Corporate sustainability management in the energy sector

AfterȱWorldȱWarȱII,ȱsocialȱconcernsȱwereȱincreasinglyȱincorporatedȱintoȱmanagementȱeducationȱandȱlegislationȱforemostȱsocialȱsecurityȱsystems.ȱBetweenȱ1960ȱandȱ1980,ȱrapidȱeconomicȱgrowt

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Oliver Salzmann

Corporate Sustainability Management

in the Energy Sector

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GABLER EDITION WISSENSCHAFT

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Oliver Salzmann

Corporate Sustainability Management in the

Energy Sector

An Empirical Contingency Approach

GABLER EDITION WISSENSCHAFT

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Bibliographic information published by the Deutsche Nationalbibliothek

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1stEdition 2008

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publica-Cover design: Regine Zimmer, Dipl.-Designerin, Frankfurt/Main

Printed on acid-free paper

Printed in Germany

ISBN 978-3-8349-0854-4

Dissertation TU Berlin, 2006

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Prefaceȱ Vȱ

ȱ

Prefaceȱ

Theȱcompletionȱofȱmyȱthesisȱowesȱmostȱtoȱmyȱ“Doktorvater”ȱProf.ȱDr.ȱUlrichȱStegerȱforȱhisȱcontinuousȱguidanceȱandȱencouragement,ȱand,ȱaboveȱall,ȱhisȱdeterminationȱtoȱreadȱtheȱfinalȱproduct.ȱIȱcannotȱthankȱhimȱenough.ȱIȱwouldȱalsoȱlikeȱtoȱexpressȱmyȱgratitudeȱtoȱmyȱsecondaryȱsupervisorȱProf.ȱDr.ȱAxelȱvonȱWerderȱforȱhisȱadviceȱandȱsupport.ȱ

Furthermore,ȱ Iȱ wouldȱ likeȱ toȱ thankȱ theȱ CSMȱ teamȱ atȱ IMD,ȱ Aileenȱ IonescuȬSomersȱandȱ Kayȱ Richiger,ȱ andȱ theȱ “BCSȱ researchȱ team,”ȱ withoutȱ whomȱ thisȱ hugeȱ studyȱwouldȱneverȱhaveȱbeenȱpossible.ȱ

Iȱ amȱ alsoȱ extremelyȱ gratefulȱ toȱ Albertȱ Diverséȱ andȱ myȱ brotherȱ Ralphȱ forȱ coachingȱandȱoftenȱchallengingȱmeȱ(thanksȱAlbert!)ȱonȱtheȱstatistics,ȱandȱtoȱWolfgangȱAmannȱandȱJochenȱBrellochsȱforȱtheirȱrepeatedȱfeedbackȱandȱ“patsȱonȱtheȱback.”ȱIȱwouldȱalsoȱlikeȱtoȱthankȱthoseȱwhoȱinvestedȱtheirȱtimeȱinȱthisȱresearchȱeffortȱbyȱservingȱasȱinterȬvieweesȱorȱansweringȱtheȱquestionnaire.ȱ

Last,ȱbutȱnotȱleast,ȱIȱwouldȱlikeȱtoȱacknowledgeȱtheȱinfiniteȱpatience,ȱmoralȱsupportȱandȱ understandingȱ ofȱ myȱ familyȱ andȱ myȱ girlfriendȱ Petra.ȱ Thisȱ achievementȱ wouldȱnotȱhaveȱbeenȱpossibleȱwithoutȱthem.ȱ

OliverȱSalzmannȱ

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Listȱofȱcontentsȱ VIIȱ

ȱ

Listȱofȱcontentsȱ

Preface V Listȱofȱcontents VII Listȱofȱabbreviations XI Listȱofȱfigures XIII Listȱofȱcharts XV Listȱofȱtables XVII Listȱofȱregressionȱtables XIX

1 Introduction 1

1.1 Researchȱfield 1

1.2 Structure 2

1.3 Intendedȱcontributions 4

2 Theoreticalȱfoundationȱandȱconcepts 7

2.1 Contingencyȱtheory 7

2.2 CSMȱandȱrelatedȱtheoreticalȱframeworks 8

2.2.1 Corporateȱsocialȱresponsibility 8

2.2.2 Corporateȱsocialȱperformanceȱ(CSP) 9

2.2.3 Corporateȱsustainability 12

2.2.4 Discussion 13

2.3 Keyȱconcepts 16

2.3.1 DeterminantsȱofȱCSM 16

2.3.1.1 Issuesȱ–ȱtheȱprincipleȱofȱpublicȱresponsibility 16

2.3.1.2 Stakeholdersȱ–ȱtheȱprincipleȱofȱlegitimacy 18

2.3.1.3 Managers’ȱattitudesȱ–ȱtheȱprincipleȱofȱmanagerialȱdiscretion 19

2.3.1.4 CompanyȬspecificȱdeterminantsȱ–ȱtheȱprincipleȱofȱcorporateȱ discretion 20

2.3.2 CSM 21

2.3.3 OutcomeȱofȱCSM 24

3 Reviewȱofȱempiricalȱliterature 25

3.1 DeterminantsȱofȱCSM 26

3.2 CSM 30

3.2.1 Strategicȱdisposition 30

3.2.2 Economicȱrationale 31

3.2.3 Implementation 34

3.3 Outcomes 35

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VIIIȱ Listȱofȱcontentsȱ

3.4 Summaryȱandȱresearchȱgaps 36

4 Conceptualȱrationaleȱandȱresearchȱquestions 37

5 Method 43

5.1 Selectionȱofȱsuitableȱmethod 44

5.1.1 Contingencyȱapproach 44

5.1.2 Selectionȱofȱinstruments 46

5.2 Instruments 51

5.2.1 Dataȱcollection 51

5.2.1.1 Qualitativeȱmethods 51

5.2.1.2 Quantitativeȱmethods 54

5.2.2 Dataȱanalysis 57

5.2.2.1 Qualitativeȱmethods 57

5.2.2.2 Quantitativeȱmethods 58

5.2.2.2.1 Basicȱstatistics 58

5.2.2.2.2 Advancedȱstatistics 59

5.3 Synergisticȱfitȱofȱmethods 68

5.4 Evaluation 70

6 Sectorȱcharacteristics 75

6.1 Characteristicsȱandȱactivitiesȱofȱcompanies 75

6.2 Trends,ȱdriversȱandȱcompetitiveȱforces 77

6.3 Discussion 79

7 Dataȱcollected 81

7.1 Qualitativeȱdata 81

7.2 Quantitativeȱdata 82

8 Empiricalȱevidence 87

8.1 Issues 90

8.1.1 Qualitativeȱanalysisȱandȱbasicȱstatistics 90

8.1.1.1 Socialȱandȱethicalȱissues 92

8.1.1.2 Environmentalȱissues 95

8.1.1.3 Theȱrelativeȱimportanceȱofȱenvironmentalȱandȱsocialȱissues 98

8.1.2 Advancedȱstatistics 102

8.1.2.1 Correlations 102

8.1.2.2 Regressions 111

8.1.3 Discussion 112

8.2 Externalȱstakeholders,ȱindustryȱandȱpartnerships 116

8.2.1 Governmentsȱandȱregulators 116

8.2.1.1 Qualitativeȱanalysisȱandȱbasicȱstatistics 116

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Listȱofȱcontentsȱ IXȱ

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8.2.1.2 Advancedȱstatistics 118

8.2.2 Publicȱpressureȱgroups 121

8.2.3 Customers 125

8.2.4 Financialȱcommunity 129

8.2.5 Industryȱandȱpartnerships 135

8.2.6 Legitimacyȱandȱtheȱrelativeȱimportanceȱofȱexternalȱstakeholders 142

8.2.6.1 Theȱroleȱofȱlegitimacy 142

8.2.6.1.1 Qualitativeȱanalysisȱandȱbasicȱstatistics 142

8.2.6.1.2.1 Correlations 145

8.2.6.1.2.2 Regressions 152

8.2.6.2 Theȱrelativeȱimportanceȱofȱexternalȱstakeholders 152

8.3 Managers 170

8.3.1 Qualitativeȱanalysisȱandȱbasicȱstatistics 170

8.3.2 Advancedȱstatistics 175

8.3.2.1 Correlations 175

8.3.2.2 Regressions 180

8.4 Companies 184

8.4.1 CompanyȬspecificȱdeterminants 185

8.4.1.3 Discussion 194

8.4.2 Strategicȱdisposition 198

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Xȱ Listȱofȱcontentsȱ

8.4.2.2.1 Correlations 204

8.4.2.2.2 Regressions 208

8.4.3 Economicȱrationale 215

8.4.3.1 Importanceȱandȱelementsȱofȱtheȱbusinessȱcase 216

8.4.3.2 Issueȱintegration 219

8.4.3.3 Buildingȱandȱquantifyingȱtheȱbusinessȱcase 222

8.4.4 Implementation 235

8.4.4.1 Managementȱtools 236

8.4.4.1.3 Discussion 241

8.4.4.2 Structures 243

8.4.4.3 Initiatives 251

8.4.5 Outcome 258

8.4.5.2.1 Correlations 259

8.4.5.2.2 Regressions 261

9 Synopsis 269

9.1 Findings 269

9.2 Significanceȱofȱtheȱstudy 278

9.2.1 Implicationsȱforȱtheory 278

9.2.2 Implicationsȱforȱpractice 279

9.3 Limitationsȱandȱsuggestionsȱforȱfurtherȱresearch 284

9.4 Conclusion 289

Appendices 291

Bibliography 333

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Listȱofȱfiguresȱ XIIIȱ

ȱ

Listȱofȱfiguresȱ

Figureȱ1.1:ȱStructureȱofȱtheȱcontent 3

Figureȱ2.1:ȱStructureȱofȱsectionȱ2 7

Figureȱ2.2:ȱWood’sȱcorporateȱsocialȱperformanceȱmodel,ȱbasedȱonȱWoodȱ(1991) 11

Figureȱ4.1:ȱCorporateȱsustainabilityȱperformanceȱmodel 38

Figureȱ5.2:ȱVisualizationȱofȱcontingencyȱapproach 44

Figureȱ5.3:ȱVisualizationȱofȱconcurrentȱtriangulizationȱdesignȱ(basedȱonȱCreswell,ȱ Clark,ȱGutmann,ȱ&ȱHanson,ȱ2004,ȱp.ȱ236) 48

Figureȱ5.4:ȱProcessȱofȱissueȱintegrationȱbasedȱonȱSalzmannȱ(2003a,ȱp.ȱ24) 52

Figureȱ5.5:ȱSystemizationȱofȱvalueȱdriversȱandȱvalueȱconstructs 53

Figureȱ5.6:ȱIntraȬȱandȱcrossȬsectorȱcomparisons 59

Figureȱ5.7:ȱVariablesȱthatȱareȱsubjectȱtoȱcorrelationȱanalysis 60

Figureȱ5.8:ȱRegressionȱanalysisȱ–ȱTestedȱdeterminantsȱofȱCSMȱintent 63

Figureȱ5.9:ȱRegressionȱanalysisȱ–ȱTestedȱdeterminantsȱofȱCSMȱsuccess 64

Figureȱ5.10:ȱSystemizationȱofȱmodelsȱpredictingȱCSMȱintent 65

Figureȱ5.11:ȱSystemizationȱofȱmodelsȱpredictingȱCSMȱsuccess 65

Figureȱ5.12:ȱComplementarityȱofȱcorrelationsȱandȱregressions 68

Figureȱ5.13:ȱSynergisticȱfitȱofȱmethodsȱ–ȱQuantitativeȱapproach 69

Figureȱ5.14:ȱSynergisticȱfitȱofȱmethodsȱ–ȱQualitativeȱapproach 70

Figureȱ7.1:ȱSamplesȱ–ȱDimensionsȱofȱcomparison 82

Figureȱ8.2:ȱIssuesȱandȱstakeholdersȱacrossȱtheȱvalueȱchainȱ(OG) 91

Figureȱ8.3:ȱIssuesȱandȱstakeholdersȱacrossȱtheȱvalueȱchainȱ(UT) 91

Figureȱ8.4:ȱCorrelationsȱ–ȱEnvironmentalȱissueȱsignificance 103

Figureȱ8.5:ȱCorrelationsȱ–ȱSocialȱissueȱsignificance 103

Figureȱ8.6:ȱDeterminantsȱofȱissueȱsignificance 113

Figureȱ8.7:ȱCorrelationsȱ–ȱGovernments’ȱSDȱrole 118

Figureȱ8.8:ȱCorrelationsȱ–ȱPublicȱpressureȱgroups’ȱSDȱrole 123

Figureȱ8.9:ȱCorrelationsȱ–ȱConsumers’ȱSDȱrole 127

Figureȱ8.10:ȱCorrelationsȱ–ȱCapitalȱmarkets’ȱfutureȱSDȱrole 132

Figureȱ8.11:ȱCorrelationsȱ–ȱIndustry’sȱSDȱrole 138

Figureȱ8.12:ȱCorrelationsȱ–ȱPublicȬprivateȱpartnerships’ȱSDȱrole 141

Figureȱ8.13:ȱCorrelationsȱ–ȱImportanceȱofȱlegitimacy 146

Figureȱ8.14:ȱCorrelationsȱ–ȱDamageȱtoȱlegitimacy 148

Figureȱ8.15:ȱDeterminantsȱofȱoutsideȱpressure 167

Figureȱ8.16:ȱCorrelationsȱ–ȱBBBȱattitude 175

Figureȱ8.17:ȱCorrelationsȱ–ȱWWȱattitude 176

Figureȱ8.18:ȱCorrelationsȱ–ȱCAȱattitude 177

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XIVȱ Listȱofȱfiguresȱ

Figureȱ8.19:ȱCorrelationsȱ–ȱUCAȱattitude 178

Figureȱ8.20:ȱSystemizationȱofȱbarriersȱtoȱCSM 194

Figureȱ8.21:ȱCorrelationsȱ–ȱSDȱfamiliarity 204

Figureȱ8.22:ȱCorrelationsȱ–ȱFutureȱSDȱimportance 205

Figureȱ8.23:ȱCorrelationsȱ–ȱCSMȱintent 205

Figureȱ8.24:ȱCorrelationsȱwithȱstrategicȱdisposition 206

Figureȱ8.25:ȱDeterminantsȱofȱCSMȱintent 213

Figureȱ8.26:ȱProcessesȱofȱissueȱintegrationȱ(Salzmann,ȱ2003b,ȱp.ȱ15) 219

Figureȱ8.27:ȱMappingȱtheȱbusinessȱcaseȱforȱsustainabilityȱȱ (BasedȱonȱSalzmann,ȱ2003b,ȱp.ȱ11) 224

Figureȱ8.28:ȱDifferentȱcasesȱforȱcorporateȱsustainability 227

Figureȱ8.29:ȱTheȱcomplexityȱofȱtheȱbusinessȱcaseȱforȱsustainability 228

Figureȱ8.30:ȱConceptualȱFrameworkȱ(Salzmannȱetȱal.,ȱ2005b,ȱp.ȱ6) 230

Figureȱ8.31:ȱTheȱbusinessȱcaseȱandȱitsȱdeterminants 233

Figureȱ8.32:ȱCorrelationsȱ–ȱCrossȬdisciplinaryȱcollaboration 245

Figureȱ8.33:ȱCorrelationsȱ–ȱCrossȬdisciplinaryȱpotential 246

Figureȱ8.34:ȱCorrelationsȱ–ȱCSMȱsuccess 260

Figureȱ8.35:ȱDeterminantsȱofȱCSMȱsuccess 266

Figureȱ9.1:ȱCrossȬsectorȱdifferences 276

Figureȱ9.2:ȱIntegrationȱofȱtheȱbusinessȱcaseȱintoȱtheȱconceptualȱframework 285

Figureȱ9.3:ȱDevelopedȱframeworkȱ–ȱTheȱbusinessȱcaseȱforȱsustainabilityȱandȱitsȱ determinants 287

