Master's thesis - CORPORATE SOCIAL RESPONSIBILITY: Strategy and impacts on financial performance


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Society is feeling more and more concerned about the environment and social issues caused, among other things, by relocation and environmental dumping. Globalization has actually raised some ethical issues which peak levels were attained, socially speaking, when apparel companies were denunciated for using sweatshops in developing countries, and environmentally speaking, with Shell’s Brent Spar platform scandal. Consequently, companies started to think of how they could improve their image, even their way of doing business and started to engage in Corporate Social Responsibility (CSR).

The purpose of this thesis is to understand why companies decide to engage in CSR and if CSR policies have impacts on firms’ financial performance. Thus, the research problem is the following: What characterizes Corporate Social Responsibility strategies and do they have an impact on financial performance?

In order to answer it, I will use first a review of the existing literature, then interviews performed with persons in charge of CSR/Sustainable Development (SD) in companies and opinion leaders will be analysed. To complement this part, a study on sustainability indexes followed by a specific outlook at the automobile sector and its impact on the environment will be undertaken.

The results show that Western multinational companies (MNCs) tend to be more and more engaged, with law pushing for that as well. Stakeholders have quite an influence on the process, but the main factor of success is the commitment of top management and the integration of CSR in corporate culture. Quantitative results are more mitigated and it cannot be clearly said that CSR favours or not financial performance. More prospective is needed to be definite in the answer.

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Master's thesis - CORPORATE SOCIAL RESPONSIBILITY: Strategy and impacts on financial performance

  1. 1. Aude Richon Academic year: 2006/2007 MASTER THESIS CORPORATE SOCIAL RESPONSIBILITY: Strategy and impacts on financial performance Under the direction of Hassan El Asraoui
  2. 2. Aude Richon Academic year: 2006/2007 MASTER THESIS CORPORATE SOCIAL RESPONSIBILITY: Strategy and impacts on financial performance Under the direction of Hassan El Asraoui «L’IÉSEG n’entend donner aucune approbation ni improbation aux opinions émises dans les mémoires ; ces opinions doivent être considérées comme propres à leurs auteurs.» IÉSEG School of Management 3 rue de la Digue 59000 Lille
  3. 3. Acknowledgements I would like to thank all the people who permitted me to finish this thesis, and supported me while writing it. I would like to thank Hassan El Asraoui for his guidance and support during my work on this thesis. I thank Olivier Rayrole, who took time and advice me when I had problems with the subject of this thesis. I would also thank the six persons who took time and accepted to meet me for interviews. Thanks to them, I had the opportunity to better grasp the concepts and challenges of CSR, and had the opportunity to bring valuable insight to my work. I would also thank Hedley Malloch for being part of my jury. Last but not least, I thank first my family for their patience and unfailing support, then my friends: Véro, for her advices, Clairoute and Brigitte, my roommates, for being present during crisis moments, Maïlys, Caro, Tan, Boon, Dam, Pierrot, JB, le Bask , who entertained me or motivated me depending on the circumstances. i
  4. 4. Contents 1 2 3 4 5 6 7 INTRODUCTION ........................................................................................................... 1 THEORETICAL FRAMEWORK ..................................................................................... 5 2.1 Globalization’s Role in Awareness for Sustainable Development..................... 5 2.2 Evolutions and Definitions of Corporate Social Responsibility......................... 9 2.3 CSR as part of corporate strategy ..................................................................... 14 2.4 Critics and Measures to Overcome Them ........................................................ 17 2.5 Increasing expectations on MNCs .................................................................... 20 2.6 Performance...................................................................................................... 23 METHODOLOGY ....................................................................................................... 29 3.1 Research Model ................................................................................................ 30 3.2 Method of data collection ................................................................................. 32 3.3 Data analysis ..................................................................................................... 36 3.4 Methodology, hypothesis by hypothesis........................................................... 37 WHY WOULD COMPANIES ENGAGE IN CSR POLICIES?........................................... 38 4.1 Presentation of the interviewees ....................................................................... 38 4.2 Presentation of the themes and subthemes studied........................................... 41 4.3 Interviews analysis............................................................................................ 42 APPLICATION TO CONCRETE CASES ........................................................................ 60 5.1 Study on sustainable indexes ............................................................................ 60 5.2 Specific look at the automotive sector concerning the environmental pillar of SD ..................................................................................................................... 70 ANALYSIS AND DISCUSSION ...................................................................................... 83 6.1 Hypothesis testing............................................................................................. 83 6.2 Attempts to answer secondary questions .......................................................... 87 6.3 Limits of the study ............................................................................................ 89 6.4 Managerial recommendations and avenues for research .................................. 90 CONCLUSION ............................................................................................................ 93 ii
  5. 5. Abbreviations ACEA ADEME CFP CSP CSR DJSI EITI EU FDI GC GRI JAMA KAMA MNC MSCI NGO PRI ROA ROE SD SRI UN WBCSD European Automobile Manufacturers’ Association Agence de l’Environnement et de la Maîtrise de l’Energie (Agency for the Environment and Energy Management) Corporate Financial Performance Corporate Social/Societal Performance Corporate Social Responsibility Dow Jones Sustainability Index Extractive Industries Transparency Initiative European Union Foreign Direct Investment Global Compact Global Reporting Initiative Japanese Automobile Manufacturers’ Association Korean Automobile Manufacturers’ Association Multinational Company Morgan Stanley Capital International Non-Governmental Organization Principles for Responsible Investment Return On Assets Return On Equity Sustainable Development Socially Responsible Investment United Nations World Business Council for Sustainable Development iii
  6. 6. Abstract Society is feeling more and more concerned about the environment and social issues caused, among other things, by relocation and environmental dumping. Globalization has actually raised some ethical issues which peak levels were attained, socially speaking, when apparel companies were denunciated for using sweatshops in developing countries, and environmentally speaking, with Shell’s Brent Spar platform scandal. Consequently, companies started to think of how they could improve their image, even their way of doing business and started to engage in Corporate Social Responsibility (CSR). The purpose of this thesis is to understand why companies decide to engage in CSR and if CSR policies have impacts on firms’ financial performance. Thus, the research problem is the following: What characterizes Corporate Social Responsibility strategies and do they have an impact on financial performance? In order to answer it, I will use first a review of the existing literature, then interviews performed with persons in charge of CSR/Sustainable Development (SD) in companies and opinion leaders will be analysed. To complement this part, a study on sustainability indexes followed by a specific outlook at the automobile sector and its impact on the environment will be undertaken. The results show that Western multinational companies (MNCs) tend to be more and more engaged, with law pushing for that as well. Stakeholders have quite an influence on the process, but the main factor of success is the commitment of top management and the integration of CSR in corporate culture. Quantitative results are more mitigated and it cannot be clearly said that CSR favours or not financial performance. More prospective is needed to be definite in the answer. iv
  7. 7. IÉSEG Master Thesis – Aude Richon – 1 Introduction 1 Introduction Society is feeling more and more concerned about the environment and social issues caused, among other things, by relocation and environmental dumping. We can observe this from the growing number of denunciations of companies’ practices by NonGovernmental Organizations (NGOs), but also by movies such as “The Corporation” by Mark Ashbar, Jennifer Abbott and Joel Bakan1, or “An Inconvenient Truth” from Davis Guggenheim and casting former US Vice-President Al Gore2. The written press communicates as well on this growing concern for a more sustainable management of the environment, like this June’s special report on business and climate change initiated by The Economist3. Social concerns are also existing especially concerning working conditions in developing countries and health and safety in general. First, let us define a few concepts. According to the Green paper4 issued by the European Commission in 2001, Corporate Social Responsibility (CSR) is a “concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”, which means beyond the frame given by law. Even though the term “environment” is not mentioned in the acronym CSR (perhaps because it is considered as obvious), I will study this component in the thesis, and emphasize its importance in the last part. The degree to which a firm is sustainable and responsible can be determined by the study of its Corporate Social Performance (CSP), which is an extra-financial appraisal of its operations. The evaluation of social performance is not really well-defined and depends on who is evaluating it, as extra-financial rating agencies use different methods, according to their beliefs, methods and clients’ requests. Even authors talk about it without clearly defining it as Donna J. Wood highlighted5. She gave concepts and attitudes to observe and analyse in order to grasp the CSP of a firm, but still, as CSP incorporates components or concepts that are not necessarily quantifiable, it is really difficult to give a precise definition of it. 1 Canadian documentary issued on Oct. 29, 2004, for more information: American documentary issued on Sept. 15, 2006, for more information: 3 Anonymous, (2007), “A special report on business and climate change”, The Economist, June 2nd, 383(8531). 4 Green papers are documents provided by the European Commission and aimed at provoking discussion on a specific policy area. 5 Wood, D. J., (1991), “Corporate Social Performance Revisited”, Academy of Management Review, 16(4), 691-718. 2 1
