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Lecture 6: Applying CSR

Dr Warren Staples

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Recap

Core characteristics of CSR

The cases For and Against CSR

(Friedman, Karnani) V (Carroll, Schwartz & Carroll, Smith, Freeman)

Corporate Moral Responsibility

CSR and CG

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Overview

Terminology & Drivers

Applying Stakeholder theory

Identification & Salience

CSR in the marketplace, workplace, community & ecological environment

CSR communication & reporting

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CSR by many names

Business Ethics

Sustainability/Sustainable Development/SDGs

Corporate citizenship

Community engagement/partnership/programs

Corporate community involvement

Creating Shared Value (CSV)

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What do firms do CSR? Levels of analysis

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CSR drivers

Macro perspectives: Institutions (Peng et al 2008; Husted & Allen 2010)

Meso level perspectives - Firm motivations, instrumental CSR (reputation, profit, etc) – stakeholder salience – community (Marquis)

Micro level perspectives: CEO Personal Values (Micro) - Chin, Hambrick and Trevino (2013),

Dimaggio & Powell (1983) institutional isomorphism:

Normative (e.g Ethical)

Coercive (e.g Regulation)

Mimetic (e.g Competitors)

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Applying stakeholder management

“any group or individual who can affect or is affected by the achievement of the organization’s purpose” (Freeman 2011)

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Freeman (2011, p. 53) defines stakeholder as “any group or individual who can affect or affected by the achievement of the organization’s purpose”. Phillips (2003) named stakeholders as “any individual or group that is the legitimate object of managerial attention”.

Based on Freeman (2011), “stakeholder management” at least should designed into three basic steps that are

“how to identify the stakeholders” by analysing the stakeholder attributes such power, legitimacy, influence (Mitchell, Agle & Wood 1997)

“how to threat the stakeholders” using ‘communications’ and ‘information’ (Smudde & Courtright 2011)

“how is the impacts of stakeholder management” has been studied by Hillman and Keim (2001) to find the impact of stakeholder management to shareholder value, while Romenti (2010) see stakeholder management impacts on corporate reputation.

2. Stakeholder Approach and Local Legitimacy

Local legitimacy is a general perception or assumption that the actions of businesses are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs, and definitions (Suchman 1995).

‘Social Pressure’ from local government and NGO is derived from the dissatisfied of local stakeholders with corporate operation (Reimann 2012; Gifford and Kestler 2008).

‘social embeddedness’ is a foundation for company obtaining local legitimacy by building relationship with local stakeholders (Gifford & Kestler 2008; Gifford, Kestler & Anand 2010).

Identification of Stakeholder and Claims

Treatment of Stakeholders

Assessment

of the Impact

Stakeholder identification & salience

Mitchell, Agle & Wood (1997):

Identification of 1) Claimants 2) Influencers

Power, Legitimacy & Urgency

Who or What Really Counts – typology of 7

Dynamism in Stakeholder-Manager relations

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Power, dependence, and reciprocity in relationships

Stakeholder identification & salience

Power

Urgency

Legitimacy

4. Dominant

5. Dangerous

6. Dependent

7. Definitive

1. Dormant

2. Discretionary

3. Demanding

8. Non stakeholder

Source: Mitchell, Agle & Wood (1997)

Footnote:

Urgency? Neville et al. (2011)

Organization (Ali 2017)

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CSR in the marketplace

Business case for CSR – does it pay off?

Marketplaces? Sourcing, buying, marketing, advertising, pricing and selling of products and services

What markets? Consumers, financial (institutional), B2B, Bottom of the Pyramid (BOP)

Crane, Matten & Spence (2014)

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CSR in the workplace

Employee recruitment & retention tool (Turban & Greening 2000; Bhattacharya, Sen & Korschum 2008)

Regulated v Less regulated workplaces

In-house v Outsourced workplaces

Labour standards – SA 8000 decent work, ILO Global labour

Equality in the workplace

Crane, Matten & Spence (2014)

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CSR in the community

Increasing interest in the impact of the community on business (Marquis & Battilana 2009; Marquis, Glynn & Davis 2011)

Communities – generally high legitimacy, low power and low urgency

Philanthropy (Carroll 1998)

Strategic philanthropy

Linking employee volunteering to HRD strategies

Linking charitable giving to marketing strategies through cause related marketing and sponsorship

Establishing cross-sector partnerships with community groups

Crane, Matten & Spence (2014)

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CSR – a case study Chinese firms in Australia – Huang & Staples (2014)

Interviews with 56 managers from Chinese firms, community group leaders, government officials

Field visits & Review company annual reports and sustainability reports.

