To study the impact of corporate social and environmental reporting on stock market performance case study of mc donald's and starbucks

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To study the impact of corporate social and environmental reporting
on stock market performance- case study of McDonald's and
Starbucks

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ABSTRACT
The operating costs of corporate social and environmental initiatives equally benefits firms to
balance its financial benefits. Violating the principle of corporate social and environmental
reporting may leads to decrease in firm value, profit dip and lowered shareholders returns and
this in turn affects stock market performances of the firm. The main purpose of the current
study is to aims to explore the correlation between corporate social and environmental
reporting and stock market performance by considering the cases of McDonalds and Starbucks.
For developing the specific knowledge regarding corporate social and environmental reporting
and the other variable, stock market performance the research has used interpretivism
philosophy and inductive approach. Exploratory research design was used by the researcher to
explore the various aspects of research topic. The researcher has used case study approach for
detailed understanding about corporate social and environmental reporting of McDonalds and
Starbucks. The researcher has accessed annual and sales reports, the financial and internal
documents of McDonalds and Starbucks for collecting in-depth data required for the study.
Criterion sampling method was in the current study to gain relevant data related to corporate
social and environmental reporting and stock market performances of the selected firms. The
final results of the study revealed that McDonalds and Starbucks maintained effective
corporate social and environmental reporting and this has facilitated the firms to perform
efficiently in stock market. But for instance the criticism related to the consumption of
unhealthy food and backlash from public on Starbucks ‘Race Together campaign’ led the firms
to face slash in their stock market performances. Based on the research findings, the researcher
for enhancing share market performances has recommended McDonald to improve their food
quality and Starbucks to improve their relationship with public.

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Contents
ABSTRACT........................................................................................................................................ 2
LIST OF FIGURES AND TABLES......................................................................................................... 5
CHAPTER 1: INTRODUCTION........................................................................................................... 6
1.1 Introduction........................................................................................................................... 6
1.2 Research background............................................................................................................ 6
1.3 Research aim......................................................................................................................... 8
1.4 Research objectives............................................................................................................... 8
1.5 Research questions ............................................................................................................... 8
1.6 Research significance and contribution ................................................................................ 9
1.7 Methodology......................................................................................................................... 9
1.8 Structure of this dissertation .............................................................................................. 10
1.9 Summary ............................................................................................................................. 10
CHAPTER 2: LITERATURE REVIEW................................................................................................. 11
2.1 Introduction......................................................................................................................... 11
2.2 Variables of the study.......................................................................................................... 11
2.3 Elements of corporate social and environmental reporting ............................................... 12
2.4 Issues related to corporate social and environmental reporting ....................................... 14
2.5 Impact of corporate social and environmental reporting on stock market performance . 15
2.6 Link between previous research and the present study..................................................... 17
2.7 Conceptual framework........................................................................................................ 18
2.8 Summary ............................................................................................................................. 19
CHAPTER 3: RESEARCH DESIGN AND METHODOLOGY................................................................. 20
3.1 Introduction......................................................................................................................... 20
3.2 Research philosophy ........................................................................................................... 20
3.3 Research approach.............................................................................................................. 21
3.4 Research design................................................................................................................... 22
3.5 Research strategy and Data collection methods ................................................................ 22
3.6 Sampling method ................................................................................................................ 24
3.7 Accessibility issues............................................................................................................... 25

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3.8 Ethical issues ....................................................................................................................... 26
3.9 Data analysis plan................................................................................................................ 26
3.10 Research limitations.......................................................................................................... 26
3.11 Summary ........................................................................................................................... 27
CHAPTER 4: ANALYSIS AND INTERPRETATION OF DATA.............................................................. 28
4.1 Introduction......................................................................................................................... 28
4.2 Plan of Analysis.................................................................................................................... 28
4.3 Case study of Starbucks....................................................................................................... 28
4.4 Case study of McDonald’s ................................................................................................... 34
4.5 Analysis and interpretation of findings ............................................................................... 41
4.6 Summary ............................................................................................................................. 44
CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS............................................................... 46
5.1 Introduction......................................................................................................................... 46
5.2 Conclusions.......................................................................................................................... 46
5.3 Evaluation of results............................................................................................................ 48
5.4 Recommendations .............................................................................................................. 48
5.5 Research Limitations ........................................................................................................... 49
5.6 Recommendations for future works ................................................................................... 49
REFERENCES.................................................................................................................................. 50

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LIST OF FIGURES AND TABLES
List of figures
Figure 2.1: Conceptual Framework ...................................................................... 18
Figure 4.1: Water consumption in Starbucks......................................................... 30
Figure 4.2: Energy consumption in Starbucks........................................................31
Figure 4.3: Stock market performance of Starbucks (1991-2016).......................... 31
Figure 4.4: Stock market performance of Starbucks (1991-2016).......................... 32
Figure 4.5:EPS of Starbucks (2012-2016)..............................................................33
Figure 4.6: Share market performance of Starbucks (March-April 2015).................34
Figure 4.7: Verified sustainable coffee-McDonald’s 2012-2014............................... 36
Figure 4.8: Fiber-based packaging of McDonalds: 2012-2020.................................37
Figure 4.9: Waste break-down in McDonald’s..........................................................38
Figure 4.10: Stock market performance of McDonalds 1980-2015.......................... 39
Figure 4.11: Stock market performance of McDonalds 2012-2015...........................39
Figure 4.12: EPS growth of McDonald’s 2005-2014..................................................41
Figure 4.13: Stock price and earnings of McDonald’s 2016.......................................41
List of tables
Table 4.1: EPS of McDonald’s- 2014-2016...............................................................40

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CHAPTER 1: INTRODUCTION
1.1 Introduction
Introductory insights on the research variables; corporate social and environmental reporting
and stock market performance are explicitly given in this chapter. It will also shed light on the
contemporary significance and the meaningful deviations that can be attributed by this work
apart from the previous studies.
1.2 Research background
One of the crucial factors that determine the success of an organization is the quality of
relationship it maintains with its stakeholders. In response to the various demands placed by
them, companies have evolved to integrate social and environmental concerns in their business
practices and have reframed their business models (Nwobu, 2016). Further, firms incessantly
modify their agendas to balance the bottom line and the intersection of societal and
environmental needs. One such effort is Corporate Sustainability Reporting (CSR) which entails
the disclosure of non-financial performance and this facilitates the assessment of the impacts
that are made by the activities of corporate firms on environmental and social elements
(D’Amato, Henderson and Florence, 2009).
As per the study ofDobre, Oana and Brad(2015)an organization should disclose details of non-
financial statements like sustainability policies along with financial statements to its
shareholders, investors, etc. As found out by Flammer (2013)measure of these practices can
underpin the profit figures and is also inevitable to uphold the brand reputation and thereby
the ultimate success. Distinguishing feats are highly imperative to attain competitive status in
business world and hence in capital market, this reporting can serve as an efficient tool by
imparting an edge to the firm. Another objective of CSR reporting is to lessen the asymmetries
in information transfer between stakeholders and the firm as found out by Nwobu (2016).
Another argument in line to this is put forth by Flammer (2013) stating that to meet the overall
business objectives and to increase the firm value, it is necessary to meet the stakeholder
expectations. CSR disclosure can invariably raise the stakeholder’s interest impacting

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shareholder value. If an organization fails to assess this fact, in the long term, company will fail
affecting the investors’ interestand thereby impacting stock market performance.
In line to this, Majumdar, Rana and Sanan (2015) ascertain that the failure of a company to
make its business operations free of systemic damages to the societal and business
environment can cause detrimental effects with regard to financial and economic measures in
the long term. Mere allocation of sumptuous amounts towards these agendas is not enough
and as argued by the authors and adherence to the tenets of CSR elements in all the phases of
business operations is imperative for a firm to enjoy success and enrichment of shareholder
value, argue the authors. As emphasized by several empirical studies, while executing this
disclosure, inclusion of elements like authenticity, commitment and transparency is also highly
important (Flammer, 2013; Paramati and Gupta, 2013; Dobre, Oana and Brad, 2015).
Thus, as recognized from the above findings, social and environmental reporting pave way for
good economic status anditinfluenceson the stock market performance of the organization
(Flammer, 2013). Thus, in this study the researcher will be exploring the affect of corporate and
social environmental reporting on stock market performance in the case of Starbucks and
McDonald’s. Besides, the researcher will compare the stock market performance of both the
organizations to conduct a detailed study on the affect of corporate social and environmental
reporting.
In the case of Starbucks, the prominent international coffee brand, the employee base
constitutes a figure of 191,000. It is well known for upholding the social and ethical image. It
has been identified that it has put high concern on corporate social and environmental
reporting. However the recent backlashes on its social campaigns as reported by Michael,
Cauley and Orengo (2016) question their adherence to CSR policies. The recent crash in the
stock market performance has highly impacted its stakeholder’s interests, reports Wahba
(2014).
McDonald’s is one of the prominent international retailers dealing with food services and
encompasses a customer base of more than 70 millions. It has exemplary frameworks of CSR
and continuously updates its stakeholders regarding its non-financial activities (CSR NEWS,

