages/International Affairs (2013) of the university. All three projects would be feasible for local companies, which can enjoy the win-win situation of doing good things and talking about it in local mass media.

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FROM SUSTAINABILITY THROUGH CSR TO CSR SUSTAINABILITY Sustainability through CSR: “Doing Well by Doing Good” The crisis is a special time that highlights weaknesses and challenges in all spheres of life. For companies it is crucial to find ways to secure sustainable growth during the period of instability. The crisis changes priorities and allows new priorities. Many experts see the key to success in continuously adjusting the strategies of companies. Many experts see CSR as one of the most effective adapting mechanisms, as in their opinion the crisis has “focused public attention on the social and ethical performance of enterprises” (A Renewed EU Strategy 2011–14 for CSR, 2011, 4) and these are the major priorities of CSR activity. The importance of CSR in times of crisis was also discussed at EU level. The European Commission has updated its policy on CSR as a result of requests from both the council and the European Parliament. In its renewed policy on CSR, it explains that “by renewing efforts to promote CSR now, the Commission aims to create conditions favourable to sustainable growth, responsible business behavior and durable employment generation in the medium and long term” (A Renewed EU Strategy 2011–14 for CSR, 2011, 4). Among the variety of CSR improvements according to the new policy (A Renewed EU Strategy 2011–14 for CSR, 2011, 9 et.seq.) the EU Commission intends to: • initiate the experience exchange and CSR partnership between the enterprises and their stakeholders, • “address the issue of misleading marketing” and “consider the need for possible specific measures on this issue,” • “consider a requirement on all investment funds and financial institutions to inform all their clients (citizens, enterprises, public authorities, etc.) about any ethical or responsible investment criteria they apply or any standards and codes to which they adhere,” and • “monitor the commitments made by European enterprises with more than 1,000 employees to take account of internationally recognized CSR principles and guidelines, and take account of the ISO 26000 Guidance Standard on Social Responsibility in its own operations.” The purpose of this new approach is not to impose the CSR practices, but to show that “addressing corporate social responsibility is in the interests of enterprises” (European Competitiveness Report, 2008, 774, and accompanying Staff Working Paper, 2008, 2853), as “it can bring benefits in terms of risk management, cost savings, access to capital, customer relationships, hu-

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man resource management, and innovation capacity” (European Competitiveness Report, 2008, 774, and accompanying Staff Working Paper, 2008, 2853) and consequently improve the competitiveness of the enterprise on the market. Furthermore, CSR policies are also supported by UN initiatives, for example, in the Millennium Goals as one part of the concept of inclusive business: “Inclusive business is about companies seizing market opportunities that work for the poor . . . delivering win-wins: new opportunities for low-income people and commercial returns for companies, and for their business” (Accelerating Progress towards the Millennium Development Goals through Inclusive Business, 2010: 3). CSR was also included in the standardization guides, for example, the AA1000 series, the ISO2600, and the GRI considering CSR “one of the main tools to be accountable to our stakeholders, while at the same time generating a management tool within a continuous improvement cycle” (CSR Report, 2011). It seems that all the leading world business observers unanimously regard CSR activities of companies as a guarantor of sustainable development, which is so crucial to be secured in times of financial instability. The development of a legal framework in the sphere of CSR has already shown results. Many researchers state that nowadays there is a shift in the evaluation of CSR among enterprises. As the survey of the IBM Institute for Business Value has revealed, many enterprises have changed their perception of CSR from philanthropy to “sustainable growth strategy“ (Pohle and Hittner, 2008, 2). The IBM institute researchers Pohle and Hittner (2008) recommend to: • incorporate CSR in the business strategy: CSR is not spending, it is investing that “can bring competitive differentiation, permission to enter new markets, and favorable positioning in the talent wars” (Pohle and Hittner, 2008, 3); • provide transparency: the multiple stakeholders (customers, partners, and investors) need much more information than is provided according to legal regulations, so they “are digging deeper into their business partners’ operations, asking about their carbon dioxide emissions, and the impact of hazardous components in the supply chain” (Pohle and Hittner, 2008, 7); it may be wiser to spare them the efforts and offer open access to the relevant information; and • increase participation: in order to satisfy the needs of customers, the companies have to know them, be proactive, and include them in the decisionmaking process. In the researchers’ opinion all these measures taken in combination offer “a company improved relationships with all of its key constituents, more loyal

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customers, lower costs, higher revenues, and an overall improvement of the business’ standing in society” (Pohle and Hittner, 2008, 15). This can make a business more sustainable. It is logical to assume that a sustainable business is, as a consequence, also more resistant to the dangers of a financial crisis. CSR Sustainability: “What Gets Planned Gets Done” The mechanisms for setting and achieving goals in CSR must be the same as in many other spheres of business such as risk management or quality management. Sustainability means being successful today and ensuring success for tomorrow. This means managers must stop folding and unfolding the “CSR umbrella” depending on the financial weather on the market. The “Father of Modern Management,” Drucker, who is also believed to be the pioneer of CSR, was convinced that “social responsibility and leadership went hand in hand” (Cohen, 2010, 97). He saw no contradiction in implementing CSR and making profits. Drucker (1968, 323) had no doubt that “the proper social responsibility of business is to tame the dragon–that is, to turn a social problem into economic opportunity and economic benefit, into productive capacity, into human competence, into well-paid jobs, and into wealth.” Cohen quoting Drucker states that by meeting the needs and expectations of the company’s employees, management secures their “profits, survival, and the growth of the business or organisation” (Cohen, 2010, 97). Furthermore, in the Drucker’s view solving social problems is the task of business, not of the government. His main argument at the time was that government had never been successful at running social projects and as a consequence people had lost faith in it (Cohen, 2010, 106). Like any other business practice, CSR has to be successful to be sustainable, that is, planned, controlled, and adapted to the changing circumstances and to results achieved. CSR must be subject to the well-established PlanDo-Check-Act cycle, which guarantees continuous development and improvement. Ideally CSR should leave the marketing department, as its concept and the activity spectrum are much wider and closer to company strategy. There should be employees who are exclusively responsible for CSR strategy and implementation and completely concentrated on this task. The natural reaction of companies to the financial crisis is the attempt to save costs in order to resist competitive conditions and market instability. As a result, CSR projects are often the first ones that are reduced to save money. This chapter aims to demonstrate that this policy is too short-sighted and leads to short-term savings at the cost of numerous negative consequences further down the line. The part of this chapter devoted to the practice examples of low-cost and no-cost CSR projects has shown that CSR does not have to be about money.

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It is possible to run successful CSR projects with no direct costs establishing genuine relationships with a company’s stakeholders. The authors came to the conclusion that CSR should not be considered a “nice-to-have” activity: it must become part of the core business strategy which is realized on a regular basis. Moreover, in times of crisis CSR activities could be promoted even more intensively, as they guarantee the connection with the stakeholders and their appreciation—which play a crucial role when choosing a new employer, producer, or seller. In this case the dividends gained will exceed the investments and secure a sustainable development. ACKNOWLEDGEMENT The authors would like to thank all who have contributed to this research, in particular the university’s steering committee for their support, Oyunbileg Batireedui from Mongolia and Katalin Perjesi from Hungary for their role in the preparatory stages of this chapter, and Jens Andreas Faulstich and Anne Fox for proofreading. REFERENCES Accelerating progress towards the millennium development goals through inclusive business. (2010). http://www.unglobalcompact.org/docs/issues_doc/development/Delivering_ Results_Moving_Towards_Scale.pdf, accessed on 13.10.2012. Aras, G., and Crowther, D. (2011). Governance in the business environment. Developments in corporate governance and responsibility. Emerald Group Publishing Limited, 2, ix-xviii. Argandoña, A. (2012). CSR and the credit crisis. http://www.europeanbusinessreview.com/?p= 977, accessed on 24.08.2012. A renewed EU strategy 2011–14 for corporate social responsibility (2011). http://ec.europa.eu/ enterprise/policies/sustainable-business/corporate-socialresponsibility/index_en.htm, accessed on 13.10.2012. Belén, F-F., and Dra, S. (2009). Crisis and corporate social responsibility: Threat or opportunity? International Journal of Economic Sciences and Applied Research, 2 (1), 36–51. Carroll, A. B. (1979). A three-dimensional conceptual model of corporate performance. Academy of Management Review, 4 (4), 497–505. Carroll, A. B. (1991). The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons, 34 (4), 39–48. Carroll, A. B., and Buchholtz, A. K. (2012). Business & society: Ethics, sustainability, and stakeholder management. Maison: South-Western Cengage Learning. Cohen, W. A. (2010). Drucker on leadership: New lessons from the father of modern management. San Francisco: Jossey-Bass. CSR Report. (2011). www.globalreporting.org/Pages/FR-Abertis-2012.aspx, accessed on 13.10.2012. Drucker, P. F. (1968). Frontiers of management. New York: Truman Talley Books. European Competitiveness Report. (2008). (COM, 2008,774), and accompanying Staff Working Paper SEC (2008, 2853). http://ec.europa.eu/enterprise/newsroom/cf/_getdocument.cfm?doc_id=4058, accessed on 13.10.2012. Facebook page of the Department of Languages/International Affairs. (2013). www.facebook. com/pages/SprachenInternationales-RheinAhrCampus-Remagen-Germany/7479932443.

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Friedman, M. (1970). The social responsibility of business is to increase its profits. New York: New York Times Company. GlobeScan Salon Briefing, CSR in the Economic Crisis. (2009). http://www.globescan.com/ news_archives/salon_lon-0109/, accessed on 24.08.2012. Giannarakis, G., and Theotokas, I. (2011). The effect of financial crisis in corporate social responsibility performance. International Journal of Marketing Studies, 3 (1), 2–10. Iamandi, I-E., Constantin, L-G., and Jolde, C-S-R. (2010). Corporate social responsibility during the economic crisis. The Case of the Romanian Companies. http:// anale.steconomiceuoradea.ro/volume/2010/n2/153.pdf, accessed on 13.09.2012. Keinert, C. (2008). Corporate social responsibility as an international strategy. Heidelberg: Physica-Verlag. Mountford, S. (2011a). First signs of recovery in global public’s assessment of companies’ CSR. http://www.globescan.com/commentary-and-analysis/featured-findings/99–firstsigns-of-recovery-in-global-publics-assessment-of-companies-csr.html, accessed on 24.08.2012. Mountford, S. (2011b). Awareness of corporate CSR activity among public has stalled. (Publication: 13.04.2012) http://www.globescan.com/commentary-and-analysis/featured-findings/ 164–awareness-of-corporate-csr-activity-among-public-has-stalled.html, accessed on 24.08.2012. Mountford, S. (2012). Credibility gap persists around companies’ CSR communications. http:// www.globescan.com/commentary-and-analysis/featured-findings/226–credibility-gap-persists-around-companies-csr-communications.html, accessed on 24.08.2012. Pohle, G., and Hittner, J. (2007). Attaining sustainable growth through corporate social responsibility. IBM Global Business Services. IBM Institute for Business Value. USA. http:// www-935.ibm.com/services/us/gbs/bus/pdf/gbe03019–usen-02.pdf. [Accessed on 14.09. 2012]. Sun, W., Stewart, J., and Pollard, D. (2010). Reframing corporate social responsibility: Lessons from the global financial crisis, Emerald Group Publishing Limited, Bingley, 1. Watts, P., International, S., Holme, L., and Tinto, R. (1998). Meeting changing expectations. Corporate social responsibility. www.wbcsd.org/pages/edocument/edocumentdetails.aspx? id=82&nosearchcontextkey=true, accessed on 24.08.2012. Yelkikalan, N., and Köse, C. (2012). The effects of the financial crisis on corporate social responsibility. International Journal of Business and Social Science, 3 (3), 292–300.

Chapter Eight

The Role of Nongovermental Organizations in CSR Huriye Toker

Nongovernmental organization or “civil society organization” shortly NGO is the definition of any nonprofit, voluntary citizens’ group which is organized on a local, national or international level. NGOs perform a variety of service and humanitarian functions, bring citizen concerns to governments, advocate and monitor policies, and encourage political participation through provision of information. According to the terminology, it can be stated that NGO is clearly the most commonly used term, although many other terms (antimarket environmentalists, pressure groups, activists, social movement actors, local community actors) are also available. The second term and the focus of this book, corporate social responsibility (CSR), can be defined as a voluntary commitment of business to exceed explicit and implicit social obligations (Parker, 2008, 84). By practicing CSR strategically, a company can “do well by doing good”; in other words, it can make a profit and make the world a better place at the same time (Falck and Heblich, 2007). In the same line Barnett (2007) defines CSR as a social obligation moreover “a discretionary allocation of corporate resources toward improving social welfare that serves as a means of enhancing relationships with key stakeholders” (Peloza and Falkenberg, 2009, 96). Not very long ago, the dividing line between business and society appeared to be clearly drawn. Many companies and business associations have recognized the importance of CSR. Large, global businesses from industrialized economies are especially likely to engage in voluntary CSR activities, publicize their yearly more CSR reports on their websites. According to the economist Milton Friedman, “There is only one social responsibility of business: to use its resources and engage in activities designed to increase its profits” (Friedman, 1970). This view no 125

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longer prevails. CSR is a rapidly increasing practice where businesses in the world are becoming increasingly interested, active, and innovative. The phenomenon has become a boardroom agenda for many organizations. The traditional view of CSR being only “corporate philanthropy” is gradually getting expanded to the well-being of people, care for the planet and increased profits. Having this stretched-out spectrum, CSR become multidimensional in its approach, widespread in its impact, and strategic in its nature. With this broad range it is clearly obvious that the aim of the CSR activities overlap the ultimate goal of NGOs. Therefore NGOs become an important stakeholder in CSR activities today. Broadly defined, “stakeholders” are individuals and groups who can influence company decisions. Many global businesses respond to citizen and NGO initiatives by involving external stakeholders in their decision-making processes. As it is shown in figure 8.1, beside NGOs, other secondary stakeholders include government, local communities, employees, trade unions, consumers, and shareholders; they each have a different level of impact on the companies. However, NGOs are one of those external stakeholders in the CSR practice, and their role in CSR is becoming more important in the last twenty years. Furthermore the relationship between NGOs and businesses (companies) has received increasing interest from both academics and NGO practitioners. The growing interest in NGOs is partially due to their rapid growth in number and influence and moreover their presence of international and national level with constantly developing new tactics for engagement with business. In the analysis of the NGO-business relationship, key research themes have included the different roles and strategies adopted by NGOs and their impact on companies, the various forms of collaboration, such as dialogue and partnerships (Kourula and Laasonen, 2009, 36). The research confirms that secondary stakeholders, such as NGOs, are becoming key players in CSR, but their role is still regarded as controversial and their legitimacy contested. Deep-seated misunderstandings and mistrust among various stakeholder groups (particularly between NGOs and trade unions) are a possible reason of this prejudicious relationship in many years. For businesses, NGOs are seen as unreliable partners and moreover for NGO managers, the research shows that NGOs are not always aware of the stereotypes they generate and the problems caused mainly by ambivalent roles of NGOs such as critic and counselor, accuser and judge, idealist and fund raiser (Arenas, Lozano, and Albereda, 2009, 175). Within this complex framework, the NGO-business relationship has reached another milestone with the ever-increasing CSR practices of business.

