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Dr. Linda Ferrell
Managing Corporate Social Responsibility:
How to Nurture Stakeholders’ Confidence
Isabelle Maignan
O.C. Ferrell
and
Linda Ferrell
Managing Corporate Social Responsibility:
How to Nurture Stakeholders’ Confidence
The collapse of Enron and WorldCom along with the subsequent series of
accounting scandals have created a renewed interest in corporate social
responsibility (CSR) in the U.S. and around the globe. Accountability and
transparency in top management decisions and business dealings are now
under the close scrutiny of a variety of stakeholders including
governmental authorities, investment funds, shareholders, and labor
representatives. A new way of doing business was recently mandated by the
2002 Sarbanes-Oxley Act, which was by far the most sweeping change in
corporate governance, securities law, and the regulation of accounting
practices since the Securities and Exchange Act of 1934. This corporate
reform act was passed to help assure distrustful stakeholders that
organizations are exposed to greater oversight. At the time the act was
passed, a Wall Street Journal/NBC poll found that 57% of the general
public felt that “standards and values of corporate leaders and executives
had dropped in the last 20 years”.
Given this recent crisis and the attached public scrutiny, CSR is now a
top area of concern for business executives. While some aspects of CSR are
being dictated by the Sarbanes-Oxley Act, businesses must still find
additional ways to ensure that social responsibility issues are
systematically integrated across all business decisions and practices.
Some leading firms already have solid CSR programs in place; however, many
companies are still deprived of any systematic organizational procedures
that support the consistent management of CSR. In fact, many executives
are still uncertain about the meaning of CSR, and its linkage to
traditional business operations. The discussion below tackles these gaps
first by detailing the nature of CSR. Second, based on the conceptual
depiction proposed, a step-by-step methodology is introduced to explain
how businesses can concretely manage CSR. The paper provides an approach
to implementing CSR that accounts both for the complexity of this concept
and for managers’ favor of clear and practical processes.
WHAT IS CSR?
From the 1950s onward, business scholars have provided various definitions
of CSR and of related notions such as corporate citizenship, corporate
social responsiveness, or corporate social performance. The differentiated
terminology employed along with the multiplicity of the conceptualizations
proposed underpin the complexity of the CSR concept. The discussion below
draws from the extant literature to outline a definition of CSR that
accommodates the intricacies of this concept while providing solid grounds
for its managerial implementation.
Like scholars, many managers still struggle with the notion of corporate
social responsibilities. In particular, they are unsure about the meaning
of the word “social,” and do not necessarily see its link to daily
business activities. Quite often, they have problems evaluating how their
own organization can have an impact on, or contribute to, the well-being
of society as a whole. This difficulty is understandable because society
is “a level of analysis that is both more inclusive, more ambiguous, and
further the ladder of abstraction than a corporation itself” (Clarkson
1995, p. 102). Therefore, we propose as a starting point that even though
businesses in general are accountable toward society at large, an
individual business can be deemed responsible only toward the definable
agents with whom it interacts. These agents can be regrouped under the
label of “stakeholders.”
Stakeholders and CSR
Stakeholders designate the individuals or groups that can directly or
indirectly affect, or be affected by, a firm’s activities (Freeman 1984).
The recent ethics crisis in the U.S. has demonstrated how employees and
investors especially can suffer dire consequences as a result of
irresponsible corporate practices. The new reforms to improve corporate
accountability and transparency also suggest that other stakeholders
--including banks, attorneys, or public accounting firms-- can play a
major role in fostering responsible decision-making. Overall, two types of
stakeholders can be distinguished. Primary stakeholders are those whose
continued participation is absolutely necessary for business survival;
they consist of employees, customers, investors, shareholders, along with
the governments and communities that provide necessary infrastructure.
Secondary stakeholders are not usually engaged in transactions with the
focal organization and are not essential for its survival; they include
the media, trade associations, non-governmental organizations along with
other interest groups. These various stakeholders embrace specific values
and norms dictating what constitutes acceptable or unacceptable corporate
behaviors.
Stakeholder norms and values. Usually, a certain number of individual
stakeholders share similar expectations about desirable corporate
practices and impacts. Some of them choose to join formal communities
dedicated to better defining, and to advocating, these vales and norms.
For example, some investors choose to play a role in SocialFunds.com, an
organization that provides information about socially responsible
investing and stimulates shareholder activism in favor of CSR. Similar
communities can also be found among employees (Employee’s Advocacy Group),
consumers (Consumer Federation of America), suppliers (Covisint in the
automobile industry), competitors (Better Business Bureau), the
geographical areas where the firm operates (Alaska Wilderness League), and
the media (National Association of Broadcasters). Individual stakeholders
may embrace and discuss issues on a collective basis even when they do not
join a formal organization. For instance, customers do not need to be
members of Environmental Defense, a group concerned about the
environmental impact of business operations, to discuss this issue with
others, and to incorporate this concern in their voting and purchasing
decisions. Accordingly, stakeholders can be regrouped into formal or
informal communities that share a certain number of values and norms about
desirable business behaviors.
