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11.pp.0276www.iiste.org call for paper-295

  1. 1. Issues in Social and Environmental AccountingVol. 1, No. 2 December 2007Pp 276-295 The Opinions of European Companies on Corporate Social Responsibility and Its Relation to Innovation M. Victoria López-Pérez Mª Carmen Perez-Lopez Lazaro Rodriguez-Ariza Faculty of Business Administration University of Granada, SpainAbstractIn recent years there has been greater concern among companies to include responsible prac-tices in their goals. To achieve this aim, companies are beginning to manage economic, socialand environmental factors following socially responsible practices. Adopting a strategy of Cor-porate Social Responsibility (CSR) may influence the different policies implemented by thecompany, one of which is that regarding innovation. In this study, we analyze the opinions of95 European companies, 42 of which form part of the Dow Jones Sustainability Index (DJSI)and 53 of which belong to the Dow Jones General Index (DJGI), concerning their CSR policy,the innovation carried out and the relation between the two concepts. Our results show that theDJSI companies, unlike those belonging to the DJGI, consider their CSR strategy to be a keyfactor in generating competitive advantages and profits. Moreover, the companies surveyedhave implemented innovations that are more incremental than radical, and these innovationpractices are found to be influenced by CSR strategies.Keywords: Corporate Social Responsibility, Innovation, Resource and Capabilities Theory,European Companies, Competitive Advantages, Environmental Aspects, Incremental Innova-tions, Radical Innovations.1. Introduction begins to demand practices of corporate social responsibility. As this occurs,In the last few decades, the goals that companies need to take steps and con-companies set out to achieve have been sider this question in formulating theirexpanding; the operations carried out strategies. Thus, the practices of corpo-may affect part of society such that it rate social responsibility are coming toM. Victoria López-Pérez is Lecturer at Department of Economics and Financial Accounting, Faculty of Business Ad-ministration, University of Granada, Spain, email: mvlopez@ugr.es. Mª Carmen Perez-Lopez is Lecturer at Faculty ofBusiness Administration, University of Granada, Spain, email: marialo@ugr.es. Lazaro Rodriguez-Ariza is ChairProfessor at University of Granada, Spain, email: lazaro@ugr.es
  2. 2. M.V. Lopez, M.C. Perez, L. Rodriguez / Issues in Social and Environmental Accounting 2 (2007) 276-295 277form part of business culture. The crite- sues:ria of corporate responsibility include a) their attitude with respect to CSReconomic and environmental elements, policies,together with that of social responsibility b) the policy developed with regard to(Hedstrom et al., 1998; Bansal, 2005). innovation, andTherefore, practices related to environ- c) the relation between these two as-mental and social goals are frequently pects.contained in the set of strategies known The aim of this study is to analyze theas the Corporate Social Responsibility behaviour of companies concerning(CSR) of companies (Adams & Zutshi, these questions, but not the result of2004:34; King, 2002). such behaviour.CSR is a broad concept that includes Research into the adoption of CSR prac-aspects related to economic, social and tices by European companies is still atenvironmental spheres (the “triple bot- an embryonic stage (McWilliams et al.,tom line”) (Carroll, 1999; Boatright, 2006), as the application of CSR policies1993). The adoption of CSR practices by these companies, as well as the fol-may produce a cultural change among lowing of sustainability guidelines, is acompanies. To the extent that they con- relatively recent phenomenon in Europecern, among other aspects, reducing (Cetindamar & Husoy, 2007). This ex-companies’ environmental footprint, as plains the interest that may be provokedwell as improving safety, businesses by studies such as the present.need to adapt their activities, organiza- The paper is organized as follows: Sec-tional structures, processes and products tion 2 presents the background concern-to bring them into line with CSR poli- ing CSR and innovation in companies,cies, bearing in mind the possible need together with the hypotheses that areto implement innovation-based activities tested in this study. The following sec-(Castelo & Lima, 2006:121; Slowinski tion describes the methodology used,et al., 1997). McWilliams & Siegel after which Section 4 provides some(2001) established, from a theoretical comments on the results obtained, andstandpoint, that CSR-oriented differen- finally, Section 5 draws the main con-tiation may require investment in re- clusions of the study.search and development. In addition,according to Hart & Milstein (2003),innovation is one of the key factors un- 2. CSR and innovation. Working hy-derlying the achievement of CSR objec- pothesestives and ensuring a company’s continu-ity. The consideration of CSR as an element that adds value to companies representsIn order to make an empirical study of a change of philosophy in the businessthe incidence of CSR practices on com- world. The concept of CSR can be con-panies, we analyzed the opinions of a set sidered from many standpoints, and inof European companies that follow CSR this study we examine CSR in the sensepractices, and of others that do not con- of the types of behaviour or ethical prac-sider them relevant to their strategies, tices followed by a company in responsewith special regard to the following is- to market forces or legal restrictions, and
  3. 3. 278 M.V. Lopez, M.C. Perez, L. Rodriguez / Issues in Social and Environmental Accounting 2 (2007) 276-295in consequence with its ethical princi- companies have been considered to gen-ples (Carroll, 1999). In our view, busi- erate competitive advantages over timeness activity involves the performance on the basis of the good use made ofof a series of processes and we believe resources when these are valuable,companies can consider themselves re- scarce, and impossible to substitute orsponsible for the results and impacts copy (Barney, 1995:56). For Hoopes etderived from their activity (Wartick & al. (2003:890), inimitability is the mostCochran, 1985). This approach is con- significant characteristic, and for Barneytained in the framework of one of the (2001:45), it is the most important con-currents of opinion concerning CSR ini- tribution of the resource-based approach.tiated in the late 1990s, the object ofwhich was to measure the initiatives For many people, CSR strategies repre-adopted in this field (Carroll, 1999). Dif- sent the greatest