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Figure 8.1. Stakeholders of corporate social responsibility. Adapted from Gopal K. Kanji, and Parvesh K. Chopra (2010) and the International Institute for Sustainable Development, 2007.

HISTORY OF BUSINESS AND NGO RELATIONS In the contemporary world, CSR modules and programs are an inseparable part of graduate-level business education in many countries. It is important for students to learn about the responsibilities of companies to the stakeholders and the shareholders (Pendleton, 2004, 79). Press, TV channels, and websites are widely used by NGOs to create public awareness and coercion for CSR practices of companies. There are several publications and websites that highlight the best and the worst corporate social and environmental responsibility practices. Publications such as Ethical Consumer exist to help consumers to make ethical purchases. There are ethical pensions and stock portfolios for people who prefer to invest in socially responsible companies. Leader companies care about their reputations and attract more consumer pressure for CSR issues than followers (Pendleton, 2004, 79). According to a survey by MORI, 80 percent of people thought large companies had a moral responsibility to society in 2002 and three-quarters of the British population (74 percent) say more information on a company’s social and ethical behavior would influence their purchasing decisions in 2003 (MORI, 2003). More-

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over, according to the latest survey conducted by IPSOS MORI, honesty, integrity, and reputation are three of the most important things to judge a company by (IPSOS MORI, 2012). Beside the increasing public interest in social responsibility of business, a comprehensive analysis of the growing amount of CSR literature on the NGO-business relation (Kourula and Laasonen, 2009, 36–37) clearly shows the rise of NGOs as relevant players, in addition to private- and public-sector actors. This has been seen as one of the most significant processes related to the global environmental and social challenges of today. Shortly, we can claim that the general society is more aware and interested in social responsibility and therefore the CSR activities of business. CSR become an important part of business-society relations and NGOs are a mediator actor in this process. To understand the relationship between business and NGOs we need to turn back to the history. When we focus the history of NGO-business relation we can observe different time zones such as before the 1990s and after the 1990s. The trend of NGOs working in cooperation with business has developed considerably in last fifteen years. The global community—including leaders of international governmental institutions and of the nonprofit sector as well as some business leaders—has recognized the importance of including business in the process of international development. Business has the potential, capital, and efficiency to impact various stakeholders in a positive way. But despite this capacity, there is a concern that business is not always attuned to the needs of CSR. Companies desiring to be more responsible do not necessarily have the knowledge, training, or dedication to carry out development programs. NGOs, on the other hand, have become instrumental in development work internationally, but they generally do not have the means and resources to carry out their projects efficiently in a sustainable manner. This is why engaging business with the public and nonprofit sectors to find common solutions to problems has been globally an increasing trend. International institutions specializing in aid and economic development have recognized the value and importance of cooperation between sectors in promoting sustainable development. To focus the history of NGO-business relations from the perspective of CSR, a division of time will be logical. Until 1990s NGOs mostly reject collaborative interaction with businesses preferring to take a confrontational position toward companies (Arenas, Lozano, and Albereda, 2009, 176). Examples of well-known anti-corporate campaigns include the one launched by the International Baby Food Action Network (IBFAN), and those against GAP for the working conditions in suppliers’ factories, Shell over the North Sea Oil Platform Brent Spar, and Nike over child labor. After the 1990s with the sudden increase of NGO activism and engagement with corporations on issues such as child labor, human rights, sustain-

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able development, oil pollution, deforestation, and lately nuclear pollution, a new form of collaboration started. Many companies have included NGOs in their stakeholder dialogue since the late 1990s, following the example in 1996 of the Body Shop. In that same year, 1996, the World Wide Fund for Nature (WWF) created the Marine Stewardship Council with the involvement of fishing companies. In 1997 the Global Reporting Initiative was launched as a multi-stakeholder initiative, and includes NGOs and businesses. The demands of the new era have brought stakeholders more closely together. Some international initiatives also support the process of collaboration. For example the OECD started consultations with civil society organizations for its Guidelines for Multinational Enterprises in 2000. And the European Multi-stakeholder Forum on CSR (European Commission) began in 2002–2004 and resumed in 2006 (Arenas, Lozano, and Albereda, 2009, 180). NGOs have actively participated in all these dialogues, consultations, and debates that are clearly related to the advancement of CSR. NGOs, therefore, have become a natural part of CSR. After these developments, new forms of business-NGO engagement emerged based on a combination of confrontation and collaboration strategies (Kilgour, 2001). The NGO is a supporting and monitoring actor in this process. As the media monitor government practices, political and social developments, and report them to the public as news, opinions, and television programs, NGOs become watchdogs, sources of social pressure at the level of an individual manager of a company, or an entire industry. Without abandoning advocacy and campaigning, today’s NGOs also engage corporations and business associations to identify and disseminate corporate practices. They form partnerships to promote social and environmental actions, provide technical assistance to corporations, promote and design CSR standards, and participate in the management, reporting, monitoring, auditing, and advising processes of CSR strategies and activities. These new forms of collaboration between business and NGOs reflect broader changes in the overall governance environment and are the source of many well-known examples of NGObusiness cooperation. CONTEMPORARY BUSINESS-NGO PARTNERSHIPS Greenpeace and the Shell Oil Company are pioneers of NGO-business cooperation. Traditionally known as a combative organization, Greenpeace has worked with Shell over many years in England. This collaborative relationship is helping Shell to change and create a positive impact on the environment. At Shell, BP, Starbucks, Nike, and almost every company, the undeniably significant part of the positive change has come about because of a relationship with an NGO (Hollender, 2004, 114).

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Another example of high-profile collaborations is the partnership between McDonald’s and the Environmental Defense Fund to reduce the environmental footprint. The Environmental Defense Fund provided expertise to McDonald’s with the use of recyclable materials. This partnership began in the late 1980s and has resulted in a reduction of the company’s packaging waste by hundred-thousands of tons. The partnership has since expanded to new areas, such as reduction of energy and reducing the greenhouse effect. Evidence shows that once stable relations are established, new forms of collaborations are possible between NGOs and the companies. A more recent example of collaboration is between the world’s largest tea company, Unilever, and Rainforest Alliance—an international environmental NGO. As a CSR strategy, Unilever decided to purchase tea from sustainable sources, and entered into a partnership with Rainforest Alliance, which certifies tea farms in Africa (Peloza and Falkenberg, 2009, 99). The initiative improves the sustainability of farming incomes and life quality of farmers and workers. It also offered Unilever an opportunity to support an issue to improve its reputation, which can provide the firm meaningful differentiation from competitors, since social factors can be important decision criteria for many consumers. A company’s deep collaboration with an NGO can lead to significant social impact, which can give firms the opportunity to positively affect local socioeconomic conditions of particular relevance to the firm. This societal change will lead to the social transformations that are important for NGOs. To be partnered with NGOs with local knowledge is more necessary when firms have significant, focused operations in a local area. For example, when BP wanted to offer fuel-efficient stoves to people living in rural India, it lacked the retail and distribution infrastructure needed to make the project work and also lacked the local knowledge to tap into the network of small shops and informal traders. The Body Shop and its Community Trade Program in the 1980s was the pioneer in CSR and worked many local NGO for animal rights and environment purposes. The company was regarded as one among the first firms in the world to publish a proper report on its social responsibility initiatives. The company stated that it is committed to several ethical principles. However, at its beginning, the project was critiqued as being too small and insignificant to have a real impact, as only 1–2 percent of the Body Shop’s overall turnover was generated by fairly traded products. The company has since committed to increasing this percentage. In 1994–1995, fairly traded products represented 17.8 percent of what the Body Shop spent on accessory purchases. In 2003–2004, 5 million pounds worth of natural ingredients and accessory items were purchased through the program, including seven hundred tons of natural ingredients (Lewis, 1998, 140). Through this program Body Shop sourced products from marginalized communities for a fair price in a sustainable way. For instance, it sourced marula oil from Namibia,

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bananas from the Caribbean, beeswax and honey from traditional beekeepers in Zambia, shea butter from a women’s group in Ghana, etc. Through this program, the Body Shop guaranteed a living wage for its community trade suppliers and their workers through a predictable and long-term business relationship. In 2006, the program included thirty-one communities spread across twenty-four countries. More than half of Body Shop’s core product line contained at least one item sourced through this program (Purkayastha and Fernando, 2007). Another well-established business-NGO relationship was constructed between Oxfam International and Starbucks. The primary goals of alliances between businesses and NGOs in the coffee industry are to promote quality coffee, and to facilitate more direct relations between the producers and buyers through supporting the Fair Trade Certified coffee production. The global coffee crisis which began in the 1990s affected twenty-five million coffee growers worldwide in 2002 and was caused by the fall in prices, which reached a twenty-year low. Many growers in developing countries have felt the consequences of the crisis as the cost of producing beans exceeded the income generated by sales. Falling prices were due to overproduction as global coffee production has increased by 15 percent since 1990, while consumption has increased by only 7 percent. The part of the solution calls upon corporations and consumers in rich countries to act as global citizens rather than simply global marketers and global consumers (Linton, 2005, 602). Partnerships between NGOs that started this movement and corporations that serve as marketers and retailers of coffee products in the north, play an important role in supporting the sustainable coffee movement. The action is also a well-known example of fair trade success. The above-mentioned examples are giving some idea about NGO and business cooperation. After stating the successful CSR initiatives we need to identify possible reasons and challenges of business-NGO cooperation to draw some conclusions. REASONS OF BUSINESS-NGO COOPERATION Today there are more than 100,000 MNCs and 900,000 foreign affiliates. The total assets of foreign affiliates as of 2010 are valued at approximately $57 trillion, more than ten times their value in 1990 (World Investment Forum, 2012). Business has enormous economic and political power in the world. However, they are financially powerful, but the social well-being of the society is not their primary concern; therefore they do not have necessary knowledge and expertise in the CSR field. On the other hand, NGOs have enough knowledge, training, or dedication to carry out development programs, but lack of financial resources to carry out these programs. This

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reciprocal independency is the basic reason of business-NGO relationship in the CSR field. NGOs are perceived by companies as one of their main stakeholders. They are the main audiences and also powerful judges of CSR activities. They are the ones who will read and evaluate communications, web pages, sustainability reports, and other materials they produce. Another reason to explain the increasing business-NGO relation is a decline in the role of the nation-state, increasing multinational nature of business, and advanced electronic means of communication. Transnational corporations or multinational corporations have gained increasing power in the last decades and some researchers labeled it as “rise of global corporatism” (Millar, Choi, and Chen, 2004). Even in the less developed world, corporations may have more economic power than governments. Transnational corporations are responsible for about 25 percent of the Earth’s gross national products, so that they have unprecedented resources at their disposal. Because of their ability to have far-reaching activities, there is an increasing sense that business has a responsible role in promoting development: “The welfare state is giving way to the business welfare” (Damlamian, 2006, 6). After the governments, decreasing power, beside corporations, NGOs and civil society groups have also stepped into the framework, assuming the role of monitor and, in some cases, enforcer of social and environmental standards (Hart, 2005, 19). This enormous power shift also gives opportunity to the NGOs for becoming an important actor both in social and economic spheres. Image and credibility in the business is the driving force for the businessNGO cooperation. The main issue for a company is the reputation, which is becoming more and more important to both investors and consumers. Although their motivations may be mostly due to public relations (PR) concerns, the increased interest of business in CSR stems from the current importance of brand image to a company’s performance thus affected on corporation’s profitability or stock value. The public in general—consumers, investors, and NGOs—are more informed of business practices around the globe; this can impact brand image and become a financial liability for corporations. The push for more responsible business practices has caused some corporations to seek out NGOs as partners to help them implement solutions to development problems. Because NGOs are usually more trusted by the public, which sees them as more reliable than businesses whose main concerns are environment and social responsibility, thus an association with NGO can bring a more positive public image to a company. Trust has become a driver for partnerships between NGOs and business because the public trusts NGOs more than it does companies. So in the public eye, NGOs are more trustworthy than corporations in terms of benefiting society. Public trust in NGOs has increased in recent years. Edelman’s 2006 Trust Barometer has confirmed NGOs as the single most trusted institutions

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in nearly every country surveyed in Europe, America, and Asia, ahead of businesses, governments, and the media. NGOs are now the single most trusted institution in every country except for China, the survey found. Again Edelman’s 2009 and 2012 Trust Barometer clearly shows that NGOs are the only trusted institutions by more than 50 percent of informed public among twenty-five countries that participated to the survey (Edelman, 2012). This result is perhaps explaining why citizens increasingly connect with NGOs to effect business change. A company that partners with an NGO can hope to be seen as trustworthy and be more credible in its attempts at CSR through this association. Maintaining trust between the public and NGOs is the reason that NGOs should not simply be playing an endorsement role with corporations but should be instead engaging with them critically. Another reason supporting the reliability of the NGOs is the positive perception of the media. According to the perceptions of some stakeholders NGOs are the type of organizations that enjoy the best image and credibility in society and this is one of the reasons why they get more sympathy from the media. Media echoes the views of NGOs and enhances their credibility even further. For the media NGOs are easier to approach than a company, because the life of NGOs depends on the dissemination of information. For the media NGOs are a much more easy and accessible source than companies. With the help of media attention CSR can lead to an enhanced reputation that makes the firm more attractive to customers and is helpful to create a more productive, high-quality workforce. In some cases, the mediation may require the effective treatment of a social or environmental issue, and collaboration with NGOs can lead to the development of new competencies. NGOs can be an external source of specialized skills and knowledge, particularly when internal development of such expertise is costly, inefficient, and timeconsuming for the company itself (Peloza and Falkenberg, 2009, 97). The drastic increase in the number of NGOs in the last ten years is another reason explaining the expanding business-NGO cooperation. As a result of this, there are currently more than 50,000 international NGOs, compared to fewer than 20,000 only a decade ago (Hart, 2005, 19). In addition to the expansion in the size of NGO sector, there has clearly been an evolution in the scope and nature of NGO activities. NGOs have begun to transform themselves from traditional charity organizations to the organizations that directly involve themselves in addressing issues in developing countries, such as rural development, poverty, nutrition and health, education, and global issues such as environmental preservation, human rights, and the population crisis. Market knowledge and better understanding of market needs are some of the benefits of working with local NGOs that possess valuable knowledge about onsite conditions. NGOs’ expertise in language, local issues, and contact facilitation could lead to private-sector engagement. Thus, NGOs can

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play a bridging role in the transfer of institutional knowledge to international or foreign corporations: they have the advantage of dual voice with both market and institutional value, and they are able to work on specific localized issues while retaining a sense of the international context in which economic development may take place. From that point we can easily conclude that NGOs must do a better job at selling themselves to businesses by emphasizing not just their agendas but also their capabilities and assets. Better CSR policy as part of a corporate strategy is the reason and also benefit for the cooperation of NGO and business. Corporations have been switching their CSR focus from charitable donations to actual involvement in community activities. Many companies have found that such involvement is the best when it is undertaken through working with local NGOs. Environmental issues are an area where partnerships have been very successful: “NGOs have access to community residents, can readily identify community needs, and are equipped with professional expertise to meet such needs” (Yamamoto, 1999, 24). NGOs are better trusted among local populations, so that they may serve as a bridge between business partners and the communities in which corporations would like to be active. More and more corporations have come to view corporate citizenship in cooperation with NGOs as part of a business strategy that must respond to their core business interests. In the business-NGO cooperation financial sustainability and funding diversification is the main reason for the NGO partnership. As local or international institutions NGOs are under increasing pressure to diversify their sources of funding. Partnerships provide a source of funding independent of government funding. One of the major problems for NGOs in acquiring private funding is that they usually lack direct contacts in the corporate world that would be a basis for potential donations (Damlamian, 2006, 15). A partnership based on personal relations between NGO staff and corporate executives could help to solve this problem. But partnerships should not mean just a simple donation from a company. Access to free marketing is an opportunity for NGOs to make their voices heard and to publicize their activities through the marketing of a collaborating company. Since corporations invest heavily in publicizing their involvement in social causes, NGOs in essence get “free” advertising that simultaneously enhances their brand image (Heap, 1999, 26). From the perspective of NGOs, potential gains from partnerships with business go far beyond financial advantages. Management skill for improved efficiency is the benefit of NGO from this business-NGO partnership. The private sector has much to offer the nonprofit sector in the areas of financial management and long-term planning. After stating possible reasons and benefits of business-NGO cooperation in CSR, it would be also informative to focus on the difficulties or challenges of this relationship.