  8. 8. IÉSEG Master Thesis – Aude Richon – 1 Introduction Looking for larger markets, lower costs, even lower environmental standards, many companies have become multinational. First they have expanded to other countries through exportations, to enlarge their market, then they intervened to help other countries develop more quickly (like investments from the USA to Europe after WWII, or from Germany to Eastern European countries after the fall of the Wall) and be able to reach them with their products. Later, companies were trying to produce at a cheaper cost and went to developing countries with less regulation (both social and environmental). Nowadays not only production is concerned but also other activities like R&D which makes qualified workers from developed countries feel threatened to lose their jobs. Globalization is not a new phenomenon, however now we are facing a financial globalization as well as a globalization of knowledge and technologies6. Globalization has raised some ethical issues which peak levels were attained, socially speaking, when most of the big apparel companies (like Nike, Gap, Reebok…) were denunciated for using sweatshops in developing countries, because of the non respect of Human Rights, pressure imposed on employees and the subsistence wages these workers earned; and environmentally speaking, with Shell’s Brent Spar platform scandal. That is how companies started to think of how they could improve their image, even their way of doing business and started to engage in CSR. This business approach is inextricably linked to the concept of Sustainable Development (SD) which has been, first, tied more closely with environment. However the scope of SD has gotten larger and larger in the last years and it is really a broad concept, difficult to define precisely. The original definition (and the most commonly used one) comes from the Brundtland Report issued in 1987 stating that “sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs”. Thus, companies now have to take into consideration all the stakeholders they are dealing with (not only the shareholders). CSR really is an actual matter as nowadays companies are communicating about it as a component totally integrated to their activities. Indeed, society as a whole, and local communities in which companies are settled feel more and more concerned about the impact companies have on their physical and human environment. Moreover we can notice a growing awareness from companies (mostly managers) and from the main audience concerning environmental issues. Maybe a game of imitation is also going on between companies, which do not want to be left behind by their competitors or rating agencies. Stakeholders have an influence also and can sometimes even expect that big corporations play a more comprehensive role. 6 Mouhoub, E.M., (2006), Mondialisation et délocalisation des entreprises, La Découverte, 8. 2
  9. 9. IÉSEG Master Thesis – Aude Richon – 1 Introduction Growing needs in energy, especially in emerging countries, limited oil reserves (non renewable energy will necessarily become more expensive and renewable energy will be more and more used, then comparably less expensive), waste management and demographic growth at the global level (we are 6.5 billion and the last population doubling only took 37.5 years) are factors requiring that we take care of the environment and natural resources, and that we modify our consumption modes. The decrease in natural resources, demographic pressure and climate change, the increasing volatility and high prices of energy resources, are present and future constraints that put the emphasis on energy and environmental issues, and place them in the heart of companies’ sustainable development policies. Sooner or later, businesses will have to consider them while elaborating their corporate strategies. Thus, working on companies’ strategies and CSR is relevant also because environmental responsibility has to be more clearly defined and should be set up in the long run at an international level. If only one country is setting standards to respect and all the others do nothing, then actions taken by the environmentally-friendly country will have no impact. For the moment, only listed companies have to publish a sustainability report in France, still not all of them are complying with this law7. Nevertheless some MNCs demonstrate a strong commitment. Some charts have also been elaborated but usually more as recommendations (like the UN Global Compact) and do not have a mandatory value. An important aspect also is the respect of Human Rights. The purpose of the investigation is to understand why companies decide to engage in CSR, and if it is a real concern or just a short-term fashion. For this purpose, it is also important to have a critic look at CSR and SD more generally, starting by the lack of clear definition and the underlying expectations companies might have (better reputation for instance). I will attempt to demonstrate whether companies’ commitment to sustainable practices has a positive impact on their performance, and the reasons of this impact. I will bring to the fore the urge for MNCs to act in favour of CSR and determine where it is coming from: stakeholders? managers? Collaboration between NonGovernmental Organisations (NGOs) and companies, in the frame of CSR, will be evoked as well. Moreover, I will try to determine whether MNCs are really doing what they are saying and promoting in their reports and advertisements. Another point addressed will be the example leading companies can be for the others, and which mechanisms are at stake when firms decide to develop corporate social responsibility policies. Finally, I will verify if pushy environmental objectives and international competition can be consistent and sustainable in the long run. For this purpose, I will study the automotive sector and its impacts on the environment more specifically. More generally, the thesis aims at answering the following research problem: What 7 Law n°2001-420 related to new economic regulations (Art. 116), 2001. 3
  10. 10. IÉSEG Master Thesis – Aude Richon – 1 Introduction characterizes Corporate Social Responsibility strategies and do they have an impact on financial performance? To clearly understand the concepts used in this work, the first part is dedicated to a review of the existing literature, it will also permit to distinguish the different opinions on Sustainable Development (SD) and Corporate Social Responsibility (CSR) mainly and their relation with performance. Then, the second part will be dedicated to the presentation of the methodology I intend to use to answer the research questions. The third part will include a qualitative analysis of interviews I made to determine why and how companies want to implement CSR policies. It will also allow explaining the consequences of such policies. The quantitative analysis will follow in the fourth part, with the study of sustainability indexes, and a specific look at the automotive industry. Finally, conclusions and managerial implications of the confrontation of the first part theoretical framework with the qualitative and quantitative analysis will form the fifth part. 4
  11. 11. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework 2 Theoretical framework 2.1 Globalization’s Role in Awareness for Sustainable Development 2.1.1 The Role of Globalization The impacts of businesses on their social and physical environment have been exacerbated by globalization, and these impacts have clearly boosted the ethical issues society now has to face: we can hear daily of globalization and its bad consequences on current society. This issue is not so easy to address as it is to be dealt with at an international level and there is neither law nor global standard legally binding. First, for a common understanding, let us define the concept of globalization. Mouhoud El Mouhoub8 gives two different definitions of globalization depending on the way the concept is apprehended: - if we think in terms of international mobility of firms and production means then we can define globalization as the “unprecedented acceleration of the freedom for firms to localize in the global space” - we can also define it thanks to its five components: operations relocation, involving or not Foreign Direct Investments (FDI) commercial flows of goods and services (between different firms or between one firm’s own subsidiaries) financial flows (short-term capital) knowledge and technology flows workers international migrations. For the rest of the thesis, we will keep in mind the second definition to have a more comprehensive approach of globalization, and in order to allow us to link the concept of globalization more easily with corporate social responsibility. Wage differences between developing and developed countries and lower environmental standards in developing countries have actually led many companies to offshore their activities. They have been going from capital intensive economies to labour intensive ones (even though this phenomenon is now starting to reverse in some places). While the motivation of workers in developing countries is often higher and sometimes a reason for relocation, the main motivation to go abroad remains the possibility companies are given to reach new markets (80% cases9). 8 Translated from French: El Mouhoub, M., Mondialisation et Délocalisation des Entreprises, 7. Agrawal, V., Farrell, D., and Remes, J. K., (2003), “Offshoring and beyond”, McKinsey Quarterly, Special Issue 4, 24-35. 9 5
  12. 12. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework While increasing firms’ leeway and power, globalization also assigns them responsibilities. Thus, in 1999, in Davos, the United Nations (UN) former Secretary General proposed the “Global Compact” (GC) between the UN and companies, asking them to comply with 10 principles, expressing values and fundamental practices necessary to respond to the global population’s socio-economical needs. The main objective of the GC is to limit the negative effects of globalization. Even though regulations are stricter and stricter, they are also sources of opportunities (boosting innovation for instance). From these issues, awareness started to grow and the concept of Sustainable Development (SD) emerged as an “answer” took over by numerous authors and researchers. 2.1.2 The Need for Sustainable Development Sustainable Development (SD) is “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”10. Frank-Dominique Vivien considers this definition more as a problem than as a solution11. He points out that this statement is not very clear, as it does not develop indicators to refer to and too many different other definitions of the concept are given by other authors. Najib Sassenou (2006) even talked of “broadened sustainable development”12 which includes both temporal and spatial solidarities. For a company, it would mean on the one hand the respect of all its stakeholders and on the other hand of its natural environment, even though it is a public good. This same idea has also been put forward by Pérez when he highlights the fact that social responsibility expresses a widening of the management responsibility system of reference beyond its traditional meaning13. He alleges that Responsible Management (RM) and CSR express the idea that organization management must be “satisfying”, that is to say relevant and coherent, on a system of reference widened both in space (geographic and societal) and in time. As for Sassenou, SD has a theoretical justification when we look at endogenous growth theories, these models actually aim at internalizing phenomena or behaviours which were considered before as externalities (contamination e.g.). Externalities can be both positive and negative: the development levels of a country or of the productivity of a plant are 10 Brundtland Report, 1987. Vivien, F.-D., (2005), Le Développement Soutenable, Paris: La Découverte, 5. 12 Sassenou, N., (2006), “Développement Durable et Responsabilité Sociétale de l’Entreprise : Apport de la Théorie Economique”, Revue d’économie financière, Sept., 85, 2. 13 Pérez, R., (2005), “Quelques Réflexions Sur le Management Responsable, le Développement Durable et la Responsabilité Sociale de l’Entreprise”, La Revue des Sciences de Gestion, Jan.-April, 211-212, 29-46. 11 6
