CHAPTER 4

Importance of capturing the value created from CSR efforts.

In recent years, scholars have devoted

considerable attention to the
managerial implica-
tions of corporate social
responsibility (henceforth, CSR).
Although there has been con-
siderable discussion about the
moral choices managers face when
encountering CSR
(McWilliams & Siegel, 2001b), most
CSR studies in the management
literature focus on the
relationship between CSR and firm
performance
In recent years, scholars have devoted
considerable attention to the
managerial implica-

C2 General
 tions of corporate social
responsibility (henceforth, CSR).
Although there has been con-
siderable discussion about the
moral choices managers face when
encountering CSR
(McWilliams & Siegel, 2001b), most
CSR studies in the management
literature focus on the
relationship between CSR and firm
performance
In recent years, scholars have devoted
considerable attention to the
managerial implica-
tions of corporate social
responsibility (henceforth, CSR).
Although there has been con-

C2 General
 siderable discussion about the
moral choices managers face when
encountering CSR
(McWilliams & Siegel, 2001b), most
CSR studies in the management
literature focus on the
relationship between CSR and firm
performance
In recent years, scholars have devoted
considerable attention to the
managerial implica-
tions of corporate social
responsibility (henceforth, CSR).
Although there has been con-
siderable discussion about the
moral choices managers face when
encountering CSR

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 (McWilliams & Siegel, 2001b), most
CSR studies in the management
literature focus on the
relationship between CSR and firm
performanc
In recent years, scholars have devoted
considerable attention to the
managerial implica-
tions of corporate social
responsibility (henceforth, CSR).
Although there has been con-
siderable discussion about the
moral choices managers face when
encountering CSR
(McWilliams & Siegel, 2001b), most
CSR studies in the management
literature focus on the
relationship between CSR and firm
performanc

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 In recent years, scholars have devoted considerable attention to the managerial implica-tions of
corporate social responsibility (henceforth, CSR). Although there has been con-siderable discussion
about the moral choices managers face when encountering CSR (McWilliams & Siegel, 2001b), most
CSR studies in the management literature focus on the relationship between CSR and firm performance

4 Journal of Management / Month XXXX

requires that we take account of a
broad range of stakeholders, including
customers, employees,
suppliers, taxpayers, governments,
community groups, and
underrepresented groups.
Adding to the difficulty of measuring
the value of CSR to society,
consumers often find
it difficult to determine if a firm’s
internal operations meet their moral
and political stan-
dards for social responsibility. The
level of asymmetric information
regarding internal

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 operations may be mediated by the
firm itself or by activists. For instance,
companies such
as McDonald’s, Motorola, and Nike
publish annual reports on social
responsibility. One can
view this activity as a form of
advertising, especially for more
general types of CSR. While
this information may be useful,
some consumers perceive it as
biased since it is filtered
through senior management. This
mistrust may be mitigated by activists
who play an impor-
tant role in supplying consumers with
information that they can rely on to
choose socially

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 responsible firms (Feddersen &
Gilligan, 2001).
Due to the presence of asymmetric
information, it is often difficult to
assess the determi-
nants and outcomes of CSR. Managers
may perceive that many external
stakeholders view
CSR activity more favorably if it is
divorced from any discussion of the
bottom line. Thus,
managers are not inclined to reveal
practical motives for engaging in
CSR, such as new
product development and promotion,
reducing labor costs, and enhancing
the firm’s reputa-

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 tion. This lack of candid information
has made it difficult to distinguish and
discuss the differ-
ent motivations for CSR, which may
be private or social, or both.
Analysis of the strategic
implications of CSR is further
hampered by cross-country or
cross-cultural differences in the
institutions that regulate market
activity, including business,
labor, and social agencies
(McWilliams, Siegel, & Wright,
2006). Institutional differences
lead to different expectations and
different returns to activity. For firms
operating in multiple