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CHALLENGES OF BUSINESS-NGO COOPERATION IN CSR The benefits provided by these collaborations are not without challenges; the most pressing one is the need for the dedicated expertise to manage the NGO partners. Managing these collaborations requires skill and experience, since NGOs have unique cultures from firms and often have competing priorities from stakeholders. Collaborations with NGOs can lead to increased expectations for support, because cooperation is seen as an invitation to bring a concern forward and the company’s willingness to add social and environmental issues to its agenda. Indeed, thus collaborative projects between firms and NGOs are more stressed than those in the traditional alliances between firms (Peloza and Falkenberg, 2009, 109). Another important challenge is that corporate responsibility issues are not black and white, clear-cut issues. There is no such thing as a perfectly responsible company. You can find something wrong, even companies such as Patagonia, Tom’s of Maine, and Ben and Jerry’s have issues of responsibility that they need to deal with. That is a challenging picture for the public, because once the consumer comes to terms with the fact that every company is somewhat good and somewhat bad, the questions for them become, “How good is good enough?” or “How good should a company be?” This is one of the most challenging questions both the corporate world and the public face (Hollender, 2004, 114). The perception of society is also an obstacle within this relationship. NGOs and business are often considered to be on opposite ends of the continuum of concern on issues of poverty and development. While business is perceived as caring only about the financial bottom line, the nonprofit sector is typically seen as being concerned with poverty reduction, and more social or environmental goals (Heap, 2000, 558). This prejudicial perception of each other prevails both NGOs and business act as they wish. Thus has led to stereotyping on both sides translating into mutual suspicion and resistance to change. NGOs see themselves as the losing party because they have weaker bargaining power and therefore believe that most of the benefits of partnerships are enjoyed by corporations. On the other hand, companies view NGOs as being too idealistic and not having enough discipline to function in the market. The most prevalent stereotypes are rooted in the fact that, as Heap (2000, 558) stated, NGOs view companies as unreliable, dominated by economic self-interest, while companies view NGOs as marginal organizations that cannot manage their finances. Beside the perception of general society, different interests of stakeholders are also the challenge in partnership of business-NGO cooperation. Stakeholders can compete for legitimacy, influence, and recognition from companies and public opinion, in the name of defending and promoting CSR. Differences in interests, priorities, values, and missions cause disagreements

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among stakeholders. Differences in perceptions and interpretations arise from well-rooted assumptions, prejudices, and values seldom made explicit in the public debate. Because an important source of disagreement often remains hidden, participants in CSR debates sometimes express weariness and dissatisfaction with the process. Different stakeholders’ perceptions, beliefs, and worldviews are essential to understand the problems in the advancement of CSR. Companies, as well as other stakeholder groups such as NGOs, need to be aware of this: how they are perceived and the world-view ascribed to them (Arenas, Lozano, and Albereda, 2009, 176). The perception of the stakeholders has an enormous effect that is deeply embedded in the historical context of the society. The overall communication strategy is important for a company. Furthermore, the communication strategy of CSR is a more fragile issue and is, at the very least, based on communication strategy and image profile as well as organization, staff, and infrastructure of information and communication technologies. There are many companies like Nike who became very well known for mishandling one significant aspect of their business (such as, in their case, labor relations and supply chain management) and who are not known for—in fact, having failed to effectively communicate—many of the positive things they have accomplished on the environmental front. This challenge is compounded by the fact that the media tends to publicize the bad and largely ignore the good. Often companies are reluctant to promote their positive accomplishments for fear that by holding themselves up for doing something good, they will only attract more criticism—which then becomes part of a never-ending spiral of confrontation, criticism, and positive change (Hollender, 2004, 115). NGO attitudes towards the business sector are changing: companies are increasingly viewed as necessary partners in improving society. At the same time, expectations regarding businesses’ commitment to social development are also growing. On the other hand, the overall attitude towards the nonprofit sector has also changed; its relevance to society’s well-being has been acknowledged. In the CSR context, there has been an increasing institutionalisation of NGO activities. The changing or evolving role of the NGOs in CSR also created challenges within NGO-business relations. The role of NGOs in CSR simultaneously gives rise to new partnership forms and is shaped by four groups of perceptions: recognition of their role as drivers of CSR; concerns about their legitimacy in relation to CSR; difficulties in how NGOs and trade unions relate to each other; and self-confidence of NGOs as important players in CSR (Arenas, Lozano, and Albereda, 2009, 176). On the one hand, NGOs are seen as the most active voices in criticizing companies for their insufficient CSR, and, on the other, they sit as judges. Both things are seen as undesirable by other stakeholders. According to other stakeholders, NGOs, even if they sometimes pay lip service to the voluntary character

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of CSR, basically favor more regulation, especially in transparency, external verification, and control (Arenas, Lozano, and Albereda, 2009, 184). In this complex relation NGOs face a dilemma in deciding whether they should encourage business to use this power to further the goals of sustainable development, or whether they should work against corporations by pushing for more private-sector regulations in an attempt to harness the power of the private sector, which they did mostly before the 1990s. This double role of NGOs as critic and counselor and supporter of CSR raises some conflicts. This is unpopular because other parties think that NGOs first create the demand for CSR, and then satisfy this need with their consultancy services or training at a price. However, NGOs see a clear difference between their role as organizations that pressure and criticize business organizations and their corporate consultancy role; this is not easy to explain to society this dual role. Whether or not this is a consulting job or whether it is easy or difficult to draw clear boundaries between different roles, this advisory role can give NGOs a deeper knowledge of the business world. An important task of NGOs is to explain their double role and manage it wisely in the future. Furthermore, NGOs recognize difficulties in their relation with companies; they see contradictions. What is common, though, is their insistence that collaboration has nothing to do with community relations, social marketing, or philanthropy. NGOs want to differentiate CSR clearly from those, and this means that they do not see their relationship with companies as one ruled by economic parameters. They try to manage their role in CSR wisely and as a result NGOs play an active role in influencing companies to increase their CSR (Carroll, 1991; Elkington, 1997; van Huijstee and Glasbergen, 2010, 591). The new economic role or commercial activities of the NGOs are also another confusing issue to explain the business-NGO cooperation. David Lewis (1998, 137) argues that relations between business and NGOs have traditionally been seen as oppositional because there is distrust between the two sides created by outdated, ill-informed, or stereotyped perceptions of each other and furthermore these situations have been reinforced by how researchers traditionally analyze corporate-NGO relations. But these relations are now changing as NGOs are finding themselves increasingly involved in areas of commercial activity, such as providing credit, supporting micro-enterprises, and forming links with producers of various products. These new areas of activity have led NGOs to benefit from the expertise and knowledge of business and improve their efficiency and economic sustainability. As a summary the main challenge within NGO-business relations is the eradication or blurring of the differences between businesses and NGOs. The main perceived difference—that NGOs have a monopoly over principles while companies focus on profit—is still generally accurate today. But the

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line between these sectors is breaking down and both sectors have begun to adopt each other’s jargon and methods such as talking about branding, niche marketing, and customer satisfaction. They are managed similarly by companies with huge turnovers, marketing strategies, and revenue targets. On the other hand businesses are increasingly concerned with explaining and publicizing their social and environmental policies with post-mission statements, CSR reports, or ethical codes of conduct on their company websites, and have restructured their communications efforts to address consumer and NGO expectations. Partnerships between an NGO and a corporation are usually a complicated and delicate issue and contain many challenges. They come with their specific set of problems that must be addressed from the beginning of the relationship. Building and maintaining such a relationship requires partners (business and NGOs) to work together as equals, and to minimize power imbalances as much as possible. Organizations and corporations should be honest and specific about what they hope to achieve through collaboration during the initial discussions before the partnership is set-up. CONCLUSION The once adversarial relationship between NGOs and companies becomes more cooperative and more communicative. The rise of NGOs as relevant players, in addition to private- and public-sector actors, has been seen as one of the most significant processes related to the global environmental and social challenges of today. Through CSR activities close relations between business and NGOs are the main issue to explain the current changes. Responsible businesses should provide benefits to the shareholders and all stakeholders in their industries. They should also provide benefits to their society, country, and the world. The term CSR means for companies caring about social and environmental issues. NGOs can help companies to achieve CSR in areas such as protecting the environment, providing nutrition, and health and education services to the poor and the public. They conduct projects and find financing from companies that want to realize their CSR duties. Corporate-NGO partnerships can be formed and implemented in different ways. It is difficult to evaluate the number of partnerships currently in existence, because many are formed between small local businesses and community groups and are not publicized. Additionally, partnerships can often involve other actors than NGOs such as local or national governments, international development institutions, or privately funded nonprofit organizations, which makes them more complex to analyze. Moreover it is also very difficult to monitor, manage, and report CSR practices of companies. There are

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many different forms of partnerships that take place at various levels ranging from small and medium-sized enterprises (SMEs) to large multinational corporates working with foreign localized nonprofits or big international NGOs. Many of the authors writing on the topic conclude that more research needs to be carried out before concluding whether these partnerships can significantly contribute to sustainable development. Additionally, it is very hard to obtain an objective analysis of partnership projects, especially ones that involve large corporations that have a widespread brand image to uphold. These companies spend a lot of money on marketing themselves in a positive light, and therefore control the content of their CSR reports to reflect their achievements without mentioning their failures. Thus it is difficult to find independent case studies assessing the efficiency of a partnership. In addition, there is little to no public data available that measures development progress for the stakeholders impacted by development projects. Public corporations are required to publish annual financial reports containing analysable figures necessary to stockholders and investors. Governments and international institutions collect data and publish economic and development indicators at regional, national, and subnational levels. But companies and NGOs alike are not required to measure the progress and efficiency of their projects in terms of development. However, difficulties exist in the field of NGO-business partnership, and through CSR it is a success story of the new millennium. Besides the society which may be seen as the main beneficiary of a cross-sector partnership, businesses and NGO actors are also the influencers of the future public policy formulation process. Moreover business companies have come to recognize that the long-term success of their business is closely related to the health and stability of the societies in which they operate. In sum, after the 1990s, the role of NGOs has changed as dramatically as the changing role of businesses. Over the past decade, there have been more collaborative interactions and partnerships between businesses and NGOs. Thus we have seen that there is an increasing trend in the NGO and the business world to work in a cooperative rather than a conflictual mode. The special focus for both stakeholders is the CSR program of business. As a stakeholder NGOs make a distinct contribution recognized by others, which means that, through CSR, they have become part of the institutional environment of companies. We can conclude that corporate-NGO partnerships are a step in the right direction in terms of influencing corporate culture as well as the nonprofit sector in many ways. Although partnerships may not lead to large-scale improvements in sustainable development and poverty reduction, they have already fostered great hope for the future of society.

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Chapter Nine

Communicating Corporate Social Responsibility Réka Jablonkai

Corporate social responsibility (CSR) has been becoming common practice of large and small companies, over the last decades. According to a global survey of corporate managers, the majority of respondents (55.2 percent) believed that CSR is important or very important for their company. An even higher percentage (68.9 percent) thought that the importance of CSR would increase in the future (Illia et al., 2013). Communicating CSR activities, however, still seems to pose a dilemma for companies. At the beginning it was thought that no extra communication is needed (Morsing and Schultz, 2006), but the company’s good deeds will speak for themselves. Still only 10 percent of companies report on their CSR initiatives (Wigley, 2008). CSR communication, however, should not be neglected as research has revealed that knowledge about a corporation’s CSR activities leads to more positive attitude toward the company. A survey among American consumers, for example, has found that 85 percent of the respondents have a more positive image of a product or company when it supports a cause they care about (Cone, 2010, 5). There are already sophisticated methods available for CSR communication such as several forms of online communication and social media that are more efficient and allow third-party endorsement (Coombs and Holladay, 2012; Morsing and Schultz, 2006). Furthermore, previous research has found that the cultural context is a crucial factor in CSR communication as CSR is perceived in a different way in different country contexts (Lee and Shin, 2010).