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Listȱofȱchartsȱ XVȱ

ȱ

Listȱofȱchartsȱ

Chartȱ7Ȭ1:ȱRegionsȱofȱoperationȱ–ȱOGȱgeneralȱmanagers 83

Chartȱ7Ȭ2:ȱRegionsȱofȱoperationȱ–ȱUTȱgeneralȱmanagers 83

Chartȱ7Ȭ3:ȱNationalitiesȱ–ȱOGȱgeneralȱmanagers 83

Chartȱ7Ȭ4:ȱNationalitiesȱ–ȱUTȱgeneralȱmanagers 83

Chartȱ7Ȭ5:ȱRegionsȱofȱoperationȱ–ȱOGȱsustainabilityȱofficers 84

Chartȱ7Ȭ6:ȱRegionsȱofȱoperationsȱ–ȱUTȱsustainabilityȱofficers 84

Chartȱ7Ȭ7:ȱNationalitiesȱ–ȱOGȱsustainabilityȱofficers 84

Chartȱ7Ȭ8:ȱNationalitiesȱ–ȱUTȱsustainabilityȱofficers 84

Chartȱ8Ȭ1:ȱIssuesȱ–ȱOpenȬendedȱquestionȱ(Generalȱmanagersȱ–ȱOG) 99

Chartȱ8Ȭ2:ȱIssuesȱ–ȱOpenȬendedȱquestionȱ(Generalȱmanagersȱ–ȱUT) 99

Chartȱ8Ȭ3:ȱMostȱimportantȱissuesȱ(Sustainabilityȱofficersȱ–ȱOG) 100

Chartȱ8Ȭ4:ȱMostȱimportantȱissuesȱ(Sustainabilityȱofficersȱ–ȱUT) 100

Chartȱ8Ȭ5:ȱSignificanceȱofȱenvironmentalȱandȱsocialȱissuesȱ (Generalȱmanagersȱandȱsustainabilityȱofficers) 101

Chartȱ8Ȭ6:ȱCapitalȱmarkets’ȱfutureȱSDȱroleȱandȱsummaryȱstatistics 130

Chartȱ8Ȭ7:ȱImportanceȱofȱlegitimacy 144

Chartȱ8Ȭ8:ȱDamageȱtoȱlegitimacyȱinȱtheȱpastȱthreeȱyears 144

Chartȱ8Ȭ9:ȱContributionȱofȱdifferentȱgroupsȱtoȱsustainableȱdevelopmentȱ (Generalȱmanagersȱ–ȱOG) 153

Chartȱ8Ȭ10:ȱȱIncidentsȱdamagingȱbrandȱvalueȱandȱreputationȱ (Generalȱmanagersȱ–ȱOG) 154

Chartȱ8Ȭ11:ȱIncidentsȱdamagingȱbrandȱvalueȱandȱreputationȱ (Sustainabilityȱofficersȱ–ȱUT) 154

Chartȱ8Ȭ12:ȱBarriersȱ(Sustainabilityȱofficersȱ–ȱOG) 155

Chartȱ8Ȭ13:ȱBarriersȱ(Sustainabilityȱofficersȱ–ȱUT) 155

Chartȱ8Ȭ14:ȱBarriersȱ(Generalȱmanagersȱ–ȱOG) 156

Chartȱ8Ȭ15:ȱBarriersȱ(Generalȱmanagersȱ–ȱUT) 156

Chartȱ8Ȭ20:ȱPromotingȱfactorsȱ(Sustainabilityȱofficersȱ–ȱOG) 173

Chartȱ8Ȭ21:ȱPromotingȱfactorsȱ(Sustainabilityȱofficerȱ–ȱUT) 173

Chartȱ8Ȭ22:ȱPersonalȱattitudesȱtowardsȱcorporateȱsustainabilityȱ (Generalȱmanagers) 174

Chartȱ8Ȭ23:ȱPromotingȱfactorsȱ(Sustainabilityȱofficersȱ–ȱOG) 186

Chartȱ8Ȭ24:ȱPromotingȱfactorsȱ(Sustainabilityȱofficerȱ–ȱUT) 186

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XVIȱ Listȱofȱchartsȱ

Chartȱ8Ȭ29:ȱSDȱfamiliarityȱandȱCSMȱintent 199

Chartȱ8Ȭ30:ȱFutureȱSDȱimportance 200

Chartȱ8Ȭ31:ȱValueȱdriversȱ(OGȱsustainabilityȱofficers) 216

Chartȱ8Ȭ32:ȱValueȱdriversȱ(UTȱsustainabilityȱofficers) 216

Chartȱ8Ȭ33:ȱToolsȱandȱsystemsȱrelatedȱtoȱcorporateȱsustainabilityȱ (Generalȱmanagersȱ–ȱOG) 236

Chartȱ8Ȭ34:ȱToolsȱandȱsystemsȱrelatedȱtoȱcorporateȱsustainabilityȱ (Generalȱmanagersȱ–ȱUT) 236

Chartȱ8Ȭ35:ȱToolsȱandȱsystemsȱrelatedȱtoȱcorporateȱsustainabilityȱ (Sustainabilityȱofficersȱ–ȱOG) 237

Chartȱ8Ȭ36:ȱToolsȱandȱsystemsȱrelatedȱtoȱcorporateȱsustainabilityȱ (Sustainabilityȱofficersȱ–ȱUT) 237

Chartȱ8Ȭ37:ȱResponsesȱtoȱenvironmentalȱandȱsocialȱissuesȱ (Generalȱmanagersȱ–ȱOG) 252

Chartȱ8Ȭ38:ȱResponsesȱtoȱenvironmentalȱandȱsocialȱissuesȱ (Generalȱmanagersȱ–ȱUT) 252

Chartȱ8Ȭ39:ȱCorporateȱinitiativesȱ(Generalȱmanagersȱ–ȱOG) 254

Chartȱ8Ȭ40:ȱCorporateȱinitiativesȱ(Generalȱmanagersȱ–ȱUT) 254 Chartȱ8Ȭ41:ȱProgressȱinȱadoptingȱmoreȱsustainableȱbusinessȱpractices 259ȱ

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Listȱofȱtablesȱ XVIIȱ

ȱ

Listȱofȱtablesȱ

Tableȱ3Ȭ1:ȱEmpiricalȱstudiesȱonȱOGȱandȱUTȱsector 25

Tableȱ4Ȭ1:ȱModificationsȱtoȱWood’sȱ(1991)ȱCSPȱmodel 37

Tableȱ4Ȭ2:ȱGapsȱinȱempiricalȱliteratureȱandȱstudyȱcharacteristicsȱtoȱfillȱthem 40

Tableȱ5Ȭ1:ȱTimelineȱofȱtheȱcrossȬindustryȱresearchȱproject 43

Tableȱ5Ȭ2:ȱComplementarityȱandȱtriangulationȱthroughȱmixedȱmethodsȱ –ȱbasedȱonȱBortzȱ(2002,ȱp.ȱ237)ȱandȱTeddlieȱ(2003,ȱp.ȱ15) 47

Tableȱ5Ȭ3:ȱDummyȱvariablesȱandȱreferenceȱgroups 62

Tableȱ7Ȭ1:ȱInterviewȱsample 81

Tableȱ8Ȭ1:ȱSummaryȱstatisticsȱ–ȱGovernments’ȱSDȱrole 117

Tableȱ8Ȭ2:ȱSummaryȱstatisticsȱ–ȱPublicȱpressureȱgroups’ȱSDȱrole 122

Tableȱ8Ȭ3:ȱSummaryȱstatisticsȱ–ȱConsumers’ȱSDȱrole 126

Tableȱ8Ȭ4:ȱSummaryȱstatisticsȱ–ȱIndustry’sȱSDȱrole 136

Tableȱ8Ȭ5:ȱSummaryȱstatisticsȱ–ȱPublicȬprivateȱpartnerships’ȱSDȱrole 137

Tableȱ8Ȭ6:ȱParametersȱofȱstrategicȱdispositionȱtoȱCSMȱ–ȱbasedȱonȱinterviewsȱandȱ analysisȱofȱcorporateȱreports/websites 201

Tableȱ8Ȭ7:ȱPortfolioȱofȱmanagementȱtoolsȱusedȱinȱcompaniesȱ(basedȱonȱDozȱetȱal.,ȱ 1988) 238

Tableȱ8Ȭ8:ȱSummaryȱstatisticsȱ–ȱCrossȬdisciplinaryȱcollaboration 243

Tableȱ8Ȭ9:ȱSummaryȱstatisticsȱ–ȱCrossȬdisciplinaryȱpotential 244

Tableȱ8Ȭ10:ȱSummaryȱstatisticsȱ–ȱCSMȱsuccess 258

Tableȱ8Ȭ11:ȱCorrelationsȱwithȱCSMȱsuccess 261

Tableȱ9Ȭ1:ȱCrossȬdisciplinaryȱdifferences 277 ȱ

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Listȱofȱregressionȱtablesȱ XIXȱ

ȱ

Listȱofȱregressionȱtablesȱ

RegressionȱTableȱ8Ȭ1:ȱCSMȱintentȱ–ȱIssuesȱ(Reducedȱclusterȱmodels) 111

RegressionȱTableȱ8Ȭ2:ȱCSMȱintentȱ–ȱImportanceȱofȱandȱdamageȱtoȱlegitimacyȱ (Expandedȱsubmodels) 152

RegressionȱTableȱ8Ȭ3:ȱCSMȱintentȱ–ȱSDȱroleȱofȱexternalȱstakeholdersȱ(Expandedȱ submodels) 160

RegressionȱTableȱ8Ȭ4:ȱCSMȱintentȱȬȱIncidentsȱthatȱdamagedȱlegitimacy(Expandedȱ submodels) 162

RegressionȱTableȱ8Ȭ5:ȱCSMȱintentȱ–ȱExternalȱbarriersȱ(Reducedȱsubmodels) 163

RegressionȱTableȱ8Ȭ6:ȱCSMȱsuccessȱ–ȱExternalȱbarriersȱ(Reducedȱsubmodels) 163

RegressionȱTableȱ8Ȭ7:ȱCSMȱintentȱ–ȱAllȱvariablesȱrelatingȱtoȱinfluenceȱfromȱ externalȱstakeholdersȱ(Reducedȱclusterȱmodels) 164

RegressionȱTableȱ8Ȭ8:ȱCSMȱintentȱ–ȱManagers’ȱpersonalȱattitudesȱ (Expandedȱclusterȱmodels) 181

RegressionȱTableȱ8Ȭ9:ȱCSMȱsuccessȱ–ȱManagers’ȱpersonalȱattitudesȱ (Expandedȱclusterȱmodels) 182

RegressionȱTableȱ8Ȭ10:ȱCSMȱintentȱ–ȱBarriersȱ(Expandedȱsubmodels) 191

RegressionȱTableȱ8Ȭ11:ȱCSMȱintentȱ–ȱBarriersȱ(Reducedȱsubmodels) 192

RegressionȱTableȱ8Ȭ12:ȱCSMȱsuccessȱȬȱBarriersȱ(Reducedȱsubmodels) 193

RegressionȱTableȱ8Ȭ13:ȱCSMȱintentȱ–ȱSummaryȱmodels 209

RegressionȱTableȱ8Ȭ14:ȱCSMȱsuccessȱȬȱCSMȱtoolsȱ(Reducedȱsubmodels) 239

RegressionȱTableȱ8Ȭ15:ȱCSMȱsuccessȱ–Structuresȱ(Expandedȱsubmodels) 249

RegressionȱTableȱ8Ȭ16:ȱCSMȱsuccessȱ–ȱInitiativesȱ(Reducedȱsubmodels) 255

RegressionȱTableȱ8Ȭ17:ȱCSMȱsuccessȱ–ȱAllȱcorporateȱdiscretionaryȱfactorsȱ (Reducedȱclusterȱmodel) 262

RegressionȱTableȱ8Ȭ18:ȱSummaryȱmodelsȱȬȱCSMȱsuccess 264

ȱ RegressionȱTableȱAȱ1:ȱCSMȱintentȱȬȱpublicȱresponsibilityȱȱ (Expandedȱclusterȱmodels) 307

RegressionȱTableȱAȱ2:ȱCSMȱintentȱ–ȱimportanceȱofȱandȱdamageȱtoȱlegitimacyȱ (Reducedȱsubmodels) 307

RegressionȱTableȱAȱ3:ȱCSMȱintentȱ–ȱSDȱrolesȱofȱexternalȱstakeholdersȱȱ (Reducedȱsubmodels) 307

RegressionȱTableȱAȱ4:ȱCSMȱintentȱ–ȱincidentsȱthatȱdamagedȱlegitimacyȱȱ (Reducedȱsubmodels) 307

RegressionȱTableȱAȱ5:ȱCSMȱintentȱ–ȱexternalȱbarriersȱ(Expandedȱmodels) 308

RegressionȱTableȱAȱ6:ȱCSMȱsuccessȱ–ȱexternalȱbarriersȱ(Expandedȱmodels) 308

RegressionȱTableȱAȱ7:ȱCSMȱintentȱȬȱpersonalȱattitudesȱ(Reducedȱmodels) 308

RegressionȱTableȱAȱ8:ȱCSMȱsuccessȱ–ȱPersonalȱattitudesȱ(Reducedȱmodels) 308

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XXȱ Listȱofȱregressionȱtablesȱ

RegressionȱTableȱAȱ9:ȱCSMȱintentȱ–ȱexternalȱbarriersȱ(Expandedȱmodels) 309

RegressionȱTableȱAȱ10:ȱCSMȱsuccessȱ–ȱexternalȱbarriersȱ(Expandedȱmodels) 309

RegressionȱTableȱAȱ11:ȱCSMȱintentȱȬȱInternalȱbarriersȱ(Expandedȱmodels) 309

RegressionȱTableȱAȱ12:ȱCSMȱintentȱȬȱInternalȱbarriersȱ(Reducedȱmodels) 309

RegressionȱTableȱAȱ13:ȱCSMȱsuccessȱ–ȱInternalȱbarriersȱ(Expandedȱmodels) 310

RegressionȱTableȱAȱ14:ȱCSMȱsuccessȱȬȱInternalȱbarriersȱ(Reducedȱmodels) 310

RegressionȱTableȱAȱ15:ȱCSMȱsuccessȱȬȱbarriersȱ(Expandedȱsubmodels) 310

RegressionȱTableȱAȱ16:ȱCSMȱsuccessȱȬȱCSMȱtoolsȱ(Expandedȱmodels) 311

RegressionȱTableȱAȱ17:ȱCSMȱsuccessȱ–ȱCorporateȱstructureȱ (Reducedȱsubmodels) 311

RegressionȱTableȱAȱ18:ȱCSMȱsuccessȱȬȱCSMȱinitiativesȱ(Expandedȱmodels) 311

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AfterȱWorldȱWarȱII,ȱsocialȱconcernsȱwereȱincreasinglyȱincorporatedȱintoȱmanagementȱeducationȱandȱlegislationȱ(foremostȱsocialȱsecurityȱsystems).ȱBetweenȱ1960ȱandȱ1980,ȱrapidȱeconomicȱgrowthȱandȱitsȱsocialȱandȱenvironmentalȱeffectsȱ(includingȱincidentsȱsuchȱasȱe.g.ȱAberfan,ȱWalesȱinȱ1966ȱandȱSeveso,ȱItalyȱinȱ1976)ȱtriggeredȱseveralȱinitiaȬtivesȱ suchȱ asȱ theȱ Clubȱ ofȱ Romeȱ andȱ theȱ Brandtȱ Reportȱ asȱ wellȱ asȱ newȱ regulatoryȱstandardsȱ inȱ industrializedȱ countries,ȱ e.g.ȱ theȱ USȱ Environmentalȱ Protectionȱ Actȱ(Mohan,ȱ2003).ȱ

Obviouslyȱtheȱgrowingȱacceptanceȱofȱbusinesses’ȱsocialȱandȱenvironmentalȱresponsiȬbilityȱ wasȱ intensivelyȱ discussedȱ amongȱ scholarsȱ andȱ practitioners.ȱ Theȱ bestȬknownȱcontributionȱtoȱthisȱdebateȱisȱundoubtedlyȱMiltonȱFriedman’sȱclaimȱthatȱ“fewȱtrendsȱcouldȱsoȱthoroughlyȱundermineȱtheȱveryȱfoundationȱofȱourȱfreeȱsocietyȱasȱtheȱaccepȬtanceȱ byȱ corporateȱ officialsȱ ofȱ aȱ socialȱ responsibilityȱ otherȱ thanȱ toȱ makeȱ asȱ muchȱmoneyȱ forȱ theirȱ stockholdersȱ asȱ possible”ȱ (Friedman,ȱ 1962).ȱ Consequentlyȱ scholarsȱincreasinglyȱ builtȱ aȱ strongerȱ andȱ moreȱ logicallyȱ groundedȱ caseȱ forȱ corporateȱ socialȱresponsibilityȱ (CSR).ȱ Forȱ exampleȱ Johnsonȱ (1971)ȱ presentedȱ severalȱ viewsȱ ofȱ socialȱresponsibility,ȱamongȱthemȱutilityȱmaximizationȱ(ratherȱthanȱprofitȱmaximization)ȱasȱtheȱprimeȱmotivationȱofȱcompanies.ȱHeȱpostulatedȱthatȱsociallyȱresponsibleȱmanagersȱmaximizeȱutilityȱbyȱextendingȱtheirȱinterestȱbeyondȱtheirȱownȱwellȬbeingȱtoȱtheirȱfelȬlowȱemployeesȱandȱcitizens.ȱ