opportunity currentlyferent companies normally define the available to the business world. Oppor-content of their explicit preferences as tunities are of various types, and includeregards CSR issues and these prefer- avoiding the threats to growth posed byences will lead to the adoption of spe- operational restrictions, and achievingcific decisions and actions (Wood, greater success through new products1991). Thus, we believe that the adop- and new technologies (Hedstrom et al.,tion of CSR policies involves a change 1998:5). Costs can be reduced, risksof culture and philosophy among com- lessened, sales growth promoted or mar-panies, as they incorporate ethical crite- ket share increased, by means of productria into their actions, which affect their innovation (Hart & Milstein, 2003) andcode of business practice. by seeking a client profile with an un- derstanding of CSR objectivesThere are a large number of theoretical (McWilliams & Siegel, 2001). Many ofstandpoints from which CSR may be these actions may require innovations. Instudied (McWilliams et al., 2006); in the this respect, we believe that innovationpresent paper, we take as a basic frame- in the business world can be studiedwork the theory of resources and capaci- from the standpoint of CSR-based prac-ties (Wernerfelt, 1984). The resource- tices.based approach has become the pre-dominant paradigm in research into In general, we may say that in Europe,management strategy (Peteraf, 1993). In CSR practices are focused on proactiveaccordance with this latter perspective, it policies related to the environment andis perfectly foreseeable that CSR criteria human resources (Social Investment Fo-will influence companies’ decisions and rum, 2003:39). This leads us to consideractions. that the strategies developed by compa- nies will to a large extent be related toAccording to the resource and capacity- the fulfilment of requirements of an en-based approach, the earnings of the com- vironmental nature, such as reducingpanies within a given business sector can emissions, obtaining energy savings,be accounted for on the basis of the dif- producing lower quantities of waste mat-ferences in their resource provisions ter and making provisions for its recy-(Barney, 1986a, 1986b, 1991; Peteraf, cling. In addition, it will be necessary to1993; Wernerfelt, 1984). Traditionally, search for other technologies that will
  4. 4. M.V. Lopez, M.C. Perez, L. Rodriguez / Issues in Social and Environmental Accounting 2 (2007) 276-295 279enable companies to reach their CSR of the factors that poses greatest diffi-goals. culty for management. As discussed be- low, studying technology, from the CSRIn the light of these considerations, we standpoint, can facilitate its analysis.studied the concern for CSR among Innovation is fundamental to value crea-companies, their policies on disclosure, tion, fostering company competitivenessand how CSR is put into practice. Thus, and productivity (Achrol & Kotler,we were able to distinguish companies 1999; Badaracco, 1991). Organizationswith serious concern for CSR issues that decide to introduce innovation crite-from those that did not consider CSR ria into some or all aspects of the busi-relevant to their strategies. Subse- ness increase their opportunities andquently, we studied specific aspects, competitive advantages in the marketsuch as the incidence of CSR on the gen- (Trillo & Pedraza, 2007: 1419).eration of competitive advantages and ofcompany results, together with aspects Innovation can be viewed as a measureof particular importance to these compa- of the application of knowledge (Balkinnies, with special reference to the ques- et al., 2000; Díaz et al., 2004; Soo et al.,tion of the environment. 2002). By means of innovation, it is pos- sible to achieve changes in technology,Therefore, the following three hypothe- comprising the materialization of poten-ses were proposed: tially profit-generating ideas in products, processes or services (Muñoz et al., H1. The companies that imple- 2007).ment CSR practices are more likely thanthose that do not to consider CSR strat- Dory (2005) claimed that innovation canegy to be a key factor in the generation be considered an effective exploitationof competitive advantages. of new ideas, using a foundation of ex- H2. The companies that imple- isting knowledge to create new productsment CSR practices consider it to have a and services, or to develop existing ones.positive effect on company results. Innovation requires a social process of H3. The companies that imple- knowledge and resource exchange, to-ment CSR practices consider, unlike gether with the learning of the necessarythose that do not, CSR strategy to in- competences, derived from interactionsvolve a consideration of environmental with interested parties.aspects. In a similar line, Goh (2005) relates in-Obtaining competitive advantages is novation to knowledge, observing thatrelated to the use made of resources in companies must create knowledge, newwhich CSR strategies play a relevant ideas and good management practices inrole. As remarked above, innovation order to innovate effectively. This authormay be one of the scarce, inimitable re- believes it is possible to obtain advan-sources on which a company relies to tages from innovation in knowledge, butachieve these types of advantages. that to do so it is necessary to identify, create and acquire new knowledge on aTechnology plays a crucial role in a continual basis, and also to foster an at-company’s competitiveness, and is one mosphere of collaboration, both within
  5. 5. 280 M.V. Lopez, M.C. Perez, L. Rodriguez / Issues in Social and Environmental Accounting 2 (2007) 276-295the organization and outside it. Compa- in which to be achieved. Faced with anies, as well as gaining knowledge from new phenomenon and a cultural change,their own experience, learn constantly it is necessary to create a knowledgefrom their relations with diverse external base enabling the company subsequentlysources (Freeman, 1987). to develop an incremental innovation.Technological innovations can be The sources of technological knowledgeclassed as either radical or incremental. are those data accumulated by compa-Radical innovations are those that give nies, which remain within the organiza-rise to products or processes that are not tion in a more or less stable form, andbased on prior technological knowledge which have the potential to create valueor on transmitted knowledge (Tushman when appropriately exploited and incor-& Anderson, 1986). Radical innovations porated, more or less immediately, intogenerate new knowledge that may fa- technologically innovative products and/vour continual innovation (Knott, 2003). or processes (Tripsas, 