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2014).However some recent reports expose violation of CSR policies as claimed in its reporting.
For instance, the selling of less nutritious foods and the cynical impact produced on the children
by theadvertisements that barrage the kids with junk foods indicate the lack of commitment by
the company to its CSR policies (Demmerling, 2014). A considerable decline in the stock price of
the company as reported by Nathan (2016) can be read in conjunction with the above findings.
Thus this study will assess whether the ineffectiveness in the CSR disclosure has any correlation
with thestock market performance of both these companies.
1.3 Research aim
This research intends to explore the correlation of two significant variables; corporate social
and environmental reporting and stock market performance. To gain pragmatic insights on this,
two service retailers; Starbucks and McDonald’s will be considered.
1.4 Research objectives
 To assess different elements of corporate social and environmental reporting.
 To evaluate stock market performance
 To critically evaluate the impact of corporate social and environmental reporting on
stock market performance of Starbucks and McDonald’s.
 To impart appropriate recommendations for Starbucks and McDonald’s based on the
identified issues.
1.5 Research questions
1. What are the main elements of corporate social and environmental reporting of
Starbucks and McDonalds?
2. How does corporate social and environmental reporting impact stock market
performance of Starbucks and McDonalds?
3. Is there a direct correlation between corporate social and environmental reporting and
stock market performance of McDonald’s and Starbucks?

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4. How can Starbucks and McDonalds improve corporate social and environmental
reporting?
1.6 Research significance and contribution
The thrust to make the nonfinancial disclosure mandatory have gained high volume and
reforms have been evolved in countries like UK to back the societal and environmental
concerns. This has placed a voluntary duty in law to enforce the non-financial disclosure that
span social and environmental impacts by large companies so that they are accountable to their
stakeholders. The onus is that these practices will underline the business of today (Chaplier,
2014).
For the long term survival, authenticity and accountability of these disclosures are critical.
Identification of the social and environmental issues is crucial with regard to investors also,
report the authors. All these indicate the current relevance of the research question. However,
from the literature review, it can be identified that this issues has not been addressed properly
in terms of stock market performance. The findings are vague and ambiguous regarding this
question especially in the service sector. Hence, by seeking answer to this problem, this
research will contribute significantly to the existing literature. As it will reveal deeper insights
on the directionality of these two research variables, companies can imbibe the suggestions to
improvise the shareholder value.
1.7 Methodology
In the current study the researcher will be using secondary data collection method. Secondary
data will be used to prepare a case study on how the corporate social and environmental
reporting influenced stock market performance in the case of Starbucks and McDonald’s. The
researcher will be using inductive approach to formulate hypothesis or theories by analyzing
the data that will be collected for accomplishing the research study. Secondary data will be
gathered by the researcher by analyzing and reviewing organizational reports, journals,
newspapers, articles, books, company website, online sources, etc on the stock performance of
McDonald’s and Starbucks. The case studies of McDonald’s and Starbucks will be compared to

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analyze their stock market performances. Furthermore, descriptive analysis will be performed
by the researcher to examine the quantitative and qualitative data obtained from the case
study.
1.8 Structure of this dissertation
1.9 Summary
Through this chapter, researcher has investigated on the background information of the
corporate social and environmental reporting and stock market performance. This has provided
meaningful introductory insights on the extent of correlation of these two variables. Further
the significance of the research has also been explored and at the end, structural overview is
given.
Chapter 1
•Introduction
•Presents research background,rationale, significance, aims and questions
Chapter 2
•Literature review
•Secondary sources ofavailable literature regarding the reaserch variables are reviwed and
presented.
Chapter 3
•Research methodology
•Various research techniques that are used to substantiate the reasearch are explained here. It also
places the data analysis plan. Ethical factors that come across the study are also outlined in this
section.
Chapter 4
•Results and annalysis
•Data generated from different research startegies are analysed and interpreted here
Chapter 5
•Conclusion and Recommendations
•Draws conclusion from the findings and presents suitable recommendations

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CHAPTER 2: LITERATURE REVIEW
2.1 Introduction
The researcher in this chapter performs an in-depth analysis based on the research issue the
impact of corporate social and environmental reporting on stock market performance. In due to
the initiation of this study the researcher analysis and comprehends the basic knowledge on
corporate social and environmental reporting and stock market performance. Further the
researcher performs a detailed study on the factors that influence corporate social and
environmental reporting and the issue related to it. The findings obtained from the study will
be utilised by the researcher in identifying the impacts of corporate social and environmental
reporting on stock market performance. The researcher also provides the association between
existing studies and the study to be carried out by the researcher. Finally, the researcher
provides an overall perspective on the researcher study with the help of a conceptual
framework.
2.2 Variables of the study
 Corporate social and environmental reporting
Corporate social and environmental reporting (CSER) is referred to as the communication
process that enhances the impacts of social and environmental issues with respect to the
economic actions of an organisation within as well as external to society. According to Setyorini
and Ishak (2012) the CSER replicates varied environmental and social factors based on which
the organisational functionalities are affected. The organisational functionalities that are
influenced by the CSER are employee related issues, environmental concerns, ethical issues,
community involvement, etc. Belal (2016) opines that CSER could also be determined as the
information disclosure related to the firms interactions with the external society.
Organisations established in developed countries are said to possess more CSER functionalities
than that of companies in developing countries. As per the observation of Setyorini and Ishak
(2012) the corporate social and environmental reporting of an organisation inclined to the
organisational performance and activities in varied operational and functional aspects. In

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general terms, CSER could be defined as the reporting of social, ethical, environmental and
human activities within an organisation (Belal, 2016).
 Stock market performance
A public entity utilised by an organisation in trading its share and other derivatives on an
accepted price between the shareholder and the organisation based on certain security lists on
stock exchange and private trading is termed as stock market or equity market (Economy
Watch, 2010). The stock market performance acts as an indicator that would avail the
organisation with the list of stock markets or information upon a particular stock. The stock
market performance alerts and warns investors on their future ventures in the business field.
According to Masoud (2013) the changes that take place in the stock price and the indexes that
signifies the future drifts in stock market are indicated by the stock market performance
indicator. With respect to the functioning of an organisation the most significant section to be
dealt with utmost care is the financial sector. Thus, the stock market performance is taken as a
measuring indicator to analyse and monitor the overall economic perspective of an
organisation was the observations estimated in the reports of Economy Watch (2010) from
various studies.
A wide range of factors such as organisation prone issues, political issues, economical issues
and international issues impacts the stock market performance of an organisation. On the other
hand, in consideration to the overall performance of an organisation the major factors that
affect stock market performance are the GNP (Gross National Product), international relations,
monetary issues, PPP (Purchasing Power Parity), political stability, etc. Thus, as per the
observations made by Masoud (2013) the stock market performance could be considered as
the economic barometer as a whole.
2.3 Elements of corporate social and environmental reporting
Corporate social and environmental reporting in a nut shell refers to the proper and timely
communication of environmental actions of organization to its stakeholder. Lack of consistency
in addressing CSR progress to information seekers may bring unpredicted negative impacts to

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the firm, reports Jagd (2014). This systematic and organized process is consists of various
elements and they are illustrated and discussed below:
Cost reduction: As per the opinion of Rang (2010) tracking the sustainability performances and
reporting it rightly to information seekers helps firms to reduce costly breeches. In addition to
this, corporate social and environmental reporting helps firms to bring out efficacy across its
supply chain and facilitates to deliver social and environmental benefits (Ojo and Marianne,
2016). For e.g. investments in sustainability initiatives such as effective utilization of resources,
reducing wastages or emissions, investments in employee developmental helps firms to
enhance productivity, reputation and employee retention rate (Simpson and Taylor, 2013).
Revenue generation: In additional to financial obligations to shareholders, the firms are
responsible to report and communicate their initiatives and social practices to all information
seekers (Smith, 2010).Regular communication of social and environmental practices to
stakeholders facilitates to firms to set their business free from competition and deception
leading to perfect reputation. This positive reputation among public supports firms to produce
enhanced revenue for providing fair returns to shareholders. Customers will be more willing to
pay premium prices for the products and services offered by sustainable firms and this may
positively impact the financial performances of organization (Belal, 2016).
Cost and liability avoidance: Studies ofLozano (2010) and Smith (2010) indicated that
companies executing strong and fair suitability reporting are more likely to attain highly
engaged employees and thereby loyal customers. According to Ojo and Marianne (2016) firms
with solid sustainable performances had 38% perfect employee loyalty, 43% good reputation,
43% efficient business process and 55% better self-esteem. Lack of quality employees and non
commitment to their job performances are one of the main challenge faced by firms as a result
of lack of sustainable initiatives (Jagd, 2014). Employees are more likely to engage with firms
that comply with sustainable practices and this will help firms to reduce the waste of resources
and the occurrences of additional costs. Moreover, reporting business practices to information
seekers in a regular manner helps the firm to avoid the unexpected risks (Belal, 2016).