Inȱtheȱ1980sȱandȱ1990sȱaȱplethoraȱofȱfurtherȱdefinitionsȱandȱframeworksȱwereȱdevelȬopedȱ andȱ refinedȱ (Arlowȱ &ȱ Gannon,ȱ 1982;ȱ Carroll,ȱ 1999;ȱ Davenport,ȱ 2000;ȱ Moir,ȱ2001).ȱ Furthermore,ȱ theȱ notionȱ ofȱ sustainableȱ development,ȱ initiallyȱ definedȱ inȱ theȱBrundtlandȱ Reportȱ byȱ theȱ Worldȱ Commissionȱ onȱ Environmentȱ andȱ Developmentȱ(1987),ȱgainedȱmoreȱandȱmoreȱimportance.ȱHowever,ȱtheȱinflatedȱuseȱofȱtermsȱsuchȱ

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2ȱ 1ȱIntroductionȱ

asȱ corporateȱ socialȱ responsibility,ȱ corporateȱ sustainabilityȱ andȱ corporateȱ citizenshipȱledȱtoȱsignificantȱskepticismȱandȱcynicism,ȱparticularlyȱinȱcivilȱsociety.ȱ

Soȱfarȱempiricalȱresearchȱessentiallyȱonlyȱproducedȱaȱplethoraȱofȱinstrumentalȱstudiesȱyieldingȱinconclusiveȱevidenceȱforȱaȱsoundȱbusinessȱcase,ȱandȱfailedȱtoȱdescribeȱcorȬporateȱ sustainabilityȱ managementȱ (CSM)ȱ andȱ itsȱ economicȱ rationaleȱ comprehenȬsivelyȱ (Griffinȱ &ȱ Mahon,ȱ 1997;ȱ Morsing,ȱ 2003).1ȱ Inȱ particular,ȱ sectorȬspecificȱ andȱcomparativeȱapproachesȱareȱmissingȱalthoughȱtheȱcontingentȱcharacterȱofȱCSMȱandȱrelatedȱ conceptsȱ suchȱ asȱ socialȱ responsivenessȱ wasȱ diagnosedȱ asȱ earlyȱ asȱ theȱ 1970sȱ(Arlowȱetȱal.,ȱ1982,ȱp.ȱ235;ȱCarroll,ȱ1979;ȱSethi,ȱ1975).ȱUnderstandablyȱskepticismȱhasȱnotȱebbedȱawayȱ(Walleyȱ&ȱWhitehead,ȱ1994).ȱ

Theȱpresentȱstudy’sȱobjectiveȱisȱtoȱfillȱtheseȱgapsȱbyȱempiricallyȱexaminingȱtheȱmainȱexternalȱ andȱ internalȱ determinantsȱ (i.e.ȱ driversȱ orȱ barriers)ȱ ofȱ CSM,ȱ companies’ȱ apȬproachesȱtoȱCSMȱinȱtermsȱofȱbothȱstrategicȱdispositionȱandȱimplementation,ȱandȱtheȱeconomicȱrationaleȱforȱtheirȱapproachesȱandȱtheirȱoutcomeȱ–ȱtheȱindividualȱresearchȱquestionsȱareȱlaidȱoutȱinȱdetailȱinȱsectionȱ4.ȱTheȱstudyȱadoptsȱaȱclearȱdescriptiveȱconȬtingencyȱ approachȱ thatȱ isȱ basedȱ onȱ dataȱ collectedȱ fromȱ twoȱ groupsȱ ofȱ managers,ȱnamelyȱsustainabilityȱexpertsȱandȱnonȬsustainabilityȱexperts,ȱinȱtwoȱdifferentȱindusȬtryȱ sectorsȱ (integratedȱ oilȱ andȱ gasȱ vs.ȱ electricȱ utilities)ȱ andȱ severalȱ geographicalȱ reȬgionsȱofȱoperations.ȱ

1.2 Structureȱ

Theȱstudyȱisȱdividedȱ inȱnineȱblocksȱ(seeȱFigureȱ1Ȭ1).ȱInȱtheȱintroductoryȱsectionȱtheȱauthorȱelaboratesȱonȱtheȱstudy’sȱresearchȱfieldȱandȱobjectivesȱasȱwellȱasȱitsȱstructureȱandȱintendedȱcontributions.ȱ

Sectionȱ 2ȱ dealsȱ withȱ existingȱ differentȱ theoreticalȱ frameworksȱ forȱ CSMȱ andȱ relatedȱconcepts.ȱItȱalsoȱdefinesȱtheȱkeyȱconceptsȱusedȱinȱthisȱstudy.ȱ

Inȱsectionȱ3ȱtheȱauthorȱassessesȱempiricalȱstudiesȱandȱdataȱtoȱprovideȱaȱcomprehenȬsiveȱbenchmarkȱforȱtheȱpresentȱstudy.ȱ

Inȱsectionȱ4,ȱtheȱauthorȱelaboratesȱonȱeveryȱdetailȱofȱtheȱstudy’sȱconceptualȱrationaleȱandȱfocusȱ–ȱbasedȱonȱtheȱtheoreticalȱandȱempiricalȱgapsȱidentifiedȱbeforehand.ȱSecȬtionȱ 5ȱ presentsȱ andȱ evaluatesȱ theȱ researchȱ methodȱ chosen.ȱ Moreȱ specifically,ȱ itȱ exȬplainsȱ(1)ȱwhyȱandȱhowȱtheȱdesignȱandȱinstrumentsȱofȱthisȱstudyȱwereȱselected,ȱandȱ(2)ȱhowȱtheȱdataȱwereȱcollectedȱandȱanalyzed.ȱ

ȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ

1 ȱTheȱtermȱ“corporateȱsustainabilityȱmanagementȱ(CSM)”ȱessentiallyȱmeansȱcorporateȱresponsivenessȱ toȱenvironmentalȱandȱsocialȱissues;ȱtheȱtermȱ“businessȱcaseȱforȱsustainability”ȱrefersȱtoȱtheȱeconomicȱ rationaleȱ forȱ corporateȱ sustainabilityȱ (i.e.ȱ positiveȱ netȱ economicȱ benefit).ȱ Bothȱ conceptsȱ willȱ beȱ deȬ finedȱinȱdetailȱbelow.ȱ

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1.2ȱStructureȱ 3ȱ

ȱ

Sectionȱ 6ȱ presentsȱ anȱ analysisȱ ofȱ theȱ mainȱ characteristicsȱ ofȱ bothȱ sectorsȱ (corporateȱactivities,ȱ drivers,ȱ trends,ȱ etc.)ȱ fromȱ aȱ nonȬsustainabilityȱ perspectiveȱ toȱ provideȱ theȱcontextȱ forȱ aȱ comprehensiveȱ andȱ holisticȱ discussionȱ ofȱ CSM.ȱ Obviouslyȱ companies’ȱactivitiesȱandȱbusinessȱenvironmentsȱ(regulation,ȱcompetition)ȱgreatlyȱdetermineȱtheȱdegreeȱtoȱwhichȱtheyȱcanȱengageȱCSM.ȱ

Section 4: Conceptual rationale and research questions

Section 5: Method

Section 8: Empirical evidence

Section 9: Synopsis

8.4 Companies

8.3 Managers

8.2 External stakeholders, industry and partnerships

8.1

Issues

Section 6: Sector characteristics

Section 7: Data collected

2.1 Contingency theory

ȱ

Figureȱ1.1:ȱStructureȱofȱtheȱcontentȱ

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Inȱsectionȱ7ȱtheȱauthorȱdescribesȱtheȱsamplesȱonȱwhichȱtheȱstudyȱisȱbased.ȱInȱparticuȬlarȱheȱelaboratesȱonȱtheȱdistributionȱofȱrespondents’ȱmanagementȱfunctions,ȱtheirȱreȬgionsȱofȱoperationsȱandȱtheirȱnationalities.ȱ

Sectionȱ8ȱpresentsȱandȱinterpretsȱofȱtheȱempiricalȱevidenceȱcollected.ȱFinallyȱsectionȱ9ȱfeaturesȱtheȱauthor’sȱkeyȱfindings,ȱanȱassessmentȱofȱtheȱstudy’sȱsignificanceȱandȱsugȬgestionsȱforȱfurtherȱresearch.ȱ

1.3 Intendedȱcontributionsȱ

Theȱ presentȱ studyȱ isȱ largelyȱ deductiveȱ andȱ explanatoryȱ inȱ nature,ȱ sinceȱ itȱ aimsȱ toȱcomprehensivelyȱanalyzeȱandȱexplainȱcompanies’ȱapproachesȱtoȱCSMȱandȱtheirȱoutȬcome.ȱSinceȱtheȱeconomicȱrationaleȱforȱCSMȱisȱanȱareaȱinȱwhichȱdescriptiveȱempiricalȱstudiesȱhaveȱnotȱbeenȱundertakenȱtoȱdate,ȱtheȱauthorȱwillȱanalyzeȱthisȱsubconceptȱinȱaȱmoreȱinductiveȱandȱexploratoryȱway,ȱnamelyȱtheȱanalysisȱofȱtheȱeconomicȱrationaleȱforȱCSM.2ȱ

Itȱ shouldȱ beȱ notedȱ thatȱ theȱ studyȱ doesȱ notȱ includeȱ anyȱ normativeȱ discussionȱ aboutȱ

howȱ “much”ȱ CSMȱ companiesȱ shouldȱ engageȱ inȱ toȱ resolveȱ existingȱ environmentalȱandȱsocialȱissues.ȱItȱisȱbasedȱonȱtheȱassumptionȱthatȱcompaniesȱareȱeconomicȱentitiesȱwhoseȱprimaryȱobjectiveȱisȱtheȱmaximizationȱofȱexpectedȱprofitsȱ(Lankoski,ȱ2000,ȱp.ȱ5)ȱ

Contributionsȱcanȱbeȱexpectedȱinȱthreeȱareasȱthatȱcompriseȱ(1)ȱtheȱconceptualȱframeȬworkȱdevelopedȱforȱandȱtestedȱinȱthisȱstudy,ȱ(2)ȱtheȱmethod,ȱandȱ(3)ȱtheȱdata.ȱ

Conceptualȱframeworkȱ

Toȱdataȱaȱtheoreticalȱframeworkȱforȱcorporateȱsustainabilityȱperformanceȱ(thatȱincorȬporatesȱCSMȱasȱaȱkeyȱconcept)ȱdoesȱnotȱexistȱasȱsuch.ȱCorporateȱsocialȱperformanceȱmodelsȱ(Wood,ȱ1991)ȱareȱlargelyȱadequateȱtoȱcaptureȱtheȱcomplexityȱofȱcorporateȱsusȬtainabilityȱ performance.ȱ However,ȱ theyȱ exhibitȱ severalȱ shortcomings.ȱ Thisȱ study’sȱconceptualȱframeworkȱforȱcorporateȱsustainabilityȱperformanceȱ(seeȱsectionȱ4)ȱbuildsȱonȱtheȱstrengthsȱofȱWood’sȱ(1991)ȱmodelȱofȱcorporateȱsocialȱperformance.ȱItȱisȱinnoȬvativeȱ insofarȱ asȱ itȱ takesȱ aȱ sequentialȱ (processȬoriented)ȱ perspectiveȱ ofȱ CSM.ȱ Itȱ inȬcludesȱtheȱdeterminantsȱofȱCSM,ȱcompanies’ȱstrategicȱdispositionȱtoȱandȱimplemenȬtationȱofȱCSMȱandȱtheȱoutcome.ȱThusȱitȱisȱalsoȱdesignedȱtoȱexamineȱcausalȱeffectsȱbeȬtweenȱtheȱkeyȱconceptsȱdefined.ȱItsȱheuristicȱvalueȱ(Bortzȱetȱal.,ȱ2002,ȱp.ȱ17)ȱshouldȱbeȱsignificant,ȱ sinceȱ itȱ notȱ onlyȱ explainsȱ variationsȱ inȱ CSMȱ andȱ itsȱ outcomeȱ butȱ isȱ alsoȱableȱ toȱ anticipateȱ futureȱ eventsȱ andȱ developments.ȱ Furthermore,ȱ unlikeȱ competingȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ

2 ȱ Aȱ combinedȱ inductiveȱ andȱ deductiveȱ approachȱ isȱ notȱ uncommonȱ inȱ empiricalȱ researchȱ (Bortzȱ &ȱ Döring,ȱ2002,ȱp.ȱ35),ȱsinceȱstudiesȱareȱoftenȱbasedȱonȱknownȱtheoreticalȱframeworksȱbutȱalsoȱofferȱ modificationsȱtoȱthem.ȱ

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1.3ȱIntendedȱcontributionsȱ 5ȱ

ȱ

modelsȱ ofȱcorporateȱ socialȱ performanceȱ (Wood,ȱ 1991),ȱ itȱ explicitlyȱ differentiatesȱ beȬtweenȱfourȱmotivatingȱprinciplesȱofȱCSMȱandȱtakesȱintoȱaccountȱbothȱitsȱsocialȱandȱenvironmentalȱdimension.ȱFinally,ȱitȱincorporatesȱtheȱeconomicȱrationaleȱforȱCSM.ȱ

Methodȱ

Empiricalȱ literatureȱ onȱ CSMȱ orȱ relatedȱ conceptsȱ hasȱ largelyȱ ignoredȱ itsȱ contingentȱnatureȱ(Salzmann,ȱ2002).ȱEarlyȱstudiesȱbyȱBuehlerȱ(1979),ȱAbouzeidȱ(1978)ȱandȱShettyȱ(1979)ȱ asȱ wellȱ asȱ moreȱ recentȱ researchȱ byȱ Henriquesȱ andȱ Sadorskyȱ (1996),ȱ Banerjeeȱ(2003)ȱandȱLankoskiȱ(2000)ȱfocusȱonȱaȱnarrowerȱresearchȱdomain,ȱi.e.ȱonȱaȱsubsetȱofȱconceptsȱanalyzedȱinȱtheȱpresentȱstudy,ȱandȱconsiderȱotherȱandȱfewerȱcontingenciesȱsuchȱasȱorganizationalȱresourcesȱandȱindustry.ȱ

Basedȱ onȱ theȱ premisesȱ ofȱ contingencyȱ theoryȱ thatȱ companies’ȱ strategies,ȱ structuresȱandȱ performanceȱ –ȱ whetherȱ inȱ aȱ generalȱ orȱ aȱ specificallyȱ social/environmentalȱ conȬtextȱȬȱareȱdeterminedȱbyȱsituationalȱ(bothȱinternalȱandȱexternal)ȱvariablesȱ(Greeningȱ

&ȱGray,ȱ1994,ȱp.ȱ491;ȱLuthansȱ&ȱSteward,ȱ1977,ȱp.ȱ183;ȱWood,ȱ1991,ȱp.ȱ700),ȱtheȱpreȬsentȱstudyȱtakesȱaȱmultipleȱcontingencyȱperspectiveȱbyȱdescribingȱcorporateȱsustainȬabilityȱmanagement,ȱitsȱdeterminantsȱandȱitsȱoutcomeȱacross:ȱ

- twoȱgroupsȱ(orȱdisciplines)ȱofȱmanagersȱinȱ

- twoȱindustryȱsectorsȱandȱ

- variousȱregionsȱofȱoperations.ȱ

Thusȱitȱallowsȱforȱ(1)ȱaȱsectorȬ,ȱmanagementȱgroupȬȱandȱregionȬspecificȱanalysisȱthatȱensuresȱ clearȱ interpretabilityȱ (internalȱ validity),ȱ andȱ (2)ȱ comparativeȱ analysisȱ thatȱyieldsȱmoreȱgeneralizableȱresultsȱ(externalȱvalidity).3ȱ