1997; Yli-RenkoThis type of innovation involves a rup- et al., 2001; Matusik, 2002; Zahra &ture with current technological thinking Nielsen, 2002). Initially, companies will(Gatignon et al., 2004) and involves a adapt existing processes to the culturalhigher degree of uncertainty with respect changes, and so we believe that the inno-to the success achieved from the invest- vations in this case will mainly be of thements made. The goal of incremental incremental type. Therefore, we proposeinnovations is to develop already- the following hypothesis:existing technologies. Experience with H4. Companies that implementcertain technologies leads to a greater CSR practices introduce innovations thatcapacity for absorption and to greater are more incremental than radical.competitiveness in the use of such tech-nologies, by enabling the organization toelaborate specialized capabilities The strategies of CSR can mean that(Muñoz et al., 2007). companies evolve from protection- oriented measures to a redesign of theirIn the present study, we seek to deter- activities, taking into account new tech-mine whether companies base their pre- nologies (Bansal, 2002). From the stand-sent innovations on earlier ones (i.e. in- point of CSR, the measures adopted maycremental innovation) or whether they produce changes in processes, such ascarry out innovation of a radical type. In reducing the environmental impact, in-addition, we examine the question of creasing safety or enabling the recyclingwhether there are significant differences of materials; they may also affect prod-concerning the type of innovation car- ucts, for example by improving the qual-ried out (incremental or radical) in com- ity of the materials employed. Innova-panies that follow CSR policies, with tion influences the efficient use made ofrespect to those that do not consider energy, and may reduce the volume ofCSR to be relevant to their strategies. materials consumed (Bansal, 2002:128).Although a cultural change such as that Thus, actions taken in accordance withinvolved in incorporating CSR policies CSR criteria sometimes involve changesmay require radical innovations, we be- in products that may be toxic, in proc-lieve the latter need a longer time frame esses, and even, in some cases, may give
  6. 6. M.V. Lopez, M.C. Perez, L. Rodriguez / Issues in Social and Environmental Accounting 2 (2007) 276-295 281rise to a change in the company’s activ- whether concern for CSR by companiesity. Hence, in the longer term, some influences the innovation they carry out;firms evolve and carry out radical with this in mind, we analyze the type ofchanges, repositioning themselves by the innovation in which concern for CSR istransformation of their activities towards materialized. It is also of interest toothers that reduce their impact on the study the existence of differences withenvironment; such is the case, for exam- companies that do not share this concernple, of the companies Dupont and Mon- for CSR. Taking these aims into ac-santo. count, we propose the following hy- pothesis:Traditionally, various types of innova- H5. Companies that implementtion have been identified: product inno- CSR practices are of the opinion thatvation, process innovation, market inno- adopting such practices influences thevation, input innovation and organiza- innovations made.tional innovation (Schumpeter, 1934).However, recent empirical studies nor-mally distinguish two types, those of 3. Methodologyproduct and process innovation This study is focused on European firms,(Sherman et al., 2000; Chryssochoidis where the degree of disclosure of CSRand Wong, 2000; Di Benedetto, 1999). strategies is fairly homogeneous, asAccording to Trillo & Pedraza (2007: companies normally follow standard1422), product innovation is that which guidelines and indexes in drawing upintroduces changes at some stage of the their reports (Doh & Guay, 2006).production process and commercializa-tion of the product; it may affect theproduct’s design, composition or presen- To test the hypotheses, we drew up atation to the market. On the other hand, questionnaire of 27 items, grouped intoprocess innovation focuses on the way in three blocks. The first of these waswhich the product innovation is per- aimed at revealing the company’s atti-ceived and implemented, and influences tude toward CSR. The second block wasthe stages of product conception, crea- focused on its innovation strategy andtion, research, development, production practices, and the third one was con-and commercialization, as well as the cerned with the relation between theseway in which these areas are interre- two concepts. The full questionnaire islated. Innovation – especially as it af- provided in Annexe 1. Our intentionfects products – is recognised as a key with this questionnaire was to obtainelement in the process of value creation data on business attitudes towards these(Han et al., 1998; Weerawardena, 2003). aspects. The items in the questionnaire were measured on a 5-point Likert scaleIn this study, we take it that CSR strate- (the Likert scale grades replies from 5gies involve a concern for environmental (highest) to 1 (lowest)), and the popula-and social aspects. We set out as one of tion was comprised of European compa-our goals that of determining whether it nies listed on the Dow Jones World In-is necessary to make an innovation- dex, specifically the Dow Jones Generalbased effort in relation to such strate- Index (DJGI)1 and the Dow Jones Sus-gies. This would involve investigating tainability Index (DJSI), in the under-
  7. 7. 282 M.V. Lopez, M.C. Perez, L. Rodriguez / Issues in Social and Environmental Accounting 2 (2007) 276-295standing that among the companies in- indexes developed in Europe5 and thecluded in these two indexes there exist DJSI takes into account the adoption ofdifferences with respect to the obser- business practices based on CSR as avance of CSR practices. The DJSI is strategic decision capable of influencingcalculated from data on firms that par- the firm’s profitability (Husted and Sala-ticipate in the DJGI. The DJSI is made zar, 2006).up of firms that are leaders in CSR prac-tices and are among the top 10% of the We sent the questionnaire to all thefirms in the DJGI. European companies quoted on the DJSI and DJGI: 113 European companies be-The DJSI is a multi-dimensional con- longing to the DJSI (these firms followstruct intended to enable the measure- and disclose CSR practices and observement of CSR practices; it is based on the economic, environmental and socialeconomic, social and environmental in- criteria required by the Sustainable As-dicators, and enjoys broad social back- set Management Group (SAM)), anding. Although some studies have