Stakeholder issues. Stakeholder values and norms apply to a variety of
issues such as working conditions, consumer rights, environmental
protection, product safety, and proper information disclosure. Noticeably,
stakeholder values and norms concern both issues that do and do not affect
stakeholders’ own welfare. For example, consumers may worry not only about
product safety, but also about child labor, an issue that does not impact
them directly. We define stakeholder issues as the concerns that
stakeholders embrace about corporate activities and the effects thereof.
Accordingly, the level of social responsibility of an organization can be
assessed by scrutinizing its impacts on the issues of concern to its
stakeholders. Table 1 provides examples of common stakeholder issues along
with indicators of businesses’ impacts on those issues.
[Insert Table 1 here]
Stakeholder pressures. Home Depot requires that an independent firm check
the environmental properties of the materials provided by its suppliers.
In particular, the retailer requires wood products be certified through
the independent Forest Stewardship Council. Hence, Home Depot imposes its
norms and concerns regarding the natural environment on its suppliers.
Similarly, as illustrated in Figure 1, various stakeholder communities are
likely to exercise pressures on the focal firm and on each other in order
to push forward their own values and norms. Figure 1 further shows that,
in spite of disparities across communities, stakeholders conform to broad
and abstract norms that define acceptable behavior in society. Noticeably,
each business has its own values and norms depicting desirable behaviors
based on its corporate culture and operations. These organizational values
and norms overlap with those of some stakeholder groups, and especially
with those of primary stakeholders since they are in the best position to
exercise an influence on the organization.
[Insert Figure 1 here]
Why do stakeholder norms matter? Stakeholders provide resources that are
more or less critical to the firm’s long-term success. Stakeholder
resources may be both material and immaterial. For example, stockholders
can bring in capital; suppliers can provide material resources or
immaterial knowledge; local communities can offer infrastructure and a
location; employees and managers can grant expertise, leadership, and
commitment; customers can provide loyalty and positive word-of-mouth; and
the media help spread positive corporate images. The ability of
stakeholders to withdraw, or threaten to withdraw, needed resources gives
them power over the organization. The idea of stakeholder power is
exemplified in Ford’s on-line Corporate Citizenship Report: “We exist in a
complex system of relationships with our stakeholders. When the
connections between us are strong, communications are clear and high
levels of trust and respect are present in our relationships, we are more
likely to achieve sustained business success. And when any part of the
system breaks down, we are more likely to fail.” Table 2 also provides
examples of situations in which stakeholders have made use of their power
to compel businesses to behave in a more socially responsible manner.
[Insert Table 2 here]
Organizational Norms and CSR
The discussion above could imply that businesses will engage in socially
responsible behaviors only in the presence of stakeholder power.
Businesses would then limit their responsibility initiatives to those
issues of concern to the most powerful and visible stakeholder
communities. This view has some merit especially since managers and
employees form stakeholder communities that actively defend specific norms
and values within the firm. However, organizations may be driven to commit
to a specific cause independently of any stakeholder pressure. Businesses
may also want to exceed stakeholder expectations. Thus, organizational
values and norms can dictate modes of behavior that are more stringent
than those demanded by various stakeholder communities.
Clear organizational values and norms are also needed to select among
conflicting stakeholder demands. A given organization could indeed be
faced with equally powerful stakeholders whose views of CSR imply
differentiated business practices. For example, while customers may demand
environmentally friendly products, shareholders may question green
investments because of their high costs and uncertain returns.
Accordingly, organizational values and norms are especially useful to
guide CSR practices when they specify the nature of either relevant
stakeholder communities or important stakeholder issues. Examples of
relevant organizational values and norms are provided in Table 3.
[Insert Table 3 here]
Organizational values and norms are most likely to actually pervade
decisions and practices when they are clearly formalized and
well-communicated to employees and business partners. The formalization of
CSR norms can be accomplished in many ways such as:
• Presenting the stakeholder issues viewed as most important in official
organizational communications (mission statement, values statement, annual
reports).
• Clarifying the nature of desirable and undesirable behaviors in a code
of ethics and associated training programs.
• Openly endorsing environmental, ethical, or social charters (e.g., Caux
principles, Keidanren Charter for Good Corporate Behavior, CERES
principles --Coalition for environmentally Responsible Economies--,
Responsible Care Principles --from the American Chemistry Council).
Noticeably, even though strong organizational values and norms are
important, they are not sufficient to ensure responsible corporate
behaviors: they may fail to account for the evolving norms and issues
valued by powerful stakeholder communities. Therefore, businesses must be
capable of defining their values and norms while concurrently keeping
abreast of those of their stakeholders.