  13. 13. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework positive externalities; negative ones are environmental damages for instance. The main issues concern negative externalities as, if no action is taken, they can have an irreversible impact (on the environment mainly, thus on the ecosystem which can affect livelihoods and living conditions, especially in developing countries where the population is much more reliant on crops and dependent on natural phenomena). SD includes three “pillars”: financial, environmental and social. The concept of “Triple Bottom Line” is often brought up and allows the evaluation of a company’s performance according to the three pillars of SD14: • • Environmental: the company’s operations must permit the preservation of ecosystems (analysis of the impacts of the firm and its products on resources used, waste production, pollution…) • 14 Financial: it is the most classical conception, it also includes the capacity to develop economically the place where the firm is settled (no corruption, respect of competitors…) Social: what the social consequences of the company’s operations are for all its stakeholders – employees (working conditions, wages, non-discrimination), suppliers, customers, local communities (cultural respect, nuisance) society as a whole. L’Observatoire de la Responsabilité Sociale des Entreprises, ORSE, 7
  14. 14. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework The scheme below shows that to be responsible a company has to find the balance between these three dimensions so that it can combine three objectives: economic prosperity, social justice and environmental quality15. Figure 2.1: CSR’s three dimensions Social / Societal fair Economical Sustainable liveable viable Environment nature Source: Capron and Quairel-Lanoizelée16. The vision shown in this scheme reinforces the following conception of SD from Quebec’s plan for sustainable development17 stating that “the stakes of sustainable development is the capacity of concerned partners to act in a concerted and harmonious way in order to create and maintain a balance between the benefits of an action and its consequences, either for the environment, the mode or the standard of living. This harmony is the result of a common will, a vision that ensures solidarity and cohesion of actions. It is necessary to consider any action knock-on on what characterizes quality of life. The whole society is thus concerned. The quest for sustainable development applies to both local and national levels. Sustainable development is a question of concern for governments, regional and local authorities, socioeconomic actors and citizens” (translated from French, 2004). Some new interpretations of the relations between the 15 ORSE: Capron, M. and Quairel-Lanoizelée, F., (2004), Mythes et Réalités de l’Entreprise Responsable, Paris: La Découverte, 116. 17 Gouvernement du Québec, (2004), Plan de Développement Durable du Québec,, 12. 16 8
  15. 15. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework three aspects of CSR add also a fourth dimension incorporating all the three others, this fourth dimension is the ethical one; Yamaha18 is considering it in its CSR philosophy. Many ethical issues are raised because of relocations (like job losses in parent countries, bad working conditions in host countries), moreover numerous NGOs are denouncing multinational companies’ (MNCs’) practices in developing countries (too low wages, long working days, child labour, pollution…). An example of NGOs’ activism can be the award-giving (Public Eye Awards) by two Swiss NGOs (la Déclaration de Berne and Pronatura) for the most irresponsible companies during the Davos Forum this year19. They made a list of candidates in three different categories: fiscal, social and environmental. This can create very bad advertisement for cited companies (like CocaCola which was mentioned in two categories…). The transcription of SD into business practices gave birth to Corporate Social Responsibility (CSR) which evolution over time has not associated all the three pillars together from the beginning. 2.2 Evolutions and Definitions of Corporate Social Responsibility In 2004, the World Business Council for Sustainable Development (WBCSD) gave the following definition of corporate responsibility: “The commitment of business to contribute to sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life”20. 2.2.1 Corporate Social Responsibility Now let us see how the concept evolved over time. Robert D. Hay and Edmund R. Gray (1980) identified three phases in the development of social responsibility, while Sethi (1975) had also previously identified three phases, encompassing more or less the same features, but named differently: 18 Yamaha: Stam, C., (2006), “Des ONG décernent des prix de l’irresponsabilité d’entreprise en ouverture du Forum de Davos”, Jan. 24, Novethic, 20 WBCSD: 19 9
  16. 16. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework Table 2.1: Phases in the development of CSR Robert D. Hay and Edmund R. Gray21 Sethi22 “Profit maximizing management”: the only objective of Social obligation managers is to maximize profits (Adam Smith, Calvinism) “Trusteeship management”: dating back from the 1920s-1930s, this phase recognised the importance of enlightened management Social responsibility towards all the people who interact with the company, not only stockholders, but also employees, customers, suppliers, banks and the community. Social responsiveness “Quality of Life Management”23: in this most recent phase, in (proactivity) addition to their enlightened management, companies are Frederick (1986) expected to solve major society issues thanks to their knowledge called this last one and resources. social rectitude24 Source: Newton and Ford. As for him, Roland Pérez25 differentiated two conceptions of CSR: • a passive conception where the managerial model is based on the dissociation business – off business, it is the neo liberal model in which CSR is non sense: since the company respects the law it can do whatever it wants, if the manager is only committed to business during the week, he can then be a good citizen the rest of the time • an active conception: the managerial model is based on the integration business – off business, professional and private life interact in this model, the manager must be competitive but he also has to take care of his internal and external partners, as well as the environment, keeping thinking of the future generations (which brings us back to the definition of SD). More generally, for Pérez, responsible management, CSR and SD represent the integration of externalities in the company’s behaviour. 21 Newton, L. H. and Ford, M. M., (2004), Taking Sides: Clashing Views on Controversial Issues in Business Ethics and Society, 8th ed., McGraw-Hill, 83-85. From Robert D. Hay and Edmund R. Gray, “Introduction to Social Responsibility”, in David Keller, man. Ed., Ethics and Values: Basic Readings in Theory and Practice (Pearson Custom Publishing, 2002). Reprinted from Robert D. Hay and Edmund R. Gray, Business and Society: Cases and Text, 2nd ed. (South-Western, 1980). Copyright © 1981 by SouthWestern, a division of Thomson Learning. 22 Sethi, S. P., (1975), “Dimensions of Corporate Social Performance: An Analytical Framework”, California Management Review, Spring, 17(3), 58-64. 23 Newton and Ford, (2004), Taking Sides: Clashing Views on Controversial Issues in Business Ethics and Society, 85. 24 Amba-Rao, S. C., (1993), “Multinational Corporate Responsibility, Ethics, Interactions and Third World Governments: An Agenda for the 1990s”, Journal of Business Ethics, 554. 25 Pérez, “Quelques Réflexions Sur le Management Responsable, le Développement Durable et la Responsabilité Sociale de l’Entreprise”. 10
  17. 17. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework From the phases identified above, different definitions of CSR have been elaborated, depending also on economic trends. Let us mention a few of them: • The only social responsibility of a company is to increase shareholder value (Friedman, 1970; Hay and Gray, 1974; Zenisk, 1979). Zenisk also insisted on the need for congruence between managerial values and shareholders’ expectations. • CSR is made of corporate good citizenship and philanthropy (Epstein, 1989; Hay and Gray, 1974; Zenisk, 1979). “Corporate philanthropy refers to the practice of companies of all size making charitable contributions to address a variety of social, economic and other issues as well as part of their overall corporate citizenship strategy”26. Donaldson (1989) also included ethics as an imperative in management. • CSR is corporate legitimacy and value of management. Patrick Gabriel and Christian Cadiou then raised the question of the company legitimacy as a moral person27. This question is even more relevant in the current context of the growing importance of CSR and increasing clashes of interests between stakeholders. The two authors assert that legitimacy is often tied to the social acceptability of actions undertaken by companies. Thus, they offer different views on legitimacy: • R. Laufer (2000): the legitimate action is in accordance with the imperatives defined by the roots of the legitimate power • Suchman (1995): legitimacy is defined by the finality of the action (noticeable after the event) • Weber (in Gabriel and Cadiou, 2005): an action is legitimate if the cause it is undertaken for is legitimate. To give a comprehensive definition of social responsibility and answer the question on the requirements of corporate social performance, Carroll (1979) created a « social performance model ». He found out that there are three types of views on CSR: • the most classical one, questioning whether corporate responsibility should go beyond profit and legal obligations • another one listing all the points CSR should address (beyond profit and legal obligation, like social and environmental issues for instance) • the last one referring to the philosophy of response from companies: reactivity or proactivity? 26 Anonymous, (2006), “CSR and philanthropy”, Caribbean Business, Sept. 28, 52. Gabriel, P. and Cadiou C., (2005), “Responsabilité sociale et environnementale et légitimité des entreprises: Vers de nouveaux modes de gouvernance ?”, La Revue des Sciences de Gestion, Direction et Gestion, n° 211-212 - R.S.E., 127-142. 27 11
  18. 18. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework To give a comprehensive view of a business’ duties, he elaborated the following scheme: Table 2.2: Categorization of Social Responsibilities Discretionary responsibilities TOTAL Ethical responsibilities SOCIAL RESPONSIBILITIES Legal responsibilities Economic responsibilities Responsibilities left to the choice of businesses (no expectations from the society, like philanthropic donations). To meet society’s expectations above the legal and economic responsibilities. This concept is not really well defined, thus companies do not really know how to deal with it. Laws and regulations that businesses have to respect as part of their “social contract”. “first and foremost social responsibility” The goal of businesses is to produce goods and services that respond to the needs of society, and sell them while making profit. These are the bases of social responsibilities. Source: Carroll28. With this model, the different responsibilities can be addressed together and not necessarily one after the other (economic and legal responsibilities are to be dealt with at the same time e.g.). 2.2.2 Stakeholders CSR includes taking care and addressing the claims/demands of all stakeholders. According to Clarkson, “stakeholders are persons or groups that have, or claim, ownership, rights or interests in a corporation and its activities, past, present or future. Such claimed rights or interests are the results of transactions with, or actions taken by, the corporation, and may be legal or moral, individual or collective. Stakeholders with similar interests, claims, or rights can be classified as belonging to the same group: employees, shareholders, customers, and so on.”29 Stakeholders can be then divided into primary and secondary stakeholder groups depending if the survival of the company depends on them or not. “A primary stakeholder group is one without whose continuing participation the corporation cannot survive as a going concern”30 while “secondary stakeholder groups are defined as those who influence or affect, or are influenced or 28 Carroll, A. B., (1979), “A Three-Dimensional Conceptual Model of Corporate Performance”, Academy of Management Review, 4(4), 499-500. 29 Clarkson, M. B. E., (1995), “A Stakeholder Framework for Analyzing and Evaluating Corporate Social Performance”, Academy of Management Review, 20(1), 106. 30 Ibid. 12
