LUẬN văn THẠC sĩ (KINH tế) analysis of how corporate social responsibility (csr) policies

This debate over CSR has existed since companies first assimilated responsibilities beyond what was required of them by law.. However globalisation and the growth in multinational corpor

ANALYSISOFHOWCORPORATESOCIAL

RESPONSIBILITY (CSR) POLICIESCREATESVALUE-

ADDEDFORCOMPANIES

Dissertation August2013MBAinFina

nce

BeatrizJaenicke 1670035

Acknowledgements 5

Abstract 6

Chapter1:Introduction 7

Chapter2:LiteratureReview 8

2.1 Conceptof CSR 8

2.2 TheShareholdervs.StakeholderConcept 10

2.3 Differentperspectivesof CSR 14

2.4 Needfor CSR 15

2.5 ConceptofValue 16

2.6 TheTriplebottom line ofCSR 17

2.6.1 Economic dimension 20

2.6.2 Socialdimension 22

2.6.3 Environmentaldimension 23

Chapter3: Methodology 25

3.1 ResearchQuestionsandHypothesis 26

3.2 StructureofResearchMethod 27

3.2.1 :Positivism .27

3.2.2 :Deductive .28

3.2.3 :Casestudy .29

3.2.4 : Multi-MethodQuantitativeResearch .30

3.2.5 : Survey .30

3.2.6 : CrossSectional 31

3.3: Sample 31

3.4 Ethics 32

3.5 Limitation 33

3.6 Assumption toresearch 33

Chapter4:ResearchFindings 34

4.1 EconomicDimension 34

4.2 EnvironmentalDimension 45

4.3 SocialDimension 52

Chapter5:Conclusions 68

Recommendationsfor FutureResearch 70

SelfReflectionon ownLearningandPerformance 77

Bibliography 76

Appendix 82

ContentofTablesandFigures Figure1 Sustainability 19

Figure2.Research’sHypothesis 25

Figure3 Research Method 27

Figure4.Revenue 37

Figure5 Netincome 37

Figure6 Return on Equity(ROE) 38

Figure7 Return onAssets(ROA) 39

Figure8.ComparisonROEandROA 39

Figure9 EconomicValueAdded(EVA) 41

Figure10 StockMarketPrice 43

Figure11.Performance 43

Figure12 EnergyReduction vs EnergyPolicyTarget 48

Table1.Environmental&EnergyGoals 51

Figure13.AwarenessofCSRpolicies 54

Figure14 Goodcorporatecitizen 55

Figure15 Goodreputation 56

Figure16RetentionandAttractionofEmployee 57

Figure17 Prideofwork 58

Figure18 JobSatisfaction 59

Figure19SocialInvolvement 60

Figure20:Aligment with theCSRpolicies 62

Figure21 EnvironmentalInvolvement 62

Table2 Cross Tabulation 63

Table3.Employeecommitment&engagement 65

Figure22.SalesperEmployed 66 Figure23.NetincomeperEmployed 66 Figure24 CSRvaluecurve 67

Iw o u l d l i k e t o expressmysincere gratitudet o mysupervisor AndrewQ u i n n f o r h i susefulcomments,remarksandengagementthroughoutthelearningprocessoft h i s master’sdissertation.Furthermore,I w o u l d l i k e t o t h a n k allt h e p a r t i c i p a n t s i n mys u r v

e y whohavesharedtheir precioustime Iwouldliketothank friendsandfamily,w h o ha

ve supportedandencouragedme throughout theentireprocess

Theworldchangesdramaticallyaseachdecadepasses.Thesechangesaffectthep o p u l a t i

o n a s a w h o l e T h e businessw o r l d i s nodifferent.Resources c a r c i t y , p o w e r o u t a

g e s a n d m o r e c o m p l e x l a b o u r u n r e s t m e a n s t h a t companieshavet o a d a p t expedi tiouslytosurvive presently.Withthecurrentgloomy economicclimateit seemseven moreimportantforcompaniestotakeextraprecautionstosurvive.Sustainabilitya n d cor porateresponsibilityhavegainedgreatermeaningforthesuccessfulcompaniespresentlybe causeo f t h i s volatileclimate.Theyhavebecomep a r a d i g m s i n t h e i r ownr i g h t

w h i c h companiesmust follow inordertotransitionto anewparadigm.

