J Bus Ethics (2018) 148:587–602
https://doi.org/10.1007/s10551-015-3011-8
Cognitive Processes in the CSR Decision-Making Process:
A Sensemaking Perspective
Ulf H. Richter1 • Felix F. Arndt1
Received: 29 May 2015 / Accepted: 29 December 2015 / Published online: 9 January 2016
 Springer Science+Business Media Dordrecht 2016
Abstract Applying the sensemaking perspective in the
field of corporate social responsibility (CSR) is a recent but
promising development. Using an in-depth exploratory
case study, we analyze and discuss the CSR character of
British American Tobacco (BAT) Switzerland. Our find-
ings indicate that BAT Switzerland does not follow tradi-
tional patters of building CSR. BAT Switzerland can be
classified as a ‘‘legitimacy seeker,’’ characterized mainly
by a relational identity orientation and legitimation strate-
gies that might provide pragmatic and/or cognitive legiti-
macy. We conclude that understanding the cognitive
processes underlying the CSR decision-making process is
of fundamental value when analyzing and changing the
CSR approach of a firm. We discuss boundary conditions
of the CSR character framework and expand it by differ-
entiating between process and product legitimacy, as both
perspectives have important but possibly different impli-
cations for the firm.
Keywords Sensemaking
Corporate social
responsibility
Globalization
Legitimacy

Identity orientation
Qualitative study
& Felix F. Arndt
ffarndt@gmail.com
Ulf H. Richter
ulf.richter@nottingham.edu.cn
1
University of Nottingham China, Taikang East Road 199,
Ningbo 315100, China
Introduction
Corporate social responsibility (CSR) continues to be at the
center stage of management research. A long list of scandals
and frauds (e.g., Enron) have led firms to aim at portraying a
more socially responsible image. Many organizations have
systematically started proactive efforts to adopt practices
that show their active and constructive role within societies
(Matten and Moon 2008). However, the literature is largely
silent on cognitive decision-making processes underlying
this goal, particularly in increasingly demanding conditions
of legitimation (Habermas 2001). Firms are frequently
challenged by civil society organizations to justify their
actions in a globalizing world (O’Higgins 2010). As a con-
sequence, firms continuously need to re-evaluate their
activities and potentially redesign and reposition their
activities to meet the demands that society sets upon them
(Matten and Moon 2008). For example, Greenpeace regu-
larly calls for actions to remove toxic substances from
clothes or to protest against hazardous actions harming the
seas (e.g., trying to improve the safety standards for oil
tankers). Often, they directly target firms with their protests.
Firms cannot make decisions in isolation anymore but are
permanently watched and evaluated by society. Under-
standing the processes underlying the decisions to carry out
activities designed to obtain legitimacy, particularly under
the condition of increasing pressure for firms have received
little attention in the literature. In this article, we address this
gap by pursuing an analysis of a multinational corporation
(MNC) which primarily operates in the tobacco industry.
This industry chronically suffers from a bad reputation of
neglecting the health consequences of its products. We apply
an organizational sensemaking lens as it is particularly
suitable to illustrate cognitive decision-making processes
(Weick 1993, 1995).
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Basu and Palazzo (2008) conceptualized the CSR
approach of firms in the form of a sensemaking model, the
CSR character, to provide a framework for better
addressing the CSR sensemaking and decision processes
internal to the firm. Firms enter into a process of sense-
making when confronted with multiple, often contradic-
tory, expectations from various stakeholders (see also
Mitchell et al. 1997; Ulmer and Sellnow 2000). In this
study, we investigate the cognitive processes of MNCs that
relate the CSR literature to managerial practice and per-
ceptions in order to predict CSR outcomes. We ask: How
do organizations respond to increasing pressure to obtain
legitimacy when operating in contested industries?
This research question is addressed with an in-depth,
exploratory case study on the CSR character of British
American Tobacco (BAT). The tobacco industry has been
classified as a ‘controversial’ industry (Lindorff et al.
2012). Controversial industries are characterized by the
provision of ‘harmful or immoral goods’ (Lindorff et al.
2012, p. 457). Palazzo and Richter (2005) report that the
World Health Organization has even challenged the pos-
sibility for such firms to be responsible. Traditional ways of
building CSR may be blocked in controversial industries
due to the nature of their offerings. We analyze the inter-
relatedness of cognitive processes of decision-makers in
times when the tobacco industry faces increasing pressure
to legitimate itself. In a society, in which the public opinion
against smoking becomes stronger and the legitimacy of
products is excluded, process legitimacy plays an increas-
ingly important role.
Our core finding is that the CSR character as described
in Basu and Palazzo (2008) needs two important exten-
sions. First, in controversial industries, managers differ-
entiate between process and product legitimacy. Contrary
to the common practice of putting products into the center
of their CSR activities, BAT is using a participative pro-
cess approach to mitigate the harmful consequences of
their products. Second, the CSR character is not static, but
dynamic and changing, particularly when firms face
increasing pressure to legitimate themselves in changing
environments. We observe changes in the cognitive
dimension of the CSR character that indicates its dynamic
nature.
Our study contributes to the existing literature in at least
four ways. First, we extend the CSR literature by high-
lighting the role of process and product legitimacy. While
conventionally the product is a driving force for firms to
build legitimacy (Palazzo and Richter 2005), process
legitimacy plays a central role when products are con-
tested. A discussion that ignores this aspect falls short in
providing guidance regarding the CSR process and its
outcomes for a number of industries and companies. We
illustrate the tensions that arise in controversial industries
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U. H. Richter, F. F. Arndt
by profiling BAT Switzerland’s dilemma in positioning
itself as a responsible company while its product is highly
contested.
Second, we make an important extension to the CSR
character of Basu and Palazzo (2008). Basu and Palazzo
(2008) describe the fundamental challenge for their model
to unveil different configurations of the CSR character,
which connect CSR processes and CSR outcomes. Our
study finds that some of the ways legitimacy is gained
differ. We propose an additional classification (product and
process legitimacy) that seems suitable for guiding thought
in the industry context of controversial industries. Our
classification of process and product legitimacy may offer a
guiding principle to cluster configurations in a less obfus-
cated way than the CSR character.
Third, we provide insights of how firms deal with
changing environments in the CSR context. We show how
firms deal with limitations inherent to their industry, how
increasing environmental pressure leads to a response, and
how this response takes into account the nature of the
product. This point offers insight into the dynamic
dimension of the model of Basu and Palazzo (2008). While
the model suggests a static nature of the CSR character, we
find it to be dynamic and changing in nature.