  19. 19. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework affected by, the corporation, but they are not engaged in transactions with the corporation and are not essential for its survival”31. An overview of both groups can be seen in the following scheme (with primary stakeholders in yellow and secondary stakeholders in blue, while influencers are in light yellow): Figure 2.2: Stakeholder groups Unions Media Shareholders Governments Rating agencies, Employees (Local/Territorial/ National Authorities) Certification institutions Civil Society (NGOs…) … Firm Communities Special interest groups (that Customers Investors (Banks…) Suppliers Environment can influence public opinion) Source: Clarkson, 1995. Secondary stakeholders do not have the power to prevent a company from performing; however, they can mobilize the public opinion for or against a company and its acting. There is actually a demand for social responsibility, thus companies have to create a “level of trust among people – a feeling of security that each individual’s interests will be taken into account”32. When people have this feeling of security they can work productively, thus “social responsibility – that is, acting in the interest of others, even when there is no legal imperative – lies at the base of trust”33. However acting in the 31 Clarkson, “A Stakeholder Framework for Analyzing and Evaluating Corporate Social Performance”, 107. 32 De Wit, B. and Meyer, R., (2004), Strategy: Process, Content, Context, 3rd ed., 598. 33 Ibid. 13
  20. 20. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework interest of employees is only a small part of social responsibility, which is to be extended to all the stakeholders of the company. 2.3 CSR as part of corporate strategy The French Observatory for CSR (ORSE)34 enumerates seven trends in determining what kind of CSR companies are engaged in: • Ethical: this approach consists for a company in applying its ethical convictions in its investments (first step in determining Socially Responsible Investments SRI), usually some sectors are excluded directly (alcohol, tobacco, nuclear power, pornography…) • Environmental: companies are selected depending on their environmental performance • Social: quality of the company’s social policies and respect of Human Rights (HR) Citizenship: around the notion of community (local community and ethnic minorities), mainly developed in the US • • SD: this approach favours companies that perform in their three sectors of responsibility (according to the three pillars of SD), it favours a long-term view and management systems that are looking for continuous progress and strategy sustainability • Stakeholder: this approach emphasizes the dialogue with all the stakeholders of the company and the way it takes into account their expectations, it is usually tied with the SD approach • Financial: taking into account societal factors in the valuation of the company is better to find the real value of the company rather than the only use of financial data; however concepts of conviction and general interest are not taken into account35. The approach chosen by companies can depend on their activity and/or on their strategy. “Corporate strategy is the pattern of decisions in a company that determines and reveals its objectives, purposes, or goals, produces the principal policies and plans for achieving those goals, and defines the range of business the company is to pursue, the kind of 34 35 ORSE, Anonymous, “Définition de la RSE”, ORSE, 14
  21. 21. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework economic and noneconomic contribution it intends to make to its shareholders, employees, customers, and communities.”36 However, it is not only a question of strategy, the adoption of CSR policies depends also on the size and financial situation of companies, even though CSR, appearing as an application of SD to MNCs, and also as a means to regulate their operations and sometimes their unethical practices in their home countries and abroad, is a concept that is spreading quite quickly. CSR first started with MNCs that implemented voluntary codes of conduct and charters but now it is also spreading to Small and Medium Enterprises (SMEs) because of the requirements of their business partners, or on a voluntary basis. However, Tuzzolino and Armandi adapted Maslow’s need theory to US companies37, and through their interpretation it is clear that MNCs are the only ones capable of attaining the last state of need, that is realized through Corporate Social Responsibility: 36 Andrews, K., (1987), “The concept of corporate strategy”, Article adapted with permission from Chapter 2 of The Concept of Corporate Strategy, McGraw-Hill Companies Inc., in De Wit, B. and Meyer, R., (2004), Strategy: Process, Content, Context, 3rd ed., Thomson, 71. 37 Tuzzolino, F. and Armandi, B. R., (1981), “A Need-Hierarchy Framework for Assessing Corporate Social Responsibility”, Academy of Management Review, 6(1), 21-28. 15
  22. 22. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework Table 2.3: Need Hierarchy – Comparison between Individuals and Companies Maslow Tuzzolino & Armandi PHYSIOLOGICAL The fundamentals of survival, including Profitability (classical model – Friedman) hunger and thirst SAFETY Dividend policy, payout ratio, integration Concern over physical survival, ordinary (vertical and horizontal), conglomeration, prudence competitive position, closure, organizational slack AFFILIATION Trade association, industry publications, Striving to be accepted by intimate lobby group, bargaining, huddling, member’s of one’s family or a group cooptation ESTEEM AND STATUS Market position, product leadership, Striving to achieve a high standing relative financial ratios and margins, market share, to others image creation, price leadership SELF-ACTUALIZATION Internal (employee relations) Job enrichment, compensation policy, pension plan, work centrality, goal A desire to know, understand, systematize, alignment organize, and construct a system of values External (community and government relations) Corporate philanthropy, affirmative action, pollution abatement, product reliability Source: Tuzzolino & Armandi, 1981. They even go further by talking of the teleogical imperative of today’s organizations, of the need for goal congruence within the organization, the socially responsible activities companies should be engaged in, and the fact that firms should repair the damages they made to the environment 10 or 20 years before they even started to engage in CSR. If we try to apply this scheme to SMEs they would probably be in one of the first three steps, but no further. Thus, from this, we can see that SD and CSR cannot be taken care of by any companies, as some of them have other priorities, such as just “surviving”. Nevertheless, some SMEs start to have CSR policies while some MNCs are not doing anything at all (except maybe some PR). Another element to take into consideration is that the authors wrote this article more than 25 years ago, and other issues have emerged since then (like global warming emphasized by recent disasters). Some things have actually evolved over the last 25 years and it is also in the interest of SMEs to engage in 16
  23. 23. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework CSR voluntarily so that whenever any regulation shows up they are prepared and they have no additional costs to bear. The socially responsible organization is the self-actualizing organization (even though the categorization of needs is fairly subjective): having satisfied prepotent needs, they have the envious position of voluntarily contributing to the welfare of all their constituencies38. 2.4 Critics and Measures to Overcome Them 2.4.1 CSR also Raised some Critics Different critics have been addressed towards CSR, some argue that there is no need for it, others say that it is unnecessary as, even if companies do not do anything for it, they will not be sanctioned, finally it is also said to give too much freedom to companies that eventually use it as a tool to avoid confrontation with stakeholders. The French movement Attac (Association pour la Taxation des Transactions financiers pour l’Aide aux Citoyennes et citoyens) also highlights the fact « social responsibility » depends on soft law, which is not binding, is freely chosen by companies, and depends on moral commitment only, without any penalty in case of non respect. The State does not intervene, thus CSR fosters self-regulation.39 According to Betsy Atkins40, shareholders expect companies not to be irresponsible, thus not to spend money on unnecessary things (like social causes which do not increase profits). Companies should comply with the laws and regulations without behaving zealously; otherwise they would irresponsibly and deceptively squander the money of their stockholders. Actually, if shareholders want to behave in a socially responsible way they do not have to rely on companies to do so: they can act by themselves. Atkins also highlights the fact that firms should use “the rhetoric of social responsibility” as a marketing tool, so that people feel good about consuming their products and investing in the corporation, but firms should not spend money for it. She is actually following the direction given by Milton Friedman (1970) for whom social actions can only be made 38 Tuzzolino and Armandi, (1981), “A Need-Hierarchy Framework for Assessing Corporate Social Responsibility”, 25. 39 Group « Economie solidaire et démocratie économique » from the scientific committee of Attac: 2003, “Responsabilité sociale des entreprises, ou contrôle démocratique des décisions économique ?”, L’Economie Politique, April, 18, 7-25. 40 Atkins, B., (2006), “Corporate Social Responsibility: Is It “Irresponsibility”?”, The Corporate Governance Advisor, 14(6), 28-29. 17
  24. 24. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework keeping in mind value maximization41, thus a firm can undertake social actions if it “[makes] it easier to attract desirable employees, it [reduces] the wage bill and [lessens] losses from pilferage and sabotage and [has] other worthwhile effects”42 or if it would permit to avoid corporate taxes e.g.. For him, “whether blameworthy or not, the use of the cloak of social responsibility and the nonsense spoken in its name by influential and prestigious businessmen, does clearly harm the foundations of a free society”. Alexandra Petrovic recounts in La Tribune that a study from Parson Consulting showed that companies complying with the minimum requirements in terms of CSR are not imposed sanctions on.43 Even in spite of social or environmental scandals, some companies keep being very profitable (Total e.g.). Nevertheless SD is not opposed to financial performance, even though SD is too often used for marketing purposes. As also reminded by Lionel Lévy44, in France, listed companies have a legal obligation to issue a sustainable development report every year (or include specific indicators in their annual report clearly linked with their enforcement of CSR). However, most of the 700 French listed companies do not respect this law45, showing that sustainable development is only used for marketing purposes for the image of the MNCs, without the transformation of operations it should incorporate. There are also notation agencies that can give the main audience a good overview of MNCs’ operations; however we are not sure they are checking for the conditions in every country MNCs operate in. Thus, from these remarks we can draw a first hypothesis: H1: There is no sanction imposed on companies that are not committed to CSR. Attac also denounces the fact that, as now companies have the shield of CSR, they are choosing the partners they are negotiating with instead of the traditional collective bargaining. They can also choose their own instruments to measure their progress in terms of CSR, without using any standardised tools. A pretty similar critic comes from the fact that CSR tends to bypass unions (which can also be supplanted by partnerships between companies and NGOs). Actually when we read about CSR, we barely read about unions or the potential role they can have in it. 41 Garriga, E. and Melé D., (2004), “Corporate Social Responsibility Theories: Mapping the Territory”, Journal of Business Ethics, 53, 53. 42 Newton, L. H. and Ford, M. M., (2004), Taking Sides: Clashing Views on Controversial Issues in Business Ethics and Society, 8th ed., McGraw-Hill, 93. From Milton Friedman, “The Social Responsibility of Business is to Increase Its Profits”, in Thomas Donaldson and Patricia H. Werhane, eds., Ethical Issues in Business: A Philosophical Approach, 4th ed. (Prentice Hall, 1993). Reprinted from The New York Times Magazine (September 13, 1970). Copyright © 1970 by Milton Friedman. 43 Petrovic, A., (2006), “Le choix du développement durable ne profite guère aux entreprises”, La Tribune, Jan. 17, 34. 44 Lévy, L., (2005), “Des rapports environnementaux et sociaux encore insuffisants”, La Tribune, April 29, 35. 45 Law n°2001-420 related to new economic regulations (Art. 116), 2001. 18
