Corporate Social Responsibility (CSR) Strategies and Benefit

1.0 Chapter 2 Literature Review

A literature review of research was carried out to put light into the definition of Corporate Social Responsibility (CSR) as this differs from country to country and different authors have modelled different definition for CSR. This makes the study of CSR more complex. Also factors influencing the strategic issues of CSR are also reviewed. Electronic database is used such as emerald to select appropriate  articles.

This  review of literature is worked out on published research on CSR, CSR strategies and benefits. The first focal point is on the definition of CSR, then the strategies of CSR in business was reviewed and the benefits associated with the strategic management of CSR. The main aim of this review is to sum up the studies in relation to the integration of CSR in its core business to gain advantage to the target group that receive the CSR and also to the business in the long run to place the business at a competitive advantage. Findings on environment have also been taken into consideration.

1.1 2.1 Theoretical Review

1.1.1 Models, Concepts, Frameworks

In the book ‘Corporate Social Responsibility’ by Crowther D and Aras G, 2008, Milton Friedman (1970) stated that

“there is one and only one social responsibility of business- to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud”

So we can understand that according to Friedman’s 1970 theory the sole responsibility of the business is to capitalise profit.

According to Friedman (1970 cited in  Galbreath 2009, p.111  ), it is the firm responsibility to meet the economic needs and that only leads to the welfare of the society and it is the role of the government, service organizations, educational institution to meet the societal welfare.

Galbreath, (2009) cited that after the publication of the thesis of Friedman, (1970)   there was much research on the social responsibilities of the firm. Galbreath, (2009) states that ‘In the late 1970s, Carroll (1979) offered one of the first – and perhaps still the most widely accepted conceptualisations of CSR (Matten and Crane, 2005).’

In Galbreath (2009), Carroll’s (1979) model conceptualises the responsibilities of the firm as:

1. the economic responsibility to generate profits;
2. the legal responsibility to comply by local, state, federal, and relevant international laws;
3. the ethical responsibility to meet other social expectations, not written as law (e.g. avoiding harm or social injury, respecting moral rights of individuals, doing what is right, just, fair); and
4. the discretionary responsibility to meet additional behaviours and activities that society finds desirable (e.g. philanthropic initiatives such as contributing  money to various kinds of social or cultural enterprises).

The last concept applies to the Mauritian context where NGOs are engaged in the philanthropic activities. They are funded by firms making profit and 1% of the profit after tax is given to the NGOs to look at the vulnerable groups in Mauritius , the other 1% goes to the contribution of programs offered by government, (NEF, 2008).

NEF,2008 cited that the economics needs of the firm are met to comply with CSR. The firm has to contribute 2% of its profit after tax in the CSR fund. If the firms make no profit then there is no contribution to CSR. This brings to the circular Mauritian model

In Mauritius, the government uses the profit for the welfare of the society.

1.1.2 Activities not meeting the criteria of CSR in Mauritius

The following activities do not fall under the definition of CSR IN Mauritius, NEF (2008):

1. Contribution for religious activities
2. Contribution to activities discriminating on the basis of race, place of origin, political opinion, colour or creed.
3. Contribution to Trade Unions
4. Sponsorship for marketing purposes
5. Contribution for political parties
6. Shareholders and Senior Staff benefits (schemes benefiting staff and/ or their family members and shareholders holding more than 5% of shareholding)
7. Staff welfare cost (including e.g. current and future staff training costs),
8. Activities which are against public safety and national interest.

In Galbreath (2009), Friedman’s (1970) social responsibilities, stakeholder theory and corporate social responsibility, Carroll (1979) are normative: they give a description of what the dos and don’ts of the firm in terms of their societal responsibilities (Rodriguez et al., 2002)

Katamba D and Gisch-Boie (2008) made a study with regards to CSR in Uganda a developing country. They stated that CSR is a new concept in Uganda and the study was carried out to know the perceptions of CSR, approaches and needs of companies in the matter of CSR.  The CSR defined by company managers in Uganda as stated by Katamba D and Gisch-Boie (2008)  are

1. “when companies consider the interests of society by taking responsibility for the impact of their activities on customers, suppliers, employees, shareholders, communities and other stkaholders as well as the environment.”
2. “how companies manage their business processes to produce on overall positive impact on society.”
3. “considering all stakeholders while making business decisions that manage stakeholders relationships
4. “giving back to society and cementing the bond of the company to society through demonstrating the caring heart of the company”

Katamba D and Gisch-Boie (2008) made the observations that large companies in Uganda do not have a CSR strategy and they cannot satisfy all the requests of communities and NGOs.