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Therefore, the aim of this chapter is to give an overview of methods, dilemmas, and practices of CSR communication. It starts by presenting the basic concepts of CSR communication, followed by an outline of the three main CSR communication strategies. Then it explains the CSR promotional dilemma and describes trends in nonfinancial reporting. The next section focuses on CSR communication on the Internet discussing how websites and social media are and can be used corporations. Finally, suggestions are made for new directions in research and practice. BASIC CONCEPTS IN CSR COMMUNICATION As in all aspects of corporate communication, basic decisions in CSR communication include the decisions about the target audience and the message. The most relevant audience in CSR communication are stakeholders. Coombs and Holladay (2012) emphasize that both external and internal stakeholders need to be targeted by CSR communication. Internal stakeholders include employees who can serve as a crucial communication channel for corporations’ CSR communication. Employees committed to the CSR campaigns and activities of their companies can verify messages and create their own positive messages about these activities. External stakeholders include “all those affected by the CSR initiative decision and any stakeholders who have a general interest in the corporation’s CSR activities” (Coombs and Holladay, 2012, 110). Local communities, NGOs, investors, customers, retailers, suppliers, and online and offline media are typical external stakeholders. Several scholars emphasize the importance of the media as an external stakeholder. According to Mark-Herbert and von Schantz (2007, 6), for example, “media deserves particular attention. What is portrayed in media will influence internal as well as other external stakeholders that in their own turn may affect others. Their role can be seen as ambassadors of message and opinions.” Therefore, corporations need to apply a carefully designed strategy and structured approach to CSR communication in order to disseminate information effectively on their CSR activities. In addition to the systematic selection of target stakeholders, effective CSR communication includes decisions on what to communicate, that is, the message content. According to Tonello (2011), the most important factors a company can highlight in its CSR communication are CSR commitment, CSR impact, and CSR fit. CSR commitment refers to the ways of support the company provides for the various social causes. It includes donating funds, contributing in-kind, and providing other resources of the company, for example, technical expertise or employee volunteering. Avon provides an example of highlighting CSR commitment in

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the message of the CEO stating the amount of funds contributed to critical issues of breast cancer, violence against women, and disaster relief: Through the efforts of our corporate philanthropy and the U.S.-based Avon Foundation for Women, we have raised and donated more than U.S. $860 million worldwide, making the Avon Foundation the largest corporate-supported foundation dedicated to women's causes globally. (Avon, 2013)

Another example of informing stakeholders about the form of commitment by the company is given by P&G. The following extract from P&G’s website reports on the way their employees contributed to the Live, Learn and Thrive program by volunteering: This commitment goes well beyond the P&G facilities. Every year, thousands of P&G employees worldwide personally commit to helping children and youth live, learn and thrive in their communities and beyond. Many employees volunteer their time or work in groups on team-building projects such as building playgrounds for children, teaching the importance of safe hygiene, or mentoring tweens and teens. (Procter & Gamble, 2012a)

Messages focusing on CSR impact emphasize the output, that is, the impact or benefits to the stakeholders or other target audiences. This is exemplified by another extract from the website of P&G’s Live, Learn and Thrive program below: This Live, Learn and Thrive program provides water purification packets on a not-for-profit basis. Since the program began, more than 5 billion liters of purified drinking water in more than 65 countries have prevented an estimated 200 million days of diarrheal illness and helped save more than 26,000 lives.” (Procter & Gamble, 2012b)

The third factor that should be communicated in a CSR message according to Tonello (2011) is CSR fit. Earlier research on the perception of CSR activities by consumers has found that stakeholders expect companies to support causes that have a logical association with their core business activities (Cone, 2010; Tonello, 2011). In a 2010 survey among consumers in the United States, 91 percent believed that companies should concentrate on social causes that are consistent with their responsible business practices or the way they make and distribute their products, and 88 percent answered that the cause should be one where their business can have the most social and/or environmental impact (Cone, 2010, 16). An example of a message focusing on CSR fit by Samsung is given below: During the year, we unveiled our green management vision and strategies. We launched eco-products such as LED TVs, power-saving DRAM, and solar-

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Réka Jablonkai powered cell phones. Our green management activities extended to recovery of waste electronic products and recycling as part of our commitment to protecting the environment. (Samsung electronics sustainability report, 2009–2010, 2)

CSR COMMUNICATION STRATEGIES In addition to identifying relevant stakeholders and creating the appropriate message, companies need to decide what strategies to apply to their CSR communication. Morsing and Schultz (2006) suggest three CSR communication strategies based on companies’ stakeholder relations: the stakeholder information strategy, the stakeholder response strategy, and the stakeholder involvement strategy. In what follows these strategies are presented starting from the one-way communication strategy toward the two-way symmetric communication strategy. Stakeholder Information Strategy The first on this continuum is the stakeholder information strategy. The purpose of a stakeholder information strategy is to disseminate information on the company’s CSR activities. According to Morsing and Schultz (2006), companies adopting this kind of strategy produce information to the media in the form of press relations programs, brochures, magazines, relevant facts, and numbers and figures. Decisions on CSR activities are made by the management of the company often in the belief that they are doing good for their local communities and stakeholders. Therefore, CSR communication focuses on providing information about CSR activities and the good intentions of the company. The most important communication tasks are to design coherent and appealing messages and to communicate them effectively to the general public and stakeholders. The Stakeholder Response Strategy In the stakeholder response strategy, as described by Morsing and Schultz (2006), the company applies a two-way asymmetric communication model. Information flows to and from the public, but it is the company that would like to change the public’s attitude and behavior. The communication tasks of the company include conducting opinion polls and market surveys in order to receive feedback from stakeholders on CSR activities. The aim of such surveys, however, is not to engage in a dialogue with stakeholders and to actively engage them in the decision process about CSR initiatives, but rather to gauge stakeholders’ understanding of the company’s CSR efforts and to find out to what extent CSR activities influence stakeholders’ attitudes.

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The Stakeholder Involvement Strategy According to Morsing and Schultz (2006), the true dialogue between the company and its stakeholders is possible by adopting the stakeholder involvement strategy. They suggest that in this kind of strategy CSR efforts are co-constructed together with stakeholders. Stakeholders are also involved in, take part in, and propose CSR activities. A constant interaction between the company and its stakeholders makes it possible to negotiate the focus of CSR activities. The purpose of communication here is to establish and maintain an ongoing, proactive dialogue with stakeholders such as corporate critics and the media. The particular communication task is not only to provide information about CSR activities, but also to build relationships. In contrast to the stakeholder response strategy, where it is the company that would like to change the general public’s attitude, in the case of the stakeholder involvement strategy, both the company and stakeholders can and will influence each other. In order to apply this strategy effectively, companies should be able to integrate internal and external stakeholders in the dialogue on CSR activities. Previous research on corporate websites as platforms for CSR communication has found that companies mainly use their websites for one-way communication to provide information on their CSR activities (Capriotti and Moreno, 2007). Furthermore, a study on corporate communication on Facebook also suggested that companies do not take advantage of the full potential of social networking sites as only a few corporations involve and engage their stakeholders in two-way communication about their CSR activities and efforts (McCorkindale, 2010). In general, studies on CSR communication emphasize that simple dissemination of information without some elements and tools for two-way communication, that is, the possibility for feedback from stakeholders and the general public, is not sufficient for effectively communicating the CSR message (Capriotti and Moreno, 2007; Coombs and Holladay, 2012; Morsing and Schultz, 2006 ). CSR PROMOTIONAL COMMUNICATION DILEMMA Researchers of CSR communication emphasize that stakeholders are interested in companies’ CSR activities (Capriotti and Moreno, 2007; Coombs and Holladay, 2012; Morsing and Schultz, 2006). The results of a survey conducted in the United States show that “90 percent of consumers want companies to tell them the ways they are supporting causes” (Cone, 2010, 5). The survey has also revealed that nearly two-thirds (61 percent) of the respondents “don’t think companies are giving them enough details about their efforts, including the amounts donated and the length of the promotions.” Furthermore, 34 percent of consumers have been found to choose another

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brand or not to buy the product at all, if there is not enough information provided by the company (Cone, 2010, 24). Other studies have found that consumers’ awareness and knowledge of CSR activities are positively connected to their purchase intentions (Lee and Shin, 2010; Wigley, 2008). However, if stakeholders perceive the company’s CSR communication efforts as too conspicuous, expensive, or time-consuming to create, they can easily become sceptical and even negative toward the company or its brands (Coombs and Holladay, 2012; Kim and Lee, 2012; Morsing and Schultz, 2006; Sen and Bhattacharya, 2001). Coombs and Holladay (2012) termed the challenge to satisfy stakeholders’ information needs and to avoid being perceived as self-promotional at the same time the CSR promotional communication dilemma. One of the crucial issues in CSR communication is to resolve this dilemma. Coombs and Holladay (2012) suggest that a careful analysis of the message tone, costs and source of CSR communication activities can help manage the CSR promotional communication dilemma. Message tone describes the frequency and prominence of CSR communication, that is, whether a CSR message is perceived to be too conspicuous and to appear too often. Most researchers argue that subtle communication that focuses on facts and that is integrated into various forms of corporate communication can be more effective (Coombs and Holladay, 2012; Morsing and Schultz, 2006). The second factor that needs to be considered is cost. It refers to the amount of money the company spends on CSR communication. Using expensive promotional tools to carry the CSR message or focusing too much on the company itself rather than the CSR activity can easily result in a backlash. Therefore, the design of any CSR communication strategy and the application of specific tools should be sensitive to what stakeholders consider “money well spent.” The third factor to take into account is source. Source is defined as the entity presenting the message (Coombs and Holladay, 2012, 112). Information on corporate CSR activities can be presented by the company itself and by third parties, for example, customers, employees, civil organizations. There seems to be a consensus in the literature that third-party sources are perceived as more credible and create a more positive attitude (Coombs and Holladay, 2012; Morsing and Schultz, 2006). Another factor that needs to be considered when managing the CSR promotional communication dilemma is the effect of cross-cultural differences. There are only a handful of studies analyzing how various CSR communication tactics might be perceived by stakeholders with different cultural backgrounds (Lee and Shin, 2010; Morsing and Schultz, 2006; Walsh and Bartikowski, 2012). More conspicuous CSR communication seems to be welcome in the North American context, where in general a more explicit communication style is common (Morsing and Schultz, 2006). The Cone survey (2010), for example, found that 88 percent of Americans said it was acceptable for

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companies to involve a social cause in their marketing, which represents a 33 percent increase since 1993. In the European context, however, a more implicit and subtle CSR communication seems to be more effective. A survey among Scandinavian consumers has found that on average 40 percent of respondents in three countries (Denmark 30 percent, Sweden 47 percent, and Norway 42 percent) thought that companies should publicize their CSR activities through corporate advertising and on average 51 percent (Denmark 59 percent, Sweden 46 percent, and Norway 49 percent) said that there should be minimal releases on websites and slightly over 9 percent suggested that companies should not publicize CSR efforts at all (Denmark 11 percent, Sweden 8 percent, and Norway 9 percent). This leads to the conclusion that a careful analysis of the target stakeholders’ perception of CSR and CSR communication should be included as an important factor in the decisions about an appropriate CSR communication strategy that successfully resolves the CSR promotional communication dilemma. NONFINANCIAL REPORTING As outlined earlier, companies can apply three main strategies for their CSR communication. The strategy whose focus is on providing information for stakeholders is the stakeholder information strategy (Morsing and Schultz, 2006). Corporations adopting this kind of strategy often provide information about their CSR activities in a report, widely referred to as a nonfinancial report (Coombs and Holladay, 2012). As can be seen in figure 9.1, there has been a growing number of companies that issued nonfinancial reports since 1999. The diagram is based on data from the Global Reporting Initiative (GRI), one of the structured reporting frameworks used for providing information on corporations’ CSR activities. The GRI framework was established by the UN Environmental Program in 1997 in order to provide guidance on balanced and comparable reporting. It provides guidelines for the structure of the report and the type of data that is to be included. A detailed description of the GRI report can be found on the website of the organization. Based on the motivation of the company to report on their CSR activities, three types of reporting can be distinguished: solicited reporting, voluntary reporting, and mandatory reporting (Golob and Bartlett, 2007). Solicited reporting entails the demand for information by a specific stakeholder group. Companies provide data in response to the request from stakeholders, which makes this form of reporting a more symmetrical, two-way communication. This form of reporting, however, is still not common practice and it is not very well developed. The most widely used form is voluntary reporting. The main disadvantage of this form from the stakeholders’ point of view is that companies can decide themselves what information they provide in their

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Figure 9.1. Number of nonfinancial reports published annually. Szigeti (2009, 3), based on GRI data between 1999 and 2009.

reports. This might lead to the practice that companies provide a more favourable picture of their CSR performance than it really is. This is the main reason for governments and other institutions to advocate the introduction of mandatory reporting. This form of reporting means that the state regulates what and how companies should report. Advocates of this form of reporting claim that this way the state can protect its citizens (Golob and Bartlett, 2007). Previous research has revealed significantly different practices of CSR reporting in different geographical regions and cultural contexts (Belal and Cooper, 2011; Golob and Bartlett, 2007; Steurer and Konrad, 2009; Szigeti 2009). An overall analysis of nonfinancial reporting worldwide shows that there is a substantial difference in the number of nonfinancial reports, published by corporations on the different continents. Based on GRI data for the decade between 1999 and 2009, Europe proved to be the leader with 2,328 nonfinancial reports published, followed by America with 1,075 reports. In Africa 215 nonfinancial reports were published in this time period, which is slightly more than a third of the number of reports issued in Asia (695) (Szigeti, 2009). CSR communication practices across the globe, however, do not only differ in the number of published reports. A comparison of Central-Eastern European (CEE) and Western European (WE) companies’ CSR reports revealed that there are important differences in the way CSR is understood and prioritized by CEE and WE companies (Steurer and Konrad, 2009). The main differences identified by the authors are summarised below:

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• CSR reporting seems to be less widespread and advanced in CEE. • The most important motivation for providing CSR reports is legal compliance, more specifically fulfilling EU standards, by CEE companies. • It seems that local communities play a less significant role as stakeholders for CEE companies, and civil society organizations are more often recognized as stakeholders by WE companies. Overall the authors claim that although these differences are numerous and relevant, they do not present a gap between CSR practices among CEE and WE corporations as wide as suggested by earlier studies (Steurer and Konrad, 2009). Research into CSR communication in developing economies in Asia suggests that the underlying motives for reporting on corporations’ CSR activities might be very different from that of corporations in the developed world. A study that analysed CSR communication of companies in China and India concluded that in addition to firm-specific and industry-specific factors CSR communications intensity seems to be influenced by country-specific factors, especially by the governance environment. The authors distinguish between rule-based and relation-based societies, and suggest that a more rule-based governance, where checks and balances are in place, courts are independent of political influence, public information is of high quality, and the citizens have a high level of trust in public rules and public information, enhances the level of CSR standards and communication (Lattemann et al., 2009). Furthermore, Belal and Cooper (2011) focusing on the absence of CSR reporting in Bangladesh, enumerate the main reasons why companies in this developing country do not disclose information about their CSR activities in general. The list of the most common reasons for nondisclosure includes the lack of regulation, lack of awareness, lack of resources, poor CSR performance, fear of bad publicity, and the need for profit. It is noteworthy, however, that companies are not only silent about negative information relating to CSR activities, but cases were mentioned where also positive CSR activities had not been reported for fear of a negative shareholder response (Belal and Cooper, 2011). In addition to communications intensity, studies in the literature of CSR communication have investigated the content of nonfinancial reports (Golob and Bartlett, 2007; Perrini, 2005). One aspect of content is the CSR themes and topics companies include in their nonfinancial reports. In the European context, Perrini (2005) identified the seven major themes of CSR reports of companies as follows: operational efficiency, maximum safety, environmental protection, quality and innovation, open dialogue, skills development, and responsible citizenship. Studies focusing on the most important themes of CSR reporting from the stakeholders’ perspective suggest that employees, environment, and services are relevant in Europe, and Australians, for exam-

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ple, are most interested in topics such as quality of products, management, and financial performance (Golob and Bartlett, 2007). These findings highlight the importance of tailoring the themes a nonfinancial report should include to the preferences of the specific stakeholder groups. An additional aspect of content investigated in earlier studies was comprehensiveness. The authors of a study analyzing CSR reports of Belgian companies suggest that comprehensive CSR reporting should include all of the following three types of information: (1) vision and goal, (2) management approach, and (3) performance indicators. The analysis revealed that companies in most cases failed to provide all three types of information in their CSR reports. Although the majority moved beyond narrative CSR information, that is, merely mentioning their vision and goals or management approach, and gave details of actions of their management approach, 64 percent of the reported CSR items have not disclosed any quantitative performance indicators (Bouten, et al., 2011). Overall, previous research suggests that the factors influencing CSR communication include country and cultural context, type of industry, size of industry, and the size of the company (Golob and Bartlett, 2007; Hou and Reber, 2011; Lattemann et al., 2009; Skouloudis, Evangelinos, and Moraitis, 2012). These factors might determine the applied communication strategies and the content of nonfinancial reporting as well. Although the current practice of CSR communication shows considerable differences in developed and developing economies, studies emphasize the important role of policy makers in increasing the level and quality of CSR communication irrespective of the level of development (Bouten et al., 2011; Lattemann et al., 2009). CSR COMMUNICATION ON THE INTERNET The most convenient way for companies to make their nonfinancial reports available to stakeholders and the general public is to put it on their websites. Corporate websites are one of the controlled ways to provide detailed information on CSR activities. The distinction between controlled and uncontrolled media was suggested by Coombs and Holladay (2012). Controlled media are fully controlled by the corporation itself. For example, it is solely the company’s decision what information and what messages they provide on their websites. In the case of uncontrolled media, however, the corporation has no influence on whether the information is disseminated, and how the message is used by the media. Online media, as examples of uncontrolled media, offer unique opportunities for providing information on CSR activities. This section will focus on how controlled media, mainly, corporate websites, are used for CSR communication and the following section will