  25. 25. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework Likewise the French movement mentions that charters and codes of conduct are a good means to send a signal to stakeholders however we can never know if they are really implemented or not. Moreover, even though more and more companies seem committed to CSR, the literature might tell us that concrete practice of CSR is limited as we can only read always the same few examples (Shell, Nike, Adidas, Ben & Jerry’s, Body Shop…). Finally, Attac also says that CSR tends to take into account direct stakeholders, while neglecting general interest. 2.4.2 Implementation of codes of conduct and reporting As an answer to criticism on their implementation of CSR, more and more companies are creating codes of conduct in order to make their commitment more concrete. Stefanie B. Hiβ46 points out that systems to monitor these codes of conduct are often criticized as they are said to be limited to few impromptu controls which are not an incentive for sustainable improvements and efforts. Moreover controls usually cannot reach the informal sector (impossible to check if subcontractors are complying with the codes of conduct) which might be an incentive for relocation from the formal to the informal sector. Finally, because of dependency structures, suppliers only comply with the least that should be done (keeping in mind money savings). KPMG conducted a survey47 in order to analyze trends in CSR reporting of the world's largest corporations. For this purpose, they looked for information on the top 250 companies of the Fortune 500 (G250) and the top 100 companies in 16 countries (N100), which accounted for more than 1600 companies. Thanks to this survey KPMG found out that reporting has been increasing for 12 years. Changes occurred in the information provided as before the main content was about environment; nowadays (from 1999) sustainability reporting is also made (with still environmental components, but also social and economic ones). In 2005, 52% of G250 and 33% of N100 companies issued separate CSR reports (45% percent and 23%, respectively, in 2002). If we include annual financial reports with CSR information, these percentages are even higher: 64% (G250) and 41% (N100). The sectors which have a relatively high impact on environment are still leaders in reporting. At the global level (G250), more than 80% companies are reporting in electronics and computers, utilities, automotive and oil and gas sectors, whereas at the national level (N100), over 50% of companies are reporting in the utilities, mining, chemicals and synthetics, oil and gas, oil 46 Hiβ, S. B., (2006), “Does Corporate Social Responsibility Need Social Capital?”, Journal of Corporate Citizenship, Autumn, 23, 81-91. 47 KPMG, (2005), International survey of corporate responsibility, electronic version. 19
  26. 26. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework and gas and forestry, paper and pulp sectors. However the most remarkable increase is in the financial sector (more than 50% growth since 2002). Companies now need to also set up an independent external system of monitoring (in addition to codes of conduct and internal controls), conducted by an independent organization (NGO e.g.). It makes them more credible towards their stakeholders (criticism of internal monitoring and the fact that codes of conduct have been implemented in an unreliable way). Firms also have to develop these monitoring systems in their supply chain in the developing countries in order to raise social standards there48. ‘Social standards’ is generally the “comprehensive term for minimum standards with respect to the provision of labour contracts and labour rights”, more specifically ‘core labour standards’ refers to the definition of the International Labour Organization (ILO) – 8 key conventions in 4 areas49. Nevertheless, there are complementarities between internal and external monitoring; furthermore, internal monitoring can help to spread social standards within the culture of the company if management feels concerned about it. There is actually a real need for reciprocal understanding, taking into account the different cultures as MNCs are operating in different countries with different cultures. In fact, problems can arise when the manager has to make a choice between loyalty to the parent firm or the host nation’s cultural values50. 2.5 Increasing expectations on MNCs 2.5.1 Should companies play the role of too weak governments? Companies also have to understand now that there is an increase in social expectations and that their role is being more important, it is not only about philanthropy, it is because their power is huge (some MNCs have bigger budgets than those of some states) and for this reason society is expecting accountability from their part. There are more and more problems at an international level that governments fail to solve together (especially environmental problems), thus companies are expected to commit themselves to find a 48 Hiβ, (2006), “Does Corporate Social Responsibility Need Social Capital?”. Ibid, 82. 50 Amba-Rao, S. C., (1993), “Multinational Corporate Responsibility, Ethics, Interactions and Third World Governments: An Agenda for the 1990s”, Journal of Business Ethic. 49 20
  27. 27. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework solution to these issues. They wanted to be more powerful and for some of them to get more power than states, consequently they have to work on global issues.51 One of the sectors in which we can realize that governments not always play their role any more is security as in some countries standing army supported by the state budget tends to be out of date.52 Consequently it is noticeable that public and private sectors are getting closer in their economic and security processes. Private sector provides arms and techniques (legally or not), it can also offer security services (and it also has the most dangerous technologies at its disposal) while public services (like defence departments) are undergoing research and using technologies closed to the ones normally linked to private sector. Furthermore, the business sphere has a more or less marked influence on conflicts: • it can manipulate them, stir them up, keep them alive, even provoke them • and when conflicts end, the private sector is expected to provide resources for rebuilding, to promote political or social rights, to give an orientation to new investments53. When conflicts are going on, companies should choose their side, or leave the country (however this is usually quite expensive, especially if they plan to start operations over at the same place), this would be morally the best solution. Anyhow, according to Bailes and Holmqvist, recent analysis showed that growth and international economical commitment more often end conflicts than produce them. Moreover MNCs often have better knowledge of dangerous zones than national or international entities, thus they can gain power from this situation or people can expect them to act responsibly as governments should be doing. 2.5.2 CSR’s stakes As mentioned in the Caribbean Business (2006)54, corporate philanthropy was first focused on parent countries and is now expanding worldwide (even in countries firms are not operating in, through foundations e.g.). Actually, companies found out that it can help them reach new markets, develop better relationships with local governments and/or business partners, and they are also improving their image. Philanthropy has thus become 51 Ruggie, J., (2002), “Comment & Analysis: Managing corporate social responsibility”, Oct. 25, Financial Times, 000706&page=2. 52 Bailes, A. J. K. and Holmqvist, C., (2006), “Quel rôle pour le secteur privé?”, Politique étrangère, Spring, in Problèmes économiques, May 24, 2.900, 33-38. 53 Ibid, 34. 54 Anonymous, (2006), “CSR and Philanthropy”, Caribbean Business, Sept. 28, 52. 21
  28. 28. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework a strategy by aligning charity with core business interests. Measurement tools of the impact of charitable contributions have even been developed. Moreover, CSR and the related codes of conduct should be an opportunity to spread social standards in developing countries. However, “the social standards integrated into a code of conduct convey certain values and norms. The monitoring systems used to control the implementation of social standards have their limits because the ‘idea’ of social standards and the values and norms incorporated in them do not trickle down into the developing societies.”55 Thus social standards can be implemented only if they are adapted to the context of each country, and their implementation can be sustainable if there is “‘capital to be social’56 to bring them to life” (Hiβ, 2006). “Increasingly companies are successfully intertwining public purpose marketing or enlightened capitalism with their economic-oriented marketing strategies”57. Even though marketing has been recognized as a way to promote CSR, some still think that deciding to market socially is a trade-off with other activities (like performance marketing). On the contrary, Attac says that nowadays thanks to CSR and communication about it, companies can gain a competitive advantage over their competitors and consider a long-term growth as they are now appreciated from internal (employees) and external (consumers, governments) opinion. According to Handelman and Arnold58, for the institutional theory, the viewpoint that organizations attempt to meet short-term goals is incomplete. A main point in the institutional theory is the acknowledgement of the institutional environment which contains taken-for-granted social and cultural meaning systems defining social reality. Thus the organization’s structure reflects the norms of the environment in which it is immersed. Consequently in a same environment, organizations will tend to be isomorphic as they are facing the same conditions. Organizations will try to find legitimation which “represents a perception of how well the organization enacts and upholds environmental norms”59. There are two elements of legitimation: pragmatic legitimacy (egoistic motivation to increase one’s own welfare) and social legitimacy (important for survival), based on whether the organization’s actions are consistent with the welfare of the community and society. Organizations are looking for this legitimacy 55 Hiβ, S. B.: 2006, ‘Does Corporate Social Responsibility Need Social Capital?’, Journal of Corporate Citizenship, Autumn, n° 23, 88. 56 Capital to be social’ is a normative quality of social capital including the use of networks, shared values and trust in order to develop an affirmative attitude towards general interest. 57 Handelman, J. M. and Arnold, S. J., (1999), “The role of Marketing Actions with a Social Dimension: Appeals to the Institutional Environment”, Journal of Marketing, July, 33. 58 Ibid, 34. 59 Ibid, 35. 22
