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CSR, Sustainability, Ethics & Governance

Series Editors: Samuel O. Idowu · René Schmidpeter

Duygu Turker

Managing
Social
Responsibility
Functional Strategies, Decisions and
Practices
CSR, Sustainability, Ethics & Governance

Series editors
Samuel O. Idowu, London Metropolitan University, London, United Kingdom
René Schmidpeter, Cologne Business School, Germany
More information about this series at http://www.springer.com/series/11565
Duygu Turker

Managing Social
Responsibility
Functional Strategies, Decisions and Practices
Duygu Turker
Yasar University
Izmir, Turkey

ISSN 2196-7075 ISSN 2196-7083 (electronic)


CSR, Sustainability, Ethics & Governance
ISBN 978-3-319-91709-2 ISBN 978-3-319-91710-8 (eBook)
https://doi.org/10.1007/978-3-319-91710-8

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I also believe that if a permanent peace is
desired, the international measures that
will improve the conditions of societies
should be taken. The welfare of all
humanity should prevail over hunger and
oppression. World citizens should be
educated in a manner that keeps them away
from envy, greed, and hatred.
Mustafa Kemal Atatürk
The Founder and Visionary Leader of
Turkish Republic
This book is dedicated
to Ayşe and Hayati Türker
Foreword

The ultimate question one has to pose when discussing business practice is whether
business serves society. As my coeditors and I asked in The Handbook of Commu-
nication and Corporate Social Responsibility (Wiley Blackwell, 2011): Is society
better off or not for having this institution? The creation of wealth, jobs, services, and
products are all good arguments that can be used to answer this question. Still, it is
also recognized that business activity in general can have negative effects. Hence,
the issue of regulation comes up. This is more often than not met with the business
response that laws and regulations are unnecessary as voluntary CSR activities will
rectify the problems. Negative effects of business will be offset through CSR
engagement, thus helping to serve the public interest. One of the central assertions
of CSR is, of course, that the organization has an obligation to the environment and
society more generally.
To take social responsibility has been highlighted as being the ethical right thing
to do for corporations and also something that can improve the ability to reach
organizational goals. The principle of enlightened self-interest sees corporate con-
cessions and CSR as helping profit, particularly in the long run. It is a practice that
can help create a better reputation, forestall regulation, secure a more stable societal
context for business, and reduce operating costs by avoiding conflict.
Still, a basic insight is that when you treat CSR as an instrument for reputation
and self-interest, it will not come across as a “good deed” in itself. It is, however,
hard to fault business for its inbuilt, instrumental agenda. Instead, we can try to make
this institution work for the best of society by harnessing the corporate concern for
reputation and regulate where needed. We set ourselves up for failure, however, if
we only use what is ultimately an economic perspective to solve problem of social or
systemic nature. The challenge is of course the balancing act.
In this volume, Duygu Turker takes a closer look at the very concept of CSR, the
drivers behind the development toward CSR as a lingua franca, how CSR is linked to
particular functional areas within corporations, what impact CSR has, as well as how
CSR can be linked to sustainable development goals. The book provides a welcome,
comprehensive literature review and gives ideas for how CSR can be integrated in

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strategy, corporate governance, production and operations, marketing, finance and


auditing, as well as human resource management. There is no need to reinvent the
wheel, and the discussed theories are more than able to inform both business
decisions and practices in these areas. It could potentially help provide for a better
society, making business serve society, rather than the other way around.

University of Oslo, Oslo, Norway Øyvind Ihlen


November, 2017
Preface

There have been a growing number of challenges that have detrimental and irrevers-
ible impacts on humanity and nature in the last centuries. It is clear that many of
these problems are created by our current business system that is inherently capital-
istic and exploitative since the dawn of industrial revolution. Therefore, companies
as well as governments, which allow them to follow solely their own short-term
profits by ignoring the larger societal and environmental interests, should be held
responsible to address the underlying causes of these problems. Despite the urgent
need for a paradigm shift in our ongoing production/consumption system, there is
still confusion on how to convert it into a more socially, economically, and envi-
ronmentally sustainable one. By the introduction of sustainable development goals
(SDGs) as of 2015, the United Nations (UN) provides the common set of objectives
for sustainable development and invites all individuals, organizations, and nations to
work collaboratively toward the achievement of those goals. Although the develop-
ment of a common reference point for all entities is important, the alignment of those
goals with current business strategies, decisions, and practices can be enabled by the
adoption of a viable approach.
The current study proposes that such a great transformation at business organi-
zations can be conceptually, theoretically, and practically grounded on the notion of
corporate social responsibility (CSR). Although there is a tendency to think CSR as a
separate business activity, which independently develops some principles or engages
in some philanthropic projects, it can go beyond this limited role. Adoption of a
truthful and honest approach toward the SDGs can be achieved by the integration of
a socially responsible perspective into all functional strategies, decisions, and prac-
tices. CSR must be interwoven throughout the entire organization and across its units
by diffusing a socially responsible philosophy and enabling the cross-functional
knowledge transfer beyond the traditional boundaries at organizational strategy,
structure, or culture. By using an implicit metaphor, the notion of social responsi-
bility is itself a liquid and living thing like blood—it is pumped by the heart (CSR
philosophy) and goes round the body (all functional areas). The brain (top manage-
ment’s commitment to CSR) coordinates its well-functioning to energize the entire

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body (organization). In doing so, the circulatory system in an organization, which is


consisted of departments, units, teams, and individuals, is refined and revitalized in
the light of CSR.
CSR as a blood is not an entirely perfect analogy, but it works how the notion of
CSR might spread across the functional areas and then become an interplay among
them. This book views CSR as a social innovation as well as the drivers of other
social innovations and figures out its integration at the functional and cross-
functional strategies, decisions, and actions from the systems perspective. The
interactional and iterative approach at CSR adoption may unveil its idiosyncratic
nature at organizations; each organization becomes a unique example of its kind by
configuring diverse inputs and creatively transforming them into different outputs.
Therefore, CSR turns into a dynamic and interactional landscape across organiza-
tional units and an emergent learning process wherein the functional strategies,
decisions, and practices may create an invaluable synergy. It is believed that
developing a socially responsible mind-set at business organizations can help us to
achieve the SDGs by 2030.

Yasar University, Izmir, Turkey Duygu Turker


November, 2017
Acknowledgements

There are no words sufficient to express my deepest gratitude to my dear parents,


Ayşe and Hayati Türker. They teach me that the only way of living a meaningful life
is to back up my thoughts with an ethical insight and work hard to fulfill my
aspirations. I also want to thank the members of my dearest family—my husband
Serkan, my sisters Yelda and Yasemin, my niece Deniz, and my nephews Kerem
Tuna and Yiğit for their constant support and patience during this process. They are
the ones who make me laugh even at the most stressful moments.
I would like to express my sincere appreciation to a few colleagues and friends
who gave me valuable comments and ideas for this book and helped and supported
me during the process—among them Øyvind Ihlen, Dilvin Taşkın, Ceren Altuntaş,
Huriye Toker, Özge Can, and Görkem Ataman.
Finally, I would like to acknowledge the support of our publishing team at
Springer headed by the Executive Editor, Christian Rauscher, Samuel O. Idowu,
Barbara Bethke, and other members of the publishing team.

Yasar University, Izmir, Turkey Duygu Turker


November, 2017

xiii
Contents

Part I Concept and Drivers


1 Corporate Social Responsibility: A Conceptual Model . . . . . . . . . . 3
1.1 CSR as a Social Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.2 CSR from the Systems Perspective . . . . . . . . . . . . . . . . . . . . . . . 6
1.3 Linking CSR and Sustainability . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2 What Are the Drivers of Social Responsibility? . . . . . . . . . . . . . . . . 17
2.1 Individual Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
2.2 Organizational Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
2.3 Environmental Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.3.1 Task Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.3.2 Institutional Environment . . . . . . . . . . . . . . . . . . . . . . . 28
2.3.3 Global Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Part II Integrating Social Responsibility into Functional Areas


3 Strategy and Social Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . 43
3.1 Social Responsibility Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . 44
3.2 How to Align CSR into Strategic Directions . . . . . . . . . . . . . . . . 46
3.2.1 Proactive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
3.2.2 External-Orientation . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
3.2.3 Internal-Orientation . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
3.2.4 Minimalist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
3.3 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

xv
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4 Corporate Governance and Social Responsibility . . . . . . . . . . . . . . 59


4.1 The Paradox of Conceptualization . . . . . . . . . . . . . . . . . . . . . . . 61
4.2 Pioneering the Ethical Responsibility . . . . . . . . . . . . . . . . . . . . . 63
4.3 New Responsibilities in the Nexus of CG and CSR . . . . . . . . . . . 64
4.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
5 Socially Responsible Production and Operations Management . . . . 73
5.1 Operations in the Nexus of External and Internal Environments . . . 74
5.2 Managing Socially Responsible Operations . . . . . . . . . . . . . . . . 76
5.2.1 Facility Location and Management . . . . . . . . . . . . . . . . 76
5.2.2 Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
5.2.3 Process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
5.2.4 Procurement and Supply Chain Management . . . . . . . . . 83
5.3 End-of-Life Products: Closed-Loop Supply Chain . . . . . . . . . . . . 87
5.3.1 Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
5.3.2 Stakeholder Collaborations: Clusters, Networks, Allies . . . 91
5.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
6 Socially Responsible Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
6.1 Societal, Sustainable, Socially Responsible Marketing: A
Conception Problem . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
6.2 Guiding Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
6.3 Socially Responsible Marketing Mix . . . . . . . . . . . . . . . . . . . . . 102
6.3.1 Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
6.3.2 Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
6.3.3 Customer Communication . . . . . . . . . . . . . . . . . . . . . . 106
6.3.4 Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
6.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111
7 Socially Responsible Finance and Accounting . . . . . . . . . . . . . . . . . 115
7.1 Financing CSR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
7.2 Socially Responsible Investment . . . . . . . . . . . . . . . . . . . . . . . . 118
7.3 Measuring and Monitoring CSR . . . . . . . . . . . . . . . . . . . . . . . . 122
7.4 Communicating and Reporting CSR . . . . . . . . . . . . . . . . . . . . . . 124
7.5 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
8 Social Responsibility and Human Resource Management . . . . . . . . 131
8.1 Towards a Policy Framework . . . . . . . . . . . . . . . . . . . . . . . . . . 132
8.2 Ensuring Fundamental Human Rights . . . . . . . . . . . . . . . . . . . . 135
8.3 Management of Ethical Issues . . . . . . . . . . . . . . . . . . . . . . . . . . 136
8.4 Philanthropy Towards/with Employees . . . . . . . . . . . . . . . . . . . . 139
8.5 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Contents xvii

Part III Outcomes and Future Implications


9 What Are the Outcomes of Social Responsibility? . . . . . . . . . . . . . . 147
9.1 Individual Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
9.2 Organizational Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
9.3 Environmental Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
9.3.1 Task Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
9.3.2 Institutional and Global Environment . . . . . . . . . . . . . . 152
9.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
10 Global Challenges: Aligning Social Responsibility and Sustainable
Development Goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
10.1 Goal 2: Zero Hunger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
10.1.1 Socially Responsible Foods . . . . . . . . . . . . . . . . . . . . . 162
10.1.2 Support to Urban Farming . . . . . . . . . . . . . . . . . . . . . 162
10.2 Goal 3: Good Health and Well-being . . . . . . . . . . . . . . . . . . . . 163
10.2.1 Fight Against Health Problems . . . . . . . . . . . . . . . . . . 163
10.3 Goal 5: Gender Equality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163
10.3.1 Support to Women Entrepreneurship . . . . . . . . . . . . . . 163
10.3.2 Distorted Body Image Among Women . . . . . . . . . . . . 166
10.4 Goal 9: Industry, Innovation and Infrastructure . . . . . . . . . . . . . 166
10.4.1 Digitalization and New Responsibilities . . . . . . . . . . . . 166
10.4.2 New Business Models for Sharing Economy . . . . . . . . 168
10.5 Goal 8: Decent Work and Economic Growth . . . . . . . . . . . . . . 169
10.5.1 Supporting Inclusive Politics for Migrations . . . . . . . . . 169
10.5.2 New Digital Platforms for Learning and Employment . . . 169
10.6 Goal 12: Responsible Consumption and Production . . . . . . . . . . 170
10.7 Goal 16: Peace, Justice and Strong Institutions . . . . . . . . . . . . . 171
10.7.1 Stand for Justice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
10.8 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
About the Author

Duygu Turker is an Associate Professor of Management and Organization at the


Faculty of Business, Yasar University. Her research interests include social respon-
sibility, business ethics, sustainability, entrepreneurship, and social innovation.

xix
List of Figures

Fig. 1.1 CSR from system perspective . .. . . . .. . . . .. . . . . .. . . . .. . . . .. . . . .. . . . .. . 7


Fig. 1.2 Integrating socially responsible strategies, decisions, and practices
into functional areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Fig. 1.3 Consolidating the efforts of major societal actors towards
SDGs . . . . . . . . . . .. . . . . . . . . .. . . . . . . . . . .. . . . . . . . . .. . . . . . . . . . .. . . . . . . . . .. . . . 11
Fig. 1.4 Traditional (top) versus new continuum (bottom) for
approaches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . 12
Fig. 3.1 Four strategic positions to align CSR into business strategy . . . . . . 47
Fig. 5.1 Operations, factors, and stakeholders in the internal and external
production environments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Fig. 7.1 Integration of domains in sustainability and social responsibility
communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Fig. 10.1 The gender gap in entrepreneurship in OECD as of 2015. Source:
OECD (2017) . .. . .. .. . .. . .. .. . .. .. . .. .. . .. . .. .. . .. .. . .. .. . .. .. . .. . .. .. . 164

xxi
List of Tables

Table 1.1 Sustainable development goals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10


Table 2.1 The ten principles of the UN Global Compact . . . . . . . . . . . . . . . . . . . 31
Table 3.1 Examples of SRS . . .. .. . .. .. . .. .. . .. .. . .. .. . .. . .. .. . .. .. . .. .. . .. .. . .. 45
Table 3.2 Nestlé crises, responses, and commitments . . . . . . . . . . . . . . . . . . . . . . . 53
Table 5.1 Supplier code of conducts examples (BASF) . . . . . . . . . . . . . . . . . . . . . 85
Table 5.2 Exemplarily GS activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Table 6.1 Socially responsible objectives of pricing, promoting, and
distribution components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Table 7.1 Five companies spending most on education . . . . . . . . . . . . . . . . . . . . . 117
Table 7.2 Sustainable and responsible investment assets by region: growth
and proportion to total managed assets (2014–2016) . . . . . . . . . . . . 121
Table 7.3 Growth of seven strategies (2014–2016) . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Table 7.4 GRI’s topic-specific standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
Table 10.1 CSR projects for women employment in Turkey . . . . . . . . . . . . . . . . 165

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Part I
Concept and Drivers
Chapter 1
Corporate Social Responsibility:
A Conceptual Model

Corporate social responsibility (CSR) has been widely recognized and practiced by
business organizations during the last decades. In parallel to this twofold interest of
practitioners and policy makers, CSR research is proliferated with the studies that
explore its meaning and multifaceted nature. As a social phenomenon, CSR can be
defined in many ways since the 1950s. It is viewed as a culture, an alternative to
government, an umbrella term (Blowfield and Frynas 2005), social obligation,
stakeholder obligation, ethics driven or managerial process (Maignan and Ferrell
2004). The review of scholarly and practitioners definitions indicates that CSR can
be linked with environmental, social, economic, ethical, stakeholder, sustainability,
and voluntariness dimensions (Dahlsrud 2006; Sarkar and Searcy 2016). A widely
recognized definition of CSR indicates that the concept includes the economic, legal,
ethical, and philanthropic expectations of society at a certain time (Carroll 1979,
1991). On the other hand, based on the premises of the philosophy of science,
Sheehy (2015, 625) defines CSR as “international private business self-regulation”
since it has a clear normative foundation and regulatory structure with its implica-
tions to internal systems, strategies, and practices.
Despite its increasing importance and wide recognition, there is no consensus on
the definition of CSR. It is partly because the concept varies over time, across
context, and among perspectives, and research goals. Although moral principles to
control human greed were traced back to early thinkers from Western and
Non-Western societies, the notion of CSR that we use today has evolved since the
1950s. Due to its dynamic nature, the concept has been understood and defined in
many ways. The focus of CSR on the responsibilities of businesses for doing good
for society in the 1950s and ethical obligations at the 1960s has shifted to a notion
that can be mutually beneficial for both business and its stakeholders at the 1970s
and 1980s and then evolved into a strategic issue that enables businesses to embed
their institutional environment during the 1990s and 2000s (Moura-Leite and
Padgett 2011). The dynamic nature of CSR manifests itself among the practitioners
and policy makers too. For example, the international or intergovernmental organi-
zations like the World Business Council for Sustainable Development (WBCSD) or

© Springer International Publishing AG, part of Springer Nature 2018 3


D. Turker, Managing Social Responsibility, CSR, Sustainability, Ethics &
Governance, https://doi.org/10.1007/978-3-319-91710-8_1
4 1 Corporate Social Responsibility: A Conceptual Model

European Union (EU) need to revise their CSR definitions at the last decades.
Therefore, it can be stated that the concept is still in its formation stage and opens
to new interpretations in the future too.
The relatively few number of studies on the cross-cultural comparison of CSR
phenomenon between developed and developing contexts (e.g. Orpen 1987; Quazi
and O’Brien 2000) can show that CSR is a context-specific phenomenon too
(Cramer et al. 2004). Despite the similarities of doing business in the era of
globalization that bridges and bonds the different business communities around
same value chains or supplier networks, CSR understandings and practices may
differ in line with the contextual variables. For instance, there is a significant
difference at the CSR perceptions of new or old members of EU (Mazurkiewicz
et al. 2005a, b; Türker and Altuntaş 2012). Unlike many Western countries, the lack
of structural support towards CSR in developing context (Jamali 2007) might reduce
the interests of companies to CSR (Jamali and Mirshak 2007); this requires to take
the development context into account (Idemudia 2008).
On the other hand, CSR literature has been expanded by the diverse paradigms
and perspectives as well. Derived from the diverse paradigmatic stances of func-
tionalism, interpretivism, radical-humanism, and radical structuralism (Burrell and
Morgan 1979), the studies in the literature have approached CSR from different
ontological and epistemological assumptions. As a reflection of diversity at the
scholars’ worldviews, the field has been enriched by the new theories trajectories
(Garriga and Melé 2004; Moir 2001) as well as fresh empirical contributions with
different research goals. For instance, the scholars try to capture the underlying
motives of CSR (Brønn and Vidaver-Cohen 2009; Ostlund 1977) and its impact on
businesses (Burke and Logsdon 1996; Lewis 2003; Porter and Kramer 2002) or
various stakeholders, such as current employees (Peterson 2004; Turker 2009),
prospective employees (Turban and Greening 1997) or customers (Kolkailah et al.
2012) etc. Although these interests on CSR from diverse perspectives contribute a lot
to our current level of knowledge, this multiparadigmatic and fragmented nature of
literature decreases the likelihood to achieve a common ground for CSR. According
to Swanson (1995), the eclectic nature of field inhibits the theory development
attempts too; therefore, there is a need for approaches and frameworks that can
show the linkages among diverse topics and themes. The purpose of current chapter
is to discover the vague meaning of CSR by viewing it as a social innovation as well
as the drivers of other social innovations and to analyze its nature and structure from
the analytic perspective of the systems theory. The proposed approach can help both
researchers and practitioners to capture the dynamic and idiosyncratic nature of CSR
over time, across contexts, and among perspectives.

1.1 CSR as a Social Innovation

There is a conceptual link between social innovation and social responsibility as a


primarily business-driven activity that integrates economic, societal, and environ-
mental concerns into the core business frameworks. Social innovation is often
1.1 CSR as a Social Innovation 5

interchangeably used with social purposes, public good or institutional change to


refer an idea, which has a potential to improve the quality and quantity of life (Pol
and Ville 2009, 881). In a broader sense, the concept can be defined as “the
development and implementation of new products, services or models to meet social
needs and create new social relationships” (Murray et al. 2010, 3). In order to clarify
the concept, Mulgan (2006) distinguishes social innovation from business innova-
tion based on the difference of underlying motivations; while former refers to
“innovative activities and services that are motivated by the goal of meeting a social
need and that are predominantly diffused through organizations whose primary
purposes are social”, the latter is driven by profit maximization and diffused
among for-profit organizations. The author accepts the existence of some borderline
cases, which are initially developed by a social organization and, then, adopted by a
for-profit organization (e.g. distance learning) or vice versa.
However, as a dynamic concept, social innovation cannot be categorized and
characterized by the identity of its creators or their motivations; the actor might be a
non-profit, government, or for-profit organization. A social innovation can be
initiated by a business organization with a social or environmental purpose too. By
defining social innovation as “a measureable, replicable initiative that uses a new
concept or a new application of an existing concept to create shareholder and social
value”, Herrera (2015) states that its integration into strategy and operations might
create the shared value and competitive advantage by increasing the likelihood of
co-creation. As a concept in the nexus of business and society, CSR can be linked
with social innovation too. In social responsibility, a business organization develops
an idea, approach, project, product, or service etc. to meet an economic, societal or
environmental challenge. In doing so, it may contribute to different stakeholders
such as employees, investors, customers, or natural environment. Therefore, con-
sidering the motivation of actor and its potential outcomes, (1) CSR itself can be seen
as a social innovation as well as (2) the incubators and drivers of other social
innovations.
Here, there are some critics on the societal impacts of CSR as well as the actual
business motivations behind the socially responsible actions. There has been an
ongoing debate whether CSR is a way out for companies to recognize their impacts
on nature and society or a blind alley. For instance, CSR can be viewed as “the latest
manifestation of earlier debates on the role of business in society” (Blowfield and
Frynas 2005, 500) by intending to “legitimize and consolidate the power of large
corporations” ideological movements (Banerjee 2008). It is clear that there are
always some individuals and organizations that might misuse CSR with a cynical
approach and, of course, the outcomes of their CSR activities can be even harmful
for society. Above all things, adopting a cynical approach has resulted in the loss of
trust between business and society. Moreover, even if the intent of actor is good or
benevolent, CSR can sometimes produce some unintended outcomes too. None of
these arguments, however, is entirely convincing to applaud or dispraise a notion;
CSR is not bad or good per se. It is a socially constructed phenomenon. Its meaning
is in the eye of the beholder by referring to the famous quote of William
Shakespeare’s Hamlet “for there is nothing either good or bad, but thinking makes
it so”.
6 1 Corporate Social Responsibility: A Conceptual Model

CSR can be viewed as a social innovation landscape by opening up a wide range


of possibilities for a company to make a positive change for society and environ-
ment. It can be used as a viable tool for balancing the conflicting interests of
stakeholders and improving the relationship between business and society. From
the critical management perspective, the increasing power of business organizations
has become a colonizing activity, which overshadows the state in “controlling and
directing of individual lives and influencing collective social development” (Deetz
1992, 17); therefore, we must rethink the decisions and actions of corporations
(Deetz 1995) and coordinate the conflicting interests of stakeholders to achieve “a
fully developed stakeholder model” (Deetz 2006, 273). CSR can build the common
ground for diverse stakeholders’ interests and increase the stakeholder involvement
into the decision making process.
Investing in CSR should not be viewed as wasting a company’s scarce resources
on an issue that is not within its area of expertise—as proposed by Milton Friedman
(1970). In a perfectly functioning society, these arguments are acceptable; each
organization would focus on their own responsibilities based on the division of
labor across people and organizations. However, in the face of increasing societal
inequalities and environmental problems, we are not living in such perfect societies
and solutions mostly require the collaborations among diverse organizations.
Recalling Karl Polanyi’s notion of ‘market society’ in which he suggests to recog-
nize ‘double movement’ between state and market rather than viewing them as
separate entities (Polanyi 2001); we need to understand the interwoven and embed-
ded relationships among various organizations in our societal systems. As it is
indicated by Wood (1991), “the basic idea of corporate social responsibility is that
business and society are interwoven rather than distinct entities”. The review of
Scherer and Palazzo (2011) on literature shows that “the strict division of labour
between private business and nation-state governance” disappears by the rise of
globalization and business firms have assumed a wider social and political roles for
themselves. Therefore, rather than following the traditional division of labor logic,
all institutions, organizations, and individuals of our societies must collaboratively
focus on the solutions of global challenges by viewing themselves as parts of a single
supra system.

1.2 CSR from the Systems Perspective

Following the perspective of systems theory (Katz and Kahn 1978; Kast and
Rosenzweig 1972), CSR can be conceptualized as a system, which takes inputs
and transforms these inputs into some outputs (Fig. 1.1).
As the corporate decisions and behaviors that affect stakeholders positively
(Turker 2009), CSR is affected by some variables at the individual, organizational,
and environmental level (input stage). These drivers of CSR, which are explained in
Chap. 2 based on an elaborate literature review, affect the degree or intensity of CSR
adoption at organizations. The variables at the individual level are usually focusing
1.2 CSR from the Systems Perspective 7

Functional
Areas

Responsibilities

Individual Individual
Stakeholders
Sustainable
Organizational Organizational Development
Goals
Drivers Outcomes
Contextual CSR Contextual

INPUT PROCESS OUTPUT


Chapter 2 Chapter 3/4/5/6/7/8 Chapter 9 Chapter 10

Fig. 1.1 CSR from system perspective

on the managerial factors such as their demographic/background characteristics,


leadership style, personality, values and ideologies. At the organizational level, the
factors such as ownership structure, board composition, strategy, culture and
employees etc. have been studied by the scholars frequently. The environmental
level can be analyzed at the three levels as task environmental, institutional envi-
ronment, and global environment. It should be noted that since these drivers of CSR
are derived from the empirically tested studies in the literature, it may not cover all
relevant factors.
The process, which is explained in between Chaps. 3 and 8, is about how CSR
can be integrated into the functional areas by identifying the responsibilities towards
stakeholders. Companies can configure the process of CSR depending on the mix,
type, and scale of inputs. Additionally, companies usually adopt an emergent
approach during the implementations of their major strategies by considering the
continuously changing organizational or environmental dynamics. Therefore, the
degree of CSR integration into functional strategies, decisions, and practices might
vary a lot among organizations and over time. In order to ease the process, which
requires making various important decisions, companies can follow some guiding
frameworks or principles. For example, International Organization for Standardiza-
tion’s (ISO) 26,000 Social Responsibility guideline helps companies to demonstrate
the core subjects of social responsibility as organizational governance, human rights,
labor practices, the environment, fair operating practices, consumer issues, and
community involvement and development (ISO 2017). This guideline can provide
a company which areas should be prioritized and addressed.
8 1 Corporate Social Responsibility: A Conceptual Model

On the other hand, the scholars also provide some useful frameworks to capture
the nature of CSR engagement. As a widely used conceptual framework of literature,
Carroll’s CSR pyramid (1979, 1991) provides the responsibilities of a business in a
hierarchical level as economic, legal, ethical, and philanthropic. While economic and
legal responsibilities are viewed as the modus operandi of a business system, ethical
responsibilities are about doing the right thing even if it is costly to do so. Recalling
the escalation of responsibilities in this pyramid, a company must address its
economic, legal, and ethical responsibilities first and then it can focus on the
philanthropic responsibilities. Although these frameworks on CSR are useful, the
integration of CSR into functional areas can be configured by taking the premises of
systems perspective to see the interlinkages among the parts of system and its link
with larger societal system. From this perspective, each part—the functional areas in
a business organization—becomes as important as the system itself; CSR should be
embedded into all functional as well as cross-functional strategies, decisions, and
practices (Fig. 1.2). The integration of socially responsible strategies, decisions, and
practices at management, production, marketing, finance, accounting and human
resources management has been discussed throughout this book.
Similar to the drivers of CSR, the outcomes of CSR have been also analyzed at
three levels based on an elaborate review of literature (Chap. 9). While at the
individual level, the studies mostly focus on the implications of CSR on managers,

Management Production

CSR
Strategies

CSR
Decisions

CSR
Human
Practices
Resource Marketing
Management

Finance and
Accounting

Fig. 1.2 Integrating socially responsible strategies, decisions, and practices into functional areas
1.3 Linking CSR and Sustainability 9

the studies at the organizational level have proliferated in terms of the impacts of
CSR on employees, financial performance, reputation, or credibility. Despite the
increasing number of studies at the task environment, the scholarly interest towards
the impact of CSR at the institutional and global environmental layers is relatively
low. Due to the measurement problems, the large scale impacts of CSR at these
levels have not properly addressed by the current literature. However, in order to
take the advantage of socially innovative approach of CSR, which can contribute to
the welfare of stakeholders positively, it is essential to link socially responsible
strategies, decisions, and practices at the functional areas with upper level societal
goals.

1.3 Linking CSR and Sustainability

Since the early 2000s, sustainability and sustainable development have become the
central themes in CSR discussion (Carroll and Shabana 2010). However, the link
between these concepts is still somewhat inconclusive. For some, the meaning of
these two concept is same (Marrewijk and Werre 2003; Willard 2002). The tendency
to use them interchangeably is also very common among the practitioners.
According to Bansal and Song (2016, 105), while CSR research is interested in “a
normative position, railing against the amorality of business; sustainability research
took a systems perspective, sounding the alarm of business-driven failures in natural
systems”. In fact, the difference between CSR and sustainability is more about their
unit of analysis.
The origins of sustainability and sustainable development can be traced back to
the famous report of World Commission of Environment and Development (WCED)
and the concept is defined as “development which meets the needs of the present
without compromising the ability of future generations to meet their own needs”
(WCED 1987, 42). Today, the concept is mostly interpreted in its three pillars of
environmental, social, and economic sustainability. While the concept of sustain-
ability highlights “the long-term nature of the benefit that business is expected to
provide to society” in the global level (Schwartz and Carroll 2008, 163), it prioritizes
the nature and future generations (Willard 2002). On the other hand, as the dominant
term of business practices (Carroll and Shabana 2010), CSR can be seen as the micro
foundation of sustainable development. Moon (2007) attempts to theoretically back
up how CSR can contribute to sustainable development based on the Hart’s (1995)
natural-resource-based view of the firm, which proposes to build a firm’s distinctive
capabilities on the environmentally sustainable economic activities. As “a compo-
nent of new systems of societal governance”, CSR brings incentives to companies by
bridging strategy with environment and this link can ultimately contribute to the
concept of sustainable development (Moon 2007, 297). Therefore, as the socially
innovative efforts of a company to affect its stakeholders positively, CSR can be
seen as the organizational-level component of sustainable development’s supra-
system.
10 1 Corporate Social Responsibility: A Conceptual Model

Table 1.1 Sustainable development goals


Goals Explanation
1: No poverty End poverty in all its forms everywhere
2: Zero hunger End hunger, achieve food security and improved nutrition and
promote sustainable agriculture
3: Good health and well-being Ensure healthy lives and promote well-being for all at all ages
4: Quality education Ensure inclusive and equitable quality education and promote
lifelong learning opportunities for all
5: Gender equality Achieve gender equality and empower all women and girls
6: Clean water and sanitation Ensure availability and sustainable management of water and
sanitation for all
7: Affordable and clean Ensure access to affordable, reliable, sustainable and modern
energy energy for all
8: Decent work and economic Promote sustained, inclusive and sustainable economic growth,
growth full and productive employment and decent work for all
9: Industry, innovation and Build resilient infrastructure, promote inclusive and sustainable
infrastructure industrialization and foster innovation
10: Reduced inequalities Reduce inequality within and among countries
11: Sustainable cities and Make cities and human settlements inclusive, safe, resilient and
communities sustainable
12: Responsible consumption Ensure sustainable consumption and production patterns
and production
13: Climate action Take urgent action to combat climate change and its impacts
14: Life below water Conserve and sustainably use the oceans, seas and marine
resources for sustainable development
15: Life on land Protect, restore and promote sustainable use of terrestrial eco-
systems, sustainably manage forests, combat desertification, and
halt and reverse land degradation and halt biodiversity loss
16: Peace, justice and strong Promote peaceful and inclusive societies for sustainable devel-
institutions opment, provide access to justice for all and build effective,
accountable and inclusive institutions at all levels
17: Partnership for the goals Strengthen the means of implementation and revitalize the
global partnership for sustainable development
Source: UN (2017)

Considering the increasing number of global challenges that must be addressed


urgently, there is a need for the integration of such organizational level efforts with
supra system goals. By the introduction of sustainable development goals (SDGs) as
of 2015, United Nations (UN) redefines the ground of working collaboratively
towards the achievement of those goals. SDGs highlight 17 objectives for the most
important global challenges. Table 1.1 shows these integrated and indivisible goals
of the ambitious and transformational 2030 Agenda of UN.
According to Fletcher and Rammelt (2017, 450), as a reflection of neoliberal
capitalist economy, this new agenda of UN decouples the economic growth from its
ecological impact by obfuscating “fundamental tensions among the goals of poverty
alleviation, environmental sustainability, and profitable enterprise that it is intended
to reconcile”. However, by viewing CSR as the catalyzer of SDGs at the organiza-
tional level, we can unify the goals for economic, social and environmental
1.4 Conclusion 11

Fig. 1.3 Consolidating the efforts of major societal actors towards SDGs

sustainability. From a holistic perspective, CSR can help the decision makers to
internalize the supra system concerns into the fabric of a business. Chapter 10
discusses how a company can internalize diverse goals in a creative and
effective ways.
Considering the scale and urgency of problems, there is a need for integrating the
efforts of all actors—businesses, governmental, and non-governmental organiza-
tions (NGOs)—around the SDGs. A strong collaboration among diverse organiza-
tions will determine the success of process (Fig. 1.3).

1.4 Conclusion

CSR is surely one of the most powerful business concepts of last decades. The
growing number of companies at different size, industry, or context may engage in
CSR on their own ways of doing things. Many business organizations view CSR as a
framework to improve, smooth, and restore the relationship with their stakeholders.
They also believe that customers and society appreciate their socially responsible
efforts and activities. In line with the increasing popularity of concept among
businesses, the roots and ramifications of CSR as well as its implementation process
have been analyzed by the scholars too. However, depending on these interests
among practitioners and scholars, the level of confusion on concept has become
greater too. This confusion manifests itself at the conceptual level and triggers the
debates on whether CSR is useful or for whom it is actually useful. Following the
systems theory, the current study treats CSR as a socially constructed analytical
concept. CSR is viewed as a social innovation as well as the drivers of other social
innovations that can contribute to stakeholders positively. From this perspective, the
12 1 Corporate Social Responsibility: A Conceptual Model

Minimalist 0 +1 Societal
Approach Approach

0
-1 +1
Cynical Truthful
Approach Approach
Minimalist
Approach

Fig. 1.4 Traditional (top) versus new continuum (bottom) for approaches

integration of CSR into the organization is systemized at the functional level


strategies, decisions, and practices. The book is structured by adopting the systems
perspective and CSR is linked with the supra system’s overarching principle of
SDGs. It is believed that the consolidation of corporate level efforts and the
collaboration of companies with other actors is a promising path for business,
society, and planet.

Critical Highlight 1. CSR Approaches: Truthful Versus Cynical


Companies vary a lot when it comes to adopt a CSR perspective. While some
of them build a sound CSR approach, some other see it as a chore and totally
ignore CSR. This variety at the CSR implementation triggers the scholars and
the last decades have witnessed the rise of various typologies on CSR such as
strategic versus social (Waldman et al. 2006), implicit versus explicit (Matten
and Moon 2008), instrumental versus altruistic (Christensen et al. 2014),
moral versus instrumental (Ogunfowora et al. 2016) etc. Most of these typol-
ogies are revolving around the questions of why a company engages in CSR,
whether it is just for the welfare of society, environment, orfuture
generationsor whether it is about the company’s self-interest. Those questions
lead people to think about CSR on a continuum between minimalist to societal
CSR and force them to choose one of them.
It is clear that all CSR approaches can be acceptable and sincere if they
generate something good in the end and, but more importantly, if they are done
within the legal and ethical framework. Moreover, CSR can generate some
beneficial results for company itself and it does not necessarily mean that this
is bad for society. If it is integrated into the whole functional strategies, decisions
and actions of an organization, CSR can ultimately produce socially innovative
outcomes for all stakeholders. Therefore, referring to how Herzberg (1968)
changes the traditional view towards the motivation concept, there is a need to
revise the approaches on CSR too. Figure 1.4 shows the traditional (top) and
new continuum (bottom) for CSR perspectives.

(continued)
References 13

The one important rule of thumb is to distinguish what is CSR and what is
not CSR based on an ethical and legal guideline. It can be seen that the range
is not between minimalist and societal approaches anymore, there are, unfor-
tunately, some firms that are using CSR for greenwashing or covering their
illegal or unethical operations. Therefore, cynical or irresponsible approach
can be seen as the dark side of CSR world. For instance, for some firms, the
donations to non-profit organizations that are linked with some politicians or
political parties can be a way of bribery and embezzlement to obtain some
favors. The latest political scandal in South Korea has unmasked the corrup-
tion in such a way and the heir of a giant South Korean chaebol, Samsung, is
sentenced to 5 years in prison since he allegedly gave donations (7.2 billion
won/$6.38 million) to foundations that are owned by a friend of the country’s
former president, Park Geun-hye, to obtain the approval for a merger between
Samsung subsidiary companies (BBC 2017; Horwitz 2017; Sala and Steger
2017). In this case, it is much better to clearly distinguish what is CSR from
what is not CSR—such cynical approach cannot be considered under CSR as
an umbrella term. It should be noted that the way from minimalist approach to
societal or proactive approach can be taken by increasing the degree of CSR
involvement within the functional areas. Configuring all organizational
strategies, decisions, and actions based on CSR notion has been the only
way to achieve SDGs.

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16 1 Corporate Social Responsibility: A Conceptual Model

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Chapter 2
What Are the Drivers of Social
Responsibility?

One of the most interesting questions in the corporate social responsibility (CSR)
literature is about the drivers of companies to engage in CSR. In the literature, many
scholars have attempted to address this question and the aim of the current chapter is
to examine these drivers of CSR in a systematic manner. The review of the literature
reveals that these antecedents of CSR can be grouped into three main input catego-
ries as (1) micro or individual level, (2) meso or organizational level, and (3) macro
or environmental level. In the first level, the studies mainly focus on top managers
by investigating the role of their gender, age, tenure, leadership styles, values etc. on
the socially responsible activities. In the organizational variables, the impacts of
ownership structure, board composition, strategy, culture, and employees, and other
characteristics are discussed based on the findings of recent studies. As the last
domain, environmental variables are analyzed at three levels of task environment,
institutional environment, and global environment.

2.1 Individual Level

In line with the separation of ownership and management by the rise of modern
business organizations, senior managers have been seen in the nexus of the success
and failure of organizations. While their critical roles in the success of their compa-
nies are rewarded with a generous compensation package [e.g. Thomas M. Rutledge
from Charter Communications has been the highest-paid Chief Executive Officer
(CEO) of American business in 2016 as a compensation of $98.0 million with a net
change of 499% from previous year (Huang and Russell 2017)], organizational
failures usually result in CEO dismissal. As the most recent example, Uber’s founder
and CEO, Travis Kalanick, has resigned by the demands of major investors in order
to calm down the increasing complaints and rumors about the sexual harassment and
discrimination in this famous Silicon Valley start-up (Isaac 2017). According to

© Springer International Publishing AG, part of Springer Nature 2018 17


D. Turker, Managing Social Responsibility, CSR, Sustainability, Ethics &
Governance, https://doi.org/10.1007/978-3-319-91710-8_2
18 2 What Are the Drivers of Social Responsibility?