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 countries or cultures, this complicates
the process of determining which
activities to engage
in and how much to invest. As the
knowledge base of CSR develops
worldwide, we will be
better able to analyze and advise on
CSR.
Empirical Issues to be Resolved
Problems with the measurement of
the costs and benefits of CSR
activities continue to
cloud our understanding of the
private and social returns.
Researchers need to use more
direct methods, such as interviews and
surveys, to tease out less observable
motivations and

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 improve the precision of
measurement of the private and social
returns to CSR. The ideal
level of CSR for the firm, that is, the
level that maximizes the private
return, can theoreti-
cally be determined by cost-benefit
analysis (McWilliams & Siegel,
2001a). However, it
may be difficult to calculate these
costs and benefits. While the costs
of providing CSR
attributes may be easy for managers
to determine, consumer demand
(benefit) may not be.
Consumer demand for CSR may be
difficult to measure because CSR
attributes may consti-

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 tute only a small percentage of all
relevant attributes of a product. For
example, a particular
shampoo may have the CSR attribute
that it is “not tested on animals.”
However, shampoo
has additional attributes, such as brand
name, scent, ingredients, and
packaging. This makes
it difficult to separate out the demand
for the CSR attribute, which affects
the ability of man-
agers to conduct a cost-benefit
analysis.
Against this contentious background the idea of creating shared value has found appeal. The heart of
the concept rests on the ability of a company to create private value for itself, which in turn creates
public value for society. And indeed there are examples of companies that have accomplished this goal.
Cisco’s establishment of Cisco Academies to train networking personnel is often held up as an example
of “shared value.” Nestle and its development of Milk Districts in China, India and Pakistan is another
oft-cited example, and there are many more.

Auditing

The first step for a company to begin devising a CSR strategy is to classify and categorize its plethora of
CSR programs into one of three theatres we have described. The CSR report published by many

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 companies is only a partial view of the range and breadth of programs undertaken by the various parts
of the company. What is reported usually turns out to be those activities that are likely to impress
external stakeholders, but the report is typically not useful as an auditing tool. A company must
assiduously collect every program from each discipline within the company that attempts to make a
deliberate social and /or environmental contribution. Having cataloged the program, the company must
next record how much was or will be spent and its likely benefits, even if they are minimal. We have
found that the process of collecting this information and classifying the various programs is a big task,
but the rewards are almost

Editing

Having classified the company’s CSR initiatives in the auditing process, the purpose of the editing effort
is to move the programs in each theatre from the top of to the bottom of Figure 3. For example, in
Theatre 1, unconnected philanthropic efforts should be molded to yield a more strategic thrust. This is
exactly what PNC Bank seems to have done by channeling its primary business expertise and greatest
institutional knowledge into a focused, well-funded and strategic philanthropy initiative. While the
broad array of CSR programs the company supported prior to launching “Grow Up Great” likely yielded
some social benefits, crafting a large-scale and significant effort around a highly visible and critical social
issue will have far greater benefits to the community PNC inhabits and relies upon. It will also benefit
the company’s overall business strategy through improved social capital and brand reputation.

Role of annual reporting in value Capture :

The aspects of disclosure of information on corporate social responsibility (CSR) in the annual reports are
analyzed in the article. Although the importance of CSR is rather widely discussed in scientific literature there
is lack of empirical research on basic CSR disclosure situation, especially in developing countries. Thus, the
main goal of this article is to investigate the level of social information disclosure in the annual reports of
Lithuanian companies after the execution of analysis of the factors of social responsibility disclosure
distinguished in scientific literature. Profit pursuit has been one of the most important company goals for a
long time, first and foremost because revenue earning is an essential condition for activity succession.
However, spreading CSR conception impels to ensure the implementation of needs and goals of all groups
concerned. Thus, responsible company has to solve many important problems such as: how to maintain natural
resources and produce goods, how to keep environment unpolluted and preserve human health, how to ensure
safe, acceptable and healthy work environment

Implementation of responsible business practice may help company in creating competitive advantage, may
have positive influence on its reputation, employee loyalty and employment, activity efficiency and sales