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Risk management: According to the view point of Rang (2013) positive practices of firms helps
to reduce the possibilities of negative consequences that disrupt smooth functions of
organization (Ojo and Marianne, 2016). It is pivotal for firms to implement effective
environment strategies and pollution control methods for preserving environmental drivers and
to report all initiatives to stakeholders for attaining enhanced support and thereby competitive
advantage in market (Simpson and Taylor, 2013). The sustainable initiates of firm to support
social and environmental drivers help to eliminate the possible repercussions such as loss of
market share, reputation, employee turnover rate etc.
2.4 Issues related to corporate social and environmental reporting
Increasing consciousness of consumers on organizations corporate social responsibilities (CSR)
persuades companies to provide effectual and legitimate reporting on these facts. As Horrigan
(2010) opines, authentic and genuine reporting of corporate social and environmental
strategies implemented by an organization and issues encountered during a financial year,
enhances the reputation and recognition of a firm. This in turn helps in improvising the
efficiency of the company, which thereby reflects on its stock market performance. However as
Rizk, Dixon and Woodhead (2008) states, in current era most of the organizations has lost its
legitimacy in corporate social and environmental reporting. In addition to the legitimate
reporting issues, increasing dilemmas in CSR practices has also enhanced several reporting
problems in organizations. Studies of Baker, Cohanier and Pederzoli (2012) reported that large
retail distributors have become comparatively reticent in reporting corporate social and
environment strategies. Increasing issues in employee dealings such as wages conflicts, reduced
healthcare and compensation policies, deprived work conditions, etc. has enhanced corporate
social and environment issues in retail industries. Hence Baker, Cohanier and Pederzoli (2012)
stated that retail industries have comparatively become confined and illicit in its corporate
social and environment reporting. The issues in effectual and valid disclosing of CSR practices of
organization have also been investigated by Williamson and Lynch‐Wood (2008). In this work,
authors determines that although various decrees, such as Companies Act 1985, Regulations
2005, etc. has been formulated by UK law to strictly report the companies CSR strategies,

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legitimacy of these reporting has become a serious challenge. With adequate support of
legitimacy theory Williamson and Lynch‐Wood (2008) establishes the fact that most of the
current organizations lack authenticity and genuineness in its corporate social and environment
reporting. Focusing on the ultimate goal of increasing organization fame, attracting customers
and thereby increasing profits, companies illicitly reports its sustainable practices and
environment ethics. However the existing working conditions may be different from these
company reports which indicate the clear case of deceiving corporate social and environment
reports (Kao, 2010). The after effects and issues that arise from these illicit reporting has also
been investigated by some researchers (Rainey, 2010). According to these authors, recognition
of false reporting by governing bodies libels the company’s reputation and this in turn results in
increasing the customer turnover rates. In addition it also results in reducing financial stability
and market recognition, which directly produces negative impacts on organizations’ stock
market performance. Although most of the sectors in UK faces challenges in these reporting
strategies, food and beverage sector is found to be experiencing the most deprived conditions.
Cheeseman (2010) reports on poor sustainability practices of UK fast food sector and Reynolds
(2010) reports on decline in social responsibilities of UK coffee industry signifies this fact.
Reynolds (2010) reports that major coffee chains in UK such as Caffe Nero, Costa Coffee,
Starbucks, etc. fails to meet the standards in CSR reporting. Thus taking into consideration
these facts, researcher has selected food and beverage industry in UK to investigate the
influence of corporate social and environmental reporting on organizations’ stock market
performance.
2.5 Impact of corporate social and environmental reporting on stockmarket performance
Corporate social and environmental reporting and its implications in organizational
performance have come under the scrutiny of past researchers. There have been mainly two
streams of studies related to corporate social and environmental reporting. The first stream
consists of studies that focussed on the role of the society in accounting corporate social and
environmental reporting of companies. The study of Aras, Aybars and Kutlu (2010) is a prime
example of this stream of research. This study focussed on the right to information of

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stakeholders and its importance in governance of corporate social and environmental
reporting. Other studies such as Orlitzky, Siegel and Waldman (2011), Reverte (2009) andWood
(2010) have also focussed on this issue.
The second stream of researches on corporate social and environmental reporting focussed on
the need for corporate social and environmental reporting from managerial point of view
(Peloza, 2009;Choi, Kwak and Choe, 2010;Becchetti and Ciciretti, 2009). These studies reviewed
how an organization can usecorporate social and environmental reporting for stakeholder
management and how significantly does stakeholders view corporate social and environmental
reporting of the company. The present study can be placed under this second stream
researches as the focus of the study is to understand the impact of corporate social and
environmental reporting on mindset of shareholders of the company and thereby in the share
market performance of the company. Or in other word the focus of the present study is to
understand whether investors deem corporate social and environmental reporting to be
important or not.
The increase in demand for better quality corporate social and environmental reporting has
been established in the studies of Carroll and Shabana (2010). Makni, Francoeur and Bellavance
(2009) link the increase in demand for corporate social and environmental reporting among
investors to the cost reduction, revenue generation, cost and liability avoidance and effective
risk management benefits of corporate social and environmental reporting. The underlying
notion of these studies is to link corporate social and environmental reporting with profit
seeking nature of investors and based on it suggest that the interest of investors in corporate
social and environmental reporting arises purely from the economic benefits associated with
corporate social and environmental reporting. However, the findings ofFlammer (2013) and
Lima Crisóstomo, de Souza Freire and Cortes de Vasconcellos (2011) contradict this view. These
studies identified that ethical investment funds have witnessed very significant growth since
2000. Moreover, there is not enough evidence in the existing literature suggest that investors
are only interested in the financial benefits of corporate social and environmental reporting.
Both these findings lead to the inference that at least some investors (ethical investors) give

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importance to corporate social and environmental reporting as whole and not just financial
benefits of corporate social and environmental reporting while making investment decisions.
Another set of studies have adopted empirical view into this issue and suggested that the short
term mentality of investors acts as hindrance to corporate social and environmental reporting
in the current market (Perrini et al., 2011;Flammer, 2013; Nelling and Webb, 2009). However,
the studies further note that corporate social and environmental reporting is important in
creating awareness among investors and in leading organizations away from unsustainable
practices to sustainable practices. However, this means that there is a high chance that
investors would deem any social or environmental activity of the company that do not directly
add financial value to be wastage (Flammer, 2013; Nelling and Webb, 2009). It is very clear
from the discussion that corporate social and environmental reporting has gained significance
among investors in recent years but has not yet become a mainstream aspect that regulates
investor behaviour. Also the existing studies fail to provide corroborative evidence for the link
between corporate social and environmental reporting and share market performance.
2.6 Link between previous research and the present study
This topic has come under the scope of some previous studies. The existing studies provide
evidence the more than temporary interest of shareholders/investors in corporate social and
environmental reporting (Choi, Kwak and Choe, 2010;Becchetti and Ciciretti, 2009). However, a
large number of studies assume that investors are primarily interested in profit maximisation
and therefore do not place much importance on corporate social and environmental reporting
other than for regulating the potential social and environmental risks faced by the company
(Ioannou and Serafeim, 2012). The significant change in governmental outlook towards social
and environmental issues has resulted in increased regulatory requirement to engage in
effective corporate social and environmental reporting (Flammer, 2013). More and more
organizations are also adopting business-led approach in this matter and are engaging
voluntary disclosures of social and environmental activities of the firm that go beyond the
regulatory requirements (Peloza, 2009;Choi, Kwak and Choe, 2010;Becchetti and Ciciretti,
2009). In this context, the studies of Lin, Yang and Liou (2009) and Kang, Lee and Huh (2010)