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discuss the opportunities and challenges of uncontrolled media, especially social media, for CSR communication. As regards company websites, the majority of companies seem to recognize the importance of CSR issues, as they usually dedicate a separate section to CSR activities, and situate this section usually on their home page (Capriotti and Moreno, 2007). Furthermore, most companies present information on CSR issues in an attractive and accessible way with documents in several formats and hypertexts (Gomez and Chalmeta, 2011). However, information provided in texts, for example, reports and CEOs’ statements, seems to dominate over visuals such as charts and videos (Beauchamp and O’Connor, 2012; Chaudhri and Wang, 2007; Gomez and Chalmeta, 2011). As regards the primary audience that websites target, studies have revealed that it is the stakeholder group of investors and the financial community that messages are tailored at in the majority of cases. This is true of websites in general (Esrock and Leichty, 1998) and of CEO statements available in CSR reports on websites in particular (Beauchamp and O’Connor, 2012; Gomez and Chalmeta, 2011). Previous studies also report on the low level of interactivity of corporate websites. Although technically it is possible to provide several forms of feedback on corporate websites, for example, e-mail linked to CSR issues, chats, forums, and blogs, most studies conclude that there is a lack of or very low level of interactivity features on corporate websites (Capriotti and Moreno, 2007; Chaudhri and Wang, 2007; Esrock and Leichty, 1998, 2000; Gomez and Chalmeta, 2011). There seems to be agreement in the literature that corporations primarily use their websites to present information on their CSR activities adopting a one-way stakeholder information strategy (Esrock and Leichty, 1998, 2000; Capriotti and Moreno, 2007; Chaudhri and Wang, 2007; Gomez and Chalmeta, 2011). Based on the findings of the analysis of a random sample of websites of Fortune 500 companies, Esrock and Leichty (1998, 317) claim that “web pages are primarily utilized to disseminate corporate social responsibility information in much the same way as other traditional, one-way corporate communication vehicles.” Overall, studies suggest that companies should focus on utilizing the technically available interactive features of websites in order to facilitate a two-way communication with their stakeholders thus making it possible to adopt a stakeholder involvement strategy in their CSR communication (Capriotti and Moreno, 2007; Esrock and Leichty, 1998, 2000). CSR COMMUNICATION IN SOCIAL MEDIA In addition to interactive features of websites, social media offer the possibility that companies engage in a dialogue with stakeholders. Social media are

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defined as “a collection of online technology tools that facilitate conversations and communication between people. People can share text, audio, video, images, podcasts and any combination thereof” (Coombs and Holladay, 2012, 118). There are estimates that 80 percent of medium-sized and large companies use social media in marketing their products and services and it is suggested that the number of companies present in social media will increase in the near future (Korschun and Du, 2012). Social media include blogs, micro-blogs, network sites, and Internet forums where people can post status updates and others can comment on them. Therefore, the application of such tools in corporations’ CSR communication can facilitate the two-way communication about CSR issues, as stakeholders can share and discuss their opinions and thoughts relating to specific CSR activities (Coombs and Holladay, 2012). Furthermore, Korschun and Du (2012) argue that virtual CSR dialogue in social media create value for the company and the cause. They state that it is achieved by “(a) fostering identification with the community of virtual CSR dialog participants, and (b) altering the stakeholder’s expectations of the company’s social responsibility” (8). One specific type of social media that have been gaining importance in corporate communication in recent years is the social network site (SNS). These can be defined as: web-based services that allow individuals to (1) construct a public or semi-public profile within a bounded system, (2) articulate a list of other users with whom they share a connection, and (3) view and traverse their list of connections and those made by others within the system. The nature and nomenclature of these connections may vary from site to site. (Boyd and Ellison, 2007, 211). One of the advantages of SNSs over other types of social media is that they provide the opportunity to build networks of stakeholders and to constantly add new connections to existing networks. Furthermore, in social network sites people can share posts within their networks and can forward the company’s CSR message to people who were not part of the original stakeholder network of the company. Coombs and Holladay (2012, 124) call this the “online version of word-of-mouth communication.” The theory that underpins the inclusion of social media into CSR communication is the big seed approach proposed by Watts and Peretti (2007). It is based on the two-step flow of communication suggested by Katz and Lazarsfeld (1955). According to the two-step model, mass media have an effect on people through opinion leaders. Thus the information provided by the mass media is first collected by opinion leaders who monitor the mass media, and then opinion leaders share the information and their interpretation of it with other people. Based on this model an important element of corporate communication is to identify the opinion leaders of the companies target audience and tailor the company’s messages to them. In contrast, according to the “big seed” approach a lot of people should be targeted already in the first step and

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there is no need to identify the specific opinion leaders of specific stakeholder groups (Watts and Peretti, 2007). Coombs and Holladay (2012, 126) summarize the essence of the big seed approach as follows: “You increase your odds of success if you plant a large number of seeds (the big seeds approach) rather than gamble on a few seeds that are believed to be important but probably are no more important than any other seed.” The Practice of CSR Communication on Facebook Social media and, especially, SNSs like Facebook, provide the possibility that corporations can reach out to a lot of people at low cost and little effort. Coombs and Holladay (2012) argue that the advantages of using social media for the communication about CSR activities include lower costs, credibility from third-party sources, two-way communication, and the possibility to engage and involve stakeholders in CSR activities. Furthermore, they suggest that companies can use SNSs (1) to listen to stakeholders, that is, they can find emerging issues, determine if stakeholders are aware of CSR initiatives and assess stakeholder reaction; and (2) to engage and promote, that is, to increase awareness of CSR initiatives and to give ways to engage stakeholders (120). A recent exploratory study analysed company Facebook pages in order to identify whether corporations use their Facebook pages to communicate their CSR efforts and whether they use it for the above-mentioned purposes (Jablonkai, 2012). The study included five Facebook pages of three companies, namely, the Body Shop, Procter & Gamble, and Prezi, a Hungarian software company. The two multinational companies had an international Facebook page and a local one, which in this case was their Hungarian page. Prezi only had one Facebook page. As can be seen in table 9.1, all Facebook pages had a similar number of posts within the analysed time period of eight months. The language of the posts was very much tailored to the targeted audience, as the international pages used English to communicate with stakeholders whereas local pages used the local language, in this case Hungarian, as the means of communication. Prezi predominantly used English on its facebook page, because they target the international market rather than their domestic market. There are a few posts in local languages on the international page of the Body Shop and on the Prezi page. In the case of the Body Shop these posts informed locals about the stations of an international campaign when it arrived to their local shops. This way the company might have wanted to raise the local awareness of the particular CSR campaign. In the case of Prezi, Spanish was used in a few posts when they announced training sessions for Spanish speakers. Again posts were tailored to the specific target audience.

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As regards communication about the company’s CSR initiatives, the number of posts focusing on CSR activities shows great diversity. As can be seen in table 9.2, almost all posts by the Body Shop International and Procter & Gamble Hungary were related to CSR activities. The majority of posts by the Body Shop Hungary, Procter & Gamble, and Prezi, however, contained information about certain products, sales, or new features of specific products. It might indicate a difference in the companies’ communication strategy they use their Facebook pages for. A closer analysis of the posts revealed that companies applied their Facebook page to listen to stakeholders, to engage them in CSR initiatives and to promote CSR activities. A few examples of posts are given below: 1. Many of you have asked how we are reaching out to help those affected by last week’s violent storms in the U.S. Here is a summary of our efforts so far. (Procter & Gamble, March 5, 2012) *communication purpose: increase awareness, listen to stakeholders. 2. Hi All, It’s Climate Week—Britain’s biggest climate change campaign! The Body Shop are proud to be doing our bit to ‘Protect our Planet.’ Our new solar panel in our Littlehampton, UK, site are helping us lower our carbon footprint, as is our dedication to use 100 percent recyclable packaging and reducing our CO2 emissions throughout our supply chain Share your tips on how to reduce your carbon footprint. (The Body Shop International, March 16, 2012) *communication purpose: increase awareness, involving and engaging stakeholders Table 9.1. Number and language of Facebook posts within the time period between January 1 and August 31, 2012. Company

Number of posts

Language of posts

The Body Shop International

104

English; one post in Rumanian, German, Greek, Norwegian, Hungarian, French, Thai, Spanish

The Body Shop Hungary

123

Hungarian

Procter & Gamble

100

English

Procter & Gamble Hungary

100

Hungarian

Prezi

108

English; three posts in Spanish

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Table 9.2. Posts relating to CSR activities. Company

Number of posts relating to CSR activities

The Body Shop International

93

The Body Shop Hungary

9

Procter & Gamble

8

Procter & Gamble Hungary

99

Prezi

0

3. [You can use an empty container of mango body lotion for multiple purposes :o) Snoozy the TBS cat is drinking milk from it here. Share with us how you use empty The Body Shop boxes and containers.] Mennyi mindenre jó egy kiürült mangós testvaj doboza :) Szundi a TBS macska most ebből issza a tejet. Ha te is újrahasznosítod a the Body Shop kiürült csomagolását, oszd meg velünk hogyan. (The Body Shop Hungary, August 20, 2012) *communication purpose: involving and engaging stakeholders 4. [Go jogging tonight.] Arra bíztatunk, hogy ma este menj el futni (P & G Hungary, August 20, 2012) *communication purpose: engaging stakeholders THE CASE OF AN EQUALITY CAMPAIGN IN THE CENTRAL EUROPEAN CONTEXT The following case shows how Facebook can be successfully used in communicating a particular CSR campaign. The campaign was conducted by espell, a Hungarian translation and localization company. The theme of the campaign was tolerance and equality and it was timed for the week before the Gay Pride Parade in Budapest in 2012. The campaign started on Facebook by posts of pictures each portraying two of the colleagues of espell with the words: “Gay people are everywhere. The only difference is the reaction they get.” Figure 9.2 shows an example. The first pictures were posted in Hungarian and in a few hours received more than two hundred likes. One in four people who liked the pictures also shared it with their Facebook friends. In a few hours based on requests in comments and e-mails, an English version of the picture was created and posted to the company’s Facebook page. In addition to the pictures and posts on Facebook, the company also took part in the parade carrying posters with the slogan of their campaign. During the parade they posted photos of colleagues holding the company posters.

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In this campaign for tolerance and equality espell used Facebook in several ways to communicate this particular CSR initiative. As Coombs and Holladay (2012) suggest, a company can use SNSs to listen to stakeholders and find emerging issues, determine if stakeholders are aware of CSR activities, assess stakeholder reactions, increase awareness of the CSR campaign, and engage and involve stakeholders in the particular CSR initiative. Espell managed to apply all these aspects in the Facebook communication of their tolerance campaign. Although the original idea did not come from stakeholders’ posts, they did listen to their stakeholders on Facebook during the campaign. They, for example, produced an English version of the slogan within a few hours when it was requested. The company could use Facebook to assess the overall reaction to the campaign by the many positive comments, likes and shares of their posts. Furthermore, they also managed to engage and involve stakeholders as their colleagues and supporters also took part in the parade. Espell’s tolerance campaign received media attention as well. It was covered by several major news portals and a radio station aired an interview with the CEO about their initiative. Overall, it can be said that SNSs provide great opportunities for CSR communication. One of their advantages over traditional communication channels is that they allow for third-party endorsement, which carries greater weight and can help resolve the CSR promotional communication dilemma.

Figure 9.2. Picture from espell tolerance campaign (2012). Reprinted with permission from espell (www.espell.com), 2012.

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As Argenti (2011, 63) puts it: “Success lies in understanding that in a social media world, everything communicates and communications affect everything.” It seems, however, that companies are still not using these opportunities to their full potential. CONCLUSIONS Successful CSR communication requires an understanding of several factors. These factors include country and cultural context, type of industry, size of industry, and the size of the company. Furthermore, companies should carefully analyze their stakeholders’ perception of CSR and its communication. Although research has shown that stakeholders do require companies to publicize their good deeds, appropriate strategies should be applied to effectively resolve the CSR promotional communication dilemma in order to avoid a backlash. Recent literature highlights the relevance of culture as a determining factor when it comes to make decisions on CSR communication. Stakeholder expectations of what an appropriate CSR theme is and how it should be communicated seems to be very much country- or region-specific. Furthermore, results of recent research suggest that more interactive ways should be applied in CSR communication. A two-way symmetric communication strategy like the stakeholder involvement strategy makes it possible to establish and maintain interaction with stakeholders such as critics and the media. As the examples of this chapter suggest, social media and SNSs provide an excellent platform for such a strategy. It should be noted, however, that there is a lack of research on how companies use social media and SNSs in CSR communication and how it is perceived by different stakeholder groups. More research is needed on several aspects of social media in CSR communication. Such research should identify (1) appropriate strategies; (2) appropriate ways and level of interaction; (3) relevant themes for specific stakeholder groups; (4) precise measurements of the general public’s reaction to specific CSR activities (e.g., comments, shares, and likes); (5) how CSR communication in social media is covered by other online and traditional media. Answers to such questions will provide companies with a better understanding of the benefits and drawbacks of CSR communication in social media and might suggest more effective communication strategies to get their messages across to their stakeholders.