Fourth, we provide case study evidence for the CSR
character with a focus on the cognitive dimension. This
contribution is noteworthy as the CSR character has been
criticized as difficult to operationalize (Maon et al. 2010).
This article is structured as follows. In the next section,
we review the literature on the CSR character and analyze
how the literature has described the phenomenon to date.
Then, we explain the methodology and present our results.
Finally, we discuss our findings in the light of the extended
framework and its implications for future research.
Literature Review
Can a firm in a controversial industry be responsible? And
if so how? Palazzo and Richter (2005) classify four
dimensions that help building CSR. In the case of the
controversial industries, all four dimensions are inhibited.
First, corporate philanthropy should reflect a companies’
core business and increase its reputation. In controversial
industries, this aspect is regularly underdeveloped as the
core business is ‘controversial.’ Profits used from contro-
versial business models, products, or services undermine
the philanthropic character of any related actions or goods.
For example, setting up an institute for cancer research
through a company that products are said to cause cancer
can do little to justify the existence of these products or
services. Second, stakeholder collaboration should lead to
greater credibility of CSR activities. In controversial
Cognitive Processes in the CSR Decision-Making Process: A Sensemaking Perspective
industries, stakeholder run a reputation risk by collaborat-
ing and therefore hinders or prevents fruitful collaboration.
Third, CSR reporting points out the positive work of a
corporation. In the case of controversial industries, the
harmful effects of the business must be displayed and
produce effects that are contrary to the idea of CSR
reporting. Fourth, self-regulation aims at voluntarily
reducing activities that may not be in line with the spirit of
CSR. In case of controversial industries, self-regulation is a
difficult instrument as it seems arbitrary and offers grounds
for doubting the motivation of these activities. Overall,
controversial industries cannot build on conventional CSR
strategies.
Nevertheless, a dramatically decreasing public accep-
tance of the tobacco industry forces the industry to react
(Chapman 2004). In this study, while empirically chal-
lenging, we use a sensemaking approach to investigate how
the tobacco industry reacts to increasing pressure to
increase legitimacy. Organizational sensemaking as ‘‘a
process by which individuals develop cognitive maps of
their environment’’ (Ring and Rands 1989, p. 342) provides
a powerful but largely neglected foundation for the analysis
of the CSR approach of a MNC (Basu and Palazzo 2008).
According to Basu and Palazzo (2008, p. 124), CSR is
defined as ‘‘the process by which managers within an
organization think about and discuss relationships with
stakeholders as well as their roles in relation to the com-
mon good, along with their behavioral disposition with
respect to the fulfillment and achievement of these roles
and relationships.’’
Basu and Palazzo (2008) introduce three independent
dimensions which they label cognitive, linguistic, and
conative to describe a firm’s CSR character as illustrated in
Fig. 1. These dimensions refer to the processes within
organizations that shape organizational identity, its mani-
festation in language, communication, and behavior based
on existing organizational knowledge. Each of these
dimensions incorporates a number of sub-dimensions. We
focus on cognition as it reflects what the firm thinks.
Cognition has arguably been the most prominent ante-
cedent in research on organizational decision-making
(Schwenk 1984). In the tobacco industry, the way a firm
changes the way it thinks about itself driven by increasing
public pressure is a particularly crucial step toward higher
CSR. How a firm thinks is crucial to understand its actions
and its general positioning in terms of CSR, how it reacts
under changing legitimacy conditions, and when analyzing
its actions.
The cognitive dimension of the sensemaking process
inherent in the CSR character consist of the two sub-di-
mensions of identity orientation and legitimacy. Identity
orientation refers to the commonly shared assumptions by
stakeholders what the firm is, and is expected to affect
589
motivation and behavior. Brickson (2005, 2007) classifies
identity orientation into individualistic, relational, and
collectivistic. The different identity orientations describe
the way a firm relates to its stakeholders.
An individualistic identity orientation emphasizes its
uniqueness and implies that an organization perceives itself
as a separate, distinctive entity (Brickson 2005, 2007).
Relationships with external and internal stakeholders are
based on instrumentality and characterized by weak ties. In
stakeholder theory, this is reflected by the classic per-
spective that without stakeholders an organization would
cease to exist (Clarkson 1995).
When having a relational orientation, an organization is
defined by dyadic connections (Brickson 2005). This
implies that corporate responsibility is understood strate-
gically and stakeholders are distinguished in primary (im-
portant for corporate performance) and secondary
stakeholders (little importance for corporate performance).
In the case of a collectivistic orientation, the organization
perceives itself as part of a larger collective (Brickson 2005)
and aims at goals well beyond its boundaries. This implies
taking on responsibilities in those collectives (i.e., con-
struction of infrastructure, protection and enforcement of
human rights, and promotion of peace and social welfare).
Brickson (2005) observes that in reality, one finds rather
hybrid forms of organizational identity orientation. Com-
panies do not act independently of their environments.
Thus, identities are affected not only by internal behaviors
but also by relationships to partners and stakeholder
groups. In the case of controversial industries, public
opinion of the industry is often driven by peripheral groups
that are not directly involved in producing or consuming
the products. Often, these groups seek transparency, regu-
lation, and accountability. Companies are presented with a
dilemma. Either they engage with these groups or increase
the risk of prohibition, respectively, regulatory forces that
drive them into illegality and unprotected space (Lindorff
et al. 2012). In this study, we try to understand how this
dilemma is reflected in the identities of company’s oper-
ating in this context.
The second sub-dimension legitimacy describes the act
of seeking legitimacy among organizational stakeholders
for what a firm does, how it does it and the way things are
done. Legitimacy takes three forms (Suchman 1995):
pragmatic, cognitive, and moral.
When a firm reacts to external demands by trying to
influence its constituencies its goal is to gain pragmatic
legitimacy. Legitimation strategies that aim for pragmatic
legitimacy are ‘‘purposive, calculated, and frequently
oppositional’’ (Suchman 1995). Values and norms which
define responsible behavior are argued to be based on
personal values and the integrity of individuals that guar-
antee a transparent process (Paine 1994).
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Fig. 1 CSR dimensions of sensemaking process from Basu and Palazzo (2008)
In order to maintain pragmatic legitimacy, a company
might monitor internal and external risks which pose a
threat to its reputation. This includes (i) monitoring
stakeholders’ expectations (i.e., by surveys or press anal-
ysis’) as in monitoring the supply chain, or the appropriate
behavior of its employees, (ii) consulting opinion leaders
whose voices have a heavy influence on the debate on CSR,
and (iii) lobby governments in order to pass favorable
legislation and assure that the firm does not lose its license
to operate in society (Herriott et al. 1985; Rasche et al.