  29. 29. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework from the society – word-of-mouth behaviour, avoiding boycotts (Handelman and Arnold, 1999). They formulated four hypotheses and tested them with video scenarios shown to random customers in a mall to collect their impressions. The results of the study indicate that institutional theory has four specific contributions to make to the way we strategically think about store, product and brand choice: • the theory and empirical results of this study strongly support the case for institutional actions to become a strategic centrepiece, along with marketing’s economic-oriented strategy • constituents have a minimum level of institutional actions that they find acceptable, below that level, the effects of even high performative firms are significantly impaired • legitimation reflects constituents’ approval of the organization, which is necessary to obtain constituents’ support • institutional theory identifies support as an important dependent variable, replacing the more specific store, product or brand choice variable if an institutional orientation is to be adopted Applied to CSR, this would explain that it is in the interest of MNCs to develop CSR processes if other firms do, as their perception from stakeholders will be improved. Even independently of what others are doing, MNCs should commit more to CSR in order to comply with the expectations of their stakeholders; they will be able, then, to get legitimation for their activities. Companies are more likely to engage in CSR in a more regulated environment, either through government regulations, collective agreements or when they partner with NGOs, they need institutionalization to feel compelled to act responsibly. Stakeholders’ activism is also usually required for the first move towards CSR60. 2.6 Performance 2.6.1 Socially Responsible Investment “Socially Responsible Investment (SRI) combines investors' financial objectives with their concerns about social, environmental, ethical (SEE) and corporate governance issues. SRI is an evolving movement and even the terminology is still very much in the evolving phase. Some SRI investors refer only to the SEE risks while others refer to ESG 60 Campbell, J. L., (2006), “Institutional Analysis and the Paradox of Corporate Social Responsibility”, American Behavioral Scientist, March, 49(7), 925-938. 23
  30. 30. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework issues (Environmental, Social, and Governance). Eurosif believes both are relevant to SRI. SRI is based on a growing awareness among investors, companies and governments about the impact that these risks may have on long-term issues ranging from sustainable development to long-term corporate performance.”61 SRI comes from the American business ethics, which started mostly with religious congregations that wanted to invest in businesses respecting their Christian values. 2.6.2 Views on Performance Meyer argues that “the performance of the firm is very difficult to measure, perhaps impossible”62. As for him, the Western capitalistic way of thinking of performance is not reliable as we cannot forecast future cash flows in a non-static environment. Moreover it is also possible to cheat on figures by overstating revenues for instance. Even though we have the possibility to add other (non financial) components to materialize performance, those are too subjective (such as the balanced scorecard, defended by Kaplan) as it also depends only on estimate. Thus thinking of performance seems only possible in the short run, implying that it cannot have any academic realization. J.P. Gond63 studied the interactions between societal and financial performances, showing that they depend also on the interests main actors can have on the market. The article he wrote attempts to show how interested actors construct and spread beliefs concerning a positive relation between societal and financial performances on financial markets on the one hand and in the business world on the other hand. As for Gond, the choice of investing in a socially responsible way does not come from an economic rationale but from a belief. He then tries to show how from these beliefs, the positive relation becomes true thanks to interactions between societal and financial performances on financial markets and in the managerial sphere. From an academic perspective, he points out disappointing empirical results, with no concrete proof of a positive relationship. From a managerial perspective, he brings to the fore that there is an interest in a positive relation (at least symbolically), to legitimate measures managers take. However to implement that kind of measure, the managers’ decisions depend on the institutional context, as they have to be part of the social context. 61 European Social Investment Forum: Meyer, M. W., (2005), “Can Performance Studies Create Actionable Knowledge if We Can’t Measure the Performance of the Firm?”, Journal of Management Inquiry, 14, p. 287. 63 Gond, J. P., (2006), “Construire la Relation (Positive) entre Performance Sociétale et Financière sur le Marché de l’ISR : de la Performance à l’Autoréalisation ?”, Revue d’Economie Financière, Sept., 85, 1-17. 62 24
  31. 31. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework Consequently, ratings have been created for the convergence of both concepts and permit to define a metric on which to align “soft” notions linked to CSR. Actors can then rationalise their actions with their newly adopted beliefs. The positive correlation shown is also put forward, as we can only read or hear of a positive correlation. Actually, if this correlation shows that responsible companies outperform then an institutionalisation is possible at a larger level, if there are beliefs existing then companies are going to change their way of doing things. Previously, as no clear relationship had been established between Corporate Social Performance (CSP) and Corporate Financial Performance (CFP), Orlitzky, Schmidt and Rynes decided to conduct a meta-analysis to find a relationship between CSP and CFP. So far, there had only been individual studies that lead to no conclusive result, no stable pattern has been found yet. Thus the authors decided to aggregate the results of individual studies, in order to get a greater precision thanks to the correction of statistical errors. The following chart is summarizing different theories about potential relationships, prior to their study: 25
  32. 32. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework Table 2.4: Theories on relations between CSP and CFP Theories Relationship between CSP and CFP Instrumental stakeholder theory CSP =>CFP Stakeholder-agency theory CSP =>CFP Good management theory CSP =>CFP Slack resources theory CFP =>CSP Virtuous circle theory CSP CFP Authors organizational performance depends on the satisfaction of the different stakeholder groups – Donaldson and Preston 1995, Jones 1995 - the different processes set up to adapt and communicate with each stakeholder group allow the managers to concentrate on the organization’s financial goals (Hill and Jones, 1992; Jones, 1995) - when dealing with multiple stakeholders, managers can permit their organization to respond more efficiently to external demands (Freeman and Evan, 1990) high CSP provides a competitive advantage by giving more rationality and fairness in the treatment of external claims (Waddock and Graves, 1997) prior CFP is directly associated with subsequent CSP: - high levels of CFP may provide the slack resources necessary to engage in CSR (Ullmann, 1985; Waddock and Graves, 1997) - the decision to allocate funds or determine social and environmental policy depends on the availability of excess funds (McGuire et al., 1988) cross-sectional relationship (Waddock and Graves’, 1997) Source: Orlitsky, Schmidt, Rynes, 2003.64 After the conduction of their meta-analysis across studies, they draw the following conclusions: - CSP and CFP are positively correlated - the relationship of the relation is bidirectional and simultaneous - reputation seems to be an important mediator in the relationship. Moreover, the implication for managers is that market forces do not punish companies with a high CSP, and that they can use (and should use) CSP as a reputational lever65. 64 Orlitzky, M., Schmidt, F. L., Rynes, S. L., (2003), “Corporate social and financial performance: a metaanalysis”, Organization Studies, 24(3), 403-441. 65 Ibid, 426. 26
  33. 33. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework Koedijk et al. (2006), in their paper, aimed at showing whether a firm can do good by doing well. They used a database of eco-efficiency scores on a 8-year period (from Innovest) to check if it influences financial performance and firm valuation. They found out that “the benefits of adopting a strong environmental policy are unlikely to outweigh the costs”66 and “that environmental winner companies initially did not trade at a premium relative to losers” 67. However, “over time, the valuation differential between winners and losers widened substantially”68. Thus, they demonstrated that “managers have little reason to worry that an environmental policy conflicts with the company’s primary financial objectives”69. Ultimately, from this literature, I can draw five more hypotheses: H2: Good environmental performance generates good financial performance. I decided to focus on environment as there are more quantitative data on environmental issues, as still some things can be measured, contrarily to social issues that are sometimes just perceptions, or ways of doing things with nothing written, thus quite hard to prove. The following hypothesis will permit to attempt the generalization of H2: H3: Companies with high socially responsible standards perform better than those with poor socially responsible standards. Then, as we can hear more and more of CSR, I propose the following hypothesis: H4: Companies tend to generalize CSR policies. After that, I will test a hypothesis on whether companies are really committed to CSR: H5: CSR is just PR. Finally, to counter critics on CSR, and support a part of the literature, the last hypothesis is: H6: Even though sustainable development can be considered as in contradiction with the market law, it provides development opportunities for companies. 66 Guenster, N., Derwall, J., Bauer, R. and Koedijk, K., (2006), “The Economic Value of Corporate EcoEfficiency”, winner of the 2005 Moskowitz Prize, Social Science Research Network,, 30. 67 Ibid. 68 Ibid. 69 Ibid. 27
  34. 34. IÉSEG Master Thesis – Aude Richon – 2 Theoretical framework Conceptual framework In order to have a clear representation of the subject of the study, the readers can have a look at the following summary of the study: Figure 2.3: Conceptual framework Stakeholders COMPANY Innovation Communication Sustainable Development Reputation Image Visibility Economic … Environmental Social The conceptual framework gathers the entities which interact with a company while in a CSR process. They are all both inside and outside the company as they all have impacts and/or are present both inside and outside the company. The arrows represent the relationships we will study along the thesis. 28
  35. 35. IÉSEG Master Thesis – Aude Richon – 3 Methodology 3 Methodology “Research design is the plan and structure of investigation so conceived as to obtain answers to research questions […] A research design expresses both the structure of the research problem and the plan of investigation used to obtain empirical evidence on relations of the problem”70. In this part, I will give an overview of the organization of the study to answer the research question, that is to say what is to be done in more technical terms. This part will provide information on data collection, instrumentation and procedures. For that, let us follow the different descriptors of research design given by Cooper and Schindler (2003). We also have to keep in mind that the research design is clearly based on the research question and needs to be adapted to it. 70 Phillips, B. S., (1971), Social Research Strategy and Tactics, 2nd ed., 93, quoted in Cooper, D. R. and Schindler, P. S.: 2003, Business Research Methods, 8th ed., 146. 29