em- 1084 European companies includedployed other multi-dimensional meas- within the DJGI in the period of ourures (McWilliams & Siegel, 2000; study. These companies are non-Wenzel & Thiewes, 1999; Griffin & financial firms; for the firms belongingMahon, 1997; Stanwick & Stanwick, to the DJSI we examined the companies1998), we selected the DJSI because its that had been included in this index fromrequirements concerning CSR are more its constitution.comprehensive2 than those applied byother indexes of sustainability3 We sent the questionnaire by e-mail,(SustAinability, 2004) and are similar to addressed to the Chair of the Board. Thethose proposed in the CSR guides - the first such mailing took place in OctoberGlobal Reporting Initiative (GRI) and 2006, followed later by a reminder. Re-the Global Compact4. The DJSI includes ception of replies was closed at the endinnovation among the parameters con- of March 2007. The CSR outlook of thesidered and it was initiated in 1999, on companies examined is supplementedthe basis of firms that had met the re-quirements of the index during 1998. ASPI Eurozone Indexes, the Citizens Index and the KLD-Nasdaq Social Index.This index is prior to that of the other 4 Global Reporting Initiative is a “Sustainability Report- ing Guideline" for voluntary use by organisations re-1 This index is now termed the Dow Jones Wilshire porting on the economic, environmental and socialGlobal Index. impacts. Sustainability reporting is the practice of meas-2 The DJSI includes indicators on the following dimen- uring, disclosing, and being accountable to internal andsions: corporate governance, investor relations, manage- external stakeholders for organizational performancement, codes of conduct, customer relations, environ- towards the goal of sustainable development. Themental policy and performance, labour practice, human Global Pact is a UN-sponsored international initiative. Itcapital development, talent attraction and retention, is aimed at encouraging firms to make a voluntary com-organizational learning, standards for suppliers, stake- mitment to social responsibility, via the adoption of theholder engagement, corporate philanthropy and social Ten Principles based on human, occupational and envi-reporting. ronmental rights and on the fight against corruption. 53 Other indexes that have been created upon criteria of Although the companies that comprise the DJSI Stoxxsustainability include the FTSE4Good and the Domini are European, this Index was set up in 2001 and so isSocial Index (KLD). These have been developed by not suitable for the purposes of the present study. Theorganizations of acknowledged standing and have lent FTSE4GOOD database was created in 2002. Thecredibility to investment in companies that follow crite- Domini Social Index was established in 1990 and is aria of sustainability. More recent additions include the reference point for investment in sustainability for US companies.
  8. 8. M.V. Lopez, M.C. Perez, L. Rodriguez / Issues in Social and Environmental Accounting 2 (2007) 276-295 283with a review of the information dis- 13), there are significant differences,closed on the subject of CSR, in the p<0.01, between the DJSI and the DJGIform of CSR reports or the companies’ companies. The former show a higherannual reports. The final sample was degree of agreement with the questionsmade up of 95 companies, 42 of which concerning CSR than do the DJGI com-form part of the DJSI, while 53 belong panies. In the case of the DJGI compa-to the DJGI. The response rates were nies, we observed a higher degree of37% for the DJSI firms and 5% for DJGI dispersion among replies than with thefirms. The response rate for DJSI was DJSI companies, which reflects greaterhigher than that for the DJGI companies, differences of opinion on the question ofwhich could be an indicator of the inter- CSR among DJGI companies thanest among the former companies in dis- among DJSI companies.closing the effort they make with respectto CSR. In addition, in order to determine whether the initial classification was appropriate, a cluster analysis was car-4. Results ried out of the companies that had com- pleted the questionnaire, to sort themThe questionnaire results are shown in into homogeneous groups. The K-meansTable 1, which is divided into three non-hierarchic grouping method wasblocks. For each question, we show the applied to the responses to the questionsmean score and the standard deviation related to CSR. The companies, thus,obtained for the two groups of compa- were sorted into two groups, one com-nies studied (DJSI and DJGI). In addi- prising the DJSI companies and thetion, in order to determine the degree of other with those belonging to the DJGI.differentiation in the replies between the The results of the cluster analysis con-two groups of companies, the final col- firmed the original classification of theumn shows the results of the T test. companies into two groups – DJSI and DJGI. This classification, therefore, wasIn this study, we make an initial distinc- considered an appropriate one.tion between companies that belong tothe DJSI and those that belong to the It is quite clear that the DJSI companiesDJGI, in the supposition that the two are concerned about CSR-related issues.differ with respect to CSR practices. These companies consider CSR to be aThis hypothesis is tested by examination very important aspect of their activitiesof the questionnaire results and by (item 1).This degree of importance as-analysis of the information disclosed by cribed to CSR by DJSI companies hasthe companies (Annual Report)6. As can grown in recent years (item 4); in mostbe seen in Table 1 (Panel A), for the cases, it is determined, moreover, by thequestions related to the company’s de- Board of Directors, which makes it onegree of commitment to CSR (Items 1- of the strategic factors on which compa- nies base their actions, which confirms6 In general, the information contained in company the statement to this effect by Hustedreports corresponds to that in the replies received, which and Salazar (2006). Moreover, the DJSIleads us to believe that company strategies concerning companies consider CSR strategy to be aCSR correspond to their opinions expressed by their keyexecutives. key factor in generating competitive ad-