Corporatebehavioura n d responsibilityi s a n a r e a t h a t m u s t change.Presently,i t i s d r

a f t e d intomanycompanies’businessstrategiesasexcessiveexploitationofresourcesa n

d environmentaldamageis beingseverelypunished.

Owingtoallthesefactors,CSRisnowanecessityandthereiswidespreadacceptanceo f thi sfact betweenmajor corporations.Change andtransitiontoa newparadigmisp i v

o t a l Companiesneedtodowithlesswithoutcausingenvironmentalharm,otherwisesurviva lwouldprovechallenging.

Anincreasinga m o u n t ofstudieshavebeencompletedregardingt h e benefitso f CSR.Howeve r,moststudiesconcentrateonthebenefitstosociety,whilelessattentionispaidt o thecreation ofvaluefororganisations.InordertobetterunderstandCSReffectsonvalue-

addedforthecompany,thisstudyexplorestheimpactofthetriplebottomlineofC S R (econ omic,environmentalandsocialdimension) inacompany casestudy, Covidien.

This debate over CSR has existed since companies first assimilated responsibilities beyond what was required of them by law However globalisation and the growth in multinational corporations has made this debate increasingly complex Operating globally confronts companies with a wide range of new issues which requires adaptation in their CSR strategy e.g cultural and regulatory differences, labor and childlabor standards, bribery and corruption, health crises, human rights, deforestation, etc.

1.

Introduction

Thecurrente c o n o m i c climatehasforcedc o r p o r a t e b o d i e s t o reevaluateallstrandso f t h

e i r operations.Ananalysisofcorporatesocialresponsibility asamethodofcreationo f valueisthereforeveryimportantaspartofthisreevaluation

Theexistenceofdoubtandlackofclaritywithin thedebate over CSRjustifiesincreasedresearch.Thus,thisresearchisundertakenfillgapsinareasofinsufficientstudy.P a r t i c u l a r l y therei s a l a c k o f informationo n t h e impacto f C S R fromt h e businessperspective,ast h e m a j o r i t y oft h e researchc o m e s fromt h e p e r s p e c t i v e o ft hestakeholdersinterests

Recentlyseveralc o m p a n i e s havebeeninvolvedi n socialandenvironmentaldisastersandas

a resultt h e i r l e g i t i m a c y hasbeenchallenged( P a l a z z o & Scherer,2006).A s a consequence,citizensareincreasingly demandingcorporationsjustifyandlegitimisen o t onlytheireconomicactions,buttheirsocialandenvironmentalactionsinthegeneralpublicsphere (Christopher&Kirby,2010)

Ino r d e r t o achievet h i s , corporatesocialr e s p o n s i b i l i t y activitiesm u s t encompassallcorporatesocialpractices-

economic,social,andenvironmentals i m u l t a n e o u s l y addressedandimplementedinordertoincreasetheconformityb e t w e e n corporatebehaviorandthe social expectationsofstakeholders(Archie Carroll,2013)

Severalresearchershaveshown therelationshipbetweenafirm’sengagementwithCSRandi t s economicperformance,t h e w e l l -

people,planet,profit)withtheirthreecorrespondingvalueindicators(economic,socialandenvironmentalindicators)within thecompany

InterestinmeasuringthespecificimpactsandoutcomesofCSR,hasincreased.M o t i v a t

i o n s f o r t h i s f o c u s area n e e d f o r internaljustificationo f C S R budgetsandt o enablecompaniest o r e p o r t C S R outcomestointernalandexternalstakeholders(cebcglobal.org,2005)

2.

Literature Review

2.1 ConceptandEvolutionof CSR

TherearemanydifferentdefinitionsofCSR,butthemostcommonviewaccordingtot h eGreenpaperis,“CSRisaconceptwherebycompaniesintegratesocialandenvironmentalconcernsi n their businessoperations andintheir interactionwiththeir stakeholdersonavoluntarybasis.”(Europeancommunities,2001)

CSRevolvedasaconcept in the1950’swhenthereferencestosocialconscienceamongmanagementpractitionersandtheoristswerenoted.CarrollcreditsHowardR.Bowen,1 9 5 3 authorofthebook“SocialResponsibilitiesoftheBusinessman”,asthe“Fatherofcorporate SocialResponsibility”

the corporation has not only economic and legal obligations but also certainresponsibilities to society which extend beyond these obligations”(p.144)