2013; Vining et al. 2005). For this purpose, a firm might try
to manage the risks which could decrease its legitimacy.
Stakeholder communication may serve as a sounding board
to develop better strategies to conform to external demands
and/or influence the public opinion in its favors (Holder-
Webb et al. 2009).
A firm may want to repair pragmatic legitimacy when
accused of wrongdoing and its reputation is in danger. It
may first react by denying evidence and justify its behavior
with legal, economic, or scientific arguments (Joutsenvirta
2011). It might as well blame individual employees,
external authorities, or global competition for the issue at
hand (Zadek 2004). A firm that wants to regain reputation
may then decide to advertise (actual or apparent) corporate
change or fund supportive NGOs or even found their own
corporate front groups (Hsu 2012; Jahdi and Acikdilli
2009). It may create communication tools such as a cor-
porate website dedicated to CSR to provide information on
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U. H. Richter, F. F. Arndt
(effective or apparent) corporate CSR activities (Drum-
wright 1996). However, following this rationale a firm
might be opposed to regulation, potentially losing the locus
of control over defining what its responsibility might be
(Maitland 1985).
When a firm tries to conform to societal models it strives
for gaining cognitive legitimacy. Its legitimation strategies
are thus based on the implicit assumption that the envi-
ronment controls the firm (Basu and Palazzo 2008). Cog-
nitive legitimacy is built on the assumption that ‘‘cultural
definitions determine how the organization is built, how it
is run, and, simultaneously, how it is understood and
evaluated’’ (Suchman 1995). The institutional perspective
explains how the perception of the environment and the
impact of resources and structure on commitment lead to
action when a firm is looking for social approval (Griffin
and Dunn 2004; Meyer and Rowan 1977). In the search for
legitimacy, a firm might refer to the compliance with
national or local laws such as paying taxes (Tyler et al.
2008). Externally, it may adopt CSR standards and inte-
grate them into its business model to increase the pre-
dictability of its action. Internally, the firm may formalize
and institutionalize structures, e.g., create a whistle-blow-
ing policy or an ethics council, or establish a code of
conduct (Yu 2008).
Legitimation strategies that aim to maintain cognitive
legitimacy refer to (i) the monitoring of cognitive frame-
works by monitoring cultural beliefs, e.g., by regularly
Cognitive Processes in the CSR Decision-Making Process: A Sensemaking Perspective
consulting CSR experts from standard setting organiza-
tions, and (ii) the promotion of CSR frameworks (Palazzo
and Scherer 2006). This may be achieved by institution-
alizing relationships to standard setting organizations and
promoting CSR standards, labels and certifications as well
as self-regulation (e.g., in advertising, selling practices,
product standards, etc.) within or even across industries
(Gilbert and Rasche 2008; Svendsen 1998).
Legitimation strategies that may repair cognitive legit-
imacy focus on institutionalizing a rational discourse
(Palazzo and Scherer 2006). Therefore, a firm may justify
its own behavior based on standards and scientific expla-
nations. In addition, it may fund supportive research to
receive recognition from professional institutions.
A firm may aspire to gain moral legitimacy by entering a
normative discourse on social issues when they feel that they
are losing the trust of the public and established societal
institutions (Palazzo and Scherer 2006). This may also be
motivated internally (in the firm’s own perception) by the
will to protect/reconsider the values of important leaders of
the firm (past or current) such as a new CEO or the founders,
or be subject to the overall concern of employees (Agle et al.
1999). A firm may do so by: (i) engaging in a moral discourse
on CSR activities with internal and external stakeholders; (ii)
assuming responsibility with regards to community, con-
sumer, customer, supply chain, etc. if an issue arises; and/or
(iii) contributing to development and sustainable business
solutions by transferring knowledge, educating the popula-
tion on certain pressing issues such as child labor, training
local managers along the supply chain, provide technical
assistance, or build infrastructures such as roads, schools,
hospitals, or wells (Crane et al. 2004; Matten and Crane
2005). In order to demonstrate its advanced understanding, a
firm may engage in the development of local, industry-wide,
or global CSR standards (e.g., within the framework of the
FSC).
Legitimation strategies that seek to maintain moral
legitimacy may include (i) monitoring the normative
environment and (ii) institutionalizing organizational val-
ues. The first might include listening to societal demands
and consulting experts from civil society, or research and
industry associations that are independent of corporate or
governmental influence (Hiss 2009; Rasche and Esser
2006). The process of institutionalization may comprehend
a variety of measures including: establishing comprehen-
sive CSR models, integrating them into the corporate cul-
ture and core management processes in order to promote
integrity (Paine 1994; Petrick and Quinn 2001), and the
engagement in multi-stakeholder dialogs (Calton and
Payne 2003). This may comprise the creation of a CSR
business unit and the integration of CSR in strategic
planning, policies, processes, procedures, communication,
training, performance and impact measurement, reporting,
591
value, mission, and the leadership model (Chen and Bou-
vain 2009). In addition to the core management functions,
legitimation strategies aiming at maintaining moral legiti-
macy include the improvement of corporate governance,
the implementation of a regular stakeholder dialog and co-
branding with NGOs (Kaptein and Van Tulder 2003).
When aiming for moral legitimacy, success is also evalu-
ated according to moral criteria for instance by involving
independent social audit committees.
Legitimation strategies that aim to repair moral legiti-
macy might include (i) an open acknowledgment of moral
failures and errors of the past and (ii) (similar to gaining
moral legitimacy) a (re)engagement in stakeholder dialog
in order to improve communication. This may be followed
by a revision of corporate practices and CSR policies, and
an institutionalization of dialog with stakeholders (Grolin
1998; Hastings 1999).
As shown, the literature offers an array of strategies for
firms to gain, maintain, and repair legitimacy. Many of
them pose caveats when applied to controversial industries.
Our case study of BAT identifies these in more detail and
analyzes how BAT deals with them.
Methods
Based on the nature of our study, we chose a qualitative
approach. We use a qualitative inquiry to analyze the firm’s
CSR character and understand the cognitive processes in
the CSR decision-making process. We adopted a case study
methodology as suggested by extant literature (e.g.,
Eisenhardt 1989; Yin 1989). Using a single in-depth
exploratory case study, we aim to investigate the CSR
character and to flesh out the sensemaking process of the
firm.