Manjoo (2017), Kalanick and his team are the ones that must be blamed on the
mismanagement of culture, structure, and strategy of the company.
It is clear that considering their interpersonal, informational, and decisional roles
(Mintzberg 1971), managers are held responsible for the whole organization with its
people and operations. On the theoretical level, two major perspectives explain the
managers’ role in organizations; agency theory views managers as the agents of
owners and characterizes them as people who seek their own interests even at the
loss of company and its owners (Jensen and Meckling 1976), whereas, stewardship
theory sees managers as the stewards of firms and suggests that they behave beyond
their self-interests and act in the favor of their companies (Chrisman et al. 2007).
Both agency and stewardship models can provide the importance of managers over
the organizations and its actions. Therefore, their personalities, ideologies, values, or
backgrounds should be taken into account when analyzing organizational actions. In
the case of CSR, the impact of managers on the process has been increasingly
recognized among scholars. However, according to Busenbark et al. (2016), the
literature on CEO-related phenomena such as their personality or environment is
fragmented due to the lack of incorporation of theoretical approaches and, therefore,
it mostly provides inconclusive results. As “a strategic choice which allows firms to
create shared value between managers’ personal interests and the social cause”
(Huang 2013, 236), CSR is also affected by the fragmented nature of literature and
needs a fresh perspective that can configure what we actually know about the
CEO-CSR link. As an important scholarly attempt, Gond et al. (2017) classify the
individual drivers of CSR into four groups by following the previous studies:
– Instrumental drivers: Taking the twofold lenses of upper echelon theory, which
suggests that CEO’s choices are the reflection of their individual experiences,
values etc. (Hambrick and Mason 1984), and agency theory, this group links the
factors such as the power or ego-based motives, need for control, and self-serving
concerns of managers as the instrumental drivers of CSR.
– Relational drivers: As relatively less investigated area of literature, the needs for
belongingness and social relationship are seen as the motive to involve in CSR.
Besides these needs, the authors suggest that the needs for positive self-esteem
can be a relational drive too.
– Moral drivers: According to the authors, moral drivers are the relatively well-
studied drivers in the literature and include the need for a meaningful existence,
concerns for environment or society.
– Other individual drivers: This group involves the factors that distinguish personal
factors such as sociodemographic, cultural or political characteristics as well as
their personality traits or emotions.
Although this classification of Gond et al. (2017) is useful, it seems that the
former three groups are the types of drivers and the latter one involves the basis for
these different types of drivers. An alternative approach might be focusing solely on
the bases of drivers since they can shape a manager’s perception, attitudes, intention,
motivation or behaviors towards CSR. After analyzing these bases, it can be much
easier to understand why some managers follow instrumental goals, but some others
2.1 Individual Level 19

are driven by the relational or moral motives. In the literature, these factors are
investigated in several research tracks:
Demographic/Background Characteristics A systematic review on 95 articles
shows that leadership demographics together with governance variables are the most
often tested predictors of CSR (Mazutis and Zintel 2015). Among the former group,
the variables such as gender, education, or tenure, are more widely investigated than
other (e.g. Huang 2013). Based on the previous studies, Alonso-Almeida et al.
(2017, 148) indicate that “being a woman with a high level of education and a
significant amount of work experience are associated with a stronger valuation of
CSR and the likelihood of its deployment in a company”. More specifically, the
presence of women at the top and middle management positions positively affects
the gender equality at organizations (Kassinis et al. 2016; Larrieta-Rubín de Celis
et al. 2015). In terms of educational background, CSR is negatively related with
having a bachelor’s degree in economics, but positively related to having a bache-
lor’s degree in humanities (Manner 2010). On the other hand, the specific level of
managerial education on CSR can result in a stronger link between CSR and a
company’s financial value (López-Pérez et al. 2017). In addition to these variables,
functional background, international or environmental experiences, presence on
other boards, CEO compensation, ethnic background are considered as other impor-
tant variables of socially and environmentally responsible management (Francoeur
et al. 2017; Jian and Lee 2015; Louis and Osemeke 2017; Manner 2010; Mazutis and
Zintel 2015).
Leadership Style The leadership style has attracted considerable attention in CSR
literature and some leadership styles (e.g. transformational, visionary, stewardship,
autocratic, and authentic) are seen particularly relevant with CSR (Mazutis and
Zintel 2015). For instance, the study of Christensen et al. (2014) discusses how
various leadership theories like trait school or behavioral school can be linked to
CSR and the authors propose that servant leadership is related to CSR-related
actions. According to the authors, as an emergent behavioral leadership theory,
servant leaders who empower and develop people (Van Dierendonck 2011) while
creating value for outsiders (Hunter et al. 2013) “may display a stronger focus on
sustainability and CSR” (Christensen et al. 2014, 173). On the other hand, Godos-
Díez et al. (2011) contrast the ethical and social responsibility perception of CEOs
based on agency and stewardship models and find that CEOs who are closer to
steward model tend to pay more attention to ethics and social responsibility. The
study of Alonso-Almeida et al. (2017) tries to investigate the impact of gender and
leadership style on a sample of 391 top managers in Spain. The study reveals that
women managers are more adaptable and effective than male counterparts on the
transformational, which is viewed as the self-sacrifice of a leader for the long-term
well-being of his/her followers (Bass 1997) and dual leadership styles; whereas,
the dominance leadership, as a decisive, goal-oriented, and power-seeking style
(Holmes 2006), is the worst for pursuing socially responsible strategies. A similar
result is obtained for the effect of transformational leadership on CSR too (Angus-
Leppan et al. 2010; Veríssimo and Lacerda 2015). However, the qualitative study of
20 2 What Are the Drivers of Social Responsibility?

Angus-Leppan et al. (2010) also finds that while explicit CSR is related to autocratic
leadership style, implicit CSR is linked to emergent and authentic leadership styles.
Similarly, CSR is found positively related with ethical leadership (De Hoogh and
Den Hartog 2008; Pasricha et al. 2017) and negatively associated with despotic
leadership (De Hoogh and Den Hartog 2008). The study of Waldman et al. (2006)
first distinguishes the components of transformational leadership and then proposes
that both ‘charismatic leadership’ as a relationship with followers on emotional and
cognitive connections and ‘intellectual stimulation’ with using their conceptual
capacity for environmental scanning are linked to the propensity of firms to engage
in CSR. However, the results of a survey on a sample of 234 managers from
95 United States (US) and 55 Canadian companies show that only intellectual
stimulation is a predictor of strategically-oriented, but not socially oriented CSR
(Waldman et al. 2006). Jacobson et al. (2014) state that intellectual stimulation is
more important than charismatic leadership when it is combined with networking
competence within and outside the organization. A recent study categorizes the
leadership style of CEOs based on their responsibility approaches and proposes
that while instrumental responsible leadership style has a more personalized vision
by focusing on the financial-bottom-line and interacting with stakeholders less,
integrative style has a socialized vision with a focus on dual bottom-line and high
degree of stakeholder interconnectedness (Maak et al. 2016). According to the
authors, the latter style of leadership is positively related to both “the organization’s
engagement in high-involvement multi-stakeholder initiatives” and “the develop-
ment and implementation of second-order social innovations” (Maak et al. 2016,
475–478).
Personality The personality is another important, but one of the less studied fields
of CSR literature. The previous literature provides that some traits such as narcissism
(Petrenko et al. 2016) or hubristic attributes (Tang et al. 2015) can explain diverse
socially responsible activities of managers. For instance, Petrenko et al. (2016) test
whether CEO narcissism positively affects CSR and negatively moderates the link
between CSR and performance. Both of these hypotheses are supported based on a
sample of Standard & Poor’s (S&P) 500 firms’ CEOs in between 1997 and 2012. By
using the perspectives of the upper echelon, stakeholder, and resource dependency
theories on a longitudinal data of S&P 1500 index firms, Tang et al. (2015, 1338)
find that the link between CEO hubris and CSR is weakened “when the firm depends
more on stakeholders for resources. . . and when the external market becomes
more uncertain and competitive”. Myung et al. (2017) entitle Machiavellianism,
psychopathy, and narcissism as negative personality traits and find that there is an
opposing link between those traits of CEOs and employees’ perception of ethicsand
social responsibility. According to Wowak et al. (2016), since charismatic CEOs are
better in considering the needs of multiple stakeholders, engaging their followers
(employees) in their stated goals, and recognizing the needs of their followers, they
can exhibit more emphasis on CSR and CEO tenure can strengthen the proposed
link. These hypotheses are confirmed by an empirical study conducting on a sample
of 113 S&P 500 CEOs. On the other hand, some CEOs’ personality characteristics
2.2 Organizational Level 21

can also take an active role in initiating and managing CSR process. The study of
Herrmann and Nadkarni (2014) uses the five-factor model of personality and finds
that some traits (e.g. extraversion and openness) affect initiation of the process, some
others (emotional stability and agreeableness) influence both initiation and imple-
mentation steps and conscientiousness have negative effects on both of these steps.
Values and Ideologies Values are viewed as the important predictors of socially
responsible behaviors as well. The aforementioned study of Mazutis and Zintel (2015)
summarizes that values like openness to change, self-transcendence, collectivism,
future-orientation, humane-orientation, stakeholder values, political liberalism, post-
conventional, eco-centrism, and religiosity are positively but conservation, self-
enhancement, and power distance are negatively related to CSR. Moreover, the values
such as social justice, fairness, respect for environment and people (Duarte 2010),
integrity and benevolence (Choi and Wang 2007) are also found related with CSR.
The study of Turker and Ozmen (2017a) grounds the managerial values towards
CSR on an ideological base by following the Schwartz’s (1994) value framework and
proposes that ideologically liberal managers can engage in CSR based on their
openness to change values, while conservative managers might follow the conserva-
tive values such as security, conformity, and tradition. Based on the second dimension
of Schwartz’s (1994) framework, egalitarian managers might involve in CSR
depending on their self-transcendence values, while non-egalitarian counterparts can
be stimulated by their self-enhancement values as achievement and power (Turker
and Ozmen 2017a). Following this study, Turker and Ozmen (2017b) develop a scale
on measuring socially responsible values. A study on a sample of 249 CEOs from
S&P 1500 firms reveals that liberal CEOs tend to be more socially responsible
than conservative CEOs when they have more power and their CSR approaches
are less dependent on the recent performance than their conservative counterparts
(Chin et al. 2013).

2.2 Organizational Level

In the literature, CSR is also investigated in line with the organizational level
variables such as ownership/board structure, organizational structure, strategy etc.
It is clear that these variables are very interactive and dynamic; they are continuously
affecting and affected by each other. For instance, recalling the Chandler’s (1962)
study, which proposes that structure follows strategy, once a company integrates
CSR into its strategy, it needs to change its structural variables too. Although some
variables are investigated well, some of them are neglected in the literature due to
this integrated nature of variables, which makes it difficult to work them alone. The
fundamental research streams of literature are provided in the following section:
Ownership Structure In a narrow sense, top management, owners, and board of
directors are three major tenets of the corporate governance system in a company
(pls. see Chap. 4). The impact of the first group on CSR is previously discussed at the
22 2 What Are the Drivers of Social Responsibility?

individual level variable; however, ownership and board structures are considered as
organizational level variables since their impacts cannot be reduced to a single
person’s decisions or acts. In the aforementioned study of Maak et al. (2016, 482),
the link between the leaders’ value orientation and the responsible leadership style
is moderated by corporate governance system as an organizational level factor; the
authors state that “strong focus of the corporate governance system on aligning
CEO behaviour with broader stakeholder interests strengthens the relationship
between a social welfare orientation and an integrative responsible leadership
style”. In terms of ownership structure, the variables such as the ownership con-
centration, which refers to “the amount of stock owned by individual investors
and large-block shareholders” (Financial Times Lexicon 2017a) (e.g. high/large
versus diffused/dispersed ownership) or ownership composition (e.g. domestic
versus foreign; state-owned versus non-state-owned) are empirically considered
as the predictors of socially responsible activities. There are, however, inconsistent
results on the impact of higher ownership concentration on CSR; while some
studies found inverse (e.g. Brammer and Millington 2005; Dam and Scholtens
2013) or no significant relationship (e.g. Adams and Hardwick 1998; Galaskiewicz
1997), some studies reveal a positive link between these variables. For instance,
firms with high ownership concentration might involve in CSR, since they can be
more effective in management supervision mechanism by leading managers to
solve any conflict among stakeholders or mitigating an agency problem (Godos-
Díez et al. 2014). According to Prado-Lorenzo et al. (2009), the existence of such
dominant shareholders might be the driving force to “adopt decisions that maximize
the firm’s economic, social, and environmental behavior” due to their “(i) interest
in the long-term survival of the firm, and (ii) the importance of maintaining their
own reputation, which is strongly linked to that of the firm”. However, since the
dispersion of ownership can increase the variety of shareholders expectations and
demands (Keim 1978), it can be assumed that such firms can be better in their CSR
disclosure (Kiliç et al. 2015). In terms of ownership concentration, the study of Oh
et al. (2011) examines the impact of different types of shareholders in Korean
context and finds that institutional investors (e.g. pension funds, insurance compa-
nies, banks) positively affect CSR ratings of companies, whereas, shareholding
by top managers is negatively linked to CSR. Another study, which is conducted
among Malaysian companies, finds that while the owners-managed companies
disclose less CSR information in their reports, the state-owned firms are better in
their CSR disclosure (Ghazali 2007). A similar study from China reveals that CSR
is positively and negatively related to non-state and state-owned firms, respectively
(Li and Zhang 2010). Additionally, a foreign ownership may also increase
CSR activities at companies in non-Western countries such as China (McGuinness
et al. 2017) or Korea (Oh et al. 2011). Moreover, since the increasing number
of investors have supported CSR, a new category of investors—socially responsible
investors—appears as a significant movement. The study of Cheah et al. (2011)
finds that the younger and female socially responsible investors believe the impor-
tance of CSR as a performance indicator. Therefore, the firms that want to attract
such investors engage in CSR too.
2.2 Organizational Level 23

Board Composition A board of directors that involve insiders directors, related or


affiliated outside directors, and independent outside directors (Financial Times
Lexicon 2017b) is responsible for the overall execution of a company by prioritizing
its objectives, monitoring and evaluating the level of progress. In doing so, they have
a significant effect on the corporate decisions towards socially responsible activities.
In the literature, there are numerous studies about the impacts of board composition,
which “normally concerns issues related to board independence (including indepen-
dence of board committees), diversity (firm and industry experience, functional
backgrounds, etc.) of board members, and CEO duality” (Financial Times Lexicon
2017b). Since the diversity at boards can widen the perspectives of directors by
allowing them to discuss issues more in-depth, it might improve the decision-making
quality at organizations. Such a broadened perspective is particularly important for
CSR since it requires to develop an understanding for the stakeholders’ needs and
wants (Hung 2011). Although today’s business landscape prioritizes the diversity on
boards, many companies are still accused of having less diverse boards. According
to a survey of Financial Times, the companies from the United States of America
(USA) have boards, which are mostly composed of older directors with higher
average tenure length than their European counterparts; these boards are more likely
male-dominant too (Foley et al. 2016). In the case of CSR, the empirical studies
reveal that the indicators of board diversity in terms of gender (e.g. Bear et al. 2010;
McGuinness et al. 2017; Setó-Pamies 2015), race (Zhang 2012), age (Hafsi and
Turgut 2013), tenure (Melo 2012), occupation (Siciliano 1996), independent and
outside directors (Dunn and Sainty 2009; Jo and Harjoto 2011; Webb 2004) are
positively linked to CSR. Besides these, the impact of variables, which are not as
visible as the gender, age or education level of board members, are mostly neglected
in the literature; for instance, the board mindset and competencies are also found
related with CSR (Knudsen et al. 2013). Although most scholars believe that the
positive impact of board diversity, there are some opponents who view diversity as
“double-edged sword” (Hambrick et al. 1996) due to the risk of dividing board
members into sub-categories, increasing the level of conflict among members or
slowing down the decision-making process; despite such negative impacts, diversity
can still provide some advantages that can enable a company to succeed in its CSR
adoption (Rao and Tilt 2016).
Strategy, Corporate Culture, and Employees Despite its overwhelming impacts
on all business decisions and actions, the strategy and culture are rarely investigated
in the literature. As one of these unique studies, Galbreath (2010) suggests that
formal strategic planning process can be linked to CSR by involving a comprehen-
sive environmental scanning stage to gather information about the firms’ external
and internal factors (e.g. natural environment, employees), integrating diverse func-
tional areas, obtaining the diverse views and knowledge of experts from the inside
and outside of organizations. Based on these arguments, the author empirically tests
the proposed link between strategic planning process and CSR by considering the
possible positive impact of humanistic culture, in which people are expected “to
strive to respond to stakeholder demands for CSR. . . demonstrates sensitivity to their
24 2 What Are the Drivers of Social Responsibility?

needs”; the results of survey on a sample of 280 CEOs from Australian firms support
both of these hypotheses (Galbreath 2010, 515). Kalyar et al. (2013) repeat the study
of Galbreath (2010) with the same variables on a sample of 172 top management
staff in Pakistan and the results again support both hypotheses. CSR-oriented culture
can positively affect CSR adoption at companies (Yu and Choi 2016); specifically
clan culture, which focuses on the cooperative and cordial relationships with other-
orientation (Cameron and Quinn 2006), and adhocracy culture that emphasizes
creativity and innovation with external orientation (Cameron and Quinn 2006)
have positive effects on CSR practices (Pasricha et al. 2017). Moreover, ethical
leadership influences CSR via the mediation of ethical culture, which can encourage
members to think beyond their personal interests by considering other stakeholders
(Wu et al. 2015).
Employees’ favorable perception of CSR and their support can also increase the
CSR involvement at organizations. Lee et al. (2013) indicate that the perceived fit
between corporate culture and CSR and the perceived CSR capability, which
includes “a unique bundle of knowledge, skills, and processes about the planning,
implementing and evaluation of CSR activity” can positively affect employees’
perception on CSR and consequently, their attachment and performance. Particularly
the implementation of CSR largely depends on the middle and lower level managers’
adoption of companies CSR approach (Maon et al. 2009; Yuan et al. 2011). The
management behavioral attributes, such as role modeling, advocacy, and facilitation,
also lead employees’ participation in CSR activities (social and environmental
activities, stakeholder relationship activities, local community support) (Chen and
Hung-Baesecke 2014). The ideologies of organizational members can affect whether
a firm engages in CSR or not and this relationship can be stronger “when firms are
high in human capital intensity, and when the CEO has had long organizational
tenure” (Gupta et al. 2017, 1018).
Other Organizational Characteristics Organizational characteristics such as
organizational type, size, age or sector can be also considered as either independent
or control variables to predict CSR. Particularly, the literature on CSR at diverse
organizational types (small versus large, local versus national/multinational, private
versus publicly traded etc.) has captured an increasing interest. For instance, the
social responsibility engagement of small and medium-sized enterprises’ (SMEs)
deserves a special attention considering their great social and economic contribu-
tions (Morsing and Perrini 2009). The studies on SMEs reveal that the founding
directors are highly critical for the adoption of CSR, which is narrowly defined for
this type of organizations (Murillo and Lozano 2006). Since these SMEs’ owner-
managers can shape the culture of their organizations, exploring their perceptions on
CSR is also important. A study reveals that they behave pragmatically and differ-
entiate the concepts of CSR and ethics clearly by grasping the interlinkages between
concepts (Fassin et al. 2011). For example, they may involve in CSR since it is a
precondition of selling their goods and services to buyers, which can be referred as a
supply chain driver (Baden et al. 2009). In sum, considering their small scale, SMEs
can usually engage in local level CSR activities due to their limited capacity. In
2.3 Environmental Level 25

contrast to SMEs, large organizations can devote more knowledge, resources, and
expertise to CSR. Perrini et al. (2007) compare the CSR strategies of SMEs and large
firms on a total sample of 3680 Italian firms and find that these two types of firms
have different CSR profiles; large firms are better to identify their stakeholders and
implement CSR strategies “since formal CSR approaches still seem to be a prerog-
ative of large firms” (Perrini et al. 2007, 293).
The scholars also attempt to investigate the CSR at the local, foreign, and
multinational enterprises (MNEs). It is clear that CSR adoption might differ between
domestic versus foreign firms as well as MNEs’ parent (home) versus subsidiaries
(host) (Kolk et al. 2010). For example, the study of Kuada and Hinson (2012) reveals
that while foreign firms in Ghana are mostly guided by legal prescriptions, local
firms follow discretionary and social considerations. In the literature, the studies on
the social responsibility of MNEs have emerged at two different levels of analysis;
CSR at their global operations and CSR at their subsidiaries in developing/under-
developed countries. Due to the measurement problems, researchers rarely analyze
the former CSR involvement of MNEs, which are geographically dispersed and
mostly operate in diverse sectors. In one of these studies, Altuntas and Turker (2015)
investigate how MNEs engage in CSR through their global foundations based on a
qualitative study on a sample of 24 corporate foundations of three MNEs; they find
that despite the overall compatibility between the main branches and subsidiaries
at the conceptual level, it may differ at the operational level in terms of the practices
of CSR, targeted stakeholders, content, and received funds. CSR at the subsidiaries
of MNEs is studied more frequently. Since most of these studies are derived from
the institutional theory by revealing how institutional context affect the subsidiaries’
CSR adoption, these studies are discussed in the next section. Additionally, organi-
zational age, size, the number of employees, primary business activity, sector,
county of origin, sales revenue, profitability are usually considered as the control
variables in the studies (Dam and Scholtens 2013; Galbreath 2010; Huang 2013
etc.).

2.3 Environmental Level

Businesses are operating in a turbulent environment, which is subject to various


economic, social, political, cultural or technological changes. Since all these changes
at the contextual level affect the operations of businesses, they need to be taken into
consideration at the formulation and implementation stages of CSR activities. As the
closest environmental layer, task or technical environment is composed of markets,
competition, and resources and, at this layer, organizations seek to attain the best fit
with contingencies (Lawrence and Lorsch 1967), to access scarce resources and
eliminate uncertainty (Pfeffer and Salancik 1978) and to reduce the transaction costs
(Williamson 1975, 1985) in order to increase their performance. Companies interact
26 2 What Are the Drivers of Social Responsibility?

with their primary stakeholders, such as customers, investors, suppliers, competitors


at this layer and the pressures of these stakeholders become one of the important
antecedents of CSR (Yu and Choi 2016). Despite the emphasis of task environment
on economic exchange relations, institutional environment involves the norms,
values, and regulations that are embedded in the institutional context (Meyer and
Rowan 1977). As one of the most influential theory in the organization literature, the
institutional theory proposes that organizations seek social approval and legitimacy
(DiMaggio 1988) in a highly institutionalized context (Meyer and Rowan 1977). It is
clear that an organization can face a dilemma of increasing institutionalization for
long-term survival or focusing on the short-term profit motive (Zucker 1987).
Following various line of inquiries, CSR can be a viable tool to respond the demands
of both environmental layers, if it is carefully planned and implemented by organi-
zations. In addition to these two layers, an organization has been also affected by
the global environmental challenges in line with globalization, which is increas-
ing the interdependency among individuals, groups, and nations and triggered by
the advanced communication and information technologies, economic factors
(e.g. transnational companies, electronic economy), and political changes (Giddens
2006). Today most companies are taking the advantages of exporting, foreign direct
investment (FDI), global sourcing, offshoring, or supply chain networks etc. and
open their operations into the developing or underdeveloped countries. Therefore,
the diffusion of global trends across countries becomes another factor that might
affect a company’s CSR adoption.

2.3.1 Task Environment

As it is stated above that CSR is not only affected by individual and organizational
level variables; it is also a product of task environment. The study of Flammer
(2015a) analyzes whether product market competition affects CSR and explores
the impact of large import tariff reductions, which increase the level of competition,
on domestic firms’ CSR engagement. The author finds that domestic companies
focus on CSR during the strict competition, since CSR can be a tool of competitive
advantage, which “generates valuable resource that allow(s) companies to improve
their competitiveness and differentiate themselves from their foreign rivals”
(Flammer 2015a, 1471). The author also shows that this effect is stronger at the
business-to-consumer (B2C) market, since the buying decisions of final customers
tend to be affected by CSR. In a similar vein, Dupire and M’Zali (2016) treat CSR as
a differentiation strategy and reveal that the level of competition increases social
performance towards core stakeholders (when compared with peripheral stake-
holders) at business-to-consumers (B2C) industries. Social ratings and environmen-
tal performance are better among the companies in more competitive industries and
there is an intense CSR variability across firms at these competitive industries due to
the use of CSR as a differentiation tool (Fernández-Kranz and Santaló 2010). As an
2.3 Environmental Level 27

integral part of the competition in a market, competitors can also directly affect to
what extent a company engages in CSR. The CSR level of competitors that produce
similar type of products (Liu and Wu 2016) and operate geographically proximate
manner (Jiraporn et al. 2014) can have a stronger effect on the CSR involvement of
other companies.
In addition to competitors, organizations also interact with other stakeholders at
their task environment. Cottrill (1990, 724) states that “if a company finds itself
competing in an industry where ethics, morality, and CSR is low, it may be that the
additional costs in a higher level of behavior cannot be successfully borne without
the help of external forces such as government”. In most countries, governments
foster CSR among companies by providing various incentives such as tax deduc-
tions, subsidies or credit alternatives (Arya and Mittendorf 2015). Governments may
also develop compulsory frameworks for CSR too. As an example, in India, a law
that requires companies to give two percent of their profits to charities passed in
2014; however, it seems that companies (52% of them) have failed to meet their
requirements (Balch 2016). Besides these direct regulations, a government is an
actor that can facilitate the development of socially responsible and sustainable
businesses by providing the necessary conditions and infrastructure. For instance,
hydrogen fuel cell vehicles, together with electric vehicles (EVs) (pls. see Chap. 6),
provide an exciting market for emission-free automobile technology. By the begin-
ning of 2018, the South Korean company, Hyundai Motor will launch its second
generation hydrogen fuel cell vehicle, which can travel more than 580 km between
fill-ups—40% farther than its first generation SUV, the Tucson ix FCEV. Unlike
pure electric cars that can be refueled in several hours, the recharge of the Hyundai’s
new model can take just a few minutes. However, the major disadvantage of this car
is about finding a fueling station, which is much easier for EVs. Against this
problem, South Korea is planning to increase hydrogen fueling stations to
100 with the aim of 10,000 fuel cell vehicles by 2020 (Lee 2017). It is clear that
the adoption of clean technology among companies must be buoyed by enabling
roles of governments.
Not only government, but also customers, suppliers, distributors or other business
partners are all among those stakeholders that have power over the firm, legitimacy
in their relationship, and urgency in their claim based on the stakeholder manage-
ment approach of Mitchell et al. (1997). Stakeholder pressure is critical to initiate a
change in the business world. They can push companies to be a good corporate
citizen or lead the way of change by collaborating on solutions. For example,
although Toys “R” Us filed for bankruptcy-court protection due to its $5 billion
debt as of September 2017, its vendors such as Mattel and Hasbro prop up the toy
chain by keeping its 1600 stores as a leverage against Amazon and Walmart
(Townsend and Ronalds-Hannon 2017). The symbiotic relationship between a
company and its distributors requires to work together to solve the problems.
Since sustaining good relationship with stakeholders is mutually beneficial for all
parties, it might contribute to the focal company too.
28 2 What Are the Drivers of Social Responsibility?

2.3.2 Institutional Environment

Institutional theory is widely used in CSR literature to address the impact of “broad
societal pressures on corporate engagement in CSR, and use these to demonstrate
how CSR varies in particular contexts” (Bondy et al. 2012, 282). According to the
theory, organizations try to conform to the institutional rules and norms through
coercive, normative, or mimetic isomorphism (DiMaggio and Powell 1983). For
instance, since cultural expectations in a society affect the adoption of CSR practices
(Kuada and Hinson 2012), and organization can follow what other organizations do
in the same cultural context—mimetic isomorphism—in order to gain a legitimacy
and obtain a societal approval. The study of Flammer (2015b) shows that the impact
of CSR on financial return is higher in industries that have higher institutional norms
of CSR.
Since these embedded standards, norms, and values can vary across institutional
contexts, there is significant variability at how CSR is perceived and adopted across
institutional contexts. For instance, the interaction of variables such as the role of
ethical leadership, governmental dependency, and cultural traditions in China sus-
tain a CSR perception in the nexus of ethical and discretionary actions (Yin and
Zhang 2012). Whereas, since Turkish companies, which have operated under the
pressure of strong state organizations, their CSR approaches are built around the
legitimacy search (Turker 2015). On the other hand, Albareda et al. (2007) classify
the public policy governance models that might foster CSR in Europe into four
groups. It can be seen in the following that each group provides a different govern-
ment approach towards CSR (Albareda et al. 2007, 401)
– Partnership model: This model appears in Denmark, Finland, the Netherlands,
and Sweden. The model refers to a “partnership as strategy shared between
sectors for meeting socio-employment challenges”.
– Business in the community model: The model, which exists in Ireland and the
United Kingdom (UK), is characterized by “soft intervention policies to encour-
age company involvement in governance challenges affecting the community
(entrepreneurship and voluntary service)”.
– Sustainability and citizenship model: The countries in this group are Austria,
Belgium, France, Germany, and Luxembourg. The main characteristics of model
are the “updated version of the existing social agreement and emphasis on a
strategy of sustainable development regulatory”.
– Agora model: The model covers the Mediterranean countries (Greece, Italy,
Portugal, and Spain) and refers to the “creation of discussion groups for the
different social actors to achieve public consensus on CSR”.
In their cross-cultural study on East Germany, Estonia, and Romania, Lang and
Rybnikova (2017) focus on the country-specific variables of socially responsible
managerial values and find important ‘strategic orientation’ in East Germany, ‘share-
holder, employees and community orientation’ in Estonia, and ‘shareholder and
religious orientation’ in Romania. All these studies show that CSR is idiosyncratic
2.3 Environmental Level 29

to the institutional contexts and might vary a lot according to the nature of these
contexts. This effect of institutional context on CSR practices is particularly evident
for MNEs since they are operating in diverse contexts simultaneously. The study of
Reimann et al. (2015) finds that the administrative distance between MNEs’ home
and host countries in terms of social rules, regulations, governmental control, and
enforcement mechanism negatively affects their subsidiaries’ commitment to CSR;
the greater the distance, the lesser is the commitment. According to the authors, one
possible theoretical explanation of such MNE behaviors might be the mimetic
isomorphism; “when operating in administratively distant emerging economies,
MNE subsidiaries may mimic the relatively low levels of strategic commitment to
CSR of local competitors” (Reimann et al. 2015, 848). Therefore, MNEs can adopt
their CSR approaches to local practices to legitimize themselves in the different
demands or pressures at institutional context (Yang and Rivers 2009); but, it may
result in a gap between what is normatively idealized at the home country and what is
actually operationalized at the host countries (Altuntas and Turker 2015). Particularly
CSR activities, which require the use of more funds, become particularly elusive
among MNEs subsidiaries (Campbell et al. 2012) since it is highly risky to trust local
partners in such a new context (Gaur and Lu 2007). Therefore, based on their study’s
results, Husted and Allen (2006, 838) state that “institutional pressures, rather than
strategic analysis of social issues and stakeholders, are guiding decision-making with
respect to CSR” for MNEs.
The institutional environment can also affect CSR involvement indirectly. For
instance, the aforementioned results on the board diversity can vary depending on
the institutional context; despite the strong empirical evidence for the positive
impact of board independence in Western-context, a study among Korean firms
reports the curvilinear relationships between CSR and board independence (with an
exponential growth curve), CEO-outsiders’ social ties that refers the density of the
social relationship between CEOs and outside directors (inverted U-shaped), and
educational diversity of board (U-shaped) (Chang et al. 2017). According to the
authors, the outside directors may not perform well in Korea (Chang et al. 2017),
since they are representing the coercive isomorphism, which emanates from gov-
ernmental bodies (Kim 2007). According to Maak et al. (2016, 482), as a cultural
factor, power distance that indicates “the degree to which the less powerful mem-
bers of a society accept and expect that power is distributed unequally” (Hofstede
2017) can also moderate the link between social welfare orientation and integrative
responsible leadership style; the link can be strengthened when the power distance
is low. On the other hand, media can raise the awareness about the business-related
problems and warn people on the future implications. The role of media on CSR
must be beyond simply doing finger wagging or applauding businesses’ negative or
positive impacts on nature or society; they have to provide critical reviews, analysis,
and reports based on the accurate and verifiable information. Raising such an
information-rich awareness among people and organizations is important to initiate
change.
30 2 What Are the Drivers of Social Responsibility?

2.3.3 Global Environment

The research on the impact of global environmental factors on CSR is relatively less
when compared to the previous environmental layers. However, the globalization
trend affect CSR a lot similar to other social phenomena. Today, CSR and
CSR-related resources and knowledge are exchanged among companies from dif-
ferent institutional contexts. A study on seven Asian countries reveals that global-
ization enhances CSR in those countries; however, as it is explained in the previous
section, the globalizing companies adapt their CSR approaches to the national styles
of host countries rather than exporting their own CSR to those countries (Chapple
and Moon 2005). In their study, Kaplan and Kinderman (2017) examine the initial
stage of CSR’s transnational diffusion in the cases of Venezuela and Britain and
show that “CSR traveled through learning exchanges between business elite
‘exporters’ and ‘importers’ whose engagement in diffusion addressed crisis-
enhanced political threats and opportunities in the receiving country”. Therefore,
in most cases, the global CSR patterns have been diffused from the developed to
developing countries by the entrance of MNEs in those markets (Jamali 2010). Local
firms’ CSR engagements in developing world are improved by the positive spillover
effect and knowledge transfers of FDI inflows at these countries (Nyuur et al. 2016).
Moreover, “CSR continues to evolve in practice, and its reach now often extends to
supply chain partners including suppliers, customers, and logistics providers”
(Maloni and Brown 2006). The supplier networks of most MNEs at developing
countries must adopt CSR in order to meet the criteria of those MNEs. For instance, a
case study on CSR practices of IKEA’s global supply chain demonstrates that these
practices cover the training of employees and key staff at the supplier level,
exchange of experience, positive incentives for suppliers or regular audits etc.
(Andersen and Skjoett-Larsen 2009). However, the news is not all good. Scherer
and Palazzo (2008) emphasize the need for change on CSR debate with globaliza-
tion. Organizations can operate beyond the boundaries of a national policy frame-
work, which is guaranteed by governmental authorities. Due to the lack of a sound
global regulatory framework, “business firms have an additional political responsi-
bility to contribute to the development and proper working of global governance”
(Scherer and Palazzo 2008, 414). The study of Tengblad and Ohlsson (2010) points
out this change among MNEs by examining the effect of globalization trend on
national business systems to frame CSR. The results based on the CEO letters at the
annual reports of 15 Sweden corporations show that the discourse has changed from
a national and communitarian view of CSR to an international and individualistic
view of CSR. However, this study also reveals that the change in discourse does not
mean an increase in the CSR commitment and interest of those corporations.
Together with globalization and increasing operations of companies across bor-
ders, there is an interest towards the creation of common frameworks of CSR and
related themes for companies. Although there is no obligation for implementation,
international organizations or business coalitions have generated diverse frame-
works or guidelines that might help companies in their CSR engagement. For
2.4 Conclusion 31

Table 2.1 The ten principles of the UN Global Compact


Category Principle
Human Principle 1: Businesses should support and respect the protection of internationally
rights proclaimed human rights; and
Principle 2: make sure that they are not complicit in human rights abuses
Labor Principle 3: Businesses should uphold the freedom of association and the effective
recognition of the right to collective bargaining; and
Principle 4: the elimination of all forms of forced and compulsory labor;
Principle 5: the effective abolition of child labor;
Principle 6: the elimination of discrimination in respect of employment and
occupation
Environment Principle 7: Businesses should support a precautionary approach to environmental
challenges; and
Principle 8: undertake initiatives to promote greater environmental responsibility;
Principle 9: encourage the development and diffusion of environmentally friendly
technologies
Anti- Principle 10: Businesses should work against corruption in all its forms, including
corruption extortion and bribery
Source: UN Global Compact (2017)

example, International Organization for Standardization’s (ISO) 26,000 Social


Responsibility, which was developed by 500 experts with linking Organization for
Economic Co-operation and Development’s (OECD) guidelines for MNEs (OECD
2017) and the United Nations’ (UN) Agenda 2030 [Sustainable Development Goals
(SDGs)] (UN 2017) provide guidance for all types of organizations on several core
subjects including organizational governance, human rights, labor practices, and the
environment (ISO 2017). On the other hand, UN Global Compact Initiative’ ten
principles, which are derived from the international conventions and declarations,
provide the minimum standards of operating as a company (UN Global Compact
2017). Table 2.1 presents these ten fundamental principles, which must be adopted
by all organizations immediately.
In addition to these common frameworks, MNEs can also develop their own
principles and expect the full compliance from business partners. For instance, the
study of Turker and Altuntas (2014) reveals that such company-specific code of
conducts become the significant domain of ensuring sustainability along the supply
chain (pls. see Chap. 6).

2.4 Conclusion

The growing literature on CSR deepens our current understanding of the antecedents
of CSR at the individual, organizational, and environmental level. From a critical
point of view, the systematic review in this chapter indicates several major draw-
backs and shows some research gaps in the literature. As the first problem, the
32 2 What Are the Drivers of Social Responsibility?

literature is very dynamic but fragmented in nature. This is partly because of the
proliferation of studies with small-sized samples that are usually derived from a
single country setting. Considering the difficulty of collecting data at the managerial
and organizational levels, the scholars frequently conduct cross-sectional surveys
with small samples and, therefore in some cases, there are significant inconsistencies
and contradictory results among the studies (e.g. the impact of high ownership
concentration). In order to overcome this problem, there is certainly a need for
conducting studies with large samples, cross-country comparisons, meta-analysis,
longitudinal surveys etc. Moreover, the qualitative studies such as content analysis,
case studies etc. can also increase the insight into the phenomena and provide a
deeper understanding for the proposed links.
Secondly, despite the wide use of various theories and approaches in studies to
provide the backbone of proposed hypotheses, most of these theories are imported
from organization literature. It seems that the field of CSR is still at the infancy
stage in the development of its own theoretical lenses and there is again a need
for developing CSR-specific theories and approaches. On the other hand, as the
third problem, while the impact of some drivers is widely studied in the literature
(e.g. the impact of women CEOs, transformational leadership style, high ownership
concentration, board diversity etc.), the role of some other drivers are mostly
underestimated or neglected by the scholars. Therefore, some potentially important
research tracks remain unexplored. For example, the impact of ideologies and values
of CEOs are very important in determining the tendencies of CEOs’ on CSR. On the
other hand, the role of strategy, culture, employees on CSR should be put under
particular scrutiny since these variables are as important as ownership structure and
board composition. Moreover, we have little or no understanding of the impact of
organizational change, organizational learning, and organizational communication
too. For example, it is still obscure how the notion of CSR is spillover within the
company—among the diverse units of companies or employees. Such a research
question can be addressed by adopting a social network perspective on the organi-
zational communication framework. Another research gap exists in the implications
of global environment on CSR. For example, since it is difficult to grasp the notion
of globalization, the studies in the literature provide only a limited perspective to
enlighten the link between globalization and CSR. It is partly because of the
difficulties of measuring the impact of larger scale variables on CSR.

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Part II
Integrating Social Responsibility into
Functional Areas
Chapter 3
Strategy and Social Responsibility

Although some managers see corporate social responsibility (CSR) as a chore, some
others credit the organizational performance or reputation to CSR. For the latter
group, CSR is ‘a creative opportunity’ that is positioned at the center of overall
corporate strategy to strengthen the business while contributing to society (Keys
et al. 2009). Designing strategies that align a company’s core competencies with its
social and environmental responsibilities is a factor that makes a CSR strategy more
effective (McElhaney 2017). Aligning CSR into strategic management process
and identifying a social responsibility strategy (SRS) are two different, but closely
interrelated trajectories in the literature. Since the latter can be viewed as a
by-product of former, the first and foremost task should be to configure how to
integrate CSR into this process by considering its cross-functional as well as external
environmental linkages. Integration of social perspective into the core frameworks
enables companies to better understand competition and guide its strategy too (Porter
and Kramer 2006). After the inclusion of CSR into overall strategic direction, a
company can focus on developing a relevant SRS, which may cover 3–5 years, and
implement it with an emergent and agile approach by responding to the ongoing
changes.
In most cases, if SRS fits well to a company’s overall strategic direction, it might
yield better results for the company (e.g. reputation, expertise) and its stakeholders
(e.g. satisfaction). Aligning a company’s social responsibility with its objectives and
values will eventually “mitigate risks, enhance reputation, and contribute to business
results, that is all to the good” (Rangan et al. 2015). However, a mismatch between
these two directions can be costly or even harmful by raising severe critics. The lack
of coordination and logic connecting various CSR activities of a company may
hamper the process even, if this company embraces a broad vision of CSR (Rangan
et al. 2015). For instance, from the Friedmanian view of CSR, if a company that has
steadily failed to meet its core ethical responsibilities at its factory floor donates a
large amount of money to a charity, most people might find it dishonest and perceive
it as greenwashing. For most people, this company should prioritize the improve-
ment of workers’ conditions. Escalation of CSR activities based on the domains of

© Springer International Publishing AG, part of Springer Nature 2018 43


D. Turker, Managing Social Responsibility, CSR, Sustainability, Ethics &
Governance, https://doi.org/10.1007/978-3-319-91710-8_3
44 3 Strategy and Social Responsibility

responsibilities (Carroll 1979, 1991) and stakeholder salience (Mitchell et al. 1997)
has been implicitly or explicitly provided in the CSR literature. In line with this
literature, the current chapter proposes that a company should align its SRS based on
its overall mission, vision, strategy, stakeholders and so on.

3.1 Social Responsibility Strategy

The level and nature of CSR involvement at strategic management process vary
across business organizations. While some companies focus solely on philanthropic
social responsibilities by donating its monetary or non-monetary resources, some
others collaboratively work to develop the common principles of ethical and envi-
ronmental trade with its business partners. In the literature, the level and nature of
CSR involvement are classified in many ways including the light green-dark green
spectrum on the environmental responsibilities (Freeman et al. 1995), the leaders-
laggards continuum depending on the proactiveness level (Hahn 2013), the compli-
ance, strategic or forced perspectives based on the recognition of responsibilities
(Munilla and Miles 2005), focusing on philanthropic, improving operational effec-
tiveness, and transforming the business model as the three theaters of CSR practice
(Rangan et al. 2015), the four stages of a CSR involvement process (developing
awareness, promoting awareness, initial implementation, and mainstreaming)
(Carlisle and Faulkner 2004) etc.
In terms of its benefits for society and business, Keys et al. (2009) identify four
types of CSR as pet projects (low at both domains), philanthropy (high at benefits to
society, low at benefit to business), propaganda (low at benefits to society, high at
benefit to business), and partnering (high at both domains). In addition to evaluate
CSR involvement based on its benefits, the authors state that companies should
assess the time frame (short-term versus long-term) and nature of benefits (tangible
versus intangible). In a similar vein, Galbreath (2006) suggests four strategies of
CSR adoption by considering the possible extensions and differentiations of overall
home country strategy (corporate strategy) across the operations at diverse host
countries [strategic business units (SBUs)]:
– Shareholder strategy: Following Friedman (1970), this strategy is focusing
merely on the economic responsibilities.
– Altruistic strategy: Adopting a giving-back approach, the strategy is composed of
the monetary donations to community for some causes.
– Reciprocal strategy: This strategy views CSR as a mutually beneficial business
and tries to increase the benefits of CSR involvement for society and business.
– Citizenship strategy: As the most strategic version, CSR strategy is designed
based on the needs of stakeholders with interacting them during the development
process.
After distinguishing strategic CSR and SRS, Turker (2013a) states that SRS
should focus on the integration of social responsibility into the strategic management
3.1 Social Responsibility Strategy 45

Table 3.1 Examples of SRS


Governance
Corporate structure of Target
strategy SR focus SR stakeholder Examples
Integration/ Social/ In-house Primary Arçelik prefers to work with local
backward economic social suppliers and provides training
opportunities/ knowledge net-
work/ ethical guidance to its
suppliers
Intensive/ Social Collaborative Secondary Turkcell has been conducting
market social ‘Kardelenler (Snowdrops) pro-
penetration jects, a scholarship programme
for young girls in less developed
regions in Turkey, collaborating
with a non-governmental organi-
zation (NGO) and governmental
organization.
Intensive/ Social Collaborative Secondary Eureko Sigorta opens a public
market nonsocial training center (ÇATOM) in a
development less developed region in Turkey
with collaborating Eureko
Achmea Foundation and two
governmental organizations.
Generic/cost- Economy/ In-house Non-social Ryanair uses less fuel to transport
leadership environment its average passenger one mile
than the 20 largest airlines by
passenger volume.
Generic/ Social/ In-house/ Secondary Proof Eyewear provides original
differentiation environment donation social/pri- products that are handcrafted
mary from sustainable materials. A
nonsocial large portion of each sunglass/
eyewear sale goes to a charity in
India that provides sight–giving
cataract surgeries to those in need.
Source: Turker (2013a)

process and entire business system in order to contribute to a company’s economic,


social, and environmental objectives. According to the author, based on the corpo-
rate strategy [integration, intensive, diversification, defensive, functional strategy
(David 2010; Wheelen and Hunger 2010), cost leadership, differentiation, or focus
strategy (Porter (1980)], a viable SRS can be developed by identifying a specific
orientation (economic, social, or environmental), target stakeholder [primary social,
secondary social, primary nonsocial, and secondary nonsocial stakeholders (Wheeler
and Sillanpaa 1997, 1998)], and governance model [outsourcing, in-house or col-
laborative (Husted 2003)]. Table 3.1 shows some example SRSs based on the
proposed framework (Turker 2013a).
Turker and Altuntas (2013) explain how Porter’s (1980) generic strategies can be
adopted to build the ethics of responsibility towards different stakeholders. For
example, while 3M follows the cost leadership strategy towards its environmental
46 3 Strategy and Social Responsibility

responsibility, Ben & Jerry differentiates its products by highlighting its societal
objectives together with product or economic objectives and Virgin Airlines &
Travel adopts the focus strategy by providing environmentally responsible and
socially inclusive mobility alternatives, such as Virgin trains, Limobikes services
etc. to a customer segment who looks for superior travel services.
Each of these classifications are useful to explain and explore CSR from different
perspectives. In the current study, however, the alignment of CSR into strategic
management process is built on a critical fault line of strategic management
literature.