The definition of corporate social performance is one which has evolved from this time

in an attempt to address the ethical responsibilities and how business responds to

changing pressures from society This evolution has been seen in the writings of Sethi (1975), Carroll (1979), and Wartick and Cochran (1985), each taking the idea of

Asearlyasthe1950’sbusinesseswerebeginningtobethoughtofashavingar e s p o n s i b i

l i t y tosocietyasawholebywriterssuchasKeithDavis,whohypothesizedt h a t therew

ardsofprofitwasnottobeatoolforfurtheringdividesinsocietybetweenrichandpoor.Bythe

1970’sthesedivisionswerebecomingincreasinglyevidentthroughs e v e r a l e x a m p l e s

o f m a j o r corporationscontemptf o r t h e environmentalandsocietaleffectso f t h e i r actio

ns.T h i s l e d t o CSR,o n a largerscaleb e i n g seenasa seriousissue fo rthefi rs t time an

dDavis’s earlierworki n the areabegantoshow its importance.Int h e 1960’s

stickingt o yourknitting”s t r a t e g y o u t l i n e d byP e t e r s andWatermani n 1 9 8 2 , whichclaimedt h a t c o m p a n i e s s h o u l d focuso n areast h a t t h e y

randKramerre-emphasiset h i s strategy byrecommendingthatbusinesses‘stickto whattheyknow’

byusingthebasicfundamentalsofcorporatestrategy todevelop andsupportbenevole

ntareasthatbenefitboth societyandthecompanyitself

In2 0 0 5 Rowe,w h i l e analysingt h e evolutiono f C S R overt h e p r e c e d i n g f o r t y years

statedthat therehasbeen anincreaseinthe popularity ofCSR inrecenttimes Rowesta

Twom a j o r theorieso n t h e designo f t h e m o d e r n businessfirme x i s t , b o t h layingo u t si

milarblueprintsf o r t h e policiesandp r o c e d u r e s o f corporategovernance,executivecomp

ensationpoliciesa n d t h e economicands o c i a l dutieso f b u s i n e s s e s Shareholdert h e o

r y focusesontheeconomicstandpointoftheseprocedures,afirms’dutytocreatewealt

hratherthanfocusingonthesignificanceofthefirmtosocietyandtakesaviewt h a t limit

sitsresponsibilitiestoshareholders,creditors,employees,customersetc.Stakeholdertheory

expandsuponthisfirsttheory,sharingtoanextenttheideathattheimportanceofwealthcre

ationisatthecoreofthefirmbutemphasisesthecentralrolewhicht h e firmplaysi n interacti

ngw i t h t h o s e groupscontiguousw i t h t h e firmands o c i e t y asawhole(M.Pfarrer,20

10)

Shareholdert h e o r y hasbeend e v e l o p e d fromt h e evolvingi d e a s startedalmostt w

o hundredandfiftyyearsagowithAdamSmith’s‘TheWealthoftheNations’in1776,

intervention in business This idea is based upon the belief that society will in fact benefit despite or because of a firm working for its own self-interest to maximise profits Shareholder theorists state that regulation of business is unnecessary as illegal or unethical behaviour undertaken by firms is controlled, or dealt with by the markets themselves in the form of ‘the invisible hand’ and as a result these firms will suffer for their behaviour

throught o t h e “ChicagoSchool”o f e c o n o m i c s , wheret h e likeso f M i l t o n Friedmanh

avelaid outwhatis thecurrentform ofthetheory

Aswasalludedt o a b o v e th is t h e o r y focuseso n t h e profitgeneratingcapabil ities o f a f

irmtomaximiset h e wealtho f t h e s h a r e h o l d e r S m i t h ’ s influencei s clear,ashi

swritingso n t h e importanceo f “free”markets,t h e “ invisibleh a n d o f s e l f