  36. 36. IÉSEG Master Thesis – Aude Richon – 3 Methodology 3.1 Research Model Figure 3.1: Research model Research purpose To understand why companies decide to engage in Sustainable Development (SD), and more specifically in Corporate Social Responsibility (CSR), while taking into account the relationship between Corporate Social Performance (CSP) and Corporate Financial Performance (CFP) Research question What characterizes Corporate Social Responsibility strategies and do they have an impact on financial performance? Secondary questions Which conditions lie at the heart of successful CSR policies? Why would companies committed to CSR perform well/better financially? How can companies overcome/counterbalance the constraints of implementing CSR policies? What are the benefits? Research design Deductive study, quantitative approach (ratio analysis) and qualitative approach (semi-structured face-to-face/telephone interviews) Data collection Primary data: interviews, financial data Secondary data: annual and sustainability reports, articles, websites Theoretical background Sustainable Development, Corporate Social Responsibility, Societal Performance, Financial Performance… Analysis and conclusion Inspired from: Persson & Slonovschi71. This figure shows the research process and the path I will follow to complete my study on CSR and performance. The first step is to determine the research purpose, then set up the research question and subsidiary questions in order to clearly set the course of study 71 Persson, C. and Slonovschi, D., (2003), New Patterns of Foreign Direct Investments Indirect Internationalisations of MNCs Using Platform Countries, Master Thesis, 12. 30
  37. 37. IÉSEG Master Thesis – Aude Richon – 3 Methodology and research. Subsequently, the figure incorporates the methods used to gather information and the concepts pre-required to come off to the analysis and draw the conclusions. 3.1.1 Degree of research question crystallization I will start with an explanatory study, using a wide range of secondary data (mainly scientific articles and reports). This study is necessary to start the research as the research problem is of international concern and a global level implies harder-to-grasp concepts on which it is almost impossible to have an opinion or quick outlook right away. I will get qualitative information from scientific articles and quantitative data from reports (research organizations reports on MNCs and CSR and annual and sustainability reports from companies). Then, I will proceed with a formal study in order to answer the few hypotheses mentioned earlier, drawn from the exploratory research and directly linked to the research question. 3.1.2 Purpose of the study The purpose of the investigation is to find out which spillovers a multinational company (in this study, a multinational company) can get from the dedication of a part of its resources to Corporate Social Responsibility. We will have a look at a potential positive relationship between Corporate Social/Societal Performance and Corporate Financial Performance. I will also try to show why companies decide to engage in CSR, what they can gain from their commitment (financially and in other immaterial aspects, such as reputation, innovation…). Thus, the purpose of the study is descriptive, as the research is more or less made to determine how sizeable the impact of CSR policies on a company’s performance is. However the study might also have some causal aspects, as we will try to find relationships between CSP and CFP. 3.1.3 Type and sources of data For the sake of the study, we will use both primary and secondary data. Primary data will be historical data concerning the returns (or other financial data) of benchmarking stock market indexes and sustainable stock market indexes. They will be 31
  38. 38. IÉSEG Master Thesis – Aude Richon – 3 Methodology compared through ratio and graphical analysis, depending on the relevance of the data gathered. I will also perform six one-hour interviews with a few Sustainable Development managers, as I want to understand their vision of CSR and the strategy of their firm concerning it. Thus I will make only few interviews but these will be in-depth. If I cannot reach enough companies, I will perform interviews of people working directly with them on SD/CSR issues, such as consultants in sustainable development, or people in charge for social investment. Secondary data will be scientific articles, reports, studies… 3.1.4 Time dimension The quantitative study will be cross-sectional as I will compare indexes over a 5-year period in order to have results from which I could draw conclusions. The qualitative study will be longitudinal as I will meet each person only once. 3.2 Method of data collection 3.2.1 Data collection As far as data collection is concerned, monitoring will be the collecting process for quantitative data. I will use the websites of institutions providing sustainable indexes and databases from Bourse websites such as Yahoo Finance72. To get qualitative data for the purpose of my study, I intend to interview five people in charge for Sustainable Development/Corporate Social Responsibility in different French multinational companies. I prefer to pick multinational companies because smaller firms usually do not have one person working full time on this issue, or each department of the firm is dealing with its own part of social responsibility. For my thesis, I think it will be more relevant to grasp a more comprehensive view of each company on this subject. If I cannot have access to companies, then I will interview opinion leaders, who are not members of the companies but work with them on CSR issues. As defined by Valerie Janesick, an interview is the “meeting of two persons to exchange information and ideas through questions and responses, resulting in communication and 72 Yahoo Finance: 32
  39. 39. IÉSEG Master Thesis – Aude Richon – 3 Methodology joint construction of meaning about a particular topic”73. Interviewing is usually described as a conversation between two people, one asking questions (interviewer) and leading the conversation, and the other one answering them (interviewee). In the context of this thesis, I will be both the researcher and the interviewer, which will allow me to spend less time on the interview guide, as I precisely know what I am looking for and the objectives of each question I will ask. I plan to perform semi-structured interviews (in-depth interviews) – conversational but with a minimum of structure (exploratory study) – so that interviewees will feel freer to express their point of view and I will get the maximum information. It will also be easier for me to catch their perspective on the situation. It will be as well a means to prevent the “social desirability bias” of the structured interview: I do not only want to hear that everything done by companies is perfect, I want to hear about a lack of opportunities to detect issues for instance. As CSR remains quite controversial, it is important also to let people talk about it, without directing them too much. Finally, I prefer not to use unstructured interviews: they would be the best situation however the risk of missing some information is too high. The questions should have more or less the same meaning to the respondents as they will occupy roughly the same function, which will take away one risk of bias. Another aspect is that I will perform personal interviews but not on personal subjects, it will then be probably easier for interviewees to answer as respondents will not be involved personally. However the pressure of the company, the corporate culture, the secrecy around strategy will probably maintain a certain reserve in their answers. Besides interviewees will more or less control the course of the interview as I am “just” a student while they will certainly be much older than I am and have a lot of responsibilities, even though I am questioning them I have to be careful not to be manipulated. Nevertheless, during the interview, I will develop a normal relationship with interviewees, as for a discussion, I’ll disclose basic information about myself (background, purpose of my study), and attempt to establish a relationship of confidence. I will prepare an interview guide with the wording of questions, making sure it is almost only made of open-ended questions to encourage the respondents to disclose more information. I will, as much as possible, avoid yes/no questions, and no leading questions (those that presuppose a particular answer). I intend to record the interviews, except if the interviewee does not accept, in order to keep the most reliable of what would have been said. 73 Quoted in Esterberg, (2005), Qualitative Methods in Social Research, chs. 5-9, McGraw-Hill Primis, p. 83. 33
  40. 40. IÉSEG Master Thesis – Aude Richon – 3 Methodology The readers can have a look at the interview guide in Appendix A. 3.2.2 Weaknesses and strengths of the data collection method Qualitative data Interviewing allows many ways of gathering information through non verbal communication, follow-up questions and probe for answers. There is also a possibility of pre-screening the interviewees (if one firm does not let me talk to the manager for sustainable development, I can choose another one), and making sure that the participants have the information I am looking for. Generally interviewing creates a good cooperation of respondents, but the risk here is that I am going to interview professionals that have busy schedules and the subject can be quite sensitive for some companies. Thus, I have to really show them that answering my questionnaire is worthy. Another issue is that interviewing is costly: in time (to get the appointments, talk to the people, follow-up) and in money (transportation costs) that is another reason why I will only be able to interview few people. There is a risk of subjectivity (because of the way of questioning for instance). Finally, I will have more experience for the last interviews, so I might not get all the information I need from the first ones. Quantitative data The weakness of the quantitative data collection process is that it is not flexible, it will be difficult for me to analyse just certain components of the indexes for instance, or maybe I will have the possibility to do it, but then I will not be able to find any benchmark to compare to. The strength is that the data I will get is reliable and I will be able to draw conclusions from it and argue against any critics. I will also have a certain flexibility concerning the indicators I decide to study, depending on each index and/or sector of activity. I will be able to study differences in financial performance, in volatility opposed to societal performance for instance. 3.2.3 Research ethics As far as ethics is concerned, I will be very careful to respect the interviewees I meet. I will ask each of them if they agree on the recording of the interviews, if they agree that I 34
  41. 41. IÉSEG Master Thesis – Aude Richon – 3 Methodology mention their company and name in the thesis. Moreover, I will not write out what they tell me off-record. I will mention every source I use and try to deliver the most relevant study to the readers. 3.2.4 Sampling design Quantitative data There is a limited amount of sustainable indexes, thus I will study most of them. You can see the list of sustainable indexes in Appendix B. Then for deeper analysis, I will study environmental and financial data of the companies of the automotive sector from the MSCI World, 24 companies listed below: - Kia Motors Corporation - Bajaj Auto Limited - BMW AG - Maruti Udyog Limited - Daimlerchrysler ag - Mazda Motor Corp. - Mitsubishi Motors Corp. - Denway Motors Limited - Nissan Motor Company Limited - Fiat - Ford Motor Company - Peugeot SA - Fuji Heavy Industries Limited - Porsche AG - Renault SA - General Motors Corp. - Suzuki Motor Corp. - Harley-Davidson Inc. - Toyota Motor Corp. - Honda Motor Company Limited - Volkswagen AG - Hyundai Motor Company - Yamaha Motor Company Limited - Isuzu Motors Limited Limited Qualitative data I will not use a random sample for my study. I will choose a few companies and see if they accept to meet me. I will attempt to meet the interviewees that would give me the greatest possible insight on the subject. Arguing a lack of time and interview fatigue as well, many companies refused the interview. However, I still managed to interview Caroline Orjebin from Dexia. I met Damien Buffet from Sarasin Expertise, who is a manager in Sustainable Responsible Investment funds, and Florent Gitiaux from Ethicity, who is a consultant in Sustainable Development. I also interviewed Yannick Ouaknine from Société Générale, who is an 35