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REFERENCES Argenti, P. A. (2011). Digital strategies for powerful corporate communications.The European Financial Review, February–March, 61–64. www.awpagesociety.com/images/uploads/ Argenti_Digital_Strategies.pdf, accessed on 04.04.2012. Avon. (2013). Company Website. www.avoncompany.com/corporatecitizenship/ corporateresponsibility/messagefromceo/index.html, accessed on 10.11.2012. Beauchamp, L. L., and O’Connor, A. (2012). America’s most admired companies: A descriptive analysis of CEO corporate social responsibility statements. Public Relations Review, 38, 494–497. Belal, A., and Cooper, S. (2011). The absence of corporate social responsibility reporting in Bangladesh. Critical Perspectives on Accounting, 22, 654–667. Bouten, L., Everaert, P., Van Liedekerke, L., De Moor, L., and Christiaens, J. (2011). Corporate social responsibility reporting: A comprehensive picture? Accounting Forum, 35, 187–204. Boyd, D. M., and Ellison, N. B. (2007). Social network sites: Definition, history and scholarship. Journal of Computer-Mediated Communication, 13 (1), 210–230. Capriotti, P., and Moreno, Á. (2007). Corporate citizenship and public relations: The importance and interactivity of social responsibility issues on corporate websites. Public Relations Review, 33 (1), 84–91. Chaudhri, V., and Wang, J. (2007). Communicating corporate social responsibility on the Internet: A case study of the top 100 information technology companies in India. Management Communcation Quarterly, 21 (2), 232–247. Cone. (2010). Cause evolution study. www.conecomm.com/stuff/contentmgr/files/0/ 6bc819050a7914fc99b99c205493d8bc/files/2010_cone_cause_evolution_study_report.pdf, accessed on 10.11.2012. Coombs, W. T., and Holladay, S. (2012). Managing corporate social responsibility: A communication approach. Chichester: Wiley-Blackwell. Esrock, S. L., and Leichty, G. B. (1998). Social responsibility and corporate web pages: Selfpresentation or agenda-setting? Public Relations Review, 24 (3), 305–319. Esrock, S., and Leichty, G. (2000). Organization of corporate web pages: Publics and functions. Public Relations Review, 26 (3), 327–344. Global Reporting Initiative (GRI). (2012). www.globalreporting.org/SiteCollectionDocuments/ ALTable_En.pdf, accessed 04.04.2012. Golob, U., and Bartlett, J. L. (2007). Communicating about corporate social responsibility: A comparative study of CSR reporting in Australia and Slovenia. Public Relations Review, 33, 1–9. Gomez, L. M., and Chalmeta, R. (2011). Corporate responsibility in U.S. corporate websites: A pilot study. Public Relations Review, 37, 93–95. Hou, J., and Reber, B. H. (2011). Dimensions of disclosures: Corporate social responsibility (CSR) reporting by media companies. Public Relations Review, 37, 166–168. Illia, L., Zyglidopoulos, S. C., Romenti, S., Rodríguez-Cánovas, B., and del Valle Brena, A. G. (2013). Communicating corporate social responsibility to a cynical public. MIT Sloan Management Review, Spring. sloanreview.mit.edu/article/communicating-corporate-socialresponsibility-to-a-cynical-public/, accessed on 02.05.2013. Jablonkai, R. (2012). Társadalmi felelősségvállalás a közösségi médiában [Social responsibility in social media]. Paper presented at the Conference of Applied Linguistics, Kodolányi College, Budapest. Katz, E., and Lazarsfeld, P. (1995). Personal influence. New York: Free Press. Kim, S., and Lee, Y. (2012). The complex attribution process of CSR motives. Public Relations Review, 38, 168–170. Korschun, D., and Du, S. (2012). How virtual corporate social responsibility dialogs generate value: A framework and propositions. Journal of Business Research, 66 (9), 1494–1504. Lattemann, C., Fetscherin, M., Alon, I., Li, S., and Schneider, A. (2009). Corporate governance. An International Review, 17 (4), 426–442.

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Lee, K., and Shin, D. (2010). Consumers’ responses to CSR activities: The linkage between increased awareness and purchase intention. Public Relations Review, 36, 193–195. Mark-Herbert, C., and von Schantz, C. (2007). Communicating corporate social responsibility—Brand management. Electronic Journal of Business Ethics and Organization Studies, 12 (2), 4–11. ejbo.jyu.fi/pdf/ejbo_vol12_no2_pages_4–11.pdf, accessed on 04.04.2012. McCorkindale, T. (2010). Can you see the writing on my wall? A content analysis of the Fortune 50’s Facebook social networking sites. Public Relations Journal, 4 (3). www.prsa. org/Intelligence/PRJournal/Documents/2010McCorkindale.pdf, accessed on 10.11.2012. Morsing, M., and Schultz, M. (2006). Corporate social responsibility communication: Stakeholder information, response and involvement strategies. Business Ethics, A European Review, 15 (4), 323–338. Perrini, F. (2005). Building a European portrait of corporate social responsibility reporting. European Management Journal, 23 (6), 611–627. Prezi. (2013). Facebook Page. www.facebook.com/prezicom?ref=ts&fref=ts. Procter & Gamble. (2012a). Company Website. www.pg.com/en_US/sustainability/social_ responsibility/live_learn_thrive_overview.shtml, accessed on 10.11.2012. Procter & Gamble. (2012b). Company Website. www.pg.com/en_US/sustainability/social_ responsibility/childrens_safe_water.shtml, accessed on 10.11.2012. Procter & Gamble. (2013a). International Facebook Page. www.facebook.com/proctergamble? ref=ts&fref=ts. Procter & Gamble. (2013b). Hungary Facebook Page. www.facebook.com/PGMagyarorszag. Samsung Electronics. Sustainability report (2009–2010). Sen, S., and Bhattacharya, B. (2001). Does doing good always lead to doing better? Consumer reactions to corporate social responsibility. Journal of Marketing Research, 38 (2), 225–243. Skouloudis, A., Evangelinos, K., and Moraitis, S. (2012). Accountability and stakeholder engagement in the airport industry: An assessment of airports’ CSR reports. Journal of Air Transport Management, 18, 16–20. Steurer, R., and Konrad, A. (2009). Business-society relations in Central-Eastern and Wester Europe: How those who lead in sustainability reporting bridge the gap in corporate (social) responsibility. Scandinavian Journal of Management, 25, 23–36. Szigeti, C. (2009). Nem pénzügyi jelentések kiadásának trendjei. Gödöllő: CG&Partners Kft. cgpartners.hu, accessed on 04.04.2012. Tonello, M. (2011). What board members should know about communicating corporate social responsibility. blogs.law.harvard.edu/corpgov/2011/04/26/what-board-members-shouldknow-about-communicating-corporate-social-responsibility/, accessed on 10.10.2012. The Body Shop. (2013a). International Facebook Page. www.facebook.com/ TheBodyShopInternational?ref=ts&fref=ts. The Body Shop. (2013b). Hungary Facebook Page. www.facebook.com/thebodyshop.hu?ref= ts&fref=ts. Walsh, G., and Bartikowski, B. (2012). Exploring corporate ability and social responsibility associations as antecedents of customer satisfaction cross-culturally. Journal of Business Research, 66 (8), 989–995. Watts, D. J., and Peretti, J. (2007). Virtual marketing for the real world. Harvard Business Review. www.fastcompany.com/magazine/122/is-the-tipping-pointtoast.html?page=0%2C5, accessed on 04.04.2012. Wigley, S. (2008). Gauging consumers’ responses to CSR activities: Does increased awareness make cents? Public Relations Review, 34, 306–308.

Chapter Ten

Developing a Social Responsibility Strategy Duygu Türker

Corporate social responsibility (CSR) has gained an increasing attention of practitioners, policy makers, and scholars during the last decades. Nowadays, most business organizations try to adopt a socially responsible way of doing business. They are either donating a significant amount of money to a nongovernmental organization (NGO) or involving directly into a social responsibility (SR) project to meet the challenges of stakeholder expectations. In parallel to these increasing attentions of companies, CSR has been promoted by various local, national, and international bodies as well. They strongly support the notion of CSR as a significant tool to achieve the overarching principle of sustainable development at the organizational level. In the renewed definition, the European Commission (EC) states that an enterprise should integrate “social, environmental, ethical human rights, and consumer concerns into their business operations and core strategy in close collaboration with their stakeholders” to meet its social responsibilities properly (EC, 2011, 6). This approach sets the priorities for enterprises with emphasising the economic, social, and environmental dimensions of sustainable development and provides a common framework with putting forward an agenda for action covering the 2011–2014. On the other hand, the United Nations (UN) promotes its strategic policy initiatives on CSR through the UN Global Compact and provides ten universally accepted principles in the areas of human rights, labor, environment, and anti-corruption (UN, 2013). The International Labour Organisation (ILO) also supports CSR and defines it as “a way in which enterprises give consideration to the impact of their operations on society and affirm their principles and values both in their own

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internal methods and processes and in their interaction with other actors” (ILO, 2013). It can be seen that almost all parties agree upon the concept of CSR and view it as an organizational solution for the increasing environmental and social problems. However, despite the increasing encouragement of international bodies and growing interest of companies, it is still problematic how the social responsibility concept can be embedded into the overall business strategy and how companies develop a viable CSR strategy. When they decide to engage in CSR, most companies do not know where they should start and what actually they should do. Particularly, the small- and mediumsized enterprises (SMEs) have little knowledge and experience in CSR. The purpose of this study is to provide a conceptual and theoretical approach to develop a social responsibility strategy (SRS) that can match a company’s external and internal environmental constraints. Following the overall strategic management model (David, 2010; Wheelen and Hunger, 2010) and reviewing the literature on the nexus between CSR and strategy, the study aims to provide a useful framework for the formulation of an SRS. In the study, the strategic alternatives for CSR are also provided based on a multidimensional framework. “SOCIAL RESPONSIBILITY STRATEGY” OR “STRATEGIC SOCIAL RESPONSIBILITY” The term strategy is frequently used in the business literature to indicate a company’s “comprehensive master plan that states how the corporation will achieve its mission and objectives” (Wheelen and Hunger, 2010, 67). In order to achieve a long-term growth and obtain competitive advantage in the market, a business organization must adopt a strategic perspective and try to find the best fit between the organization and its environment. However, considering the dynamic nature of the business environment, the strategic adoption of an organization must meet the new challenges of the external environment and provide a comprehensive view of an organization within its context. Therefore, nowadays, a business strategy should provide a game plan for an organization to produce its goods and services in an effective and efficient, as well as technologically oriented and socially responsible, manner (Turker, 2012, 280). Therefore, a company’s strategy is no longer built only on the traditional concepts of effectiveness and efficiency; it must develop an understanding of doing business in a socially responsible way also. This new focus can be best achieved with developing a viable SRS. Depending on the increasing public concerns on environmental degradation and wider acceptance of the information technologies to access and share information, CSR has become popular among companies and so they

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start to adopt a strategic CSR approach during the last decades (Das Gupta, 2013). Although it is used interchangeably, CSR strategy and strategic CSR is not only linguistically, but also conceptually different. According to Burke and Logsdon (1996, 496) CSR is “strategic when it yields substantial business-related benefits to the firm, in particular by supporting core business activities and thus contributing to the firm’s effectiveness in accomplishing its mission.” Strategic CSR is mainly interested in the use of CSR to take advantage of ongoing opportunities or minimizing the impact of threats. In strategic CSR, managers view CSR as a means to an end (usually increasing company performance) rather than an end in itself. Therefore, a company can take the benefits of “effective strategic CSR” in the areas of human resources, reputation and branding, and operational cost savings, etc. (McElhaney, 2009, 31). However, developing an SRS is a comprehensive business activity that should be proactive in nature. An SRS is focusing on the integration of SR approach into the company’s whole strategic management process and entire business system. It is designed to contribute a company’s mission, which embraces a deeper CSR philosophy. Although Porter and Kramer (2006) use the term of strategic CSR, their approach is much broader than the strategic use of CSR. According to the authors, it is about choosing a unique position among competitors and increasing the shared value both for society and business (Porter and Kramer, 2006). In fact, the literature provides similar distinctions on the degree of company proactivity in social and environmental involvement. For instance, while Freeman, Pierce, and Dodd (1995) suggest four approaches of a company’s environmental responsibility from light green (legal approach) to dark green (activist approach), Carlisle and Faulkner (2004) propose the four stages of CSR involvement, including developing awareness, promoting awareness, initial implementation, and mainstreaming. Similarly, Hahn (2012) classifies organizations as leader and lagger with respect to their social and environmental involvement; while a “leader” multinational company (MNC) has “a proactive recognition of its responsibilities, ambitious targets, and extensive reporting,” a lagger “has a management style oriented in short-term financial goals” and might be thinking strategically involve in CSR to avoid scandals or problems. The adoption of a broader view of CSR and developing an SRS might contribute to the company in the long term as well. According to a “business case” approach for CSR (Carroll and Shabana, 2010; Weber, 2008), involvement in CSR activities is not only beneficial for stakeholders, but it might contribute also to the firm with increasing its reputation (Lewis, 2003), competitiveness (Burke and Logsdon, 1996; Porter and Kramer, 2002), affecting the employees’ organizational commitment positively (Peterson, 2004; Turker, 2009), or attracting the prospective employees to the company (Turban and Greening, 1997), etc. According to Das Gupta (2013, 599), an SRS helps

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companies when “balancing the creating of economic value with that of societal value, managing their stakeholder relationships (especially those with competing values), identifying and responding to threats and opportunities facing their stakeholders, developing sustainable business practices, deciding the organization’s capacity for philanthropic activities.” FORMULATION OF SOCIAL RESPONSIBILITY STRATEGY The literature provides some useful frameworks to integrate SR into a company’s overall strategy (Korhonen, 2004; Porter and Kramer, 2006; Porter and van der Linde, 1995). This integration process should start with developing a deeper understanding on the core concepts of CSR. Although the concept of CSR is defined in many ways, Dahlsrud (2008) identifies five commonly used dimensions as environmental, social, economic, stakeholder, and voluntariness dimensions. It can be noticed that these core dimensions of CSR are reflecting the overall understanding on CSR conceptions in the business community, which is in line with the principle of sustainable development. Therefore, following the overall approach of EC (2013) on CSR, an SRS can be embedded into the core principles of sustainable development and its main tenets can be built on this triple bottom line of economy, society, and environment. Developing such a comprehensive CSR philosophy can guide to the strategists during the rest of the process. Research on the awardwinning Thai companies in CSR practices shows that having a “moral-driven or social-responsible CSR philosophy” is one of the most important features of these successful companies (Virakul, Koonmee, and McLean, 2009, 191). Therefore, considering the interdependency between business and society, “a company must integrate a social perspective into the core frameworks it already uses to understand competition and guide its business strategy” (Porter and Kramer, 2006, 5). In the formulation stage of an SRS, the strategists need to know an organization’s competencies and its interactions with the environment. The management systems, like ISO 26000, are particularly helpful for this initial stage of strategic management process, since it encourages organizations to review all core subjects that are relevant for organizational context (Hahn, 2012). In order to gather the necessary information about these core subjects, a company’s internal environment and its key economic, political, legal, social, cultural, demographic, natural, technological, and competitive environment should be monitored very carefully. Based on the obtained information, strategists can perform internal and external audits (David, 2010; Wheelen and Hunger, 2010)—namely SWOT analysis. This analysis can be seen as a process of identifying a company’s “inside-out” and “outside-in” linkages with the society (Porter and Kramer, 2006).