3.2 How to Align CSR into Strategic Directions

The understanding of what strategy is and how strategy can be developed has
changed significantly over time and scholars have not achieved any consensus yet.
Therefore, the concept of strategy and its development process can be articulated
from different perspectives. For example, while planning school grasps strategy
formation as a formal process, entrepreneurial school or cognitive school view it
as a visionary or mental process, respectively (Mintzberg and Lampel 1999;
Mintzberg et al. 1998). By taking a socially-responsible business mindset and
defining strategy as “a game plan for an organization to produce its goods and
services in effective and efficient, as well as technologically oriented and socially
responsible manner” (Turker 2013b, 280), managers can configure CSR as an
organic and indispensable part of strategic management. As a long-run process,
strategic management is about “charting how to achieve a company’s objectives, and
adjusting the direction and methods to take advantage of changing circumstances”
(Faulkner and Campbell 2011, 3). Therefore, companies must focus on the factors
that might affect this process internally and externally.
The debate on external versus internal orientation has affected the field of
strategic management significantly. Hoskisson et al. (1999) review the literature
on this trajectory and reveal that there is a swing like a pendulum in between two
lines of inquiry that are theoretically stemmed from industrial organization view
(IOV) and resource-based view (RBV). Deriving from the Bain/Mason paradigm
(Bain 1956, 1968; Mason 1939), IOV focuses on the analysis of industry environ-
ment and market structure as the main predictors of organizational performance
(Porter 1980, 1985). Simply, it is proposed that companies can obtain a competitive
edge by differentiating its position among rivals by analyzing the five forces of
industry competition well (rivalry among existing competitors, threat of new
entrants, threat of substitute products or services, bargaining power of buyers, and
bargaining power of suppliers) (Porter 1980, 1985). On the other hand, RBV
(Barney 1991; Wernerfelt 1984), which can be dated back to the early writings on
strategic management literature, emphasizes the internal strength of an organization.
Organizations can be conceptualized as a collection of resources (Penrose 1959),
which are tangible and intangible (Wernerfelt 1984) including routines, distinctive
3.2 How to Align CSR into Strategic Directions 47

Resources &
Capabilities
Strong

I
II Proactive
External-
Orientation Industrial/
Market
Conditions

Unfavorable Favorable
IV
Minimalist III
Internal-
Orientation

Weak

Task Env.
Institutional Env.
Global Env.

Fig. 3.1 Four strategic positions to align CSR into business strategy

competencies, culture, organizational learning, human resources etc. Developing


capabilities for configuring these resources in a dynamic manner enables a company
to make a difference among its rivals.
Since these two approaches constitute one of the building blocks at strategic
management thinking, the overall strategic direction of a company for CSR can be
cultivated in the light of IOV and RBV. Figure 3.1 illustrates four strategic positions
by considering the strength and importance of internal and external factors. The
x-axis represents whether industry/market conditions, which are implicitly or explic-
itly imposed upon organizations, are favorable or unfavorable. Following IOV, the
market and industry specific factors at the task environment should be considered to
identify a firm’s overall direction. Although task environment is the closest layer,
which has influenced a company most urgently, businesses simultaneously interact
with other environmental layers too (pls. see Chap. 2). An organization navigates its
strategic direction along with the factors at the institutional and global environmental
layers. Figure 3.1 shows the factors at institutional and global environments that are
illustrated as the surrounding layers of task environment. The arrows with solid and
dashed lines indicate the direct and indirect impacts of factors at these layers. In
addition to their indirect impacts by affecting the factors at task environment, the
institutional and/or global environment may affect a company directly as well. For
instance, although the starvation in Somalia has no direct impact on a company that
48 3 Strategy and Social Responsibility

is operating in a developed country, the company may still focus on this problem and
develop a SRS towards this problem.
By taking its premises from RBV, the y-axis shows to what extent the organiza-
tional resources and capabilities fit well to its external environment to take the
advantages of opportunities and minimize the impacts of threats. Having the valu-
able or inimitable resources is not sufficient to dominate its strong position in the
long run. In a turbulent business world with many forces at play, business organi-
zations must be capable of exploring new knowledge and exploiting the current
knowledge simultaneously (Gupta et al. 2006). The companies that have sound
strategic assets (Bowman 2009) and capability to explore new and to exploit existing
assets can be positioned at the strongest end of spectrum; whereas, companies can be
considered as the weakest end, if they do not have such resources or cannot
capitalize their existing valuable resources.
Recalling the difference between corporate and business unit’s strategies, it
should be noted that the current framework is suitable to the alignment of CSR in
both levels. A corporation that may have several SBUs operating at the different
contexts (industries, countries or other geographical regions) might ground its
overall CSR approach based on the idiosyncratic positions of each SBU at the
internal/external domain. Therefore, SRS at the corporate level is an organic com-
pound of its SBUs’ SRSs. Considering the recursive and adaptive nature of strategy
development process in the multi-business firms across the corporate centers and
business units (Paroutis and Pettigrew 2007), it can be stated that the process of SRS
development and implementation for corporate and SBU levels is very interactive.
Moreover, it is proposed that the relevance and integration between the overall
corporate/SBU strategies and SRS may increase the level of commitment to the
desired goals and motivate managers and employees to show a sincere concern for
those stated goals. By using the craftsman metaphor of Mintzberg (2007), the greater
level of sincerity and passion among managers can improve the process of strategic
management as well as its outcomes.
It should be also noted that none of these positions does not have to be pursued
forever; a company can dynamically take diverse positions throughout its history.
For instance, during his company’s early years, Henry Ford mainly focused on the
production of an internal-combustion-engine driven auto in large quantities and took
on his workers’ responsibilities seriously (e.g. “hiring blacks and handicapped in
large numbers, decent pay, and the modern and airy work place”). In 1955, however,
as a family owned company, Ford Motor “put 60% of its voting power into common
stock” and this strategy of company is presented as one of its “apparently socially
responsible moves” in the biography of Ford (Ford Motor 2017). Going public can
be considered as part of social responsibility since an economy with a ‘good’
equilibrium where most firms are publicly traded can create positive externalities
like “superior resource allocation and greater firm values” (Subrahmanyam and
Titman 1999, 1048). However, a decision for initial public offering is not merely
made for the sake of economic welfare of society; of course, it can be in line with the
company’s overall strategy towards scaling up its business. All in all, these two
examples at the history of a company show that companies’ CSR perceptions may
change by responding different internal and external forces over time.
3.2 How to Align CSR into Strategic Directions 49

Based on the two-fold dimensional structure, four strategic positions are


described for developing and designing their social responsibility strategies in the
following.

3.2.1 Proactive

As the most advantageous position in terms of its internal and external environments,
Quadrant I can give an organization to take proactive attempts by formulating and
implementing new strategies, changing its structure or culture, developing innova-
tive products and even generating new industries through disruptive innovations.
Companies can use its internal resources, capabilities, and competencies to take the
advantage of favorable market conditions. Obviously, this position is particularly
suitable to conduct the grand-scale and high-impact CSR involvement. Since a
company may have the accumulated knowledge, in-depth expertise, and valuable
and diverse resources at this position, the type, variety, extent, and impact of its
social responsibility integration is only limited by the imagination of managers. In
addition to its benefits to the beneficiaries or business itself, companies can improve
social capital and strengthen the governance system by collaborating with other
companies, international organizations, or media.
For instance, according to Medappa and Srivastava (2017), the Samsung’s CSR
practices on green memory solutions have been characterized by a disruptive
technology with its value creation capacity and large-scale impact potential. As
one of the early proponent of Electronic Industry Citizenship Coalition (EICC),
Samsung has invested a lot by prioritizing the ceaseless innovation to provide a wide
range of next-generation technologies in an environmentally friendly manner.
Unilever’s Project Shakti, which is classified as the example of transforming the
business model by Rangan et al. (2015), can be viewed as a proactive initiative as
well. Conducted by Hindustan Lever as Unilever’s Indian business, Project Shakti
aims to strengthen the economic and social situation of poor women living in
particularly rural areas of India by training them on sale and book keeping and
help them to be micro-entrepreneurs. After the completion of training, a woman can
be the official distributor of Unilever’s products in her village and nearby areas.
While creating a significant impact on the lives of those women, the project was
designed to expand the company’s market coverage across the small villages where
there is no road or transportation (Unilever, 2017). Based on the aforementioned
criteria of time frame and nature of benefits, Keys et al. (2009) evaluate the benefits
of Project Shakti for business and society in terms of time frame and ability to
quantify:
– Tangible results in the short run: The project creates $100 million sales growth for
the company and employment for 42,000 rural women.
– Tangible results in the long run: The project creates new rural distribution system
for the company and improves the health and living-standard of society.
50 3 Strategy and Social Responsibility

– Intangible results in the short run: The project increases corporate reputation/
education and provides education and training for society.
– Intangible results in the long run: The project helps the enchancement of brand
loyalty and support the rural entrepreneurship.
A company may use its strong position to alter a worsening situation at the
institutional or global context as well. By taking the leadership and maintainer role
at a sensational campaign (e.g. stop hunger or malaria, fight against the gender
discrimination or worker exploitation) can be an example. If a company has become
a role model, other organizations tend to follow its behavior and, like the circular
waves induced by a stone on a pond, the positive implications can be viewed at the
task, institutional, or even global environment. TOMS Shoes’ buy-one-give-one
business model has been also considered as a proactive attempt to make a difference
at the global scale by many people (TOMS 2017). The number of shoes donated by
company to poor children around the world has continuously increased from its
foundation at 2006 and it seems that this philanthropic-based business model has
inspired some other companies to donate their products; e.g. Warby Parker (eye-
glasses), Smile Squared (toothbrushes), Roma Boots (boots), Nouri Bar (meal), Sir
Richard’s (condom), KNO clothing (clothes and shelters), Soapbox Soaps (water,
soap, vitamins) (Knowledge@Wharton 2015; Montgomery 2015).
The model of TOMS attracts the attention of investors too; Bain Capital, a private
equity firm, bought 50% of company in 2014 by $625 m by raising woes whether the
company continues to give away shoes (Stock 2014). However, it seems that
company and its one-for-one shoes model is not without its critics. For some, this
corporate giving does not focus on the long-run needs of poor people and may have
some unintentional harms on other stakeholders such as the local shoe-suppliers
(Davenport 2012). Perhaps due to these critics, the company has expanded its model
by including gift sunglasses, birth bags or gift cards by focusing on new areas such
as health, clean water or safer birth (TOMS 2017). In sum, the proactive SRS
approaches of companies may come up with many contradictory, but inspiring
ideas. In the long run, if a company takes an emergent approach and modifies its
approach for the search of excellence, it may create the critical mass to drive a
paradigm shift.

3.2.2 External-Orientation

Quadrant II shows a position wherein a company is strong at its internal dynamics,


but it is negatively influenced by some external factors or trends. At this position, a
company mainly focuses on the external factors at the alignment of CSR into its
strategic management process. It addresses the external risks or opportunities by
adopting a socially responsible perspective. For example, if a company faces a strict
competition in its current market, it may chart a new strategic direction towards the
objective of differentiating its products to be or to remain the most preferred brand.
3.2 How to Align CSR into Strategic Directions 51

The alignment of CSR into this strategy can be accomplished by following a SRS
that attracts the attention of customers and larger society. Indeed, the studies in the
literature show that the increasing level of competition affects the perception of
businesses to view CSR as a tool for competitive advantage to differentiate them-
selves from rivals (Flammer 2015; Dupire and M’Zali 2016).
A company might pay more attention to build a CSR-related brand positioning
under the pressures of its current market. In doing so, it should demonstrate a long-
term commitment to CSR activities with the support of senior managers by “taking
into consideration the issues that are salient to the brands’ stakeholders” (Polonsky
and Jevons 2006). For instance, today most companies start to see China as a
significant buying market for their products and try to increase their brand awareness
by positioning CSR as a conveyor of these market expansion attempts. As an
example, while United Kingdom’s (UK) Jaguar Land Rover establishes the China
Children and Youth Dream Foundation by contributing 50 m Yuan (£4.86 m),
HSBC announces its commitment to CSR in China on its website (Rice 2014). If
these companies succeed in matching their CSR efforts with the concerns of their
brand stakeholders in China, they can increase their market presences and shares as
well. As of May 2017, Jaguar Land Rover has delivered a record sale, 604,009
vehicles as the most in its 95-year history, thanks to the increasing demand in China
(32% sales growth) and North America (24% sales growth) (Monaghan 2017).
Although it is difficult to pinpoint this sale increase directly to CSR, it is clear that
the company’s current strategies, including its SRS, currently work well in China.
As another example, if a company has struggled to find the skilled labor for its
open positions due to the shortage of talented people in the labor market, it may take
some socially responsible measures to improve the current situation. Koç Group
Companies in Turkey attempt to address this problem of labor shortage for the
technical jobs in Turkey. Collaborating with Vehbi Koc Foundation and the Ministry
of National Education, Koç has initiated a CSR project (The Vocational High
Schools: A Matter of Country) to increase the quality of education at the vocational
schools by providing scholarship, internship opportunities or volunteer mentorship
supports (Koç 2017). Moreover, since the level of CSR or ethical commitments in an
industry may promote or hamper the success of CSR adoption among members
(Cottrill 1990), businesses may also start the industry-wide solutions. For example,
in 1998, a group of companies, non-governmental organizations and trade unions in
UK launched Ethical Trading Initiative (ETI) to improve the lives of workers in
companies’ supply chain. Today, in addition to its founding members such as
ASDA, Premier Brands, The Body Shop, Littlewoods, and Sainsbury’s, the initiative
has gained the support of many companies too (ETI 2017).

3.2.3 Internal-Orientation

In contrast to the previous position, Quadrant III represents a stance where company
is operating in the favorable industry and market conditions, but it has several
52 3 Strategy and Social Responsibility

internal weaknesses. Therefore, CSR can be aligned into the functional level strat-
egies. For example, the low performance or retention rate among current employees
can be improved by a SRS towards employees. Compared to other stakeholders,
CSR towards employees is the most important predictor of their organizational
commitment (Turker 2009). Moreover, as explained in Chap. 8, the support of
companies to employee volunteerism has been an effective way to increase the
work-related behaviors such as job performance or citizenship behavior and to
improve some personal outcomes like need satisfaction of well-being (Rodell et al.
2016). The award-winning employee volunteerism program of Macy’s and
Bloomingdale’s Partners in Time creates important benefits not only for community,
it provides opportunities to obtain the skills for teamwork, collaboration, and
leadership among employees too (Macy Inc. 2017).
Business organizations may also focus on the issues that are problematic for
itself. For example, Table 3.2 shows how Nestlé reacts to several important crises in
its history by taking actions and creating principles. The company states that it
enhances its list of 42 commitments under six domains (Nutrition, health and
wellness; Rural development; Water; Environmental sustainability; Human rights
and compliance; Our people) by directly aligning with its business and objectives
(Nestlé 2017a). To what extent the company succeeds in addressing these challenges
or whether those commitments are properly aligned with its objectives can be, of
course, another debate. According to Clapp and Scrinis (2017), as being a member of
an influential lobby group in its sector (International Food and Beverage Alliance),
Nestlé has worked together with other big food firms to dominate the international
nutrition policy and regulations “to enhance their power and position in global
processed and packaged food markets”.

3.2.4 Minimalist

Since both the internal and external conditions are not so favorable at this domain, a
company attempts to improve its organizational strategy, structure, culture, technol-
ogy etc. to adapt to the dynamic internal and external conditions. If the company has
limited capabilities to manage its strategic dynamics, it can take a more defensive
position by reducing the scale and scope of its business through restructuring or
retrenchment strategies. However, even when a large-scale downsizing is the only
remedy for a company’s problems, it should still meet the expectations of its diverse
stakeholders. Addressing the economic, legal, and ethical responsibilities at Caroll’s
(Carroll 1979; Carroll 1991) pyramid is the first and foremost responsibilities of
a company even under the severe conditions. Moreover, if it is possible, it may take
some philanthropic attempts to improve its conditions; for instance, if companies
decide to lay off some of its personnel, they might provide outplacement services or
facilitate this difficult process of their employment life by following employee-
friendly strategies. However, many times, they are solely focusing on their own
financial bottleneck, which drowns out the voices of its employees and local
3.2 How to Align CSR into Strategic Directions 53

Table 3.2 Nestlé crises, responses, and commitments


No. Crises Corporate response/s Relevant commitment/s
1  Marketing infant formula  The influential boycott led  Launch more nutritious
aggressively as a substitute the World Health Organiza- foods and beverages, espe-
of breast milk in less devel- tion (WHO) and the United cially for mothers-to-be,
oped countries where many Nations Children’s Fund new mothers and children
uneducated women lives (UNICEF) to develop a code  Support breastfeeding
 A 7-year boycott was on the regulation of market- and protect it by continuing
launched by the Infant For- ing breast milk substitutes, to implement an industry-
mula Action Coalition feeding bottles and teats; leading policy to market
(INFACT) in 1977 against 3 years later of the code’s breast-milk substitutes
company by the allegation adoption, in 1984, Nestlé responsibly (Nestlé 2017a)
of consciously misleading agreed to implement it
Third World mothers who (Sasson 2016)
are lack of knowledge  As of 2017, company
(Sasson 2016) requests to read and confirm
that it is supplying the
related information about
formulas in each visit to its
web site on infant formula
(Nestlé 2017b)
2 The former CEO of Nestlé, The company released a  Work to achieve water
Peter Brabeck claims that statement to clarify the efficiency and sustainability
the water is not a human words of Peter Brabeck “Our across our operations
rights in a documentary: former Chairman Peter  Advocate for effective
“It’s a question of whether Brabeck-Letmathe passion- water policies and steward-
we should privatise the nor- ately believes that water is a ship
mal water supply for the human right. . . His critics  Treat the water we dis-
population. And there are use a video interview that charge effectively
two different opinions on the Peter gave in 2005 to claim  Raise awareness on
matter. The one opinion, that he thinks all water water conservation and
which I think is extreme, is sources should be improve access to water
represented by the privatized. This is simply and sanitation across our
non-governmental organiza- false. . . He supports the value chain (Nestlé 2017a)
tions (NGO), who bang on United Nations’ view on
about declaring water a water: ‘There is enough
public right. That means that freshwater on the planet for
as a human being you should seven billion people, but it is
have a right to water. That’s distributed unevenly and too
an extreme solution.” (Soh much of it is wasted, pol-
2016; YouTube 2017) luted and unsustainably
managed’ (Nestlé, 2017c)
3 Greenpeace unveils a video The company made  Simplify our ingredients
that shows the use of Youtube to take down the list and remove artificial
unsustainable palm oil in the video by citing copyright colours
production process (Soh (Soh 2016)  Apply and explain nutri-
2016) tion information on packs,
at point of sale and online
(continued)
54 3 Strategy and Social Responsibility

Table 3.2 (continued)


No. Crises Corporate response/s Relevant commitment/s
4 The auditors find the evi-  The company signed the  Assess and address
dence of child labour use on Harkin-Engel protocol, an human rights impacts
the farms at Ivory Coast, the agreement to end child across our business activi-
world’s largest cocoa pro- labour in 2001 ties
ducer (Clarke 2015)  The company informed  Improve workers’ liveli-
the farmers on its code of hoods and protect children
conduct (Clarke 2015) in our agricultural supply
chain (Nestlé 2017a)
Source: Clarke (2015), Nestlé (2017a, b, c), Sasson (2016), Soh (2016), YouTube (2017)

community. In a case study on downsizing, Mäkelä and Näsi (2010) frame the issue
on mass media articles and company disclosures and reveal that the company and its
stakeholders have developed different perspectives on the same situation; while the
former mainly highlights its economic responsibilities towards its shareholders by
trying to solve its legitimacy crises, employees and local public demand a more
extended view of responsibility based on the social contract between a business and
society. However, under such circumstances, the laid off employees have more
legitimate claims than any other stakeholders (Carroll 1991). Before making a
decision towards downsizing, managers should take some measures to temper the
negative impacts of this decision on its employees and larger community such as
conducting an impact analysis, giving advance notice to the related employees or
providing outplacement services etc. (Karake-Shalhoub 1999).

3.3 Conclusion

Considering the impacts of variables at the individual, organizational or environ-


mental level on CSR (pls. see Chap. 2), the formulation and implementation of SRS
should be viewed as a joint product of many factors such as managerial cognition,
entrepreneurial vision, organizational cultural, power structures, or environmental
trends. The best response to such a multifaceted development and implementation
process is to be emergent and agile while recognizing the whole nature of process.
These four positions may give a sense of direction to achieve a company’s overall
and CSR objectives. According to Moore (2011), when compared with the
Mintzberg’s emergent approach, a formal and straightforward planning approach
of Porter might be irrelevant in a turbulent business world where “knowing what
industry you are in is not as clear cut as it once was” or “the value chain is now
shared across firm boundaries and at times, in part, in common with competitors”.
Following an adaptive organizational learning strategy (Van der Heijden et al.
2002), it is also suggested to take a holistic perspective on the formation of a SRS by
engaging stakeholders into the process by strategic conversations (Miles et al. 2006).
For example, as the internal stakeholders, employees can be involved into the
References 55

process as the creators and implementers of SRS. The social, cultural, and structural
embeddedness of SRS in an organization might become the distinctive competency.
The motivation and coordination at CSR involvement can be evaluated by consid-
ering whether the firm’s CSR approach fits well to its overall mission and to what
extent it is inherently difficult to imitate (Husted 2003). At the interorganizational
level, a SRS can be thought as part of the United Nations’ overarching sustainable
development goals (SDGs). For example, according to Porter and Kramer (2011),
building clusters, which involve diverse business partners and stakeholders, can
improve the surrounding conditions at the firms’ production environment and,
ultimately, contribute to the development of shared value.

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YouTube. (2017). Nestlé CEO (Bilderberger) Peter Brabeck - GMO promotor & water as human
right ¼ ‘extreme’. Accessed October 6, 2017, from https://www.youtube.com/watch?
v¼7iGj4GpAbTM
Chapter 4
Corporate Governance and Social
Responsibility

A business organization is more than just the combination of some resources that
are brought together in a deliberate manner around the purely rational purposes.
According to Scott (2003), organizations can be defined in many ways based on
different ontological roots. While the rational system perspective views them as
collectivities that are working to achieve relatively specific goals within highly
formalized social structures, the natural system perspective defines them as collec-
tivities whose participants are pursuing diverse but common goals within an infor-
mal structure of relationship. Whereas, from the systems perspective, “organizations
are congeries of interdependent flows and activities linking shifting coalitions of
participants embedded in wider material-resource and institutional environments”
(Scott 2003, 29).
All these diverse views on organizations actually point out the question of
why organizations exist. Taking a historical perspective, Nielsen (2003) attempts
to find out what is optimized in an organization to exist by examining the nature
of these different constrained optimization forms and their ethical reasonings.
According to the author, the optimization criterion has changed over time and
across different perspectives; it is about (1) ‘family income’ in the Smith’s small
family business, (2) ‘family wealth and power’ in Hegel and Marx’s oppressive large
family-controlled business, (3) ‘organizational community development’ in Weber’s
(1906/1999) large family-owned business, (4) ‘rational efficient social contract’ at
managerial capitalist business, (5) ‘shareholder value’ at investor capitalist business,
and (6) contested, contingent, separate diversity at postmodern business organiza-
tions (Nielsen 2003). This comprehensive historical analysis reveals that the per-
spectives on the optimization way of a business is certainly bounded by who controls
and manages it. Therefore, why an organization exists can be partly understood by
analyzing its ownership and administrative structure, which is today within the field
of corporate governance (CG).
Considering that our modern business organizations are mainly governed by
the board of directors, top management, and shareholders, CG can be defined as
the relationship among these groups when determining the corporate’s direction and

© Springer International Publishing AG, part of Springer Nature 2018 59


D. Turker, Managing Social Responsibility, CSR, Sustainability, Ethics &
Governance, https://doi.org/10.1007/978-3-319-91710-8_4
60 4 Corporate Governance and Social Responsibility

performance (Monks and Minow 1995). In a narrow sense, CG mainly focuses on


the responsibilities of the board of directors and managers, board compositions
(insiders/outsiders or interlocking directorates etc.), the nomination and election of
board members, and organization of the board etc (Wheelen and Hunger 2010).
However, even this narrow interpretation of CG deals with highly complex relation-
ship among shareholders, the boards of directors, and senior managers. For instance,
in June 2017, the board of directors ousted the Chief Executive Officer (CEO) of
General Electric (GE), Jeff Immelt and replaced him with John Flannery. Interest-
ingly, it looks like “Flannery may do the same to half the company’s board” which
has 18 members as of 2017 (Staley 2017). In the recent presentation to investors,
Flannery announced the strategy change for dividend policy too. Obviously, these
new decisions of Flannery does not make happy both the current board of directors
and shareholders. Some of these decisions (GE Investor Update 2017):
– To reduce the number of board members from 18 to 12 person
– To ensure accountability by conducting annual director elections and annual
board governance review
– To reduce the total amounts of dividend from $8.4B to $4.2B
– To reduce the dividend yield from 4.7% to 2.3%
However, another CEO, Michael O’Leary from Ryanair, the aggressively low-cost
airline of Europe, solely focuses on the demands of stockholders and ignores its pilots
by failing in scheduling their vacation time or customers by cancelling their flights;
but stockholders must be happy, since they re-elected O’Leary to the board with the
support of 99.3% of stockholders (Detrixhe 2017).
A broader definition, which is accepted by the Organisation for Economic
Co-Operation and Development (OECD) as well, states that CG includes “procedures
and processes according to which an organisation is directed and controlled. The CG
structure specifies the distribution of rights and responsibilities among the different
participants in the organisation—such as the board, managers, shareholders and
other stakeholders—and lays down the rules and procedures for decision-making”
(European Central Bank 2004). According to International Financial Corporation
(IFC) from the World Bank Group, CG includes “the structures and processes for the
direction and control of companies” and focuses on the relationship among all related
parties; therefore, “good corporate governance contributes to sustainable economic
development by enhancing the performance of companies and increasing their access
to outside capital” (IFC 2014).
Today, many organizations tend to adopt this broader view and they figure out CG
based on the internationally recognized frameworks for good governance. OECD
provided one of these framework which suggests companies to (OECD 2004):
• promote transparent and efficient markets, be consistent with the rule of law and
clearly articulate the division of responsibilities among different supervisory,
regulatory and enforcement authorities.
• protect and facilitate the exercise of shareholders’ rights.
4.1 The Paradox of Conceptualization 61

• ensure the equitable treatment of all shareholders, including minority and foreign
shareholders, and give all shareholders the opportunity to obtain effective redress
for violation of their rights.
• recognize the rights of stakeholders established by law or through mutual agree-
ments and encourage active co-operation between corporations and stakeholders
in creating wealth, jobs, and the sustainability of financially sound enterprises.
• ensure that timely and accurate disclosure is made on all material matters regard-
ing the corporation, including the financial situation, performance, ownership,
and governance of the company.
• ensure the strategic guidance of the company, the effective monitoring of man-
agement by the board, and the board’s accountability to the company and the
shareholders.
It can be seen that the OECD guideline draws the framework of CG in a broader
sense to include almost all issues about the operation of a business organization.
Among all these issues, the emphasis on recognizing the stakeholders’ rights and
creating cooperation for wealth, jobs, and the sustainability has become particularly
relevant for the management of companies. Today, most people view businesses as
the entities that exist to meet the expectations and interests of different stakeholders.
Therefore, how a business accomplishes such a complex task of satisfying diverse
stakeholders’ needs and wants has become the subject of an ongoing debate during
the last decades and the answer partly depends on integrating CG with corporate
social responsibility (CSR).

4.1 The Paradox of Conceptualization

There is a paradox on the link between CG and CSR in the literature. According
to Halal (2000), CG has evolved from a profit-centred model, which is characterized
by profit-maximization target during the Industrial Age (1900–1950), to a social
responsibility model that emphasizes the importance of stakeholders in the
Neo-Industrial Age (1950–1980) and then finally arrived at a new stage of corporate
community model, which arises in the Information Age (1980–?) and focuses on
creating collaborative business-stakeholder partnership to be economically produc-
tive. On other hand, Kang and Moon (2011) view CG as a missing link between
institutional environment and CSR based on the notion of ‘institutional complemen-
tary’. Moreover, according to the authors, while CG is about the structure of
ownership and control among key stakeholders who invest in the company and
control its activities, CSR is “a set of firm-level policies that go beyond the narrow
interests of the immediate stakeholders to consider a broader range of issues that
concern the firm’s wider group of stakeholders (that is, how the decisions of the firm
addresses a wide range of responsibilities)” (Kang and Moon 2011, 5).
In addition to these evolutionary and process-based approaches, there are some
other perspectives on the link between CSR and CG. Based on the narrow and broad
62 4 Corporate Governance and Social Responsibility

definitions of CG, Jamali et al. (2008) analyze the nexus of CG and CSR; while
the narrow approach indicates the internal dimension of CSR with considering
employee related issues, the latter fits well to the management of complex stake-
holder relationship. The authors attempt to explain this link based on the relevant
literature and mention three different models (Jamali et al. 2008):
• CG as a pillar for CSR: CG is conceptualized as one of the main pillars of CSR
together with human capital, stakeholder capital, and the environment (Hancock
2005).
• CSR as an attribute of CG: CSR is embedded in CG practices through the
activities such as adopting policies, enforcing and auditing, reporting etc.
(Ho 2005).
• CG and CSR as coexisting: CSR and CG are considered as the complementary
frameworks which contribute to the corporate accountability continuum
(Bhimani and Soonawalla 2005).
Among all, the second approach might be the most widely accepted perspective
in the literature. Since any form of CSR decision is taken at the board level and
affects the downward layers of management hierarchy, CSR is conceptualized as a
part of governance mechanism (Idowu 2009, 56). From this perspective, CSR
policies and activities must be embedded into the sound CG framework (Welford
2007; Shahin and Zairi 2007). “By adhering to sound CG that allows directors to
play a constructive role in achieving CSR objectives and obtaining stakeholders’
trust, companies demonstrate a real commitment to CSR” (Maon et al. 2009, 87). In
their study, Jo and Harjoto (2012) attempt to investigate this link between CG and
CSR empirically. Based on the results drawing from a sample of 12,527 firms in
United States of America (USA), the authors find some interesting results on the
casual effect of lagged CG and CSR; while the lagged value of CG positively affects
CSR, the lagged valued of CSR does not affect CG. On other hand, another study,
which was conducted over the listed companies in 2002–2009, indicates that having
a better governance system positively affects the CSR involvement of companies
and combination of both constructs can increase the financial performance ultimately
(Ntim and Soobaroyen 2013). The appointment of the chief officer of CSR on the
top management team can also improve the firm performance; if the appointee is
female and has a functional background, the impact becomes stronger (Wiengarten
et al. 2017).
More recent findings support the third approach at Jamali et al.’s model (2008).
Bhimani and Soonawalla (2005) considers CG and CSR as the complementary
frameworks. However, according to Rahim and Alam (2014), while a convergence
between CG and CSR can be true for only the developed country context, which
produces ‘a socially responsible corporate self-regulation’, this is not visible in the
weak economies due to the lack of necessary institutional and regulatory mechanism
in those countries. Despite the late adaptation of developing and less-developed
countries, it seems that the future of corporate world with all affairs will be built on
the co-existence of good governance and CSR.
4.2 Pioneering the Ethical Responsibility 63

4.2 Pioneering the Ethical Responsibility

Rossouw and Sison (2006, 1) state that “CG is geared toward ensuring that compa-
nies take responsibility for directing and controlling their affairs in a manner that is
fair to stakeholders”. However, their approaches can vary depending on the extent of
involvement for this stakeholder issues (in voluntarily or compulsory manner) or the
scope of their stakeholder identification (in a narrow or broader sense) (Rossouw and
Sison 2006). While some companies strongly engage in the improvement of their
stakeholders with investing in CSR activities, some others take a minimalist per-
spective and focus solely on the profit maximization. However, even in this mini-
malist perspective (Friedman 1970), the companies must meet the economic
responsibilities towards their shareholders in an ethical and legal manner. It can be
remembered from the first chapter, this approach is largely compatible with the CSR
pyramid of Carroll (1979, 1991) with involving the economic, legal, and ethical
responsibilities—but not the philanthropic responsibilities. Today, most executives
have also accepted their discretionary responsibilities towards their stakeholders.
However, due to the corporate breakdown in the beginning of 2000s through
the chain of corporate frauds in USA, the ethical dimension of CSR has gained an
increasing importance among the corporations. Although most people think that
corporate management has been bounded by the international, national or local
legal frameworks, the ethical matters are still essential to ensure good governance.
Recently, three former senior executives of Tesco are accused of the fraud and false
accounting at company based on a case of an overstatement of profit forecast in 2014
(Reuters 2017). According to McBarnet (2006, 36), the ‘creative’ accounting tricks,
which were done under the control of many executives, auditors, advisers in Enron,
can show us that such misconduct is not only related with the insufficiency of law
(both in its construction or enforcement); “we need to recognize that how businesses
choose to comply with law involves judgment. It is not just a technical matter but an
ethical matter”. Although governments start to enforce the acts, like Sarbanes-Oxley,
to protect the shareholders from the failures of large corporations, the legal compli-
ance has still several important limitations with lacking “the moral firepower to
restore confidence and the ability to build trust” (Arjoon 2005, 343).
Angel Gurría (2009), OECD Secretary-General, points out that business ethics
are critical for good governance: “business ethics derive from transparency, objec-
tivity, reliability, honesty and prudence. These values allow the financial sector to
generate the key asset to conduct business and discharge its fiduciary responsibility:
trust”. Therefore, as the primary responsibility, the executives must ensure trust in all
corporate operations and relations and the governance mechanism should be built
around a sound ethical stance. Today, both the developed and developing countries
make significant reforms on CG (Rossouw 2005). Therefore, the ethical perspective
on governance has entered into the agenda of many corporations during the last
decades. Ethics can act as the antecedents of CG and can be encouraged through the
ethical training program and CSR initiatives (Tuan 2012).
64 4 Corporate Governance and Social Responsibility

4.3 New Responsibilities in the Nexus of CG and CSR

The literature shows that the variables, such as managerial structure, ownership, and
board related characteristics, might affect the level of CSR involvement at compa-
nies (Jamali et al. 2010). Therefore, the ongoing debate on CG and CSR brings new
responsibilities to the key actors at decision making process in organizations. Today,
stockholders are expected to make more ethical and socially responsible investment
(Sparkes 2001). Despite the tension between the ethical investment and shareholder
primacy, “we need not be hopelessly idealistic to believe that shareholders have, and
are capable of recognizing, ethical responsibilities in relation to their investment
decisions” (Lee 2006, 21).
The studies show that the CSR involvement of companies might be affected
by the shareholder types (Nakamura 2013) or the ownership structure (Rees
and Rodionova 2013). As it is elaborately discussed in Chap. 2, for instance, the
demographic variables of investors, such as gender, age, income, and education
level, might affect their investment decisions; young and female investors tend to
make more socially responsible investment (Cheah et al. 2011). Individual or
institutional investors make responsible investment for different reasons such as
legal origin of the country, size-related variables (Sievänen et al. 2013) or ownership
structure (Dam and Scholtens 2012; Sievänen et al. 2013). For the latter variable, a
more recent study on a sample of 23,902 firms in 2002–2012 indicates that family
holdings have negatively associated with the environmental, social, and governance
rankings (Rees and Rodionova 2015). Therefore, the organizational responses
towards CSR can be shaped by its owners and so their investment choices become
essential to make them socially responsible and increase the well-being of our
societies. For instance, Travis Kalanick resigns as a CEO of Uber after the investors’
revolt to a series of scandals throughout 2017 (e.g. the allegations of sexual harass-
ment, trade-secret lawsuit from Waymo, Google’s self-driving car) (Carson and
Gould 2017).
In addition to the shareholders, corporate boards can affect whether a company is
socially responsible or not. For instance, the employees at Uber are embarrassed by
their board of directors since they tolerate Uber’s former CEO Travis Kalanick’s
clearly wrong behaviors. Kalanick “spent years breaking laws and waging fiery
political battles to spread the ride-hailing model worldwide”; the board did not care
these law-breaking activities until the news start to affect the public image of
company in 2017 (Griswold 2017). In the literature, the socially responsible or
irresponsible decisions are also associated with the structure and composition of
boards (pls. see Chap. 2). For instance, the scholars have continuously discussed the
role of outsiders over the CSR involvement during the last decades; but the result of
these studies is still inconclusive (Gustavson 2009). On the other hand, a study on
Malaysian government-linked companies shows that board size might positively
affect the extent of CSR disclosure (Esa and Ghazali 2012). According to Knudsen
et al. (2013), in order to prioritize CSR in board’s agenda, the members of board
should have (1) a mind-set for the contribution of CSR to the firm, (2) sufficient
4.3 New Responsibilities in the Nexus of CG and CSR 65

competence to figure out CSR related issues, and (3) compensation system that
reflects CSR performance. The authors state that the first two variables must be
analyzed in line with the human resources development. CSR can be vitalized
through the change of whole structure within the organization and board of directors
are clearly the most important part of such a breakthrough. As a result of increasing
attention of companies to CSR, nowadays, a manager who is responsible from the
CSR decisions can take a seat at the board of directors in some countries (Idowu
2009, 56).
Although the shareholders and board of directors are important on decision
making process, the top managers have the highest responsibility to develop a
socially responsible future for their organizations. For instance, newly appointed
CEO of Uber, Dara Khosrowshahi plans to change the Kalanick’s strategy on
keeping Uber a privately held company as long as it is possible and recently
confirmed that Uber goes public in 2019; Khosrowshahi says that “We have all of
the disadvantages of being a public company, as far as the spotlight on us, without
any of the advantages of being a public company” (Fiegerman 2017). In addition to
this turnaround on the company ownership strategy, Khosrowshahi attempts to
repair the eroded reputation of Uber due to the hacking attack to customer/drivers
information and the aftermath payment of $100,000 to hackers for destroying the
stolen information (The Associated Press 2017). He says that “none of this should
have happened, and I will not make excuses for it. While I can’t erase the past, I can
commit on behalf of every Uber employee that we will learn from our mistakes. We
are changing the way we do business, putting integrity at the core of every decision
we make and working hard to earn the trust of our customers” (Khosrowshahi 2017).
Moreover, Khosrowshahi tries to replace the problematic values of Uber’s culture,
which were obtained through the workplace culture report (e.g. Let builders build,
Always Be Hustlin’, Meritocracy, Superpumped, Toe-stepping, etc.) with new
norms based on the votes of employees (Balakrishnan 2017):
• We build globally, we live locally.
• We are customer obsessed.
• We celebrate differences.
• We do the right thing.
• We act like owners.
• We persevere.
• We value ideas over hierarchy.
• We make big bold bets.
Since the increasing impact of CEO’s leadership for the firm’s CSR agenda
(Spitzeck 2009), the literature devotes a special attention to their values and percep-
tion towards ethics, social responsibility, or sustainability (pls. see Chap. 2). They
are directly responsible from the stakeholder engagement with balancing their
diverse interest and stake over the firm. Creating an ethical culture that will affect
its internal and external relations is also among their major tasks. A survey on a
sample of 450 CEOs, chief financial officers (CFOs), and board members reveals
that ‘tone at the top’ arises as the most essential factor on corporate culture
66 4 Corporate Governance and Social Responsibility

(MacLellan 2017). Similar to Uber’s new CEO, today, most senior managers
develop their code of conduct to emphasize the key values, ensure stakeholder rights
and create a better engagement with board of directors, stockholders, and stake-
holders. According to Staley and Slobin (2017), the recent proliferation of chief level
executives at corporate America may be a reflection of what is prioritized in an
organization’s culture; “a pillow maker has a chief sleep officer. A cupcake company
has a run by a chief baking officer”. In 2016, 19% of the world’s largest public
companies, which is 6% higher than 2015, have the chief digital officers to lead their
digital agenda (Peladeau et al. 2017). The good news is that there is an increasing
trend among companies to appoint a chief sustainability or social responsibility
officer too.
On the other hand, in order to ensure the accountability and transparency within
all company operations, the reporting and disclosure activities must be prioritized
also. The study of Kolk (2006) on the Fortune Global 250 companies reveals that
companies start to involve CG issues, such as board supervision and structuring of
sustainability, ethics, and external verification into their sustainability reporting. It
should be noted that the range of responsibilities has been also widened in line with
the expansion of global supplier networks. Critical Highlight 4 shows that it might
result in deadly accidents, when companies do not care their suppliers’ and integrate
them their system properly.