Research Context
We chose BAT Switzerland, a leading tobacco company.
BAT Switzerland is the Swiss subsidiary of a British
tobacco company, founded in 1902, which belongs to the
fast moving consumer goods sector. At the time of study,
BAT was the number two tobacco company in terms of
total turnover (after Philip Morris) and the number one in
sales outside of the United States. For the fiscal year 2005,
the company reported revenues of £24 billion, profits of
£2.6 billion, and about 90,000 employees. Our analysis
focuses on the national level, looking at BAT’s Swiss
subsidiary. At the beginning of the study, BAT’s public
perception was regarded as low.
BAT Switzerland represents an ‘‘extreme case’’ (Eisen-
hardt 1989) through the lens of the CSR literature: BAT
Switzerland has a particularly negative track record in its
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interpretation of its role in society based on decades of hiding
and omitting information, financing falsified research, and
lobbying against anyone that would argue that smoking
might be addictive and have serious health risks. BAT has
been deeply involved in what has been called ‘‘the dark ages
of the tobacco industry,’’ making it a public enemy in the
eyes of its critics (Palazzo and Richter 2005). Moreover, the
constant battle over the public opinion of the health impact of
tobacco consumption over decades has trained the company
to deal with substantial public pressure from governments,
public health, and civil society organizations.
Data Collection
Primary data on BAT Switzerland was collected through
thirteen semi-structured interviews in two rounds with
senior managers from BAT Switzerland (1st round, n = 9,
2nd round, n = 4). The interviewees were selected by the
CSR manager at the time who acted as key correspondent,
coordinating the interviews with the researchers. The CSR
manager was crucial for building trust among the inter-
viewees at BAT Switzerland given that the tobacco
industry was a highly contested industry at the time, facing
many adversaries. The CSR manager was highly important
for interviewees to open up, provide truthful, and open
responses that went beyond pure public relations. He fre-
quently explained to BAT Switzerland interviewees the
importance of the study, the dialog with academia, and the
necessity to provide a truthful account.
The second round of interviews served to clarify issues
that were raised by the respondents in the first round and to
gain an in-depth understanding of the issues at hand. We
conducted a series of eleven stakeholder interviews,
including tobacco experts of the WHO and Bureau Veritas
Switzerland, politicians and government representatives of
the three Swiss political parties CVP, FDP, SVP, the crit-
ical NGO OxyRomandie, the European consumer organi-
zation BEUC, the Swiss retailer cooperative for tobacco
SOTA, the Swiss tobacco lobby organization Swiss
Cigarette, the chief editor of the Swiss newspaper Edipress,
and the International Organisation of Employers. The
anecdotal data were used to triangulate the findings from
the interviews with corporate managers as primary data
source and to eliminate elements that could not be verified
and to inform the second round of interviews with BAT
Switzerland. Given the limited length of this article, our
analysis focuses on the systematic analysis of the data
collected from BAT Switzerland.
Pilot Study
We conducted a pilot study prior to the first interview
round, in order to develop an interview guide with a
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U. H. Richter, F. F. Arndt
detailed set of open-end questions to extract general, dic-
tionary, directory, recipe, and axiomatic knowledge
(Sackmann 1992) about corporate responsibility and the
stakeholder concept of BAT Switzerland. The interview
guide for the first round was revised several times during
the pilot study based on the feedback received and finally
translated into French and back-translated by native
speakers (see Appendix). The interview guide for the sec-
ond round was tailored to the issues identified in the first
round that were specific and material to the company. The
pilot study focused on understanding communicative pro-
cesses of BAT Switzerland’s corporate practice. Secondary
data sources were used to examine the data from the
interviews, to provide the necessary background, and to
identify ‘‘narrative truth’’ (Spence 1982), i.e., discrepancies
between fact and fiction. That includes industry reports
from sources such as Euromonitor to understand industry
figures, reports from health organizations such as the
WHO, and critical NGOs such as OxyRomandie. Qualita-
tive raw data was processed, stored, and managed using
QSR NVIVO 7.
Data Analysis
After completing the data collection, we went through the
data at least four times, coding different themes, and
applying different techniques analyzing code frequencies
within cases, subsets of cases, and across cases each time.
A set of meta-codes was created. The final coding
scheme consists of a twelve page manual with detailed
description of each code (the dimensions of the CSR
character), its properties, and indicators with respect to the
interview questions.
Research Validity
We used multiple coders as suggested by the literature
(e.g., Isabella 1990), consensus validation, and a constant
comparative analysis to ensure reliability. After our initial
coding, six research assistants coded the interviews again
using our predefined codes and categories. This procedure
further strengthened the codes by reducing initial codes
into broader codes and by eliminating weak and redundant
codes. In the second step, doctoral students independently
coded some data in order to ensure the accuracy of the
categories. Based on this feedback, the codes were further
refined. We tested inter-coder reliability regarding cate-
gories and coding procedure. For each case, we extracted
100 randomly chosen but representative verbatim sections
out of the interview data, totaling 300 excerpts. We coded
them with a binary scheme (1 = code is present/0 = code
is not present). The second coder assigned codes without
previous knowledge of the codes we had assigned. Cohen’s
Cognitive Processes in the CSR Decision-Making Process: A Sensemaking Perspective
kappa for all categories was .804 (total n = 7199, one
degree of freedom), excluding pure chance agreement
(Grayson and Rust 2001).
Case Analysis
Identity Orientation
BAT Switzerland reveals two dominant traits for the
understanding of CSR: an individualistic and a relational
identity orientation. Interpretations of CSR that point to an
individualistic identity orientation are dominated by two
topics: First, interviewees describe BAT Switzerland con-
tinuously as an organization which is trying hard to com-
pensate the mistakes that have been made in the past when
talking about tobacco. BAT Switzerland wants to keep its
‘‘license to operate’’ such as its right to advertise or ‘‘right
to talk to its consumers’’ (Manager G). The way in which
products are marketed is seen as very important with
regards to CSR and should be conducted in a conscientious
way. The main theme refers to the duty to society at large
and the willingness to react to societal expectations. BAT
Switzerland wants ‘‘to understand what society expects
from us’’ (Manager H) in order to ‘‘show ownership of
what we are doing’’ (Manager C). BAT Switzerland also
strives for improved corporate governance in order to avoid
legal problems out of the concern for the sustainability of
its business. Second, BAT Switzerland’s self-interest with
regard to its involvement in CSR lies in the objective of a
sustainable business and the right to reach out to con-
sumers. The long-term goal of the involvement in CSR at
BAT Switzerland is to increase shareholder value. The
underlying assumption is that ‘‘just being responsible…is a
cliché’’ and that ‘‘responsibility as such is not an end in
itself’’ (Manager C) but serves to guarantee organizational
survival and is thus in the best interest of shareholders.