15 large Chinese firms in Australia operating in four states: VIC, WA, NSW, and TAS

Industries: Mining, agriculture, manufacturing, banking, telecommunications, airlines, and trading.

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The next 9 slides are all from research undertaken by Charlie Huang & I (Warren Staples) from the School of Management at RMIT University

The research focuses on the community engagement practices of Chinese firms in Australia.

Arts & culture

Donation and sponsorship of the arts, cultural events, and sports

Improving communities’ health and wellbeing

Huang & Staples (2014)

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Raising Brand awareness, sponsoring events that politicians attend in order to build awareness and relationships

From left to right

Burnie Arts and Performing Centre – MMG

Sydney Chinese Festival – Bank of China

Melbourne Festival – China Southern Airline

Tyrannosaurus National Australia Museum - China Eastern

Disabled Art troupe – Sinosteel

Kulcha Multicultural Arts festival – CITIC pacific

Sport

Huang & Staples (2014)

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Sponsoring local sporting teams, professional sporting teams, and major events – Melbourne Cup horse racing

From top left clockwise:

TCL – Box Hill Hawks,

Melbourne Cup Horse Racing

Huawei – Canberra Raiders strategically positioned outside of Parliament – and a bizarre footballer getting a Huawei tattoo on his thigh

MMG – Local football Rosebery Toorak FC – Regional Tasmania

Health & wellbeing

Huang & Staples (2014)

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Mining company - Dental van in remote communities for people who cannot afford the dentist

Huawei – tablet computers in hospitals

Chinese medicine in regional australia

Fruit in a local school

Huang & Staples (2014) Education

Donations or sponsorship of educational programs in local communities, including scholarship, apprenticeship, traineeship, community programs, and after school activities at local schools

Infrastructure

Sporting facilities, solar panels, opportunity (thrift) shop facilities,

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Indigenous art in regional school in very small town in Western Australia

Targeted employment

Target recruitment practices towards specific groups of people to address with social problems (local workers, unemployed youth, indigenous).

Chinese firms have devoted resources to providing employment opportunities, and pre-employment training to indigenous Australians

Huang & Staples (2014)

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Entrepreneurship development

Engaged local communities to develop their entrepreneurial capabilities (community farm)

Micro-finance (http://www.manyrivers.org.au/)

Supporting local entrepreneurs and social enterprises (aquaponics, organic chickens, watermelons)

Donating resources to develop local industry incubators (indigenous business farm, innovation park).

Huang & Staples (2014)

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Diversification of local economies

Procurement of goods and services from local providers

Micro finance initiatives to support (Citic Pacific)

Support of social enterprises (Sinosteel through Pollinators Geraldton)

Conclusions: benefits to the community

Infrastructure – social & physical community facility development

Community development - building community capability and resilience

Conclusions: benefits to chinese firms

Gaining legitimacy (license to operate), enhancing corporate image, reputation and reducing operational costs

Building relationships with host-country governments and key stakeholders

Huang & Staples (2014)

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CSR in the ecological environment

Using natural resources efficiently and minimizing waste

Pollution prevention

Establishing product stewardship

Innovating in products, processes & services

Managing climate change

Responding to natural disasters

Ensuring resource security and resource justice

Crane, Matten & Spence (2014)

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CSR practice – strategy, structure & communication

Strategy (Hustead & Allen 2011)

Structure (Brammer & Millington 2003, 2005)

Internal functions: CSR/Community & External affairs, Central admin

Communication

Targeted or Broader stakeholder communication - Community v General Stakeholders

Engagement and dialogue – listening

Social issue identification – ability to identify issues of relevance

CSR reporting – Global Reporting Initiative (GRI) - Rhetorical strategies designed to be persuasive

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Conclusions – thinking critically about CSR

CSR is a prominent contemporary phenomenon

Whilst debate exists as to the role of business, most businesses embrace a range of CSR practices

It’s voluntary – an inherent weakness?

Is legislation needed to renew the social contract between business & society? And make it more explicit?

Does that necessitate changes to the model of the Anglo-American corporate governance? i.e unitary tier board

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Review questions

What are some of the drivers of CSR behaviours in firms?

Describe Mitchell et al’s (1997) stakeholder salience typology and explain how community stakeholders are normally classified?

How is CSR relevant in the marketplace, workplace, community and ecological environment?

What are some of the important elements of contemporary CSR practice?