(M.Pfarrer,2 0 1 0 ) A s Friedmanstated‘theb u s i n e s s o f businessi s business’.H e m a i n

t a i n s thebelieft h a t issuesofm o r a l i t y o r s o c i a l reformaref o r governmentsand

a socialconsciencew e r e i n facta c t i n g m o r e e t h i c a l l y o r m o r a l l y bys t a y i n g a w a

y froms u c h areasofinterest.H e highlightedt h e importanceo f governmentsands o c i e t y

increating andm a i n t a i n i n g such boundaries.Hearguedthatwithth ese

TCE is based on the existence of strong corporate hierarchies and systems being in place to reduce self-interested behaviour from employees Agency theory is based around the principal vs agent, or in other terms, shareholder vs manager relationship in firms and how to balance the interests of each to create the most value for the firm (Oxford Handbook of Human Capital).Stakeholder theory is a more contemporary approach than that of the aforementioned

s e i t s p o t e n t i a l i n r e l a t i o n t o c o m p e t i n g firms,s o despitet h e i r m a n y difference

s,theyhavesimilarobjectives.The keydifferenceslie inh o w afirmcanachievethesegoals

good for the other Furthermore, by taking this broader, multi-dimensional approach that takes stakeholders into account, firms are in a better position to achieve their full potential.Stakeholder theory today:

The term stakeholder is a used in this context to include a wide range of groups that are influenced or affected by the firm, from consumers and competitors, right up to

Carrollsoughtt o r e d e f i n e t h e u n d e r s t a n d i n g o f wherea firm’sr e s p o n s i b i

CSRi s itselfa stakeholder-relatedtheory,w i t h

t h e o b v i o u s dimensionso f a firmsinteractionsw i t h i t s environmentbeingcentralt o

a manager'sperformancet o b e assessedeasily.Iti s especiallyimportantincompanieswithprofessionalmanagerwithoutan owninginterest

Thefinalcasei n t h e argumenta g a i n s t C S R comesfrommarketingguruTheodoreLevitt

w h o arguedt h a t “sentimenti s a debilitatingi n f l u e n c e i n businesst h a t fostersleniency,inefficiencyandsluggishness.Thegoverningruleshouldbethatsomethingisgoodonlyi

f itpays.Otherwiseit is alienandimpermissible.”

ManyadvocatesofCSRincluding,HenryMintzberg,MichaelPorterandDavePackardv i e

w C S R ast h e essenceo f a developeds o c i e t y andasessentialt o business

makes it easier to recruit customers, staff, investors and make profits

Furthermore, if corporations voluntarily exceed their regulatory obligations then the need for interference of government in business affairs is diminished This leaves business free to concentrate on maximising commercial returns and keeping investors happy.Taken together the arguments for and against CSR can be considered as not being

strategy.Packardwantsbusinessment o seeth at companiese x i s t t o deliversom et hi ng m o

r e t h a n profitst o society.Doinggoodf o r s o c i e t y h a s alsobeens h o w n t o deliverm o r

e f o r shareholders.MichaelPorterbelievest h a t C S R candelivera competitiveadvantaget

obusinesses(CharteredAccountantsIreland)

Ithasb e e n arguedt h a t a businessreceivesi t s l e g i t i m a c y froms o c i e t y andt h a t t h i

s charterpermitsa b u s i n e s s t o operatew i t h i n a society.Iti s importantt h e r e f o r e t h

u a l i t y ofbusinessprocesses.Itcanthereforeb e impliedt h a t s o c i a l l y responsiblebusiness

practicescanonlybev i e w e d asa p o s i t i v e a s s e t andt h a t recentargumentst h a t haveb e

e n m a d e a g a i n s t i n v e s t i n g i n C S R d o n o t h o l d water.(ManagementStudyGuide)

businesses if it is to have the long-term strategic effects of producing a compassionate, socially and environmentally conscious new capitalism (Management Study Guide).

Therefore, a lot of work remains to be done before proponents of CSR can rest assured that corporations will automatically regard these methods as being more than just a fad The message needs to be stated and restated so that CSR becomes an integral part of the modern business environment as a process of voluntary acceptance by corporations,

Givent h e weighto f evidencen o w s u p p o r t i n g C S R , i t seemslogicalt h a t businessess

anotion ofvaluelinkedto thestakeholdersinterest

Theconcepto f C r e a t i n g SharedV a l u e (CSV)isa businessconceptf i r s t introducedi n

HarvardBusinessReviewarticleStrategy&Society:TheLinkbetweenCompetitiveAdvant

ageandC o r p o r a t e SocialResponsibility.T h i s valuew i l l b e everythingt h a t allow

st h e c o m p a n y t o o b t a i n a benefito r contributeo r t o enrich,n o t o n l y t o t h e sh

areholders,butallof thestakeholders