4.4 Conclusion

In parallel to the rise or decline of modern companies during the last decades, many
aspects regarding with them has gained prominence. Obviously, their managerial
approach and governance structure are among these hot topics due to their over-
whelming impact on the direction of corporations. Considering the increasing
importance of economic, social, and environmental problems, companies start to
adopt more responsive management style and redesign their governance structure.
Growing number of companies left their old-fashion narrow-focused CG perspective
and adopted a broader perspective that encompasses all stakeholders of the organi-
zations in line with a viable CSR approach. The activities of companies have varied
during the integration of CG and CSR. It is mentioned in the previous section
that while some of them focus on developing the code of conducts, some others
elect a CSR manager to the board or make more ethical investment. Despite all these
developments, there is still a long way that should be taken by the corporate world.
Particularly the companies operating in the developing countries should adopt a
proactive view to follow the ongoing developments at CG field. In order to be
competitive in the global marketplace, they have to convert their traditional CG view
into a new one that includes social and environmental concerns—even if their
current institutional context does not require it. Since the financial crises can easily
turn into social crises, the companies notice that they can ensure their good gover-
nance structure with a viable CSR strategy. In 2008, the OECD initiated an action
4.4 Conclusion 67

plan towards better CG to eliminate its shortcomings that can be caused by the
financial crisis (OECD 2014). Therefore, integrating CG and CSR is not only
beneficial for balancing the interest of stakeholders, it becomes essential to survive
even during the hard conditions of an unexpected financial crisis.

Critical Highlight 4. Rana Plaza


By the wave of globalization after the 1980s, the growing number of compa-
nies attempt to reduce their cost and escape the tightening standards at their
homes by off-shoring operations towards the countries where the labor and
environmental standards are low. However, it can be too burdensome for
managers to settle to the minimum common denominator of sustainability
principles across the supply chain at those host countries. In the end, it turns
into an agency problem, which is a conflict of interest involving members of
organizations—such as owners, managers, workers, or consumers—and
reveals the importance of governance structure (Hart 1995). Based on the
agency theory, which explains the situation when a party (principal) delegates
authority to another party (agent), an agency problem occurs if agent does not
show the necessary efforts towards the goals of principal (moral hazard) and
if agent misrepresents his/her abilities during the selection (adverse selection)
(Eisenhardt 1989). Adoption of this perspective on SCM indicates how critical
the role of managers is “to understand and mitigate abnormal behaviours
across the supply chain” (Fayezi et al. 2012).
Considering the increasing geographical dispersion of supplier networks
as well as the need for agility at the SCM structures and strategies, most
companies put forward some strategies to deal with the rising suppliers’
problems, which are accompanied with the massive media attention in their
Western markets. However, the accidents such as the collapse of Rana Plaza
in 2013 show how the measures and efforts taken by the companies are
insufficient to prevent problems.
The collapse of Rana Plaza building at Dhaka, Bangladesh has been
one of the worst industrial accidents by killing 1135 people and injuring
thousands of others. At the time of this tragedy, the building housed the
garment factories that are the suppliers of well-known Western brands at
fashion and apparel sector, including Benetton, Mango, The Children’s Place,
H&M, Primark, Marks & Spencer and Walmart etc. (Business and Human
Rights 2017; Williams 2013). Despite several measures taken by the retailer
brands, government, or trade unions (e.g. some companies sign the Alliances
for Bangladesh Worker Safety and the Fire and Building Safety; some others
announce the addresses of suppliers factories through transparency pledge),
there is still a limited progress in the Bangladesh garment industry in terms of
transparency, working conditions, and wages (Westerman 2017). For exam-
ple, as a company that had suppliers at Rana Plaza, H&M became the first
retailer that signs on 2013 Accord on Fire and Building Safety in Bangladesh

(continued)
68 4 Corporate Governance and Social Responsibility

(Kasperkevic 2016). On the other hand, in H&M’s code of conduct, under the
health and safety title, there are requirements for building safety, fire safety,
accidents and first aid, working environment by stating “. . .supplier failing to
undertake sustainable improvements within the stipulated time frame would
seriously damage its relationship with H&M. Unwillingness to cooperate or
repeated serious violations of H&M’s Code of Conduct and local law may
lead to reduced business and ultimately termination of the business relation-
ship with H&M” (H&M 2017). Despite these efforts, the company is accused
of working with suppliers that do not still provide safe working environment
for its employees (Kasperkevic 2016). For some, the H&M’ recent display of
factory names/location for Arket, its new label which has slightly higher prices
than the overall H&M products, is an initial step taken towards transparency,
but it should not be the last; company should provide ‘verified third-party data
about labor conditions’ in its website too (Bain 2017).
It seems that the situation is not getting any better in the near future. Since
the country’s economy heavily depends on the garment exports, which account
for an industry of $28 bn-a-year (Reuters 2016), government might not
suppress companies to take corrective actions. Even the survivors of this
catastrophic event were not appropriately compensated for their trauma and
injuries (Khullar 2014).
One might think that the lack of monitoring on suppliers’ activities renders
these employees very vulnerable to the profit-oriented suppliers’ exploitations.
However, a recent report sheds light on how in-house or third-party audits
can be also open to biases and impartial assessments that are “working for
corporations, but failing workers and planet” (LeBaron and Lister 2016).
According to Boyd et al. (2007), higher level of monitoring may also hamper
the relationship between company and its suppliers and even reduce the
level of compliance among suppliers; alternatively, the authors suggest an
approach based on procedural justice by promoting the procedures and
criteria to make unbiased, ethical, transparent, and correctable decisions.
Assessment of suppliers and collaborating with them can make a difference
towards more sustainable chains (Sancha et al. 2016).
In order to end up sweatshops at developing countries, global retailers
must build a strong social responsibility perspective towards their suppliers
and persist in applying its guiding approach across its chain. Roy Williams,
managing director of a supply chain consultant firm, suggests that companies
can follow several major principles when managing their global SCM
(Williams 2013):
– Keep it simple: Companies should avoid designing a complex SCM by
working with triers of subcontractors with the pressure of cost reduction.
– Make ethical considerations part of every buying decisions: Companies
should align their overall CSR goals to SCM’s objectives.

(continued)
References 69

– Collaborate, but stick to your principles: Companies should collaborate


with new suppliers after clarifying their ethical and legal expectations and
explaining their responses for the breach of contract.
– Use the ‘how would it look to you’ test: Since the activities conducted by a
particular supplier is not taken place in front of their eyes, companies can
sometimes ignore the troubles at suppliers. In such kind of cases, compa-
nies should ask how they would feel if they could see it happening for
yourself.
– Use you buying power to good effect: Companies should involve actively
into their SCM to improve their working conditions and contributions to
local community.
– Communicate your ethical achievements: Companies should highlight how
ethical considerations are critical for their operations and work in accor-
dance with the expectations of customers and market.

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Chapter 5
Socially Responsible Production
and Operations Management

In his study, Porter (1985) comes up with the notion of value chain and describes
how a firm can be configured as a collection of activities that enable to design,
produce, market, deliver, and support a company’s products. By taking the relevant
inputs and transforming them into some outputs, production and operations man-
agement (POM) contributes to this value creation process a lot. Although its basic
principles and contributions to the companies remain same, the trends, techniques,
and approaches in operations management have significantly changed over time. For
instance, Mehrabi et al. (2000) divide the manufacturing techniques into three
epochs. The first period, pre-computer numerical epoch (pre-1960s), is characterized
by the mechanical control of machines, the use of transfer lines and interchangeable
parts for cost reduction without a competition threat. Whereas, in the computer
numerical control period (1960–1990), companies start to take the advantage of
computer technologies to increase production volume and improve quality and
control systems by using total quality management (TQM), just-in time (JIT), lean
manufacturing etc. (Mehrabi et al. 2000). The wide recognition of excellence
principles by the adoption of TQM or JIT during this period stimulates the efforts
towards improving process management that has evolved towards sustainable oper-
ations management later on (Kleindorfer et al. 2005). During the last period,
knowledge epoch (post-1990), the global competition and information technologies
largely affect the manufacturing systems to respond quickly to changing customer
demand and to lower the unit costs by following the trends like agile manufacturing,
restructuring or decentralized production teams (Mehrabi et al. 2000).
The globalization wave accompanied by the rapid changes at communication
technologies since the beginning of 1990s have had a profound impact on sustain-
able and socially responsible operations too. Production is not an internally focused
area anymore; it must holistically capture how value is created from the conceptu-
alization of a product to its commercialization in all around the world. The review of
sustainable operations management literature unveils that the field has evolved
towards the green product and process development, lean and green operations,
remanufacturing and closed-loop supply chains (CLSC) (Kleindorfer et al. 2005). As

© Springer International Publishing AG, part of Springer Nature 2018 73


D. Turker, Managing Social Responsibility, CSR, Sustainability, Ethics &
Governance, https://doi.org/10.1007/978-3-319-91710-8_5
74 5 Socially Responsible Production and Operations Management

a relatively new research track, the socially and environmentally responsible


value chains expand the operational management literature in terms of contexts
(emerging and developing economies), objectives (economic, environmental and
social responsibility), and stakeholders (e.g. producers, consumers, shareholders)
(Lee and Tang 2017). Porter and Kramer (2011, 6–7) mention the concept of shared
value, as “policies and operating practices that enhance the competitiveness of a
company while simultaneously advancing the economic and social conditions in the
communities in which it operates” and state that shared value can be created by
“reconceiving products and markets, redefining productivity in the value chain, and
building supportive industry clusters at the company’s locations”. While the former
way is discussed at Chap. 6, the latter two approaches, which are analyzed in this
chapter, require the integration of a socially responsible approach into production
systems and ecosystems, respectively.

5.1 Operations in the Nexus of External and Internal


Environments

By taking ‘operations’ as the unit of analysis, Sodhi (2015) states that there is a need
for observing and analyzing operations from corporate social responsibility (CSR)
perspective instead of labelling them as responsible or not. Each operation at the
input-transformation-output chain must be reviewed from this perspective and then
they should be improved by involving activities such as saving resources, minimiz-
ing waste, or improving workers’ conditions. The congruence between society and
productivity in the value chain can be achieved in many ways from responsible
energy or resource use to procurement, logistics, and distribution (Porter and Kramer
2011). According to Rangan et al. (2015), together with new business models, the
operational improvements enable companies to engage in CSR by reducing their
resource use and wastes as well as redesigning or creating new operations.
Deriving from several case studies, Besiou and Wassenhove (2015) identify the
common characteristics of socially responsible operations:
– Complexity: These operations are complex due to the high level of uncertainty,
scarcity of resources, and trade-offs between short-term and long-term objectives.
For instance, there is a high degree of uncertainty on the management of photo-
voltaic (PV) panels’ end-of-life due to the existence of different regulatory
frameworks in Europe [such as European Union (EU), national governments,
local municipalities]. This process is about the recycle of valuable and scarce
resources in the end of product’s useful life. However, using materials that are
more appropriate for recycling may reduce the durability of products during the
bad weathers. This trade-off increases the level of complexity to achieve a
solution that is acceptable for all parties.
– Unfamiliar context: Another feature of socially responsible operations is regard-
ing with the contextual factors, which are both internal and external to the
system. In the school feeding programs, the existence of many stakeholders
5.1 Operations in the Nexus of External and Internal Environments 75

(e.g. beneficiaries, international organizations, governmental organizations, sup-


pliers) with diverse goals increases the complexity. On the other hand, the
problems such as the misfit of in-kind contributions to the beneficiaries needs
(external) or the tendencies towards the decentralizations of programs make it
difficult to manage the process holistically.
– Counter-intuitive behavior: This behavior is actually the result of former two
characteristics. By the transition from the food donation system to the cash-and-
voucher system in the aforementioned case of school feeding program, the
coordinating institution confronts new challenges such as the decreasing support
of donors to new system, the increasing risk of theft and corruption, the insuffi-
ciency of local suppliers etc.
Considering the complexity of process, unfamiliar context, and counter-intuitive
behavior, creating a socially responsible value chain requires the involvement of
various stakeholders into decision making process and considering all factors at the
internal and external environment of organizations into account. By reformulating
the previous frameworks of literature, Kleindorfer et al. (2005, 485) suggest that
pursuing sustainability at the operations management involves internal and external
strategies for the current and future landscapes of operations:
– The current internal strategies: improving internal operations with continuous
process improvements towards sustainability, such as employee involvement,
waste reduction, energy conservation, or emission control.
– The current external strategies: improving extended supply chains by analyzing
upstream supply chain operations to consider trade-offs in the choice of materials
and processes and pursuing CLSC for remanufacturing and safe disposal.
– Internal strategies for the future: investing in capabilities to recover pollution-
causing chemicals during manufacturing, to develop substitutes for nonrenewable
inputs, and to redesign products to reduce their material content and their energy
consumption during manufacturing and use.
– External strategies for the future: developing core capabilities in products,
processes, and supply chains for long-term sustainability and pursuing strategies
to facilitate it.
In the nexus of internal and external environment, organizations must build its
socially responsible production system by considering the operations, factors, and
stakeholders. Figure 5.1 exhibits some examples for the operations, factors, and
stakeholders at two layers.
It should be noted that considering the permeability and indispensability between
two environmental layers, some factors, operations, or stakeholders can be active in
both layers (Fig. 5.1). The interplay between layers manifests itself in the operations
like procurement, which interacts with both internal (e.g. procedures, programs,
policies) and external (e.g. supplier relations, lead times) environments. On the other
hand, while the environmental legislation emanates from external environment, it
might impose an enforced choice for changing the existing manufacturing process or
altering the product ingredients. Therefore, in the current chapter, the inclusion of
76 5 Socially Responsible Production and Operations Management

e.g. managing supply EXTERNAL ENVIRONMENT e.g. suppliers, government,


chain/ supplier networks, customers, competitors,
transportation and investors, labor unions
logistics, procurement

INTERNAL ENVIRONMENT
e.g. facility managemant, e.g. employees,
forecasting, manufacturing, managers,
order processing, supplier stockholders
OPERATIONS STAKEHOLDERS
selection, warehousing,
information management,
waste management
FACTORS

e.g. production technology,


e.g. labor market, customer/
production capacity, economies of
competitor pressures, environmental
scale, working conditions of
regulations, changes in production
employees, financial management,
technology, scarcity of rawmaterials,
organizational learning
international standards

Fig. 5.1 Operations, factors, and stakeholders in the internal and external production environments

sustainable and socially responsible perspectives into POM is analyzed in line with
the interactions between layers.

5.2 Managing Socially Responsible Operations

Socially responsible operations management covers every decisions and actions


from the design of product to its disposal. Jayal et al. (2010) state that “achieving
sustainability in manufacturing requires a holistic view spanning not just the prod-
uct, and the manufacturing processes involved in its fabrication, but also the entire
supply chain, including the manufacturing systems across multiple product life-
cycles”. Therefore, it can be noticed that domains mentioned in this section are
closely interwoven with each other.

5.2.1 Facility Location and Management

Choosing the right facility location is an initial strategic decision for companies that
must consider the factors such as the access to low-cost manufacturing opportunities,
the access to skills and knowledge or the proximity to market (Ferdows 1997). In
parallel to the increasing importance of sustainability and CSR and the growing
5.2 Managing Socially Responsible Operations 77

supplier networks of companies around globe (Chen et al. 2014), social and envi-
ronmental concerns have been also taken into account when making a location
decision (Dou and Sarkis 2010). None of companies wants to establish its million
dollar operation in a place where people are lack of basic educational opportunities
(social sustainability) or local government does not support its recycling efforts
(environmental sustainability) etc. Therefore, choosing the right location in terms of
country, region, or city is the starting point for companies to produce sustainable and
socially responsible manner.
Chen et al. (2014) review the literature from 1990 to 2011 to provide the impact
of sustainability concern into the decision of facility location selection based on three
pillars of sustainable development and find that while most studies focus on eco-
nomic and environmental issues, social sustainability at the facility location is
lagging:
– Environmental: Ecosystem vitality (air pollution related to the ecosystem, water
quality related to the ecosystem, biodiversity protection, climate change perfor-
mance), environmental health (environmental burden of disease, air pollution
related to humans, water quality related to humans), environmental factors within
production (material use, energy consumption, renewable resources, waste gen-
eration, water treatment, waste disposal, recycling of material, energy, and waste)
– Social: Governance (corruption, political stability, trade and tariff barriers),
education (general education level), individual (civil liberties, human rights),
community (equity, safety, cohesion, local technology)
– Economic: Cost (labor cost, energy cost, material cost, facility cost, logistic cost),
market (international markets, potential demand), economic stability (favorable
tax, exchange rate fluctuations), suppliers (proximity to key suppliers, potential
high quality suppliers), growth (industry growth, competitiveness in the host
region).
Although all these factors given above are relevant for selecting the facility
location, when companies are offshoring their in-house operations or outsourcing
and subcontracting without direct investment (OECD 2007, 16–17), they usually
focus on the economic criteria such as labor cost or favorable tax conditions. After
they settle down in a place where the standard of living is lower than their home
countries, they might focus on improving the social and environmental conditions.
For example, the locally focused community water projects have been the major area
of interest for Coca Cola’s sustainability strategy for a long time. After conducting
the source water vulnerability assessments at its bottling plants, the company
develops the source water protection plans “to address identified vulnerabilities in
a given community and lead to many of our community water partnership projects”
by collaborating with the local communities and government (Coca Cola 2017).
However, the socially responsible interest of Coca Cola towards the water shortage
of local communities is not a random choice; for instance in India, the company itself
has been the main reason of this water shortage by extracting water from the scarce
common groundwater resources (Hills and Welford 2005). If Coca Cola does not
78 5 Socially Responsible Production and Operations Management

find an effective solution for its dependency to water sources, it will fail in the
markets where there are serious water shortages (McElhaney 2017).
Companies can also integrate their sustainability and social responsibility
approaches at the management of their facilities. In addition to their responsibilities
to ensure “the functionality of the built environment by integrating people, place,
process and technology” (IFMA 2017), facility managers must also think about how
a facility can be managed in a socially responsible manner too. Plant managers’ more
balanced view on economic and ethical values and investment towards the plants’
long-term viability can nurture a sound plant-level environmental management
(Klassen 2001). For instance, there is an increasing attention to the environmental
performance of buildings or green buildings (Lützkendorf and Lorenz 2006).
Kyocera, the Japan producer of printers and multifunctional products, develops its
green factories by installing solar power generating systems, replacing 56,000
fluorescent lamps with LED lights, using a new heat exchanger from production
equipment, using high-efficiency equipment etc. (Kyocera 2017).

5.2.2 Product

Socially responsible products are the most visible part of the efforts towards socially
responsible POM. Today many customers demand the products that have developed,
designed, produced, traded, and marketed in a socially responsible manner. A meta-
analysis on 80 studies published in between 1992–2009 also reveals that 60% of
respondents are willing to pay more for socially responsible products; the willing-
ness to pay more for such products is higher when they are beneficial for humans
(Tully and Winer 2014). By “meeting consumer needs effectively and efficiently
while avoiding ethical and regulatory problems”, product social performance has a
strong positive impact on firm performance when compared to environmental social
performance (Jayachandran et al. 2013, 1257).
Although companies recognize the impact of socially responsibility products on
their sale and reputation, there is no consensus on the characteristics of socially
responsible products. For example, as one of the biggest retailer in United States of
America (USA) with $25.778 billion sale and 140,000 employees as of 2016,
Macy’s introduces the products that are produced within its social responsibility
projects as socially responsible products (e.g. the baskets and bowls handmade by
Rwandan female weavers under Path to Peace program, decorative pieces made by
artisans of Haiti’s earthquake in 2010 at Hearth of Haiti program etc.) (Macy’s
2017). In a similar vein, some people believe that the integration of CSR into the
business model and marketing strategy is sufficient to make this product socially
responsible. The best corporate example in this sense is TOMS that offers a new pair
of shoes for a child in need for each pair of shoes purchased by a customer (TOMS
2017). As the main outputs of projects or a business model, the aforementioned
products of Macy’s or TOMS are revolving around the notion of CSR, but they
cannot be seen as the examples of socially responsible products unless the
5.2 Managing Socially Responsible Operations 79

companies do not provide these products in a socially and environmentally friendly


manner. To best of our knowledge, there is no clue about socially responsible
charateristics of Macy’s product, but TOMS claims that their shoes “include natural
hemp, organic cotton, and/or recycled polyester and these materials are used on the
upper, liner and/or the insole cover (instead of our standard suede insole)” and their
“shoes boxes are made from 80% recycled post-consumer waste and are printed with
soy ink” (TOMS 2017).
Social responsibility at a product is about whether the product is in accordance
with the pre-determined standards or criteria throughout its lifetime—from its
design to its disposal. Designing socially responsible product is the initial stage;
however, at this stage, it is critical to anticipate the possible future problems about
the product usage and disposal and take the necessary measures beforehand. The
unforeseen problems at the later stages might result in costly product recalls
or, worse, harm consumers or nature. In a broader sense, design management for
CSR covers “effective management of (1) designing business and organizational
processes for CSR and (2) creating designed outcomes that include: (a) socially
responsible products and services; (b) socially responsible operating environ-
ments; and (c) CSR-informed communication strategies” (Koo and Cooper 2011).
According to Melles et al. (2011), designing socially responsible products suc-
cessfully depends on the following criteria:
– Need: does the user or community need this product/solution?
– Suitability: is the design culturally appropriate?
– Relative affordability: is the outcome locally and regionally affordable?
– Advancement: does it create local or regional jobs and develop new skills?
– Local control: can the solution be understood, controlled and maintained locally?
– Usability: is it flexible and adaptive to changing circumstances?
– Empowerment: does it empower the community to develop and own the solution?
– Dependency: does it add to third world dependency?
About the first criterion in this list, it is the producers’ responsibility to redesign
their products according to the diverse needs of people. For example, Mattel pro-
vides the new version of Uno, the famous card game played by matching colors and
numbers, by redesigning the product based on ColorADD standards for people with
all types of color-blindness that accounts for 350 million people around the world
(Wilson 2017). On the other hand, the usability of product can even save the people’s
lives. During the Hurricane Irma, Tesla Motors provides the free over-the-air
upgrades for the drivers of its electric vehicles (EVs) in order to allow them to use
the increased capacity until 16 September, 2017 (Collins 2017a). Such a flexibility
on a product attribute is particularly crucial if you want to escape from a hurricane,
which might devastate your city.
Ensuring the product safety and reliability is the utmost important responsibility
of any company. However, the cases such as the Samsung’s exploding battery
problem at Galaxy Note 7 (Moynihan 2017) or the hacked personal information of
143 million customers at Equifax, a credit reporting agency in USA (Collins 2017b)
80 5 Socially Responsible Production and Operations Management

show how even the large corporations might have safety or security problems at
their goods and services. Companies try to mitigate consumer anxiety about the
product safety by tightening their own standards and procedures. For example, as a
global company operating 190 countries and regions, Canon Inc. tries to increase
customer trust to its brand by following standards “stricter than legal requirement”
(e.g. Voluntary Action Plan Based on the Basic Policy on Product Safety and
Product Safety Technical Standards) and engaging the activities like quality assess-
ment during development and after-sales support (Canon 2017). Another leading
company at global electronics sector, Sony identifies its product responsibility at
four domains of (1) product quality and quality management, (2) responsiveness and
customer service, (3) accessibility and usability, and (4) recycling end-of-life prod-
ucts in order to “provide products and services that meet customer requirements in
terms of satisfaction, reliability, and trust” (Sony 2017a).
In addition to their own standards and programs, companies might follow the
standards that can be developed by private, public or civil society sectors to upgrade
their products or processes (Kaplinsky 2010). Although internal controls and audits
are important, many customers want to buy the products that are certificated or
labelled by external auditory institutions. For example, at food sector, customers are
attracted by the ecolabels, standards, and certifications that guarantee the socially
responsible production characteristics (McCluskey et al. 2009). Certification can
allow companies “to dissociate themselves from negative impacts in the public eye”
(Mithöfer et al. 2017, 72). Therefore, companies attempt to obtain these certificates
and align their products according to internationally recognized standards. For
example, EU’s Ecolabel is recognized across Europe with covering 37,000 products
that have to meet the certain criteria for environmental impact over the entire life of a
product (EU 2017). The Blue Angel, an environmental label organized by the federal
government of Germany, certificates 12,000 environmentally-friendly products of
1500 companies all around the world (The Blue Angel 2017). However, there are
many weak or, more dangerously, bogus certification systems too. A consultancy
firm’s study shows that while the number of greener products has increased by 73%,
the 95% of these products, which are marketed as eco-friendly, had one or more sins
of greenwashing (Terrachoice 2010). According to company, these seven sins of
greenwashing are:
– The sin of the hidden trade-off: promoting a product as green based on an
unreasonably narrow set of attributes.
– The sin of no proof: promoting a product as green without providing accessible
supporting information or a reliable third-party certification.
– The sin of vagueness: using poorly defined or broad claims that can be misun-
derstood by consumers [e.g. all-natural (arsenic, uranium or mercury are also all
naturally occurring)]
– The sin of irrelevance: using true, but unimportant or unhelpful claims that does
not help consumers to choose green products [e.g. CFC-free (since CFC is banned
by law, this information is unimportant)]
5.2 Managing Socially Responsible Operations 81

– The sin of lesser of two evils: using claims that might be true for product category,
but distracting consumers from the greater negative impacts of all category
(e.g. organic cigarettes)
– The sin of fibbing: using false environmental claims.
– The sin of worshiping false labels: using the words or images that give the false
impression of a third-party endorsement.
An interesting example of greenwashing on the product feature comes from the
Lululemon Athletica’s a line of clothes. The products were promoted with its health
benefits due to its material—seaweed—by releasing amino acids, minerals, and
vitamins into the skin; but this claim of company was not supported by the analysis
of an independent lab and the company stopped marketing this line (Gelles 2015).

5.2.3 Process

The integration of CSR within the manufacturing processes is usually channeled into
action at the environmental domain. Obviously, making production processes clean
and sustainable is the primary responsibility of any production manager. The United
Nations Environment Programme (UNEP) defined cleaner production (CP) in 1991
as “the continuous application of an integrated preventative environmental strategy
to processes, products and services to increase efficiency and reduce risks to humans
and the environment” (UNIDO 2017a) by enabling “efficient use of natural
resources”, “minimization of wastes and emissions”, and “reduction of risks to
humans and environment from use of chemicals and disposal of chemicals in
industry” (UNIDO 2017b). Some examples for the complimentary CP techniques
or practices can be found in the following (UNIDO 2017a):
– Good Housekeeping: appropriate provisions to prevent leaks and spills and to
achieve proper, standardized operation and maintenance procedures and
practices;
– Input Material Change: replacement of hazardous or non-renewable inputs by less
hazardous or renewable materials or by materials with a longer service life-time;
– Better Process Control: modification of the working procedures, machine instruc-
tions and process record keeping for operating the processes at higher efficiency
and lower rates of waste and emission generation;
– Equipment Modification: modification of the production equipment so as to run
the processes at higher efficiency and lower rates of waste and emission
generation;
– Technology Change: replacement of the technology, processing sequence and/or
synthesis pathway in order to minimize the rates of waste and emission generation
during production;
– On-Site Recovery/Reuse: reuse of the wasted materials in the same process or for
another useful application within the company;
82 5 Socially Responsible Production and Operations Management

– Production of Useful By-Products: transformation of previously discarded wastes


into materials that can be reused or recycled for another application outside the
company;
– Product Modification: modification of product characteristics in order to mini-
mize the environmental impacts of the product during or after its use (disposal) or
to minimize the environmental impacts of its production.
Companies can adopt the cleaner production approach with extracting value out
of that highly focused efforts. Socially responsible manufacturing practices might
enhance the manufacturing and supply chain through cost savings, quality improve-
ment, innovation in design or speed of delivery (Niehoff et al. 2011). However, in
addition to increasing effectiveness or efficiencies at manufacturing processes,
companies might have other stimuli to have socially responsible manufacturing
processes. For example, the study of Lin et al. (2014) on Chinese companies
shows that compared to the companies operating with domestic focus, the compli-
ance with environmental regulation is better among the companies with international
linkages. Therefore, working with international partners or strict governmental
regulations can drive companies to integrate social and environmental concerns
into manufacturing.
Certification of production processes is also very common among companies to
prove how they are committed to the social and environmental goals. For example,
in addition to their own internal safety requirements, Canon obtained the right to
carry out the publicly certified in-house testing by the organizations such as Inter-
national Organization for Standardization (ISO), International Electrotechnical
Commission (IEC), Underwriters Laboratories Inc. (Canon 2017). On the other
hand, Sony has announced its independent verification reports for greenhouse gas
emissions or ISO 14001 certification status on its web sites (Sony 2017b, 2017c).
The former system, ISO 14000 family of standards, has been widely adopted by
companies to align environmental responsibilities with organizational activities and
operations; as of 2016, there are 300,000 valid certificates to ISO 14001 in 171 coun-
tries (ISO 2017).
Making the production process socially responsible is now more attainable for
companies by the development of sophisticated methods and the integration of
digitalization into manufacturing. For instance, the notion of distributed production
can provide the leaner and cleaner manufacturing alternatives (e.g. mass customiza-
tion or personal fabrication) by mitigating the environmental impacts of conven-
tional production approach, which centralizes the mass production with the long and
linear supply chains (Kohtala 2015). As the most disruptive alternatives emerging
from the tradition of handicraft and do-it-yourself (DIY) trend, the peer production
or personal fabrication (fabbing) may alter our production and consumption systems
(Kohtala and Hyysalo 2015). For example, additive manufacturing, which is also
known as 3D printing, may offer sustainability benefits by improving resource
efficiency, extending product life, and reconfiguring value chains (Ford and
Despeisse 2016) and enable a shift towards a circular economy by improving
resource efficiency with eliminating wastes (Despeisse et al. 2017). Additive
5.2 Managing Socially Responsible Operations 83

manufacturing particularly fits well to the needs of manufacturers of customized


products such as dental, bio-medical, fashion and apparel by increasing the produc-
tion flexibility, decreasing supply chain complexity and lead times etc. (Bogers et al.
2016). Based on a future projection for 2025, the use of 3D printing can lower the
use of financial, labor, and energy resources and decrease costs, CO2 emissions and
wastes (Gebler et al. 2014). Even today, 3D printing can be used to stop poverty.
According to Jeremy Faludi, a sustainable design strategy consultant and educator,
3D printing helps the people at the developing world by “putting the means of
production into the hands of the local people” (Liang and Paddison 2016).

5.2.4 Procurement and Supply Chain Management

There is a complex and dynamic interplay between internal and external environ-
ments when it comes to manage an organization’s sourcing/procurement activities
and supply chain. The difficulties of ensuring sustainability and social responsibility
across suppliers are unmasking the multifaceted nature of procurement and supply
chain management (SCM) most. Socially responsible purchasing refers to the
inclusion of the issues such as diversity, environment, safety, human rights, and
philanthropy (Carter 2004; Carter and Jennings 2004) promoted by different stake-
holders into purchasing decisions (Maignan et al. 2002) in order to provide positive
social (Drumwright 1994, 1), environmental, and economic change. Although it is a
very complex task, by identifying the relevant opportunities, organizations can align
social responsibility with strategic sourcing that focuses on the cost savings through
logistical and purchasing efficiencies (Knight et al. 2017). In doing so, organizations
can follow different strategies (reactive, defensive, accommodative, and proactive);
as the most effective strategy, proactive socially responsible buying involves
the practices of defining social responsibility goals for the purchasing function,
designating organizational members in charge of socially responsible purchasing,
educating suppliers, monitoring suppliers, sanctioning suppliers, communicating
achievements to stakeholders, receiving stakeholders’ feedback (Maignan et al.
2002).
Although the factors such as the absence of supplier audits due to scarce
resources, the difficulties to ensure the same standards along supply chain, the
high level of corruption in some countries, might hinder the involvement of CSR
into purchasing decisions and SCM, some factors can drive more socially responsi-
ble purchasing such as the stakeholders’ impact, organizational values, attention of
media and non-governmental organizations (NGOs), employees’ interest (Mont
and Leire 2009). The socially responsible purchasing behavior is positively affected
by the factors such as the existence of people-oriented organizational culture,
the leadership of top management, customer pressures (Carter and Jennings 2004)
or realized absorptive capacity as the ability to exploit external knowledge based
on the existing knowledge (Cohen and Levinthal 1990) particularly among
non-multinational enterprises (MNEs) (Riikkinen et al. 2017). A review of literature
84 5 Socially Responsible Production and Operations Management

between 2000–2010 on socially and environmentally responsible purchasing shows


that while the role of internal political processes and resources is prioritized at this
process, the pressures of stakeholders are mostly ignored (Hoejmose and Adrien-
Kirby 2012). However, stakeholders may also exert their own norms as “the
common set of rules and behavioral expectations shared by the majority of the
members of a stakeholder community” to initiate a change on organizational buying
behaviors (Maignan and McAlister 2003, 83). A survey on the apparel and footwear
sector reveals that the pressures of consumer, industry peers, and media interest drive
companies towards socially responsible supply chain orientation (Park-Poaps and
Rees 2010).
In the literature, these solutions and efforts of companies towards suppliers are
usually entitled as the sustainable supply chain management (SSCM), which refers
to “the management of material, information and capital flows as well as cooperation
among companies along the supply chain while taking goals from all three dimen-
sions of sustainable development, i.e., economic, environmental and social, into
account which are derived from customer and stakeholder requirements” (Seuring
and Müller 2008, 1700). SSCM has been mostly driven by the instrumental logic,
which inhibits to achieve a ‘truly’ sustainable supply chains (Gold and Schleper
2017). In a broader sense, the social responsibility at global commodity chains can
be ensured in three governance modes as (1) market mode through managing based
on price competition and customer preferences (2) hierarchy mode with generating
an internalized structure on power and authority, and (3) network mode by coordi-
nating interorganizational relations based on reciprocity, trust, cooperation (Fichter
and Sydow 2002). While the first governance mode (a customer-driven approach)
leaves the coordination of system to the market, most organizations follow the
second mode (a buyer-driven approach) to ensure the sustainability and socially
responsibility in their SCM. In doing so, they lead and strategically coordinate all
activities throughout the supply chain by developing its internal principles or
mechanisms. For instance, the Walt Disney Company involves the supplier diversity
into its corporate priorities and tries to ensure the inclusion of minority-owned,
women-owned, and veteran-owned business enterprises. Following this principle,
the company hosted 100 companies from different industries to look for the potential
collaborations (Walt Disney 2015).
Such corporate principles are often backed up with a written document. The
company-specific code of conducts have been the vital element of ensuring sustain-
ability (Turker and Altuntas 2014) and CSR (Fichter and Sydow 2002). A code of
conduct must be prepared by considering diverse economic, social, and environ-
mental concerns. For instance, the strike of immigrant tomato pickers working in
sweatshop condition at the suppliers of Taco Bell, a subsidiary company of Yum
Brands that also owns KFC and Pizza Hut, took the attention towards the corporate
principles in 2003. A hunger striker and one of the leaders of Coalition of Immokalee
Workers (CIW) stated that “Taco Bell has a policy that it will not buy food from
contractors that mistreat animals. . .All we are asking is that they have the same
policy for humans.” (Campbell 2003). After a 4-year boycott of Taco Bell, Yum
Brands agrees to pay an extra penny a pound for tomatoes (Greenhouse 2014).
5.2 Managing Socially Responsible Operations 85

Depending on the increasing support of employees, customers, and citizens, CIW


initiated the Fair Food Program (FFP), an effective model for worker-driven social
responsibility (WSR) by the partnership of farmworkers, Florida tomato growers,
and participating retail buyers, including Subway, Whole Foods, and Walmart (CIW
2017). Although there are still some problems, the giant food companies in USA
(Burger King, Subway, Taco Bell etc.) have accepted the fair food agreement (CIW
2017), and they have pledged to buy from the suppliers that follow the new standards
and drop the growers that violate the standards (Greenhouse 2014).
Companies can take the internationally recognized frameworks as the building
blocks for the development of standards and principles for suppliers. As a global
chemistry company, BASF develops its conduct based on the UN Global Compact
Initiative and the responsible care program of global chemical industry (Table 5.1).
The company asks any of given verification methods (self-assessments, third party
assessments, certifications/statements, on-site audits) to ensure full compliances of
its suppliers (BASF 2017).

Table 5.1 Supplier code of conducts examples (BASF)


BASF
Environmental criteria
You comply with all applicable environmental, health and safety regulations
You promote the safe and environmentally sound development, manufacture, transport, use and
disposal of your products
You protect your employees’ and neighbors’ life and health, as well as the general public at large
against hazards inherent in your processes and products
You use resources efficiently, apply energy-efficient, environmentally friendly technologies and
reduce waste, as well as emissions to air, water and soil
You minimize your impact on biodiversity, climate change and water scarcity
Social criteria
You support the protection of internationally proclaimed human rights, including minimum wage
and working hours
You fight forced labor, child labor and discrimination at the workplace
You uphold the freedom of association and the right to collective bargaining
Governance criteria
You abide by all applicable national and international antitrust and trade control regulations
You work against corruption including bribery and ensure that personal relationships do not affect
business activities
You abstain from any money laundering activities
Verification methods
1 Self-assessments: We may ask you to fill in a questionnaire on compliance with ESG standards
2 Third-party assessments: We may solicit desktop information from a third party, e.g. a data
provider, on your compliance and performance with regard to ESG standards
3 Certifications/statements: We may ask you for a certification or statement confirming com-
pliance with ESG standards
4 On-site audits: We or an authorized third party acting on our behalf may contact you and ask
for permission to verify compliance with ESG standards on site
Source: BASF (2017)
86 5 Socially Responsible Production and Operations Management

Although the reported compliance of companies are relatively high (Turker and
Altuntas 2017), developing a code of conduct does not guarantee the compliance of
suppliers to sustainability and social responsibility. Therefore, in order to ensure the
full compliance of suppliers, buyer company might involve in activities such as
improving suppliers by training and supportive mechanism, communicating with
suppliers, developing criteria for suppliers, avoiding economic, environmental, and
social risks, or improving supply chain performance (Turker and Altuntas 2014).
Based on the interviews with Swedish organizations, Leire and Mont (2010) try to
systematize the socially responsible purchasing in five steps as developing internal
policies, setting purchasing criteria, applying assurance practices, managing supplier
relations, and building internal socially responsible purchasing capacity. On the
other hand, deriving from the previous literature, Akhavan and Beckmann (2017)
provide an overview for sustainable sourcing and supply management practices:
– Internal integration and governance: e.g. commitment of top management; usage
of internal codes of conduct; setting goals, action plans and management system;
incentives and reward systems for company members; systematic supply chain
analysis and supplier classification.
– Supplier screening with focus on social and environmental issues: Definition of
minimum requirements and standards; supplier assessment; supplier selection
process; supplier monitoring; designing consequences for non-compliance and
remediation.
– Supplier development with focus on social and environmental issues: training and
education; collaboration and joint development; follow-up activities; supplier
diversity; supplier incentives; shared knowledge and asset (resources & capabil-
ities) investment.
– External governance, inter-organizational collaboration and collective initiatives:
Collaboration with NGOs, Collective (industry) initiative, Membership in NGOs.
The results of those corporate practices towards the improvement of suppliers’
social and environmental performance might vary. The study of Porteous et al.
(2015) examines the impacts of the positive and negative reinforcements of buyers
over the environmental and social compliances of suppliers on a sample of 334 com-
panies across 17 sectors. The authors firstly classify the penalties (termination of
contract, reduced business, fines) and incentives (supplier training, increases busi-
ness, preferred supplier status, better terms and conditions, public recognition, price
premiums) as two separate factors and then analyze their impacts on performance
measures (reduction in social and environmental violations in the supply chain and
reduction in supply chain operating cost). Although many companies prefer to
reduce the business after warning (45%) and provide a preferred-supplier status by
giving priority for future business (56%), the findings of analysis reveal that the
penalty of contract termination after a warning (27%) the incentives of supplier
training (39%), increased business (46%), and public recognition (25%) are among
the strongest tools to reduce the suppliers’ social and environmental violations.
According to Fichter and Sydow (2002), as the third mode of governance,
network mode might have several superiorities over other approaches by supporting
the development of shared views and norms for mutually beneficial cooperation
5.3 End-of-Life Products: Closed-Loop Supply Chain 87

among network members, allowing resource relationship and pooling resources to


achieve synergies, and building/maintaining a positive cycle of cooperation. This
integration among the network members, however, is highly costly and requires a
careful planning process. Luckily, most companies nowadays capitalize their tech-
nological strengths on supplier networks. As an example, IBM is collaborating with
the giant retailer and food companies such as Walmart, Nestlé, Dole, Tyson Foods
and Kroger on the adoption of blockchain technology to track the food products
across the global supply chains. This technology is particularly useful to create one
organized system among different members of chain—including farmers, proces-
sors, distributors, and retailers—to ensure the food safety; against a health risk at a
food, the retailer can easily detect the batch of this food by scanning a barcode on the
package and remove the products from the shelves to stop the spread of illness
urgently (Purdy 2017).