An Integrative Definition of CSR
The discussion above suggests that businesses committed to CSR, at a
minimum, adopt values and norms along with organizational processes to
minimize their negative impacts and maximize their positive impacts on
important stakeholder issues. Therefore, the CSR of an individual business
is issue-specific: while an organization might display exemplary behavior
with respect to one stakeholder issue, it may fail to properly address
another stakeholder concern. For example, while Nike had long been
committed to environmentally friendly practices, it failed throughout the
1990s to properly address the human rights issues associated with the
labor practices of its suppliers. The degree of commitment to CSR is best
evaluated at the level of an individual business unit: within large
companies, various business units may face different stakeholders and
stakeholder issues.
Important stakeholder issues. Given limited organizational resources,
businesses cannot possibly address all stakeholder issues. The nature of
the most important stakeholder issues is determined by considering
simultaneously: (a) the priorities dictated by organizational values and
norms, and (b) the relative power of different stakeholder groups. As
earlier mentioned, organizational values and norms can be more stringent
than those of stakeholders; therefore, addressing relevant stakeholder
issues is seen as a strict minimum to show commitment to CSR. The
evaluation of the organization’s impacts on various stakeholder issues can
be based on objective indicators such as those outlined in Table 1. This
assessment can also be performed by surveying the satisfaction of
different stakeholders with the organization along with their image of the
organization.
CSR processes. Two main types of CSR processes can be recommended to bring
organizational norms into practice and to properly address relevant
stakeholder issues. First, stakeholder intelligence generation processes
help the firm keep abreast of the nature of powerful stakeholder
communities along with their main norms and concerns. A second type of CSR
processes consists in implementing concrete initiatives aimed at tackling
relevant stakeholder issues. These initiatives can take many different
forms. For example, processes aimed at addressing some employee issues
could include a health and safety program, the development of a career
management program, or work schedules that facilitate the coordination of
personal and professional lives. With respect to customers, concrete CSR
implementation processes could consist of product quality and safety
programs, or of procedures aimed at responding to individual customer
complaints. Initiatives aimed at the community include philanthropic and
volunteerism programs along with environmental protection efforts.
Overall, the view of CSR depicted thus far helps render this concept
manageable by limiting its scope and tying it to concrete business
activities. The next section uses this conceptual framework as a basis to
develop a solid plan to manage CSR.
MANAGING CSR
The practical methodology depicted below outlines the steps to be adopted
to properly manage CSR. In particular, the methodology advanced is aimed
at companies interested in introducing a coherent CSR program that fits
organizational values and objectives. An overview of the proposed
methodology is provided in Figure 1.
[Insert Figure 1 here]
Step 1: What Do We Stand For?
In order to fit in the business where it is developed, a CSR program must
align with the norms, values, and mission of the organization. The purpose
of this first step is to identify the organizational values and norms that
are likely to have implications for CSR. In particular, relevant existing
values and norms are those that specify the stakeholder groups and
stakeholder issues that are deemed as most important by the organization.
Very often, relevant organizational norms can be found in corporate
documents such as the mission statement, annual reports, sales brochures,
or web sites. Table 4 illustrates how concrete corporate values and norms
can be translated in terms of CSR objectives.
[Insert Table 4 here]
Formal documents may not be sufficient to elicit how the organization
envisions its relationships and contributions to stakeholders. Interviews
of leading and senior organizational members may yield fruitful insights.
For example, a CEO we worked with stated: “I have always thought about my
grand children --even before I had any--; I worry about what this company
is going to leave behind for them; whether they will also have a nice
natural environment to live in.” If this viewpoint really inspires
organizational activities, then one would expect the firm to be concerned
about the issues of sustainability and protection of the environment.
Similarly, the owner of a middle-sized enterprise explained: “For me, it
is important that the people who work here have fun; they must be happy to
come to work; they must enjoy collaborating and growing.” Such a statement
implies that employees are likely to be seen as an essential stakeholder
group, and that the quality of work life along with personal development
are likely to be issues valued in the company. While they clarify the
stakeholders and issues they stand for, businesses must also understand
which corporate practices and impacts are of greatest concern to their
stakeholders. In order to generate this intelligence, businesses must
first identify powerful stakeholders.
Step 2: Who Are Powerful Stakeholders?
As earlier mentioned, stakeholders have some level of power over a
business because they are in the position to withhold, or at least
threaten to withhold, organizational resources. To assess the power of a
given stakeholder community, it is useful to rate the extent to which: (a)
the firm depends on the resources of this stakeholder community for its
continued survival, and (b) the welfare of the stakeholder community
depends on organizational success. As illustrated in Figure 2,
stakeholders have most power when their own survival is not really
affected by the success of the organization, and when they have access to
vital organizational resources. For example, most end customers do not
need per se to buy Nike shoes. Therefore, if they decide to boycott Nike,
they have to endure only minor inconveniences. Nevertheless, their loyalty
to Nike is vital to the continued success of the sport apparel giant.