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The internal audit is performed to identify a firm’s internal strengths and weaknesses in order to capitalize its strengths and improve the weaknesses (David, 2010, 210). From the resource-based view (RBV), these internal strengths and weaknesses basically stem from a firm’s resources (Wernerfelt, 1984), which can include all tangible and intangible assets (Caves, 1980) or “any valued activity, service or commodity” (Cook, 1977, 64) of a firm at a given time. The value of resources depends on either one of these qualifications; it should be rare, hard to imitate, or not easily substitutable (David, 2010, 124). The proponents of RBV suggest a link between a firm’s valuable resources and its sustained competitive advantage. Therefore, when taking an organization as a unique system of this valuable resource combination, strategists should look into all elements and processes within each subsystem and identify all their advantages and shortcomings. For instance, since CSR is closely related with a firm’s financial capabilities to cover the cost of related activities, the strategists need to assess a firm’s financial strengths and “establish CSR working resources (e.g., department, manager, regular reports/ news, effective communication methods, appropriate budget)” (Virakul, Koonmee, and McLean, 2009, 191). External audit is undertaken to identify a firm’s opportunities and threats (David, 2010) in its task and general environment (Bourgeois, 1980; Dill, 1958). Based on institutional theory (DiMaggio and Powell, 1983; Scott, 1987), external environment can be the major sources of constraints, which shape organizational decisions and actions. Although institutional theory emphasizes the importance of adherence and conformity to the external rules and norms, resource dependency theory (Pfeffer and Salancik, 1978) suggests the availability of active choice behaviours to handle these external forces when accessing the critical resources (Oliver, 1991). Therefore, organizations are capable of analyzing and addressing social and political concerns to manage “issues” (Jones, 1983; Wartick and Rude, 1986) strategically (Dutton and Duncan, 1987; Greening and Gray, 1994). In doing so, they should take into consideration the political, economic, or financial risks posed by their environment (Godfrey, Merrill, and Hansen, 2009; Luo, 2006; Rodríguez, Montiel, and Ozuna, 2013) and find ways to take the advantage of opportunities or minimize the impact of threats (David, 2010, 211). For instance, based on Matten and Moon’s (2008) distinction between implicit and explicit CSR, Rodríguez, Montiel, and Ozuna (2013) propose that when country risk is around moderate to high, firms engage in a high level of explicit responsibility, which includes voluntary involvements; whereas, when country risk is very high, firms do not engage in such type of responsibility. According to Husted and Allen (2006), “just as firms select an organizational strategy (e.g., multidomestic, transnational, or global) contingent upon global and local product-market demands, a strategic approach to CSR requires that firms select a CSR strategy contingent upon the demands

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of salient local and global stakeholders.” However, the empirical findings of their study indicate that the processes of institutional isomorphism within a MNC become more important than the strategic analysis of social issues within the country when choosing an SRS (Husted and Allen, 2006). Ignoring the impact of contextual variables can affect not only the formulation, but also the implementation process of an SRS. According to Aguinis (2011, 855), organizational responsibility can be also defined as “context specific organizational actions and policies that take into account stakeholders’ expectations and the triple bottom line of economic, social, and environmental performance.” In order to involve the stakeholders’ expectations on an SRS, an organization should communicate frequently with their stakeholders at this stage. Creating a multidirectional and multidimensional mechanism of strategic conversations can be a good way to “minimize future stakeholder concerns and enhance CSR strategy making” (Miles, Munilla, and Darroch, 2006). According to Castka, Bamber, and Sharp (2004), organizations should transform these stakeholders’ expectations into a set of social responsibility and governance objectives, targets, and indicators, which will affect the whole organizational system. In sum, in order to formulate the best matching an SRS, strategists need to know how an organization can improve its responses to its internal and external environmental factors. An example of internal and external factor evaluation matrices (SWOT analysis) can be found in table 10.1. Following David’s (2010) methodology, the internal and external factors of a firm operating in consumer electronics industry were listed and then a weight (W) and rating (R) were assigned to each factor to formulate an overall strategy. It can be seen that while the weighted score (WS) of internal matrix is 2.67, it is around 2.83 for the external matrix. Since both of these scores are above average, the company can be accepted as successful in its response to internal and external factors. In addition to this overall SWOT analysis, each factor was also assessed based on their implication on an SRS (table 10.1). In order to perform a SRspecific evaluation, a social responsibility weight (SRW) and rating (SRR) were assigned for each factor based on its importance and relation with CSR management. For instance, although the first factor in strength can be accepted as a “major strength” for the company, since the annual budget of SR is still 0.5 percent of net income, its importance is higher—but rating is lower than the overall company values. In sum, the scores of SR-SWOT of a company are considerably lower than the SWOT scores; 1.90 and 2.59 for internal and external matrices, respectively. Strategists should ensure the objectivity and accuracy of this analysis to provide a snapshot of a company’s existing social responsibility involvement.

Table 10.1.

Exemplary SWOT and SR-SWOT of a European firm in consumer electronics industry.

Internal Audit

W

R

WS

SRW

SRR

SRWS

Implications on CSR Management

1. The net income increased 5%

.17

4

.68

.20

1

.20

Annual budget of SR is still 0.5% of net income

2. Revenues of home-entertainment segment increased 3%

.12

4

.48

.05

3

.15

Increasing effort for product safety/ eco-labeling etc.

3. The market share of computer segment increased to 10% in local market

.14

3

.42

.10

1

.10

A relatively weak customer services to provide accurate information on products & company

4. Company has a significant technological know-how

.10

3

.30

.15

4

.60

Actively transferring the accumulated knowledge to NGOs in current network

1. Relatively weak control over the suppliers in developing countries

.12

2

.24

.17

2

.34

Monitoring the safety of working conditions and quality of production process in suppliers

2. Online & social media management is not effective

.15

1

.15

.15

1

.15

Online channels is not used to obtain stakeholders’ expectations quickly

3. Employee turnover rate is 15%

.20

2

.40

.18

2

.36

Relatively low morale and motivation of employees

Total

1.00

2.67

1.00

.36

.12

Strengths

1.90

Developing a Social Responsibility Strategy

Weaknesses

External Audit Opportunities 1. Significant advancements in the production technology

.12

3

4

.48

Company converted its current production system into an energy efficient one

169

170

2. Increasing awareness on social and environmental problems in society

2

.20

.17

2

.34

Company has a SR department

3. Demand for electronics increased .13 among elder population around Europe

4

.52

.11

3

.33

Increasing R&D activities for finding more user-friendly technology for elder people

4. EU supports the innovative and sustainable initiatives

.10

1

.10

.18

1

.18

Funding support for large-scale multipartner projects or consortium

1. The Eurozone crisis has affected the .20 social and economic life of households

3

.60

.20

1

.60

Company has no SR effort against poverty

2. New legislation to protect immigrant applicants and foreign workers

.15

3

.45

.12

3

.36

Company monitors the recruitment process and provide legal consultancy to its current employees

3. Increasing competitive pressures from developing countries

.20

3

.60

.10

3

.30

Company has a knowledge sharing network with its local suppliers/ competitors

Total

1.00

2.83

1.00

Threats

2.59

Note 1. W: Weight/ R: Rating/ WS: Weighted Score [WS was obtained with multiplying each factor’s W by R]/ SRW: Social Responsibility-Weight/ SRR: Social Responsibility-Rating/ SRWS: Social Responsibility-Weighted Score [SRWS was obtained with multiplying each factor’s SRW by SRR]. Note 2. Weight: Ranging from 0.0 (not important) to 1.0 (all-important) / Rating in External Evaluation: 1 (the response is poor), 2 (the response is average), 3 (the response is above average), 4 (the response is superior) / Rating in Internal Audit: 1 (a major weakness), 2 (a minor weakness), 3 (a minor strength), 4 (a major strength).

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STRATEGIC ALTERNATIVES OF SOCIAL RESPONSIBILITY: A THEORETICAL FRAMEWORK After determining a viable CSR philosophy and performing an SR-specific SWOT analysis in line with the overall mission and SWOT analysis, an SRS should be selected among all alternative strategies. The literature provides useful insights into the strategic choices of companies in sustainability and social responsibility activities. For instance, Edward, Stead, and Starik (2004) classify the sustainable strategic management strategies at the corporate and functional levels; Russo and Tencati (2009) distinguish CSR strategies as formal and informal strategies depending on organizational size; Muller (2006) mentions the global and local corporate strategies for CSR practices of MNC subsidiaries in host countries, etc. Although all these studies are invaluable, strategists need an overall framework that can guide during the SRS selection. Figure 10.1 provides a multidimensional framework depending on four factors of SRS selection, as corporate strategy, governance structure, SR focus, and target stakeholder. In the framework, the former two factors are built on the company’s overall vision/mission and SWOT analysis, whereas the latter two are derived from the company’s SRspecific philosophy and SWOT. Based on this input, the strategist should find the best matching factorial set of SRS. As can be seen in figure 10.1, corporate strategy can impinge upon the choice of SRS. A company has various alternatives when choosing its future

Figure 10.1.

Multidimensional framework for SRS selection.

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direction and in the current study, a set of these strategies was provided with consolidating the classifications of David (2010) [integration, intensive, diversification, and defensive strategies], Wheelen and Hunger (2010) (growth and functional strategies), and Porter (1980) (generic strategies as cost leadership, differentiation, and focus strategies) into eight broad categories. The corporate strategy can be taken as a significant antecedent of SRS selection; strategists should formulate an SRS that is compatible with this overall corporate strategy. For instance, if a company decides to follow a horizontal integration strategy in the next period, SRS can be built around starting a collaborative network on a social or environmental problem with existing competitors. Considering the failures of most mergers and acquisitions due to culture clashes (Cartwright and Cooper, 1993) and social conflict (Vaara et al., 2012), this type of an SRS can help managers to recognize competitors before forming a long-run interorganisational partnership. Husted (2003) states that a firm can obtain a competitive advantage when its CSR activities are “strategically aligned with its mission” and “cost effective.” In order to meet these twofold aim, a manager first decide upon the theme of its CSR involvement (Husted, 2003), which can be called as the SR focus in figure 10.1. Since the extent of social and environmental problems is beyond the limits of a single firm, an SRS can be more effective when focusing on a selected theme. For instance, “the decision to focus efforts on AIDS as opposed to homelessness is the company’s choice” (Husted, 2003, 482)—but this should be a deliberate choice based on the company’s SR philosophy and SR-SWOT analysis. The principle of sustainable development can provide an overall basis for this SR focus of organizations; a company can devote its efforts either on economic, social, or environmental activities. For instance, recalling the SR-SWOT in table 10.1, the company can match its two strengths with one threat to pursue a SRS as making monetary contribution (S1) and transferring technological knowledge (S4) to NGOs in their fight against poverty in Greece, which is ravaged by the European sovereign debt crisis (T1). According to Husted (2003), the second problem a manager faces in CSR involvement is how these activities should be managed “so as to reduce the costs associated with such activities”—which indicates the decisions on governance model in figure 10.1. Considering the “cost side of CSR management” and the combination of its strengths and weaknesses in terms of its capacity for coordination and motivation, a firm can either outsource its CSR through charitable contributions, develop an in-house program, or create a collaborative model (Husted, 2003). A firm can take the challenges of motivation and coordination in CSR through two dimensions (Husted, 2003, 489):

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• Centrality: The closeness of fit between the firm’s CSR activity and its mission and objectives. It is high when the firm’s CSR activity is closely related to the firm’s core business activity. • Specificity: The extent to which the firm is able to capture a share of the profit stream generated by its investments in CSR. Specificity is high when it is a CSR activity that is both inherently difficult to imitate and easily excludes others from its benefits.

One of the best SRS that is integrating these two dimensions is performed by Cisco Systems. The company executes several activities under its Social Investment Programme. For instance, while Cisco Networking delivers training opportunities on computer literacy to individuals, Public-Private Partnership for Education promotes socioeconomic development through educational reform in the developing world (Cisco Systems, 2013). Therefore, while the company’s social responsibility involvement is an extension of its core business activity, it is difficult to imitate and provides the long-term benefits of creating future customers and work force. The last factor in the framework (figure 10.1) is identifying target stakeholder of SRS. As it is stated above, an organization cannot solve the problems of all stakeholders. Therefore, SRS can be more effective when focusing on a target stakeholder. In a wider sense, the stakeholders can be classified as primary social, secondary social, primary nonsocial, and secondary nonsocial stakeholders (Wheeler and Sillanpaa, 1997, 1998). Therefore, strategists should focus on only one stakeholder among all these stakeholders when formulating SRS. In sum, SRS should be selected based on a good combination of these four factors. Some good examples for this strategic combination from corporate world are provided in table 10.2. It can be seen that each company creates a unique mix of these four factors in their SRS selection. CONCLUSION AND SUGGESTIONS Considering the increasing number of social and environmental problems, many people start to demand more socially responsible ways of production and consumption. Today, CSR has been promoted as the most significant tool to achieve the sustainable development at the governmental and intergovernmental level (Turker and Altuntas, 2012). CSR has become increasingly popular among organizations and they spend so much time and money to engage in socially responsible activities. However, most organizations fail to increase their CSR involvement and cannot obtain a desired result from all these activities. The current study tries to explain how an organization can formulate an SRS to increase the effectiveness of CSR management. Although Porter and Kramer (2011) sharply distinguish CSR from the concept

174

Table 10.2.

SRS exemplary implication. Governance Structure of SR

Target Stakeholder Exemplary

Integration/ Backward

Social/ Economic

In-house

Primary social

Arçelik prefers to work with local suppliers and provides training opportunities/ knowledge network/ ethical guidance to its suppliers

Intensive/ Market Penetration

Social

Collaborative

Secondary social

Turkcell has been conducting ‘Kardelenler (Snowdrops) projects, a scholarship program for young girls in less developed regions in Turkey, collaborating with an NGO and governmental organization.

Intensive/ Market Development

Social

Collaborative

Secondary nonsocial Eureko Sigorta opens a public training center (ÇATOM) in a less developed region in Turkey with collaborating Eureko Achmea Foundation and two governmental organizations.

Generic/ Costleadership

Economy/ Environment

In-house

Non-social

Ryanair uses less fuel to transport its average passenger one mile than the 20 largest airlines by passenger volume.

Generic/ Differentiation

Social/ Environment

In-house/ Donation

Secondary social/ Primary nonsocial

Proof provides original products that are handcrafted from sustainable materials. A large portion of each sunglass/eyewear sale goes to a charity in India that provides sight–giving cataract surgeries to those in need.

Arçelik, (2013); Eureko Sigorta, (2013); Ryanair, (2013); Proof, (2013); Turkcell, (2013).