  9. 9. 284 M.V. Lopez, M.C. Perez, L. Rodriguez / Issues in Social and Environmental Accounting 2 (2007) 276-295vantages (Item 2), with a mean score with a mean score of 2.9. Therefore,assigned in this respect of 4.64. This from an empirical standpoint, hypothesisopinion is in line with positions de- H1 is confirmed for the companies ex-fended from a theoretical standpoint amined in this study.(Husted and Salazar, 2006; Adams andZutshi, 2004; King, 2002). On the con- In addition, and concerning companytrary, the DJGI companies did not pre- management, the DJSI companies be-sent an agreed opinion on this issue, lieve that the CSR strategy is aimed at Table 1. Panel A. Statistics of the questionnaire results concerning CSR DJSI Firms DJGI Firms T-test Standard Standard (p-value) Mean Mean Deviation DeviationCSR1. CSR is a very important concern for your com-pany 4.73 0.47 2.85 0.97 0.001**2. In your company, the CSR strategy is a key fac-tor in generating competitive advantages 4.64 0.67 2.90 1.00 0.000**3. In your company, the CSR strategy is aimed atcreating future business opportunities, such as 3.91 0.83 2.85 0.90 0.007**opening up new market sectors4. In your company, the importance of CSR hasincreased in recent years 4.64 0.67 3.38 0.77 0.000**5. The company follows a policy of disclosure withrespect to its CSR practices 4.91 0.30 3.38 0.87 0.000**6. The edition of CSR Guides has helped determinethe aspects of CSR that are disclosed by your com- 4.82 0.40 3.23 1.30 0.001**pany7. Adoption of the CSR strategy involves takingenvironmental aspects into consideration. 4.82 0.40 2.77 0.83 0.000**8. The disclosure of CSR practices in your companyis related to the demands of stakeholders (investors, 4.82 0.40 2.54 0.66 0.000**institutions, clients, etc.) in this respect9. The adoption of CSR practices in your companyhas a value added effect for stakeholders (profits,remuneration, working environment, product qual- 4.82 0.40 2.77 1.01 0.000**ity, etc.)10. The CSR strategy depends on or is supervisedor drawn up by the Board of Directors 4.64 0.50 2.92 0.95 0.000**11. The CSR practices in your company are au-dited / certified / confirmed by external agencies 4.73 0.47 2.31 1.38 0.000**12. The adoption of CSR practices in your companyhas a positive effect on the company’s short-termresults (reductions in costs, increases in sales, etc.) 4.00 0.77 2.15 0.38 0.000**13. The adoption of CSR practices in your companyhas a positive effect on the company’s long-termresults (new market sectors, change of activity, etc.) 4.55 0.69 3.15 1.14 0.002**** p< 0.01
  10. 10. M.V. Lopez, M.C. Perez, L. Rodriguez / Issues in Social and Environmental Accounting 2 (2007) 276-295 285creating future business opportunities, of the capital market on which they aresuch as opening up new market sectors quoted, pressure by stakeholders or the(item 3); however, this latter item is wish to improve the company’s reputa-given a lower score (mean score 3.91) tion.than the capacity of CSR to generatecompetitive advantages. Thus, adopting With respect to the influence of CSRCSR practices does influence the man- practices on company results (items 12agement of these companies, by generat- and 13), the DJSI companies considering competitive advantages and creating that the effect of these practices on theirfuture business opportunities. own results will be positive, and this is borne out in the literature (López et al.The appearance of CSR guidelines has 2007; Simpson & Kohers, 2002), al-made it possible to establish yardsticks though the respondents seem to expectand thus indicators enabling the manage- these results to be greater in the longment and measurement of results. These term (4.55) than in the short term (4.00).guidelines also enable companies to sys- These scores enable us to accept hy-tematize the information disclosed so pothesis H2. More immediately, many ofthat it is comparable, while at the same the practices related to CSR are aimed attime they help bring about standardised meeting current legal requirements inCSR measures for use as a management the environmental field or concern hu-tool. Systematization and the establish- man resources, which may lead to costing of standards means that practices can reductions by rationalizing the use ofbe audited or certified externally, a pol- resources, or improving technologiesicy that is followed by most of the DJSI and motivating staff, reducing staff turn-companies (items 5 and 6). The disclo- over or improving their productivity. Itsure of information can be employed as seems reasonable that CSR strategiesa political tool to avoid social pressure should be more effective in the long(Parker, 1986:76). term, as their influence may well be on the company as a whole; furthermore,Unlike the DJSI companies, the DJGI technologies may be developed in accor-companies do not believe CSR to be dance with the company goals set out. Itvery important for their business (item 1, might be necessary for a certain periodmean score 2.85), although they do state of time to elapse to demonstrate thatthat the importance of CSR has grown in CSR involves a cultural change that willrecent years, and are considering follow- be gradually be brought about. We be-ing a policy of disclosure with respect to lieve that CSR policies need time to be-their CSR practices (items 2 and 4, mean come consolidated and to begin to pro-score 3.38). It can be said that the moti- duce results (Lee et al., 1996; Brown &vation among these companies to adopt Svenson, 1998; Souitaris, 2002).and disclose CSR practices does notarise from the fact that they consider Although the DJSI companies considerCSR to be a key factor in generating CSR practices to influence companycompetitive advantages (item 3, mean results, they report with greater empha-score 2.90). Disclosing this information, sis (mean score 4.82) that the adoptionhence, must be due to some other kind of CSR practices is related to demandsof motivation, such as the requirements from stakeholders (item 8) and that it
  11. 11. 286 M.V. Lopez, M.C. Perez, L. Rodriguez / Issues in Social and Environmental Accounting 2 (2007) 276-295produces added value for them (item 9). DJSI ones. For the latter, the adoption ofThe results related to stakeholders CSR practices constitutes a strategic de-(profits, remuneration, working environ- cision that will influence diverse com-ment or product quality) can be consid- pany policies (innovation, human re-ered short term effects. It is confirmed sources, communication with stake-that companies’ decisions to follow CSR holders) and will require information topractices are motivated by factors of be obtained on these aspects so that theybusiness (Williamson et al., 2006), but may be appropriately addressed. For thethey also consider these practices to DJGI companies, however, CSR doeshave greater effects on stakeholders in not comprise a strategic factor in theirthe short term. management, and its effects on company results are not important. It may be saidThe opinions of the DJGI companies that among the DJGI companies there isdiffer significantly from those of the growing interest in