Is CSR because of its voluntary nature an inherently flawed?

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Exercise: Orica – how not to 1

Describe the timeline of events and evaluate the main ethical issues of the case (consider CSR in the, market, workplace, community and ecological environment).

2. Identify the affected parties (Orica’s stakeholders) and classify them as primary/secondary according to Freeman (2008). Further classify them as claimants/influencers per Mitchell, Agle & Wood (1997). Think about those affected directly by the spill at Kooragang Island and broader stakeholders.

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Exercise: Orica – how not to 2

Use Mitchell, Agle & Wood’s (1997) stakeholder salience (Power, Urgency & Legitimacy) typology to analyse Orica’s stakeholders according the seven types proposed (Definitive, Dangerous, Dormant, Dominant, Discretionary, Dependent, Demanding). Who or what really matters in this case?

Freeman’s stakeholder theory is concerned with notions of justice ethics (distributive, procedural and interactional). Are these elements of justice prevalent in Orica’s dealings with stakeholders?

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Exercise: Orica – how not to 3

Consider impact of Orica’s history, culture, leadership as well as external politics on this case. What factors do you feel have contributed to Orica at Kooragang Island having been such a repeat offender? What do you make of the conduct of CEO Graeme Liebelt? How would you feel if you were an investor in Orica?

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References

Bhattacharya, CB, Sen, S; Korschun, D (2008) ‘Using corporate social responsibility to win the war for talent’, MIT Sloan Management Review, Vol.49(2), p.37(7).

Brammer, S & Millington, A (2003) ‘The Effect of Stakeholder Preferences, Organizational Structure and Industry Type on Corporate Community Involvement’, Journal of Business Ethics, Vol.45(3), pp.213-226.

Brammer, S & Millington, A (2005) Corporate Reputation and Philanthropy: An Empirical Analysis, Journal of Business Ethics, Vol.61(1), pp.29-44.

Carroll, AB 1998, 'The Four Faces of Corporate Citizenship', Business and Society Review, vol. 100, no. 1, pp. 1-7.

Chin, MK, Hambrick, DC, Treviño, LK (2013) ‘Political Ideologies of CEOs: The Influence of Executives’ Values on Corporate Social Responsibility.’ Administrative Science Quarterly, 2013, Vol.58(2), pp.197-232.

Crane, A, Matten D & Spence, L (2014) Corporate Social Responsibility: Readings and Cases in a Global Context (2nd Edition), Routledge, New York, USA).

DiMaggio, P.J., & Powell, W.W. (1983). "The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields." American Sociological Review, 48(2), 147-160.

Eweje, G (2006) The Role of MNEs in Community Development Initiatives in Developing Countries: Corporate Social Responsibility at Work in Nigeria and South Africa, Business Society, 45: 93

Freeman, RE 2010, Strategic management : a stakeholder approach, Cambridge University Press, UK.

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References

Greening, DW, Turban, DB (2000) ‘Corporate social performance as a competitive advantage in attracting a quality workforce’, Business and Society, Vol.39(3), p.254(27)

Huang, X & Staples W (2014) Community engagement by Chinese firms in Australia: Practices and benefits, Viewed at: http://mams.rmit.edu.au/xnjztnvvfxek.pdf [Accessed 20 Janunary 2015]

Husted, B & Allen, DB (2006) Corporate Social Responsibility in the Multinational Enterprise: Strategic and Institutional Approaches, Journal of International Business Studies Vol. 37, No. 6,

Husted, B, Allen, DB (2011) Corporate social strategy : stakeholder engagement and competitive advantage,

Marquis, C, Davis, GF, & Glynn, MA (2013). "Golfing Alone? Corporations, Elites and Nonprofit Growth in 100 American Communities." Organization Science, 24(1): 39–57

Marquis, C & Battilana, J (2009) "Acting Globally but Thinking Locally? The Enduring Influence of Local Communities on Organizations." Research in Organizational Behavior, 29: 283–302.

Mitchell, RK, Agle, BR, Wood, DJ. (1997) ‘Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts’, Academy of Management Review, Vol.22(4), pp.853-886.

Neville, B, Bell, SJ & Whitwell GJ (2011) ‘Stakeholder Salience Revisited: Refining, Redefining, and Refueling an Underdeveloped Conceptual Tool’, Journal of Business Ethics

Peng, MW., Wang, DYL & Jiang Y (2008). An institution-based view of international business strategy: A focus on emerging economies. Journal of International Business Studies, 39 (5): 920-936.

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