[Insert Figure 2 here]
The proper assessment of the power held by a given stakeholder community
also requires an evaluation of the extent to which that community can
collaborate with others to pressure the firm. The more ties exist or can
easily be developed between stakeholder communities with similar norms,
the more vulnerable the organization. This idea can be illustrated with
Shell’s Brent Spar crisis. Greenpeace had secured the support of several
televisions and newspapers outlets before it launched its offshore
demonstrations against Shell’s planned destruction of an oil platform. The
NGO had also gathered beforehand support among other environmental groups,
church representatives, and political leaders in several European
countries. As a result, Greenpeace’s actions were highly visible and led
to broad-based and unified condemnations of Shell. The oil giant then had
little choice but to give into activists’ demands. Such contagion effects
and collaboration help stakeholders build power relative to the firm. At
the end of Step 2, businesses should have a list of stakeholder
communities in hand, with a rough assessment of their respective and
common power.
Step 3: Which Stakeholder Issues?
Together, steps 1 and 2 lead to the identification of the stakeholders who
are both the most powerful and the most valued by the firm. Step 3
consists then in understanding the nature of the main issues of concern to
these stakeholders. Some of this knowledge is often partially in-house,
but has not been systematically integrated and analyzed. Boundary spanners
(e.g., sales representatives, customer-service representatives, purchasing
managers, public relations specialists) may be especially knowledgeable
about the main norms and concerns shared by customers, suppliers, and the
public opinion. Relevant information can also be found in secondary
documents published by stakeholder organizations such as professional
associations, governmental agencies, NGOs, or competitors. In spite of
this existing knowledge, it may still be useful to conduct panel
discussions or interviews with stakeholders to better understand their
specific expectations. Topics to be tackled in these forums could include:
• Stakeholders’ views of CSR in general: What is CSR? What are examples of
socially responsible firms? What are examples of socially irresponsible
firms? To whom are businesses most responsible?
• Stakeholders’ views of the social responsibilities faced by the focal
organization: To whom is this firm responsible? What are negative impacts
of the firm on society and on its business associates? How can the
organization actively contribute to the well-being of different
stakeholders?
Such a process of stakeholder intelligence generation is in place at
General Motors with “Community Impact Strategic Teams,” in charge of
identifying internal and external issues that may impact the company and
its communities. The giant food retailer Ahold has moved one step further
by conducting a formal research in aimed at characterizing stakeholder
issues. Specifically, qualitative research was conducted in several
countries among customers, employees, opinion leaders, NGOs, and
responsible investors. Overall, step 3 should result in a clear list of
powerful stakeholders and associated issues. Table 5 provides an example
of such a list for a garbage treatment company we worked with.
[Insert Table 5 here]
Step 4: What Does CSR Mean For Us?
Steps 1 through 3 consist in generating information about CSR among a
variety of actors in and around the organization. Step 4 brings these
three first stages together to arrive at a concrete definition of CSR that
fits specifically the organization of interest. This general definition
will then be used to evaluate current practices and to select concrete CSR
initiatives. Ideally, this chosen definition is then formalized in
official documents such as annual reports, web pages, or company
brochures. The definition should at least clarify two main points: (1) the
motivation underpinning the commitment to CSR, and (2) the stakeholders
and issues that are perceived as priority by the organization. Table 6
introduces the definition of CSR adopted by the global food retailer Ahold.
[Insert Table 6 here]
The first element of the definition clarifies why CSR is of interest to
the company, and therefore places CSR in the context of the broader
organizational objectives and mission. From the analyses conducted in
steps 1 and 2, it may become obvious that CSR is an integral part of the
organization’s values and norms. This is what is implied in Ahold’s
definition of CSR (see Table 6). Similarly, the financial services
provider PNC clearly states that community involvement programs are
grounded in organizational values and norms: “Giving back is a bedrock
value at PNC. For us, that is business-as-usual.” In contrast, CSR could
be mainly the result of stakeholder pressures. This perspective is adopted
by the pharmaceutical company AstraZeneca: “We aim to be in tune with the
changing expectations of society and to conduct business in a way that
meets widespread approval.” In some firms, CSR is seen as an excellent
instrument to achieve performance objectives. For example, the global
supermarket chain Carrefour states: “We firmly believe that our
responsible approach is the source of our financial success.”
The second element of a definition pinpoints the stakeholders and issues
that will be the main targets of CSR initiatives. These priorities are
clearly stated in Ahold’s definition of CSR where the natural environment,
financial stakeholders, employees, customers, suppliers, and communities
are listed as relevant stakeholders. In addition, Ahold’s definition
points to core stakeholder issues including health and safety,
sustainability, and quality of life. This general definition of CSR can
then be used as basis to survey current practices.
Step 5: Auditing Current Practices
Two main questions can guide an audit of current CSR practices: (a) what
does the organization already have in place to address important
stakeholder issues? and (b) which practices need improvement? The first
part of this inventory is necessary because most organizations do not have
a good overview of the various processes already in place to tackle each
specific stakeholder issue. For example, when considering the issue of
quality of work-life, managers may consider a broad range of initiatives
such as working schedules, ergonomics, organizational communications,
along with employee volunteerism and out-of-company outings.