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assessed the wastefulness of corporate social and environmental reporting and suggested that
corporate social and environmental reporting lack market relevance and thus have no
implications of market performance of a firm. This indicates that though investors are
increasingly demanding more openness in corporate social and environmental reporting, there
is no clear evidence to suggest that there is a positive correlation between corporate social and
environmental reporting and share market performance. The present study intends to build on
the existing knowledge and provide corroborative evidence for the link between corporate
social and environmental reporting and stock market performance.
2.7 Conceptual framework
Figure 2.1: Conceptual Framework
Source: Created by author
The above figure displays the conceptual framework of the research study that would be
accomplished by the researcher. From the figure it could be depicted that the corporate social
and environmental reporting influences the stock market performance of an organisation
significantly. The varied factors of the corporate social and environmental reporting such as
cost reduction, revenue generation, cost and liability avoidance and risk management
influenced shareholders through shareholder awareness and shareholder behaviour. The two
shareholder factors namely, shareholder awareness and shareholder behaviour together
constitute the stock market performance.

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Reduced expenses and cost, increased generation of revenue, preventing and avoidance of
liability and cost and efficient risk management strategies and their efficient implementation
are the major factors that influence shareholders. A firm that enhance all these features would
attract more number of shareholders and more investments towards business. This would
enable the firm’s growth and expansion worldwide. Thus, it would result in efficient stock
market performance of the firm in the market place. Hence, it could be concluded that the
corporate social and environmental reporting plays a significant role in shareholder awareness
and behaviour in developing efficient stock market performance.
2.8 Summary
In the current chapter the researcher provided detailed study based on corporate social and
environmental reporting and its impact on stock market performance. In this chapter the
researcher has provided detailed discussion on issues related to corporate social and
environmental reporting and its elements. Additionally, in this chapter the researcher also
provided conceptual framework based on literature review.

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CHAPTER 3: RESEARCH DESIGN AND METHODOLOGY
3.1 Introduction
Research methodology tries to attain a valid and precise solution to the research problem by
the application of different techniques that are scientific and which can be approached
systematically. According to Bryman (2012) it attributes the study with empirical and
theoretical support and hence strengthens the study. The accomplishment of the study
depends on the selection of research technique and hence it is assumed as the inevitable
ingredient that leads to the ultimate answer. As per Blaikie (2009) research methodology
comprises a vast array of techniques that can be utilized to derive the answer and it covers the
basic approach of the study and the technical procedures.
Research philosophy, approach, and design form the fundamental basis of the study while
sampling techniques, data collection methods, data analysis plans constitute the embedded
procedures. In this chapter, researcher has illustrated the selection of techniques with the
rationale and has also analysed ethical, accessibility and limitations confronted by the study.
3.2 Research philosophy
Research philosophy embodies the underlying knowledge developed during the process of
study which is utilized to gather the data required for the research and it also forms the basis
for its analysis. Thus the overall structure of the study can be highly influenced by the choice of
philosophy from the available variants. The main variants include positivism, interpretivism and
realism. When the basis is formulated on the objective nature of knowledge, it is called as
positivism and it does not consider the subjective interpretations of the research problem
(Gulati, 2009). Realism also fails to regard the socially constructed interpretations however
interpretivism is quite subjective in the nature and hence apt in the situations which are
complex with the integration of human beliefs. However, in this research situation, the scenario
is more complex and requires subjective interpretation while gathering, analysing and utilizing
the data. Hence the current study has adopted the interpretivism philosophy.

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This philosophy has facilitated the collection of sufficient data regarding corporate, social and
environmental reporting. Researcher could approach the theoretical information from the
various secondary sources and hence could generate significant findings. The linkage of this
reporting to stock market performance could also be assessed. The choice of this philosophy
has further enabled the inference of different components that forms the fundamental basis of
CSR and it has also facilitated the analysis of whether the financial disclosure has influenced the
performance of the company in the stock market i.e. whether the organisation could raise the
share holder value by engaging in explicit corporate social reporting. As interpretivism
philosophy relies on testing the information and measuring the findings before extracting the
significant findings, it has attributed the study with meaningful data.
3.3 Research approach
Research approach entails the manner adopted to analyse the research problem. It can be
either inductive or deductive. Broader theoretical assumptions regarding the research question
is specified with the use of suitable approach. The choice of this approach influences the study
by impacting the selection of other research procedures. By the use of deductive approach,
researcher reaches the specific point from the general perspectives while inductive generalises
the theoretical information and helps in the specification of broader assumptions (Khan,2011).
In this current study, researcher has utilized inductive approach which has facilitated the
development of specific knowledge regarding corporate social and environmental reporting and
the other variable, stock market performance. The correlation between the two also could be
identified as this approach narrows the information. Researcher could identify the linkage
between the stock market performance of McDonald's and Starbucks with the readiness to
disclose the intricate details of sustainability and how the two factors are correlated. The
selection of this approach has also further identified that there exist a direct correlation
between corporate social and environmental reporting and stock market performance of
McDonald’s and Starbucks. Also the researcher was able to understand with the help of this
approach how corporate social and environmental reporting created awareness among the
investors and helped organizations to highly focus on the sustainable practices. This method

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also aided the researcher in providing suitable recommendations for McDonald’s and Starbucks
for improving the corporate social and environmental reporting. Moreover with this approach
the researcher was able to critically evaluate the impact made by corporate social and
environmental reporting on the stock market performance of Starbucks and McDonalds.
3.4 Research design
As per the observation of Kumar (2013) research design highly plans and gives proper directions
for carrying out the research study effectively. Exploratory research design allots a clear
research background and also helps to explore the research topic for enhancing the knowledge
regarding the study. Thus it is highly flexible and helps in getting a deep idea about the research
problem. Explanatory usually evaluates the casual relationship that exists in between the two
research variables and also helps in understanding more about the research variables by
thoroughly analyzing their effectiveness. The descriptive research design provides a detailed
descriptive analysis of the research topic and it also help to develop definite outputs in the
research (Stangor, 2010).
The researcher for getting a broadened explanation regarding the research topic has adopted
exploratory research design. Through this exploratory research design the researcher was able
to explore the various aspects of the corporate social and environmental reporting and it also
aided in attaining prior knowledge regarding the advantages and disadvantages of corporate
social and environmental reporting and how it influenced the stock market performance of
Starbucks and McDonalds. This method assisted the researcher to develop a detailed research
background and also gained a profound knowledge about the various research issues
confronted by these organizations due to the ineffectiveness of corporate social and
environmental reporting. Furthermore exploratory research design also helped the researcher
to understand the importance of sustainability in influencing the stock market and financial
performance of the organization.
3.5 Research strategy and Data collection methods

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Research strategy is highly regarded as an effective research method for analyzing and solving
the research issue systematically. It helps in gaining profound details regarding the research
issue and also evaluates the data collected for attaining suitable conclusions. Interview and
survey are considered as the two effective tools used for collecting the qualitative and
quantitative data in a simple and cost effective manner while case study enhances the
knowledge of the researcher regarding the research topic and also helps in solving the research
questions within the real-life perspective (Kumar, 2013).
In the view point of Bryman (2012) for gathering the reliable and valid information for carrying
out the research study in a well-efficient manner data collection methods play a pivotal role.
And data collection methods mainly includes primary and secondary data collection methods in
which the former is defined as the initial and fresh data collected by the researcher directly
whereas the secondary data are the already published information available through various
external and internal secondary sources. It is mainly with the help of interview, observation
method, surveys, etc. the primary data are gathered. On the other hand secondary information
highly enhances the knowledge and perception level of the researcher regarding the topic.
Hence for analyzing the impact of corporate social and environmental reporting on stock
market performance the researcher has adopted case study research strategy as this strategy
highly helps in dealing with both the quantitative and qualitative information. The researcher
also employed secondary data collection methods for attaining the secondary information and
the secondary data required for performing the research study was mainly gathered by the
researcher by reviewing the annual and sales reports of the company, the financial statements
of Starbucks and McDonalds, internal documents of the company, online publications,
magazines, journals, books, stock market reports from the year 2011-16. The researcher for
getting a detailed picture about the research topic also referred earlier studies related with the
topic. By reviewing the company websites, company documents, etc. the researcher was able
to understand the various CSR practices adopted by the respective companies and how much
importance the company management gave to the corporate social and environmental
reporting. The financial documents of the company helped in attaining the quantitative