5.3 End-of-Life Products: Closed-Loop Supply Chain

Since all governance modes at SCM have their own pros and cons, using a combi-
nation of several modes is much better than relying on a single mode to highlight the
mutually recognized incentives and sanctions across members (Fichter and Sydow
2002, 365). For example, CLSC requires the integration of both forward and reverse
supply chain/ logistics to manage the end-of-life products (Govindan and Soleimani
2017). By taking back products from customers, CLSC manages “the design,
control, and operation of a system to maximize value creation over the entire life
cycle of a product with dynamic recovery of value from different types and volumes
of returns over time” (Guide and Wassenhove 2009, 10). Considering the relatively
low rate of recycling even at the developed countries (McCarthy 2016; OECD
2015), following strategies towards the final stages of products at product life
cycle has become one of the main environmental responsibility of companies.
In their study, Khor and Udin (2012) illustrates that CLSC combines the efforts of
forward supply chain (starting from the extraction of raw material to the consump-
tion of product) with reverse supply chain that involves the processes of repairing,
reconditioning, remanufacturing, recycling, and disposing. For example, Best Buy is
very active at recycling; the company has been the USA’s largest retail recycler of
used electronics and appliances by offering free and easy recycling option for used
technology product “regardless of where (customers) bought it, how old it is or who
made it” (Best Buy 2017).
It is clear that CLSC has become an umbrella term by adopting a cradle-to-grave
approach towards product. An elaborate review on reverse logistics and CLSC
literature reveals that the problems on designing and planning of networks (e.g. its
location or capacity), the price control and coordination among network members,
production planning and inventory management etc. have been among the major
research tracks in between 2007–2013 (Govindan et al. 2015). There are, however,
many interesting and relevant topics that should be addressed by the researchers.
On the other hand, the practitioners have also unified their efforts on CLSC.
88 5 Socially Responsible Production and Operations Management

Closed Loop Partners (2017) bring together the world’s largest companies
including Walmart, Coca Cola, Procter&Gamble, Unilever, Colgate-Palmolive,
3M, Dr. Pepper etc. to invest in “sustainable consumer goods, advanced recycling
technologies and the development of the circular economy”.

5.3.1 Services

CSR transforms the service businesses too. Although this sector is not usually linked
with environmental pollution or societal problems, they can also create a devastating
impact on the nature and society. For example, the cruise industry, which is the
fastest growing category in the leisure travel market with 7% annual growth rate, has
$117 billion economic impact by creating 956,597 jobs in 2015 and providing 24.2
million passengers in 2016 (FCCA 2017). However, the cruise ships have not taken
any measure to reduce their pollution, despite their adverse effects on natural
environment; “a mid-size cruise ship’s diesel engine can use 150 tonnes of fuel
each day, which would emit as much particulate as one million cars” (Zhou 2017).
Therefore, similar to manufacturing firms, reducing waste and energy must be a
major concern for the service businesses too. For instance, the largest door-to-door
delivery service company in Japan with 60,000 workers and 1.87 billion packages
annually, Yamato Transport Co. tries to devise better ways to minimize manpower
and energy for its re-deliveries, which account for 20% of packages as of 2015
(Steger 2017). In the face of increasing labor shortage and rising customer demand,
the company launched a program by installing the lockers at Seven-Eleven conve-
nience stores in Tokyo for its busy recipients who can register for lockers online and
then pick their packages up whenever they want (Japan Times 2017). On the other
hand, the Greenpeace’s 2017 report on the electricity consumption of information
technology companies grades the companies based on the same criteria (e.g. energy
use, energy transparency, renewable energy commitment and sitting policy, energy
efficiency and mitigation, renewable procurement, advocacy) and shows that while
the companies like Google, YouTube, iTunes, WhatsApp, Facebook, Instagram,
Blogger.com have committed to the goals of renewable energy, the companies such
as Alibaba.com, Vimeo, SoundCloud, Spotify, Pinterest, Reddit.com, Twitter per-
form poorly (Greenpeace 2017).
In order to minimize its environmental impacts, Chan et al. (2016) suggest three
complementary green services (GS) practices as (1) pollution prevention-oriented
practices for minimizing pollution or reducing waste (e.g. servicing location, logis-
tics, promotion); (2) product-oriented practices for coordinating with chain members
to manage the impact of product (e.g. procurement, product design and develop-
ment, after-sale); (3) long-term development-oriented practices for ensuring com-
pany growth and development by a shared vision (e.g. information system, human
resources, corporate policy). Some specific examples for such practices can be seen
at Table 5.2. According to Koo and Cooper (2011), while the product-oriented
businesses emphasize socially responsible products and services, the service-
oriented businesses focus on CSR-informed communication strategies.
Table 5.2 Exemplarily GS activities
GS Scope Activity example Case example Company example
1 Servicing location Design of service delivery processes Redesign organizational structure to simplify oper- Home Depot Inc.; Intel Co.
activities with maximized efficiency ations processes
Application of sustainable design Use of renewable and recyclable construction Walmart Stores Inc.; Toyota Motor Co.
features in servicing locations materials
Reusing, recycling, and reducing of Reducing of paper used in business operations Bristol-Myers Squibb Company;
resources used in servicing locations Unilever Co.
Logistics activities Optimization of shipping routes Finding closest vendor location to pick up freight Weyerhaeuser Company; Royal Dutch
Shell PLC
Maximized use of transportation Consolidate multiple deliveries Daimler AG Company; Unilever Co.
capacity
Use of low-emission transportation Reducing air shipment and increasing the use Hewlett-Packard Development
modes of ocean shipping to reduce emissions Company; Procter & Gamble Company
Promotion Implementing activities that raise Conducting sustainability forums and seminars for Goodyear Tire and Rubber Company;
activities customer awareness on environmental customers to increase their awareness of environ- Xerox Co.
issues mental issues
5.3 End-of-Life Products: Closed-Loop Supply Chain

Motivating customers to engage in Offering customers with reward points PepsiCo Inc.; Target Co.
environmental protection programs (e.g. entertainment, dining and travel discounts) if
they return end-of-life products for recycling
2 Procurement Following corporate environmentally Developing wood purchasing guidelines to avoid Weyerhaeuser Company; Home Depot
activities responsible guidelines in sourcing sourcing wood fiber from forest areas and to ensure Inc.
that there will be timber for future generation
Sourcing products from environmen- Developing sustainability criteria to evaluate Baxter International Inc.; Kroger Co.
tally responsible suppliers suppliers’ sustainability initiatives and performance
Collaboration with suppliers to Working with suppliers for end-of-life products Intel Co.; Unilever Co.
minimize environmental impacts recycling
Product design Designing manufacturing processes Adopting innovative manufacturing processes, Ford Motor Company.; PepsiCo Inc.
and development with minimum environmental impacts e.g., water-saving machining, to conserve
activities resources
89

(continued)
Table 5.2 (continued)
90

GS Scope Activity example Case example Company example


Designing products and packaging with Avoiding the use of hazardous substances in prod- Dell Inc.; Bristol-Myers Squibb
minimum environmental impacts ucts and packaging Company
After-sale Provision of maintenance services to Product repair services that can prolong the usable Home Depot Inc.; Unilever Co.
activities prolong usable life of products life of product
Collection of end-of-life products Placing collection bins in stores to collect end-of-life Eastman Kodak Company; Royal
products Phillips Company
3 Information sys- Implementation of information systems Development of database to track environmental Ford Motor Company; Bristol-Myers
tem related to monitor and manage environmental performance, such as energy and water Squibb Company
5

activities management practices and consumption, at firm’s facilities


performances
Reporting and sharing up-to-date infor- Publishing corporate sustainability reports to Electrolux Company; Chevron Co.
mation about environmental manage- provide stakeholders with information about their
ment practices and performances with environmental management
stakeholders
Human resource Establishment of measurable Setting targets for workers in plant to reduce energy Kroger Co.; Weyerhaeuser Company
management environmental performance targets for consumption in facilities
activities employees
Motivating employees to participate in Linking compensation package to environmental Intel Co.; Eastman Kodak
environmental management practices protection performance of employees Company
Corporate policy Formulation of corporate environmental Formulation of policy to provide customers with DaimlerChrysler Co.; Ford Motor
related activities policies to comply with the environ- end-of-life vehicles take-back service to comply Company
mental regulations with the requirements of directives
Regular reviews and modifications of Working with governmental agencies or Procter & Gamble Company; Kroger
corporate environmental policies environmental organizations to review and update Co.
corporate polices with the aim to understand and
participate in policy development
Source: Adapted from Chan et al. (2016)
Note: GS ¼ Green Services, GS/1 ¼ Pollution prevention-oriented, GS/2 ¼ Product-oriented, GS/3 ¼ Long-term development-oriented
Socially Responsible Production and Operations Management
5.3 End-of-Life Products: Closed-Loop Supply Chain 91

Moreover, service sector organizations have also encountered the challenges of


spreading their principles throughout their networks and supply chains in all around
the world. For example, today most Western universities, including Cambridge,
Carnegie Mellon, Duke or John Hopkins, have collaborated with Chinese universi-
ties on the common degree-granting programs to meet the Chinese students’ demand
for studying abroad, which has increased from 50,000 students in 2000–500,000 in
2015. It can be expected that those elite universities from Western tradition can
import their own principles of and commitment to academic freedom, critical
thinking, and free inquiry in order to liberalize their Chinese partners—similar to
the spillover effect of a manufacturer’s code of conduct over its suppliers. Surpris-
ingly, the latest fiasco of Cambridge University Press’s censorship on 300 articles at
the China Quarterly, on behalf of Chinese government, shows that the Western
universities start to export those illiberal thoughts, which can jeopardize the aca-
demic freedom and autonomy significantly (Balding 2017). It seems that the instru-
mental interests of those universities help them to ignore their commitments to the
longstanding values.

5.3.2 Stakeholder Collaborations: Clusters, Networks, Allies

Since diverse stakeholders have involved into the production steps, the collaboration
and cooperation at production have been particularly important to create socially
responsible operations. For example, as the final component of creating shared
value, the clusters can be considered as the upper level system, which may involve
all the related businesses, suppliers, service providers, logistics infrastructures, trade
associations, universities etc.; “firms create shared value by building clusters to
improve company productivity while addressing gaps or failures in the framework
conditions surrounding the cluster” (Porter and Kramer 2011, 12). Therefore, the
integration of all stakeholders towards socially responsible and sustainable produc-
tion can enhance the welfare of whole society—as the supra system. In order to
improve the managerial decision making at operations management, Sodhi (2015,
1377) proposes a stakeholder resource-based view (RBV) by indicating that a
company’s utility maximization is improved “. . .not only by developing their own
organization’s dynamic capabilities, resources and routines but also by developing
those of the company’s stakeholders thereby improving their respective utilities as
well”. Therefore, CSR at the operations management must go beyond the efforts of a
single manufacturer. The responsibility can be shared within actors of supply chain
and such an integrated and decentralized supply chain can improve the economic as
well as environmental performance of whole system (Jacobs and Subramanian
2012). The coordination across supply chain leads both higher profit and more
environmentally friendly product design (Subramanian et al. 2009).
The system and its boundaries at the interorganizational relations can be defined
in many ways—it can be in the form of supply chain networks, clusters or allies
(Turker 2014). Depending on the nature of operational needs, companies can create
92 5 Socially Responsible Production and Operations Management

or cease their own collaborative landscapes. The aforementioned example of Best


Buy on taking back the used technology products of all brands and retailers also
shows the need for an industry-wide systemic approach. If only a single company
continues to buy those used-materials and the rest of giant retailers (e.g. Amazon or
Walmart) become the laggards, the free rider problem might occur (Gunther 2015)
and the system may exhibit entropy. Therefore, there is a need for a collaboration
among all retailers. In a similar vein, the application of same criteria on how to trade
products among different actors across the commodity chains can be guaranteed by
the interorganizational initiatives and agreements. Today, the fair trade movement
has been the flagship of this sort of operations by rebalancing the power struggles
among producers and retailers. It is introduced as an alternative approach to con-
ventional trade by providing “a better deal and improved terms of trade” for farmers
to improve their lives (Fair Trade International 2017).
Another domain of such collaborations is the co-creation, which is the value
creation based on the interaction of companies and consumers (Prahalad and
Ramaswamy 2004a). By sharing their experiences on the product usage, consumers
can participate into the co-creation process (Kristensson et al. 2008) that converts the
system from the mass customization of products to the joint problem identification
and solution on the basis of an active customer-company dialogue (Prahalad and
Ramaswamy 2004b). In line with this trend, companies are increasingly using
crowd-sourcing platforms to obtain the valuable ideas of their external stakeholders.
However, only some of them succeed in finding these relevant ideas. According to a
manager at McKinsey & Company, companies must think about making co-creation
process more effective and efficient based on their target co-creators; segmenting
their audiences and tailoring some appealing promotions for them, finding motiva-
tions (e.g. compensation or social recognition) in order to obtain good ideas and a
sustainable competitive advantage (Bughin 2014). As a good example, Heineken
motivated co-creators to design a more sustainable packaging by a monetary com-
pensation. At the end of process, the winner who proposed a recycling game with an
incentive to win $1000 by the return of their bottles, won a $10,000 prize (Consumer
Value Creation 2014).

5.4 Conclusion

Combining the Porter’s (1985) framework with Kay’s (1993) approach to measure
competitive advantage in terms of added value, Pitkethly (2009, 257) states that “the
aim of the firm is to try to maximize the added value that it can appropriate by
providing benefits at each stage of the value chain that the customer is prepared to
pay more for than they cost the firm to provide”. For socially responsible operations,
however, the existence of multiple stakeholders with diverse interests (Besiou and
Wassenhove 2015) and increasing complexity of production due to the factors such
as resource scarcity, insatiable consumer demand, shortened product life cycles,
product end-of-life policies, environmental regulations, technological developments
References 93

require the integration of sustainability and social responsibility into the whole
nature of production system. In doing so, companies can focus on the operations,
factors, and stakeholders at the internal and external environment. Therefore, as the
components of production and operations management, facility location and man-
agement, product, process, procurement and supply chain management, closed-loop
supply chain must be monitored from CSR perspective.

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Chapter 6
Socially Responsible Marketing

Corporate social responsibility (CSR) is closely interrelated with marketing concept.


For some, CSR can be viewed as “a ‘product’ which is offered implicitly by the firm
to its various publics and is, therefore, the focus of an exchange process between the
firm and society”; these products include “all positive or negative social goods. . . or
services” (Murray and Montanari 1986, 817). Although some companies merely
view CSR as a tool to attract more customers towards their products and services,
when it is carefully formulated and implemented, it can create positive implications
on stakeholders. Marketing can contribute to this process a lot.
In line with the increasing environmental and social concerns, consumers expect
companies to behave more socially responsible way (Mohr et al. 2001) and they
are ready to pay more for the socially responsible products (Ha-Brookshire and
Norum 2011). However, the impact of CSR on customers’ buying behavior depends
on some factors such as the type of CSR, product quality, the level of customers’
support to CSR (Sen and Bhattacharya 2001), consumers’ willingness to pay, the
structure of competition (Bagnoli and Watts 2003), consumer motives as self-
centered versus other-centered motives (Ellen et al. 2006). Therefore, it is not easy
for a company to use CSR as a simple marketing tool without fully integrating it into
this function. The chapter focuses on the critical role of marketing in CSR. In doing
so, it first clarifies the concept by distinguishing it from the similar themes. Then, it
discusses how CSR can be integrated into the process of marketing.

6.1 Societal, Sustainable, Socially Responsible Marketing:


A Conception Problem

Integration of CSR into marketing function is a vital task to obtain the desirable
outcomes of CSR at the individual, organizational, and contextual level. For some,
such an integration can be called as socially responsible marketing, which can be

© Springer International Publishing AG, part of Springer Nature 2018 99


D. Turker, Managing Social Responsibility, CSR, Sustainability, Ethics &
Governance, https://doi.org/10.1007/978-3-319-91710-8_6
100 6 Socially Responsible Marketing

defined as “a marketing philosophy that says a business should take into consider-
ation what is in the best interest of society in the present and long term. . .by
keeping in mind the ethical, environmental, legal, public, social and cultural values
and issues of society and targeted market” (DeWitt and Dahlin 2009, 69). The
concept of socially responsible marketing overlaps with some other notions such as
societal marketing, which refers to make marketing decisions with considering
“consumers’ wants, the company’s requirements, consumers’ long-run interests
and society’s long-run interests” or sustainable marketing as “socially and envi-
ronmentally responsible marketing that meets the present needs of consumers
and businesses while also preserving or enhancing the ability of future generations
to meet their needs” (Armstrong et al. 2015, 13). It can be noticed that some
differences exist across these constructs. For instance, the concept of sustainable
marketing considers the future needs of both consumers (societal marketing) and
business (strategic planning concept) rather than focusing on the immediate out-
comes and results (Armstrong et al. 2015, 455). Although the well-being of target
customer segment is also at the heart of socially responsible marketing, it embraces
the responsibilities towards all stakeholders. Therefore, stakeholder orientation,
which refers to “the organizational culture and behaviors that induce organiza-
tional members to continuously be aware of, and positively act upon, a variety
of stakeholder issues” is critical for socially responsible marketing (Maignan
et al. 2011, 314). In doing so, marketers can contribute to CSR management by
“expanding their focus beyond consumers to include other stakeholders and by
bundling together various social responsibility initiatives” (Maignan and Ferrell
2004, 3).
On the other hand, the link between CSR and cause-related marketing is
also perplexing for many people. Cause-related marketing is “a type of marketing
involving the cooperative efforts of a ‘for profit’ business and a non-profit organi-
zation for mutual benefit” (DeWitt and Dahlin 2009, 70) and mostly used as a
communication tool to build reputation and improve customer loyalty (Brønn and
Vrioni 2001). The earliest known example of cause-related marketing is the Amer-
ican Express’ preservation campaign of the Statue of Liberty and Ellis Island in
1983 (the campaign raised $1.7 million). According to the company, the goal was
“to increase public awareness of the importance of historic and environmental
conservation, preserve global historic and cultural landmarks, educate visitors on
sustainable tourism and strengthen local communities through preservation efforts”
(American Express 2017). A professional fundraiser states that “when it is done
right, cause related marketing products can be an incredibly effective way to
raise both money and awareness” and indicates the Pampers and United Nations
Educational, Scientific and Cultural Organization (UNICEF) Partnership as one of
the excellent cause related marketing practices (Christopher 2015). Pampers has
collaborated with UNICEF since 2006 to eliminate Maternal and Neonatal Tetanus,
which kills 49,000 babies each year in less privileged areas, by donating one
vaccine for the purchase of one pack of Pampers nappies and wipes (Pampers
2017).
6.2 Guiding Principles 101

6.2 Guiding Principles

Considering the wide prevalence of marketing practices, such as high pressure


selling tactics, coercion in the channel distribution, over-the-top psychological
approaches (e.g. fear for home security systems), the sexual exploitation of
women, or price gauging during the product shortage period, most consumers feel
like they are the means rather than the ends for companies (Laczniak and Murphy
2006). In addition to such high pressure selling tactics, marketing phenomenon has
been also criticized by society due to higher prices (e.g. high advertising and
promotion costs, excessive markups), deceptive practices, shoddy or harmful prod-
ucts, planned obsolescence, poor service, materialism, few social goods, or cultural
pollution (Armstrong et al. 2015, 455–461). As an example, planned obsolescence,
which refers to “the production of goods with uneconomically short useful lives so
that customers will have to make repeat purchases” (Bulow 1986) is widely used in
technological products. Considering the longevity of a light bulb, which has been
shined since 1901 (Centennial Bulb 2017), one can ask “if an incandescent bulb
made with nineteenth Century technology can last so long, why not new-fangled,
twentieth and even twenty-first Century bulbs?” (Hadhazy 2016). Although there
might be a rationale for the short life span of some products, companies mostly use
such tactics to sell their products more. As an example, when an old version of a
game console is not compatible with the games provided for its new version,
company leaves no choice for customers but to buy this new console.
The frustration of customers towards companies based on such bad experiences
has brought about new trends like consumerism, which is “a social movement
seeking to augment the rights and power of buyers in relation to sellers” (Kotler
1971, 49). Consumerism movement that can be traced back to the 1920s affects the
marketing practices significantly by improving the consumer rights (e.g. the right to
be informed, the right to be protected against unsafe products) and changing the
marketers’ approach towards consumers (Abratt and Sacks 1988). According to
Armstrong et al. (2015), together with consumerism, environmentalism also pro-
motes sustainable marketing practices by leading companies to protect the natural
environment.
Today, most people believe that marketing professionals need some guiding
principles. From a normative point of view, Laczniak and Murphy (2006) provide
the basic perspectives of marketing professionals on marketing ethics as becoming
one of the most studied domains in the literature. Their framework involves basic
perspectives such as “ethical marketing puts people first”, “ethical marketers must
achieve a behavioral standard in excess of the law” or “marketers should articulate
and embrace a sore set of ethical principles” etc. It can be seen that this framework
covers the critical perspectives in the nexus of marketing and society. These ethical
principles are needed to make the right decisions under the high degree of uncer-
tainty or complexity.
According to Robin and Reidenbach (1987), integrating social responsibility and
ethics into marketing process starts with aligning mission statement and ethical
102 6 Socially Responsible Marketing

profile of company with marketing objectives. In the subsequent steps, a company


should identify the impacted public, the develop actionable ethical core values to
oversee the development of marketing mix, the enculture-integrate core values into
the organizational culture to implement marketing strategy, and monitor and control
for the marketing and ethical effectiveness (Robin and Reidenbach 1987, 52).
Potential customers want to know the core values, behavior, and beliefs of compa-
nies and they cannot be deceived by the tactics such as “making charitable contri-
butions or selling a product or two recyclable packaging” (Elliott 2013). The honesty
of CSR approach in marketing depends on the existence of a strong socially
responsible and ethical understanding.

6.3 Socially Responsible Marketing Mix

Consumer decisions are affected by a company’s socially responsible marketing mix


(El-Ansary 1974), which involves developing, pricing, promoting, and distributing a
product responsibly.

6.3.1 Product

Developing a product, which meets the needs and wants of customers without
harming humanity and natural environment, is the first and foremost component of
a socially responsible marketing mix. According to Sirgy and Lee (1996, 23), the
marketers can improve the consumers’ quality of life by following several product
objectives:
– Serving one or more consumer populations by offering one or more products that
can enhance one or more dimensions of the consumers’ wellbeing.
– Reducing any significant negative side effects to the consumers associated with
the use of the product.
– Reducing any significant negative side effects to other publics (beside the con-
sumer public) associated with the product.
– Decreasing costs associated with the development and manufacturing of the
product.
Although it is usually seen as a marketing activity, developing a new product is a
task that must integrate the knowledge from all relevant functions such as research
and development (R&D), production, purchasing, finance etc. (Grant 2009) under
the control of multifunctional product development teams (Clark and Fujimoto
1991). However, based on the overall strategic direction of a company (Ansoff
1965), a marketing department is the starting point of this cross-functional activity
by anticipating what customers need and want (both today and in the future) based
6.3 Socially Responsible Marketing Mix 103

on the information obtained through an intense marketing research and intelligence


process.
Before developing a socially responsible product, it can be important to know
whether the target market currently pays attention for social responsibility (Webb
et al. 2008); however, companies should not limit themselves to the current wishes
and desires of target market and they should try to guess what future customers or
other customer segments might expect. For example, if a product is a necessity for
overall public, but it is currently produced for only the high-income segment,
marketers can think about developing or improving products with similar functions
for low-income group as well. One of the way to create shared values is to
reconceive products and markets for the unmet needs of society (e.g. better health
system, housing opportunities, nutrition solutions, financial security, environmental
improvements etc.) (Porter and Kramer 2011). For instance, there are significant
inequalities at accessing clean and safe drinking water in some underdeveloped
countries and many people still drink water from unsafe sources (663 million people
in 2015) (Slaymaker and Bain 2017). Although investing in clean water access as
well as sanitation facilities will be beneficial for all of us (Ashoka 2017), only some
businesses or social enterprises try to develop innovative water systems fighting
against this problem (Spinks 2017).
According to Karnani (2007a, 90), “poor people—at the bottom of the pyramid
(BOP)—represent a very attractive market opportunity. . . selling to the poor can
simultaneously be profitable and help eradicate poverty”. As a socio-economic
concept, the BOP involves billions of poorest citizens who live with less than
$2.50 per day by representing “an invisible and unserved market blocked by
challenging barriers that prevent them from realizing their human potential”
(Financial Times Lexicon 2017). This market may lead the radical innovations and
profitable opportunities for companies by creating awareness, access, affordability,
and availability (Prahalad 2012). However, before serving at this market, companies
need to identify how to change the traditional consumer behavior at this market and
their current ways of production and distribution (Simanis and Duke 2014).
Although the inventors of concept do not clearly imply the link between CSR and
the BOP (e.g. Prahalad and Hart 2002), some authors compare and contrast two
concepts in terms of their scales and impacts (Simanis and Duke 2014). Engaging
with the BOP is “a mainstream business activity, not as some peripheral function
to be taken up when profits allow and dropped when they do not” and it can be
“successful only if the core elements of CSR are understood and incorporated into
the BOP strategy from the outset” (Davidson 2009, 31). Therefore, developing a
socially responsible mindset is the sine qua non to serve at the BOP markets. Despite
the existence of some bad examples [e.g. Nestlé infant formula, which is marketed as
an alternative for breastfeeding in third world countries (Krasny 2012), Unilever’s
Fair & Lovely, a skin whitening product marketed in Asian and African countries
(Karnani 2007b)], the BOP literature shows that the scholars mostly report positive
social impact of such activities (Kolk et al. 2014). As a good example, SC Johnson
innovates insect control products to combat malaria in poor regions of Ghana or
Indonesia (SC Johnson 2017).
104 6 Socially Responsible Marketing

The experts investigate the success and failure in the BOP markets at ten key
principles (Paddison 2014):
– Make it more about core business
– Scaling up a business model is challenging
– It’s vital to understand the needs, demands and constraints of the target market
– Work should be grounded in country offices
– There is a significant role for the public and development sector
– Business need to constantly adapt their products
– BOP business doesn’t mean exploiting the poorest communities
– It’s not just about selling product
– Take the risk away from the customer
– There are good examples of business models working well in BOP markets
According to Karnani (2007b, 1357), CSR is “the best hope” for reconciling the
differences between private profits and public welfare for poor people. Integrating
CSR philosophy into the product development process will give the necessary
ethical and normative rationale for companies. Considering the fact that while
71% of world population (3.4 billion individuals) holds 3% of global wealth and
only 0.7% of population receives 45.2% of total wealth at the global wealth pyramid
(Credit Suisse 2015), companies should recognize “their possible responsibilities for
the poorest of the poor” (Hahn 2009).
It is clear that socially responsible marketing cannot succeed without the exis-
tence of its supporters; socially responsible consumers are the prerequisite for
successful programs (Antil 1984). Developing more socially and environmentally
responsible products will lead more positive customers’ attitudes towards CSR.
Despite the overwhelming impacts of aforementioned trends like consumerism or
environmentalism, consumers’ perception is largely shaped by what is currently
provided in the market place. Therefore, companies are also responsible from
initiating socially responsible consumer behavior, which is “the behavior of a
consumer basing decisions on a desire to minimize or eliminate any harmful effects
and to maximize any beneficial impacts on society in one or more consumption steps
of the consumption process. . .(including) product information search, acquisition,
usage, storage, disposal, and postdisposal evaluation” (Ha-Brookshire and Hodges
2009). A very good example is the climbing sales of electric vehicle (EV) segment in
global automobile market (Critical Highlight 6).

6.3.2 Pricing

Despite the centrality of product strategies in socially responsible marketing mix,


companies need to consider developing socially responsible pricing, promoting, and
distributing strategies too. Table 6.1 shows the possible socially responsible objec-
tives of companies to improve the quality of life on these three domains (Sirgy and
Lee 1996). In terms of pricing, a company must think about the current price of
6.3 Socially Responsible Marketing Mix 105

Table 6.1 Socially responsible objectives of pricing, promoting, and distribution components
Pricing Promotion Distribution
To provide an affordable To increase the knowledge of To increase the distribution
price for new product target consumers about access of product
product
To decrease the price of To decrease the costs associ- To decrease the costs associ-
exiting product ated with the promotion of ated with the distribution of
product product
To reduce negative side To reduce negative side effect To reduce negative side effect
effects of product to target of product to target consumers of product to target consumers
consumers due to the pricing due to the promotion due to the distribution
To reduce negative side To reduce negative side effect To reduce negative side effect
effects of product to target of product to public due to the of product to public due to the
public due to the pricing promotion distribution
Source: Adapted from Sirgy and Lee (1996)

product as well as the future economic implications of using this product. A study
reveals that 72% of customers prefer an EV for economic reasons (e.g. high taxes of
petrol or equivalents for substitute products), while only 26% of them choose this
type of cars due to environmental concerns (Milne 2017).
Companies must consider various variables from the unit cost or the level of
competition to macro-economic conditions in order to determine the right price for
their products. Depending on the effects of these factors, companies can follow
different pricing strategies. However, some pricing approaches are frequently criti-
cized by customers. For instance, dynamic pricing is put under scrutiny of such
customer attention. A telephone survey on 1500 adults shows that people have little
knowledge on the nature of dynamic pricing, which gives companies the legal rights
to charge different prices for different people on the same day (Knowledge@Wharton
2017). Particularly during the online shopping, each customer can pay different prices
exactly for the same product. Using personal information for such price discrimina-
tion betrays the ethical problems regarding with dynamic pricing (e.g. “unfair treat-
ment of consumers, socially unjust allocation of price advantages if persistently
disadvantages the same individuals or groups” etc.) (Miller 2014, 99).
Although pricing is essential for all industries, companies in some industries must
be very sensitive to pricing ethics. In this sense, Spinello (1992) specifically focuses
on the pharmaceutical industry and suggests that some variables such as the nature of
illness, the availability of low-price substitutes, the target end-users of this product
etc. must be considered in the determination of product. The Chief Pharmacy Officer
at the Cleveland Clinic in United States (US), Scott J. Knoer (2016) mentions how
chronic the problem of overinflated price in this sector (e.g. 548% increase in the
price of a drug for autoimmune diseases and allergies, EpiPens or 5455% increase at
lifesaving anti-parasitic medicine of Turing Pharmaceuticals). According to Knoer
(2016), after “a drug company buys a well-established medication developed by
another company. . .it raises the price by an obscene amount” and such an immoral
pricing strategy affects not only patients, hospitals or society, but also it increases the
106 6 Socially Responsible Marketing

burden on insurance companies, employers, employees, the government, and all


taxpayers. It means that such companies solely focus on their own self-interests at
the expense of all other stakeholders.
Supplying goods and services at the right prices, which is objectively determined
based on the relevant and timely criteria, can be very critical in some cases.
However, the Hurricane Harvey that hits Texas at the last week of August 2017
once again demonstrates that disasters can be seen as profitable opportunities by
some organizations. The prices of essential products like water, gasoline, and
batteries increase sharply despite the existence of anti-price gouging laws in the
state; “without the incentive of a profit, suppliers of goods outside the affected area
will be less motivated to bring products into disaster zones” (Purtill 2017). The price
gouging under these circumstances is only tolerated from a purely economic per-
spective; businesses do not want to supply their goods in such areas due to the higher
risks of supplying items during the disasters and the increasing costs that might
hinder the ordinary flow of goods throughout the supply chain. However, those
crises can be the best times for companies to transfer and pool their resources and
competencies through CSR in order to help people and cope with the black markets
for their goods.

6.3.3 Customer Communication

Customer communication is surely the most visible component of marketing mix,


since customers mostly know companies via their marketing messages that are
displayed at different media channels. However, there are also various ethical lapses
and dilemmas at this component like the customer privacy, stealth marketing,
controversial advertising etc. For instance, the access to personal information of
consumer triggers the privacy-related problems such as “vulnerability to fraud,
privacy invasions, unwanted marketing communications, and highly targeted, obtru-
sive marketing communications that disrupt the rhythm of day-to-day activities”
(Martin and Murphy 2017, 135). Particularly internet has given an uncontrollable
power to marketers for collecting vast data on customer preferences and behaviors
(Knowledge@Wharton 2017). The wide acceptance of social media among people
from all around the world increases the scale and nature of data collection and brings
new ethical concerns to the forefront. According to Boyd and Crawford (2012), in
the era of big data, which traces the massive quantities of information about things,
people, or interactions (e.g. health records, government records, social media inter-
actions), new questions are emerging such as this one: “Will large-scale search data
help us create better tools, services, and public goods? Or will it usher in a new wave
of privacy incursions and invasive marketing?” Marketers have always looked for
the opportunities to gather more data about their customers, but currently they should
ask themselves where exactly they have to stop while doing this. Recalling the
first and second basic perspectives of Laczniak and Murphy (2006), marketers
6.3 Socially Responsible Marketing Mix 107

should always put people first and try to achieve a behavioral standard beyond the
legal requirements.
Another important debate in customer communication is about stealth marketing,
which is a hidden marketing technique since the target customer is unaware of the
actions of marketers (Roy and Chattopadhyay 2010). It involves techniques such as
viral marketing, brand pushers, celebrity marketing, bait-and-tease marketing, mar-
keting in video games, marketing in pop and rap music etc. (Kaikati and Kaikati
2004). Although Roy and Chattopadhyay (2010) suggest that stealth marketing can
be used as a strategy to do good for society by generating positive publicity, this
method is still questionable for many others. For instance, if the target customer is
children, marketers must recognize the boundary of children’s cognitive capacity to
understand and critically evaluate the given message; however, most advertising
formats for children still aim to implicitly persuade them to buy the product (Nairn
and Fine 2008). Although the childhood obesity is frequently associated with the
overconsumption of unhealthy snack foods and fizzy drinks, there is a limited
governmental control over the use of fat, salt and sugar in the production of these
products (Campbell 2014) and their advertisements in different media channels
(Boseley 2016).
It is clear that there is no clear-cut solutions for ethical dilemmas in the business
world, but having a set of guiding principles on ethics and social responsibility can
improve the decision-making quality in customer communication. Providing the
reliable, verifiable, and accurate information on product in an ethically acceptable
manner should be the first priority in socially responsible communication strategy.
This approach must involve all forms of customer communication from advertising
to direct marketing and companies should attempt to integrate CSR philosophy
into their core activities. For instance, in socially responsible advertising, which is
sometimes called as corporate image advertising, a company does not aim to present
one of its specific product or product feature; rather it emphasizes the company’s role
in society (Sheehan 2014). This type of advertising might be used to improve the
public image and public relations of an industry (Sirakaya and Sonmez 2000) or a
company. Additionally companies may use advocacy advertising to explain their
stances or announce their supports to a social or environmental cause. For instance,
a Turkish company, Filli Boya, attempted to raise the awareness of public on the
women rights by an advocacy advertisement presented at the International Women’s
Day (Filli Boya 2017). According to Turker and Ozmen (2017), this “feminist voice
in a conservative country” goes much beyond a simple image-building activity. Even
this example can show that in some cases, marketing tools and techniques can
provide the most influential ways of being socially responsible.
In addition to developing socially responsible products, companies should think
about changing the current consumption patterns by designing effective communi-
cation strategies. A study on measuring the impact of CSR education at higher
education system (HES) in Turkey shows that the attitudes of students towards
socially responsible companies positively change as consumers (Toker et al. 2016).
Even a small scale training on CSR can change the students’ buying behaviors
positively (Turker et al. 2014). Therefore, companies can develop collaborative
108 6 Socially Responsible Marketing

programs with education institutions and work together to change the behaviors of
future consumers towards socially responsible consumption. In the Organisation for
Economic Co-operation and Development’s (OECD) policy recommendation report,
consumer education is defined as “a process of developing and enhancing skills and
knowledge to make informed and well-reasoned choices that take societal values and
objectives into account” and business organizations are invited to take active roles
in this process (OECD 2009). In addition to the integration of socially responsible
consumption into formal education system, companies develop advocacy campaigns
to educate and inform their own customers. For example, in order to stop food waste
and “inspire consumers to demand that businesses operate more responsibly”, the
companies like Walmart runs a video in checkout lane to explain consumers how to
minimize food waste at home (Refed 2017). As the masters of persuasion, marketers
can find very innovative ways of convincing customers to consume more socially
responsible way.

6.3.4 Distribution

Socially responsible distribution involves how a company delivers its products to


customers by minimizing its adverse impacts. There are fundamental responsibilities
of companies at this domain towards customers, distributors, society or natural
environment. The delivery of product on time and efficiently is the conventional
responsibility of a company. Beyond such traditional responsibilities, companies
can increase the place and time utility of product by designing a more socially
responsible distribution strategy. For instance, selecting the most appropriate market
coverage strategy is critical for supporting the selling activities. Although companies
carefully design their strategies, some of them find innovative ways to provide a
product whenever and wherever it is needed. As an example, Uniqlo, a US based
textile firm, provides its wool jackets in a vending machine at the airports—in doing
so, the company both increases the visibility of their products, but also it provides the
product for passengers who forget to pack a jacket (Bain 2017). Another product that
is provided at the airport is Iseeka child tracking system for the parents who want to
monitor their children in the crowded places.
On the other hand, companies can transform and redefine the whole distribution
channel by innovating new and socially responsible distribution systems. For exam-
ple, Kindle or Google Scholar are just two examples, which enable customers to
access to large amount of information without wasting resources (Porter and Kramer
2011). By extending its scope, socially responsible distribution can be used for the
BOP markets so that companies can access poor people through innovative ways to
use scarce resources efficiently. Vachani and Smith (2008) mention the case of ITC
Limited, which is a multinational enterprise (MNE) of agricultural commodities, and
how this company uses information technology to empower poor farmers by pro-
viding them real-time market information and market access to sell their products
directly.
6.4 Conclusion 109

Distributors and logistics partners must be integrated into socially responsible


marketing approach of a company as well. For instance, the working conditions of
the distributors’ employees should be monitored and their safety and well-being
must be ensured by a company. As part of supply chain management, which is
explained in detailed in Chap. 5, the distributors’ compliance to the company’s
overall CSR and sustainability approach is critical for the success of CSR. Particu-
larly, when wholesalers and retailers have bargaining power over the actors in supply
chain, they can improve the standards of whole chain. For instance, large European
food retailers, as organizations binding farmers, producers, other distributors, and
customers, take the role of change agents for the sustainability of whole food chain
(Chkanikova and Kogg 2011) in terms of food safety, animal welfare, ethical
trading, human rights, and social welfare (Jones et al. 2005).
On the other hand, in line with the disintermediation trend, which has altered
the traditional distribution channel system by taking the advantage of advanced
communication technologies, all companies have encountered various threats and
opportunities (Ritchie and Brindley 2000). In the case of tourism sector, the use of
advanced technology triggers the disintermediation and while some new business
models emerge like online reservation companies (e.g. Booking.com) or peer-
to-peer marketplaces (e.g. Airbnb), traditional models like tourism agents are
disappearing or converting their business through diversifications. The same pattern
is evident in many sectors. It can be understandable for a hotel to work with these
new forms of businesses to ensure its full capacity; but it might be a responsibility for
a hotel to look for new collaboration areas with its former longstanding business
partners or support them during the transition process.

6.4 Conclusion

According to Maignan et al. (2005), even if there is no pressure from any stakeholder,
marketers who are committed to some key values and norms can go beyond what it
expected and demanded from them. However, in practice, companies usually prior-
itize some of their stakeholders based on the power of these stakeholders as well as
their own self-interest (Ozturkoglu and Turker 2013). According to the aforemen-
tioned stakeholder resource-based view of Sodhi (2015) (pls. see Chap. 5), stake-
holders should be equally treated regardless of their power. A company might derive
the ethics of its responsibilities towards its indirect stakeholders from a consequen-
tialist (what should be right action?) or deontological views (what can be the possible
results of our action in the future?) (Turker and Altuntas 2013). In both cases, the
existence of some guiding principles and standards may help companies to reconcile
diverse interests of stakeholders. For instance, considering the strict competition and
market share wars, companies mostly neglect their relationship with competitors.
Spence et al. (2001) call competitors as “forgotten stakeholder” and imply that they
can be very important in some cases. For instance, small or medium sized enterprises
(SMEs) can collaborate with their competitors to build a value-laden framework of
110 6 Socially Responsible Marketing

producing and selling socially responsible products. As an example, the small-scale


sugar plantations of Guatemala formed such a cooperative of farms to pool their
resources and capabilities in order to address their social responsibilities (Visser
2012).
This chapter reviewed some ways of being socially responsible at the four
domains of marketing mix. It can be noticed that there are many different and
creative ways for marketers. By taking the boundary-spanning role in organizations,
marketers can work as an early warning system while recognizing the social
and environmental concerns of their customers, who are the members of a larger
society. They may initiate and contribute a lot to a comprehensive change in their
organizations.

Critical Highlight 6. Developing Socially Responsible Products


for Socially Responsible Buyers: Tesla Motors and Future of Electric
Vehicles
Although electric vehicles (EV) segment currently represents 1% of 17.5
million cars sold in US/ 2016, the demand has increased by the efforts of
some leading companies like Tesla Motors. By targeting one million con-
sumers as of 2020, Tesla does not compete with other EV producers; the
competition is with the gasoline engines (Coren 2017). According to the data,
the distribution of car sales at US electric vehicles market in 2016 climbs
quickly and it is clear that Tesla provides the leading brands of this market by
29,421 cars for Tesla Model S and 17,129 cars for Tesla Model X (Fleetcarma
2017).
In his letter to the investors, Tesla Chief Executive Officer (CEO), Elon
Musk mentions the company’s newest brand, Model 3, and how this product
will contribute to the company’ overall mission of accelerating the world’s
transition to sustainable energy by introducing first solar roofs, designing
with greater simplicity and fewer components etc. (Tesla 2017). The existence
and availability of such products will gradually change the consumers’
perception and turn them into more socially responsible buyers. However, a
radical paradigm change on consumer perception towards United Nation’s
(UN) 2030 sustainable development goals (SDGs) cannot be accomplished by
the attempts of business organizations. Recalling the Hyundai example in
Chap. 2, without the support of governments to build the recharge stations
and necessary infrastructure, none of these companies can succeed at selling
socially responsible products. In the case of EVs, although some countries
have ambitious targets to increase fuel station coverage [e.g. in Norway, as
the world leader of EVs, “about 35% of new cars are sold with a plug, and the
country has a target of zero emissions for all new cars by 2025” (Milne
2017)], there is no obvious strategy in most developed and developing coun-
tries. The dearth of stations in those countries will certainly limit the future
sale of such emission-free cars among customers.