The second part of the audit consists essentially in identifying which
organizational practices need to be modified in order to better address
stakeholder issues. A systematic review of all organizational processes
along with surveys of different stakeholders could be conducted to perform
the second part of this audit. Objective indicators of the organizational
impacts on specific stakeholder issues (see those presented in Table 1)
can also be used. Businesses can rely on standardized audits such as those
offered by the Global Reporting Initiative and the Social Accountability
Institute. These standards provide a listing of issues to be surveyed,
along with recommended indicators of impacts. These standardized audits
implicitly assume that all companies share similar values and face about
the same stakeholder communities and issues. As a result, they are most
adequate for large companies that confront a wide range of issues and can
afford to tackle this variety. Regardless of size, businesses should make
sure that their audit centers on the stakeholders and issues favored in
their own definition of CSR. Such a focus best enables businesses to
concentrate their efforts and to establish a clear profile in the eyes of
stakeholders. At the end of Step 5, businesses should have a detailed
inventory of organizational activities that need improvement.
Step 6: Implementation of CSR Initiatives
The CSR implementation process starts with the prioritization of the
challenging areas outlined in Step 5. Two main criteria can be considered.
First, the levels of financial and organizational investments required by
different actions should be considered. In particular, one could
distinguish between the challenges that require:
• Only small adaptations of current processes. For instance, philanthropic
donations could be re-organized to systematically target one specific
social issue. Similarly, communications to employees could be consolidated
in order to yield greater accessibility and clarity.
• The creation of new administrative processes. Examples would include the
development of a supplier selection program based on environmental
criteria, and the adoption of a process to give a personal answer to every
customer complaint.
• The development of new production processes. For instance, businesses
could attempt to lower the non-recyclable content of products, or design
ways to re-use old packaging.
A second criterion to consider when prioritizing CSR challenges is
urgency. When the challenge under consideration corresponds to a point
listed in the definition of CSR, and when stakeholder pressures on the
issue could be expected, then the challenge can be considered as urgent.
It should therefore be tackled without delay. Once a depiction and
schedule of CSR challenges has been established, it is essential to
allocate responsibility both to individual initiatives, and to the CSR
implementation process as a whole. Even though it is often neglected, the
designation of an individual or committee in charge of overseeing all CSR
efforts is the only way to ensure the coherence of diverse initiatives,
along with their fit with the stated definition of CSR.
Step 7: Generating Enthusiasm for CSR
Creating awareness. Given that one aspect of CSR consists in addressing
stakeholder issues, it is essential that businesses keep stakeholders
aware of the initiatives undertaken to address these issues. Environmental
and social reports constitute an increasingly popular means of keeping
some stakeholders informed (mainly shareholders, investment funds,
business partners, and employees). An increasing number of companies also
seem to also use web sites to communicate their achievements. Besides
these general communication means, many businesses are eager to discuss
their efforts within forums dedicated to social responsibility and
sustainability issues such as the World Summit on Sustainable Development
that took place in Johannesburg in 2002, or the regular conferences
organized by the Global Reporting Initiative. These forums give businesses
an opportunity to inform experts and activists in the CSR area of their
progress. Another example of this type of promotion is provided by General
Motors: its foundation organizes annually a scientific conference on
cancer. This helps keep stakeholders aware of GM’s commitment to cancer
research, and highlights the firm’s dedication to philanthropy and medical
science.
Traditional advertising can also be used to enhance awareness of CSR
initiatives. For instance, Shell has been conducting for several years a
campaign on the theme: “Profits and Principles. Is there a choice?” This
campaign emphasizes Shell’s commitment to social responsibility and
environmental sustainability. Given that the successful management of CSR
requires the continuous generation of intelligence about stakeholders,
communications on CSR should not flow solely from businesses to
stakeholders. Instead, businesses should strive not only to create
awareness of CSR, but also to establish bonds to stakeholders and invite
them to participate in their CSR initiatives.
Getting stakeholders involved. One approach to stimulating a sense of
bonding to the firm consists in emphasizing the fact that the business and
its stakeholders share similar concerns. For example, Wal-Mart advertises
on store displays and on its web site the thank-you letters, and special
acknowledgements received by its employees during the working hours they
spent as volunteers in the community. These messages make public the
common concern for the community displayed by both the company and its
employees. The publicized affiliation and commitment might be appealing to
potential recruits, consumers, and community members. Following a similar
approach, the food manufacturer ConAgra has partnered with the charity
Second Harvest to create a multi-media campaign aimed at enhancing the
public opinion’s understanding of child hunger in the U.S. With these
activities, ConAgra publicizes simultaneously its affiliation with the
charity and its commitment to addressing a specific community issue.
Awards, prices, and events are also popular methods to encourage
stakeholders to partner with the firm in order to address a specific
issue. For example, AstraZeneca has adopted an awards program that
recognizes the country managers that have introduced successful
initiatives with respect to safety, health, and the environment. In a
similar vein, AstraZeneca organized community initiatives in more than
twenty countries to celebrate its first birthday. Not only employees, but
also business partners, NGOs, and community leaders were invited to take
part in these special events.