Theȱvalidityȱandȱtheȱscopeȱofȱresultsȱisȱfurtherȱincreasedȱthroughȱtheȱstudy’sȱmixedȱmethodȱ designȱ thatȱ combinesȱ bothȱ qualitativeȱ andȱ quantitativeȱ instrumentsȱ ofȱ dataȱcollectionȱandȱanalysisȱandȱthusȱmakesȱaȱcomplementarityȱandȱtriangulationȱofȱfindȬingsȱpossibleȱ(Teddlieȱ&ȱTashakkori,ȱ2003,ȱp.ȱ17).ȱ

Dataȱ

Itȱ isȱ surprisingȱ howȱ fewȱ descriptiveȱ studiesȱ onȱ theȱ businessȱ caseȱ forȱ sustainabilityȱmanagementȱareȱavailableȱtoȱdateȱ(seeȱEpsteinȱ&ȱRoy,ȱ2003ȱasȱaȱrareȱexception),ȱparȬticularlyȱ ifȱ oneȱ takesȱ intoȱ accountȱ thatȱ aȱ plethoraȱ ofȱ instrumentalȱ studiesȱ producedȱlargelyȱinconclusiveȱevidenceȱregardingȱitsȱexistenceȱ(Salzmann,ȱ2002).ȱThisȱstudyȱisȱtheȱfirstȱofȱitsȱkindȱtoȱincludeȱaȱcomprehensiveȱdescriptionȱofȱtheȱeconomicȱrationaleȱforȱCSMȱasȱitȱisȱperceivedȱbyȱmanagers.ȱ

3 ȱSeeȱe.g.ȱBortzȱ(2002,ȱp.ȱ37)ȱonȱtheȱneedȱforȱinternalȱandȱexternalȱvalidityȱofȱresearchȱresults.ȱ

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Furthermoreȱtheȱdatasetȱonȱwhichȱthisȱstudyȱreliesȱisȱnew,ȱuniqueȱandȱ–ȱconsideringȱthatȱthisȱisȱnotȱaȱcrossȬsectionalȱstudyȱ–ȱrelativelyȱlarge.ȱThusȱtheȱstudyȱprovidesȱanȱextensiveȱ andȱ currentȱ benchmarkȱ forȱ aȱ soȱ farȱ unmatchedȱ varietyȱ ofȱ dimensionsȱ ofȱ

CSM.ȱItȱshouldȱbeȱnoted,ȱhowever,ȱthatȱdueȱtoȱitsȱbroadȱscope,ȱitȱcannotȱprovideȱdeȬ

tailedȱanalysesȱofȱtheȱindividualȱdimensions.ȱ

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Section 2: Theoretical foundation and concepts

2.2 Corporate sustainability

management and related

theoretical frameworks:

• Corporate social responsibility

• Corporate social performance

• Corporate sustainability

2.3 Key concepts:

• Determinants

• Corporate sustainabilitymanagement

Itȱ isȱ obviousȱ thatȱ contingencyȱ theoryȱ alsoȱ appliesȱ toȱ theȱ domainȱ ofȱ corporateȱ socialȱresponsibilityȱ andȱ performance.ȱ Earlyȱ empiricalȱ studiesȱ inȱ thatȱ areaȱ pointedȱ toȱ theȱneedȱtoȱexamineȱcorporateȱsocialȱperformanceȱandȱresponsivenessȱcontingentlyȱuponȱfactorsȱ suchȱ asȱ organizationalȱ size,ȱ relevanceȱ ofȱ issuesȱ andȱ industryȱ characteristicsȱ(Abouzeidȱ etȱ al.,ȱ 1978;ȱ Arlowȱ etȱ al.,ȱ 1982;ȱ Buehlerȱ etȱ al.,ȱ 1979;ȱ Holmes,ȱ 1977,ȱ 1978;ȱShetty,ȱ 1979).ȱ However,ȱ theoreticalȱ foundationsȱ inȱ theȱ domainȱ onlyȱ emergedȱ muchȱlater:ȱHustedȱ(2000)ȱpresentedȱanȱissueȬcontingentȱmodel,ȱarguingȱthatȱaȱbetterȱfitȱofȱcorporateȱ strategiesȱ andȱ structuresȱ withȱ socialȱ issuesȱ increasesȱ socialȱ performance.ȱ

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8ȱ 2ȱTheoreticalȱfoundationȱandȱconceptsȱ

Furthermore,ȱGreeningȱandȱGrayȱ(1994)ȱpresented,ȱbasedȱonȱtheirȱempiricalȱanalysis,ȱaȱmodelȱthatȱincorporatesȱinstitutionalȱpressure,ȱmanagerialȱdiscretionȱandȱfirmȱsizeȱasȱtheȱkeyȱdeterminantsȱofȱcorporateȱissuesȱmanagementȱstructures.ȱTheȱauthorȱwillȱdescribeȱ bothȱ studiesȱ (Greeningȱ etȱ al.,ȱ 1994;ȱ Husted,ȱ 2000)ȱ inȱ moreȱ detailȱ inȱ sectionȱ2.2.2ȱCorporateȱsocialȱperformance.ȱ

2.2 CSMȱandȱrelatedȱtheoreticalȱframeworksȱ

Anȱ assessmentȱ ofȱ theȱ currentȱ academicȱ literatureȱ quicklyȱ revealsȱ thatȱ theȱ termȱ

“CSM”ȱ isȱ onlyȱ rarelyȱ used.ȱ Scholarsȱ haveȱ focusedȱ moreȱ stronglyȱ onȱ otherȱ conceptsȱsuchȱasȱcorporateȱsustainabilityȱandȱinȱparticularȱcorporateȱsocialȱresponsibilityȱandȱcorporateȱsocialȱperformance.ȱInȱtheȱfollowingȱparagraphsȱtheȱorigins,ȱmeaningsȱandȱlinksȱofȱtheȱdifferentȱtermsȱwillȱdiscussedȱinȱmoreȱdetail.ȱ

2.2.1 Corporateȱsocialȱresponsibilityȱ

Theȱoriginȱofȱcorporateȱsocialȱresponsibilityȱ(CSR)ȱcanȱbeȱtracedȱbackȱtoȱtheȱfirstȱhalfȱ

ofȱtheȱlastȱcenturyȱorȱevenȱfurtherȱtoȱtheȱindustrialȱrevolution.ȱDuringȱtheȱ1950sȱandȱ1960s,ȱtheȱnotionȱgainedȱmoreȱimportanceȱthroughȱcontributionsȱfromȱauthorsȱsuchȱasȱ Bowenȱ (1953)ȱ andȱ McGuireȱ (1963)ȱ whoȱ reactedȱ toȱ emergingȱ socialȱ issuesȱ ofȱ emȬployeeȱ andȱ humanȱ rightsȱ inȱ theȱ US.ȱ Aȱ comprehensiveȱ scholarlyȱ frameworkȱ develȬopedȱvirtuallyȱexclusivelyȱinȱtheȱUSȱthroughȱcontributionsȱfromȱauthorsȱsuchȱasȱCarȬrollȱ (1979),ȱ Wartickȱ andȱ Cochranȱ (1985),ȱ Woodȱ (1991),ȱ Swansonȱ (1999)ȱ andȱMcWilliamsȱ(2001).ȱȱ

StudiesȱmainlyȱsearchedȱforȱprinciplesȱtoȱguideȱbusinessȱinȱtermsȱofȱitsȱroleȱinȱsociȬety,ȱi.e.ȱfactorsȱthatȱmotivateȱbusinessȱtoȱcertainȱlevelsȱofȱresponsivenessȱtoȱsocialȱandȱenvironmentalȱ issues,ȱ andȱ discussedȱ severalȱ theoriesȱ suchȱ asȱ agencyȱ theoryȱ (FriedȬman,ȱ 1970),ȱ stakeholderȱ theoryȱ (Freeman,ȱ 1984)ȱ andȱ corporateȱ socialȱ performanceȱmodelsȱ(Carroll,ȱ1979;ȱWartickȱetȱal.,ȱ1985;ȱWood,ȱ1991).ȱOverall,ȱtheȱconceptȱofȱcorȬporateȱsocialȱresponsibilityȱvariesȱgreatlyȱacrossȱtheȱdifferentȱmanagementȱandȱacaȬdemicȱ disciplines.ȱ Probablyȱ theȱ mostȱ significantȱ contributionȱ comesȱ fromȱ Carrollȱ(1979)ȱ withȱ hisȱ definitionȱ ofȱ fourȱ categoriesȱ ofȱ socialȱ responsibility.ȱ Heȱ definedȱ theȱfourȱcategoriesȱ–ȱeconomic,ȱlegal,ȱethicalȱandȱdiscretionaryȱresponsibilityȱ–ȱasȱhierarȬchicalȱbutȱnotȱmutuallyȱexclusiveȱconceptsȱandȱarguedȱthatȱtheyȱcouldȱserveȱasȱprinȬciplesȱforȱmanagersȱselectingȱadequateȱcorporateȱresponsesȱtoȱaȱspecificȱissue.ȱCarrollȱacknowledgedȱcompanies’ȱeconomicȱresponsibilityȱtoȱ generateȱprofitsȱasȱtheȱfundaȬmentalȱ organizingȱ principleȱ andȱ thusȱ defusedȱ argumentsȱ relatingȱ toȱ theȱ priorityȱ ofȱeconomicȱoverȱsocialȱresponsibilityȱ(Friedman,ȱ1970).ȱTheȱremainingȱthreeȱprinciplesȱareȱdefinedȱasȱfollows:ȱTheȱlegalȱresponsibilityȱofȱbusinessȱisȱcomplianceȱwithȱexistȬingȱ regulation;ȱ theȱ ethicalȱ responsibilityȱ refersȱ toȱ fulfillingȱ society’sȱ expectationsȱ orȱavoidingȱcausingȱharm;ȱtheȱprincipleȱofȱdiscretionaryȱ(alsoȱlaterȱcalledȱphilanthropic)ȱ

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2.2.2 Corporateȱsocialȱperformanceȱ(CSP)ȱ

Theȱconceptȱofȱcorporateȱsocialȱperformanceȱrefersȱtoȱcorporateȱbehaviorȱratherȱthanȱtoȱ principlesȱ thatȱ guideȱ theȱ behavior.ȱ Theȱ firstȱ keyȱ theoreticalȱ contributionsȱ origiȬnatedȱinȱtheȱ1970s:ȱSethiȱ(1975)ȱarguedȱthatȱcorporateȱsocialȱperformanceȱisȱculturallyȱandȱtemporallyȱdeterminedȱandȱpresentedȱaȱthreeȬstateȱschemaȱforȱclassifyingȱcorpoȬrateȱbehavior,ȱwhichȱcomprisedȱ(1)ȱsocialȱobligationȱ(proscriptive),ȱ(2)ȱsocialȱresponȬsibilityȱ (prescriptive),ȱ andȱ (3)ȱ socialȱ responsivenessȱ (anticipatoryȱ andȱ preventive).ȱSubsequently,ȱ Carrollȱ (1979)ȱ introducedȱ aȱ threeȬdimensionalȱ corporateȱ socialȱ perȬformanceȱmodel.ȱItȱcomprisedȱ(1)ȱsocialȱresponsibilityȱencompassingȱtheȱfourȱcategoȬriesȱreferredȱtoȱabove,ȱ(2)ȱsocialȱissuesȱthatȱchangeȱoverȱtimeȱandȱdifferȱbetweenȱinȬdustries,ȱ andȱ (3)ȱ socialȱ responsivenessȱ thatȱ standsȱ forȱ “anȱ actionȱ phaseȱ ofȱ manageȬmentȱrespondingȱinȱtheȱsocialȱsphere“ȱ(Carroll,ȱ1979,ȱp.ȱ502).ȱ

WartickȱandȱCochranȱ(1985)ȱcontinuedȱwithȱCarroll’sȱthreeȬdimensionalȱCSPȱmodel.ȱTheyȱdiscussedȱthreeȱkeyȱchallengesȱtoȱtheȱconceptȱofȱsocialȱresponsibility:ȱ

- Theȱ conceptȱ ofȱ economicȱ responsibilityȱ attacksȱ bothȱ basicȱ premisesȱ ofȱcorporateȱsocialȱresponsibility:ȱ(1)ȱtheȱsocialȱcontractȱthatȱimpliesȱaȱsetȱofȱrightsȱandȱobligaȬtionsȱthatȱbusinessȱoperationȱmustȱfollow,ȱandȱ(2)ȱtheȱideaȱofȱmoralȱagencyȱpostuȬlatingȱanȱalignmentȱbetweenȱtheȱvaluesȱofȱbusinessȱandȱsociety.ȱ

- Theȱconceptȱofȱpublicȱresponsibilityȱ(Prestonȱ&ȱPost,ȱ1975)ȱcallsȱforȱaȱdiscussionȱofȱwhichȱissuesȱareȱrelevantȱorȱirrelevantȱandȱhowȱresponsibilitiesȱmayȱbeȱrealized.ȱ

- Theȱ challengeȱ ofȱ socialȱ responsivenessȱ demandsȱ aȱ shiftȱ ofȱ emphasisȱ awayȱ fromȱsocialȱobligationsȱtoȱtheȱprocessȱofȱsocialȱresponsiveness.ȱ

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Theyȱsynthesizedȱtheȱchallengesȱandȱexistingȱmodels.ȱFirst,ȱbothȱeconomicȱresponsiȬbilityȱandȱpublicȱresponsibilityȱwereȱsubsumedȱinȱoneȱmodel.ȱSecond,ȱsocialȱresponȬsivenessȱwasȱincludedȱasȱaȱseparateȱprocessȱdimensionȱofȱcorporateȱsocialȱperformȬance.ȱThird,ȱcorporateȱsocialȱperformanceȱwasȱbasedȱonȱtheȱpoliciesȱofȱ(social)ȱissuesȱmanagementȱ (asȱ aȱ directȱ extensionȱ ofȱ socialȱ responsiveness).ȱ Thusȱ theȱ authorsȱ creȬatedȱaȱprinciple/process/policyȱmodelȱofȱcorporateȱsocialȱperformance.ȱCorporateȱsoȬcialȱperformanceȱwasȱdefinedȱasȱ“theȱunderlyingȱinteractionȱamongȱtheȱprinciplesȱofȱsocialȱresponsibility,ȱtheȱprocessȱofȱsocialȱresponsiveness,ȱandȱtheȱpoliciesȱdevelopedȱtoȱaddressȱsocialȱissues”ȱ(Wartickȱetȱal.,ȱ1985,ȱp.ȱ758).ȱ

Woodȱ (1991)ȱ revisitedȱ theȱ modelȱ ofȱ corporateȱ socialȱ performanceȱ andȱ synthesizedȱformulationsȱfromȱseveralȱauthorsȱsuchȱasȱCarrollȱ(1979)ȱandȱforemostȱWartickȱandȱCochranȱ (Wartickȱ etȱ al.,ȱ 1985).ȱ Sheȱ addressedȱ theȱ followingȱ issuesȱ inȱ existingȱ theoȬreticalȱliteratureȱ(Wood,ȱ1991,ȱp.ȱ692):ȱ

1 Theȱtermȱ“performance”ȱrefersȱtoȱactionsȱandȱoutcomesȱ–ȱratherȱthanȱinteractionsȱandȱ integrationȱ asȱ conceptualizedȱ byȱ Wartickȱ andȱ Cochranȱ (1985).ȱ Henceȱ anȱ acȬtionȱcomponentȱneededȱtoȱbeȱaddedȱtoȱtheȱmodelȱofȱcorporateȱsocialȱperformanceȱtoȱfacilitateȱtheȱdefinitionȱofȱcorporateȱsocialȱperformanceȱasȱsuch.ȱWood’sȱ(1991)ȱmodelȱ featuresȱ aȱ processȱ viewȱ ofȱ socialȱ performanceȱ ratherȱ thanȱ anȱ outcomeȬorientedȱapproachȱasȱpresentedȱbyȱWoodȱandȱJonesȱ(1995).ȱ

2 Thereȱareȱvariousȱfacetsȱofȱsocialȱresponsiveness.ȱHenceȱitȱisȱessentialȱtoȱseeȱitȱasȱaȱsetȱofȱprocessesȱ(e.g.ȱstakeholderȱmanagement,ȱenvironmentalȱassessment)ȱratherȱthanȱaȱsingleȱprocess.ȱ