disclosing informa- Table 1. Panel B. Statistics of the survey results concerning innovation. DJSI Firms DJGI Firms T-test Standard Standard (p-value) Mean Mean Deviation DeviationINNOVATION14. Your company develops its own technology and 3.85 0.60 4.62 0.77 0.000**does not externalize R+D+I activity15. Current innovation in your company is groundedupon prior innovation (incremental innovation) 4.64 0.50 3.85 0.55 0.002**16. The innovation policy in your company is ori- 3.55 0.93 3.15 1.07 0.354ented towards inventions (radical innovation)17. In the innovation carried out in your company, 4.55 0.38 3.82 0.60 0.000**environmental aspects are taken into consideration.18. In your company’s innovation policy, emphasisis placed on strengthening the capacity to develop 4.09 0.70 3.92 1.04 0.654new technological capabilities19. Your company’s innovation policies are focused 4.73 0.47 4.31 0.85 0.161on products20. Your company’s innovation policies are focused 4.45 0.93 3.31 0.95 0.007**on processes** P <0.01.tion on CSR practices, even though this On the other hand, the DJSI companiesdisclosure is of a voluntary nature, but stated that the adoption of CSR strate-both in the reports that are published and gies involves the consideration of envi-in the replies to the questionnaires, the ronmental aspects (item 7). Environ-adoption of CSR practices does not seem mental issues form part of the concept ofto be related to business results (items CSR, together with economic and social12 and 13) or to the demands of stake- aspects (the “triple bottom line”), and soholders (item 8). it is to be expected that they should be associated with the company’s CSR
  12. 12. M.V. Lopez, M.C. Perez, L. Rodriguez / Issues in Social and Environmental Accounting 2 (2007) 276-295 287strategy. In addition, let us note that al- With respect to the questions concerningthough the adoption of CSR practices is innovation (Items 14-20. Panel B), thea voluntary issue (EC, 2001, 2002; DTI, DJSI and the DJGI companies awarded2001), companies must observe a series similar average scores and in some itemsof legal obligations in environmental there were no significant differencesmatters. between the two groups. Specifically, both the DJSI and the DJGI companiesThe DJGI companies, on the other hand, agreed in their perception of the radicaldo not consider environmental issues to innovation carried out, in the develop-be so important with respect to CSR ment of technological competence andstrategies. Moreover, the differences in in the fact that their innovation is mainlythe responses by the two groups of com- product oriented. In the remaining itemspanies are significant. As we remarked in this block of questions, the opinionsabove, innovation policies may respond of the two groups of companies differedto many different strategies, and in the significantly.case of companies that do not manifest aconcern for CSR, they consider that en- The DJSI companies implemented inno-vironmental questions are not especially vation that was mainly of an incrementalrelated to the CSR strategy adopted by type, and thus hypothesis H4 is accepted.the company. Therefore, hypothesis H3 The companies consider that better re-is accepted. sults are obtained in areas in which the Table 1. Panel C. Statistics of the survey results concerning the relation between CSR and innovation.CSR AND INNOVATION21. Your company’s innovation policies are relatedto its strategies of sustainability 4.91 0.30 3.00 0.82 0.000**22. The adoption of CSR criteria has led to a changein the company’s policies regarding innovation 4.55 0.52 2.85 0.90 0.000**23. The adoption of CSR criteria has led to in-creased expenditure on innovation 4.36 0.50 2.62 0.77 0.000**24. The adoption of CSR criteria has led to techno-logical changes in its production processes 4.73 0.47 3.08 1.04 0.000**25. The adoption of CSR criteria has led to techno-logical changes that affect the quality of its products 4.91 0.30 3.38 0.87 0.000**(design, quality, etc.)26. The adoption of CSR criteria has led to techno-logical changes that affect the range of products that 4.73 0.65 2.69 0.95 0.000**are marketed27. The adoption of CSR criteria has led to techno-logical variations that represent a radical change inthe company’s principal activity 1.82 0.60 1.38 0.87 0.178** P <0.01.
  13. 13. 288 M.V. Lopez, M.C. Perez, L. Rodriguez / Issues in Social and Environmental Accounting 2 (2007) 276-295appropriate fundamental research has agreement about the relation betweenbeen developed (Clemens & Row, CSR and companies’ policies on innova-1991). Furthermore, these companies tion. In fact, there are significant differ-reinforce their capability to develop new ences in the responses of the two groupstechnological competences and present a of companies in question, for all thecertain degree of agreement on develop- items listed in Panel C, Table 1, excepting their own technology rather than the last one, according to which theresorting to the externalization of re- companies in the two groups believe thatsearch, development and innovation. CSR strategies do not lead to radicalTheir innovation practices are related to changes in the company’s main activity.environmental aspects. These companies For the DJSI companies, unlike thosedevelop both product and process- belonging to the DJGI, the adoption oforiented innovation. CSR practices influences the innovation carried out and leads to changes in theirThe DJGI companies, too, report greater policies on innovation. The DJGI com-agreement on the implementation of in- panies, we find, do not consider CSR tocremental rather than radical innovation. be a strategic element on the basis ofThe behaviour of these companies re- which their policies should be devel-flects a preference for developing their oped, which is consistent with the re-own technology, rather than externaliza- plies made (items 21-27), which ratifytion, and for reinforcing the develop- the view that their policies with regardment of technological competences to to innovation are not created followingensure ongoing innovation. Among this CSR criteria.group of companies there is a clear pre-dominance of product rather than proc- Nevertheless, the replies to this block ofess-oriented innovation. The most im- questions are of great interest for theportant difference between DJGI and DJSI companies, as they reveal the linkDJSI was found to be the item concern- between the adoption of CSR practicesing process-oriented innovation. We and the innovation they have carried outmight conclude that both groups of com- (item 21). CSR criteria involve a changepanies implement innovation strategies, in the innovation policies of these com-but that the DJSI companies are