Consequently, BAT Switzerland describes CSR as an
inherent part of its corporate strategy. The perception as a
trustworthy, (financially) sustainable business is seen as
stabilizing or even helping to drive the share price.
Stakeholder definitions that reveal traits of an individual-
istic identity orientation reduce stakeholders to those that
‘‘really have a stake’’ (Manager G), i.e., which have a
direct influence on the organization’s survival. This
includes shareholders, employees, customers, and con-
sumers. The theme of ‘‘delivering shareholder value’’
appears to be relatively weak for a company listed on the
stock exchange.
Traits of a relational identity orientation were present in
the responses of the interviewees and an important theme
in all of BAT Switzerland’s activities. Definitions of CSR
that point to a relational identity orientation are dominated
593
by three topics: First, BAT Switzerland wants to engage
with its stakeholders in an appropriate way in order to be
able to satisfy stakeholder expectations and thus behave in
a responsible way. That includes listening, understanding,
dialog, and ‘‘delivering on what you were told’’ (Manager
C). In the self-descriptions, interviewees emphasize the
value of responsiveness and mutual benefit and the char-
acter of a ‘‘looking for dialogue-company’’ (Manager F).
BAT emphasizes that involvement and dialog as a process
is one activity that helps gaining legitimacy for the firm.
Second, BAT Switzerland claims to care for internal
(employees) as well as for external stakeholders (such as
farmers and even their families in the case of developing
countries). Caring for stakeholders is another dimension
that signals that BAT tries to ensure the sustainability and
fairness of their operations. Third, BAT Switzerland
intends to take a position and defend the interests of those
stakeholders that have a strong interest in the survival of
the business such as business partners and consumers (as
well as its own). BAT Switzerland is increasingly focused
on its relationships with its stakeholders defining them
rather broadly. Stakeholder definitions that indicate a
relational identity orientation refer to the mutual influence
of the organization’s and the stakeholder’s behavior. This
includes those who are ‘‘affected,’’ ‘‘impacted,’’ ‘‘tou-
ched,’’ or ‘‘directly or indirectly concerned’’ by the com-
pany, and those who have an ‘‘interest’’ in or an ‘‘opinion’’
on the company, notably including ‘‘non-smokers.’’ The
reason is that BAT Switzerland believes in the ‘‘value of
responsiveness, of honesty, of trustworthiness, of mutual
benefit of responsibility towards our product, towards our
consumers and towards civil society’’ (Manager E). The
broad understanding of stakeholders and the care that BAT
uses to deal with them reflects BAT relational character
and the processes underlying this orientation.
The strong presence of relational themes toward a more
relational identity orientation has been identified as a
potential solution to regain public trust. BAT Switzerland
believes that it will have no future and lose its ‘‘license to
operate’’ (Manager G) if it does not ‘‘get to buy-in from the
majority of our stakeholders’’ (Manager G). For a long
time, the tobacco industry represented a ‘‘black box’’
(Manager F) which was not only obscure and non-trans-
parent but also systematically spoke ‘‘the half-truth’’
(Manager F) or was even lying about the lethal nature of
the product it was selling. Scientific evidence was denied
and/or distorted through counter-‘‘evidence’’ (Palazzo and
Richter 2005). This led to a massive loss of trust and
eventually to tremendous external pressure to engage in
CSR. The changing environment made BAT as a whole
realize that it had to change its defensive attitude toward
the public and accept the scientific evidence if it wanted to
remain a ‘‘sustainable business.’’ BAT Switzerland states
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594
that it has ‘‘changed 180’’ (Manager F) toward a respon-
sible attitude emphasizing the virtue of dialog and
responsiveness. As an interviewee remarks, the reason
‘‘why we went relatively quickly for the Swiss environment
[toward engaging in CSR] is that it’s clear we are operating
in a very controversial business’’ (Manager F).1 As a result
of the stakeholder consultations, BAT Switzerland wel-
comed visitors on its website with the message that it wants
to provide ‘‘all relevant information about us, our business
and big issues in an industry that can be seen as contro-
versial. We want to engage in an open dialogue and we
welcome your views’’ (BAT Switzerland 2007). The
stakeholder dialog at BAT Switzerland that took place
during the period of the study appears to have resulted in an
alteration of acknowledged stakeholders as the following
statement indicates: ‘‘I experienced through the corporate
responsibility project that we are working on, there might
be some guys around that are stakeholders, see themselves
as stakeholders and we have to accept them as stakeholders
although they don’t smoke our cigarettes they don’t do
business with us or they don’t own shares or work for us’’
(Manager G).
BAT Switzerland puts emphasis on legitimizing their
operations through processes that guarantee broad stake-
holder involvement. The very existence of the tobacco
industry continues to be at risk due to the lethal and
addictive nature of its products. The tobacco industry is
facing a fundamental dilemma that threatens its chance for
survival. BAT Switzerland is facing a situation where ‘‘no
matter what we could do, we would … [not be perceived
responsible], just because the product is controversial’’
(Manager C). BAT Switzerland has thus acknowledged
that it is operating in a controversial business where some
stakeholders fight for ‘‘a world without tobacco’’ (Manager
G). While a considerable part of its stakeholders refuse to
talk to a tobacco company, BAT Switzerland feels the urge
to enter into dialogue ‘‘to retain its license to operate’’
(Manager G).
Legitimacy and Legitimation Strategies
In Western societies, the tobacco industry has experience a
dramatic decrease of support in recent years. BAT
Switzerland is focused on adapting to societal demands in
order to regain public trust. Legitimation strategies that aim
at pragmatic legitimacy include four themes: First, CSR in
the eyes of BAT Switzerland is approached from a risk
management perspective. Its objective is to change its
‘‘perception as just the bad guys’’ (Manager F). The key
1 stewardship). Their effectiveness is constantly improved by
Switzerland is generally acknowledged in Europe as a conservative
environment where changes occur slowly, and usually considerably
later than in more progressive European countries.