(continued)
References 111

Some companies provide different solutions for the problem—Taiwanese


startup Gogola provides the scooters with swappable battery packs; cus-
tomers buy a vehicle with a membership access to charging network to swap
depleted batteries for fresh ones, rather than parking at a charging station for
plugging in his/her scooter (Hao 2017). All in all, creating socially responsi-
ble customers who are ready to adopt the future transportation alternatives
requires a viable governance system, which involves the supports of all
organizations in a society.

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Chapter 7
Socially Responsible Finance
and Accounting

Every organization must back up their socially responsible activities with a sound
financial and accounting system by planning the need, allocation, and spending of
funds as well as measuring, interpreting, and communicating the impacts of such
activities. Grounding corporate social responsibility (CSR) in organizations can be
accomplished by taking a socially responsible perspective at finance and accounting
too. Huang and Watson (2015, 3) state that “there is a natural link between CSR and
accounting because the accounting profession has a general responsibility for the
measurement, disclosure, and assurance of information, including CSR-related
information”. In the literature, however, the link between CSR and these business
functions has been often reduced to the impact of CSR on financial performance.
Although this research track has uncovered interesting and, sometimes, contradic-
tory findings, it is just one of the organizational level outcomes of CSR (pls. see
Chap. 9). CSR can be linked with finance and accounting in many ways.
Although finance managers were found as the least interested group with social
responsibility among all functional level managers due to their limited contact with
external stakeholders and the quantitative nature of their task in the 1990s (Petrick
and Scherer 1993), this has changed over time. After particularly the corporate
scandals surrounding large corporations of United States of America (USA), such
as Enron or WorldCom, by unmasking the fraudulent accounting practices and
manipulations on earnings, the finance and accounting managers are held more
responsible from the socially responsible conduct of their companies. The study of
O’higgins and Kelleher (2005) shows that against an unethical conduct, both human
resources managers and finance managers would be more disapproving than mar-
keting managers would. On the other hand, sustainability becomes one of key
themes that has consistent influences on decision making processes of chief finance
officers (CFOs) (Coleman et al. 2010). However, a survey of McKinsey & Company
and Canada Pension Plan Investment Board reveals that 79% of managers feel the
heavy pressure of short-termism, which emanates from the board of directors,
executive team, private-equity investors, institutional shareholders, banks and/or
debt holders etc. (Bailey et al. 2014). Therefore, the first and foremost prerequisite

© Springer International Publishing AG, part of Springer Nature 2018 115


D. Turker, Managing Social Responsibility, CSR, Sustainability, Ethics &
Governance, https://doi.org/10.1007/978-3-319-91710-8_7
116 7 Socially Responsible Finance and Accounting

for integrating CSR into finance and accounting is to cultivate a socially responsible
mind-set among functional managers. According to Shrivastava (1995, 130), devel-
oping an eco-centric management paradigm can assign new roles for each business
function such as “finance aims for long-term sustainable growth, instead of short-
term profits. Accounting seeks to incorporate social and environmental costs of
production, instead of externalizing them”. Therefore, they must learn how to
balance the short-term and long-term demands by developing a socially responsible
approach.

7.1 Financing CSR

In addition to many factors at the individual, organizational, and contextual levels,


socially or environmentally responsible activities also depend on the availability of
excess funds (Waddock and Graves 1997; Wahba 2010 etc.). However, after all, the
existence of excess money for CSR is a matter of intention and choice in most cases.
Although the CSR budgets of companies are increasing, the aggregate amount
devoted to CSR is still very low when compared to overall financial strengths of
companies. For instance, the Fortune Global 500 companies from USA and United
Kingdom (UK), including Oracle, Prudential, Merck, Johnson & Johnson etc., spent
$15.2 bn for CSR as of 2014 (Smith 2014). Considering the total market values of
these companies, which account for $14,236,630.3 mn for US and $2,343,502.8 mn
for UK firms (Dullforce 2014), this amount is very low. In a similar vein, CSR
spending of FTSE 100 companies is around 11% by rising £12.5–£13.9 mn, which
accounts for only 0.8% of pre-tax profits (B2B Marketing 2014).
The global CSR spendings of companies are low when considering the urgency
of needs too. For instance, although there is a budgetary shortfall of $26 bn at the
field of education annually, Fortune Global 500 companies can spare only $2.6 bn on
education per year (Watson 2015). Table 7.1 shows five top-tiers among these
corporations and brief information on their pioneering projects on education.
The survey of McKinsey Company (2011) on 3203 executives shows that the
budgeting is a business process wherein sustainability is the least integrated. On the
other hand, although CSR costs are “minuscule compared to virtually any other line
item in a company’s budget”, “spending in this area is scrutinized closely” within the
company; because managers think that it is almost impossible to pinpoint the return
on investment of social spending, but if they do not allocate resource to CSR they
may risk at their social approval (Klein 2014).
Beyond the short-term financial benefits, managers must incorporate the multiple
bottom lines under the domains of environment, social, and governance (Bassen and
Kovacs 2008). However, sometimes, the short-term thinking becomes a character-
istic of investors and transmitted to managers like in the case of the Chief Executive
Officers (CEOs) of Procter & Gamble, Honeywell, or Pfizer that are under the
pressure of activist investors to split up their companies (Staley 2017). Balancing
the short-term and long-term demands has been always one of the hard-core tasks for
7.1 Financing CSR 117

Table 7.1 Five companies spending most on education


Percent of
Country Educational CSR
Company of origin spending budget (%) Pioneer program (if any)
Banco Spain $196.5 mn 79 The Becalos project gave ATM users
Santander the option of donating five pesos to
education
IBM USA $144 mn 72 As a partnership program, KidSmart
early learning aims to use technology to
help beginning students around the
globe
Telefonica Spain $129.9 mn 65 Company integrates information tech-
nologies into classrooms around the
globe
ExxonMobil USA $115.5 mn 39 As a sponsorship program, national
math and science initiative works to
improve math and science education in
the US
Target USA $95.2 mn 37 Company spend $1 bn on education
Source: Watson (2015)

finance and accounting managers. Being a forward-thinking manager who can


manage the diverse and conflicting goals of stakeholders can be seen as a talent
that can be obtained over time. Probably because of this, the experienced Chief
Financial Officers (CFOs) might engage in CSR more (Sun and Rakhman 2013).
Integration of CSR into whole business functions should be projected in the long
term by designing short-term and long-term capital needs. The large scale sustain-
able transformations cannot be covered by a single actor in a market, even if this
actor is government. Andreas Halse, an environmental spokesman from Norway, as
the leading country in the sale of electric vehicles (EVs), states that “what we have
proven in Norway is that if you give enough subsidies and impose enough restric-
tions on fossil fuel vehicles, people will buy electric. If we want to continue to be an
example for the rest of the world we need to show how this can be commercial. We
need to get there because we can’t rely on public finances forever” (Milne 2017).
Currently, Norway provides significant incentives for EVs (e.g. 25% tax exemption)
and this governmental support accelerates the rate of adoption ten times higher than
other markets by reaching 37% of new car sales (Lambert 2017). In order to build the
viable systems that can be self-sustained in the long run, there is a need for the
involvement of diverse stakeholders in a societal and economic governance model
by using the tools of free market economy.
Since there are always some short-term thinkers in and around the organization,
this cannot be accepted as an excuse for a company to focus less on CSR or
sustainability. According to Steven Kaplan, a business professor at the University
of Chicago, the managers have always complained about the short-term investing,
however, the existence of some companies like Amazon or Tesla that have not taken
the attention of activists’ investors yet, show that market can reward the valuable
118 7 Socially Responsible Finance and Accounting

companies with good investment (Staley 2017). It seems that The relentless com-
mitment on the long-term growth instead of the short-term profit focus (Atlas 2017a)
does not demotivate the investors of Amazon (Atlas 2017b); “An investor who put
$100 into Amazon’s initial public offerings (IPO) would have turned it into $63,990
on the company’s 20th anniversary this May” (Gershgorn et al. 2017).
It seems that Amazon’s obsession on growth and stock market performance does
not reduce its attention to CSR; its stock has been among the top ten constituents of
the S&P 500 Environmentally & Socially Responsible Index (SPXESRP) (S&P
Dow Jones Indices 2017). The company has also mitigated the raised criticisms on
its unsustainable practices on employee treatment, recycling etc. by hiring experts
(Gunther 2016) and investing on sustainability and social responsibility (Amazon
2017). Both financial and non-financial indicators should be monitored in order to
assess to what extent Amazon will commit to its socially responsible and sustainable
business principles in the future.

7.2 Socially Responsible Investment

Today, many investors include CSR as a criterion for their investment. However,
investors may differ in their line of reasoning when they are interested in CSR. For
some investors, CSR is viewed as a proxy for the corporate transparency and
accountability that may mitigate the future environmental or social risks. For
example, the turmoil in Volkswagen after the notorious emission scandal (Hotten
2015), in which company deliberately intervenes to circumvent emissions control by
designing a software for the aim of obtaining an unfair advantage over its compet-
itors (Dans 2015), has affected the whole operations of company—including its
stock prices as well. The stock price of company sharply declined by the 18th of
September, 2015, and it has not recovered yet, as of October 2017 (Bloomberg
2017). Obviously, investors are looking for the best option that would not risk their
investments due to such problems. Based on an experimental study, the CSR
assurance, which helps investors to make decision by showing the credibility of
CSR reports, positively affects the investors’ willingness to invest in a company
(Shen et al. 2017).
Such socially and environmentally irresponsible behaviors of companies have
also altered the perception of investors. The number of investors who do not care
CSR so long as a company is profitable has decreased at the last decades. According
to Harvard Professor and Nobel laureate Oliver Hart and the Faculty Director of the
Stigler Center and Professor at University of Chicago Luigi Zingales, shareholders
are not only care about money, they can be also concerned with ethical and social
issues like other ordinary people and, therefore, a company should prioritize ‘the
maximization of shareholders’ welfare, not value’ (Schechter 2017). In this case,
CSR is not only viewed as an attractive criterion for risk averse investors; many
investors want to support and encourage socially responsible companies by investing
in them too. The study of Ioannou and Serafeim (2015) on a sample of publicly
7.2 Socially Responsible Investment 119

traded firms in USA over 15 years reveals that the opinions of financial analysts
about the socially responsible firms has changed over time; “in the early 1990s,
analysts issue more pessimistic recommendations for firms with high CSR ratings.
However, analysts progressively assess these firms more optimistically over time”.
In line with the development of socially responsible investment (SRI) notion, the
investors can find diverse investment options depending on their motivations and
priorities. SRI can be traced back to the ethical funds that emerged in USA in the
1920s by relying on the promoters’ religious values to exclude the industries such as
alcohol, tobacco or weapon; during the 1960s, socially responsible funds revolved
around moral values based on the criteria of human resources, environments and
product quality (Crifo and Mottis 2016). According to Sparkes and Cowton (2004,
47), the inception of socially responsible retail funds in USA and UK, in 1971 and
1984, respectively, has built on this avoidance approach, which is “relatively
straightforward and negative approach of excluding shareholdings in companies
judged to be unethical”. This approach is still very common among the investors,
who do not want to invest in socially irresponsible companies.
Another group of investors includes people who really care CSR and want to
praise those companies. Sparkes and Cowton (2004) state that SRI has changed in
size and establishment of funds; although it started with the traditional avoidance
approach, it becomes more mature by the inclusion of different approaches over
time. In line with the increasing attention of investors towards CSR and sustainabil-
ity, SRI market has grown over time and diversified by the integration of different
approaches. As the tomorrow’s investors, millennials will control $30 trillion over
the next 40 years and women will control the half of private equity in USA by 2020;
since both groups tend to seek out sustainable investments options, a significant
amount of capital will pool to SRI funds (O’Connor and Labowitz 2017).
By defining sustainable and responsible investment as “a long-term oriented
investment approach, which integrates Environmental, Social and Governance
(ESG) factors in the research, analysis and selection process of securities within an
investment portfolio”, Eurosif (2012, 10; 2016, 9) identifies seven strategies of asset
managers to incorporate CSR and sustainability into their investment decisions:
– Sustainability themed investment: Investment in themes or assets linked to the
development of sustainability. Thematic funds focus on specific or multiple
issues related to ESG such as climate change, eco-efficiency and health. Since
2008, funds are required to have an ESG analysis or screen of investments in
order to be counted in this approach.
– Best-in-class investment selection (Positive/best-in-class screening): Approach
where leading or best-performing investments within a universe, category, or
class are selected or weighted based on ESG criteria. This approach involves the
selection or weighting of the best performing or most improved companies or
assets as identified by ESG analysis.
– Norms-based screening: Screening of investments according to their compliance
with international standards and norms. International norms on ESG are those
defined by international bodies such as the United Nations (UN).
120 7 Socially Responsible Finance and Accounting

– Exclusion of holdings from investment universe (Negative/exclusionary screen-


ing): An approach that excludes specific investments or classes of investment
from the investible universe such as companies, sectors, or countries. Common
criteria include weapons, pornography, tobacco and animal testing. This
approach is also referred to as ethical- or values-based exclusions, as exclusion
criteria are typically based on the choices made by asset managers or asset
owners.
– Integration of ESG factors in financial analysis (ESG integration): The explicit
inclusion by asset managers of ESG risks and opportunities into traditional
financial analysis and investment decisions based on a systematic process and
appropriate research sources. The integration process focuses on the potential
impact of ESG issues on company financials (positive and negative), which in
turn may affect the investment decision.
– Engagement and voting on sustainability matters (Corporate engagement and
shareholder action): Engagement activities and active ownership through voting
of shares and engagement with companies on ESG matters. This is a long-term
process, seeking to influence behaviour or increase disclosure. Engagement and
voting on corporate governance only is necessary, but not sufficient to be counted
in this strategy.
– Impact investment (Community investment): Impact investments are investments
made into companies, organizations and funds with the intention to generate
social and environmental impact alongside a financial return. Impact investments
can be made in both emerging and developed markets, and target a range of
returns from below market-to-market rate, depending upon the circumstances.
Investments are often project-specific, and distinct from philanthropy, as the
investor retains ownership of the asset and expects a positive financial return.
Impact investment includes microfinance, community investing, social business/
entrepreneurship funds and French fonds solidaires.
The aforementioned strategies may attract investors with diverse motivations.
The recent report of Global Sustainable Investment Alliance (GSIA) shows that the
global sustainable investment assets have increased from $18.28 trillion in 2014 to
$22.89 trillion in 2016 (Table 7.2). While the total growth rate is around 25%, their
proportion in total managed assets has declined from 30.2% in 2014 to 26.3% in
2016.
Table 7.3 presents the composition of seven strategies in terms of assets values
and percentages. It can be noticed that negative/exclusionary screening has the
largest share among all asset management strategies in both years. All assets have
grown in the given period and impact/community investing has obtained the highest
compound annual growth rate (CAGR).
According to Gustke (2017), some truths on SRI have been more apparent over
time:
– SRI funds perform as well as traditional stock funds.
– As algorithms to identify ESG (environmental, social and governance) factors
improve, there is a better chance for SRI outperformance.
7.2 Socially Responsible Investment 121

Table 7.2 Sustainable and responsible investment assets by region: growth and proportion to total
managed assets (2014–2016)
2014 2016 Growth over Compound annual
Region Bn $ %a Bn $ %a period (%) growth rate (%)
Europe 10,775 58.8 12,040 52.6 11.7 5.7
United States 6572 17.9 8723 21.6 32.7 15.2
Canada 729 31.3 1086 37.8 49.0 22.0
Australia/New Zealand 148 16.6 516 50.6 247.5 86.4
Asia ex Japan 45 0.8 52 0.8 15.7 7.6
Japanb 7 474 3.4 6689.6 724.0
Total 18,276 22,890 25.2 11.9
Global 30.2 26.3
Source: GSIA (2016, 7)
a
The proportion of sustainable and responsible investment assets in total managed assets
b
Asia figure includes Japan in 2014, but excludes Japan in 2016

Table 7.3 Growth of seven strategies (2014–2016)


2014 2016 Growth over Compound annual
Strategy (Bn $) (Bn $) period (%) growth rate (%)
Impact/community investing 101 248 146 56.8
Sustainability themed investing 137 331 140 55.1
Positive/best-in-class-screening 890 1030 16 7.6
Norms-based screening 4385 6210 42 19.0
Corporate engagement and 5919 8365 41 18.9
shareholder action
ESG integration 7527 10,369 38 17.4
Negative/exclusionary 12,046 15,023 25 11.7
screening
Source: GSIA (2016, 9)

– SRI funds face two major hurdles: Any actively managed fund will struggle to
beat an index fund, and any fund with an annual fee higher than the cheapest
traditional index fund or ETF version starts at a disadvantage.
– Socially responsible funds that focus on excluding stocks, rather than identifying
stocks that score highly on ESG metrics, have a harder time generating good
long-term performance.
The birth and growth of SRI markets generate a powerful mechanism over the
companies’ decisions towards the development of nonfinancial policies and perfor-
mance (Crifo and Mottis 2016) and contribute to the development of CSR and ethics
among companies ultimately (Scholtens 2006). However, there are still some crucial
steps that must be taken to achieve a better mechanism. In their study, O’Connor and
Labowitz (2017) choose 12 leading measurement frameworks for the social assess-
ment (labor and other human rights issues) and classify them under three groups as
company focused [global reporting initiative (GRI), Sustainable Accounting Stan-
dards Boards (SASB), UN Guiding Principles Reporting Framework], investor
122 7 Socially Responsible Finance and Accounting

focused (Dow Jones Sustainability Index, FTSE ESG Ratings, Bloomberg Social
Indicators), and human rights focused standards (Access the Medicine Index,
Enough Project’s Rankings on Conflict Minerals, Oxfam’s Behind the Brands,
Ranking Digital Rights’ Corporate Accountability Index, Know the Chain—ICT
and Food & Beverage Benchmarks, Corporate Human Rights Benchmark). The
findings on the evaluation of social indicators at these 12 measurement frameworks
show that these assessment of social indicators have several major problems:
– Social measurement almost exclusively targets efforts (92%), not effects (8%).
– ‘Social’ is defined in a multitude of (often vague or limited) ways, making it
difficult to draw conclusions about company performance.
– Lack of clarity in measuring ‘Social’ increases costs for investors and companies.
– Supply chains merit special focus, but are largely missing from evaluations of
‘Social’.
– In the current ESG landscape, transparency too often functions as a substitute for
more meaningful measurement of performance.

7.3 Measuring and Monitoring CSR

The absence of quantifiable objective metrics and tools to assess the investment on
CSR can be one of the major obstacles to convince managers to increase their CSR
budgets (Klein 2014). In order to surmount this structural barrier, there is a need for
the development of a reliable and verifiable measurement and monitoring process.
There are many alternatives to measure, monitor, and assess the level of progress at
sustainability such as surveys, award schemes, investors’ criteria, benchmarking,
sustainability indexes, external communication tools, accreditation processes, stan-
dards and codes, sustainability indicators, metrics for sustainability performance,
non-quantifiable sustainability initiatives (Székely and Knirsch 2005). Each of these
methods has some pros and cons. For instance, while surveys are the best way of
examining the stakeholders’ opinions on the environmental performance, they are
not objective at all; this method can provide the perceptions of respondents, which
may not be exactly same with reality.
Since the progress at CSR can be measured and monitored both internally and
externally, a company can adopt a system that integrates several different approaches
to increase the reliability and accuracy of process. The internal process starts with
identifying the right indicators, which range from environmental performance met-
rics to diversity ratios, and building a system that objectively produces comparable
outcomes for managers. According to the guideline of United Nations Conference on
Trade and Development (UNCTAD), the core indicators of corporate responsibility
must meet following criteria (UNCTAD 2008, 11–13):
– Comparability: the indicator should be compared over time and across
organizations.
– Relevance and materiality: the indicator should meet the needs of organization
to make better decisions. The materiality of an information depends on its impact
7.3 Measuring and Monitoring CSR 123

on the user’s decisions when it is omitted or misstated. Since it can be difficult


to determine the materiality or importance of an information, an organization
can consult the material importance to the related officers or important
stakeholders etc.
– Understandability: The manner of presentation should be based on the know-
ledge and experience of users. A good design, systematic classification of
topics and indicators, concise use of language etc. can increase the level of
understandability.
– Reliability and verifiability: While reliability is about whether the information is
free from material error and bias and whether it gives a true, complete and
balanced view of actual situation in neutral and fair manner. Additionally, the
indicator should allow for internal or extern verification and comparison.
Based on these criteria and considering the constraints of data collection process,
such as costs and benefits, confidentiality, and timeliness, a company can develop a
set of criteria to assess “the long-term viability of an enterprise by balancing the
needs of its stakeholders” (UNCTAD, 2008). However, many times, the pressures
for increasing the short-term performance have shortened the time horizon for
their review of strategy, which is 2 years for 44% of managers, and they cannot
focus on the non-financial metrics as much as they want. Bailey et al. (2014)
comparatively show the types of information, which are currently used to make
decisions (Already in use) and would be most helpful to base long-term decisions
(Most helpful), respectively. The longer the strategic term for decision-making, the
more non-financial indicators are taken into account. By the extension of period, the
managers’ attention shifts towards the metrics such as customer satisfaction, diver-
sity and environmental performance.
Balancing the short-term and long-term pressures is one of the major responsi-
bility of managers. For many managers, however, financial measures are in parallel
to the non-financial variables in organizations. In the study of Coleman et al.
(2010, 616), a CFO of manufacturing firm states that “key performance measures
on our business are in fact all about sustainability. They are about energy usage,
waste, health and safety measures, lost time injury frequency rates. . . all this is now
being branded as sustainability, but in fact it’s all about economics, about smart
ways of doing business.” In their study, Figge et al. (2002) incorporate environ-
mental and social aspects into the Kaplan and Norton’s balanced scorecard that is a
performance measurement and management tool for linking the financial and
non-financial as well as the short-term and long term measures. Based on some
basic requirements, the authors suggest following three steps to develop a sustain-
ability balanced scorecards (SBSCs): (1) finding strategic business unit, (2) identi-
fying environmental and social aspects, and (3) determining the strategic relevance
of those aspects to financial, customer, internal process, and learning and growth
perspectives. The authors show an exemplary SBSC for a company by indicating
the indicators, targets, and measures to improve its sustainability (Figge et al.
2002, 282).
124 7 Socially Responsible Finance and Accounting

In addition to the internal mechanism, companies can also adopt external mea-
surement and monitoring approaches. Among external mechanisms, accreditation
systems are surely one of the most widely used methods by the companies. Some of
these systems are provided in the following:
– SA8000 Standard: It was established by Social Accountability International in
1997 to provide a framework to the fair treatment of workers in organizations.
Reflecting the labor provisions of the Universal Declaration of Human Rights and
International Labour Organization (ILO) conventions, SA8000 Standard involves
nine elements: child labor, forced or compulsory labor, Health and Safety,
Freedom of Association and Right to Collective Bargaining, Discrimination,
Disciplinary Practices, Working Hours, Remuneration, and Management System
(SAI 2017).
– ISO 14000 Family: The International Organization for Standardization (ISO)
develops the family of ISO 14000 to “help organizations to take proactive
approach to managing environmental issues” on a wide spectrum of portfolio
including audits, communications, labelling, life cycle analysis etc. (ISO 2017).
– AA1000 Series of Standards: These standards of sustainability is provided “to
demonstrate leadership and performance in accountability, responsibility and
sustainability” by AccountAbility as a global consulting and standards firm. It
includes principles standards, assurance standards, and stakeholder engagement
standards (AccountAbility 2017).
The adoption of such systems may increase the level of commitment to social
responsibility within an organization as well as improve its credibility among its
stakeholders. Such organizational level outcomes can be obtained by the involve-
ment of companies into the reputation index and ratings too. According to Brammer
and Pavelin (2016, 455), “there is a significant relationship between a firm’s
reputation and the extent to which that firm is perceived by its stakeholders to be
behaving responsibly”. However, if such rewarding systems are easy to obtain, the
tendencies towards legitimacy search among some companies may jeopardize the
reputation of company (Mueller et al. 2009). Therefore, organizations must avoid
adopting suspicious standards and indices, which have lower level standards.

7.4 Communicating and Reporting CSR

Hart and Zingales (2017, 5) claim that “many investors are prosocial even though
they are willing to hold the shares of tobacco or gun companies. . . each individual
puts some weight on doing the right or socially efficient thing, but only if he feels
responsible for the action in question”. However, increasing the feeling of respon-
sibility among investors depends on to what extent the company is transparent and
provides the accurate and reliable information to its stakeholders about its opera-
tions, decisions, and outcomes. By the increasing demand for the CSR-related
information, CSR communication has gained a considerable attention among
7.4 Communicating and Reporting CSR 125

Fig. 7.1 Integration of domains in sustainability and social responsibility communication

practitioners and scholars. Based on the emphasis of critical theory on communica-


tion and stakeholder involvement, Turker and Toker (2017) provide a conceptual
framework for integrated sustainability and social responsibility communication
(ISSRC). Critical theory highlights that the stakeholder involvement into decision-
making process (Deetz 1995) enables us to obtain a better governance system (Kuhn
and Deetz 2008) under the managerial coordination on the conflicting interest of
those stakeholders (Deetz 2006). According to the authors, the integration of sus-
tainability and social responsibility into communication can be carried out in four
domains (Fig. 7.1). Organizations should build a system that allows the participation
of all stakeholders whenever they need and want to involve into the process. On the
other hand, the components of communication must be compatible with each other.
For instance, a message must be delivered to its recipients by choosing the most
appropriate channel.
Today, a company can make both financial and non-financial disclosures. A
survey on 4500 companies from 45 countries reveals that the average rate of
reporting CSR is around 73% globally and the companies from Asia-Pacific regions
are the leaders by achieving 79% reporting rate (KPMG 2015). While CSR disclo-
sure has been affected by the variables such as the country of origin or industry of a
company (Wanderley et al. 2008), the higher a company provides its social infor-
mation, the greater it has a market value (Qiu et al. 2016). Moreover, the reporting of
CSR activity helps companies to gain legitimacy and attract the high quality
graduates too (Duff 2016). Therefore, even from an instrumental point of view,
CSR reporting has become as important as the disclosure of financial information.
As one of the most widely used paradigm, the triple bottom line (TBL) enables
companies to combine their financial and non-financial disclosures within economic,
126 7 Socially Responsible Finance and Accounting

Table 7.4 GRI’s topic-specific standards


GRI 200: Economic GRI 300: Environmental GRI 400: Social
201: Economic performance 301: Materials 401: Employment
202: Market presence 302: Energy 402: Labor/management relations
203: Indirect economic 303: Water 403: Occupational health and safety
impacts 304: Biodiversity 404: Training and education
204: Procurement practices 305: Emissions 405: Diversity and equal
205: Anti-corruption 306: Effluents and waste opportunity
206: Anti-competitive 307: Environmental 406: Non-discrimination
behavior compliance 407: Freedom of association and
308: Supplier collective bargaining
environmental assessment 408: Child labor
409: Forced or compulsory labor
410: Security practices
411: Rights of indigenous peoples
412: Human rights assessment
413: Local communities
414: Supplier social assessment
415: Public policy
416: Customer health safety
417: Marketing and labeling
418: Customer privacy
419: Socioeconomic compliance
Source: GRI (2016)

social, and environmental categories. However, the weight of each domain in a


disclosure document might vary according to institutional, cultural or regulatory
factors (Ho and Taylor 2007).
The lack of standardization across corporate disclosures motivates some interna-
tional organizational to develop a common set of rules and frameworks. As a
network-based organization, GRI develops a sustainability reporting framework on
a TBL approach by following the principles of balance, comparability, accuracy,
timeliness, clarity and reliability. Based on the most recent guideline, the topic-
specific standards of GRI sustainability reporting can be found in Table 7.4. For
instance, as an economic standard, anti-corruption includes the disclosures on
“operations assessed for risks related to corruption, communication and training
about anti-corruption policies and procedures, confirmed incidents of corruption and
actions taken”, while a social indicator, training and education is composed of
“average hours of training per year per employee, programs for upgrading employee
skills and transition assistance programs, percentage of employees receiving regular
performance and career development reviews” (GRI 2016). Despite the increasing
interests of companies to CSR and sustainability reporting, according to Roland
Schatz, the founder of United Nations (UN) Global Sustainability Index Institute,
“The sustainability report of a company is not legally binding and is therefore of less
relevance. It can turn into greenwashing” (Morrison 2017).
According to a survey on corporate responsibility reporting, although GRI remains
the most popular among the companies, the increasing number of companies has
References 127

connected their activities and reporting with the UN’s 17 Sustainable Development
Goals (SDGs) too (KPMG 2017). The 82% of 100 blue chip companies, which have a
combined market cap of $9.781 trillion US dollar, disclosed the commitment to the
SDGs in the 2016 reports (UNGSII 2017). UNGSII’s visibility analysis (2017) shows
that while Volvo, Novartis, and Sainsbury are the companies that are communicating
SDGs most in the annual reports, some companies like Walmart, Pfizer, Disney, Apple
or Costco have not communicated the SDGs yet. It can be noticed that European
companies are better than American companies in the rankings.
Although reporting has been ubiquitous practice across companies, there are
some critics towards such efforts by seeing them as a waste of time and money or
simply greenwashing activity (de Boer 2013). Obviously, a company can build its
own rhetoric when writing its report and tend to exaggerate their solutions towards
CSR or simplify some problems at the factory floor (Turker and Altuntas 2014).

7.5 Conclusion

The integration of CSR into finance and accounting can be accomplished by


considering the dynamic interactions among the aforementioned domains. For
instance, sparing a sufficient amount of fund for CSR is vital to initiate the change
across the organization. Then, measuring and monitoring CSR based on the financial
and non-financial performance indicators enable to assess the level of progress at the
organizational and societal level. If organizations develop better systems to scruti-
nize the implications of CSR at the organizational level, it becomes much easier to
monitor larger scale impacts on the institutional and global levels. Additionally,
communicating CSR with the internal and external stakeholders can also increase the
quality of decisions and activities. In doing so, today, most companies focus on
reporting CSR and sustainability better. Despite the existence of several frameworks
that can guide companies on how to prepare their CSR reports in a standardized
manner, the companies must think about aligning their reporting schemes with the
SDGs too. Moreover, these reports should include the reliable, verifiable, and
accurate information on a company’s socially responsible decisions, actions, and
outcomes, rather than a sterile document, which reflects the aspirations of companies
or includes some false or unreliable information.

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Chapter 8
Social Responsibility and Human Resource
Management

The review of popular definitions during the last decades shows that almost all
corporate social responsibility (CSR) definitions emphasize a social dimension by
mentioning social stakeholders or responsibilities towards them. Recalling the
United Nations’ (UN) sustainable development goals (SDGs), the responsibilities
towards social stakeholders are essential for all business organizations. As one of
these social stakeholders, employees and their rights are clearly indicated under
Goal-8: Decent work and economic growth. In line with this overarching goal,
employees must be at the top of CSR agenda in any organization.
Since employees are the primary stakeholders of companies, CSR perception can
be built around the contributions of companies to their current and prospective
workforce. The findings of a large scale CSR survey on 27 European Union (EU)
member states reveal that while job creation (57%), contributing to economic growth
(32%), and providing training to employees (31%) are considered as the most
positive impacts of companies over society, corruption (41%), reducing staff
(39%), and environmental pollution (also 39%) are at the top in the list of most
negatively affecting variables (Flash Eurobarometer 2013). Today, company’s
human resources management (HRM) and its alignment with CSR is closely mon-
itored by overall public and media. The increasing societal expectations and pres-
sures affect to the degree and intensity of CSR towards employees. A survey on a
sample of Belgium companies measures to what extent the companies perform at six
themes of CSR (human resources, human rights, environment, customers and
suppliers, community involvement and corporate governance) and the authors find
that the highest number of companies are active in human resources (Louche et al.
2009). This result, which shows the centrality of HRM in CSR construct in Belgium,
is not a surprise when considering the tradition of union activism in this country
(Heene et al. 2005).
HRM and CSR are closely interrelated with each other at least in two domains.
While taking better care of their employees and improving the conditions and well-
being is core element at a company’s social responsibility approach, CSR towards
other stakeholders, such as customers, can manifest itself at the behaviors of

© Springer International Publishing AG, part of Springer Nature 2018 131


D. Turker, Managing Social Responsibility, CSR, Sustainability, Ethics &
Governance, https://doi.org/10.1007/978-3-319-91710-8_8
132 8 Social Responsibility and Human Resource Management

employees (Bučiūnienė and Kazlauskaitė 2012, 6). Particularly in the service sector
businesses, like the one in hospitality industry, happy employees are necessary for
happy customers; however, making employees happy requires to treat them as team
members, provide them training opportunities and give them the tools and policies
for doing their job (Garlick 2010). Therefore, HRM should be embedded into the
overall CSR approach of an organization.
The review of literature shows that being a socially responsible employer posi-
tively affects some important employee outcomes (Aguilera et al. 2007; Brammer
et al. 2007; Peterson 2004; Turker 2009). On the other hand, organizations that have
a more developed HRM, have also better CSR policies, which in turn affect the
organizational and financial performance (Bučiūnienė and Kazlauskaitė 2012). In a
similar vein, the content analysis of World Business Council for Sustainable Devel-
opment (WBCSD) members’ websites indicates that many companies try to link
their sustainability efforts with HRM and communicate this information with their
important stakeholders (Ehnert 2008). This chapter attempts to provide the backbone
of such an integration between HRM and CSR based on the main responsibilities of
companies towards their current and prospective employees.

8.1 Towards a Policy Framework

Since CSR is seen as a voluntary business activity, there is no formal and one single
way of conducting CSR at HRM. Although the legal frameworks have the strongest
effect over companies to consider their obligations towards employees, they say little
about the changing dynamics at the HRM and CSR nexus. Although some countries
start to enact legislation on CSR and related themes, they are currently ineffective,
since they are more about quantity rather than the quality of CSR. For instance, India
became the first country that has a CSR legislation by enforcing the companies to
give 2% of their net profits to charitable causes or to set up a CSR board committee
etc.; but despite its huge size (294-page act), “enforcement is a bit vague” (Chhabra
2014). Although the legislation on CSR is a good sign of the institutionalization of
CSR, such an attempt needs to be more specific in terms of diverse business
conducts.
On the other hand, civil society organizations (CSO) such as charities, voluntary
associations, social movement organizations, and other non-governmental organi-
zations (NGO) have gained an increasing influence on the HRM activities of
businesses by increasing public awareness on the problematic issues at companies.
According to Williams et al. (2011), their efforts tend to be associated with a CSR
agenda, since they try to provide better environmental and labor standards, which are
usually accepted as more effective than state regulations. In most countries, these
organizations can engage in standard setting, information-gathering, and behavior
modification activities to provide an effective regulatory control over businesses
(Hood et al. 2001).
8.1 Towards a Policy Framework 133

As one of the strong reference point for the companies across Europe, European
Commission (EC) has also provided an integrative approach to the development of
HRM policy under CSR scheme. Recalling its definition, EC sees CSR as a
multidimensional concept and suggests that companies should address the challenge
of human rights, labor and employment practices (training, diversity, gender equal-
ity, and employee health and well-being), environmental issues, and combating
bribery and corruption. According to EC, companies cover these issues with follow-
ing the major international guidelines such as Organization for Economic
Co-operation and Development (OECD) Guidelines for Multinational Enterprises
(MNE), the ten principles of the UN Global Compact, the International Standardi-
zation Organization (ISO) 26,000 Guidance Standard on Social Responsibility, the
International Labour Organization (ILO 2006) Tri-partite Declaration of Principles
Concerning Multinational Enterprises and Social Policy, the UN Guiding Principles
on Business and Human Rights etc. (Commission of the European Communities/
CEC 2011).
It should be noted that all these guidelines share a common perspective and
provide the basic principles on the overlapping themes about employment and
human rights. For instance, among these organizations, ILO develops a significant
policy framework and manages viable projects towards working people in all around
the world. By the joint commitment of governments, employers, and workers, ILO
works for shaping policies and programmes to promote ‘sustainable enterprise’ for
all type or sized organizations under three pillars: creating enabling environment,
entrepreneurship and business development, and sustainable and responsible work-
places (ILO 2014). Defining CSR as a voluntary and enterprise-driven initiative by
going beyond the legal obligations (ILO 2009), ILO builds its CSR approach
towards employees based on its Declaration on Fundamental Principles and Rights
at Work covering the following key issues:
– Freedom of association and the effective recognition of the right to collective
bargaining,
– Elimination of all forms of forced or compulsory labor,
– Effective abolition of child labor,
– Elimination of discrimination in respect of employment and occupation.
Considering their overwhelming impact on the global society, ILO also invites
MNEs to sign its Tripartite Declaration of Principles concerning social policy, which
encompasses the principles on employment (employment promotion, equality of
opportunity and treatment, security of employment), training, conditions of work
and life (wages, benefits and conditions of work), safety and health, and industrial
relations (freedom of association and the right to organize, collective bargaining,
consultation, examination of grievances, settlement of industrial disputes).
Socially Responsible Human Resources Management (SRHRM) In addition to
these governmental and intergovernmental attempts on providing guidance to enter-
prises, the scholars have also attempted to build the main tenets of socially respon-
sible human resources management (SRHRM). For instance, deriving from the
134 8 Social Responsibility and Human Resource Management

ILO’s CSR approach and relevant literature, Kroon and Paauwe (2014) mention
three areas of socially responsible employment practices:
• Right to freedom in terms of duration of contract (full-time contract) and nature of
the employment relationship (year round, permanent contract)
• Right to well-being in terms of employee access to exercise their rights at work
(work council, employee work meetings), protection from termination of employ-
ment (training, career development support), and physically and socially safe
work environment.
• Right to equality in terms of written down employment policies and employment
benefits scheme.
On the other hand, Orlitzky and Swanson (2006) show how a value-attuned
organization, which meets both social and economic performance criteria, can
adopt CSR at HRM practices (e.g. recruitment and selection, performance appraisal,
compensation, and training and development). Although all these frameworks are
quite useful to understand the key domains of being a socially responsible employer,
considering the importance of creating coherence between HRM and CSR con-
structs, we need an integrated approach to develop a viable SRHRM perspective. In
parallel to the major HRM challenges of contemporary business organizations, a
SRHRM model can be built based on the Carroll’s CSR pyramid (1979, 1991, 42):
• Economic and Legal Responsibilities: Ensuring Fundamental Human Rights
(e.g. employee health and safety, employment security, wages and promotions,
working hours, work-life balance, union activism)
• Ethical Responsibilities: Management of Ethical Issues (e.g. diversity manage-
ment, career development, training centres, organizational justice and trust)
• Philanthropic Responsibilities: Philanthropy towards/with Employees (e.g. child
or elderly care centres, retirement programmes, internship for youth, employee
voluntarism and giving)
As the figure illustrates that the first layer of a SRHRM pyramid covers the
fundamental human rights of all employees, which correspond to the economic and
legal responsibilities towards employees. The second layer of pyramid includes the
ethical responsibilities, which should be built on the overall ethical philosophy
towards all stakeholders. The last layer of pyramid encompasses how an enterprise
can contribute to its employees beyond the economic, legal, and ethical consider-
ations. It should be noted that the some critical themes at HRM like compensation or
performance appraisal are not necessarily ascribed to one or another layer in this
model. Instead, all these themes are evaluated from the perspectives of basic, ethical,
or philanthropic layers. Moreover, these layers are not mutually exclusive and they
should be operative at the same time. However, as the first and foremost objective of
its HRM approach, a company must address its economic, legal, and ethical respon-
sibilities. Although it is sometimes perceived as the essence of all responsibilities
due to this voluntarily nature (Turker 2013), “. . .philanthropy is highly desired and
prized but actually less important than the other three categories of social responsi-
bility. In a sense, philanthropy is icing on the cake—or on the pyramid, using our
8.2 Ensuring Fundamental Human Rights 135

metaphor” (Carroll 1991, 43). Therefore, at least on the normative level, it can be
suggested that companies can involve the responsibilities at this last layer after
meeting their responsibilities at the economic, legal, and ethical domains.