Overall, Step 7 is intended first and foremost at keeping stakeholders
aware of, and enthusiast about, the firm’s CSR efforts. Meanwhile, the
different communication tools and promotional operations adopted during
this phase may give businesses a chance to enhance their image among
stakeholders and secure increased stakeholder support for their
activities. When stakeholders get a chance to understand that a business
acts upon issues that they value, they may be appreciative of the firm’s
efforts, and may be willing to walk an extra mile in the firm’s favor.
There is some preliminary research evidence that supports the likelihood
of increased stakeholder resources as a result of CSR initiatives. In
particular, scholars have established positive relationships between
perceptions of CSR and a variety of desirable outcomes such as positive
product and brand evaluations, customer loyalty, employee commitment, and
attractiveness as an employer. Even though these findings need
confirmation, they suggest that businesses may be able to enjoy concrete
rewards from their investments in CSR. Even though such benefits may be
real, businesses should not be tempted to use Step 7 only for promotional
purposes. It is indeed also essential that businesses use communications
to obtain stakeholders’ feedback on their CSR efforts.
Step 8: Stakeholder Feedback
The different activities mentioned in step 7 help stimulate a fruitful
dialogue with stakeholders. Other instruments can be employed to keep
abreast of stakeholders’ views of the firm and of their evolving issues.
Additional stakeholder feedback can be generated through a variety of
means. First, stakeholders’ general assessment of the firm and its
practices can be obtained through satisfaction or reputation surveys. For
instance, AstraZeneca has conducted a global survey of its employees to
evaluate not only their own satisfaction, but also their perceptions of
the firm’s socially responsibility efforts. Beyond Petroleum (BP) has
conducted several surveys of stakeholders in order to evaluate their
perceptions of the firm, and get insights into welcome improvements. One
quantitative survey focused on the reputation of BP among several
audiences in the U.S. and U.K.
Second, in order to gauge stakeholders’ perceptions of the firm’s
contributions to specific issues, more qualitative methods may be
desirable. For example, BP conducted a qualitative evaluation of its
social responsibility efforts and reporting through in-depth interviews of
institutional investors, private shareholders, community leaders, and
NGOs. The British home improvement retailer B&Q has bi-annual roundtables
with associations, suppliers, community leaders, and NGOs to discuss the
company’s performance in terms of environmental and community
responsibilities. Bristol-Myers-Squibb offers an open-ended on-line survey
on sustainability that includes an evaluation of the firm’s sustainability
initiatives. These different approaches enable to assess the firm’s
progress in addressing specific stakeholder issues. They also highlight
areas that require further improvements. Therefore, as suggested in Figure
3, we suggest that stakeholders’ feedback be used as input for the next
audit. Consequently, the sequence linking steps 5 to 8 (from the CSR audit
to stakeholder feedback) should be performed on a regular basis. In fact,
we recommend to conduct an audit of current practices bi-annually.
Figure 3 further suggests that stakeholders’ feedback can be used as an
input to re-assess the first three steps of the CSR management process in
the long-run (approximately every four years). Stakeholder surveys and
interviews could indeed highlight a new and important stakeholder group,
or could reveal emerging stakeholder issues. As a result, organizational
norms and values along with the definition of CSR might need to be
revised. For example, in the late 1990s, during the process of stakeholder
dialogue, B&Q became aware of the fact that its stakeholders were not
worried only about the environmental impact of the firm, but also about
its larger contribution to British society. This finding led to a broad
consultation inside the retailer, followed by the inclusion of CSR in
revised corporate values and norms. Since social responsibility practices
are aimed in large part at addressing stakeholder issues, it is essential
that businesses continuously gauge the evolution of these concerns, and
integrate the changes into organizational values, norms, and practices.
CONCLUSION
CSR has been depicted in this paper has the result of an interaction
process between stakeholder and organizational norms. Accordingly, the
successful management of CSR consists in systematically integrating these
two types of norms along with the issues attached into business decisions
and practices. Given that stakeholder groups and issues vary across
companies, regions, and time, there is no single recipe to successfully
manage CSR. In addition, the implementation of CSR is not a one-time
enterprise. Instead, it is a continued process that requires the
perseverance of organizational leaders. The methodology presented in this
paper outlined only the main logic underpinning the sound implementation
of CSR. This approach certainly oversimplifies the CSR management process.
In particular, our discussion discarded the difficulty attached with the
selection of specific initiatives, especially in the presence of
conflicting stakeholder demands, and in situations when the exact impact
of corporate activities on different stakeholders communities is not known
clearly.