123
U. H. Richter, F. F. Arndt
consideration is ‘‘how is an activity perceived by an
environment’’ (Manager F) since it recognizes that an
activity, even though legal, might ‘‘potentially harm the
reputation of the business’’ (Manager F). This perspective
reflects a tension between the product of BAT Switzerland
that is seen as harmful and the process that BAT
Switzerland uses to produce, market, and sell their prod-
ucts. Manager F points out that BAT can increase legiti-
macy primarily through inclusive, open, and fair processes
but can do very little in terms of changing the harmful
effects of its products. Second, BAT Switzerland claims
that it wants to inform the consumer by putting health
warnings on its packages ‘‘even in countries where it is not
set by law’’ (Manager C). With this comment, manager C
stresses the importance of legitimizing products through
open communication. Moreover, BAT Switzerland dis-
closes its ingredients on its website in three different lan-
guages as ‘‘moral obligation’’ in order to make consumers
‘‘aware that smoking is dangerous and poses certain risks
for health’’ (Manager I). Third, BAT Switzerland wants to
take action based on the feedback from its stakeholder
dialogues believing that ‘‘you have to get a voice, not as a
brand but as a company’’ (Manager G). BAT learned that
part of its stakeholders want it to ‘‘play a more active role’’
(Manager G) by being more visible and more vocal in the
debate of critical issues. Finally, one interviewee empha-
sized that one of BAT’s major contributions to society is
the government revenues it generates. He emphasized that
BAT was able to establish credibility in developing coun-
tries by properly collecting and remitting taxes on time to
the respective governments. Overall, our interviews
demonstrate that, in their eyes, legitimacy results from
open communication and an honest account of what their
products are, their willingness to admit the harmful con-
sequences of their products, and the proactive community
engagement through public debate and financial returns to
the society.
Legitimation strategies that aim at cognitive legitimacy
refer to four major themes. First, compliance with the law
is imperative for BAT Switzerland since one should ‘‘look
at tobacco as a sustainable business because it’s still a legal
product’’ (Manager G). Moreover, with regards to changing
legislations BAT Switzerland claims that it cannot be its
primary goal to reduce litigation or to ‘‘try to take advan-
tage of weak regulations in country A or country B’’
(Manager H). Second, with regards to its internal corporate
governance BAT Switzerland emphasizes the existence
and strict application of its codes of conduct and other
standards and principles (ranging from good corporate
governance, business ethics, and mutual benefits to product
aligning employees through training, information sessions,
and sharing documents. The goal is ‘‘to embed corporate
Cognitive Processes in the CSR Decision-Making Process: A Sensemaking Perspective
social responsibility in the company’’ (Manager E) as an
inherent part of the process of BAT Switzerland. Third,
BAT Switzerland argues for a number of self-regulations
that are based on BAT’s International Marketing Standards
which represent a baseline that ‘‘raises the bar’’ and pro-
vide norms that are ‘‘not negotiable’’ (Manager C) since
‘‘the reputation of BAT is the sum of all the reputations of
our subsidiaries’’ (Manager H). BAT continues to support
the enactment of legal restrictions and the adoption of
legislated or voluntary standards. ‘‘We work at all times
within the framework of a country’s laws—whatever those
laws may be’’ (comment by BAT Switzerland) since ‘‘a
global company should not be colonialist’’ (Manager C).
Fourth, BAT Switzerland has a voluntary agreement with
the Swiss National Manufacturers Association. It includes,
among others, no advertising next to schools, and no sell-
ing to minors below age 18. To achieve that, it actively
informs trade partners of its own standards and asks the
point of sale (trading partners) to collaborate in the pre-
vention of sale to youth by explicitly communicating the
legal minimum age for the sale of tobacco products. BAT
Switzerland was engaged in lobbying the federal govern-
ment to establish stricter regulation with regards to selling
to minors. To underline its efforts, BAT Switzerland seeks
to educate its consumers (i.e., smokers) to consider the
needs of non-smokers, as well as, how to keep the envi-
ronment clean of cigarette stubs. Trade partners are
expected to respect its marketing standards.
Finally, BAT Switzerland has been striving to establish
a genuine dialog with the Swiss society through a struc-
tured social reporting process. BAT initiated a number of
stakeholder dialogs around the world in order to embed the
principles of CSR within the whole company and its sub-
sidiaries. This process had also reached BAT’s Swiss
subsidiary at the beginning of the case study in 2005.
Accordingly, the interviewees overwhelmingly emphasized
the importance of the social reporting process as a major
strategy to regain legitimacy in the Swiss society.2 The
institutionalized exchange of arguments was supposed to
help exclude bias as much as possible to let the better
argument prevail. In order to meet expectations, BAT
Switzerland came back with proposals for action and
commitments to be taken. Progress was tracked through
regular communication with stakeholders in the form of a
newsletter and through the second cycle of social report in
2007/2008.
The major elements included a training session, four
external stakeholder consultations at different geographic
locations, and a final public presentation of a social report.
2 that could vary independently and continuously. Thus, a
One of the consequences was that BAT Switzerland shows a
relatively homogeneous picture with regards to responses of different
interviewees and the information available on the local website.
595
The social report process was preceded by a workshop
focusing on an internal value discussion in order to
understand how BAT Switzerland’s employees understood
BAT’s business principles. The internal dialog on values
took place at BAT Switzerland’s headquarters. It included
intensive discussions and workshops on how to deal with
external stakeholders which were facilitated by an external
consulting team. A representative of an internationally
renowned social assurance organization was appointed to
certify that the process followed the AA1000 standards for
stakeholder dialog. The stakeholder dialog process with
external stakeholders took place in conference rooms of
hotels in two Swiss cities. Half a year later, the social
report was launched in a wine bar in Geneva that was
chosen for its interesting smoking policy. After the final
presentation of the results, a social report for 2005/6 was
printed and published on the website. BAT Switzerland
also produced, among others, a number of communication
and ‘‘educational’’ materials that were supposed to educate
consumers and customers on topics such as public smoking
or youth prevention (Fig. 2).
Legitimation strategies that aim at moral legitimacy are
rather underrepresented and mainly refer to BAT’s global
activities but not to its Swiss subsidiary. Themes evolved
around responsible and sustainable management through
supplier control for fair wages and the absence of child
labor. Beyond that, BAT works with NGOs and runs
environmental initiatives. Respecting human rights in all
its operations is a fundamental principle of BAT’s strategy
and operations.
In summary, BAT Switzerland presents a range of
activities that are aimed to legitimatize the activities of the
company. Primarily, these actions are process driven and
aim at increasing dialog, offering information, and sup-
porting communities. An overview of managers’ quotes is
displayed in Table 1. BAT aims to legitimize its products
that are by nature lethal and the reason why the company
faces societal pressure by emphasizing its exemplary pro-
cesses that are embedded in the operational and strategic
work of BAT Switzerland.