8.2 Ensuring Fundamental Human Rights

This layer of SRHRM includes the employment conditions that can be considered
within the borders of basic human rights. As it is mentioned in the previous section,
these rights cover the overlapping themes at the guidelines of almost all international
organizations. The employee health and safety, employment security, wages and
promotions, working hours, work-life balance, and union activism are among these
hot topics. Although these issues can be considered as the basic rights, which must
be provided to every employee without reservation, a study shows that the well-
known European fast fashion brands encounter the challenges of ensuring the safe
and secure employment conditions over their supplier network in the developing
countries like Turkey, India, Bangladesh or China (Turker and Altuntas 2014). The
disasters such as the collapse of Rana Plaza in Bangladesh, as the supplier of
European fast fashion companies, reveals that many employees in those countries
are working under severe conditions (pls. see Chap. 4). Considering the labor
markets, which are composed of disadvantaged people such as unskilled people,
youth, women, children (Turker and Altuntas 2014) or forced labor (Viederman
2013), the companies in the developing countries are very far away from providing
even these basic conditions. People in those countries may face with significant
problems such as discrimination, bad treatment, low wages or long hours (Ichimura
2011).
Thanks to the better legal and governance systems, the developed countries’
governments are better in ensuring the basic employee rights—however, they have
also various problems. According to Lawrence Summers, a Harvard Professor and a
former United States (US) Treasury secretary, the majority of American adults get
the middle class anxiety and believe that “their children will not live as well as they
did” due to their decreasing bargaining power and economic security against their
employers (e.g. employers can replace them easily by taking alternatives such as
using technology to offshore the operations or offering less job security by the gig
economy), diminished saving, and less opportunities. According to a survey on
human resource leaders conducted by Kronos Incorporated and Future Workplace
in the United States of America (USA), 46% of respondents think that employee
burnout is responsible for the half of annual workforce turnover; while “larger
organizations seem to suffer more”, burnout is fueled by many issues including
unfair compensation, unreasonable workload, too much overtime, insufficient tech-
nology adoption to do job etc. (Workplace Trends 2017). Despite the enormous
increase in the employee productivity since the beginning of 2000s, companies have
not adjusted their wages and benefits to reward their employees due to this produc-
tivity increase (Schawbel 2017). “The net productivity growth of 21.6% from 2000
136 8 Social Responsibility and Human Resource Management

to 2014 translated into just a 1.8% rise in inflation-adjusted compensation for the
median worker (just 8% of net productivity growth)” (Biven and Mishel 2015).
Summers (2017) suggests that unions, in which the membership is continuously
declining (e.g. only 6.4% for private sector employees), are needed to restore the
declining bargaining power of those American employees.
On the other hand, there is a popular trend among companies in the developed
countries towards going beyond the basic employee rights by triggering the altruistic
tendencies among employees and prospective employees. Building organizational
cultures by their obsessions with creativity, innovation, and flexibility, the high-tech
companies at Silicon Valley provide a wide range of luxury within dazzling working
spaces. For example, the employees at Google can choose their free meals from Indian
foods to fresh fruit smoothies at over 30 cafes, while Asana provides “life coaching
services, organic home-cooked meals twice a day, monthly Uber perks, customized
workstation, pet-friendly, and onsite yoga classes” for its employees or Twitter gives
“catered meals (breakfast, lunch and dinner), unlimited time off within reason, gym
membership reimbursements, onsite acupuncture, meditation classes, a coffee/beer/
wine bar, a rooftop deck, and more” (Bradford 2016). On the other hand, Microsoft
has built three tree houses at its headquarters in Washington to offer a place for its
employees to work up high in nature (MacLellan 2017). Beyond the familiar services
such as free beverages, the ping pong tables, the famous Building 16 and 17 at
Microsoft provide more unusual offerings such as Xbox lounge or No Tech Lounge
where employees disconnect (Warnick 2017). Martha Clarkson, the designer for
Microsoft Real Estate and Facilities, states that “we very much want our spaces to
be a relaxed aesthetic, a warm, intimate environment that’s less corporate feeling.
That’s what makes people feel comfortable. It’s all about having variety, about giving
people spaces that are tactile and interesting and not just stamped out” (Warnick 2017).
These quirky benefits and perks at companies are very attractive to lure
employees who want to work while taking the pleasure of luxury; a recent survey
of Glassdoor (2017) reveals that those company offerings are among the top
considerations for 57% of job seekers when accepting a job. However, there is an
increasing inquiry about these corporates’ efforts towards creating less corporate
feelings and atmosphere. One interesting point is whether this dazzling work envi-
ronment can worth for destroying an employee’ work-life balance. According to
Schuman (2017), “for Germans, a good work-life balance does not involve unlimited
massages and free meals on the corporate campus to encourage 90-hour weeks”; it is
much more about spending times with families and friends. Therefore, these extra
benefits and great working spaces can be acceptable only if there is no trade-off
between the luxury and other employee rights.

8.3 Management of Ethical Issues

Ethical debate on HRM related issues has attracted the attention of both scholars and
practitioners during the last decades. According to Winstanley and Woodall (2000),
since the ethical debate in enterprises is centered around the concept of CSR, the
8.3 Management of Ethical Issues 137

ethical dimension of HRM was mostly overlooked until the 1990s. Considering its
increasing importance, the authors suggest that the ethical agenda of HRM can be
addressed by concerning (1) the nature of ethical inquiry with developing an ethical
sensitivity as “the ability to reflect HRM and be able to identify the ethical and moral
dimensions and issues” and ethical reasoning as “the ability to draw on relevant
theory and frameworks to make more explicit the alternative interpretations and
responses that could be made to inform decision-making” and (2) adopting an ethical
framework, which can be implemented at the HRM practices (Winstanley and
Woodall 2000, 9). Adopting such a perspective can result in providing an ethical
work climate, which “involves formal values and compliance requirements as well
as an understanding of how interpersonal relationships affect the informal interpre-
tation of ethics” (Das Gupta 2009). Those organizational politics and individual
responses of managers towards the critical issues within an organization should be
backed up with a clear code of conduct and managers should ensure that all
employees develop an individual ethical stance, which is compatible with the overall
ethical climate.
For some businesses, this ethical management is interpreted in a wider sense to
include the responsibilities on managing diversity, helping employees to build their
career path, providing additional training and education, and ensuring the applica-
tion of key values such as justice, trust or honesty in every employee-related issue.
For example, the diversity can be an industry-wide problem in some countries; a
recent report based on the examination of 168 movies released in 2015 and 1206
shows aired on TV in 2014–2015 at Hollywood reveals that people of color are still
underrepresented both behind the scenes and in front of the camera (Rao 2017). The
failure of film industry at diversity management are usually protested through the
campaigns at social media (e.g. #oscarssowhite). The rate of discrimination in a
society manifests itself in its industries and organizations and when particularly at
the times of economic turmoil. Recalling the institutional theory, organizations are
embedded into their institutional context, which sets some invisible boundaries on
their choices through widely accepted values, norms or standards. However, insti-
tutional theory also admits the role of organizations to alter their institutional context
as change agents. In the case of diversity, we are witnessing such a change by the
attempts of some companies. In One Young World Summit in Bogotá, Colombia,
Apple’s vice president of diversity and inclusion, Denise Young Smith highlighted
the change in the meaning of diversity: “Diversity is the human experience. I get a
little bit frustrated when diversity or the term diversity is tagged to the people of
color, or the women, or the LGBT. . . there can be 12 white, blue-eyed, blonde men
in a room and they’re going to be diverse too because they’re going to bring a
different life experience and life perspective to the conversation” (Mohdin 2017).
Viewing diversity as a matter of representation and mix for bringing all voices into
organizations can exceed our narrow classifications based on gender, race or
religion.
Although this layer of SRHRM is viewed as a luxury for most small businesses,
investing in ethics ultimately contributes to the companies. Today, many companies
believe that managing diversity is an integral part of building a socially responsible
138 8 Social Responsibility and Human Resource Management

image. According to a survey result, CSR (62%) is one of the strong motives of
ensuring diversity in organizations after legal pressures (68%) and recruiting and
retaining best talent (64%) (Chartered Institute of Personnel and Development/CIPD
2006). Therefore, many companies start to apply the threshold selection to rebalance
their workforce composition in line with the community wherein they serve their
products (Noon 2012).
Ethical responsibilities can be also relevant in the areas of sustaining fair and
reliable performance appraisal and compensation systems. Ensuring distributive,
procedural and interactional justice is critical for all employees and organizations
that want to foster productivity, performance, citizenship behavior, commitment,
trust etc. (Cohen-Charash and Spector 2001). For instance, in Starbucks, while all
corporate-level employees are eligible for 12 weeks of paid parental leave, the store
employees are eligible for it if they are birth mothers or adoptive parents and it is
only 6 weeks. Such unequal benefits for low-income and gay workers are not only
unethical, but also detrimental for employee productivity (Staley 2017a). It is clear
that ethical principles should be also considered to balance the salaries and benefits
of senior managers. The astronomical salaries and great benefits when they are
working for companies and the golden parachutes when they are leaving the
companies have raised critics against the companies; the critics can be much more
severe and turned into a legal problem when companies try to hide this information
even from their own shareholders. The amount of compensation ($27.5 million) and
unusual benefits (e.g. sending an empty aircraft to follow CEO just in case his plane
broke down during the trip) for the former General Electric (GE) CEO, Jeffrey
Immelt, has become a reminiscence for the retirement package of another former
CEO of company—Jack Welch. The amount of package, which “valued at almost
$420 million, and included items like the use of an $50,000-a-month Manhattan
apartment, choice seats for the Yankees, Knicks, Red Sox, and at Wimbledon, and
the use of GE’s airplanes”, is unveiled in the divorce filings of Welch and became a
subject of US Securities and Exchange Commission’s enforcement action (Staley
2017b).
Moreover, the high performance expectations of companies can drive employees
to the stressful conditions, which can harm their work-life balance or even result in
physical or psychological problems. In some cases, the hard-core performance
criteria can be very stressful. The owner and chef of restaurant with three Michelin
star, Sébastien Bras explains that he wants to focus on cooking without the pressure
of Michelin rankings “hanging over his heads”; although those rating and ranking
systems are for honoring people at the top of their performance, he states that “in
practice, the stress involved in being ranked and rated can be bad for both our
performance and our psychological health” (Todd 2017). The recent studies show
that the neural response for such numerical based performance ratings can provoke a
‘brain hijack’ that occurs when a person faces with a physical threat like confron-
tation with a wild animal; if an employee is scored low in rating system, s/he tends to
ignore feedbacks and avoids to demonstrate the learning and professional growth
(Rock et al. 2014).
8.4 Philanthropy Towards/with Employees 139

Moreover, in a broader sense, the ethical responsibilities of a company must cover


its prospective employees too. As a company that receives one million applications
for its 25,000 openings per year, Johnson & Johnson provides a new user-friendly
system for the job applicants to help them in tracking their progress through the
recruitment process by providing timely feedbacks (Staley 2017c). By the availabil-
ity of review platforms like Glassdoor, not only current or former employees, but
also job seekers can assess the employers. Their reviews about to what extent they
feel content with the hiring process surely affect other job seekers’ preferences and
attitudes towards companies. Therefore, HRM managers must recognize their ethical
responsibilities for these stakeholders too.

8.4 Philanthropy Towards/with Employees

The last layer in the model is the philanthropic responsibilities that represent the
voluntarily involvement of a business to social or environmental problems.
Although such philanthropic responsibilities are usually taking the form of charitable
giving of companies towards NGOs, there are some ways that can enable companies
to involve their employees into the process. For instance, some companies, such as
Novo Nordisk or ING Group, build their social responsibility towards employees
from a paternalistic perspective and care the employees, their families, and even the
local community (Ehnert 2008, 208). Following the Husted’s (2003) governance
model, a company can develop in-house projects towards its employees; for exam-
ple, in its Vital Measures program, Boeing tries to support the overall health of both
its employees and retirees. Considering how the cost of childcare has skyrocketed for
the last decades (by around 70% since 1985 in USA), working parents have many
difficulties to find the quality and affordable care for their children (Purtill and Kopf
2017). Companies start to provide some innovative childcare options, like Goldman
Sachs’ on-site corporate office crèche, which offers 20 days free childcare per year
when there is an urgent need or free use of nursery for 4 weeks during the transition
back to work from parental leave, or gNappies’ new policy in London office on
remote working for the parents who have children aged from 1 to 16 (Jenkin 2016).
On the other hand, the emergence of baby-inclusive organizations that permit to their
employees to bring their babies is another trend in the business world (Babiesatwork
2017).
In addition to the philanthropic responsibilities towards employees, the compa-
nies might contribute to the solution of environmental and social problems with
involving their own employees. Based on an elaborate review of literature, Rodell
et al. (2016) define employee volunteering as “employed individuals giving time
during a planned activity for an external nonprofit or charitable group of organiza-
tion” and indicate the importance of company level and workplace characteristics to
obtain positive employee outcomes. Today, many companies support a variety of
employee voluntarism and giving programmes. For instance, Cisco Systems enables
to active participation of their employees to such programmes through devoting their
140 8 Social Responsibility and Human Resource Management

talent, time, and compassion; the employees are voluntarily working in the areas
such as helping to reduce high school drop-out rates or providing disaster relief after
a devastating flood in Bangalore, India (Cisco 2014).

8.5 Conclusion

Although the number of companies that try to integrate their CSR approach into their
HRM practices is increasing, that adoption process may differ across companies.
According to Paauwe and Boselie (2003), HRM practices are embedded into the
broader framework of society by becoming the product of macro regulatory and
institutional environment. Therefore, CSR adoption towards HRM can vary
depending on the changing environmental conditions. Some countries enforce
enterprises to develop a more sophisticated understanding on the link between
HRM and CSR beyond the legal requirements. Thus the companies in those coun-
tries must develop viable ways of implementing SRHRM to legitimize their activ-
ities for their customers and society at large. On the other hand, in the developing or
less developed countries, the absence of necessary regulatory framework and cus-
tomer pressure might result in the ignorance of enterprises both CSR and HRM. By
the spread of supplier networks, some MNEs follow both this sophisticated and
ignorance strategy together towards their employees in developed countries and the
employees of their suppliers in the developing countries, respectively.
Despite the variety of those national contexts and the diverse corporate responses
towards local circumstances, the proponents of convergence theory state that busi-
ness organizations are increasingly adopting a similar approaches in parallel to the
industrialization movement. Considering the increasing number of global challenges
that affect the corporate world almost equally, their responses towards SRHRM must
resemble to each other early or late. According to Das Gupta (2009), today the
corporate world is facing five major crises of leadership, mobility, focusing, empow-
erment, and vision; these crises can be overcome by clearly defining the role of
organization in line with a strong HRM understanding.
Although following a SRHRM policy is essential for the firms, it might be
ignored by many firms under the conditions such as an economic crisis. During
this hard times, implementing a cost-cutting strategy over the human resources
seems to be easiest way for most firms that are operating in a labor intensive sector.
However, the studies show that there are still some companies that pursue the
socially responsible employment systems even during the crisis period (Gittel and
Bamber 2010; Kroon and Paauwe 2014). Drawing on the structuration theory
(Giddens 1984), Kroon and Paauwe (2014) try to explain why some actors act
responsibly towards their employees under severe conditions rather than simply
conforming to their institutional environment as proposed by institutional and
resource-based theories (Oliver 1997). Conducting the comparative case studies on
the Dutch agricultural sector, the authors find that some companies can follow
more socially responsible employment strategies (on staffing, remuneration and
References 141

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the legal framework (Kroon and Paauwe 2014). It is clear that more proactive
companies tend to adopt more socially responsible behaviors before waiting for
the occurrence of any future problem and eager to take to opportunities of external
environment than reactive organizations in the same context.

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Part III
Outcomes and Future Implications
Chapter 9
What Are the Outcomes of Social
Responsibility?

Corporate social responsibility (CSR) is one of the most popular constructs of


modern business organizations. This popularity of concept among the practi-
tioners and scholars can be partly linked with the outcomes of CSR. It seems
that increasing number of company have noticed that doing good can pay off in
the long run. For instance, Subaru of America has contributed 105 events
for 46 different organization with its 512 volunteer employees to build homes
at poor regions, to assemble wheelchairs for veterans, or to fill backpacks for
schoolchildren at the first 9 months of 2017. According to Sullivan (2017), these
metrics can help company to attract talented employees and support to the
company’s marketing campaign. There are many examples that link CSR to the
organizational level outcomes. Companies have increasingly noticed the impact
of CSR on their own organizations. Although these organizational level outcomes
are important to encourage the company to maintain its commitment in the future
and stimulate the competitors to follow the socially responsible counterparts, the
outcomes of CSR are not only limited by these organizational level variables. In
the current chapter, similar to the analysis of its antecedents, the consequences of
CSR have been also articulated at the (1) micro or individual level, (2) meso or
organizational level, and (3) macro or environmental level. At the individual
level, most scholars focus on the impact of socially responsible business decisions
and activities to the managers’ career, benefits or further decisions. Although
there is a growing interest of scholars to the impact of CSR to organizational level
variables, the literature mostly neglects its implications at the institutional and
global levels. In order to connect CSR with United Nations’ (UN) sustainable
development goals (SDGs), there is a need for more clear understanding on the
larger level implications of CSR.

© Springer International Publishing AG, part of Springer Nature 2018 147


D. Turker, Managing Social Responsibility, CSR, Sustainability, Ethics &
Governance, https://doi.org/10.1007/978-3-319-91710-8_9
148 9 What Are the Outcomes of Social Responsibility?

9.1 Individual Level

Although there are only limited number of studies, the impact of CSR on managers
has become an interesting and developing research track in the literature. The studies
show that managers’ socially responsible decisions and actions affect their own
career, compensation as well as their further decisions. For example, a recent study
finds that greater prior investment on CSR has increased the risk of chief executive
officer (CEO) dismissal at poor performing companies; however, CSR might protect
the CEOs at the high performers (Hubbard et al. 2017). Based on a sample of 1946
American companies, which are observed over a period of 1996–2010, Cai et al.
(2011) find that the level of CSR in the previous year is adversely linked with CEO’s
total and cash compensation; this inverse association is mostly comes from the
strong employee relationship since “a higher score in employee relations might be
the result of the CEO’s constrained desires for excessive pay, and/or a sign of lower
firm risk, which also might lead to lower CEO compensation” based on the conflict–
resolution approach.
On the other hand, Ormiston and Wong (2013) find that prior socially responsible
behavior of a manager may affect his or her subsequent socially irresponsible acts;
the best example can be found in the case of British Petroleum’s (BP) Deepwater
Horizon explosion, which occurred by following the company’s industry leadership
at safety records under the management of Tony Hayward. Deriving from the moral
licensing research, “top leaders who have previously implemented CSR strategies
will glean moral credits from this past behavior, which leads them to develop a
strategy that mistreats firm’s stakeholders”. Moreover, the proposed link is much
stronger for the managers who outwardly express his or her moral actions and
behaviors to the public. However, the socially irresponsible behavior increases the
likelihood of executive turnover (Chiu and Sharfman 2016). Although the impact
of CSR on managers needs some further explorations, one thing is very clear for all
CEOs; they must avoid socially irresponsible behavior under all circumstances.
Moreover, it seems that the literature is currently interested in the visible impacts
of CSR on managers. Since it requires meeting the diverse needs of stakeholders by
managing resources strategically, CSR engagement can enhance a managers’ CSR
specific expertise, experience or skills too. These type of mostly invisible, but highly
important, impacts can be also taken into account when analyzing the individual
level impact of CSR.

9.2 Organizational Level

The impact of CSR at this level is relatively well-studied by the scholars. However,
scholars have mostly focused on the impact of CSR on the employee-related out-
comes and financial performance.
9.2 Organizational Level 149

– Employees: In the literature, there has been a growing interest in the link between
CSR and employee related outcomes. Following the study of Aguinis and Glavas
(2012), Rupp and Mallory (2015) provide a synthesis on the employee-oriented
CSR-outcomes by revealing (1) outcomes as performance, organizational atti-
tudes, and organizational attraction, (2) moderators as CSR attributes, manage-
ment attitudes, organizational justice, and individual differences, (3) mediators as
perception of trust and other perceptions of the firm. In the first group, the studies
have focused on the impact of CSR on organizational commitment (Brammer
et al. 2007; Peterson 2004 etc.), job satisfaction (Asrar-ul-Haq et al. 2017),
employee-company identification (Kim et al. 2010) etc. The studies find that
the link between CSR and employee outcomes is moderated or mediated by the
importance of CSR for employees (Turker 2009a), work meaningfulness, per-
ceived organizational support (Glavas and Kelley 2014), justice perceptions,
organizational identification (De Roeck et al. 2014), corporate ability (Brammer
et al. 2015) etc. The proposed link between CSR and employee outcomes can be
stronger when CSR is directly designed for the needs of employees (Kundu and
Gahlawat 2015; Turker 2009a). Companies use the employee-related CSR as a
strategic governance tool to increase the engagement of employees and reduce
their counterproductive behaviors (Flammer and Luo 2017). A recent study,
however, finds that employees’ job needs and their demands for CSR are not
homogenous; CSR can create positive employee outcomes (e.g. higher job
satisfaction and lower turnover intention) when it meets the employees’ ideolog-
ical and developmental job needs (Du et al. 2015). Particularly, after a tragedy
such as the 9/11 terrorist attack, people tend to re-evaluate their expectations from
their employers and may prefer to work for companies with higher CSR engage-
ment, since these organizations can provide a greater pro-social impact (Carnahan
et al. 2017). Moreover, some studies reveal that CSR can be an effective tool to
attract the prospective employees as well (e.g. Alniacik et al. 2011; Greening and
Turban 2000; Turban and Greening 1997). The companies that communicate
their CSR information in their web pages can be viewed more favorable by the
job applicants (Jones et al. 2009). However, even for the prospective employees,
CSR fosters the favorable outcomes in line with the existence of some other
variables. For example, the study of Rupp et al. (2013) on a sample of job
applicants shows that the impact of CSR on the job pursuit intention is decreased
when a person experiences high distributive justice themselves, whereas it is
increased by their high moral identity. The proposed link is also confirmed on a
sample of employees too (Rupp et al. 2013).
– Financial Performance: The link between CSR and financial indicators has been
another most frequently studied mainstream in the literature. However, the results
of studies at this track are inconclusive, since the studies have been derived from
diverse theoretical lenses as well as they have followed different methodological
approaches. This fragmented nature of literature makes it difficult to arrive at
a precise conclusion; but it provides very interesting results about the nature of
this link. The studies can be grouped under several titles. While some studies
find negative impact of corporate social performance (CSP) on corporate financial
150 9 What Are the Outcomes of Social Responsibility?

performance (CFP) (Aupperle et al. 1985), some other studies find neutral
(McWilliams and Siegel 2000), positive (Waddock and Graves 1997) or
non-linear (Barnett and Salomon 2012) relations between these constructs.
For instance, according to Waddock and Graves (1997), CSP is positively
affected by past financial performance and it is positively affecting the future
financial performance. On the other hand, McGuire et al. (1988) indicate that the
prior performance is more influential on CSR than the future performance. The
study of Barnett and Salomon (2012) obtains a U-shaped link between social
performance and financial performance due to the impact of stakeholder influence
capacity, which refers to the ability of a company to take the advantage of its CSP
among its stakeholders. Building good relations with stakeholders enhances
shareholder value too (Hillman and Keim 2001). Brammer and Millington
(2008) find that the unusually low and high social performance may bring higher
financial returns; while former is doing best in the short run, the latter is doing
best over the long run.
In order to explore the nature of this link, some studies follow more elaborated
models by taking the effects of moderators into consideration. According to
Saeidi et al. (2015), the studies searching the direct link between CSR and firm
performance is spurious and imprecise, therefore, some factors must be integrated
into the models. For instance, the authors reveal the mediation of competitive
advantage, reputation, and customer satisfaction on the proposed link (Saeidi
et al. 2015). On the other hand, Hull and Rothenberg (2008) find a positive link by
considering the impacts of innovation and differentiation; CSP “most strongly
affects performance in low-innovation firms and in industries with little differen-
tiation”. The study of Kim et al. (2015) takes the competitive-action, which is
defined as “externally directed, specific, and observable competitive moves to
enhance a firm’s competitive position” (Smith et al. 2001, 321), as a contingency
variable. On a sample of 113 companies in the United States of America (USA)
over the period of 2000–2005, the authors find that CSR increases financial
performance when competitive action level is high; whereas, corporate social
irresponsibility (CSI) enhances firm performance if competitive action level is
low (Kim et al. 2015). Kang et al. (2016) also attempt to explore the impact of
CSR and CSI on financial performance by identifying four mechanisms as slack
resources, penance, good management, and insurance on a sample of 4500 firms
over a period of 19 years. Kang et al. (2016) show that except good management
model, companies neither take the financial advantage of CSR nor offset their
former CSI.
– Other organizational outcomes: CSR can help businesses to gain legitimacy
(Aksak et al. 2016) and affect public opinion by enhancing corporate image,
reputation and credibility (Arendt and Brettel 2010; Pfau et al. 2008). These
outcomes of CSR can be particularly important for multinational enterprises
(MNEs) to gain legitimacy at the local markets (Gifford and Kestler 2008). CSR
can be also effective on organizational performance (Valmohammadi 2014),
competitiveness (Porter and Kramer 2006), and exploratory innovation (Costa
et al. 2015). According to Vilanova et al. (2009), the link between CSR and
competitiveness can be viewed as a learning and innovation cycle and
9.3 Environmental Level 151

competitiveness follows CSR when CSR is embedded and integrated into the
business process. In the companies with CSR principles, technology orientation
has a stronger effect on exploratory innovation and CSR enables companies to
benefit from the higher exploratory innovation in the international markets (Costa
et al. 2015). Moreover, while the environmental and governance performance
buffers the firms against lawsuits, interestingly, social performance has a positive
link with involvement in litigation (Barnett et al. 2014).
The link between CSR and tax payment has been also investigated by some
studies. According to Lanis and Richardson (2012), there is a negative link
between the disclosure of CSR involvement and corporate tax aggressiveness,
which is a socially irresponsible and unethical act of companies to reduce their tax
liability. However, in some studies, the companies with higher CSR scores can be
the ones that are following aggressive tax avoidance; for example, despite its high
CSR ratings, Pfizer’s decision to move its operations from USA to Ireland to pay
lower tax is not an exception in the business world (McCann 2015). It seems that
CSR and tax payments act as substitutes (Davis et al. 2015) when companies
believe that corporate tax detracts investment and entrepreneurship in society
(Djankov et al. 2008), they find themselves more efficient than governments in
resource utilization (McGee 2010) and involve in CSR to offset their negative
images (Fombrun et al. 2000).

9.3 Environmental Level

9.3.1 Task Environment

CSR affects the factors and stakeholders at the task environment. As an important
research track, the impact of CSR engagement on customers has been studied by
considering diverse variables as well as including different mediators and modera-
tors. For instance, CSR positively affects customers’ intention to buy (Alniacik et al.
2011), loyalty (Shin and Thai 2015) or satisfaction (Luo and Bhattacharya 2006). By
distinguishing the type of CSR, Moisescu (2015) finds that CSR to customers, public
authorities, environment, community development affects brand loyalty, whereas
Pérez and del Bosque (2015) show that customer-centric CSR affects the customers’
affective and behavioral responses. However, customer responses to CSR range
from unresponsive to highly responsive as well (Mohr et al. 2001).
In the literature, vast majority of studies have interested in the impact of moder-
ators and mediators on the link between CSR and customer responses. These studies
can be classified into three groups as (1) customer-related factors such as customers’
demographic variables (Pérez and del Bosque 2017), community orientation
(Chomvilailuk and Butcher 2013), level of support to CSR (Sen and Bhattacharya
2001), willingness to pay (Bagnoli and Watts 2003), brand preference (Liu et al.
2014a), motives (Ellen et al. 2006), satisfaction (Martínez and del Bosque 2013;
Walsh and Bartikowski 2013), trust (Fatma et al. 2016; Martínez and del Bosque
152 9 What Are the Outcomes of Social Responsibility?

2013), identification (Martínez and del Bosque 2013); (2) company-related factors
like the type of CSR, product quality (Sen and Bhattacharya 2001), perceived brand
quality (Liu et al. 2014b), CSR-brand fit (Cha et al. 2016), corporate image (Chung
et al. 2015), corporate ethical identity (Karaosmanoglu et al. 2016); (3) environmen-
tal factors such as the structure of competition (Bagnoli and Watts 2003).
The studies have also revealed the positive impact of CSR on investors’ behaviors
(Alniacik et al. 2011). Similar to the aforementioned study of Carnahan et al. (2017),
Wang et al. (2011) examine the responses of both individual and institutional
investors in China after the milk scandal, which started by finding the high levels
of toxic chemical melamine in a powdered baby milk brand and resulted in the death
of some babies in 2008 (BBC 2010). The authors find that institutional investors’
behaviors are significantly affected by CSR performance. While the companies
that report their environmental CSR take the advantage of increasing stock prices,
irresponsible behaviors decrease the stock prices (Flammer 2013). On the other
hand, investing in social responsibility by improving employee relations or environ-
mental policies etc. can reduce the cost of equity financing; however, the firms
in tobacco and nuclear power industries have higher cost of equity (El Ghoul
et al. 2011). CSR can also help firms to obtain more favorable credit ratings (Jiraporn
et al. 2014; Attig et al. 2013), which affect the cost of debt favorably.
The study of Chen et al. (2016) focuses on the CSR spillover effect, which occurs
when the investment of a company on CSR decreases the reputation of others. This
factor can increase the focal firms’ output and prices, whereas it may decrease the
competitors’ total output and prices. CSR can be seen as a tool to overcome economic
crises too. Owens (2016) thinks that Japanese manufacturers cannot eliminate the
obstacles caused by continuous cost cuts due to the competition, deflation, shrinking
domestic market, increasing labor shortage solely by their reputation of highest
quality. They can and should be “a hub of sustainability excellence” by meeting
social expectations, recognizing international frameworks like United Nations (UN)
Global Compact, attracting socially responsible investors etc. in order to save time,
money, and management hours.
Although relatively few in numbers, some studies examine the negative spillover
effects of CSR on a larger group of stakeholders in task environment. For example,
the aforementioned study of Chen et al. (2016) shows that since CSR spillover
negatively affects the competitors’ output level, it reduces the consumer surplus and
social welfare. Whereas, the baseline model of Arya and Mittendorf (2015) exam-
ines how market-based government incentives for CSR can negatively affect sup-
pliers, retailers, and consumers by triggering firms to decrease input prices and raise
output prices—all else being equal.

9.3.2 Institutional and Global Environment

As discussed earlier, the impact of institutional environment on companies is


surely overwhelming and often leads them to conform to the taken-for-granted
norms, standards, and rules. In the literature, many studies attempt to explore these
9.3 Environmental Level 153

widespread impacts of institutional environment on businesses’ socially responsible


decisions and actions (pls. see Chap. 2). Although it has received relatively less
attention in the literature, the interplay between CSR and institutional environment is
also prolific at least in two ways: (1) whether, to what extent, and how CSR is
institutionalized and (2) which results CSR may lead at the institutional and global
context. Recalling the tension between conformity and change in the institutional
theory (DiMaggio 1988) and the recursive interactions between agency and institu-
tions (Barley and Tolbert 1997), there is an interaction between institutional envi-
ronment and CSR as a social phenomenon. Although it is difficult to observe this
iterative and interwoven relationship between action and structure, there are some
cases that can show scholars how CSR affects its institutional context too. Bondy
et al. (2012, 282) signify the accidents or frauds as these type of incidents, which are
“linked back to the wider responsibilities of business to society”; e.g. viewing the
response of BP to the Deepwater Horizon spill as a CSR model or making banks
responsible by taxing them to fund CSR. In most cases, the corrective actions taken
against corporate misdeeds have been framed within the CSR context and institu-
tionalized by its social or legal ramifications.
The institutionalization of CSR might occur within and across networks as well.
After distinguishing two modes of organizing CSR as complete, which is done by the
elements within a company, and partial that requires the acquisition of some external
elements by the involvement of other organizations, Rasche et al. (2013) suggest a
shift from the former to the latter in line with the institutionalization of CSR in the
interorganizational landscape. According to the authors, this less formal and poten-
tially more collaborative partial organizing mode can also lead institutional change
by influencing the existing routines and patterns like in the case of reporting scheme,
which shifts from traditional sustainability approach to an integrated one. The rise of
industry-wide socially responsible initiatives or platforms, which can affect national
and even global practices, can be also seen as the institutionalization of CSR norms
and values. Perhaps the most visible indicator of the institutionalization of CSR is its
entrance into legal framework by specific taxes; India introduced a corporate tax that
mandates to spend 2% of net profit on CSR (Somvanshi 2015) by Section 135 of
India’s Companies Act in 2013. Similar to the institutionalization of some other
social and business phenomena, CSR has evolved from a voluntarily action to a
notion, which is inherently embedded into all business decisions and actions.
Recalling the CSR definition of Turker (2009b) as corporate activities that affect
stakeholders positively and go beyond the firm’s economic interest, it is crucial to
reveal its broader consequences, which align CSR to the overarching sustainable
development principles (Turker and Altuntaş 2012). Despite the growing body of
literature on the previous research track, the debate over the larger societal impact of
CSR has been hampered by the lack of a systematic overview. Although many
scholars emphasize the importance of identifying such impacts over the society and
environment, there is no agreement in the literature on what should be measured,
how it should be measured (Salazar et al. 2012) and how the data should be
collected (Kolk and Van Tulder 2010). For some, the arguments towards CSR
cannot be supported due to the existence of some major limitations. Following a
154 9 What Are the Outcomes of Social Responsibility?

phenomenological approach, the study of Khan and Lund-Thomsen (2011) on the


global companies’ CSR at their local manufacturers in Pakistan reveals that CSR is
perceived as an extension of historical imperialism by the suppliers. On the other
hand, Frynas (2008, 274) states that the claims on the impact of CSR on the
international development challenge are not justified due to “the lack of empirical
evidence, analytical limitations of CSR, the constraints of the business case for
CSR, and unresolved governance questions”. According to the author, the current
form of CSR, which prioritizes the interests of principals and agents of a firm, does
not fit well to the need of international agenda without a comprehensive governance
reform.
Although the above-mentioned problems are largely shared by other scholars,
many of them are more optimistic on the potential positive implications of CSR in
generating the larger societal impacts. The companies operating in the global scale is
not only “part of problem, but also perhaps part of solutions” of social and economic
development (Kolk and Van Tulder 2010). For instance, while Salazar et al. (2012)
conceptually link CSR with human development and focus on the project-based
evaluations across the difference between the participants and control group, Drews
(2010) emphasizes the societal benefits of CSR and tests the proposed measurement
model on an in-depth case study. On the other hand, Fortanier and Van Wijk (2010)
interview with the local and foreign-owned hotels to reveal the MNEs’ social impact
on the employment. In similar vein, Blowfield (2007) accepts the positive implica-
tions of CSR beyond the firm’s own interests and the existence of assessment ways
for the consequences of CSR on social and economic development; the author finds
the current measurement methods (such as case studies, CSR reports and ratings)
insufficient and suggests the better transfer of development community’s experience
on assessment methods to those in companies. Heal (2005, 387) attributes “a
resource-allocation role” to CSR in order to ensure that “the invisible hand acts, as
intended, to produce social risks”. According to Jenkins (2005), except a limited
number of cases or some charitable activities, the adoption of CSR is unlikely to
address the poverty in the South by creating employment or providing goods to poor
people.

9.4 Conclusion

It can be noticed that the impact of CSR is widely studied at the organizational level.
Particularly the link between CSR and performance outcomes has attracted the
attention of many scholars. Although the findings are still inconclusive, the studies
in the literature show that under some conditions, social responsibility and financial
performance is not mutually exclusive. At this point, it becomes essential to under-
stand that these certain conditions are usually about integrating CSR into all areas,
decisions, and actions rather than doing some good things superficially. The strategic
integration of CSR into production, marketing, human resources, finance and
accounting does not only improve the visible outcomes of an organization such as
References 155

profitability or turnover, it can help to transform current unsustainable business


ecosystems and contribute to the UN’s SDGs. Therefore, there is an increasing
need for larger scale studies that can reveal whether and how CSR can address the
global challenges and contribute to the SDGs.

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Chapter 10
Global Challenges: Aligning Social
Responsibility and Sustainable
Development Goals

In the face of many global challenges, such as natural or humanitarian crises,


technological change or societal movements, business organizations must redefine
their roles in society. As the indispensable component of society, they must collab-
orate with other organizations to confront with these challenges. By viewing it as a
social innovation, corporate social responsibility (CSR) can provide a viable frame-
work for building such a relationship between business and society and become the
landscape for such collaborations in many ways. A socially responsible activity of a
business may trigger new social innovations in a society. Recalling the Chap. 1, if all
business organizations align their CSR approaches with Sustainable Development
Goals (SDGs) and work together, we can succeed in the transition of our current
system into a more sustainable one.
According to World Business Council for Sustainable Development (WBCSD
2017), “the SDGs lie at the heart of what we do. Even though your business may not
be focusing on any specific SDG target, by putting effort into the business solutions
that are aligned with your business strategy, and that have the greatest meaning and
impact potential for your business, you are effectively contributing to the SDGs.”
Today, most investors and non-governmental organizations (NGOs) suppress
companies to align their businesses into SDGs (Morrison 2017). Although some
companies have recognized the importance of these common goals, their interests
towards goals may differ significantly. For instance, while the goals of climate
action, gender equality, reduced inequalities, quality education attract attention
most, the companies pay less attention to the partnership for the goals, zero hunger,
life on land, no poverty, and life below water (UNGSII 2017). It is clear that there are
many ways of aligning social responsibility and SDGs and this chapter discusses
how companies can contribute into some of these overarching SDGs of United
Nations (UN).

© Springer International Publishing AG, part of Springer Nature 2018 161


D. Turker, Managing Social Responsibility, CSR, Sustainability, Ethics &
Governance, https://doi.org/10.1007/978-3-319-91710-8_10
162 10 Global Challenges: Aligning Social Responsibility and Sustainable. . .

10.1 Goal 2: Zero Hunger

10.1.1 Socially Responsible Foods

According a recent report of UN, the world population, which is currently 7.6 billion,
is expected to reach 8.6 billion in 2030, 9.8 billion in 2050 and 11.2 billion in 2100,
even if the fertility rate continues to decline (UN 2017a,b). There are many serious
implications of this population increase. For example, UN Food and Agriculture
Organization (FAO) estimates that farmers must produce 70% more food than today
to feed people by 2050 (The Guardian 2011). However, despite the pessimist
estimations of Thomas Robert Malthus and his followers on population growth,
they may not happen, if we can find new solutions by taking the advantage of
technological advancements and the power of cooperation (Kucharski 2017).
According to Sara Merker, the founder and chief executive of an agricultural tech-
nology company, Gro Intelligence, a fight against this future food problem requires
taking serious measures like reforming the agricultural sector in developing and
underdeveloped countries, changing consumption of food, decreasing food waste,
increasing farm yields, using data technology etc. (Dahir 2017). On the other hand,
companies can also try to produce and market socially responsible products that are
compatible with the goal of providing sufficient and health nutrition alternatives for
people. For instance, Coop, the second largest supermarket of Switzerland, enters a
new food line, which involves bug burgers to insect balls. By taking the support of
food security authorities towards sustainable living, the supermarket chain provides
the protein-rich meal worm of Essento, a Swiss-based start-up (DW 2017a).
According to the food experts, this alternative food system is not only healthy or
sustainable; such systems can provide viable solutions to feed the world population in
the long run (DW 2017b).

10.1.2 Support to Urban Farming

Since most of the growing population reside in cities, the food shortage become
particularly severe in those areas. However, urban farming movement can be a
powerful method to overcome this problem. Similar to victory gardens during the
World War II, “urban farming could not only feed future generations, but also create
appealing clean-tech jobs for the waves of new ‘immigrants’ that cities across the
world will see in coming years” (Harper 2016). A Tokyo-based staffing company,
Pasona Group supports to this movement by turning its office spaces to fertilize
tomatoes, herbs, or rice. By providing such a green office environment, the company
intends to relax its employees, to stimulate people to think creatively about agricul-
ture, and to provide office-grown healthy foods at the company’s cafeteria (Shemkus
2014).
10.3 Goal 5: Gender Equality 163

10.2 Goal 3: Good Health and Well-being

10.2.1 Fight Against Health Problems

Global health problems are always one of the top issues of global agenda. Although
there has been a significant progress at the fight against child mortality and HIV since
2000, Bill Gates and Melinda Gates (2017) state that the decreasing commitment of
developed and developing countries’ governments by implementing the retrench-
ment policies and budgetary cuts would slow down the progress or reverse the curve.
Therefore, both governments and businesses continue to support the initiatives that
are fighting against serious diseases and health problems. Moreover, since the future
can bring new problems, all actors must take serious measures to prevent humanity
from new health problems. For example, aforementioned report of UN also under-
lines the aging populations due to the lower fertility rates; the number of people who
are older than 60 is currently 962 million and it is estimated to reach 2.1 billion
in 2050 and 3.1 billion in 2100 (UN 2017a). In some countries like South Korea, this
demographic change has become even faster than other developed countries (Steger
2017). Such a shift towards an aging society comes up with new challenges. The
number of people with dementia is approximately 46.8 million as of 2015 and it is
expected to increase to 75 million in 2030 and 131.5 million in 2050 (Alzheimer’s
Disease International 2017). In parallel to this increase, the cost of health care has also
increased too; the total costs for Alzheimer’s and other dementias currently account
for $259 billion in United States of America (USA) (Alzheimer’s Association 2017).
Considering the growing number of people who can suffer from the acute health
problems, it becomes the pharmaceutical companies’ responsibility to develop new
methods and drugs for such problems. However, the large-scale capital needs and
disappointments in developing drugs lead many companies to give up their invest-
ment in neuroscience. According to an analysis of Cleveland Clinic in USA, 99.6% of
Alzheimer’s treatments tested between 2002 and 2012 failed in clinical trials (Garde
2016). The companies like GlaxoSmithKline, Bristol-Myers Squibb or AstraZeneca
to cut their budgets to flee neuroscience; “in the past 5 years the number of drugs
being developed by large drugmakers for brain and nervous system disorders fell
50% to 129” (Herper 2015). It is, of course, not the most responsible way to deal with
a global problem. According to Herper (2015), this scenario may change by the
reinvigoration of some companies’ efforts in the near future.

10.3 Goal 5: Gender Equality

10.3.1 Support to Women Entrepreneurship

Gender inequality has been a serious problem for all societies and companies have
become the places where this problem is more evident. For instance, only 24 compa-
nies at Standard & Poor’s (S&P) 500 list are managed by women directors (Staley
164 10 Global Challenges: Aligning Social Responsibility and Sustainable. . .