The dynamic nature of CSR along with the complexity of the challenges
raised call for a significant amount of organizational resources and
commitment. Hence, the sound management of CSR is costly, time-consuming,
and full of uncertainties. Yet, investing in CSR is likely to yield
tangible business benefits in terms of customer loyalty, employee
enthusiasm, supplier commitment, and corporate reputation. Furthermore,
avoiding the costs of managing CSR may lead to misbehaviors and scandals
which, as demonstrated by current business events, can not only tarnish
the image of the firm, but also endanger its mere existence. Far from
being a luxury, CSR has become an imperative to secure stakeholders’
continued support, and ensure the continuity of business operations in the
long-run.
Table 1:
Examples of Stakeholder Issues and Associated Measures of Corporate
Impacts
Some stakeholder groups and issues Potential indicators of corporate
impact on these issues
EMPLOYEES
1 - Compensation and benefits 1 - Ratio of lowest wage to national legal
minimum or to local cost of living
2 - Training and development 2 - Changes in average years of training of
employees
3 - Employee diversity 3 - Percentages of employees from different gender
and race
4. Occupational health and safety 4 - Standard injury rates and absentee
rates
5. Communications with management 5. Availability of open-door policies or
ombudsmen
CUSTOMERS
1 - Product safety and quality 1 - Number of product recalls over time
2 - Management of customer complaints 2 - Number of customer complaints
and availability of procedures to answer them
3 - Services to disabled customers 3 - Availability and nature of the
measures taken to insure service to disabled customers
INVESTORS
1 - Transparency of shareholder communications 1 - Availability of the
procedures to keep shareholders informed about corporate activities
2 - Shareholder rights 2 - Litigation involving the violation of
shareholder rights (frequency and type)
SUPPLIERS
1. Encouraging suppliers in developing countries 1. Prices offered to
suppliers in developed countries in comparison to other suppliers
2. Encouraging minority suppliers 2. Percentage of minority suppliers
COMMUNITY
1 - Public health and safety protection 1 - Availability of an emergency
response plan
2 - Conservation of energy and materials 2 - Data on reduction of waste
produced and comparison to industry
3 - Donations and support of local organizations 3 - Annual employee time
spent in community service
ENVIRONMENTAL GROUPS
1. Minimizing the use of energy 1. Amount of electricity purchased;
percentage of green electricity
2. Minimizing emissions and waste 2. Type, amount, and destination of the
waste generated.
3. Minimizing the adverse environmental impacts of products and services
3. Percentage of product weight reclaimed after use.
Table 2
Examples Illustrating Stakeholders’ Use of Power
Stakeholders
Initiatives employed to advocate more responsible corporate behaviors
Investors
Morley Fund management, which runs 2.5% of the funds invested in the
London stock exchange, refuses to approve the accounts of the 100 largest
British firms that do not produce an environmental report.
Walden Assets Management, in association with other mutual funds, put a
resolution to push Coca-Cola and Pepsi to introduce an environmental
policy to address the fact that their bottles end up in garbage bins.
Customers A coalition of consumers started a lawsuit in 2001 against
Bayer, accused of paying $200 million to three producers of generic
medicines in order to avoid the introduction on the market of the generic
version of its Cipro (against anthrax intoxication).
Customer protests outside of Staples stores called for the company to stop
sales of non-recycled paper.
Employees Twelve employees from AT&T filed against their employer in 2001
based on sex, age, and handicap discrimination charges.
Unionized janitors went on strike in the Spring of 2000 in Los Angeles in
protest against their low wages that were not sufficient to keep a family
of four above the poverty line.
Community The “Clean Clothes Campaign” (run by several NGOs) has called
for a boycott against Triumph International (clothes manufacturer) because
the company owns a manufacture in Birmanie accused of child and forced
labor, and of giving support to a ruthless government.
Doctors Without Frontiers published in 2001 a report on the social
responsibility of pharmaceutical companies. This report demonstrates that
pharmaceutical firms virtually do not develop any medication for the
diseases affecting mainly poor countries.
Regulators
Media
British regulations demand that retirement funds communicate to which
degree they integrate social, environmental, and ethical considerations in
their investment choices.
The European parliament has adopted a regulation in 2002 requiring
appliance manufacturers to carry the costs associated with the recycling
of their products. This regulation requires that the recycling process
last 30 months maximum, and that 70% of product contents be recyclable.
The South China Sunday morning Post, echoed by diverse newspapers in
Western countries, wrote a series of articles on 2001 about the poor
working conditions faced by the children working for McDonald’s toys’
suppliers in China.
Table 3:
Examples of Organizational Values and Norms Defining Stakeholder
Responsibilities
Values and norms defining:
Examples:
Important stakeholder groups
Bristol-Myers Squibb: “Our company’s core values […] center on sustaining
and improving the lives of people throughout the world. This specifically
includes our employees and shareholders, customers and consumers,
suppliers and contractors, and members of the communities in which we
operate.”
Prudential: “We demonstrate our responsibility as a corporate citizen when
we interact with our customers, associates, and the community at large.”
Important
stakeholder issues American Axle & Manufacturing: “Most of AAM’s community
and business contributions, sponsorships and volunteer activities support
educational, youth-focused initiates—programs that have a direct focue on
our fute workforce.”