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information required for the study. The researcher also analyzed the significant role played by
the corporate social and environmental reporting and also attained a in depth knowledge about
the relation that exist among the corporate social and environmental reporting and stock
market performance. The researcher also was able to understand how the corporate social and
environmental reporting influenced stock market performance in the case of Starbucks and
McDonald’s.
3.6 Sampling method
As per the view of Levy and Lemeshow (2013), sample based research studies highly help in
solving the research issues by gathering ample amount of information. It is also found that large
sample size highly enhances the accuracy and reliability of the information gathered.
Population is regarded as a pool of samples and it is from this population the samples needed
for the study are chosen and the samples included in the population highly depicts the
characteristics of the population. Carrying out the research study based on the population is
considered as a complicated task thus the researcher for conducting the study in a cost and
time effective manner has chosen appropriate samples. Sampling methods is regarded as the
techniques that are used for choosing suitable samples from the targeted population (Lohr,
2010).
Sample selection is determined as the number of cases selected when conducting studies based
on the case study and while selecting the cases it is highly important to choose the cases that
are relevant to the topic of the research study. According to Neelankavil (2015) some of the
main types of sampling methods are maximum variation sampling, extreme case sampling,
criterion sampling, homogenous sampling and convenience sampling. The main advantage of
criterion sampling is that it helps to gather information that is highly pertinent and applicable to
the research questions and variables while in the case of homogenous sampling it is on a
particular aspect of the topic the cases focus and in the convenience sampling it is based on the
convenience of availability the sample cases are chosen.
The researcher mainly focussed on the studies that detailed the two research variables
corporate social and environmental reporting and stock market performance and mainly

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considered these as the population for the research study. And thus the researcher has
adopted criterion sampling method for choosing the cases as this method highly helped in
attaining pertinent information related to the research topic.
While selecting the samples the researcher mainly focussed on the cases that detailed the
information about the corporate social and environmental reporting and stock market
performance and maintained this as the main criterion for the sample selection. The qualitative
data that was highly required for the study was acquired by the researcher by choosing cases
published after 2009 and this highly helped in improving the reliability of the information. Due
to the limitation induced by the cost and time the researcher had to restrict the cases selection
to 30 cases and it was with these cases the researcher developed a detailed case study of both
the companies related with the research variables. Also it was through evaluating the financial
statements and annual reports of Starbucks and McDonald’s from 2011 to 2015 time period the
researcher collected the quantitative data. Thus with these cases the researcher was able to
prepare a efficient background for performing the research study in an effective manner.
By adopting criterion sampling method another main benefit the researcher attained was the
collection of relevant and significant quantitative and qualitative information and this method
also enabled the researcher to describe the various main elements of corporate social and
environmental reporting of Starbucks and McDonalds and how it impacted the stock market
performances of McDonald's and Starbucks.
3.7 Accessibility issues
Accessibility issues are the main problem faced by all the researchers at the beginning of
research study. One of the foremost accessibility issues faced by the researcher was in
collecting the secondary data. Collection and accessing of some of the secondary data
demanded authorities’ permission and some of them were also payable in nature. Certain
company documents were preserved with great confidentiality thus the researcher faced
accessibility issues in obtaining information from those resources. Also the problems regarding
maintaining the privacy and confidentiality of the collected data without disclosing to the public
also induced accessibility issues for the researcher.

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3.8 Ethical issues
The researcher while carrying out the study followed strict ethical policies and procedures and
also confirmed the privacy of the data collected by strictly adhering with the Data Protection
Act, 1998. Before performing the research study the researcher attains the consent from the
respective company management and also gains the permission for collecting the data from the
various external and internal secondary sources. The researcher also highly maintained the
privacy and confidentiality of the collected data and also ensured that all the data collected for
the secondary sources are provided with an accurate reference list. The researcher also assured
that the data collected will be mainly used for academic purposes and won’t be used for the
personal benefits of the researcher.
3.9 Data analysis plan
The researcher has utilized secondary data in this study for analyzing the impact of corporate
social and environmental reporting on stock market performance of McDonald's and Starbucks.
The case study of the respective companies were prepared by the researcher by reviewing
various internal and external secondary sources such as annual reports of the company,
journals, newspapers, company documents, articles, sales report of both the companies, online
publications, printed books, etc. And with the help of these sources the researcher was able to
develop a detailed literature review and in-depth case study regarding both the companies.
And also through the case study strategy the researcher was able to collect both the qualitative
and quantitative information regarding the topic and for evaluating the information collected
descriptive analysis method was used. Furthermore the findings of the study were cross
evaluated with the theoretical framework of the study to reach at appropriate conclusions.
3.10 Research limitations
One of the major limitations confronted by the research was carrying out the study on the basis
of case study. The absence of primary data highly affected the reliability and validity of the
study and also questioned the accuracy of the date collected. Due to the use of secondary data
the scope for analyzing new findings was also limited and this was also considered as another

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major limitation for the study. And for conducting the study only case studies after 2009 were
reviewed and this highly limited the study as the earlier studies regarding the topic were also
available.
3.11 Summary
To carry out the research study on the topic the impact of corporate social and environmental
reporting on stock market performance by taking the case study of McDonald's and Starbucks
the researcher has adopted various research methods and techniques. For the different
methods taken the researcher has provide a detailed justification. The researcher through this
chapter has explained the various research methods such as research philosophy, research
approach, design, data collection methods, sampling methods along with the data analysis plan,
ethical issues, research litigations and accessibility issue.
For carrying out the study successfully the researcher has adopted interpretivism philosophy
and inductive approach and with the exploratory research design the researcher was able to
improve the background knowledge of the research topic. Case study strategy was used by the
researcher to describe how corporate social and environmental reporting impacted upon the
stock market performance of McDonald's and Starbucks and it also enabled in collecting both
the qualitative and quantitative information required for carrying out the research study. The
researcher also reviewed various secondary sources for developing the literature review and
case studies’ of the respective companies. It was on the basis of the criterion sampling method
the researcher selected the relevant cases studies related to the research topic.

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CHAPTER 4: ANALYSIS AND INTERPRETATION OF DATA
4.1 Introduction
During this research study the researcher had gathered numerous data from various secondary
sources. This chapter of the dissertation aims in analysing and interpreting these collected data.
By analysing the collected data the researcher has evaluated whether any relation exists
between corporate social and environmental reporting and stock market performance of
entities and has identified differences between earlier literatures and present study. Moreover
the researcher has also described the theoretical and managerial contribution of present study
to the considered research topic.
4.2 Plan of Analysis
The main sources of data collection for this study have been secondary sources. In order to test
whether corporate social and environmental reporting and stock market performance were
liked with each other, the researcher considered two global companies namely Starbucks and
McDonald’s and the information related to these companies have been collected from different
sources ranging from academic books to various online sources. However the main source of
data collection has been the Corporate Social Responsibility and Sustainability reports of the
above two companies. Also much information has been gathered from organisational websites.
Other organisational documents, newspaper articles, magazines, online stock markets, other
online sources etc have also been considered by the author. The researcher has analysed
collected secondary data using descriptive analysis method. The data analysis and
interpretation of secondary data have also been done using tables, charts, graphs etc.
4.3 Case study of Starbucks
Starbucks Corporation is a leading coffee chain that operates more than 23,000 coffee shops
and employs more than 191,000 employees. The company has its headquarters in Seattle, US
and had revenue of $16.447 billion in 2014 (Hamann et al., 2015). Social and ethical brand
image of Starbucks along with superior taste and quality of coffee were integral elements of the
success of Starbucks (Semroc et al., 2013). This means that Starbucks has historically placed