3 TheȱoutcomeȱcomponentȱofȱWartickȱandȱCochran’sȱ(1985)ȱmodel,ȱnamelyȱpolicies,ȱisȱ tooȱ restrictive.ȱ Aȱ comprehensiveȱ corporateȱ socialȱ performanceȱ modelȱ shouldȱincorporateȱ additionalȱ dimensionsȱ ofȱ outcomeȱ suchȱ asȱ programsȱ andȱ otherȱ obȬservableȱoutcomesȱ(e.g.ȱsocialȱimpactsȱofȱcorporateȱbehavior).ȱ

4 Corporateȱsocialȱperformanceȱisȱaȱ“neutral”ȱconceptȱinȱtheȱsenseȱthatȱitȱisȱnotȱlimȬitedȱtoȱresponsibleȱcompanies:ȱItȱcanȱbeȱpositivelyȱorȱnegativelyȱevaluated.ȱWoodȱ(1991,ȱp.ȱ693)ȱdefinedȱcorporateȱsocialȱperformanceȱasȱaȱcompany’sȱ“configuraȬtionȱ ofȱ principlesȱ ofȱ socialȱ responsibility,ȱ processesȱ ofȱ socialȱ responsiveness,ȱ andȱpolicies,ȱprograms,ȱandȱobservableȱoutcomesȱasȱtheyȱrelateȱtoȱtheȱfirm’sȱsocietalȱrelaȬtionship”ȱ(seeȱFigureȱ2Ȭ2ȱforȱaȱvisualizationȱofȱtheȱmodel):ȱItȱisȱprocessȬȱratherȱthanȱresultsȬoriented:ȱ Corporateȱ socialȱ performanceȱ isȱ seenȱ asȱ aȱ configurationȱ ofȱ drivers,ȱprocessesȱandȱoutcomes,ȱratherȱthanȱasȱanȱoutcomeȱonly.ȱ

Sheȱalsoȱsuggestedȱthatȱtheȱthreeȱguidingȱprinciplesȱofȱsocialȱresponsibilityȱ–ȱpublicȱresponsibility,ȱlegitimacyȱandȱmanagerialȱdiscretionȱ(discussedȱinȱmoreȱdetailȱinȱ2.3ȱKeyȱ concepts)ȱ –ȱ shouldȱ notȱ beȱ understoodȱ asȱ absoluteȱ standards,ȱ butȱ asȱ “analyticalȱ

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2.2ȱCSMȱandȱrelatedȱtheoreticalȱframeworksȱ 11ȱ

ȱ

formsȱ toȱ beȱ filledȱ withȱ theȱ contentȱ ofȱ explicitȱ valueȱ preferencesȱ thatȱ existȱ withinȱ aȱgivenȱculturalȱorȱorganizationalȱcontextȱandȱthatȱareȱoperationalizedȱthroughȱtheȱpoȬliticalȱandȱsymbolicȱprocessesȱofȱthatȱcontext”ȱ(Wood,ȱ1991,ȱp.ȱ700).ȱȱ

Corporate social performance

as business organization's configuration of Principles of social responsibility

Outcomes of corporate behavior

Public

responsibility Legitimacy

Managerial discretion

Social impacts

Social programs Social policies

Processes of social responsiveness

ȱ

Figureȱ2.2:ȱWood’sȱcorporateȱsocialȱperformanceȱmodel,ȱbasedȱonȱWoodȱ(1991)ȱ

Woodȱ discussedȱ threeȱ processesȱ thatȱ areȱ interlinkedȱ andȱ partlyȱ overlap:ȱ environȬmentalȱ assessmentȱ (analysisȱ ofȱ theȱ company’sȱ businessȱ environment),ȱ stakeholderȱmanagementȱ(theȱmanagementȱofȱstakeholderȱrelationships),ȱandȱissuesȱmanagementȱ(minimizingȱsurprises,ȱcrisisȱmanagement,ȱpublicȱaffairs).ȱOutcomesȱofȱcorporateȱbeȬhaviorsȱwereȱcategorizedȱintoȱtheȱsocialȱimpactsȱofȱcorporateȱbehaviorȱ(althoughȱnotȱexplicitlyȱnamed,ȱenvironmentalȱincidentsȱsuchȱasȱoilȱspillsȱwereȱalsoȱaccountedȱfor),ȱcorporateȱ socialȱ programsȱ (investmentsȱ ofȱ resourcesȱ inȱ someȱ courseȱ ofȱ action)ȱ andȱcorporateȱsocialȱpoliciesȱtoȱguideȱdecisionȬmakingȱ(Wood,ȱ1991,ȱp.ȱ709).ȱItȱshouldȱbeȱnotedȱ thatȱ –ȱ unlikeȱ socialȱ programsȱ andȱ socialȱ policiesȱ –ȱ socialȱ impactsȱ existȱ bothȱwithinȱandȱbeyondȱtheȱorganizationȱ(henceȱtheȱwhiteȱratherȱthanȱtheȱgreyȱboxȱinȱFigȬureȱ 2Ȭ2ȱ –ȱ inȱ contrastȱ toȱ theȱ otherȱ outcomesȱ andȱ theȱ processesȱ ofȱ socialȱ responsiveȬness).ȱ Itȱ isȱ importantȱ toȱ noteȱ thatȱ Woodȱ (1991)ȱ primarilyȱ presentsȱ aȱ “classificatoryȱdevice”ȱratherȱthanȱaȱtheory,ȱasȱtheȱnatureȱofȱtheȱrelationshipsȱbetweenȱtheȱelementsȱofȱherȱmodelȱremainȱunclear.ȱ

Sinceȱ Wood’sȱ refinement,ȱ researchȱ hasȱ increasinglyȱ focusedȱ onȱ measurementȱ andȱtheoreticalȱ developmentȱ (Collinsȱ &ȱ Starik,ȱ 1995;ȱ Greeningȱ etȱ al.,ȱ 1994;ȱ Griffin,ȱ 2000;ȱGriffinȱ etȱ al.,ȱ 1997;ȱ Husted,ȱ 2000;ȱ Moore,ȱ 2001;ȱ Simpsonȱ &ȱ Kohers,ȱ 2002;ȱ Swanson,ȱ1999;ȱWoodȱetȱal.,ȱ1995).ȱAsȱCarrollȱ(1999,ȱp.ȱ292)ȱalsoȱpointedȱout,ȱrevisedȱorȱadaptedȱframeworksȱhaveȱnotȱemergedȱdistinctȱfromȱexistingȱframeworksȱandȱareȱunlikelyȱtoȱ

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doȱ soȱ inȱ theȱ future.ȱ Neverthelessȱ twoȱ subsequentȱ modelsȱ ofȱ corporateȱ socialȱ perȬformanceȱwillȱbeȱdiscussedȱinȱmoreȱdetail,ȱasȱtheyȱalsoȱ–ȱlikeȱtheȱpresentȱstudyȱ–ȱinȬcorporateȱaȱcontingencyȱapproach.ȱ

Basedȱ onȱ empiricalȱ analysis,ȱ Greeningȱ andȱ Grayȱ (1994)ȱ presentedȱ aȱ contingencyȱmodelȱ forȱ corporateȱ socialȱ performanceȱ thatȱ incorporatesȱ bothȱ institutionalȱ theoryȱandȱ resourceȱ dependencyȱ theory.ȱ Partlyȱ inȱ alignmentȱ withȱ Woodȱ (1991),ȱ theyȱ conȬcludedȱthatȱcorporateȱsocialȱperformanceȱisȱdrivenȱbyȱissuesȱmanagementȱstructuresȱwhichȱ areȱ inȱ turnȱ motivatedȱ byȱ externalȱ institutionalȱ pressures,ȱ i.e.ȱ legitimacy,ȱ andȱorganizationalȱresponseȱcapabilitiesȱ(Gray,ȱ1994,ȱp.ȱ491).ȱ

Hustedȱ(2000)ȱformulatedȱanȱissueȬcontingentȱmodelȱofȱcorporateȱsocialȱperformanceȱasȱ “aȱ functionȱ ofȱ theȱ matchȱ betweenȱ theȱ socialȱ issuesȱ andȱ theȱ varietiesȱ ofȱ responseȱthatȱareȱavailableȱtoȱtheȱfirm”ȱ(p.ȱ25).ȱHisȱmodelȱimpliesȱthatȱaligningȱstrategiesȱandȱstructuresȱ toȱ socialȱ issuesȱ willȱ leadȱ toȱ greaterȱ socialȱ performance.ȱ Inȱ contrastȱ toȱWood’sȱ (1991)ȱ model,ȱ itȱ isȱ resultsȬoriented,ȱ asȱ heȱ definesȱ corporateȱ socialȱ performȬanceȱ“asȱtheȱextentȱtoȱwhichȱstakeholders’ȱexpectationsȱregardingȱtheȱfirm’sȱbehaviorȱwithȱrespectȱtoȱthoseȱsameȱorȱotherȱrelevantȱstakeholdersȱareȱsatisfiedȱorȱexceeded”ȱ(p.ȱ31).ȱHeȱcontinuedȱtoȱpresentȱseveralȱhypothesesȱaboutȱwhichȱstrategiesȱ(computaȬtion,ȱ discovery,ȱ inspiration,ȱ bargaining)ȱ andȱ structuresȱ (bureaucratic,ȱ collegial,ȱ orȬganizedȱchaosȱandȱrepresentative)ȱshouldȱbeȱusedȱtoȱachieveȱtheȱalignmentȱbetweenȱtheȱfirmȱandȱitsȱenvironmentȱmostȱeffectively,ȱdependingȱonȱtheȱnatureȱofȱtheȱexistȬingȱ socialȱ issue,ȱ whichȱ heȱ definedȱ inȱ termsȱ ofȱ differentȱ kindsȱ ofȱ expectationalȱ gapsȱbetweenȱtheȱcompanyȱandȱitsȱstakeholdersȱ(seeȱalsoȱsectionȱ2.3.1.1)ȱ

2.2.3 Corporateȱsustainabilityȱ

Corporateȱsustainabilityȱwasȱ“born”ȱwithȱaȱslightȱenvironmentalȱemphasisȱatȱtheȱendȱofȱtheȱ1980s.ȱItȱisȱbasedȱonȱtheȱnormativeȱsinceȱmultigenerationalȱconceptȱofȱsustainȬableȱdevelopment.4ȱInȱgeneral,ȱcomparedȱtoȱcorporateȱsocialȱresponsibility,ȱitȱisȱseenȱasȱ theȱ broaderȱ organizingȱ principle,ȱ becauseȱ itȱ differsȱ fromȱ theȱ traditionalȱ manageȬmentȱparadigmsȱofȱgrowthȱandȱprofitȱmaximizationȱbyȱincorporatingȱaȱsocietalȱthreeȬdimensionalȱ(economic,ȱenvironmentalȱandȱsocial)ȱgoalȱofȱsustainabilityȱforȱcorporaȬtions,ȱgovernmentsȱandȱcivilȱsocietyȱ(Wilson,ȱ2003).ȱBusinessȱrespondedȱtoȱtheȱ“call”ȱ

ofȱ theȱ Brundtlandȱ Reportȱ (Worldȱ Commissionȱ onȱ Environmentȱ andȱ Development,ȱ 1987)ȱ withȱ theȱ Businessȱ Charterȱ forȱ Sustainableȱ Developmentȱ (1990)ȱ andȱ Changingȱ

Courseȱ (Schmidheiny,ȱ 1992)ȱ whichȱ wasȱ endorsedȱ byȱ theȱ thenȱ Businessȱ Councilȱ forȱ

4 ȱThereȱareȱaȱvarietyȱofȱdefinitionsȱforȱtheȱtermȱsustainableȱdevelopment.ȱTheȱmostȱcommonȱoneȱorigiȬ natesȱfromȱtheȱBrundtlandȱReportȱ(WorldȱCommissionȱonȱEnvironmentȱandȱDevelopment,ȱ1987),ȱinȱ whichȱsustainableȱdevelopmentȱisȱdefinedȱasȱaȱdevelopmentȱthatȱmeetsȱtheȱneedsȱofȱpresentȱgeneraȬ tionsȱwithoutȱcompromisingȱtheȱabilityȱofȱfutureȱgenerationsȱtoȱmeetȱtheirȱneeds.ȱ

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2.2ȱCSMȱandȱrelatedȱtheoreticalȱframeworksȱ 13ȱ

ȱ

Sustainableȱ Development.ȱ Bothȱ arguedȱ forȱ aȱ synergisticȱ ratherȱ thanȱ dualisticȱ relaȬtionshipȱ betweenȱ economicȱ performanceȱ onȱ theȱ oneȱ hand,ȱ andȱ environmentalȱ andȱsocialȱperformanceȱonȱtheȱother.ȱȱ

Corporateȱ sustainabilityȱ wasȱ subsequentlyȱ refinedȱ byȱ severalȱ authorsȱ (Marrewijk,ȱ2003;ȱMarrewijkȱ&ȱWerre,ȱ2003;ȱStarik,ȱ1995,ȱp.ȱ916).ȱAlongsideȱsustainableȱdevelopȬment,ȱWilsonȱ(2003)ȱidentifiedȱthreeȱkeyȱconstituentsȱofȱcorporateȱsustainability:ȱ

- Corporateȱsocialȱresponsibility,ȱwhichȱoffersȱethicalȱargumentsȱforȱmanagers’ȱandȱcompanies’ȱengagementȱinȱsustainableȱdevelopment.ȱ

- Stakeholderȱtheoryȱwhichȱprovidesȱtheȱnecessaryȱbusinessȱarguments,ȱasȱitȱsugȬgestsȱ thatȱ moreȱ sustainableȱ businessȱ practicesȱ willȱ improveȱ companies’ȱ relationȬshipsȱwithȱtheirȱstakeholders.ȱ

- Corporateȱ accountability,ȱ whichȱ complementsȱ corporateȱ socialȱ responsibilityȱ byȱreferringȱtoȱcompanies’ȱdutyȱtoȱexplainȱandȱjustifyȱcorporateȱactivitiesȱratherȱthanȱtoȱtheȱneedȱtoȱengageȱinȱthem.ȱ

Asȱ theseȱ moreȱ recentȱ contributionsȱ show,ȱ improvingȱ theȱ theoreticalȱ basisȱ ofȱ corpoȬrateȱ sustainabilityȱ remainsȱ aȱ challengingȱ task,ȱ sinceȱ theȱ underlyingȱ normativeȱ conȬceptȱ ofȱ sustainableȱ developmentȱ isȱ moreȱ complexȱ thanȱ thatȱ ofȱ corporateȱ socialȱ reȬsponsibilityȱdueȱtoȱitsȱmultiȬdimensionalȱandȱmultiȬgenerationalȱnature.ȱItȱisȱalsoȱobȬviousȱthatȱanyȱtheoreticalȱfoundationȱofȱcorporateȱsustainabilityȱwillȱtoȱaȱcertainȱexȬtentȱ“fallȱback”ȱonȱtheȱalreadyȱexistingȱframeworksȱforȱcorporateȱsocialȱresponsibilityȱandȱsocialȱperformance.ȱ

2.2.4 Discussionȱ

Aȱreviewȱofȱexistingȱtheoreticalȱframeworksȱrevealsȱsignificantȱdifferencesȱinȱtermsȱofȱtwoȱcriteria:ȱ

1 Comprehensiveness:ȱBothȱcorporateȱsocialȱresponsibilityȱandȱcorporateȱsocialȱperȬformanceȱfeatureȱaȱstrongȱandȱconclusiveȱtheoreticalȱbasis.ȱInȱcontrast,ȱcorporateȱsustainabilityȱisȱhardlyȱtheoreticallyȱgrounded.ȱ

2 Focus:ȱCorporateȱsocialȱresponsibilityȱandȱcorporateȱsustainabilityȱareȱconceptualȬizedȱasȱprinciplesȱthatȱmotivateȱcorporateȱbehavior.ȱInȱcontrast,ȱmodelsȱofȱcorpoȬrateȱ socialȱ performanceȱ areȱ aȱ lotȱ broader:ȱ Alongsideȱ motivatingȱ principles,ȱ i.e.ȱdriversȱofȱcorporateȱbehavior,ȱtheyȱincludeȱcorporateȱbehaviorȱasȱsuchȱ(processesȱofȱ socialȱ responsiveness)ȱ andȱ itsȱ outcome.ȱ Furthermore,ȱ theȱ notionȱ ofȱ corporateȱsocialȱresponsibilityȱtendsȱbeȱmoreȱnarrowȱandȱlessȱstronglyȱfocusedȱonȱenvironȬmentalȱ(moreȱstronglyȱonȱsocial)ȱeffectsȱofȱcorporateȱactivitiesȱthanȱcorporateȱsusȬtainabilityȱ (Marrewijkȱ etȱ al.,ȱ 2003).ȱ Theȱ meaningsȱ ofȱ bothȱ conceptsȱ haveȱ increasȬ