Nordstrom: “We are proud of our efforts to maintain a workforce that
represents many backgrounds, and are deeply committed to cultivating an
environment where the contributions of every employee, customer, and
vendor are respected.”
Table 4:
What Do We Stand For?
Company
Statement of Organizational Values and Norms Implications for CSR
3M
3M has four fundamental corporate values: “(1) satisfying customers with
superior quality and value, (2) providing investors an attractive return
[…], respecting the social and physical environment, (4) being a company
that employees are proud to be a part of.”
- Identification of most valued stakeholders: customers, investors, social
and physical environment, employees.
- Identification of valued stakeholder issues: satisfaction, quality, and
value for customers; return for investors; no damage for the natural
environment; and a sense of belonging for employees.
McGraw-Hill
“The McGraw-Hill Companies services its customers, employees and
shareholders alike, reaching across the globe. But our mission remains
simple: […] to help people around the world learn, grow, acquire new
skills, better their lives and, in doing so, better their community.”
- Identification of valued stakeholders: customers, employees,
shareholders.
- Identification of important stakeholder issues: education and personal
development.
Beyond Petroleum
BP’s business policy includes: “Each individual in the teams that form the
new company comes from a background in which values matter. These values
may have been manifested in different ways, but they have much in common:
a respect for the individual and the diversity of mankind, a
responsibility to protect the natural environment, a belief in honest
exchange and an awareness that a strong reputation is essential for
business success.”
- Identification of relevant stakeholder issues: diversity, respect of
human rights, protection of the natural environment, ethical business
transactions.
Table 5
Which Stakeholder Issues? Examples from a Garbage Treatment Company
Relevant stakeholders
Issues
Employees
- Safety at work
- Information about strategic decisions
- Education / training opportunities
Customers (end and business)
- Agreements implemented as promised
- Affordable prices
- Accessibility of information (including different languages)
- Garbage odors
Local authorities
- Clear and justified prices
- Effect of the treatment activities on natural environment
- Quality of service to end customers
- Support of local activities (events, charities)
Suppliers
- Respect of the payment terms
- Advice with the development of environmentally friendly processes and
products
Shareholders
- Offering more quality to customers
- Being seen as environmentally responsible
Display 1
Ahold’s Definition of CSR
Figure 1
Interactions Between Organizational and Stakeholder Values and Norms
Primary stakeholders; Secondary stakeholders; Society at large
Figure 2
When is a Stakeholder Community Powerful?
Figure 3
A Step- By-Step Approach to Managing CSR
Endnotes
CANNOT FIND THIS ONE CITED IN TEXT.
K. J. Sobnosky, “The Value-Added Benefits of Environmental Auditing,”
Environmental Quality Management, 9 (Winter 1999), 25-32.
[1] E. Hellweg, “Mopping Up After Merrill Lynch,” September10, 2002 www.business2.com
[1] Various examples of definitions appear in the following sources:
H.R. Bowen, “Social Responsibilities of the Businessman” (New York: Harper & Row, 1953); and A.B. Carroll (1979), "A Three-Dimensional Conceptual Model of Corporate Performance," Academy of Management Review, 4, 4 (1979): 497-505; and M.B.E. Clarkson, "A Stakeholder Framework for Analyzing and Evaluating Corporate Social Performance," Academy of Management Review, 20, 1 (1995): 92-117; and R. Strand, "A Systems Paradigm of Organizational Adaptations to the Social Environment," Academy of Management Review, 8, 1 (1983): 90-96; and D.J. Wood, "Corporate Social Performance Revisited," Academy of Management Review, 16, 4 (1991): 691-718.
[1] J. Frooman, "Stakeholder Influence Strategies," Academy of Management Review, 24, 2 (1999): 191-205.
[1] I. Maignan and D.A. Ralston, “Corporate Social Responsibility in Europe and the U.S.: Insights from Businesses’ Self-presentations,” Journal of International Business Studies, Third Quarter 2002: 497-614.
[1] T.J. Brown and P. A. Dacin, "The Company and the Product: Corporate Associations and Consumer Product Responses," Journal of Marketing, January 1997, pp. 68-84; and J.M. Handelman and S.J. Arnold, "The Role of Marketing Actions with a Social Dimension: Appeals to the Institutional Environment," Journal of Marketing, July 1999, pp. 33-48; and I. Maignan, O.C. Ferrell and G.T.M. Hult, “Corporate Citizenship: Cultural Antecedents and Business Benefits,” Journal of the Academy of Marketing Science, Fall 1999, pp. 455-469; and S. Sankar and C.B. Bhattacharya, “Does Doing Good Always Lead to Doing Better? Consumer Reactions to Corporate Social Responsibility,” Journal of Marketing Research, May 2001, pp. 225-243; and D.B. Turban and D.W. Greening, "Corporate Social Performance and Organizational Attractiveness to Prospective Employees," Academy of Management Journal, Fall 1996, pp. 658-672.