Duygu Türker

Corporate Strategy SR Focus

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of creating shared value (CSV) and find it difficult to justify and maintain in the long-run due to its focus on reputation and a limited connection to the business, the strategic management approach in the current study can emphasize the overlaps between these two concepts. CSR can make a valuable contribution both to the company and to its stakeholders, if it is managed strategically. Following this main notion, the current study tries to provide a framework of developing an SRS that matches best the company’s internal and external factors. However, developing an SRS is not a guarantee of effectiveness and success of whole process; the implementation and evaluation of an SRS is as important as this initial stage. During the implementation stage, all functional managers should take active roles and support all stages of the process. Therefore, the level of cooperation should be high among all functional managers to achieve a common long-term CSR philosophy. For instance, in line with the company’s overall SRS, while R&D manager focus on creating more environmentally friendly products, marketing manager try to find ways of increasing the market share of these new products through the ethical sales efforts. Therefore, the implementation stage should be seen as an integrated activity of social responsibility management and company leaders try to increase the level of motivation and trust among all company units. In their study on the link between leadership style and CSR activities, Angus-Leppan, Metcalf, and Benn (2010, 194) suggest that organizations need the transformational leaders as the required linchpin during particularly the implementation stage, since they can “inspire, stimulate intellectually, consider the individual and influence through idealised visions.” There are some good examples from the corporate world on improving the leadership style of managers. For instance, Wilh. Wilhelmsen (WW) Shipping Company has a management training program that integrates triple bottom line components with organizational values and leadership behaviours (Hargett and Williams, 2009; Wilh. Wilhelmsen, 2013). In the evaluation stage of SRS, a company should assess the results of SRS and compare the obtained results with the pre-specified standards and performance indicators. Based on the results of regular monitoring activities, it can be possible to review the whole process and identify the problems occurring in the formulation and implementation stages; if there is gap between the actual and desired outcomes, the necessary measures can be taken and implemented timely. The companies can embed this evaluation stage into its reporting system and monitor all activities in accordance with this framework. For instance, the Global Reporting Initative (GRI) provides a very useful reporting framework for companies to measure and report their sustainability involvement (GRI, 2013). On the other hand, the Account Ability Principles Standard (AA1000APS) also provides a similar framework for organizations to identify, prioritise, and respond to their sustainability and

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CSR challenges (AA1000APS, 2013). Using one of these frameworks, a company can systematize its evaluation stage and increase the transparency of all CSR management with sharing this information through its stakeholder network. In sum, developing an SRS is a starting point of a CSR management process and affects the rest of the process. Therefore, as a rule of thumb, an SRS should encompass four important criteria at the same time as being effective, creative, feasible, and, more importantly, sincere. Although most people ignore sincerity, it might be the thin line between the strategic CSR and SRS, because a cynical approach cannot be hidden for a long time and so the companies should be honest in their all activities including particularly CSR involvement. REFERENCES Account Ability Principles Standard (AA1000APS). (2013). www.accountability.org/ standards/aa1000aps.html, accessed on 12.05.2013. Aguinis, H. (2011). Organizational responsibility: Doing good and doing well. In Sheldon Zedeck (Ed.), APA handbook of industrial and organizational psychology: Maintaining, expanding, and contracting the organization. APA Handbooks in Psychology, 3, 855–879. Washington, DC: American Psychological Association. Angus-Leppan, T., Metcalf, L., and Benn, S. (2010). Leadership styles and CSR practice: An examination of sensemaking, institutional drivers and CSR leadership. Journal of Business Ethics, 93 (2), 189–213. Arçelik. (2013). www.arcelikas.com/sayfa/204/Surdurulebilirlik_Raporu, accessed on 25.05.2013. Bourgeois, L. J. (1980). Strategy and environment: A conceptual integration. Academy of Management Review, 5 (1), 25–39. Burke, L., and Logsdon, J. M. (1996). How corporate social responsibility pays off. Long Range Planning, 29 (4), 495–502. Carlisle, Y. M., Faulkner, D. O. (2004). Corporate social responsibility: A stages framework. European Business Journal, 16 (4), 143–151. Carroll, A. B. (1979). A three dimensional conceptual model of corporate social performance. Academy of Management Review, 4 (4), 497–505. Carroll, A. B. (1991). The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders. Business Horizons, 34 (4), 39–48. Carroll, A. B., Shabana, K. M. (2010). The business case for corporate social responsibility: A review of concepts, research hand practice. International Journal of Management Reviews, 12 (1), 85–105. Cartwright, S., and Cooper, C. L. (1993). The role of culture compatibility in successful organizational marriage. The Academy of Management Executive, 7 (2), 57–70. Castka, P., Bamber, C., and Sharp, J. M. (2004). Implementing effective corporate social responsibility and corporate governance: A framework. London: BSI Publications. Caves, R. E. (1980). Industrial organization, corporate strategy and structure. Journal of Economic Literature, 58, 64–92. Cisco Systems. (2013). csr.cisco.com/pages/csr-reports, accessed on 12.04.2013. Cook, K. S. (1977). Exchange and power in networks of interorganizational relations. The Sociological Quarterly, 18 (1), [Special Issue: Organization Analysis: Critique and Innovation]: 62–82. Dahlsrud, A. (2008). How corporate social responsibility is defined: An analysis of 37 definitions. Corporate Social Responsibility and Environmental Management, 15 (1), 1–13.

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Index

accountability, 20, 23, 30, 35, 43, 73, 80 agency theory, 12, 25 anti-corruption, 74, 84, 163 attribution theory, 61 awareness, 4, 39, 45, 50, 53, 76, 114, 127, 147, 151, 155, 165; raising, 45, 84; of social responsibility, 76; sustainibility, 101 business, 20; ethics, 5. See also ethics; environment, 164; model, 9, 12, 43, 112; strategy, 121, 123, 164, 166 carbon, 63, 121; emission, 100; footprint, 67, 101, 156; child labor, 79, 128 classical management theory, 2 competitive advantage, 7, 14, 71, 91, 109, 172 contingency theory, 12 corporate: citizenship, 7, 14, 30, 134; governance, 14, 19, 20–21, 22–24, 26, 28, 29, 34–39; identity, 58; communication, 58, 59, 60, 144, 147, 148, 154; responsibility (CR), 57, 66, 112, 135; social performance (CSP), 5, 14; sustainability (CS), 89, 94, 100 corruption, 74, 78, 163 CR communication, 57, 59, 63, 64, 66, 67 CSR. See corporate social responsibility corporate social responsibility (CSR), 1, 2, 5, 39, 43, 71, 89, 125, 143, 163;

communication, 65, 143–144, 144, 146, 147, 147–149, 150, 151, 152, 159; communication strategy, 148, 149; theory, 2–3, 4 EMAS. See Eco-Management and Audit Scheme Eco-Management and Audit Scheme (EMAS), 72 environmental: footprint, 130; management, 71, 86; natural, 92; performance, 48, 58, 59, 76, 81, 99, 111, 168; pollution, 74; protection, 51, 83, 84, 151; quality, 34; reports, 50, 77 environmentally friendly, 99, 175 ethics, 5, 6, 20; code of, 8 EC. See European Commission European Commission (EC), 10, 11, 32, 43 European Multi-stakeholder Forum, 11 GC. See Global Compact Global Compact (GC), 47, 48, 72, 74, 97, 163 GRI. See Global Reporting Initative Global Reporting Initative (GRI), 72, 78–79, 97, 121, 149, 150, 175 green management, 145; marketing, 100; procurement, 92, 100; purchasing, 89 GSCM. See Green supply chain management

181

182

Index

Green supply chain management (GSCM), 89, 92 greenhouse effect, 130; gas emission, 84 greenwashing, 57, 58–59, 59–67 human: resources, 20, 80, 165; rights, 12, 44, 48, 50, 73, 74, 76, 78, 83

performance, 10, 23, 52, 110, 132, 149; corporate social, 5, 14; environmental, 8, 48, 58–59, 76, 81, 99; financial, 6, 13, 58, 101, 111, 151; social and environmental, 9, 48, 59, 168. See also social and environmental performance quality management, 71, 72, 75, 79, 122

IBFAN. See International Baby Food Action Network International Baby Food Action Network (IBFAN), 128 ILO. See International Labour Organisation International Labour Organisation (ILO), 47, 72, 77, 163 ISO 14001, 72 ISO 26000, 47, 48, 72, 73, 81–82, 85, 166 ISO 9001, 79 ISO 9004, 72 information theory, 91 institutional theory, 12, 13, 167 labor relations, 50, 136 life cycle, 92, 101; analysis, 100; assessment, 7, 95, 96, 101 logistics, 20, 99 marketing strategy, 45, 112 media, 25, 90, 118, 119, 129, 133, 136, 144–159; online, 152 NGO. See Nongovernmental organizations Nongovernmental organizations (NGOs), 44, 53, 64, 125–139 occupational safety, 83 OHSAS 18001, 73 OECD. See Organisation for Economic Co-operation and Development Organisation for Economic Co-operation and Development (OECD), 21, 47, 73, 76, 129 philanthropic, 9, 107; activities, 5, 8, 166; performance, 10; responsibilities, 10, 84, 108 philanthropy, 5, 9–10, 14, 114, 121, 137 product life cycle, 92

reputation, 13, 57–67, 94, 109, 127, 165 resource dependency theory, 167 RBV. See Resource-based view Resource-based view (RBV), 12, 13, 167 responsible, 1, 4, 34, 43, 57, 59, 89, 128, 163; investment, 120; management, 73, 77 RSCM. See responsible supply chain management Responsible supply chain management (RSCM), 89 reverse logistics, 92, 99, 100 risk management, 12, 52, 94, 100, 120 SA 8000, 79, 80, 86 shareholder, 4, 19, 20, 63, 126, 127; theory, 89; value, 58 skepticism, 57–67 SMEs. See Small- and medium-sized enterprises (SMEs) Small- and medium-sized enterprises (SMEs), 45, 101, 114, 115, 138 social: and environmental performance, 8, 48, 59, 81, 99, 111, 168; marketing, 137; network site (SNS), 154; policy, 5, 77; responsiveness, 4–5; theory, 91 stakeholder: approach, 6, 19, 23–39; theory, 6, 8, 12, 35–39, 89 standards, 72, 80, 82, 86, 175; social and environmental, 132 stewardship theory, 12 strategic management, 6, 164, 165, 166, 175 strategy, 10, 11, 12, 20, 36, 43, 61, 64; CSR, 10, 77, 86, 122, 130 Supply Chain Management, 35, 89–101 SCOR. See Supply Chain Operations Reference Supply Chain Operations Reference (SCOR), 99

Index sustainable, 13, 63, 105; consumption, 84; sustainable development, 2, 10, 11, 43, 71, 128, 163 SDS. See Sustainable Development Strategy Sustainable Development Strategy (SDS), 43 SSCM. See Sustainable supply chain management Sustainable supply chain management (SSCM), 89 SWOT analysis, 166–172 systems thinking theory, 12, 91

183

theory of the firm, 12, 13, 89 third-party logistics (3PL), 99 transportation, 99, 100 UN Global Compact, 48, 74, 75, 97 vision, 11, 51, 145, 152 warehouse, 99, 100 water footprints, 101 WWW. See World Wide Fund for Nature World Wide Fund for Nature (WWF), 129

About the Contributors

Ceren Altuntaş graduated from the Department of Business Administration of Dokuz Eylul University in 2002. She has a masters degree in total quality management at Dokuz Eylul University and is currently enrolled in a PhD program in the Department of Business Administration at the same university. She worked for several firms in the logistics sector (including Arkas Holding—Hapag Lloyd and Trans Union Logistics) from 2002 to 2009. Since 2009, she has been working as a lecturer at Yasar University. Her research interests include sustainability, ethics, supply chain management, quality management, and logistics. Laurent Borgmann is senior lecturer at the University of Applied Sciences Koblenz and has been the director of the Department of Languages and Foreign Affairs since 1999. He has taught lectures and conducted European projects on corporate social responsibility since 2011. He has worked as an international researcher and lecturer internationally at various universities in Europe, Lebanon, and Australia since 1989 and many of his international research projects have been reported in his award-winning podcast (www. absolutely-intercultural.com). Anne Burke is lecturer at the School of Business, Letterkenny Institute of Technology. Her main teaching areas are auditing and corporate governance. She is a fellow of the Association of Chartered Certified Accountants and has a first class honors MSc degree from Dublin City University. She is currently pursuing a PhD through Trinity College Dublin in the area of strategic alignment in the public sector.

185

186

About the Contributors

João M. S. Carvalho is researcher and assistant professor at ISMAI University, Portugal. He worked for fifteen years at pharmaceutical companies in several management positions. His research interests are related to management, entrepreneurship, market orientation, corporate social responsibility, strategic planning, and concept measurement. He is vice-director of UNICES (Research Unit on Business Sciences and Sustainability), coordinator of the Master in Business Administration, and CEO of CEITEC (Entrepreneurship Centre of ISMAI-Tecmaia). Nikolay A. Dentchev is assistant professor of entrepreneurship and corporate social responsibility at the University of Brussels (VUB) and at HUBrussels. Wim J. L. Elving (PhD, Twente University, 1999) is assistant professor at the Amsterdam School of Communications Research (ASCoR) in the communication science department at the University of Amsterdam. He teaches several courses on corporate communication and is affiliated as visiting professor at the IE University Business School in Madrid. His main research interests are corporate branding, corporate social responsibility, communications, and internal communication and organizational change. He has authored more than one hundred books, as well as chapters and articles in Dutch and English, in journals. He is editor in chief of Corporate Communications, an international journal. Réka Jablonkai is senior lecturer at the Institute of Behavioural Studies and Communication Theory at Corvinus University of Budapest. She has been teaching business communication and intercultural communication for students of economics, business, and communication. Her research interests include intercultural communication, communication in new media, and lingua franca English. Jan Jonker is professor of corporate sustainability at the Nijmegen School of Management of the Radboud University Nijmegen (the Netherlands). His research interests are in sustainable strategy development, (new) business models, and transition thinking. Nadezda Kokareva has been working in the Department of Languages and Foreign Affairs at the University of Applied Sciences Koblenz since September 2011. She holds a degree in education and is about to finish a second degree in business administration. She is writing her final thesis on CSR and has actively initiated and carried out CSR projects at RheinAhrCampus (e.g., supporting a pet shelter, organizing events for the schoolchildren from local schools and elderly people in the local nursing home).

About the Contributors

187

Gökay Özerim received his PhD from Dokuz Eylül University (İzmir) in the field of European studies in 2012. He has worked at the University of Oxford; Centre of Migration, Policy and Society, as visiting researcher by the awarded Chevening Scholarship of UK Government (2011). He currently works as the deputy director of the European Union Center and is lecturer in the Department of International Relations at Yasar University. His academic specialization areas include the European Union, security studies, and international migration. Janusz Reichel is associate professor at the Faculty of Management, University of Lodz, Poland. She is also a researcher, an expert in projects, programs, and assessment procedures (e.g., 7PR [European Commission], Leonardo da Vinci [National Agency], Fund for Civic Initiatives [Polish Ministry of Labour and Social Affairs], and other), a member of the Technical Committee in Polish Committee for Standardization working on ISO 26000 Guidance, and a member of the Working Group on CSR in Ministry of Economy, Poland. Agata Rudnicka is associate professor at the Faculty of Management, University of Lodz, Poland. She is a member of Working Group on CSR in Ministry of Economy in Poland. In 2013 she was listed on the List of 50 Women of Polish CSR prepared by the Responsible Business Forum. She is a participant of many conferences and professional trainings devoted to CSR and sustainability. Huriye Toker has been an assistant professor in the Faculty of Communication at Yasar University. She has administrative and research experience on many national and international projects. Her research interests include communication, media, gender studies, European politics, political elections, and corporate social responsibility. Duygu Türker is assistant professor at the Department of Business Administration, Faculty of Economics and Administrative Sciences, Yasar University. She graduated from the Department of Business Administration of Dokuz Eylul University in 2001. She has MSc degree in environmental sciences at Ankara University, an MBA degree from Dokuz Eylul University, and a PhD degree on public administration from Dokuz Eylul University. During the 2007–2008 academic year, she was a guest researcher at the University of Oslo with the support of the Research Council of Norway. Her research interests include ethics, corporate social responsibility, entrepreneurship, environmental management, and interorganizational relations.

188

About the Contributors

Ayselin Yıldız is assistant professor at Yasar University. She holds her Phd from Middle East Technical University (Ankara) in the field of international relations. She has been working as the director of the European Union Center at Yasar University since 2005. She was a research fellow at Wageningen University (the Netherlands) in 2004 and the University of California Berkeley (USA) in 2009. Her academic specialization areas include EU-Turkey relations, external relations of the EU, migration policy, and EU neighborhood policy with a special focus on the Mediterranean region.