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 volumes. Based on the analysis of scientific literature, there are four main activities distinguished that raise
interest of various groups concerned: human resources' activity, product design and development activities,
community activity and environmental activity. According to the annual activity report of the Lithuanian
National Responsible Business Network for the year 2008, this Network had united 57 Lithuanian companies
and organizations on 31 st of December, 2008. However, only 11 Lithuanian companies have presented social
progress reports for 2008. This shows that major part of Lithuanian companies is oriented towards compulsory
presentation of financial reports and financial information disclosure on requisition. Thus, while investigating
the level of social information disclosure, compulsory reports – annual reports have been used where
companies may voluntary disclose more social information on their activity.

Content analysis as one of the most common methods for social information analysis was used for research.
Full sentences on company social responsibility and page ratio to full volume of annual report in percents were
used as a measurement unit for content analysis. There were annual reports for the years 2007 -2008 of four
companies from diary industry that had been quoted in the stock exchange used, aiming to ensure data
comparability and logical conclusions. The results of research have revealed that the content of disclosure in
Lithuanian companies is not comprehensive and is highly various, even in the same branch of industry.
Investigated companies use written narrative but not quantifiable methods to disclose CSR in their reports.
None of companies have disclosed information on community activity. Only one of surveyed companies has
presented information on environment protection. Information on human resources has been presented mainly
in digital form and in tables. Information on product quality and safety has been presented in the annual reports
of all companies, as well as green (environmentally-friendly) products have been distinguished.

Conclusions

Analyzing theoretical issues and influence of corporate social reporting to value of Lithuanian publicly

listed companies, these main conclusions were made. Growing number of companies that participates in

social disclosure confirms the phenomenon of CR reporting. Theoretical studies have produced
conflicting

results: acknowledging positive, negative or mixed/neutral impact of CR reporting to company’s value

and

financial performance. Most theoretical and empirical studies usually focus on one country or one
region case,

so different results of CR reporting to company’s value may be explained by the different levels of

development, regional differences and behavioral characteristics of the largest (publicly listed)

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 Difference between tangible and intangible CSR value:

What are Tangible Assets?

Assets with a physical existence that can be touched and felt are tangible assets.  They are used primarily in the
operation of the business to produce products or services.  Since tangible assets are often purchased, they are
much more easily valued than intangible assets.
Tangible assets can be accounted for as either long-term or current assets depending on their estimated life. 
These types of assets include buildings, automobiles, physical inventory, furniture and machines.  They
depreciate in value over time

4 main capitals that relate to intangibles

 Human – knowledge assets and leadership
 Organizational – communications and strategy
 Market – reputation, brand development, partnerships and networks,
and adaptability
 Innovation – R&D capability and technologies

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 The link between CSR and intangible assets
I found that even if Business for Social Responsibility’s paper was well into
its teens, it still to this day accurately pinpointed the link between intangible
assets and Corporate Social Responsibility:
“The link between intangibles and CSR is intimate and mutlifaceted.
Understanding how value is created through intangible assets is integral to
understanding how long-term wealth is created through CSR.”

In an ever changing business world where the customer is getting involved,

asking more questions and caring a whole lot more about his or her footprint,
organizations from all industries have had to adapt and change the way they
do business, hence the increase in Corporate Social Responsibility programs
worldwide.

Corporate social responsibility (CSR), community relations, accountability,

corporate citizenship, transparency, stakeholder engagement, (I could go on
for a while here) are too often seen as nice-to-haves or nice-to-pursue by
executives. Bottom line is, all of these are directly affecting your
organization’s finances. How so? They’re all closely linked to your intangible
assets. And even if they’re still not quite obvious to everyone yet, intangible
assets are as impactful as tangible assets (sometimes even more) to business
continuity. That being said, I’m sure that whether you’re the owner, top
executive, Community Relations or Public Relations professional in your
organization, your brand’s reputation, its place in the market and its
perception by communities where you operate are fairly high on the agenda.
Especially if recently your name has been all over the news

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