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high importance on corporate social and environmental reporting. Starbucks was in fact one of
the first major corporations to engage in organization-wide corporate social and environmental
reporting. The company published its first Corporate Social Responsibility (CSR) report in 2001
when CSR reporting in corporate entities was still in nascent stage (Hamann et al., 2015). This
indicates that Starbucks has always been at the forefront of corporate social and environmental
reporting.
As one of the leading coffee chains in the world, Starbucks has strong challenges in terms of
achieving social and environmental sustainability. Some of the key issues faced by the company
are adherence to ethical sourcing and waste, energy and water management (Jochim,
Ottenbacher and Harrington, 2015). Starbucks has adopted several key measures to tackle the
issues faced by the company. Some of the main social responsibility practices of Starbucks are:
Social responsibility reporting: C.A.F.E. (Coffee and Farmer Equity)practices are used by
Starbucks to ensure ethical sourcing of coffee. This was program was initiated in 1994 and uses
a rating system to evaluate the farming practices of suppliers of Starbucks. The suppliers with
higher C.A.F.E ratings get higher prices for their products. The underlying aim of this program is
to promote environmental leadership, economic accountability and social responsibility among
coffee farmers (Semroc et al., 2013). Starbucks procures more than 90% of its coffee from
C.A.F.E. certified farmers. However, C.A.F.E. practices have come under criticism for lack of
independent verification of the rating system (Jaffee, 2007). Despite this criticism it is clear that
Starbucks gives high importance to ethical sourcing. This is reflected in the association of
Starbucks with Fairtrade which is a consumer-led ethical sourcing practice. Starbucks
partnership with Ethos Water and Food Donation connection are some of the other prominent
social responsibility initiatives of the company (Renard, 2010).
Environmental reporting: Environmental reporting of Starbucks focuses on reducing the
environmental impact of the company. The company had in 2008, set a target of reducing
water, energy and waste in its coffee shops by 25% in 2015. Starbucks was able to exceed its
goals and achieve 26% reduction in water consumption (Starbucks CSR report, 2015).

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Figure 4.1: Water consumption in Starbucks
Source: Starbucks CSR report (2015)
The above figure shows that Starbucks was able to considerably reduce water consumption in
its operations. However, the company failed in achieving significant reduction in energy
consumption as shown in the below figure.
Figure 4.2: Energy consumption in Starbucks

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Source: Starbucks CSR report (2015)
Starbucks had set out to reduce energy consumption by 25% in its stores by 2015 but was only
able to achieve 4.3% reduction in energy consumption with reference to 2008 baseline
(Starbucks CSR report, 2015). From the discussion it is evident that Starbucks gives importance
to social and environmental reporting and adopts positive measures to tackle the issues.
Stock Market performance of Starbucks
Figure 4.3 Stock market performance of Starbucks (1991-2016)
Source: Google Finance (2016)
Stock market performance of Starbucks has been very good for the last 6 years. The company
was in performance slump before the return of Howard Schultz as the CEO of the company in
2008. Since then the share price of Starbucks has been on rise and reached its highest value
($62.61) in 2015 October (Google Finance, 2016).

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Figure 4.4 Return on investment in Starbucks stocks (2009-2014)
Source: Jones (2014)
As per Jones (2014), Starbucks outperformed all competing companies in stock market and
delivered high returns to shareholders. This is shown in the above figure. The figure shows that
$1000 investment in Starbucks in 2009 would have returned a value of $9000 in 2014. This
exceptional return on investment in Starbucks stocks is more than double that of competing
companies. This shows that Starbucks has performed exceptionally in stock market.
Figure 4.5 EPS of Starbucks (2012-2016)

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Source: YCharts (2016)
The growth of EPS (earnings per share) of Starbucks during 2012-2016 from 0.235 to 0.52 also
shows that Starbucks has performed admirably in the stock market. The case study of Michael,
Cauley and Orengo (2016) on Starbucks ‘Race Together’ campaign identified that the severe
backlash received by the company on this campaign did not reflect in the stock market
performance of the company. The ‘Race Together’ campaign of Starbucks was targeted at
creating awareness among customers regarding race relates issues (Friedersdorf, 2015). The
campaign encouraged baristas of Starbucks to engage with customers and talk about race
related issues. The campaign was introduced in March 2015 but received immediate criticism
and backlash from general public and media outlets (Baertlein and Rigby, 2015). The main
criticism was that the campaign was PR stunt aimed at generating publicity for the company.
The company had to shut down the campaign due to the severe backlash from customers.
Figure 4.6 Share market performance of Starbucks (March-April 2015)
Source: Michael, Cauley and Orengo (2016)
However, this backlash did not reflect in stock market performance as the shares of the
company achieved 4% increase in March-April 2015- the period during which ‘Race Together’
campaign was active (Michael, Cauley and Orengo, 2016). This is shown in the above chart. A

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closer look into the data shows that there was very minute drop in share price during March 20-
April 2 period. But the share price gained significant growth after this period. This leads to the
inference that the criticismof CSR efforts of Starbucks did not influence shareholder behaviour.
Another initiative of Starbucks that linked its CSR efforts with stock market was the
introduction of sustainability bonds by the company in 2016 (Nasiripour, 2016). Through this
initiative Starbucks intends to take help from investors in order to fund its environmental
efforts. The funds collected through sustainability bonds will be used by Starbucks for funding
its CSR practices such as C.A.F.E practices, notes Clancy (2016). Chasan (2016) reports that
Starbucks was able to raise around $500 million through the sustainability bonds. As per the
report of Sustainalytics (2016), ethical investors groups were the main investors in sustainability
bonds of Starbucks. This indicates that investors have special interest towards sustainability
efforts of Starbucks. However, it can be summarised from the case study of Starbucks that
though investors are increasingly demanding corporate social and environmental reporting,
there is not enough evidence to suggest that corporate social and environmental reporting
directly impacts shareholder behaviour.
4.4 Case study of McDonald’s
The world’s largest fast-food brand McDonald’s is also among the world’s best companies and
as per Forbes (2016) the company has placed itself at the 189th position among top 2000 global
companies. The number of fast-food stores of the brand has exceeded 35000 across 121
nations and the reports from Statista (2016) shows that McDonald’s tops the list of ten most
valuable fast food chains in the world with a brand value of $88,654 million in 2016. As per
McDonald’s (2013) the company’s main aim is to serve people with superior quality and healthy
food and quickest service and Lee and Carter (2012) observes that the global success of
McDonald’s is attributable to its objectives. Being world’s leading fast-food brand, McDonald’s
has regularly ensured that it does not involve in any issue which could adversely affect its
stakeholders. The company asserts that it places strong focus on its corporate social
responsibility strategies and involves in transparent CSR and environmental reporting, every
year.

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Corporate social and environmental reporting of McDonald’s
Corporate Social reporting: One among the major studies that has contributed to the field of
CSR reporting is that done by D'Anselmi (2011) and the author found that McDonald’s has
categorised its corporate social and environmental reporting under four section namely
consumer well-being, sustainable supply chain strategies, environmental responsibility and
corporate philanthropy.
To comply with its consumer well-being strategy, the McDonald’s incorporates calorie
information on its menu and stores worldwide and to follow its sustainable supply chain
strategies, McDonald’s procures materials only from those suppliers who abide by the
principles of healthy ad hygienic manufacturing. In 2006, McDonald’s had updated its
nutritional labelling by introducing daily percentage intake and in 2012, the company
introduced ‘kilojoule system’ in its menu which clearly mentioned about the calorie value of its
foods (McDonald’s Corporation, 2013). Thus consumer well-being strategy is supposed to assist
its customers with better purchase decisions. Sustainable coffee has also been focused by
McDonalds and while in 2012 McDonald’s had 25% verified sustainable coffee, it has reached
32% in 2014.