The Government of Mauritius has catered for the approved programmes relating to socio economic development, Health, leisure and sport, environment, education and training and catastrophe, (NEF, 2008).

The NEF has an important role to play to drive firms to CSR strategies. The Government of Mauritius stated in NEF (2008)  has set up a guiding principle with the general purpose of  directing registered companies to give 2% of their book profit to programmes contributing to the social and environmental development of the country.

NEF (2008) stated the objectives of the fund  to:

• Support firms to administer their own agenda, resulting in the triple reporting aspect, that is, the economic, social and environmental development.
• Ease the involvement of the companies to sustain existing Approved National Programmes applied by Companies, national agencies or NGOs
• support a serviceable society to NGOs working with the approved national development program

1.2 Empirical Review

1.2.1 Applied Studies and Findings

Research gaps

In Sidsel Grimstad (2011) pp. 73-74, Shrivastava and Hart (1994) suggested green politics will be among the powerful forces of economic, social, and political change,  businesses and managerial theory have to change them drastically to hold environmental distress. In the same paper In Sidsel Grimstad (2011) pp. 73-74, stated that after more than ten years, Kallio and Nordberg (2006)  there are still questions that have not been answered regarding firms and their link with the natural environment. These questions are :

“ what is the organisation’s relationship with the natural environment? Why does integration of concerns for the natural environment happen within organisations? Where does it happen? Who does it happen to? How does it happen? What are the consequences of an integration of the organisation and the natural environment? “ (Sidsel Grimstad 2011 stated by Kallio and Nordberg  (2006 ))

They also found that while considerable empirical research had been done, there were few development of theory conbining organizational and management theories with natural environment.

Sidsel Grimstad (2011) stated that few research has been carried out to assess how prolonged actions affects firm’s or clusters competitiveness and the way natural environment is bonded to the involved firms of organisations’ (businesses, government, non-profit, or others)  day to day activities (Gladwin et al., 1995; Kallio

and Nordberg, 2006). Little has been done to judge against framework, local formal and informal institutions while looking at business-driven environmental action (Gjølberg, 2009; Halme et al., 2009; Hart, 1995 cited in Sidsel Grimstad (2011) )

Sidsel Grimstad (2011) found from the above literature review comes up many knowledge gap. He states that more study  examining how firms operates and implements environmental action, the insight of environmental action, the reason they are doing it, what they see as main factors for the environment and business to mutually develop and benefit each other, the way they carry out environmental action, the way they organize and the short and long term consequences for the environment and society.  Sidsel Grimstad (2011),More concept is required the forming of  the relationships between the natural environment business organizations and competitive advantage. Sidsel Grimstad (2011) cited that

“ More comparative research is required analysing how businesses deal with

environmental issues within different contexts and different national

institutional frameworks.”

Sidsel Grimstad (2011)  cited that

“When faced with serious environmental issues, it would be expected that the way/mode and means a business, a business cluster or society will respond to the environmental challenge will differ according to the country’s formal and informal institutions.”

Sidsel Grimstad (2011) stated that these matters would be more outstanding in areas where the natural environment and landscape encompasses basis for tourism as an additional strategy for earning income for businesses based on agriculture.

Sidsel Grimstad (2011) also found that

“.. it would be expected that agriculture based tourism businesses would have a vested interest in going beyond compliance with the environmental regulatory systems. In addition such clusters would also perceive the natural landscape as a prerequisite for value-adding for their tourism businesses in the future and are therefore worth taking care of.”