Discussion
The CSR character offers a large number of combinations
of traits that could represent a company’s CSR process.
Basu and Palazzo (2008, p. 131) specify: ‘Indeed, as
argued by Meyer et al., there are no limits to the number of
organizational types, described along a variety of attributes
fundamental challenge in linking CSR process to CSR
outcome would lie in determining if there are certain
123
596 U. H. Richter, F. F. Arndt

Fig. 2 Extract of commitments Topic Detail

adopted by BAT Switzerland in 1. Public Place Our stakeholders asked us to communicate and clarify our position on public place smoking in Switzer-
the 2005/6 social report Smoking land and to develop possible solutions to accommodate non-smokers and smokers in public venues.
2. Corporate Our stakeholders greatly emphasized the need for more communication on our part, on both topics of
communication public interest (such as public place smoking, marketing restrictions) and on our activities.
3. Youth Smoking Stakeholders felt that BAT Switzerland had a role to play in retail access and that we should support
Prevention initiatives to limit access to tobacco products for under-age people. We were asked not to target under-
(YSP) age people in our advertising. It was also brought to our attention that BAT Switzerland should become
involved in prevention activities and should fund activities for minors with the aim of preventing under-
age smoking.
4. Working envi- During the Boncourt dialogue sessions, BAT Switzerland was asked to improve the planning of work
ronment shifts in the factory so that employees could participate more actively in community life. Moreover, cer-
tain stakeholders asked BAT Switzerland to involve trade unions more pro-actively and create an indus-
try-wide collective agreement.
5. Supplier Rela- The need for better planning and more information for our local suppliers were highlighted during the
tions dialogue sessions. Stakeholders wanted to know if BAT Switzerland had plans to delocalize production
and if its intention was to continue to work with local suppliers.
6. Consumer Stakeholders asked for more information on our products, both on innovative products but also on the
Information ingredients we use within our products. Stakeholders felt that further information on our Research &
Development was needed, [and] required information about what we were doing in terms of harm reduc-
tion.

combinations of these dimensions that are likely to cluster
together, thereby creating profiles of CSR types.’
While we only investigate the cognitive dimension of
the CSR character, our study contributes in at least three
ways to help solving the ‘fundamental challenge’ of the
CSR character:
First, our findings suggest that one promising way to
tackle the fundamental challenge of the CSR character is
differentiating the way legitimacy is gained, maintained,
and repaired through processes on the one hand, and the
positive attributes or outcomes of products that have tra-
ditionally been used to gain legitimacy. This classification
can help solving the ‘fundamental challenge’ underlying
the CSR character by providing a rationale for clustering,
respectively, combining a set of legitimation strategies in a
less complex way than the CSR character suggests. We
illustrate the power of this classification by profiling BAT
Switzerland’s dilemma in positioning itself as a responsible
company while its product is highly contested. We show
that firms operating in controversial industries face a con-
flict between process and product legitimacy. This conflict
results from the harmful nature of the products and has
implications for the use of legitimation strategies. In our
context for example, the moral dimension of legitimacy is
blocked due to the nature of the firms’ products. As a
result, firms need to find alternative legitimation strategies
allowing firms that to put the product into the center of
their activities.
We find that the focus on process and dialog is one way
to do that. This is reflected in the identity orientation of
companies operating in controversial industries and their
legitimation strategies (as well as changes therein). In
terms of identity orientation, firms operating in contro-
versial industries has difficulties developing collective
orientations. These difficulties result from the nature of
their products that forces them into an outsider position.
Firm’s legitimation strategies are bound to a limited range
of cognitive and pragmatic strategies. The context and the
classification of legitimation strategies intended to gain
legitimacy through processes and products helps identify-
ing meaningful clusters of configurations within the CSR
character.
Second, we provide insights into how firms deal with
changing environments. We show how firms deal with
limitations inherent to their industry, how increasing
environmental pressure leads to a response and how this
response takes into account the nature of the product.
Analyzing the cognitive dimension of the CSR character of
BAT Switzerland, we find the following developments
noteworthy:
Identity Orientation
At the time of study, BAT Switzerland was in a change
process from an individualistic toward a relational identity
orientation. Our analysis indicates a domination of rela-
tional identity orientation. However, a strong individual-
istic identity orientation exists in parallel. Traits of a
collectivistic identity orientation are rather weak. We
explain this duality of individualistic and relational identity
orientation from the shift the company is experiencing.
This shift is reflected by a society that is increasingly
outspoken about the health effects of BAT’s products. As a
result of the low legitimacy of their products, BAT shifts
its focus to procedural legitimacy.
Legitimacy and legitimation strategies
BAT Switzerland’s legitimation strategies appear to be
based on its self-interest for survival as a business which is

123
Cognitive Processes in the CSR Decision-Making Process: A Sensemaking Perspective
Table 1 Cognitive processes in the CSR decision-making process: an extension of CSR as sensemaking (excerpts)
Procedural legitimacy
‘‘If you want to be responsible you got to listen first. Again, you can
never be sure that what you had in mind or what you believe it is a
social, corporate social activity or socially responsible behavior
would be perceived as such by your stakeholders.‘‘(Manager C, BAT
Switzerland)
‘‘The basic responsibility lies in obeying the law. That may vary from
country to country and that you might like or not like but if you are
operating in that country you have to obey the law.’’ (Manager G,
BAT Switzerland)
‘‘It’s even more important that we start to look for dialogue with our
different stakeholders to check out where are nevertheless, in which
area is a common understanding. What can we do to change our
perception as just the bad guys, which is a little bit the case. So there
is no way out to avoid the direction of dialogue.’’ (Manager F, BAT
Switzerland)
‘‘Staying quiet is not an alternative. Raising your voice, making best
use of all the access you have to your external stakeholders is the
only thing we can do.’’ (Manager G, BAT Switzerland)
‘‘As a business we have responsibility towards our stakeholders and it
is important for us to engage in a dialogue to understand what is the
society at large expecting from a company like ours and to try to
respond to it in the most appropriate way.’’ (Manager H, BAT
Switzerland)
‘‘It is important to consult and to dialogue with our stakeholders, in
order to be in line with the expectations of society.’’ (Manager I,
BAT Switzerland)
‘‘We initiated [a social reporting process] at a group level in 2005 in
Switzerland, where we go and meet with stakeholders to understand
their expectations, to try to meet those expectations as much as we
can, and we believe that this is responsible behavior.’’ (Manager C,
BAT Switzerland)
‘‘[For the] social reporting process…we ask our stakeholders for their
views on how they see we run our business and what opportunities
there are for us to improve the way we operate. And we then respond
to our stakeholders and give them a series of action points, we follow
up against and track up progress to be a more socially responsible
company.‘‘(Manager B, BAT Switzerland)
’’The social report is a key cornerstone, because it’s a tool that enables
us to engage in a dialogue…We have to understand what society
expects from us, so that we can react towards it.’’ (Manager H, BAT
Switzerland)
‘‘When we did our corporate social responsibility efforts, the social
report and all that, in autumn last years, we invited the guys, but none
of them [WHO] ever showed up.’’ (Manager H, BAT Switzerland)
‘‘We are going ahead with the stakeholder dialogue which is different
from what we have done in the past. We are talking to our key
stakeholders. We are trying to understand what they are. Big step in
the Swiss culture and the Swiss organization to go in that direction.’’