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Figure 4.7: Verified sustainable coffee-McDonald’s 2012-2014
Source: McDonald’s (2015)
According to D'Anselmi (2011) McDonald’s has partnered with the non-profit organisation
(NPO) ‘Ronald McDonald House Charities (RMHC)’ and donates a fixed percentage of its profit
to the NPO. McDonalds is the largest contributor of RMHC and thus follows its corporate
philanthropy by supporting ill and needy children and families. By participating with RMHC, the
author finds that McDonald’s has earned better corporate reputation and this has helped it to
perform well in markets.
Environmental Responsibility: Among its CSR activities, McDonald’s has given immense focus
to its environmental protection and preservation strategies. Environmental protection is done
by McDonald’s under four categories namely Energy and water, Waste and recycling,
Community and litter and Sustainable sourcing. In 1989 when CSR were least focused in
business world, McDonald’s partnered with EDF (Environmental Defense Fund) to reduce
human impact on ecological footprint. The company has strict environmental protection
guidelines and involves in reuse, recycle and preservation of every material used in its business.
For instance, McDonald’s Corporation (2013) cites that it uses only LED lights in its stores to
reduce electricity consumption and more than 85% recyclable materials are used for packing.
Almost all stores of McDonalds have been equipped with 100% renewable resources.
Compared to 9.3% in 2012, McDonalds has been able to achieve 53% target in fibre-based
packaging in 2015 and the brand has targeted 100% fibre-based packaging by 2020.
Figure 4.8: Fiber-based packaging of McDonalds: 2012-2020

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Moreover, McDonald’s is one among the world’s first corporate brands to install waterless
urinal systems. By placing such facilities, McDonald’s has been able to save more than
200million litres water per annum. Furthermore, since the main raw materials of the company
is from UK, it also makes an annual investment of £360million to the nation’s agricultural sector
and support’s in the development of both farmers and the industry (McDonald’s, 2016b).
According to McDonalds (2012) more number of customer complaints has been on the wastes
of fast-food stores and the brand is constantly aiming to reduce such wastes by using recyclable
materials. The company could manage 36% in-store wastes in 2013 and by 2020, McDonald’s
aims to recycle more than 50% of in-store wastes. The waste break-down in McDonald’s is as
below:
Figure 4.9: Waste break-down in McDonald’s
The environmental reporting systems of McDonalds UK also show that it has ‘Love Where You
Live’ campaign to reduce littering in Britain and protect the society. In 2015 alone, 11000
employees in McDonalds participated to conduct 380 clean-up events. The above facts thus

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show that McDonalds has a transparent and efficient corporate social and environmental
reporting system(McDonald’s, 2016b).
Stock Market performance
While reviewing the stock market performance of McDonald’s during 1980-2015 periods, it
could be observed that it is steadily growing since 1980.
Figure 4.10: Stock market performance of McDonalds 1980-2015
A closer look at the stock performance during 2012-2015 also shows that McDonald’s has a
positive stock performance in its industry.

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Figure 4.11: Stock market performance of McDonalds 2012-2015
The Price-earnings of McDonalds has also been steadily growing since 2014. In 2014 the P/E
ratio of McDonald’s was 18.66 and this has increased almost by 24% to 23.05 in 2016.
Table 4.1: EPS of McDonald’s- 2014-2016
Source: Nasdaq (2016)
According to Damodaran (2012) the PE ratio considers all aspects in stock market and considers
both past and futuristic performance of an organisation. As the PE ratio reveals investor
expectations, a growing PE ratio is an indicator of company’s better worth among stakeholders.
In light of this information it can be stated that McDonald’s has better worth among its
stakeholders. As per the reports of Derousseau (2015) McDonald’s has shown a staggering
performance in stock market recording 17% hike between September-November 2015.
However the reporter also observed that stock market performance of McDonald’s has not
been remarkable since 2011. Even though the above results showed positive results to
McDonald’s stock market growth, Dividend Growth Investor (2015) finds that the EPS of
McDonald’s has declined during the past few years compared to average industry EPS. The EPS

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chart of McDonald’s also show positive result during 2009-2013 periods. But a steep fall was
observed in the company EPS during 2013-2014 periods and the EPS which stood above 5 fell
below 5 in 2014.
Figure 4.12: EPS growth of McDonald’s 2005-2014
Source: Dividend Growth Investor (2015)
The latest reports from Nathan (2016) also show that the stock price of McDonald’s has
significantly fallen in the second quarter of 2016.

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Figure 4.13: Stock price and earnings of McDonald’s 2016
Source: Nathan (2016)
As per the forecast done by business analysts, McDonald’s with $6.3 bn revenue was supposed
to register an EPS of $1.39. But the company showed only $1.25 in 2016. A 4.5% decline has
also been observed in the share prices of the company and this poses serious threat to future
growth in stock performance of McDonald’s. D'Anselmi (2011) criticises that though
McDonald’s says its food to be healthy and of high nutritional values, it is mostly fast-food with
added chemicals and this causes serious health issues to its customers especially children. The
growing criticism on unhealthy food has been pointed out by Dividend Growth Investor (2015)
as a main reason for fall in EPS of McDonald’s.
4.5 Analysis and interpretation of findings
In this section the researcher analyses the findings emerging from the case study with
reference to the existing findings identified in the literature review section. One of the main
findings emerging from the case study is the importance given by both Starbucks and
McDonald’s in corporate social and environmental reporting. The case studies reveal that
Starbucks has developed very effective CSR and environmental practices such as C.A.F.E

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practices and scheme to reduce water and energy consumption (Semroc et al., 2013; Starbucks
CSR report, 2015). Similarly the case study of McDonald’s it was found that the company
engaged in wide range of CSR practices such as ‘Ronald McDonald House Charities (RMHC)’,
Energy and water, Waste and recycling and Community and litter and Sustainable sourcing
(McDonald’s, 2013). From this it can be inferred that companies such as Starbucks and
McDonald’s are placing high importance on corporate social and environmental reporting. This
is in line with the finding of Makni, Francoeur and Bellavance (2009) that there is an increased
demand for effective corporate social and environmental reporting.
It was identified in the literature review that due to short term mentality, investors deem
importance to social or environmental activity of the company that directly add financial value
(Perrini et al., 2011; Flammer, 2013; Nelling and Webb, 2009). The findings of the study are in
line with this observation. For example, the case study of Starbucks identified that the backlash
received by Starbucks for its ‘Race Together’ campaign did not reflect in the stock market and
that the shares of Starbucks achieved 4% growth during the same time period (Michael, Cauley
and Orengo, 2016). From this it can be inferred that the investors did not place much
importance on the failure of CSR initiative -‘Race Together’ campaign- of Starbucks as it did not
add any direct value to the company. On the other hand, investors had very positive outlook
towards the sustainability bonds of Starbucks as these bonds were used for funding
sustainability efforts that add value to the company (Chasan, 2016). From the discussion it is
clear that revenue benefits and cost reduction benefits of CSR initiatives regulated shareholder
behaviour. This is in line with the correlation outlined by the conceptual model of the present
study.
Similar findings are evident from the case study of McDonald’s. From the case study of
McDonald’s it was revealed that the stock performance of McDonald’s was positive during
2012-2015 period. It was further revealed from the case study that the P/E ratio of McDonald’s
had increased almost by 24% to 23.05 in 2016. From this it can be inferred that McDonald’s has
performed well in the stock market. Furthermore, the case study identified that there was
significant decline (4.5%) in EPS of McDonald’s in 2016. This was linked to the low sales

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performance of the company resulting from the alleged health issues of McDonald’s products
(D'Anselmi, 2011). These allegations have also resulted in small dip in stock market
performance of the company. From the discussion it is clear that shareholders of McDonald’s
gave importance to corporate social and environmental reporting when it threatened long term
sustainability of the company. This again leads to the inference that revenue benefits, risk
management and cost reduction benefits of CSR initiatives regulated shareholder behaviour.
The most important finding emerging from the case study of Starbucks is that there is not
enough evidence for the correlation between corporate social and environmental reporting and
stock market performance. The evidence from the case study reveal that Starbucks has
performed admirably in the stock market in the last few years and that the company has
outperformed all other competitors by providing very high return on investment in the
company. For example it was identified that investment of $1000 in Starbucks shares would
have led to a return of $9000 in 2014 (Jones, 2014). This indicates that the admirable
performance of Starbucks in the stock market can be linked to the higher returns and higher
EPS of the company. This is in line with the observation of Ioannou and Serafeim (2012) that
investors are primarily interested in profit maximisation and as a result do not place much
importance on corporate social and environmental reporting. Moreover, the case study
revealed that stock market performance of Starbucks was very positive even during the debacle
of ‘Race Together’ campaign of the company (Michael, Cauley and Orengo, 2016). From this it
can be understood that CSR issues do not have any significant effect on shareholder behaviour.
Another finding emerging from the case study of Starbucks is the prominence of ethical
investment funds. As per Sustainalytics (2016) report, ethical investment funds were the main
investors in sustainability bonds introduced by Starbucks in 2016. From this it can be inferred
that ethical investment funds have gained important position in stock market in recent years.
Similarly, of Flammer (2013) and Lima Crisóstomo, de Souza Freire and Cortes de Vasconcellos
(2011) identified that ethical investment funds have gained prominence in the market since
2000. It is clear from this discussion that ethical investment funds have special interest in
corporate social and environmental reporting.