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inglyȱconvergedȱ(Wheeler,ȱColbert,ȱ&ȱFreeman,ȱ2003,ȱp.ȱ2),ȱandȱareȱnowadaysȱofȬtenȱconsideredȱsynonyms.ȱ

SinceȱtheȱpresentȱstudyȱaimsȱtoȱanalyzeȱtheȱdeterminantsȱofȱandȱresultingȱapproachesȱtoȱCSM,ȱtheȱtheoreticalȱframeworkȱofȱcorporateȱsocialȱperformanceȱisȱbestȱsuited.ȱToȱdate,ȱtheȱmodelsȱofȱWoodȱ(1991),ȱGreeningȱandȱGrayȱ(1994)ȱandȱHustedȱ(2000)ȱrepreȬsentȱtheȱmostȱstringentȱtheoreticalȱfoundations.ȱAsȱtheȱauthorȱwillȱillustrateȱinȱtheȱfolȬlowing,ȱtheyȱdifferȱinȱtermsȱofȱtheirȱstrengthsȱandȱweaknesses.ȱ

Lackȱofȱdifferentiationȱbetweenȱsocialȱandȱenvironmentalȱissuesȱ

Woodȱ (1991,ȱ p.ȱ 708)ȱ focusesȱ onȱ theȱ shortȬtermȱ socialȱ impactsȱ ofȱ corporateȱ behaviorȱ(factoryȱ disasters,ȱ illegalȱ payments,ȱ etc).ȱ Hereȱ itȱ isȱ necessaryȱ toȱ broadenȱ theȱ frameȬworkȱ toȱ explicitlyȱ differentiateȱ betweenȱ socialȱ andȱ environmentalȱ issues,ȱ andȱ thusȱtakeȱ intoȱ accountȱ theȱ pureȱ environmental,ȱ i.e.ȱ biophysical,ȱ constraintsȱ (seeȱ sectionȱ2.3.1.1ȱIssuesȱ–ȱtheȱprincipleȱofȱpublicȱresponsibility)ȱofȱeconomicȱactivitiesȱ(Starikȱ&ȱRands,ȱ 1995,ȱ p.ȱ 909).ȱ Similarly,ȱ Greeningȱ andȱ Grayȱ (1994)ȱ andȱ Hustedȱ (2000)ȱ failȱ toȱdistinguishȱbetweenȱtheȱtwoȱissueȱdimensions.ȱ

InadequateȱprocessȬorientation:ȱFromȱmotivatingȱprinciplesȱtoȱstrategy,ȱimplementationȱandȱ outcomeȱ

Asȱ pointedȱ outȱ earlier,ȱ Wood’sȱ (1991)ȱ modelȱ isȱ aȱ classificatoryȱ deviceȱ thatȱ doesȱ notȱdescribeȱfunctionalȱtheoryȬbasedȱrelationshipsȱbetweenȱitsȱelements.ȱFurthermore,ȱitsȱsystemizationȱofȱprocessesȱ(e.g.ȱstakeholderȱmanagement)ȱandȱoutcomesȱ(e.g.ȱsocialȱprograms)ȱ doesȱ notȱ lendȱ itselfȱ toȱ anȱ analysisȱ ofȱ howȱ externalȱ andȱ internalȱ determiȬnantsȱinfluenceȱcompanies’ȱstrategicȱdispositionȱtoȱCSM,ȱwhichȱinȱturnȱinfluencesȱtheȱimplementationȱ ofȱ CSMȱ andȱ eventuallyȱ theȱ outcomeȱ (i.e.ȱ actualȱ socialȱ andȱ environȬmentalȱeffects)ȱofȱCSM.ȱ

Hustedȱ(2000)ȱtakesȱaȱsystemsȱapproachȱtoȱsocialȱissueȱstrategies,ȱbasedȱonȱwhichȱtheȱ

“natureȱofȱtheȱsocialȱissueȱdeterminesȱidealȱstrategyȱandȱstructureȱthatȱmustȱbeȱusedȱtoȱ achieveȱ anȱ alignmentȱ betweenȱ theȱ firmȱ andȱ itsȱ socialȱ environment”ȱ (p.ȱ 34).ȱ Heȱlinksȱcertainȱstrategiesȱandȱstructuresȱtoȱhigherȱsatisfactionȱofȱrelevantȱstakeholders’ȱdemandsȱ(p.ȱ36).ȱHisȱprocessȱorientationȱisȱveryȱspecificȱ–ȱclearlyȱtooȱspecificȱforȱtheȱpresentȱstudy,ȱwhichȱwasȱdesignedȱtoȱdetectȱcommonalitiesȱandȱdifferencesȱbetweenȱindustriesȱacrossȱtheȱ“entireȱprocess”,ȱi.e.ȱfromȱmotivatingȱprinciplesȱtoȱoutcome.ȱGreeningȱandȱGray’sȱ(1994)ȱmodelȱalsoȱincorporatesȱaȱprocessȱviewȱofȱexternalȱandȱinternalȱdeterminantsȱthatȱinfluenceȱtheȱchoiceȱofȱcorporateȱresponsesȱandȱresultingȱcorporateȱ socialȱ performance.ȱ However,ȱ theirȱ frameworkȱ primarilyȱ relatesȱ toȱ issuesȱmanagementȱstructuresȱandȱdoesȱnotȱdifferentiateȱbetweenȱstrategicȱdispositionȱandȱimplementation

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WhereasȱGreeningȱandȱGrayȱ(1994)ȱseparatelyȱandȱexplicitlyȱconsiderȱcorporateȱdisȬcretionȱ–ȱunderȱtheȱlabelȱofȱresourceȱdependencies/firmȱcapabilitiesȱ–ȱandȱtopȱmanȬagementȱdiscretionȱ(p.ȱ491),ȱHusted’sȱ(2000)ȱmodelȱimplicitlyȱincorporatesȱthemȱintoȱtheȱ differentȱ issueȱ types.ȱ Forȱ example,ȱ Husted’sȱ (2000)ȱ typeȱ 2ȱ socialȱ issueȱ mayȱ inȬvolveȱ anȱ incongruenceȱ betweenȱ theȱ firm’sȱ perceptionȱ ofȱ corporateȱ vision/purposeȱandȱitsȱexternalȱstakeholders.ȱThisȱincongruenceȱmayȱbeȱpartlyȱcausedȱbyȱbothȱcorpoȬrateȱandȱmanagerialȱdiscretionȱ(p.ȱ32).ȱ

Lackȱofȱconsiderationȱofȱeconomicȱrationaleȱ

Woodȱlargelyȱneglectsȱtheȱeconomicȱrationaleȱforȱprocessesȱofȱsocialȱresponsiveness,ȱalthoughȱitsȱimportanceȱisȱimplicitȱ(Freeman,ȱ1984;ȱWilson,ȱ2003,ȱp.ȱ4):ȱWithoutȱprofȬits,ȱ aȱ firmȱ neglectsȱ itsȱ economicȱ function,ȱ itsȱ firstȱ andȱ foremostȱ socialȱ responsibilityȱ(Carroll,ȱ1979,ȱp.ȱ500),ȱandȱthusȱrisksȱlosingȱtheȱlicenseȱtoȱoperateȱfromȱseveralȱstakeȬholdersȱsuchȱasȱownersȱandȱemployees.ȱGreeningȱandȱGrayȱ(1994)ȱincludeȱbothȱcorȬporateȱ socialȱ andȱ financialȱ performanceȱ asȱ anȱ outcomeȱ componentȱ inȱ theirȱ model.ȱHustedȱ(2000)ȱimplicitlyȱtakesȱintoȱaccountȱtheȱeconomicȱrationale,ȱasȱheȱdefinesȱcorȬporateȱ socialȱ performanceȱ inȱ relationȱ toȱ theȱ (profitȬdriven)ȱ satisfactionȱ ofȱ stakeȬholders.ȱOverall,ȱhowever,ȱtheȱbusinessȱcaseȱforȱcorporateȱsustainabilityȱisȱonlyȱmarȬginallyȱdiscussedȱinȱanyȱofȱtheȱframeworksȱpresented.ȱ

5 ȱInȱfact,ȱcorporateȱdiscretionaryȱfactorsȱsuchȱasȱinvestmentȱinȱhumanȱresourcesȱdirectedȱatȱenvironȬ mentalȱ issuesȱ haveȱ alreadyȱ beenȱ testedȱ empiricallyȱ underȱ theȱ labelȱ ofȱ theȱ managerialȱ discretionȱ (Henriquesȱ&ȱSadorsky,ȱ1995).ȱ

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- andȱtheȱoutcomeȱofȱCSM.ȱ

2.3.1 DeterminantsȱofȱCSMȱ

Theȱ determinantsȱ ofȱ CSMȱ compriseȱ theȱ threeȱ principlesȱ ofȱ socialȱ responsibilityȱ thatȱfeatureȱinȱWood’sȱ(1991)ȱmodelȱofȱcorporateȱsocialȱperformance:ȱpublicȱresponsibilityȱ(issues),ȱ legitimacyȱ (stakeholders)ȱ andȱ managerialȱ discretionȱ (managers).ȱ Asȱ statedȱabove,ȱ Wood’sȱ modelȱ doesȱ notȱ accountȱ forȱ companyȬspecificȱ determinantsȱ suchȱ asȱcorporateȱculture.ȱInȱtheȱpresentȱstudyȱtheyȱareȱexplicitlyȱaccountedȱfor.ȱInȱanalogyȱtoȱWood’sȱ threeȱ originalȱ principles,ȱ companyȬspecificȱ determinantsȱ areȱ summarizedȱunderȱtheȱprincipleȱofȱcorporateȱdiscretion.ȱ

Hence,ȱ itȱ doesȱ notȱ allowȱ aȱ definitionȱ ofȱ corporateȱ responsibilityȱ throughȱ personalȱpreferencesȱ andȱ theȱ socialȱ connectionsȱ ofȱ firms’ȱ topȱ executives.ȱ However,ȱ itȱ leavesȱroomȱforȱmanagerialȱinterpretationȱofȱtheȱrelevanceȱofȱproblemsȱ(Wood,ȱ1991,ȱp.ȱ698).ȱItȱtargetsȱcompaniesȱatȱtheȱorganizationalȱlevelȱbutȱdoesȱnotȱrequireȱthemȱtoȱsolveȱallȱofȱsociety’sȱsocialȱandȱenvironmentalȱproblemsȱ(Wood,ȱ1991,ȱp.ȱ697).ȱ

Wartickȱ andȱ Mahonȱ (1994,ȱ alsoȱ citedȱ inȱ Husted,ȱ 2000,ȱ p.ȱ 32)ȱ classifiedȱ socialȱ issuesȱbasedȱ onȱ differentȱ kindsȱ ofȱ expectationalȱ gaps:ȱ (1)ȱ aȱ cognitiveȱ conflictȱ dueȱ toȱ disȬagreementsȱaboutȱtheȱrealityȱ(e.g.ȱdifferentȱperceptionsȱofȱenvironmentalȱproblems),ȱ(2)ȱ aȱ conflictȱ ofȱ visionȱ andȱ purposeȱ (e.g.ȱ differentȱ perceptionsȱ ofȱ theȱ legitimacyȱ ofȱproducingȱaȱpotentiallyȱharmfulȱproduct),ȱandȱ(3)ȱgoalȱincongruence,ȱe.g.ȱconflictingȱgoalsȱandȱpurposesȱbetweenȱaȱcompanyȱandȱitsȱstakeholdersȱ(i.e.ȱclashȱwithȱaȱcomȬpetitor’sȱdifferentȱcorporateȱstrategy).ȱ

Alongȱtheseȱlines,ȱtheȱauthorȱofȱtheȱpresentȱstudyȱdefinesȱanȱissueȱasȱanyȱkindȱofȱsoȬcialȱ orȱ environmentalȱ problemȱ thatȱ isȱ causedȱ throughȱ companies’ȱ primaryȱ andȱ secȬ

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2.3ȱKeyȱconceptsȱ 17ȱ

ȱ

ondaryȱactivitiesȱ(alsoȱaȱlackȱofȱengagement),ȱandȱwhichȱmayȱeventuallyȱleadȱtoȱexȬpectationalȱ gapsȱ betweenȱ theȱ companyȱ andȱ itsȱ stakeholders.ȱ However,ȱ heȱ willȱ notȱdifferentiateȱbetweenȱtheȱdifferentȱkindsȱofȱgapsȱdescribedȱabove,ȱbutȱratherȱbetweenȱtheȱenvironmentalȱandȱsocialȱnatureȱofȱissues.ȱ

Issuesȱcanȱdifferȱacrossȱseveralȱdimensionsȱthatȱareȱinterdependentȱandȱinfluenceȱtheȱstrengthȱofȱtheȱunderlyingȱmotivatingȱprinciple:ȱscopeȱ(globalȱvs.ȱlocal),ȱsensoryȱvisiȬbilityȱ (sight,ȱ smell,ȱ etc.),ȱ certaintyȱ (determinabilityȱ ofȱ impacts),ȱ transparencyȱ (deterȬminabilityȱofȱcause)ȱandȱemotivityȱ(Bansalȱ&ȱRoth,ȱ2000;ȱBowen,ȱ2000,ȱp.ȱ100).ȱTheȱ principleȱ ofȱ publicȱ responsibilityȱ isȱ empiricallyȱ supportedȱ byȱ variousȱ studiesȱ(e.g.ȱAgleȱ&ȱMitchell,ȱ1999;ȱBansalȱetȱal.,ȱ2000;ȱCordanoȱ&ȱFrieze,ȱ2000;ȱHenriquesȱetȱal.,ȱ 1996;ȱ Lawrenceȱ &ȱ Morell,ȱ 1995;ȱ Rondinelliȱ &ȱ Berry,ȱ 2000;ȱ Winn,ȱ 1995).ȱ Itȱ isȱ alsoȱlinkedȱtoȱtheȱprincipleȱofȱlegitimacy:ȱObviously,ȱtheȱsignificanceȱofȱanȱissueȱtoȱaȱcomȬpanyȱdependsȱonȱtheȱexistenceȱofȱatȱleastȱoneȱstakeholderȱwhoȱisȱwillingȱtoȱrewardȱorȱpunishȱcorporateȱactivitiesȱthatȱdoȱorȱdoȱnotȱaddressȱtheȱissue,ȱi.e.ȱtheȱstakeholder’sȱdemandȱlinksȱtheȱissueȱtoȱfinancialȱthreatȱorȱopportunity.ȱ

Scholarsȱ beganȱ discussingȱ theȱ significanceȱ ofȱ socialȱ issuesȱ relativelyȱ earlyȱ –ȱ inȱ factȱenvironmentalȱ issuesȱ wereȱ treatedȱ asȱ beingȱ ofȱ aȱ socialȱ andȱ anȱ economicȱ natureȱ(Throop,ȱ Starik,ȱ &ȱ Rands,ȱ 1993,ȱ p.ȱ 66).ȱ Environmentalȱ issuesȱ wereȱ onlyȱ recognizedȱveryȱlateȱbyȱstrategicȱmanagementȱtheories,ȱdespiteȱtheirȱbiophysicalȱandȱthermodyȬnamicȱsignificanceȱasȱisȱbrieflyȱillustratedȱinȱtheȱfollowingȱtwoȱparagraphs:ȱ

- Theȱlawȱofȱentropyȱstatesȱthatȱ disorderȱinȱanyȱclosedȱ physicalȱsystemȱisȱalwaysȱincreasing.ȱLocalizedȱreductionȱofȱentropyȱwithinȱhumanȱorganizationsȱandȱotherȱbiologicalȱ systemsȱ isȱ onlyȱ possibleȱ “atȱ theȱ expenseȱ ofȱ muchȱ greaterȱ amountsȱ ofȱdisorderȱinȱtheȱsurroundingȱenvironment”ȱ(Throopȱetȱal.,ȱ1993,ȱp.ȱ72).ȱThisȱmeansȱthatȱeconomicȱactivitiesȱareȱinherentlyȱlinkedȱtoȱincreasesȱinȱentropy,ȱe.g.ȱthroughȱtheȱuseȱofȱfossilȱfuels.ȱ