Sidsel Grimstad (2011) found that the two countries chosen, Norway and Australia have clearly different situations and organizational frameworks when dealing with environmental management in rural areas. He chose two business-driven green initiatives have been identified and there are still on-going research. Sidsel Grimstad (2011)  cited that re

“They are self-defined or self-organised clusters, in as such they do not follow administrative or geographical borders, but rather are based on a common business focus – agriculture-based tourism – in a geographical area where the borders have been defined by the business community itself through formal organisations such as local chambers of commerce.”

He also stated that they hold the definition of clusters given by Porter (1998), that describes these geographic clusters of interrelated firms and institutions in a specific field.

Sidsel Grimstad (2011) also stated that the clusters include both suppliers of provider of inputs, services, and education( universities, training), and later stage of businesses centered on customers that both compete and work together.

In Australia the associating organisation is a Chamber of Commerce in a wine tourism region, and in Norway is a farming of apple and tourism region, a shareholding firm has been set up with the objective of promoting continuing improvement in the area, (Sidsel Grimstad 2011).

In Norway, the area in agriculture has received much subsidy to cater for both self-sufficiency in essential foods and secondly in sustaining the rural population. the subsidies in agriculture have been drastically reduced in the last decade, but they have been turned towards subsidies for farm-based ecological protection and preservation. These have led to new ventures in tourism sector for a new value-adding strategy. The above extract is from (Sidsel Grimstad 2011).

Sidsel Grimstad 2011 also found in his study that traditional farming has been drifted towards  a mix of farming and agri-tourism, preceded by the principles of geo-tourism.

In Sidsel Grimstad ( 2011) the definition of  Geo-tourism is given by

“ tourism that sustains or enhances the geographical character of a place – its environment, culture, aesthetics, heritage, and the well-being of its residents (National Geographic Society, 2009).”

Sidsel Grimstad ( 2011) stated that small agricultutal sector tourism clusters have been founded by the concepts of  geo-tourism that they call landscape parks that are natural and cultural regions described by the natural landscape and by the identification of local population.  The development of home agro and tourism have to undertaken in an sensitive way

Taking care of the environment that must be attractive to both local people and the tourist (Sidsel Grimstad, 2011).

From the above extract this leads to the creating of strategies to look after the issues of sustaining and preserving environment. Mauritius being a tourism industry can give importance to the environmental programs for maintaining and preserving it keeping in mind the problems that are the world is facing towards natural ecological change.

1.3 2.3 Case Studies

Added on17/04/11

Volker Turk (2003) has worked in a paper e-business and CSR- the business case for the new economy. The paper looked at the major significance  for corporations working in the ICT and e-business sector concerning environmental and social issues.

Volker Türk (2003) developed an essential finding from the research that is e-business is not entirely virtual but it is related to the use of natural resources.

Volker Türk (2003), identified key factors influencing the ecological consequences of environmental ICTs and e-application. He identified them as

“Monitoring the environmental impacts of ICT and e-business, greening the hardware, shifting to e-services, enabling transport efficiencies, raising awareness and changing habits, recognize and extent the (digital) responsibility, acknowledge the technologies limitations and risks, Improve sustainability and accountability along supply-chains.

social responsibilities are different from social issues but closely linked (Galbreath 2009). 

The society have expectations on the firm and these are social responsibilities. These responsibilities are related to factors. These are social issues. These factors can have an effect on the ability of the firm to meet objectives , and can also affect the social responsibilities. This view has been supported in the work of Galbreath (2009).

ELABORATE HERE………………………………………?????

Galbreath (2009) states that

‘In this sense, these definitions help to describe what the “firm side” of the social contract (Donaldson and Dunfee, 1994, 1999) between business and society consists of. On one hand, the “formal” social contract defines a firm’s explicit responsibilities, including generating returns for shareholders, obeying laws and regulations, creating jobs, paying taxes, and honouring private contracts. On the other hand, the “semiformal” social contract reflects society’s implicit expectations. Here, society’s unspoken expectations of firms include responsibilities such as adherence to global labour and environmental standards (e.g. SA 8000, AA 1000, ISO 14031) that are not required by law, triple bottom-line reporting, following industry norms and codes of conduct, fulfilling brand promises and contributing philanthropically to the community.’