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From the discussion of the case study findings, it is clear that shareholders give importance to
corporate social and environmental reporting only when there is either cost reduction and
revenue generation opportunities or risk management opportunities arising from corporate
social and environmental reporting of the company. On the other hand, when corporate social
and environmental reporting do not add any direct value to the company, shareholders tend to
provide no credence to corporate social and environmental reporting. The case of ‘Race
Together’ campaign of Starbucks exemplifies this behaviour of shareholders. This leads to the
inference there is no correlation between corporate social and environmental reporting and
stock market performance. This contradicts the findings of Choi, Kwak and Choe (2010) and
Becchetti and Ciciretti (2009) that shareholders had long term interest in corporate social and
environmental reporting.
The main contribution of the present study to the existing literature is that the findings of the
study corroborate the findings of Flammer (2013) and Nelling and Webb (2009) that
shareholder give importance only to social or environmental activity of the company that add
financial value to the company.The findings of the case study reveal that stock market
performance of both Starbucks and McDonald’s were impacted when shareholders viewed that
there either potential benefits or potential risks with social or environmental activity of the
company, For example, the stock market performance of McDonald’s was adversely affected by
the allegations regarding harmful substances in the products of the company. On the other
hand, in the case of Starbucks the impact was positive as investors positively viewed the
introduction of sustainability bonds by Starbucks. This leads to the conclusion in the present
study though there is no evidence for correlation between corporate social and environmental
reporting and stock market performance, it is clear that shareholder behaviour is affected by
the particular aspects (cost reduction, revenue generation or risk management) of corporate
social and environmental reporting.
4.6 Summary
This chapter of the dissertation deals with the presentation and analysis of data collected for
the study. For the present study the researcher had collected secondary data from wide range

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of sources. The secondary data was used for developing detailed case study of McDonald’s and
Starbucks. From the analysis and interpretation of data presented in the case study the
researcher was able to identify that shareholder behaviour was influenced by the benefits or
risks of corporate social and environmental reporting. However, the study was not able to
present evidence for the correlation between corporate social and environmental reporting and
stock market performance.

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CHAPTER 5: CONCLUSIONS AND RECOMMENDATIONS
5.1 Introduction
In this chapter the researcher provides in-depth analysis on research findings and examines the
extent to which objectives are met with the research findings. In this chapter the research
provides suitable recommendations to McDonalds and Starbucks for improving their corporate
social and environmental reporting for enhancing stock marker performances.
5.2 Conclusions
In this section the researcher discusses findings of the study on the basis of research objectives.
Objective 1: To assess the different elements of corporate social and environmental reporting
From the literature review, the researcher identified cost reduction, revenue generation, cost
and liability avoidance and risk management as major elements of corporate social and
environmental reporting (Jagd, 2014). It was identified from the case study that by engaging
corporate social and environmental reporting, it became possible for Starbucks to eliminate the
possibilities of risks. It was identified from the case study that, by incorporating timely reporting
of CSR progress to stakeholders, the firm has achieved efficacy in its operations (Starbucks CSR
report, 2015). From the case study, the researcher revealed that Starbucks adopted several
measures to tackle issues such as wastage of resources, energy management and other
resources. This has helped the firm to gain benefits such as cost reduction, effective risk
management, revenue generation and liability avoidance (Jochim, Ottenbacher and Harrington,
2015). Similarly from the case study of McDonalds, the researcher identified that effective
reporting of Corporate social and environmental progress to information seekers benefited the
firm to gain positive public reputation. Moreover the sustainable initiatives of McDonalds such
as consumer well-being, sustainable supply chain strategies, environmental responsibility and
corporate philanthropy benefited the firm to generate positive outcomes in terms of efficacy in
operations, cost reduction and effective risk management (McDonalds, 2012). Therefore it can
be deduced that the researcher findings has successfully met with one of the main objective of
the study.

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Objective 2:To evaluate stock market performance of Starbucks and McDonald’s
The researcher from the case study revealed that, for the past 6 years, the stock market
performances of Starbucks was found as very good with highest share price of $62.61 in 2015.
The researcher from the case study identified that Starbucks delivered higher returns to
shareholders by outperforming all competing companies and also the firm has doubled its
exceptional return on investment when compared to competing firms (Jones, 2014). During the
year 2012-2016, the EPS (Earnings per Share) of Starbucks has been increased from 0.235 to
0.52. Though ‘Race Together’ campaign of Starbucks created backlash from general public, this
issue has not affected the stock market performances of the firm (Michael, Cauley and Orengo,
2016). The stock market performance of McDonalds has shown steady increase from the year
1980-2015 (Google Finance, 2016). The Price-earnings ratio of McDonalds steadily increased
almost by 24% to 23.05 in the year 2016. The researcher from the case study identified that
McDonalds has shown astounding performances in stock market with 17% hike in between
period of September-November 2015 (Derousseau, 2015). Thus from the research findings the
researcher identified that both McDonalds and Starbucks fair performances in their stock
market recording and thus have successfully met with objectives of the study.
Objective 3:To critically evaluate the impact of corporate social and environmental reporting
on stock market performance of Starbucks and McDonald’s
The researcher from the case study revealed that the major social responsibility practices of
starbucks included social responsibility reporting (C.A.F.E. practices) and environmental
reporting (reducing water and energy wastage). It was the sustainability bonds, the major CSR
initiative of Starbucks which is inked stock market. The sustainable initiatives of Starbucks
helped the firm to bring out noticeable improvement in its resource utilization and
minimization of energy and water wastages. The effective social and environmental reporting
of Starbucks led the firm to outperform its competitors and thereby to gain competitive
advantage in coffee industry. This performance has facilitated Starbucks to yield higher
performances in stock market (Google Finance, 2016). Moreover the researcher revealed that
McDonalds categorized corporate social and environmental reporting under four sections, well-

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being, sustainable supply chain strategies, environmental responsibility and corporate
philanthropy. The sustainable initiatives of McDonalds enabled the firm to achieve 53% target
in fibre-based packaging in 2015 (McDonald’s, 2013). From the case study, the researcher
revealed that outperforming initiatives of McDonalds enabled the firm to enhance its stock
market performances with steady growth in P/E ratio by 24% to 23.05 in 2016. On the other
hand, it was also revealed that the EPS of McDonalds fallen during the past few years due to
growing criticismon unhealthy food.
5.3 Evaluation of results
From the case studies, the researcher identified that both the firm have regularly maintained
effective corporate and social reporting to their stakeholders. It was identified by the
researcher that for tackling the issues such as ethical sourcing and waste, energy and water
management, Starbucks implemented social responsibility practices such as social responsibility
reporting and environmental reporting. The researcher understood that the CSR reporting of
McDonalds was categorised in to consumer well-being, sustainable supply chain strategies,
environmental responsibility and corporate philanthropy. .from the research findings the
researcher revealed that effective CSR reporting benefited both the firms to outperform it
competitors and to achieve improved stock market performances. The researcher identified
that the stock markets performances of Starbucks has shown positive results for the last six
years and during the year 2015, the firm has reached highest share price value of $62.61.
Additionally, the researcher revealed that the stock performance of McDonalds has shown
positive stock market performances from the year 2012-2015.
5.4 Recommendations
Provide quality food: It has been identified from the research study that the Earnings per Share
of McDonalds is in falling state due to growing criticism on unhealthy food. Thus by aligning
more with ethical souring and trading, the firm must assure that the food served to customers
assures high quality and are free from heath issues. Thus by aligning with ethical sourcing of
food products, the firm can guarantee its quality and thereby justify its CSR reports.

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Develop and maintain healthy relationship with public: The researcher from the study
revealed that Starbucks Race Together campaign has created backlash among public since the
campaign involved PR stunt indicating race related issues. This has created frustration among
customers. Therefore it is highly recommended Starbucks to follow CSR ethics while
implementing promotional campaigns.
5.5 Research Limitations
The current study was completely based on secondary data and this was one of the major
limitations of the study in addition to time and cost. The perfection of the research findings has
been challenged by the lack of adequate primary data that could be collected using qualitative
and quantitative methods. Apart from this, the findings of current study is confined to fast food
industry and coffee industry and therefore the results of the present research study would not
be supportive for other industries like apparel, sports, oil and refinery etc.
5.6 Recommendations for future works
In this section, the researcher based on findings of the study provides certain suggestions to
future researchers. Since the current study is based on secondary data, it is highly
recommended that future researchers need to consider primary data for strengthening the
validity of research findings. It is also recommended that future researchers need to consider
more number of organizations in addition to Starbucks and McDonalds for assuring the
accuracy of research findings. In addition to this, it is also recommended that for improving the
research results, the future researchers must consider the use of sophisticated tools for data
analysing, such as SPSS, regression, etc.

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