- Carryingȱcapacityȱstandsȱforȱtheȱmaximumȱpopulationȱanȱenvironmentȱcanȱ“susȬtain”ȱwithoutȱincurringȱlongȬtermȱdamage.ȱForȱtheȱhumanȱspecies,ȱlifestylesȱplayȱ

aȱ significantȱ additionalȱ factorȱ sinceȱ theyȱ determineȱ intensityȱ ofȱ consumption.ȱCurrentȱlevelsȱofȱconsumptionȱareȱbelievedȱtoȱbeȱapproachingȱorȱevenȱexceedingȱtheȱthresholdsȱofȱglobalȱcarryingȱcapacityȱ(Starikȱetȱal.,ȱ1995,ȱp.ȱ910).ȱ

ObviouslyȱenvironmentalȱissuesȱareȱlargelyȱsectorȬspecific.ȱInȱtheȱenergyȱsectorȱtheyȱspanȱaȱgrowingȱrangeȱofȱpollutants,ȱhazardsȱandȱecosystems,ȱbutȱareȱalsoȱdueȱtoȱsevȬeralȱfactorsȱsuchȱasȱpopulationȱgrowth,ȱeconomicȱdevelopmentȱandȱlifestylesȱthatȱareȱpartlyȱbeyondȱtheȱenergyȱindustry’sȱcontrolȱ(e.g.ȱairȱemissionȱfromȱmobilityȱsector).ȱTheyȱareȱmainlyȱassociatedȱwithȱtheȱproductionȱandȱconsumptionȱofȱfuels,ȱandȱmostȱimportantlyȱ includeȱ acidȱ precipitationȱ (throughȱ SO2ȱ andȱ NOxȱ emissionsȱ associatedȱ

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withȱ theȱ useȱ ofȱ fossilȱ fuels),ȱ stratosphericȱ ozoneȱ depletionȱ (NOxȱ emissions),ȱ globalȱclimateȱchangeȱ(mainlyȱthroughȱCO2ȱemissions),ȱtheȱemissionȱofȱnuclearȱsubstancesȱandȱtheȱdirectȱdestructionȱofȱecosystemsȱthroughȱextractiveȱactivitiesȱ(Dincer,ȱ1999).ȱSocialȱissuesȱprimarilyȱcompriseȱfuelȱpoverty,ȱparticularlyȱinȱruralȱareasȱofȱdevelopȬingȱ countriesȱ –ȱ alsoȱ referredȱ toȱ asȱ theȱ NorthȬSouthȱ energyȱ divideȱ (Worldȱ EnergyȱCouncil,ȱ 1999).ȱ Theyȱ alsoȱ includeȱ relocationsȱ dueȱ toȱ largeȱ hydropowerȱ orȱ surfaceȱminingȱ projectsȱ (Khagram,ȱ 2003;ȱ Suzman,ȱ 1998)ȱ andȱ fairȱ allocationȱ ofȱ oilȱ revenuesȱbetweenȱ oftenȱ totalitarianȱ nationalȱ governmentsȱ andȱ theȱ localȱ communitiesȱ aroundȱextractionȱandȱproductionȱprojectsȱ(Fritz,ȱ2003;ȱGavin,ȱ2003).ȱ

2.3.1.2 Stakeholdersȱ–ȱtheȱprincipleȱofȱlegitimacyȱ

Theȱ institutionalȱ principleȱ ofȱ legitimacyȱ originatesȱ fromȱ Davisȱ (1960)’ȱ Ironȱ Lawȱ ofȱResponsibility.ȱ Davisȱ definesȱ socialȱ responsibilityȱ asȱ “businessmen’sȱ decisionsȱ andȱactionsȱthatȱareȱtakenȱforȱreasonsȱatȱleastȱpartiallyȱbeyondȱtheȱfirm’sȱdirectȱeconomicȱorȱtechnicalȱinterestsȱ(Davis,ȱ1960,ȱp.ȱ70),ȱandȱinfluencedȱbyȱtheȱculturalȱframework,ȱobjectivesȱ andȱ policiesȱ ofȱ theirȱ companies.ȱ Heȱ statesȱ thatȱ peopleȱ haveȱ historicallyȱbeenȱconcernedȱwithȱbalancingȱpowerȱandȱresponsibility.ȱTheȱIronȱLawȱofȱResponsiȬbilityȱ suggestsȱ thatȱ powerȱ andȱ responsibilityȱ areȱ coȬequal:ȱ Avoidanceȱ ofȱ socialȱ reȬsponsibilityȱhasȱledȱtoȱtheȱreductionȱofȱpower,ȱsinceȱotherȱsocietalȱgroups,ȱmostȱimȬportantlyȱgovernmentsȱwillȱassumeȱtheȱnecessaryȱresponsibilities.ȱSocietyȱcanȱamendȱorȱ revokeȱ aȱ company’sȱ charterȱ toȱ existȱ (i.e.ȱ licenseȱ toȱ operate),ȱ ifȱ itȱ doesȱ notȱ useȱ itsȱpowerȱinȱaȱwayȱthatȱsocietyȱconsidersȱresponsibleȱ(Davis,ȱ1973ȱp.ȱ314).ȱThusȱtheȱprinȬcipleȱofȱlegitimacyȱcanȱbeȱphrasedȱasȱfollows:ȱ

Societyȱgrantsȱlegitimacyȱandȱpowerȱtoȱbusiness.ȱInȱtheȱlongȱrun,ȱthoseȱwhoȱdoȱnotȱuseȱpowerȱ inȱaȱmannerȱwhichȱsocietyȱconsidersȱresponsibleȱwillȱtendȱtoȱloseȱitȱ(Davis,ȱ1973,ȱp.ȱ314ȱcitedȱ by;ȱWood,ȱ1991).ȱ

Theȱ principleȱ ofȱ legitimacyȱ isȱ supportedȱ byȱ severalȱ significantȱ theoreticalȱ developȬmentȱsuchȱasȱFreeman’sȱstakeholderȱtheoryȱ–ȱaccordingȱtoȱwhichȱfirmsȱshouldȱbeȱreȬsponsibleȱ toȱ “thoseȱ groupsȱ whoȱ canȱ affectȱorȱ areȱ affectedȱ byȱ theȱ achievementȱ ofȱ anȱorganization’sȱ purpose”ȱ (Freeman,ȱ 1984,ȱ pȱ 49),ȱ andȱ legitimacyȱ theoryȱ (Suchman,ȱ1995).ȱ Theȱ latterȱ transcendsȱ earlyȱ managementȱ theoriesȱ thatȱ understoodȱ organizaȬtionsȱ asȱ rational,ȱ socialȱ machinesȱ thatȱ efficientlyȱ transformȱ inputsȱ toȱ outputs.ȱ Theȱunderlyingȱ rationaleȱ isȱ basedȱ onȱ theȱ conceptȱ ofȱ organizationalȱ legitimacy,ȱ whichȱSuchmanȱdefinesȱasȱaȱ“perceptionȱorȱassumptionȱthatȱtheȱactionsȱofȱanȱentityȱareȱdeȬsirable,ȱ proper,ȱ orȱ appropriateȱ withinȱ someȱ sociallyȱ constructedȱ systemȱ ofȱ norms,ȱvalues,ȱ beliefsȱ andȱ definitions”ȱ (Suchman,ȱ 1995,ȱ p.ȱ 574).ȱ Suchmanȱ concludesȱ thatȱcompaniesȱandȱtheirȱmanagersȱhaveȱsignificantȱroomȱforȱmaneuverȱtoȱensureȱorganȬizationalȱlegitimacy.ȱ

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ȱ

Numerousȱstudiesȱalsoȱempiricallyȱconfirmȱtheȱprincipleȱofȱlegitimacyȱ(Bansalȱetȱal.,ȱ2000;ȱ Greeningȱ etȱ al.,ȱ 1994;ȱ Lawrenceȱ etȱ al.,ȱ 1995;ȱ Winn,ȱ 1995).ȱ Theȱ importanceȱ ofȱstakeholdersȱ inȱ drivingȱ CSMȱ dependsȱ onȱ twoȱ factors:ȱ (1)ȱ theirȱ powerȱ toȱ revokeȱ aȱcompany’sȱlicenseȱtoȱoperateȱandȱ(2)ȱtheirȱdemandȱforȱCSM.ȱTheȱlatterȱfactorȱisȱinfluȬencedȱbyȱtheȱlegitimacyȱandȱtheȱurgencyȱofȱtheȱdemandȱ(Agleȱetȱal.,ȱ1999,ȱp.ȱ508).ȱItȱ isȱ alsoȱ meaningfulȱ toȱ differentiateȱ betweenȱ twoȱ kindsȱ ofȱ licensesȱ toȱ operate:ȱ theȱformalȱandȱtheȱinformal.ȱTheȱformerȱisȱobviouslyȱgrantedȱbyȱgovernmentsȱandȱreguȬlators,ȱtheȱlatterȱbyȱnonȬregulatoryȱstakeholdersȱsuchȱasȱcapitalȱmarkets,ȱNGOsȱandȱcustomers.ȱ Sinceȱ bothȱ kindsȱ areȱ grantedȱ byȱ differentȱ stakeholders,ȱ theyȱ canȱ beȱamendedȱ orȱ revokedȱ forȱ varyingȱ degreesȱ ofȱ corporateȱ environmentalȱ andȱ socialȱ efȬfects,ȱ dependingȱ onȱ eachȱ stakeholders’ȱ individualȱ agenda.ȱ Theȱ informalȱ licenseȱ toȱoperateȱincludesȱintangibleȱconceptsȱsuchȱasȱbrandȱvalueȱandȱreputation,ȱemployeeȱsatisfactionȱ(i.e.ȱtheȱgoodwillȱofȱnonȬregulatoryȱstakeholders).ȱItȱisȱaȱsignificantȱmodȬeratingȱfactorȱofȱCSMȱforȱtheȱfollowingȱreasons.ȱFirst,ȱeveryȱcompanyȱhasȱtoȱhaveȱaȱformalȱlicenseȱtoȱoperate.ȱHenceȱaȱgreaterȱimportanceȱofȱtheȱinformalȱlicenseȱtoȱoperȬateȱ isȱ associatedȱ withȱ aȱ riskȱ premium.ȱ Second,ȱ legislativeȱ processesȱ areȱ relativelyȱslowȱ comparedȱ toȱ possibleȱ adȱ hocȱ reactionsȱ fromȱ customers,ȱ NGOsȱ orȱ employees,ȱwhichȱcanȱaffectȱtheȱinformalȱlicenseȱtoȱoperateȱimmediatelyȱ(e.g.ȱbrandȱdamageȱdueȱtoȱconsumerȱprotests,ȱdiscontinuedȱoperationsȱthroughȱstrikes)ȱ(Steger,ȱ2003,ȱp.ȱ73).ȱ2.3.1.3 Managers’ȱattitudesȱ–ȱtheȱprincipleȱofȱmanagerialȱdiscretionȱ

Theȱprincipleȱofȱmanagerialȱdiscretionȱfocusesȱonȱtheȱlevelȱofȱtheȱindividual.ȱItȱstatesȱthatȱsociallyȱresponsibleȱactionȱisȱnotȱcarriedȱoutȱbyȱanȱabstractȱorganizationȱbutȱbyȱmanagersȱ

whoȱhaveȱanȱindividual’sȱrightȱandȱresponsibilityȱtoȱactȱresponsiblyȱwithinȱaȱgivenȱeconomic,ȱ legalȱandȱethicalȱframeworkȱ(Wood,ȱ1991,ȱp.ȱ698).ȱ

Theȱprincipleȱisȱbasedȱonȱtheȱpremiseȱthatȱsocietyȱandȱcompaniesȱprovideȱmanagersȱwithȱaȱsetȱofȱchoicesȱ(Ackermann,ȱ1975,ȱp.ȱ32).ȱJobȱdescriptionȱandȱcorporateȱproceȬduresȱleaveȱmanagers’ȱsignificantȱroomȱtoȱactȱmoreȱorȱlessȱresponsiblyȱasȱindividuals.ȱIndividualȱdecisionsȱareȱdeterminedȱbyȱseveralȱfactorsȱsuchȱasȱpersonalȱattitudesȱandȱvalues,ȱwhichȱmayȱvaryȱaccordingȱtoȱdifferentȱculturalȱbackgrounds,ȱlevelsȱofȱexperiȬence,ȱ etcȱ (Wood,ȱ 1991,ȱ p.ȱ 700).ȱ Asȱ Duttonȱ etȱ al.ȱ (1983)ȱ stateȱ inȱ theirȱ frameworkȱ onȱstrategicȱ issueȱ diagnosis,ȱ managersȱ alsoȱ haveȱ significantȱ impactȱ onȱ howȱ issuesȱ areȱorganizedȱ andȱ exploredȱ –ȱ i.e.ȱ onȱ developmentsȱ thatȱ precedeȱ theȱ actualȱ managerialȱdecisionȱ–ȱthroughȱtheirȱcognitiveȱmapsȱandȱpoliticalȱinterestsȱ(p.ȱ10)ȱwhichȱinfluenceȱcauseȬeffectȱunderstandings,ȱpredictiveȱjudgments,ȱlanguageȱandȱlabels.ȱ

Aȱ theoreticalȱ principleȱ ofȱ sociallyȱ responsibleȱ humanȱ actionȱ hasȱ beenȱ missingȱ forȱ aȱlongȱ time.ȱ Whereasȱ literatureȱ onȱ corporateȱ socialȱ responsibilityȱ primarilyȱ emphaȬsizedȱorganizationalȱreactionȱtoȱexternalȱdemand,ȱbusinessȱethicsȱwasȱtoȱsomeȱextentȱ

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moreȱ concernedȱ withȱ theȱ actionȱ ofȱ individualsȱ withinȱ theȱ organizationȱ (Whettenȱ etȱal.,ȱ2002,ȱp.ȱ382).ȱModelsȱofȱethicalȱandȱunethicalȱbehaviorȱinȱcompaniesȱwereȱlargelyȱabsentȱ untilȱ theȱ endȱ ofȱ theȱ 1980s,ȱ whenȱ Bommerȱ etȱ al.ȱ (1987,ȱ p.ȱ 265)ȱ developedȱ aȱmodelȱthatȱexplainsȱdecisionȬmakingȱthroughȱtheȱindividualȱproblemȱsituationȱorȱdiȬlemmaȱandȱseveralȱenvironmentalȱ(suchȱasȱsocial,ȱprofessionalȱandȱpersonal)ȱfactors.ȱTheȱ importanceȱ ofȱ theȱ principleȱ ofȱ managerialȱ discretionȱ hasȱ beenȱ empiricallyȱ conȬfirmedȱbyȱvariousȱauthorsȱ(Anderssonȱ&ȱBateman,ȱ2000;ȱBansalȱetȱal.,ȱ2000;ȱCordanoȱetȱal.,ȱ2000;ȱEgriȱ&ȱHerman,ȱ2000;ȱGreeningȱetȱal.,ȱ1994;ȱMorris,ȱRehbein,ȱHosseini,ȱ&ȱArmacost,ȱ1990;ȱSturdivantȱ&ȱGinter,ȱ1977;ȱWinn,ȱ1995).ȱȱ

2.3.1.4 CompanyȬspecificȱdeterminantsȱ–ȱtheȱprincipleȱofȱcorporateȱdiscretionȱTheȱprincipleȱofȱcorporateȱdiscretionȱisȱnotȱanȱexplicitȱpartȱofȱWood’sȱframework,ȱalȬthoughȱitȱisȱinterlinkedȱwithȱmanagerialȱdiscretion.ȱInȱanalogyȱtoȱtheȱlatter,ȱitȱstatesȱthatȱ

companiesȱhaveȱtheȱpotentialȱandȱresponsibilityȱtoȱprovideȱanȱadequateȱorganizaȬ tionalȱandȱinstitutionalȱcontextȱforȱtheȱmindsetȱandȱactivitiesȱofȱitsȱemployeesȱ

throughȱe.g.ȱcorporateȱcultures,ȱcorporateȱobjectivesȱandȱpoliciesȱ(Davis,ȱ1960;ȱWood,ȱ1991,ȱ p.ȱ 700).ȱ CompanyȬspecificȱ factorsȱ constituteȱ importantȱ determinantsȱ ofȱ howȱstronglyȱ companiesȱ exerciseȱ theirȱ discretionaryȱ powersȱ toȱ resolveȱ socialȱ andȱ enviȬronmentalȱ issues:ȱ “Thoughȱ externalȱ factorsȱ createȱ incentivesȱ andȱ expectationsȱ forȱfirms,ȱ intrafirmȱ dynamicsȱ areȱ likelyȱ toȱ influenceȱ howȱ managersȱ perceive,ȱ interpretȱandȱ translateȱ theseȱ externalȱ pressuresȱ intoȱ actionableȱ items”ȱ (Griffin,ȱ 2000,ȱ p.ȱ 485).ȱBommerȱ etȱ al.ȱ (1987,ȱ p.ȱ 271)ȱ alsoȱ argueȱ thatȱ corporateȱ goals,ȱ policiesȱ andȱ cultureȱ