more panies (item 22). Thus, for the DJSIinclined than the DJGI ones to opt for companies, CSR is a strategic factor thatprocess-oriented innovation. This find- affects their policies on innovation.ing might be due to attempts by these Moreover, although to a lesser degreecompanies to reduce the environmental (mean score 4.36), it involves increasedimpact of their activities, a subject on expenditure on innovation (item 23).which there is also a considerable degreeof difference between the DJSI and the The DJSI companies report that theDJGI companies. adoption of CSR practices has not led to radical changes in the activities of theFinally, with regard to the relation be- company (item 27). The CSR practicestween the adoption of CSR practices and involve the gradual adaptation of exist-innovation shown in panel C, we found ing products and processes. Companiesthat the DJSI companies, unlike the that have adopted CSR criteria reportDJGI ones, presented a high degree of that these have led to changes both in
  14. 14. M.V. Lopez, M.C. Perez, L. Rodriguez / Issues in Social and Environmental Accounting 2 (2007) 276-295 289their products – slightly more in quality In general, our study reveals, from an(item 25) than in product range (item 26) empirical standpoint, that the DJSI com-– and processes (item 24). Therefore, panies present a higher degree of agree-hypothesis H5 is accepted. According to ment on CSR-related topics than dothe information disclosed, the companies those belonging to the DJGI. The adop-are examining how to reduce the envi- tion of CSR practices becomes a strate-ronmental impact of their activities, re- gic factor, as can be seen among thehabilitate their surroundings or change DJSI companies, as it affects specifictheir processes, but they are not contem- policies, in this case, those concerningplating a change in the basic activity that innovation. The DJSI firms, taking intois carried out. Indeed, changes in activ- account CSR, are of the opinion that thisity, such as those put into practice by strategy is related to gaining competitiveDupont and Monsanto, are sporadic and advantages, obtaining results in the shorttend to occur in a gradual manner. and long term, and satisfying a series ofTherefore, we see that the adoption of stakeholders’ demands. They recognizeCSR practices by companies involves a the capacity of CSR to create value, andchange of outlook in the use of re- that its possibilities for the future aresources, in this case, those destined to mainly long term, thus assuring the per-innovation. manence and future development of these companies. Moreover, the adop- tion of CSR practices requires the con-5. Conclusions sideration of environmental issues, an- other of the dimensions making up CSR.The appearance of a new strategy, such This perceived importance might be in-as concern for CSR, requires a study of fluenced by social pressures and currentthe factors by means of which it is to be regulatory measures, although the eco-applied. Companies’ views in this re- nomic standpoint is also relevant, asspect provide an initial approach to- CSR may reduce the need for resourceswards determining the behaviour of or favour the use of less contaminatingcompanies faced with this new reality. resources, with positive effects in theTherefore, in this study, and taking into short term on the company’s image andaccount the recent adoption of CSR even perhaps on its profitability.practices by European companies, wehave analyzed the opinions of compa- The CSR strategy influences policiesnies that belong to the DJSI, and which and specific practices, affecting the di-thus demonstrate a concern for CSR, on verse functional areas of the companythe effects of adopting a CSR strategy, and, therefore, the activities it carries outthe innovation they have carried out and and the processes, products or servicesthe relation between the two concepts. offered. The DJSI companies report thatThese opinions were then compared their innovation policies are related towith those of companies that belong to CSR, with effects both on their productsthe DJGI and which do not implement (quality and range) and on their proc-CSR practices; certain significant differ- esses. This fact, therefore, has importantences were observed between the two implications for the management of thegroups of companies. activities of these companies. Moreover, the DJSI companies state that the adop-
  15. 15. 290 M.V. Lopez, M.C. Perez, L. Rodriguez / Issues in Social and Environmental Accounting 2 (2007) 276-295tion of CSR criteria leads to greater ex- or on the results obtained by companiespenditure on innovation. in relation to CSR and innovation.The present study has enabled us to ana- For future lines of research, we are con-lyze the effects of CSR practices on in- sidering characterizing the innovationnovation among a group of companies carried out by the companies that followthat consider CSR to be a strategic factor CSR practices and determining whetherfor them. Company management is af- this generates competitive advantages,fected by this issue, although it may be taking for this purpose, indicators ofnecessary for a longer period of time to business performance.elapse before we can determine the realeffect of the adoption of CSR practices,from an economic-financial and man- Referencesagement standpoint. Achrol, R.S. and Kotler, P. (1999)As concerns the innovation carried out “Marketing in the networkby all the companies in the study, this economy”, Journal of Market-mainly involves incremental-type inno- ing, Vol. 63 (special issue), pp.vation, based on prior knowledge. In 146-163.general, the DJSI and the DJGI compa- Adams, C., Zutshi, A. (2004) “Corporatenies reported similar views with respect social responsibility: Why busi-to the questions related to innovation. ness should act responsibly andThey were in agreement that innovation- be accountable”, Australianbased activities are influenced by envi- Accounting Review, Vol. 14, pp.ronmental aspects and that they are 31-39.aimed at both products and processes. Badaracco, J. (1991) The knowledge link: how firms compete throughThis study has enabled us to identify the strategic alliances. Boston: Har-motivations of the DJSI companies for vard Business School Press.adopting CSR practices, although it re- Balkin, D.B., Markman, G.D. & Gomez-mains unclear exactly why other compa- Mejia, L.R. (2000) “Is CEO paynies, which do not do so, i.e. the DJGI in high-technology firms relatedcompanies, should take an increasing to innovation”, The Academy ofinterest in CSR. It may be because of the Management Journal, Vol. 43,demands made by stock markets, or pp. 1118-1129.those of stakeholders, or simply a re- Bansal, P. (2002) “The corporate chal-sponse to trends in the sector in which lenges of sustainable develop-such companies carry out their activities. ment”, Academy of Manage-With regard to the limitations of our ment Executive, Vol. 16, pp.study, these concern especially the use 122-131.of questionnaires to obtain data on opin- ________ (2005) “Evolving sustainably:ions. In addition, we focused on the per- a longitudinal study of corpo-ception by companies of the aspects in rate sustainable development,question, and not on the specific policies Strategic Management Journal,and practices that were put into practice Vol. 26, pp. 197-218.by following a given business strategy, Barney, J.B. (1986a: “Strategic factor