Fig. 10.1 The gender gap in entrepreneurship in OECD as of 2015. Source: OECD (2017)

2017). Since the problem is very acute at the corporate world, one effective solution to
sustain gender balance in an economy is to increase the proportion of women
entrepreneurs. However, Fig. 10.1 shows the share of female (top) and male
(bottom) entrepreneurs across the Organization for Economic Co-operation and
Development (OECD) members as of 2015. In all countries, the ratio of female
entrepreneurs is lower than the ratio of male entrepreneurs.
According to a report of OECD ( 2012), “there are fewer women entrepreneurs
then men in OECD countries and women-owned enterprises have on average lower
profits”. Women entrepreneurs have not operated under the equal conditions with
their male counterparts even at the developed countries. After facing with sexism
in their communication with male artists, developers, and designers, two female
entrepreneurs of a Los Angeles-based online shopping company need to create a
fake male co-founder, Keith, to be taken seriously by those artists community and,
luckily or maybe unfortunately, this strategy worked and company made $200,000
sales in its first year (MacLellan 2017). Therefore, as a major challenge, companies
can also focus on women entrepreneurs in order to provide favorable conditions for
10.3 Goal 5: Gender Equality 165

Table 10.1 CSR projects for women employment in Turkey


Concrete results/
Company Project title Period Project objective Outcomes
Borusan My Mom’s job 2013– Provide childcare services Architectural design
is my future 2016 to increase women’s contest was resulted to
employment rate in industry build centers
and improve the mental and
physical development of
children
Boyner Pomegranate 2009– Prevent the poverty of Educated 162 women
arils – Strong 2015 women; increase the for 15 days and
young women, employment of women; mentored for 1 year
happier future prevent violence against (51% find job; 33%
women; to struggle against continue to education;
social exclusion; increase 16% seek job)
joint activities among vari-
ous sectors
Kale Skilled women 2009– Provide employment Educated 75 women;
Group 2015 opportunity to women in employed 254 person in
men-dominant sectors of 12 cities
construction
Mudo Argande 2008– Provide employment and Provided employment
Present education to women in for 200 women in the
southwestern region in the manufacturing firms of
garment industry Argande in less-
developed cities
Toros Project for edu- 2010– Educate the women Organized education
Tarim cation and sup- Present farmers, who make para- sessions in Izmir and
port for women mount contribution to the Antalya
farmers agricultural labor in Turkey,
on the correct and balanced
use of chemical fertilizers,
one of the most important
inputs in agriculture
Turkcell Women 2012– Support the women to par- 29,000 students are
empowerment Present ticipate in the economy funded, 17,000 students
in economy through this mobile for graduated from high
development campaign school, 1800 students
graduated from
universities
Source: Turker and Yılmaz (2016)

these stakeholders to start and scale up their businesses. In their study, Turker and
Yılmaz (2016) identify the impact of CSR projects towards women problems
(Table 10.1). Six out of 15 projects during the last decades particularly focus on
women employment in Turkey. However, none of them is designed to support
women entrepreneurs.
166 10 Global Challenges: Aligning Social Responsibility and Sustainable. . .

10.3.2 Distorted Body Image Among Women

Despite its positive implications, which can be easily aligned with the notion of
CSR, the healthy living trend might result in some negative consequences too. For
instance, there is a debate on whether wellness culture can create eating disorders
such as orthorexia, which is an eating disorder about “a moral or righteous fixation
on consuming ‘pure’ and ‘clean’ foods” (Spinks 2017). Considering the attractive
profits at an industry, which accounts for 3.7 trillion, the companies at wellness
industry can easily misuse the wellness-obsession of people all around the world.
The eating disorders are also fostered by fashion industry by shaping the perception
of young women on ideal body sizes. Although the sector has traditionally used the
good-looking models to introduce their latest cloths, today, the use of size-zero
models have become ubiquitous at fashion shows. Even a model with size 4–6/UK
(32–34/Europe) can be dropped from a Louis Vuitton show since she was found ‘too
big’; by the way, the casting agents suggested the model to “drink only water for the
next 24 h” before the show (BBC 2017). While the mobbing against those models, as
the workers of fashion industry, is one facet of debate, how such a zero-size model
can be the emblematic of an ideal female body at the twenty-first century is another
consideration. However, as a positive initiative, several companies, including Louis
Vuitton, Saint Laurent, LVMH and Kering, have joined to a campaign in order to
ensure the well-being of their models and ban size zero (Willsher 2017). According
to Cartner-Morley (2017), although “it is too early to say whether LVMH and
Kering’s ban on using size zero models will improve women’s health, but it is a
sign the business is changing”. On the other hand, Dove has started its own
campaign on female body image in order to help people “to make beauty a source
of confidence, not anxiety” (Dove 2017). There are always some companies that may
misuse its customers’ natural tendencies or instincts. Although they have been at
majority, a sincere and well-understood CSR approach of one industry member can
enlighten all other companies to think about the impact of their decisions and
actions.

10.4 Goal 9: Industry, Innovation and Infrastructure


10.4.1 Digitalization and New Responsibilities

In his letter to Amazon’s shareholder in 1997, Jeff Bezos foresaw the future of
digitalization precisely: “we have a window of opportunity as larger players marshal
the resources to pursue the online opportunity and as customers, new to purchasing
online, are receptive to forming new relationships. The competitive landscape has
continued to evolve at a fast pace. Many large players have moved online with
credible offerings and have devoted substantial energy and resources to building
awareness, traffic, and sales” (Bezos 1997). He is clearly right in his prediction. In
10.4 Goal 9: Industry, Innovation and Infrastructure 167

the dawn of digital age, we have witnessed for a large scale and mostly disruptive
technological transformation that will affect all business functions from human
resources to communication or production. For instance, in line with the improve-
ments on the automatic language translations to bridge and bound different people
and societies (Pino et al. 2017), the development at artificial intelligence (AI) helps
us to interact with machines—such as Apple’s Siri or Google’s Alexa—and to
enable the communication among machines. As the latter version of technological
transformation, the rise of smart manufacturing, which is known as Industry 4.0,
currently fosters a debate on whether it is a revolutionary phenomenon that features
the radical changes or is just an illusion, which is “simply self-perpetuating echoes in
capitalism” by applying information technologies into manufacturing (Kim and
Torneo 2017). If the first, we must think about the integration of social responsibility
into the idea from the very beginning of process, if the second, CSR has the potential
to retaliate against the drawbacks of capitalism—as a product of this worldview.
Whether technology can increase our overall welfare in the sense of what
technological utopians imagined or lead us to a dark dystopia depends on the
responsible use of technological power. It is difficult to solve the technology woes
by simple argumentations or fruitless discussion like in between Elon Musk and
Mark Zuckerberg (Bogost 2017). What we need right now is the formation of a
strong community-level governance structure that can monitor and transparently
communicate the implications of technology to flourish and free humanity. It is again
the business organizations’ responsibility to be the initiator and maintainer of a new
system. Making the new technologies ethical and safe has been another responsibil-
ity of companies. Like human beings, these high-tech machines are expected to
behave ethically. There are some ethical dilemmas, which have no certain, clear-cut
solutions, even for human beings. For instance, nowadays, the driverless car
technology revitalizes the old-fashioned trolley problem, which is a philosophical
thought experiment about switching the trolley based on various scenarios to unveil
how people make different choices based on their ethical stances (Davis 2015;
Saalfield 2012). The German Federal Government tries to adopt a guideline for
this robot vehicle system, which “would choose to hit whichever person it deter-
mines it would hurt less, no matter age, race, or gender”; however, it is quite obscure
“how a car would determine the damage it would cause” (Gershgorn 2017). More-
over, it seems that the guideline currently ignores the lives of other creatures—we
are currently very far away from Arne Naess’ (1973) deep ecology movement.
On the other hand, by the rise of digitalization, information security has become a
major issue for most companies and society. Cyber-attacks create devastating impacts
on business transactions by crippling global IT systems. For example, the latest
ransomware attack at the end of June 2017, NotPetya, hits many companies including
TNT or Maersk by causing delays on the international shipments or Reckitt Benckiser
by disrupting production and deliveries of goods (Brignall 2017; Monaghan 2017).
Protecting the information systems from hackers has become very costly for compa-
nies; but more importantly, such security problems at the soft or hard procedures of
companies might unveil customers’ personal information and make them open to a
168 10 Global Challenges: Aligning Social Responsibility and Sustainable. . .

possible deception. Therefore, securing stakeholders’ information has become


another new responsibility of companies.

10.4.2 New Business Models for Sharing Economy

Beyond the improvements of services or the development of products, disruptive


technologies create new industries or even a new economy, which is often called
as sharing or gig economy and pioneered by the companies like Uber or Airbnb.
New business models that are taken their revenue generation engine on a digital
platform are ubiquitous during the last decades. According to Barry Wacksman,
Global Chief Strategy Officer of R/GA “. . .digital started to deconstruct the
entire world. Netflix came along and destroyed broadcast television. Airbnb came
along and disrupted hotels. Uber comes along and disrupts transportation. Amazon
is disrupting everybody!” (R/GA 2017). By their unique business models, these
companies radically change their sectors, or even generate a new one by finding blue
oceans. Compared to traditional merchants, the companies like Facebook and
Google, in which users themselves produce value by uploading information and
pictures follow a completely different route to make revenue and these free exchange
models cannot be easily captured in economic senses (Economist 2017).
There is an increasing public debate and media concern on the sustainability and
social responsibility of these new models too. For instance, although the notion of
home/room sharing at Airbnb looks very sustainable, the absence of a tax payment
mechanism (BBC 2016a) and its impact on housing shortage in major cities (BBC
2016b) increase the concerns on the legal or ethical responsibilities of company. On
the other hand, there is a heightened debate on the Uber’s freelance-based business
model in which drivers are independent contractors rather than the company’s own
employees. This model minimizes the labor costs as well as corporate control over
drivers and since the latter is a major problem for the company, Uber has hired many
behavioral scientists to work on the psychological tricks to motivate drivers to work
on more (Scheiber 2017). Beyond these activities that push the firm to an obvious
ethical lapse, working for Uber may not be economically good for drivers too
(Griswold 2017a). A working paper reveals that “Uber raises the base fare in a
city, the driver hourly earnings rate rises immediately, but then begins to decline
shortly thereafter” (Hall et al. 2017, 3). In addition to the scandals throughout 2017
(Carson and Gould 2017), Uber is also accused of the discrimination of treatment to
its well-paid tech workers and impoverished drivers “who are earning low and
unstable wages in a job without security or benefits, or struggling to pay off loans
for their Uber cars—debts that some have equated to dodgy subprime mortgages”
(Green and Levin 2017). Griswold (2017b) states that “Uber’s disregard for the law
was never a secret—quite the contrary, deliberately flouting laws and regulations
was the way the company opened up markets and created demand for its service.
That demand translated into public pressure on cities, states and countries to change
rules protecting their established taxi industries”. According to Fortuna (2017), the
10.5 Goal 8: Decent Work and Economic Growth 169

only way to make this system more sustainable for freelance and contract workers of
companies such as Uber or TaskRabbit is the unionization; for those at the bottom
“to stand together to prevent exploitation from those at the top”. It is clear that these
companies think more about the negative implications of their business models and
convert it into a more socially responsible one urgently.

10.5 Goal 8: Decent Work and Economic Growth

10.5.1 Supporting Inclusive Politics for Migrations

Although the UN’s 2030 Agenda for Sustainable Development views migration as a
driving force of inclusive growth and sustainable development (UN 2015), the
migrants have rarely welcomed in the host countries and, most frequently, they
become the subject of discriminations. However, migrants can contribute a lot to a
nation’s economic growth by being employees or employers. For example, Brexit
that will take effect in March 2019 and restrict the flow of workers by bringing visa
requirements to immigrants, shows that how the labor market balance in United
Kingdom (UK) is contingent on migrants (Brinded 2017). Therefore, it is also
the responsibility of companies to protect their migrant employees against the
politician’s short-term evaluations. Recently, the leaders of tech titans, such as
Mark Zuckerberg as the founder and CEO of Facebook, Sundar Pichai as the CEO
Google Inc., Tim Cook as the CEO of Apple, Jeff Bezos as the CEO of Amazon,
Chuck Robbins as the CEO of Cisco Systems, call the President Donald J. Trump to
protect the Deferred Action for Childhood Arrivals (DACA) program, which allows
nearly 800,000 undocumented immigrants (so-called Dreamers) to work and study
without the threat of deportation (Dreamers 2017). Since some of the dreamers, who
were brought to USA when they were children, are recruited by signatory companies
(e.g. 27 of them at Microsoft), the companies attempt to protect the work permis-
sions of their work force by writing an open letter to Trump (Overly 2017). Besides
signing this letter to President, the CEOs have also run public relations campaign
against the problem; for example, Tim Cook from Apple tweeted his support for
250 Dreamers in Apple (Liptak 2017). All these campaigns surely affect the deci-
sions of politicians and raise the awareness of society about migrants.

10.5.2 New Digital Platforms for Learning and Employment

Digital technologies can be also used to provide alternative platforms for learning
and employment for millions of people in all around the world. While the digital
learning platforms like Coursera may take the place of ancient classrooms or
libraries in the traditional university system even in an unnoticed ways, most people
start to believe a university degree might not necessary to innovate in the new era
170 10 Global Challenges: Aligning Social Responsibility and Sustainable. . .

(Wang and Schrager 2017). The crowdsourcing companies like TopCoder or


Innocentive bring together the talented and creative people who may or may not
have a bachelor degree, with the entities that are looking for solutions to their hard-
core problems on a digital platform. Integration of social responsibility into those
models may help people in the poor countries and regions to access equal learning
and employment opportunities too. For instance, a company’s donation of computers
to the schools in a rural area may not only increase the tangible assets of those
schools. Using these computers as a medium of education for students or organizing
training programs for local people may also help those people to connect with
the rest of the world. Obtaining new skills and increasing accessibility ultimately
contribute to the economic and social development in poor regions.

10.6 Goal 12: Responsible Consumption and Production

It is an inevitable fact that the current production and consumption patterns of world
are totally unsustainable and it may bring the end of humanity. Changing usual
consumption pattern requires a paradigm shift. In the postmodern times, people can
consume not because of they need the material utility of product, but for its symbolic
meaning too; our societies are organized around such an unconscious logic of
consumption (Baudrillard 2016). Governments, non-governmental organizations
(NGOs) as well as companies must cultivate a sense of environmental consciences
and promote a sustainable lifestyle among children and young generations. Sustain-
able lifestyle can be viewed as “a cluster of habits and patterns of behaviour
embedded in a society and facilitated by institutions, norms and infrastructures
that frame individual choice, in order to minimize the use of natural resources and
generation of wastes, while supporting fairness and prosperity for all” (Akenji and
Chen 2016, 3). This movement has affected many people who want to consume
consciously and ethically. Following the SDGs at the individual level, it requires to
make more sustainable decisions at the key lifestyle domains as (1) food (what we
eat and drink—how it is produced, processed and provided—and how we dispose of
it etc.); (2) housing (how we live, where we live, what is used to build, heat and cool
our living spaces etc.); (3) mobility (what forms of transport we choose, how often
we travel etc.); (4) consumer goods (the products we buy, the type and quantity of
materials that are used in producing them etc.); (5) leisure (how we spend leisure
time, our choice of tourism destinations and activities etc.) (Akenji and Chen 2016).
According to ‘a sustainable lifestyle blogger’, however, conscious, ethical or
eco-friendly consumerism is a lie; doing such small ethical decisions might make
people feel better, but we cannot make any systematic change unless we continue to
ignore the structural support towards the unsustainable business models of capital-
ism (Wicker 2017). Currently consuming more and unsustainably is the dominant
lifestyle for millions of people and maximizing consumption is a raison d’etre of
10.7 Goal 16: Peace, Justice and Strong Institutions 171

capitalism. As a simple example, in USA, one third of all the bread goes to waste,
which accounts for 19% of food waste in the country and this is mostly because of
the surplus at factory bread sold at the supermarkets (Halloran 2017). On the other
hand, a report of Greenpeace points out the incredible rise in the production and
consumption of fast fashion products based on some leading and lagging indicators;
“sales of clothing have nearly doubled from 1 trillion dollars in 2002 to 1.8 trillion
dollars in 2015, projected to rise to $2.1 trillion by 2025” and “global trade in used
clothes reaches 4.3 million tonnes, many are unlikely to be worn again” (GreenPeace
2017).
All in all, consumption is “a part of a complex system of technology, culture,
institutions and markets advancing continued economic growth” (UNEP 2016).
According to Wicker (2017), people can continue to make such small sustainable
choices, but a real progress can be made if people start to fight against this
unsustainable system by devoting their money, time, or energy: “globally, we’re
projected to spend $9.32 billion in 2017 on green cleaning products. If we had
directed even a third of that pot of money (the typical markup on green cleaning
products) toward lobbying our governments to ban the toxic chemicals we’re so
afraid of, we might have made a lot more progress by now”. Social and environ-
mental problems of current economic system can be addressed by the radical
transformation at the system and CSR can pave the way of such a change among
businesses.

10.7 Goal 16: Peace, Justice and Strong Institutions

10.7.1 Stand for Justice

By collaborating other governmental, non-governmental, and international organi-


zations, companies support a peaceful and fair social system. Political issues and
protests have been always a challenge for firms; it is a major question whether firms
should take a stance or not. Most businesses and manager do not want to take a side
on a social or political problem. However, sometimes they have to be a part of debate
in a defensive or offensive manner. At the international level, most striking example
for such business behaviors comes from the Body Shop, when its founder and CEO,
Dame Anita Roddick, supports the Ogoni people in Nigeria for their search for
justice and reparations against Shell, which was using the lands for oil exploration
and production. After the Shell’s recognition of the wider communities interests by
the declaration of ‘profits and principles’ campaign in 1998, Roddick states that “I
like to think we had a hand in getting Shell to think about what it really means to be a
corporate citizen” (Roddick 2017). Therefore, it is the social responsibility of a
company to clearly acknowledge its stand for justice whenever and wherever it is
needed.
172 10 Global Challenges: Aligning Social Responsibility and Sustainable. . .

10.8 Conclusion

According to Muhammad Yunus, the founder of the Grameen Banks and the
recipient of the 2006 Nobel Peace Prize, “poverty is not created by poor people. . .It’s
created by the system we built. Poor people are like a bonsai tree. You take the best
seed from the tallest tree in the forest, but if you put it in a flower pot to grow, it
grows only a meter high. There’s nothing wrong with the seed. The problem is the
size of the pot. Society doesn’t give poor people the space to grow as tall as
everybody else. This is the crux of the matter.” (Bornstein 2017). These words on
poverty is true for all problems—gender problems are not created by the people who
experienced those problems or the nature itself is not held responsible from climate
change too. Our current production and consumption system, which are dominated
by business organizations within the current regulatory framework of governmental
organizations, have the major responsibility on this increasing number of problems.
It is believed that a large scale transformation at the business organization can
be managed through the integration of CSR into all functional strategies, decisions,
and practices. In doing so, the companies must focus on their contribution to the
overarching SGDs. This chapter exemplifies how companies can and should align
their CSR approaches to SDGs. It is clear that these examples are just some of the
possible ways of integrating CSR and SDGs. Companies can formulate and imple-
ment creative configurations by confronting these challenges. None of these prob-
lems can be overcome by the efforts of a single company. However, business
organizations are embedded into their social and historical context and, when
taken collectively, their attempts towards a paradigm shift will eventually change
our current consumption and production patterns. Establishing collaborations and
networks on the same global missions are one of the most important steps towards
such a radical change. The diffusion of knowledge and resources across organiza-
tions is the only way to obtain a fair and sustainable system. Similar to the
establishment of WBCSD in 1991 by 50 companies, there is a need for more
collaboration among all organizations towards achieving the SDGs.

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Index

A B
AA1000 Series of Standards, 124 Bain Capital, 50
Access the Medicine Index, 122 Balanced scorecard, 123
Accountability, 118, 124 Banco Santander, 117
Accreditation, 122, 124 Bangladesh, 67, 135
Additive manufacturing, 82 BASF, 85
Adverse selection, 67 Baxter International Inc., 89
Advertising, 101, 106, 107 Belgium, 131
Agency problem, 67 Ben & Jerry, 46
Agency theory, 18, 67 Benchmarking, 122
Agenda 2030, 31 Benetton, 67
Agile manufacturing, 73 Best Buy, 87, 92
Aging, 163 Bezos, J., 166, 169
Agricultural sector, 140 Big data, 106
Airbnb, 109, 168 Blockchain technology, 87
Alibaba.com, 88 Blogger.com, 88
Altruistic, 44, 136 Bloomberg Social Indicators, 122
Alzheimer’s, 163 Bloomingdale’s, 52
Amazon, 27, 92, 117, 118, 168 Board composition, 7, 60
American, 17, 135, 136 Board of directors, 21, 23, 59, 60, 64–66
American Express, 100 Body Shop, 171
Anti-corruption, 126 Boeing, 139
Apple, 137, 169 Booking.com, 109
Arçelik, 45 Borusan, 165
Artificial intelligence (AI), 167 Bottom of the pyramid (BOP), 103, 104, 108
Asana, 136 Boyner, 165
ASDA, 51 Brand loyalty, 151
Asset, 119, 120 Brand preference, 151
AstraZeneca, 163 Bras, S., 138
Australian, 24 Brexit, 169
Automobile market, 104 Bribery, 133

© Springer International Publishing AG, part of Springer Nature 2018 177


D. Turker, Managing Social Responsibility, CSR, Sustainability, Ethics &
Governance, https://doi.org/10.1007/978-3-319-91710-8
178 Index

Bristol-Myers Squibb, 163 ColorADD standards, 79


Bristol-Myers Squibb Company, 89, 90 Communication, 164, 167
British Petroleum (BP), 148, 153 Compensation, 134–136, 138, 148
Burger King, 85 Competition, 43, 46, 50, 73, 84, 99, 105,
Burnout, 135 109, 110
Business model, 44, 49, 50, 168–170 Competitive advantage, 26, 150
Business partners, 27, 31 Competitiveness, 26
Business-to-business (B2B), 116 Compound annual growth rate (CAGR), 120
Business-to-consumers (B2C), 26 Consequentialist, 109
Consumerism, 101, 104
Cook, T., 169
C Coop, 162
Canada Pension Plan Investment Board, 115 Core competencies, 43
Canadian, 20 Corporate frauds, 63
Canon, 80, 82 Corporate Human Rights Benchmark, 122
Capitalism, 167, 170 Corporate image, 150, 152
Capitalist, 10, 59 Corporate image advertising, 107
Carroll’s CSR pyramid, 63, 134 Corporate scandals, 115
Carroll’s pyramid, 8 Corporate social irresponsibility (CSI), 150
Cause-related marketing, 100 Corporate social performance (CSP), 149, 150
Centennial Bulb, 101 Corruption, 75, 77, 83, 85, 131, 133
Certifications, 80, 82, 85 Cost-leadership, 45
Chaebol, 13 Counterproductive behaviors, 149
Charity, 43, 45 Coursera, 169
Charter communications, 17 Credit ratings, 152
Chevron, 90 Critical theory, 125
Chief Executive Officer (CEO), 60, 64–66, 148 Crowd-sourcing, 92, 170
CEO compensation, 19 Cruise industry, 88
CEO duality, 23 Culture, 3, 7, 47, 49, 52
Chief finance officers (CFOs), 115, 117, 123 adhocracy culture, 24
Childcare, 139 clan culture, 24
Child mortality, 163 CSR-oriented culture, 24
China, 22, 28, 51, 135, 152 cultural traditional, 28
China Children and Youth Dream ethical culture, 24
Foundation, 51 Customer communication, 106–108
Chinese, 82, 91 Customer loyalty, 100
Cisco Systems, 139 Customers, 4, 5, 11
Citizenship, 44, 52 Customer satisfaction, 150, 151
Citizenship behavior, 52 Cyber-attacks, 167
Citizenship behaviour, 138 Cynical approach, 5, 13
Civil society organizations (CSO), 132
Cleaner production (CP), 81
Climate change, 77, 85 D
Closed-loop supply chains, 73 Daimler AG Company, 89
Clusters, 55 Decision-making process, 115, 123, 125
Coalition of Immokalee Workers (CIW), 84 Decision-making quality, 23
Coca Cola, 77, 88 Deep ecology movement, 167
Co-creation, 92 Deepwater Horizon, 148, 153
Code of conduct, 31, 137 Deferred Action for Childhood Arrivals
CO2 emissions, 83 (DACA) program, 169
Cognitive school, 46 Dementia, 163
Colgate-Palmolive, 88 Deontological, 109
Collective bargaining, 133 Differentiation, 44, 45, 150
Colombia, 137 Digitalization, 82, 166, 167
Index 179

Digital platform, 168, 170 Equity financing, 152


Discrimination, 17, 31, 50, 105 Essento, 162
Diseases, 163 Estonia, 28
Disintermediation, 109 Ethical climate, 137
Disney, W., 84 Ethical dilemmas, 167
Disruptive technologies, 49, 168 Ethical funds, 119
Distance learning, 5 Ethical identity, 152
Distinctive capabilities, 9 Ethical management, 137
Distribution strategy, 108 Ethical responsibilities, 43, 52, 134, 135,
Distributors, 27 137–139
Diversity, 23, 29, 32, 133, 137, 138 Ethical Trading Initiative (ETI), 51
Diversity management, 134, 137 Ethical training, 63
Dividend, 60 Ethics, 3, 19, 20, 24
Division of labor, 6 Ethnic, 19
Do-it-yourself (DIY), 82 Eureko Sigorta, 45
Dove, 166 Europe, 28, 133
Dow Jones Sustainability Index, 122 European Commission (EC), 133
3D printing, 82, 83 European Union (EU), 3, 74, 131
Dreamers, 169 ExxonMobil, 117
Driverless car, 167
Dutch, 140
Dynamic capabilities, 91 F
Facebook, 88, 168, 169
Facility location, 76, 77, 93
E Fair trade, 92
Eco-centric management, 116 Faludi, J., 83
Ecolabels, 80 Family business, 59
Ecological, 10 Fashion industry, 166
Economic crises, 152 Fashion shows, 166
Ecosystems, 74, 77 Fast fashion industry, 135
Education, 19, 23 Female entrepreneurs, 164
Electric vehicle (EV), 104, 105, 110, 117 Fertility rate, 162, 163
Electrolux, 90 Filli Boya, 107
Electronic Industry Citizenship Coalition Finance manager, 115–117
(EICC), 49 Financial
Ellis Island, 100 financial return, 28
Employee health and safety, 134, 135 financial value, 19
Employee relations, 148, 152 financial-bottom-line, 20
Employees, 5, 7, 9, 17, 20, 23–25, 28, 30, 32 Financial performance, 9, 62, 148–150, 154
Employee volunteerism, 52 Firm performance, 62
Empowerment, 79 Flannery, J., 60
Enough Project’s Rankings on Conflict Focus strategy, 45, 46
Minerals, 122 Food
Enron, 63, 115 food problem, 162
Entrepreneurial school, 46 food shortage, 162
Entrepreneurship, 133 food waste, 162
Entropy, 92 Food and Agriculture Organization (FAO), 162
Environmentalism, 101, 104 Ford, 48
Environmental performance, 26 Ford Motor, 89, 90
Environmental pollution, 131 Fortune, 66, 116
Environmental responsibilities, 43, 44 Forward supply chain, 87
Epistemological, 4 Foundations, 25
Equifax, 79 Freedom of association, 133
180 Index

Free market, 117 Hollywood, 137


Free rider problem, 92 Home Depot Inc, 89
FTSE ESG Ratings, 122 Honeywell, 116
Functional background, 19, 23 HSBC, 51
Future generations, 9, 12, 162 Human development, 154
Human resources management (HRM),
131–134, 136, 137, 139, 140
G Human resources manager, 115
Galaxy Note 7, 79 Human rights, 7, 77, 83, 85, 131, 133, 135
Gates, B., 163 Hurricane Harvey, 106
Gates, M., 163 Hurricane Irma, 79
Gender equality, 19, 133 Hyundai, 110
General Electric (GE), 60, 138 Hyundai Motor, 27
Generic strategies, 45
Germany, 28, 80
Ghana, 25, 103 I
Gig economy, 135 IBM, 117
GlaxoSmithKline, 163 Identification, 149, 152
Global compact, 31, 133, 152 Ideologies, 18, 21, 24, 32
Global Compact Initiative, 85 IKEA, 30
Globalization, 26, 30, 32, 73 Image, 64
Global reporting initiative (GRI), 121, 126 Immelt, J., 60, 138
Global Sustainable Investment Alliance Immigrants, 162, 169
(GSIA), 120, 121 Implicit CSR, 20
gNappies, 139 Incentive, 152
Gogola, 111 Index, 121
Golden parachutes, 138 India, 77, 132, 135, 140, 153
Goldman Sachs, 139 Indonesia, 103
Good governance, 60, 62, 63, 66 Industrial organization view (IOV), 46, 47
Google, 64, 88, 136, 168, 169 Industry 4.0, 167
Google Scholar, 108 Infant Formula Action Coalition (INFACT), 53
Governance, 7, 9, 19, 21, 22, 28, 30, 31 Information security, 167
Governance model, 45 Information technologies, 73
Government, 27, 28 ING Group, 139
Green office, 162 Initial public offerings (IPO), 48, 118
Greenpeace, 53, 88, 171 Innocentive, 170
Green services (GS), 88, 90 Innovation, 82, 136, 150
Gro intelligence, 162 Instagram, 88
Guatemala, 110 Institutional environment, 3, 152, 153
Guidelines, 30 Institutional investors, 152
Gurría, A., 63 Institutional theory, 25, 26, 28, 137
Integrated sustainability and social
responsibility communication
H (ISSRC), 125
Hackers, 167 Intel Co., 89
Haiti, 78 Intellectual stimulation, 20
Hamlet, 5 Intergovernmental organizations, 3
Hasbro, 27 Interlocking directorates, 60
Heineken, 92 International Electrotechnical Commission
Hewlett-Packard, 89 (IEC), 82
High pressure selling tactics, 101 International Financial Corporation (IFC), 60
HIV, 163 International Food and Beverage Alliance, 52
H&M, 67, 68
Index 181

International Labour Organization (ILO), 124, Leadership, 7


133, 134 autocratic leadership, 20
International Organization for Standardization charismatic leadership, 20
(ISO), 7, 31, 82 ethical leadership, 20, 24, 28
International Women’s Day, 107 servant leadership, 19
Investors, 5 transformational leadership,
socially responsible investors, 22 19, 20, 32
Ireland, 151 Lean manufacturing, 73
Iseeka, 108 Learning, 30, 32, 138, 169, 170
ISO 14000, 82, 124 Legitimacy, 26–28, 124, 125
ISO 14001, 82 Leisure travel market, 88
Isomorphism, 28, 29 Liberal/Liberalism, 21
ITC limited, 108 Lithuania, 15
iTunes, 88 Litigation, 151
Littlewoods, 51
Lululemon Athletica’s, 81
J LVMH, 166
Japan, 78, 88
Japanese, 152
Job applicant, 149 M
Job performance, 52 3M, 45, 88
Job satisfaction, 149 Machiavellianism, 20
Johnson & Johnson, 116, 139 Macy’s, 52, 78, 79
Justice, 137, 149 Maersk, 167
Just-in time (JIT), 73 Malaysian, 22, 64
Malthus, T.R., 162
Managerial values, 21, 28
K Mango, 67
Kalanick, T., 17, 64 Market coverage strategy, 108
Kale Group, 165 Marketing ethics, 101
Kering, 166 Marketing manager, 115
KFC, 84 Marketing objectives, 102
Khosrowshahi, D., 65 Market society, 6
Kindle, 108 Marks & Spencer, 67
KNO clothing, 50 Mass customization, 82, 92
Knoer, S.J., 105 Mattel, 27, 79
Know the Chain—ICT and Food & Beverage McKinsey & Company, 92, 115
Benchmarks, 122 Merck, 116
Knowledge, 23–25, 30 Merker, S., 162
Koç Group, 51 Metaphor, 48
Kodak, 90 Michelin star, 138
Korea/Korean, 22, 27, 29 Microsoft, 136
Kroger Co., 89, 90 Migration, 169
Kyocera, 78 Millennials, 119
Mission, 44, 55
Moral hazard, 67
L Moral licensing, 148
Labor market, 169 Mudo, 165
Labor shortage, 51, 88 Multinational enterprises (MNEs), 25, 29–31,
Land Rover, 51 83, 133, 140
Laurent, S., 166 Musk, E., 110, 167
182 Index

N Pepper, Dr., 88
Narcissism, 20 PepsiCo Inc., 89
Natural environment, 5 Perceived organizational support, 149
Natural-resource-based view, 9 Performance, 149, 150, 154
Nestlé, 52–54, 103 financial performance, 115, 123, 127
Netflix, 168 stock market performance, 118
Networks, 26, 30, 32, 77, 86, 87, 91, Performance appraisal, 134, 138
92, 153 Personal fabrication (fabbing), 82
New business models, 74 Personal information, 167
Nigeria, 171 Personality
Non-governmental organizations (NGOs), 11, the five-factor model of personality, 21
45, 53, 83, 132, 139, 161, 170 Pfizer, 116, 127, 151
Norms, 137 Pharmaceutical, 163
Norway, 117 Philanthropic social responsibilities, 44
NotPetya, 167 Philanthropy, 83, 134, 139
Nouri Bar, 50 Philosophy of science, 3
Novo Nordisk, 139 Photovoltaic (PV), 74
Nuclear power industries, 152 Pichai, S., 169
Nutrition, 162 Pinterest, 88
Pizza Hut, 84
Planned obsolescence, 101
O Planning school, 46
Offshoring, 26, 77 Policy
One Young World Summit, 137 national policy, 30
Ontological, 4 public policy, 28
Oracle, 116 Policy makers, 3
Organizational commitment, 147, 149 Population, 162, 163
Organizational learning, 47, 54 Postmodern, 59
Organizational performance, 150 Power distance, 21, 29
Organizational types, 24 Premier Brands, 51
Organization for Economic Co-operation and Primark, 67
Development (OECD), 31, 60, 108, Proactiveness, 44
133, 164 Procter & Gamble, 88, 116
Outsourcing, 45 Procurement, 74, 75, 83–87, 89, 93
Overtime, 135 Product end-of-life policies, 92
Ownership Productivity, 135, 138
foreign ownership, 22 Product life cycle, 87
ownership concentration, 22 Product quality, 152
ownership structure, 17, 21, 22 Proof Eyewear, 45
Ownership structure, 7 Prospective employees, 131, 132, 136, 139, 149
Owners-managers, 18 Prudential, 116
Oxfam’s Behind the Brands, 122 Psychopathy, 20
Publicity, 107

P
Pakistan, 154 R
Pampers, 100 Rana Plaza, 67, 68
Paradigms, 4 Ranking Digital Rights’ Corporate
Paradigm shift, 50, 170, 172 Accountability Index, 122
Parental leave, 138, 139 Reciprocal, 44
Park Geun-hye, 13 Recruitment, 134, 139
Partnering, 44 Recycle/ recycling, 74, 77, 80, 87–89, 92
Partners in Time, 52 Recycling, 118
Index 183

Reddit.com, 88 Social innovation, 4–6, 11, 161


Renewable resources, 77 Socially irresponsible, 148
Reputation, 22, 43, 50, 150, 152 Socially irresponsible behavior, 148, 151
Reputation index, 124 Socially responsible advertising, 107
Research and development (R&D), 102 Socially responsible consumer behavior, 104
Resource-based view (RBV), 46, 91 Socially responsible human resources
Resource dependency theories, 20 management (SRHRM), 133–135,
Restructuring, 52, 73 137, 140
Retailer, 109 Socially responsible investment (SRI), 118–122
Retrenchment, 163 Socially responsible marketing, 99–111
Reverse supply chain, 87 Socially responsible marketing mix, 102–109
Robbins, C., 169 Socially responsible product, 99, 103, 107, 108,
Roddick, D. A., 171 110, 162
Roma Boots, 50 Socially responsible purchasing, 83, 86
Romania, 28 Social media, 131, 137
Royal Dutch Shell PLC, 89 26.000 Social responsibility, 7
Royal Phillips Company, 90 Social responsibility strategy (SRS), 43–45, 48,
Rutledge, T.M., 17 50–52, 54, 55
Rwandan, 78 Societal marketing, 99–100
Ryanair, 45 Somalia, 47
Sony, 80, 82
SoundCloud, 88
S South Korea, 13, 27, 163
Sainsbury’s, 51 South Korean, 13
Samsung’s, 13, 49, 79 Spain, 19, 28
Sarbanes-Oxley, 63 S&P 500 Environmentally & Socially
SA8000 Standard, 124 Responsible Index (SPXESRP), 118
Scandals, 64 Spotify, 88
SC Johnson, 103 Stakeholder, 3–7, 9, 11, 12, 20–27, 29, 60–63,
Self-driving car, 64 65–67, 99, 100, 106, 109, 115, 117,
Service sector, 91 123–125, 127
Seven-Eleven, 88 social stakeholder, 131
Sexism, 164 stakeholder salience, 44
Sexual harassment, 17, 64 target stakeholder, 45
Shakespeare, W., 5 Stakeholder management, 27
Shared value, 18, 74, 91 Stakeholder orientation, 100
Shareholder, 44, 54, 115, 118, 120, 121 Standard & Poor’s (S&P), 20
Shell, 171 Starbucks, 138
Silicon Valley, 17, 136 Statue of Liberty, 100
Sir Richard’s, 50 Stealth marketing, 106, 107
Size-zero models, 166 Stewardship theory, 18
Small business, 137 Stock, 152
Small and medium-sized enterprises’ Strategic assets, 48
(SMEs), 24 Strategic business units (SBUs), 44, 48
Smart manufacturing, 167 Strategic planning process, 23
Smile Squared, 50 Strategy, 5, 7, 9
Smith, D.Y., 137 differentiation strategy, 26
Soapbox Soaps, 50 Structuration theory, 140
Social Structure, 17, 18, 21–22, 32
social innovations, 20 Subaru, 147
social justice, 21 Subway, 85
social performance, 26 Supermarket, 162, 171
social ties, 29 Suppliers, 45, 46, 50
social welfare, 22, 29 Supply chain management (SCM), 83
Social enterprises, 103 Sustainability, 3, 9, 10
184 Index

Sustainability balanced scorecards Transparency, 66, 67, 118, 122


(SBSCs), 123 Triple bottom line (TBL), 125, 126
Sustainable Accounting Standards Boards Trolley problem, 167
(SASB), 121 Trump, D.J., 169
Sustainable development, 9, 10, 153, 161–172 Trust, 62, 63, 65, 134, 137, 138
Sustainable development goals (SDGs), 10–13, Turkcell, 45, 165
31, 127, 131, 161 Turkey, 45, 51, 135, 165
Sustainable enterprise, 133 Turkey/Turkish, 28
Sustainable lifestyle, 170 Turnover, 148, 149, 155
Sustainable living, 162 Twitter, 88, 136
Sustainable marketing, 100, 101
Swedish, 86
Switzerland, 162 U
Systems perspective, 59 Uber, 17, 64–66, 136, 168, 169
Systems theory, 4, 6, 11 Underwriters Laboratories Inc, 82
Unethical, 151
UN Guiding Principles Reporting
T Framework, 121
Taco Bell, 84, 85 Unilever’s, 49, 88, 89, 103
Taiwanese, 111 Union, 136
Target, 117, 120, 122, 123 Union activism, 131, 134, 135
Target Co., 89 Uniqlo, 108
Target market, 100, 103, 104, 107 United Kingdom (UK), 51, 116, 119, 169
Task environment, 17, 26–27, 151–152 United Nations (UN), 10, 81, 131, 133, 147,
TaskRabbit, 169 152, 155, 161
Tax aggressiveness, 151 United Nations Children’s Fund (UNICEF), 53
Tax payment, 168 United Nations Conference on Trade and
Telefonica, 117 Development (UNCTAD), 122, 123
Tenure, 17, 19, 20, 23, 24 United Nations Educational, Scientific and
9/11 Terrorist attack, 149 Cultural Organization (UNICEF), 100
Tesco, 63 United States (US), 20, 115–117, 121, 127,
Tesla, 79 135, 138
Tesla Motors, 110 United States of America (USA), 62, 150, 151
The Body Shop, 51 Universal Declaration of Human Rights, 124
The Children's Place, 67 Upper echelon theory, 18
The International Standardization Organization Urban farming, 162
(ISO), 133 Utility of product, 108
The sustainable supply chain management
(SSCM), 84
The Vocational High Schools: A Matter of V
Country, 51 Value
TNT, 167 value orientation, 22
Tobacco, 152 Value chain, 53, 54, 73–75, 82, 92
TOMS, 78, 79 Value creating, 49
TOMS shoes, 50 Values, 43, 48, 63, 65, 66, 100, 102, 103, 108,
Tony Hayward, 148 109, 137
TopCoder, 170 Vehbi Koc Foundation, 51
Top management, 24 Vehicles
Toros Tarim, 165 electric vehicles (EVs), 27
Total quality management (TQM), 73 hydrogen fuel cell vehicles, 27
Toyota Motor Co., 89 Venezuela, 30
Toys “R” Us, 27 Vimeo, 88
Traits, 18, 20, 21 Virgin Airlines & Travel, 46
Index 185

Vision, 20, 43, 54 World Business Council for Sustainable


Vital measures, 139 Development (WBCSD), 3, 132,
Vocational schools, 51 161, 172
Volkswagen, 118 WorldCom, 115
Voluntariness, 3 World Commission of Environment and
Volunteerism program, 52 Development (WCED), 9
Vuitton, L., 166 World Health Organization (WHO), 53
World War II, 162

W
Walmart, 27, 85, 87–89, 92 X
Warby Parker, 50 Xbox, 136
Waste, 74, 75, 77, 79, 81, 82, 85, 88 Xerox Co., 89
Waymo, 64
Welch, J., 138
Wellness industry, 166 Y
Weyerhaeuse, 89, 90 Yamato Transport Co., 88
Weyerhaeuser Company, 89, 90 YouTube, 88
WhatsApp, 88 Yum Brands, 84
Whole Foods, 85
Wholesaler, 109
Work-life balance, 134–136, 138 Z
World Bank Group, 60 Zuckerberg, M., 167, 169