Scholars have looked at the social issues concept, mainly through the life-cycle approach (cited in Galbreath (2009), Lamertz et al., 2003). Although several definitions exist, a widely accepted definition in the life-cycle tradition describes social issues as:

‘Social problems that may exist objectively but become “issues” requiring managerial attention when they are defined as being problematic to society or an institution within society by a group of actors or stakeholders capable of influencing either governmental action or company policy (Mahon and Waddock, 1992, p. 20; emphasis added).’

Galbreath (2009) expressed this view. The definition implies that social problems exist at the societal level (but not necessarily at the organizational level)  and these problems are  elevated to the “status” of a social issue by the actions of various actors, including stakeholders. However, such a definition does not address how these social problems and issues might be an opportunity for the firm and thus, is problematic with respect to the concept of strategy.

Galbreath (2001) cited that

‘some firms signal that CSR is a fundamental purpose – mission – of their existence. As part of its mission, The Body Shop makes cosmetics that do not hurt animals. Here, The Body Shop has addressed a social issue – animal cruelty – through the very core of their business: developing the highest quality, innovative, effective and safe cosmetic products.

A bank with a heart

The Mauritian bank, Mauritius Commercial Bank (MCB) is involved in ‘Corporate Social Responsibility’ to serve the communities by not only by financing of projects but also to build and sustain schemes for social, environmental and economic welfare of the community. The MCB Group contributes 2% of its bok profits annually to the MCP Forward Foundation . This extract is from MCB Ltd,2010.

Another example of Corporate Social Responsibility in a  Mauritian company is the

IBL Children

(Schumpeter, 1934; Nelson and Winter, 1982; Jacobson, 1992) economic growth can be attained through innovation.  (Schumpeter, 1934; Jacobson, 1992; Hill and Deeds, 1996; Chan Kim and Mauborgne, 2004)  presented the views below. Innovation can be an opportunity to meet social needs and deal with social issues instead of considering them as a threat. The knowledge acquired from the target markets, target customer needs and the unmet social needs and/or social issues directly from the market, can be used to explore the opportunity to reach new markets and gain competitive advantage. This can be done by introducing new customer offerings, developing new processes or creating new market segments.

Gabreath , 2009 cited that Corporate managers admit that CSR is a vital reflection for motivating achievement. But they acknowledge to be under pressure to anticipate about the uncertainty of unmet social needs or social matters that will affect their business or how to develop strategies to cater for these problems (Galbreath, 2009) . Galbreath, 2009 said in his findings that much has been on paper to recommend that CSR is important for competitive success, but efforts have been prevalent on conceptual and theoretical advancements and empirical tests between CSR and firm accomplishment. Galbreath, 2009 came to the conclusion that this causes a breach regarding CSR and strategy. Galbreath, 2009 cited

‘If an assumption is made that CSR is important to competitiveness, and if strategy serves as a foundation for a business firm’s creation, while establishing its position in the market, its competitiveness and its on-going existence, then placing CSR within the context of strategy seems vital.’

Galbreath, 2009 first implication was that CSR should not be regarded only in terms of  the duties organizations have toward society or to whom they are accountable.

Galbreath, 2009 cited that

‘Normatively postulating, for example, that firms have an economic responsibility to generate profits or a legal responsibility to obey appropriate laws or that firms have a responsibility to meet the needs of various stakeholder groups (and who those groups are) does not describe how they can do so in a strategic manner.’

Galbreath, 2009 suggested that to know CSR strategically, unmet social desires and social matters  and also the firm’s responsibilities toward society, these have to be considered individually. This is essential to tackle CSR more accurately within the underlying elements of strategy (Galbreath,2009). Galbreath, 2009 implies and questions

‘to what degree does CSR have to be built into strategy before it can be considered “strategic”? ‘

During its existence, the firm has to frequently face with  different opportunities and threats and decisions are made to deal with them (Galbreath, 2009).

According to Galbreath, 2009 there are six-dimensions of strategy

1. firm mission;
2. strategic issues;
3. markets;
4. customer needs;
5. resources; and
6. competitive advantage.