  16. 16. M.V. Lopez, M.C. Perez, L. Rodriguez / Issues in Social and Environmental Accounting 2 (2007) 276-295 291 markets: expectations, luck and new product success: mediating business strategy”, Management effects of new product develop- Science, Vol. 32, pp. 1231- ment and rollout timeliness”, 1241. The Journal of Product Innova-_________ (1986b) “Organizational cul- tion Management, Vol. 17, pp. ture: can it be a source of sus- 268-285. tained competitive advantage?”, Di Benedetto, C.A. (1999) “Identifying Academy of Management Re- the key success factors in new view, Vol. 11, pp. 656-665. product launch”, Journal of_________ (1991): “Firm resources and Product Innovation Manage- sustained competitive advan- ment, Vol. 16, pp. 530-544. tage”, Journal of Management, Díaz, N.L., Aguiar, I. & De Sáa, P. Vol. 17, pp. 99-120. (2004) “Efecto directo versus_________ (2001) “Is the resource- indirecto del conocimiento tec- based “view” a useful perspec- nológico en la performance”, tive for strategic management XIV Congreso Nacional de research? Yes”, Academy of ACEDE, Murcia. Management Review, Vol. 26, Doh, J.P. & Guay, T.R. (2006) pp. 41-56. “Corporate social responsibility,Boatright, J.R. (1993) Ethics and the public policy, and NGO activ- conduct of business. Englewood ism in Europe and the United Cliffs: Prentice Hall. States: an institutional-Brown, M.G. & Svenson, R.A. (1998) stakeholder perspective”, Jour- “Measuring R&D productivity” nal of Management Studies, Research Technology Manage- Vol. 43, 47-73. ment, Vol. 41, No. 6, pp. 30-35. Dory, T. (2005) Review of IPTS´s re-Carroll, A.B. (1999) “Corporate social search on regional profiles. responsibility. Evolution of a MLP Regional Profiles and definitional construct”, Business Growth Poles. Brussels: Work- and Society, Vol. 38, pp. 268- shop. 295. DTI – Department of Trade and IndustryCastelo, M & Lima, L. (2006): (2001) Business and society: “Corporate social responsibility developing Corporate Social and resource-based perspec- Responsibility in the UK tives”, Journal of Business Eth- (March). London: DTI. ics, Vol. 69, pp. 111-132. EC – European Commission (2001) Pro-Cetindamar, D. & Husoy, K. (2007) moting a European framework “Corporate social responsibility for Corporate Social Responsi- practices and environmentally bility. Green Paper, Luxem- responsible behaviour: the case bourg, Office for Official Publi- of the United Nations Global cations of the European Com- Compact”, Journal of Business munities, July, [online] Avail- Ethics, Vol. 76, pp. 163-176. able at: http://Chryssochoidis, G.M. & Wong, V. www.ec.europa.eu/ (2000) “Customization of prod- employment_social/ uct technology and international publications/2001/
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  20. 20. M.V. Lopez, M.C. Perez, L. Rodriguez / Issues in Social and Environmental Accounting 2 (2007) 276-295 295ANNEXE 1SURVEY ON CSR AND INNOVATIONWith respect to your company, please quantify the strength of support for each statement, bymarking the appropriate column: 5 Strongly support, 4 Support, 3 Neutral, 2 Oppose, 1Strongly oppose 1 2 3 4 5Corporate Social Responsibility (CSR)1. CSR is a very important concern for your company.2. In your company, CSR strategy is a key factor in generating competitive advantages.3. In your company, CSR strategy is aimed at creating future business opportunities, such as openingup new market sectors.4. In your company, the importance of CSR has increased in recent years.5. The company follows a policy of disclosure with respect to its CSR practices.6. The edition of CSR Guides has helped determine the aspects of CSR that are disclosed by your com-pany.7. Adoption of the CSR strategy involves taking environmental aspects into consideration.8. The disclosure of CSR practices in your company is related to the demands of stakeholders(investors, institutions, clients, etc.) in this respect.9. The adoption of CSR practices in your company has a value added effect for stakeholders (profits,remuneration, working environment, product quality, etc.).10. The CSR strategy depends on or is supervised or drawn up by the Board of Directors.11. The CSR practices in your company are audited / certified / confirmed by external agencies.12. The adoption of CSR practices in your company has a positive effect on the company’s short-termresults (reductions in costs, increases in sales, etc.).13. The adoption of CSR practices in your company has a positive effect on the company’s long-termresults (new market sectors, change of activity, etc.).INNOVATION14. Your company develops its own technology and does not externalize R+D+I activity.15. Current innovation in your company is grounded upon prior innovation (incremental innovation).16. The innovation policy in your company is oriented towards inventions (radical innovation).17. In the innovation carried out in your company, environmental aspects are taken into consideration.18. In your company’s innovation policy, emphasis is placed on strengthening the capacity to developnew technological capabilities.19. Your company’s innovation policies are focused on products.20. Your company’s innovation policies are focused on processes.CSR AND INNOVATION21. Your company’s innovation policies are related to its strategies of sustainability.22. The adoption of CSR criteria has led to a change in the company’s policies regarding innovation.23. The adoption of CSR criteria has led to increased expenditure on innovation.24. The adoption of CSR criteria has led to technological changes in its production processes.25. The adoption of CSR criteria has led to technological changes that affect the quality of its products(design, quality, etc.).26. The adoption of CSR criteria has led to technological changes that affect the range of products thatare marketed.27. The adoption of CSR criteria has led to technological variations that represent a radical change inthe company’s principal activity.
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