“stronglyȱ influenceȱmanagers’ȱdecisionsȱonȱwhetherȱtoȱactȱethicallyȱorȱunethically.”ȱFurthermore,ȱFredricksonȱ(1986)ȱsuggestsȱthatȱ–ȱinȱadditionȱtoȱtheȱundisputedȱ“strucȬtureȱ followsȱ strategy”ȱ –ȱ structureȱ hasȱ aȱ significantȱ effectȱ onȱ strategy,ȱ particularlyȱwhenȱstrategyȱisȱnotȱsufficientlyȱinstitutionalizedȱ(p.ȱ295).ȱThisȱisȱlikelyȱtoȱbeȱparticuȬlarlyȱrelevantȱtoȱCSMȱifȱstrategyȱlacksȱ–ȱasȱitȱisȱoftenȱtheȱcaseȱ(Morsing,ȱ2003)ȱ–ȱinstiȬtutionalizationȱandȱintegrationȱintoȱbusinessȱstrategies.ȱ

Severalȱempiricalȱstudiesȱhaveȱconfirmedȱtheȱimportanceȱofȱcorporateȱdiscretion,ȱalȬthoughȱ theȱ authorsȱ neverȱ explicitlyȱ referredȱ toȱ theȱ principleȱ asȱ such.ȱ Inȱ factȱ HenriȬquesȱandȱSadorskyȱ(1995)ȱtestedȱandȱpartlyȱconfirmedȱfirms’ȱfinancialȱpositionsȱandȱinvestmentsȱ inȱ humanȱ resourcesȱ asȱ determinantsȱ ofȱ environmentalȱ responsivenessȱunderȱtheȱexplicitȱlabelȱofȱ“managerialȱdiscretion.”ȱOtherȱauthorsȱascertainedȱtheȱroleȱofȱcorporateȱstructuresȱ(Lawrenceȱetȱal.,ȱ1995,ȱp.ȱ116;ȱSwinthȱ&ȱRaymond,ȱ1995),ȱcorȬporateȱ toolsȱ (Kolkȱ &ȱ Levy,ȱ 2001),ȱ corporateȱ cultureȱ (Cruzȱ DenizȬDenizȱ &ȱ GarciaȬ

Falcon,ȱ2002)ȱandȱorganizationȱsizeȱ(Greening,ȱ1995,ȱp.ȱ487)ȱinȱinfluencingȱindividualȱ

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“anȱ actionȱ counterpartȱ toȱ theȱ principledȱ reflectionȱ ofȱ socialȱ responsibility”ȱ (Wood,ȱ1991,ȱp.ȱ703).ȱThisȱactionȱcounterpart,ȱwhichȱcorrespondsȱtoȱtheȱmeaningȱofȱCSMȱinȱtheȱpresentȱstudy,ȱhasȱbeenȱsystemizedȱinȱdifferentȱwaysȱ(Ackermann,ȱ1975;ȱStrand,ȱ1983;ȱWood,ȱ1991).ȱHowever,ȱnoneȱofȱthemȱdifferentiatedȱbetweenȱstrategyȱandȱimȬplementation.ȱ Theȱ authorȱ arguesȱ thatȱ thisȱ differentiationȱ isȱ meaningful,ȱ becauseȱ itȱtakesȱintoȱaccountȱthatȱcorporateȱresponsivenessȱthroughȱprocessesȱsuchȱasȱenvironȬmentalȱ assessment,ȱ stakeholderȱ managementȱ andȱ issuesȱ managementȱ (Wood,ȱ 1991,ȱp.ȱ703)ȱisȱcontingentȱupon:ȱ

- aȱ moreȱ orȱ lessȱ consciousȱ strategicȱ decisionȱ toȱ reactȱ toȱ theȱ motivatingȱ principles,ȱi.e.ȱ drivers,ȱ moreȱ orȱ lessȱ stronglyȱ andȱ systematicallyȱ (strategicȱ disposition).ȱ Thisȱdecisionȱobviouslyȱreliesȱonȱhowȱcompaniesȱrecognizeȱandȱevaluateȱdrivers,ȱandȱhowȱtheyȱperceiveȱtheȱfinancialȱeffectȱofȱrespondingȱtoȱthem,ȱi.e.ȱhowȱstrongȱandȱsoundȱtheirȱeconomicȱrationaleȱis.ȱ

- andȱaȱcompanyȬspecificȱapproachȱtoȱimplementingȱthisȱstrategicȱdecisionȱthroughȱdifferentȱmeansȱsuchȱasȱmanagementȱtools,ȱstructures,ȱetc.ȱ(implementation).ȱInȱthisȱsituationȱitȱappearsȱobviousȱtoȱgoȱbeyondȱexistingȱnotionsȱofȱcorporateȱsocialȱresponsiveness,ȱalsoȱtoȱconsiderȱbothȱsocialȱandȱenvironmentalȱissues.ȱTheȱresultingȱdefinitionȱrefersȱtoȱCSMȱas:ȱ

TheȱstrategicȱandȱprofitȬdrivenȱcorporateȱresponseȱtoȱenvironmentalȱandȱsocialȱisȬ suesȱthatȱareȱcausedȱthroughȱtheȱorganization’sȱprimaryȱandȱsecondaryȱactivities.ȱ Itȱ incorporatesȱ aȱ certainȱ levelȱ ofȱ strategicȱ dispositionȱ toȱ respond,ȱ isȱ basedȱ onȱ aȱ moreȱorȱlessȱelaboratedȱeconomicȱrationaleȱandȱimplementedȱthroughȱtools,ȱstrucȬ turesȱandȱinitiatives.ȱ

Theȱfirstȱpartȱofȱthisȱdefinitionȱisȱratherȱcloseȱtoȱthatȱofȱissuesȱmanagementȱwhichȱhasȱbeenȱdescribedȱasȱaȱfirm’sȱidentification,ȱanalysisȱandȱresponseȱtoȱsocialȱandȱ–ȱinȱtheȱcaseȱofȱstrategicȱissuesȱmanagementȱasȱdefinedȱbyȱDuttonȱ(1987)ȱ–ȱpurelyȱcompetitiveȱissuesȱ(Greeningȱetȱal.,ȱ1994).ȱHowever,ȱtheȱauthorȱintentionallyȱrefrainedȱfromȱusingȱthisȱterminologyȱtoȱdissociateȱtheȱconceptȱofȱCSMȱfromȱtheȱusualȱ“dangerous”ȱconȬ

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nectionȱofȱissuesȱmanagementȱwithȱpublicȱrelationsȱandȱcrisisȱmanagementȱ(seeȱalsoȱp.ȱ33).ȱ

Theȱ attributeȱ “strategic”ȱ emphasizesȱ theȱ needȱ forȱ aȱ systematicȱ andȱ integratedȱ apȬproach,ȱtheȱattributeȱ“profitȬdriven”ȱstressesȱtheȱimportanceȱofȱaȱsoundȱeconomicȱraȬtionaleȱ forȱ resolvingȱ issuesȱ underȱ considerationȱ andȱ thusȱ acknowledgesȱ economicȱresponsibilityȱasȱtheȱfundamentalȱorganizingȱprinciple:ȱAȱfirmȱcanȱonlyȱsuccessfullyȱresolveȱ issuesȱ associatedȱ withȱ itsȱ activitiesȱ ifȱ itȱ generatesȱ profitsȱ inȱ theȱ midȱ toȱ longȱterm.ȱȱ

CSMȱ asȱ definedȱ aboveȱ incorporatesȱ threeȱ importantȱ subconcepts,ȱ namelyȱ strategicȱdisposition,ȱ economicȱ rationaleȱ andȱ implementation.ȱ Sinceȱ noneȱ ofȱ themȱ hasȱ beenȱdescribedȱ andȱ definedȱ inȱ theȱ contextȱ ofȱ corporateȱ socialȱ responsivenessȱ orȱ relatedȱconceptsȱbefore,ȱtheȱauthorȱprovidesȱdefinitionsȱinȱtheȱfollowingȱparagraphs.ȱ

Economicȱrationaleȱ

TheȱeconomicȱrationaleȱforȱCSMȱhasȱbeenȱconceptualizedȱthroughȱtheȱnotionȱofȱtheȱbusinessȱcaseȱforȱsustainabilityȱ(Epsteinȱetȱal.,ȱ2003;ȱHolliday,ȱSchmidheiny,ȱ&ȱWatts,ȱ2002;ȱPerceval,ȱ2003;ȱReed,ȱ2001).6ȱIfȱaȱsignificantȱpositiveȱeconomicȱnetȱeffectȱofȱinteȬgratingȱanȱenvironmentalȱorȱsocialȱissueȱintoȱbusinessȱstrategiesȱorȱoperationsȱcanȱbeȱclearlyȱ diagnosed,ȱ oneȱ usuallyȱ speaksȱ ofȱ aȱ strongȱ businessȱ caseȱ forȱ sustainability.ȱObviously,ȱtheȱstrongerȱtheȱbusinessȱcaseȱ(e.g.ȱimprovedȱreputationȱandȱprocessȱeffiȬciency),ȱtheȱgreaterȱtheȱmotivationȱforȱCSMȱ(Bansalȱetȱal.,ȱ2000).ȱ

Itȱshouldȱbeȱnotedȱthatȱtheȱtermȱ“businessȱcaseȱforȱsustainability”ȱisȱstillȱrarelyȱusedȱamongȱscholarsȱwho,ȱparticularlyȱinȱtheȱUS,ȱreferȱratherȱtoȱaȱpositiveȱfinancialȬsocialȱperformanceȱ linkȱ (e.g.ȱ Griffinȱ etȱ al.,ȱ 1997;ȱ Prestonȱ &ȱ OȇBannon,ȱ 1997;ȱ Stanwickȱ &ȱStanwick,ȱ 1998a).ȱ Thisȱ linkȱ isȱ alsoȱ atȱ theȱ rootȱ ofȱ theȱ majorȱ frameworksȱ buildingȱ aȱtheoreticalȱbusinessȱcaseȱforȱsustainability.ȱTheyȱprimarilyȱcompriseȱtheȱsocialȱimpactȱhypothesisȱ (Cornellȱ &ȱ Shapiro,ȱ 1987)ȱ andȱ theȱ goodȱ managementȱ hypothesisȱ (WadȬȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱȱ

6 ȱToȱfullyȱadhereȱtoȱtheȱterminologyȱusedȱinȱtheȱpresentȱstudy,ȱoneȱwouldȱhaveȱtoȱuseȱtheȱtermȱ“theȱ businessȱcaseȱforȱCSM.”ȱHoweverȱtheȱauthorȱhasȱstuckȱwithȱtheȱoriginalȱnotion,ȱsinceȱitȱisȱalreadyȱ relativelyȱcommonlyȱusedȱtoday.ȱ

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ȱ

dockȱ&ȱGraves,ȱ1997).ȱSeveralȱauthorsȱhaveȱalsoȱexplicitlyȱdiscussedȱaȱnonȬlinear,ȱinȬvertedȱ UȬshapedȱ relationshipȱ betweenȱ environmentalȱ orȱ socialȱ andȱ financialȱ perȬformanceȱ(Alanen,ȱ1998;ȱLankoski,ȱ2000;ȱSalzmann,ȱ2002;ȱSchalteggerȱ&ȱSynnestvedt,ȱ2001;ȱSteger,ȱ2004).ȱAnȱinvertedȱUȬshapedȱrelationshipȱnotȱonlyȱexplainsȱtheȱlargelyȱinconclusiveȱempiricalȱevidenceȱonȱtheȱlinkȱbetweenȱenvironmentalȱorȱsocialȱandȱfiȬnancialȱperformance,ȱbutȱisȱalsoȱintuitivelyȱappealingȱsinceȱ“exaggerated”ȱimproveȬmentsȱofȱenvironmentalȱorȱsocialȱperformanceȱ(e.g.ȱtowardsȱaȱzeroȱemissionȱgoal)ȱareȱextremelyȱcostly,ȱandȱwouldȱmostȱcertainlyȱdamageȱcorporateȱprofits.ȱ

Aȱbusinessȱcaseȱforȱsustainabilityȱcanȱonlyȱbeȱbuiltȱsystematicallyȱthroughȱaȱprocessȱthatȱ

recognizesȱrelevantȱsocialȱandȱenvironmentalȱissuesȱandȱtheȱeconomicȱpotentialȱofȱ resolvingȱthemȱandȱintegratesȱthemȱintoȱstrategies.ȱ

Thisȱprocess,ȱinȱtheȱfollowingȱtextȱreferredȱtoȱasȱissueȱintegration,ȱshouldȱnotȱbeȱconȬfusedȱwithȱtheȱnotionȱofȱissueȱmanagement,ȱwhichȱstillȱlargelyȱhasȱaȱconnotationȱofȱissueȱshapingȱthroughȱpublicȱrelations,ȱcrisisȱmanagement,ȱetc.ȱ(Ansoff,ȱ1975;ȱArringȬtonȱ&ȱSawaya,ȱ1984).ȱ

Implementationȱ

Applyingȱ contingencyȱ theoryȱ toȱ organizationȱ designȱ suggestsȱ thatȱ thereȱ isȱ noȱ bestȱwayȱtoȱalignȱorganizationȱtoȱaȱstrategicȱdecision,ȱbutȱallȱalternativesȱareȱnotȱequallyȱsuitableȱ (Galbraithȱ &ȱ Kazanjian,ȱ 1986,ȱ p.ȱ 9).ȱ Variousȱ “soft”ȱ (e.g.ȱ corporateȱ culture)ȱandȱ “hard”ȱ (e.g.ȱ structure)ȱ meansȱ existȱ toȱ fulfillȱ thisȱ task.ȱ Theyȱ compriseȱ interȱ aliaȱmanagementȱ toolsȱ suchȱ asȱ e.g.ȱ incentiveȱ systems,ȱ tasksȱ andȱ initiativesȱ (i.e.ȱ concreteȱactionsȱdependingȱonȱhowȱtheȱstrategyȱisȱoperationalized)ȱandȱstructuresȱ(e.g.ȱcrossȬdisciplinary,ȱcrossȬbusinessȱteams)ȱ(Hussey,ȱ1996,ȱp.ȱ8;ȱMaxwell,ȱRothenberg,ȱBriscoe,ȱ

&ȱMarcus,ȱ1997,ȱp.ȱ120).ȱ

Inȱtheȱpresentȱstudy,ȱthreeȱdimensionsȱofȱtheȱimplementationȱofȱCSMȱareȱconsidered:ȱ

1 TheȱportfolioȱofȱmanagementȱtoolsȱthatȱcompaniesȱuseȱtoȱensureȱthatȱtheȱstraȬtegicȱdispositionȱisȱimplementedȱ

2 Theȱportfolioȱofȱinitiativesȱthatȱcompaniesȱcarryȱoutȱtoȱresolveȱenvironmentalȱandȱ socialȱ issues.ȱ Itȱ shouldȱ beȱ notedȱ thatȱ –ȱ toȱ narrowȱ theȱ alreadyȱ immenseȱscopeȱofȱtheȱstudyȱ–ȱinitiativesȱforȱstakeholderȱinteractionȱ(Wood,ȱ1991,ȱp.ȱ704)ȱwillȱnotȱbeȱaccountedȱfor,ȱevenȱthoughȱtheyȱconstituteȱaȱsignificantȱcomponentȱofȱsustainabilityȱmanagement.ȱ

3 TheȱcorporateȱstructuresȱandȱdegreeȱtoȱwhichȱtheyȱfacilitateȱcollaborationȱbeȬtweenȱ sustainabilityȱ expertsȱ andȱ generalȱ managersȱ (inȱ theȱ followingȱ referredȱtoȱasȱcrossȬdisciplinaryȱcollaboration).ȱ

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