Galbreath, 2009 says that at any stage one facet of strategy of the six-dimensions might be more vital than others. In Galbreath, 2009 for some scholars ‘strategic’ CSR deals with contributing slack resources (profit spending) to the needs of society and community that are related to objectives and strategy of the organisation such as philanthropy, sponsorships and cause-related marketing (Mullen, 1997; Lantos, 2002; Porter and Kramer, 2002). Galbreath, 2009 observed that strategically, this is a limited view and is mainly related to the discretionary (philanthropic) component of Carroll’s (1979) theory of CSR. Galbreath, 2009 demonstrated in his paper that CSR is not an organizational occurrence strategically limited to a restricted aspect within the organization. He states that while taking corporate responsibilities, unmet social desires and social matters into account, synergies develop that are essential for several dimensions of strategy.  In Galbreath, 2009 he stated an example;

  ‘while the economic responsibility to produce profits constitutes part of the firm’s formal social contract, by exploring unmet social needs and social issues through strategy dimensions such as markets served, customer needs and resources required to compete, a firm not only can address social opportunities that generate profits (thereby meeting its economic responsibility to shareholders), but can offer societal benefits as well (Burke and Logsdon, 1996; Husted and Salazar, 2006).’

Galbreath (2009) found from his study that CSR cannot only be philanthropic or an obligation towards ethics, that is code of conduct; CSR can be carried out within six elements of corporate strategy,  adding up to good organisation practice,  profitable to the economy and to the wellbeing of society (Galbreath 2009).

Galbreath 2009,  concluded that firms contribute economically to the society and profits making is a social responsibility (Carroll, 1979; Henderson, 2005). But in the present ambience, social matters are cropping up on firms to the extent that CSR seems to be the new battlefield for competitive achievement (Porter and Kramer, 2006 cited in Galbreath 2009). According to the guidelines, NEF, 2008 it can be extracted that the Government of Mauritius is mainly dealing with vulnerable groups as philanthropic activities to eradicate poverty rather than using CSR as an competive edge for the business. But for business perspectives in Mauritius, firms can deal with the CSR activities dealt as per the government program but at the same time build a strong long term competitive advantage by building good reputation for the company and at the same time deal with societal issues.

Galbreath, 2009 concluded that if the statement is true then firms do not have to meet the interest of shareholders but also of society at large. Galbreath (2009) sated that

“ strategy takes on significant meaning not only with respect to fulfilling social responsibilities and the development of firms, but also with respect to the development and sustainability of society/nations (Raimond, 1996; Rodriguez et al., 2002).”

Galbreath, (2009) made an interesting conclusion: companies who have a broader understanding of their social responsibilities and who starts to  investigate further on how they can build CSR into strategy at a more competitive edge in the future benefiting the shareholders and also the society at large.

Galbrath (2009), to deal with CSR more strategically, the paper made an argument that organizations should consider six strategy dimensions:

“firm mission”, “ strategic issues”, “markets”, ” customer needs”, “ resources” and

“ competitive advantage.”

Galbreath (2009) stated that strategy is about recognising matters that have an influence on a organisation’s capacity to attain its mission, so goods/services can be given to achieve markets’ needs providing through valuable resource construction to build and maintain competitive advantage. When CSR is thought about in these aspects it provides a way to methodically delve into means where social responsibilities can be constructed into strategy (Galbreath, 2009). If CSR is not done this way, companies   take the risk of defining CSR as “codes of ethics”, triple bottom line reports and public relations campaigns, (Galbreath 2009).Galbreath(2009) cited that

“Such approaches are too limited, too defensive and are too disconnected from strategy.

Nur Diana Hidayati, (2011) , showed in the case study that there is elevated dedication from the four companies she studied to catty out CSR programs and company moral values. The companies attempt to deal with the triple bottom line issues,(Nur Diana Hidayati,2011).  Nur Diana Hidayati, (2011, p104), found in the case study that

‘ two consumer goods companies (Unilever Indonesia and Sari Husada) and one manufacturing company (Astra International) conduct CSR programs that are both related and unrelated to their core businesses while a mining company (Aneka Tambang) tends to conduct CSR programs that are unrelated to its core business.’