  42. 42. IÉSEG Master Thesis – Aude Richon – 3 Methodology SRI analyst and Sophie Glémet, who is the corporate communications manager of Toyota France. 3.3 Data analysis 3.3.1 Topical scope of the study I will limit my study to multinational companies as the information concerning them is quite available. I do not intend to cover all the fields of CSR, but to have a more comprehensive view on it and grasp the strategies of companies. 3.3.2 Method(s) to analyze the data I will make a cross-sectional study of the interviews performed. It will give me the opportunity to compare the practices of companies and their vision. To complete this qualitative analysis, I will use ratio analysis, and a statistical or econometrical model to explain the link between CSR and CSP and compare the practices of different companies. 3.3.3 Limits Even though CSR is talked about more and more, it is still a sensitive subject, and also a possible way to gain competitive advantage, thus companies are not necessarily open to share their practices, at least no more than what they actually do. Thus, first, it is quite difficult to obtain interviews and second, it is highly possible that the only information given will be the one we could have read anywhere. 36
  43. 43. IÉSEG Master Thesis – Aude Richon – 3 Methodology 3.4 Methodology, hypothesis by hypothesis Reminder of the hypothesis: H1: There is no sanction imposed on companies that are not committed to CSR. H2: Good environmental performance generates good financial performance. H3: Companies with high socially responsible standards perform better than those with poor socially responsible standards. H4: Companies tend to generalize CSR practices. H5: CSR is just PR. H6: Even though sustainable development can be considered as in contradiction with the market law, it provides development opportunities for companies. The following table introduces the readers to the way hypotheses are tested. Table 3.1: Investigation of the hypotheses Primary data Secondary data - sustainability indexes returns - existing literature - environmental indexes returns H1 - existing literature - annual reports of automotive companies - sustainability reports of automotive companies - complementary literature - existing literature H2 H3 H4 H5 H6 - interviews - sustainability indexes returns - interviews - existing literature - interviews - existing literature - interviews - existing literature Method - comparison of sustainability returns against their benchmarks - link with existing literature - comparison of environmental returns against their benchmarks - ratio analysis of data from the automotive industry - link with existing literature - comparison of sustainability returns against their benchmarks - cross-sectional analysis of interviews - link with existing literature - cross-sectional analysis of interviews - link with existing literature - cross-sectional analysis of interviews - link with existing literature - cross-sectional analysis of interviews - link with existing literature 37
  44. 44. IÉSEG Master Thesis – Aude Richon – 4 Why would companies engage in CSR policies? 4 Why would companies engage in CSR policies? This part corresponds to the qualitative analysis of my research. It consists of the study of the data gathered from the interviews I performed. 4.1 Presentation of the interviewees For the readers to better understand the context of my interviews. Here is a short presentation of each interviewee and its company. The interviewees are presented in the order I met them. Interviewee 1 Name: Caroline Orjebin Company: Dexia SA Position: Project Manager – Sustainable Development Department Sector: Banking and finance Employees: 33 321 of 72 nationalities Geographic presence: international, 33 countries (except Asia and South America) Dexia (group) arose in 1996, from the alliance between two important European institutions specialised in the local sector financing: Crédit Local de France and Crédit Communal de Belgique. Dexia is amongst the twenty biggest financial institutions of the Eurozone and is building its strategy on two pillars: retail banking in Europe (Belgium, Luxembourg, Slovakia, and Turkey) and world leadership in public and project finance. CSR lies at the heart of Dexia’s strategy. The group is part of UNEP-FI, the Global Compact, the Equator Principles, the Principles for Responsible Investment (PRI), and the Carbon Disclosure Project. Moreover it is included in 7 SD indexes: DJSI, FTSE4Good, Aspi, Ethibel, Ethical Index Euro, ECPI®E-Capital Partners Indices, Ethical Index Euro®. 38
  45. 45. IÉSEG Master Thesis – Aude Richon – 4 Why would companies engage in CSR policies? Interviewee 2 Name: Florent Gitiaux Company: Ethicity (SARL) Position: Consultant in Sustainable Development Sector: Consulting in Sustainable Development Strategy Employees: 10 and external experts Geographic presence: national, with one international client (Rainforest Alliance, which is an NGO established in Chile) Ethicity is an independent agency specialised in consulting in SD strategy. It was created in 2001 and is working with companies such as Danone, Norauto, Yves Rocher, MAAF… They are supplying them with an inventory of the firm’s situation, a formulation of recommendations, then they are working together on improvements and concrete actions, and finally they can also be asked for the set up of the sustainability reports of these companies. Interviewee 3 Name: Damien Buffet Company: Sarasin Expertise AM Position: Management SRI Values Sector: Banking/Asset Management Employees: 12 Geographic presence: national for clients, Eurozone for values Founded in 1997, Sarasin Expertise AM has been since March 2003 the French subsidiary of Banque Sarasin & Cie SA, which is a Swiss bank headquartered in Bâle. It was one of the first companies to engage in sustainable development in France. Sarasin Expertise is managing 33 billion euros of assets, with an SRI outstanding portfolio of 2 to 3 billion euros. 39
  46. 46. IÉSEG Master Thesis – Aude Richon – 4 Why would companies engage in CSR policies? Interviewee 4 Name: Claude Arquizan Company: Total SA Position: In charge of the sponsorship of projects aiming at economic development and employment generation in South West of France Sector: Petroleum Employees: 95070 Geographic presence: international (in more than 130 countries) Total is an energy company, which is one of the chemical manufacturers’ leaders and is the fifth largest international oil and gas producer. SD is very important for Total. Indeed the firm is evolving in a controversial environment as the countries where oil is extracted are mainly dictatorships. Total is part of the Global Compact and recognizes the OECD guidelines for multinational companies. The group also set up a foundation in 1992 in order to protect the biodiversity and is listed in the following SD indexes: FTSE4Good, DJSI World, DJ STOXX SI, FTSE ISS CGI and ASPI Sustainable Development and Governance indices. Interviewee 5 Name: Yannick Ouaknine Company: Société Générale Position: Senior SRI Marketing Analyst Sector: Banking Employees: almost 120 000 Geographic presence: international (established in 77 countries) Société Générale was created in 1864. It is now a leading bank in Europe in terms of retail banking, market capitalization, financing and investment as well as asset management. It also ratified the Global Compact, the PRI, the Carbon Disclosure Projec and the UNEP-FI. At last, the company stock is listed in the following indexes: FTSE4GOOD, Dow Jones Sustainability Index World, DJSI STOXX and Aspi Eurozone. Interviewee 6 Name: Sophie Glémet Company: Toyota Position: Corporate Communications Manager Sector: Automotive Employees: 67 650 Geographic presence: international (production in 26 countries and markets in over 170 countries/regions) Toyota is now the first automobile manufacturer in the world. It sold more than 8.8 million vehicles in 2006. The company is very productive thanks to lean production and processes such as Kaizen. Toyota is quite innovative technically as well and good at innovative practices in terms of SD. It is also present in many sustainability indexes and is part of the Global 100. 40
  47. 47. IÉSEG Master Thesis – Aude Richon – 4 Why would companies engage in CSR policies? Dexia, Total and Toyota were interviewed as companies implementing CSR policies; I attempted to get their point of view on CSR, its development and its outcomes. Ethicity, Sarasin Expertise and Société Générale were a bit questioned on the CSR of their company, but their role was more as opinion leaders, since with their activity they are in regular contact with different companies and have the opportunity to observe evolutions in terms of CSR. The questionnaire used for the interviews is in Appendix A (the readers should note that it had been adapted when I interviewed the opinion leaders). 4.2 Presentation of the themes and subthemes studied I identified the themes and subthemes in accordance with the notes I gathered from the interviews and the relevant topics for my research. They are all assembled in the following table: Table 4.1: Presentation of the themes and subthemes of the interviews analysis Themes Corporate history and CSR CSR within the company Communication and (potential) achievements of CSR Subthemes Motives for action Stakeholders’ influence Evolution over time Partnerships in the frame of CSR Perspectives for the future SD departments Governance and decision making Accreditations, certifications and labels CSR at the global level Integration of CSR in the day-to-day operations Reporting and indicators Communication Positioning and image Performance Reasons for CSR policies success First, we will have a look at how companies started to be interested in CSR and the milestones of CSR policies implementation. Then, we will see the concretization of CSR on a day-to-day basis, and finally, we will identify how companies communicate on their SD measures and the results of these measures. 41
  48. 48. IÉSEG Master Thesis – Aude Richon – 4 Why would companies engage in CSR policies? 4.3 Interviews analysis 4.3.1 Corporate history and CSR Motives for action For this subtheme and from the interviews, I gathered ten reasons why companies would implement CSR policies. They are all in the table below, with the corresponding argument in the cells on the right. Table 4.2: Motives companies can have to implement CSR policies Commitment of main shareholders Will/Awareness of the CEO Company’s mission Opportunity to act/ Act like the others Denunciation of a problem Differentiation policies Attract new shareholders Dexia’s main French shareholder is the Caisse des Dépôts et Consignations, which is itself very engaged in CSR, while its main Belgian shareholder is ARCO, a mutualist group from the Christian labour move which is very attached to ethics and CSR. The president of Dexia wants the bank to be the reference bank for sustainable development. There is a mainstreaming awareness of top management on SD issues; they are now communicating it to stakeholders. The strategy of Sarasin Expertise in Paris is only based on SRI. Toyota’s mission is to build the cleanest cars with the cleanest supply and production chains. Ethicity is often consulted by companies with no CSR policies, which see that some things are happening and want to be part of the move as well. They always have some actions put in place but they need help to formalize their policies. Companies are doing that prospectively rather than with a real will to change. Some companies just take a few measures, to do like the others, but take no concrete actions, it is not really CSR. Nike can be an example for this one. However, it is not very common, as NGOs do not have enough money to spend on investigations and communication. Thus they only pick big examples. For companies like Sarasin Expertise, specializing in SRI and working on a niche is important, otherwise they would be run down by bigger groups. When a company is in SRI indexes it can attract new investors as well. They are investors that the company would not have thought about before, thus CSR can be a good communication and reputational tool. 42