The other finding from the case study is that both programs related to CSR and not related to CSR are  ways for the companies to go for ‘sustainable development’, Nur Diana Hidayati, (2011, p104),

This leads to carry out a study in the Mauritian context of the competitive advantage placed while incorporating Corporate Social Responsibility as a strategic management in the business.

Anonymous, nd from the Emerald Group Publishing stated that it is difficult to manage Corportae Social Responsibility issue if the firm you are running a firm of huge size. Senior management are more conscious that the firm is presumed to put forward some kind of advantages to the wider world, (Anonymous, nd).

‘newspaper articles, academic papers, the activities of their peers and the public all tell them so. ‘

Many executives of firms are anxious that their firm is not looked as making contributions morally to the society and  to the environment as their day to day activities then they can lose their reputation and customers, (anonymous, 2008).

Lance Moir ‘the basic idea of corporate social responsibility is that business and society are interwoven rather than distinct entities.’

Business depends on society to run and it is using natural resources may be at the detriment of the environment. Though it is contributing to the economic development of the country or society, it has other duties to fulfil to contribute part of what it has gained during the business process  by providing Corporate Social Responsibility.

Holmes (1976), in a study of executive attitudes to social responsibility, finds that the strongest response was that “in addition to making a profit, business should help to solve social problems whether or not business helps to create those problems even if there is probably no short-run or long-run profit potential”. This applies to the Mauritian context where the contribution is enforced by 2% contribution after profit although it is given as tax. But how far the business person is agreeable to this is to be studied through the research questionnaire.

Proponents of CSR claim that it is in the enlightened self-interest of business to undertake various forms of CSR. The forms of business benefit that might accrue would include enhanced reputation and greater employee loyalty and retention. We can identify this approach in some of the current approaches by business.

So, the introductory section of the recent report by the World Business Council for Sustainable Development on Corporate Social Responsibility (WBCSD, 1999) used phrases such as “business benefits”, “could destroy shareholder value”, “control risks”, “identify market opportunities”, “improving reputation” and “maintaining public support”.

CSR Europe’s approach is that business benefits from being more socially responsible and that this can help to build sales, the workforce and trust in the company as a whole. The objective is to build sustainable growth for business in a responsible manner.

Frederick (1994) identifies the development in the understanding of CSR up to 1970 as an examination of

“corporations’ obligation to work for social betterment” and refers to this as CSR1. However, around 1970 he notes a move to “corporate social responsiveness”, which he calls CSR2. Frederick (1994), identifies corporate social responsiveness as “the capacity of a corporation to respond to social pressures”.

(Moir L. 2001) In effect the move from CSR1 to CSR2 reflects a move from a philosophical approach to one that focuses on managerial action.

  Lately, Frederick (1986) has developed this analysis to include a more ethical base to managerial decision taking in the form of corporate social rectitude and terms this CSR3. In this development, Frederick claims that the study of business and society needs an ethical anchor to

“permit a systematic critique of business’s impact upon human consciousness, human community and human continuity”.

Frederick (1986), asserts that whilst CSR1 was normative, it was hesitant and that CSR2 led to non-normative enquiry. Thus the requirement for a moral basis provides a normative foundation for managers to take decisions in the area of CSR. As part of a normative manifesto, he proposes that the

The World Business Council for Sustainable Development (1999) defines CSR as:

“the ethical behavior of a company towards society . . . management acting responsibly in its relationships with other stakeholders who have a legitimate interest in the business,’ and CSR is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.”

Examples cited in Moir L, 2002 are from individual companies in the area of CSR reinforcing stakeholder analysis:

Johnson & Johnson:

“the company’s responsibilities to be fair and honest, trustworthy and respectful, in dealing with all our constituents” (Johnson & Johnson, 2000).

Volkswagen (2000):

“adopt a position which builds both shareholder value and workholder value in order to deliver “sustainable growth for the future”.

Shell:

“We all need to assess the impact our business makes on society and ensure that we balance the economic, environmental and social aspects of everything we do” (Moody-Stuart, 1999). 

Apart from the triple bottom line, I think business should feel responsible and contribute to the social growth and go beyond the expectation of society  and integrate CSR in the way business is