(Manager D, BAT Switzerland)
‘‘It is essential to listen to our stakeholders’ expectations and to
respond to our stakeholders and integrate their expectations to our
company plan and company activities.’’ (Manager I, BAT
Switzerland)
clearly reflected in the strong presence of strategies aiming
for pragmatic legitimacy. However, not only are the pos-
sibilities to achieve pragmatic legitimacy practically
597
Product legitimacy
‘‘Due to the nature of the product we sell it is a duty towards society
and our stakeholders to do our business in a responsible way.’’
(Manager I, BAT Switzerland)
‘‘BAT was the first company to publicly acknowledge that our products
pose health risks….and it was obviously triggered by most of those
class action suits putting financial risks to the companies exposed to
them.’’ (Manager H, BAT Switzerland)
‘‘We are faced with a lot of initiatives on whatever reason it’s pricing,
i.e. tariffs and all that on our products.’’ (Manager H, BAT
Switzerland)
‘‘We are seeking whatever possibility to talk, to broaden the arena
where we can get a say on whatever is linked to our business. We try
to get across that we acknowledge the potential risks of our product.’’
(Manager G, BAT Switzerland)
‘‘What kind of escalated here is also the clear position of the health
department which has an impact on all the areas. It not only has an
impact on passive smoking, or public smoking ban or whatever, but it
definitely also has an impact on the exercise on all the areas. And that
is something which is very new, let’s put it this way.’’ (Manager B,
BAT Switzerland)
‘‘The department of trade and industry in the UK carried out an
investigation six years or so ago. There were allegations that we were
actively supporting the smuggling of our products from one country
to another in order to avoid excise and make higher profits.’’
(Manager C, BAT Switzerland)
‘‘BAT was the first company to publicly acknowledge that our products
pose health risks….and it was obviously triggered by most of those
class action suits putting financial risks to the companies exposed to
them.’’ (Manager H, BAT Switzerland)
‘‘In Switzerland it is mostly driven by the WHO where they have put
an agenda in place. As far as I understand it the end target is to have a
world without tobacco consumption at all.‘‘(Manager H, BAT
Switzerland)
‘‘[We have] a rule, let’s call it: to defend our consumers, defend our
partners in terms of tobacco issues. So it’s not our responsibility for
our own but within a part of our stakeholders.’’ (Manager F, BAT
Switzerland)
‘‘You have…this one guy in Geneva that is promoting effectively a ban
on smoking, that’s his end game. And you will have multiple articles
positive articles in the Newspaper on his opinion. And if the industry
tries to respond to that you probably will never see an article or if you
see an article it will not be positively put in the paper.’’ (Manager I,
BAT Switzerland)
‘‘The framework of the tobacco convention…definitely has a strong
influence on the industry, and it also definitely has a strong influence
on local governments….I think it is one of the most powerful
strategies really to limit the rights of the tobacco industry.’’ (Manager
B, BAT Switzerland)
‘‘We are in a controversial industry.’’ (Manager B, BAT Switzerland)
‘‘We have acknowledged that as a company, as a tobacco company, we
cannot have a future, if we don’t get to buy in the majority of our
stakeholders.’’ (Manager G, BAT Switzerland)
reduced to its functions as a cash-cow and employer but
also the cognitive legitimacy of the tobacco industry as a
whole is under heavy fire. Therefore, BAT Switzerland
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598
managers seemed to be eager to adapt to almost any
fashion if that would increase the legitimacy of the tobacco
business in society. Thus, arguably, the major emphasis of
the legitimation strategies of BAT Switzerland is changing
toward isomorphic strategies that aim to repair cognitive
legitimacy.
We show that the CSR character is dynamic in nature.
BAT managers adopt strategies that have been proven to be
successful in other industries under attack. Due to the
limited options, BAT attempts to use any available option
to establish a CSR process, but is often unsuccessful in
including all relevant stakeholders or deriving effective
actions. Many actions remain shallow. However, with
increasing pressure, we observed an increasingly proactive
nature of establishing CSR processes even if not very
successful or effective.
Basu and Palazzo’s (2008) CSR character would benefit
from a framework that does not only specify the configu-
rations of the CSR character, but takes it dynamic nature
into account. We show how identity orientation and legit-
imation strategies are stimulated through environmental
pressure and changing managerial cognition. Future
research could identify a more complete set of factors that
explain the dynamics within the CSR character.
Third, we provide case study evidence for the cognitive
dimension of the CSR character. This contribution is
noteworthy as the CSR character has been criticized as
being difficult to operationalize (Maon et al. 2010).
Translating the different high-level concepts into every-day
language of executives in the corporate environment, their
actions, and the institutions that have been built at BAT
Switzerland over time, was a major challenge and required
several rounds of coding and to understand the sense-
making process of BAT Switzerland managers. It required
interacting on a regular basis with BAT Switzerland while
remaining independent and critical. On the other hand,
there are also many stereotypes among researchers about
corporate processes that one has to overcome to provide a
balanced and objective picture of the situation investigated.
Future research could build on this operationalization and
aim for a more complete assessment of the CSR character
and possibly translate the operationalization into quantita-
tive approaches that ease the inclusion of larger samples.
Fourth, we show that in the contested tobacco industry,
BAT learned to admit to the initially neglected lethal nat-
ure of their products. The insights are particularly mean-
ingful as managers started to differentiate between harmful
products and legitimization processes that are designed to
raise the public opinion of the companies producing these
products. Gaining legitimacy through process alters the
way we have traditionally understood how companies build
CSR (Palazzo and Richter 2005). Communication at BAT
became honest, proactively elucidating customers
123
U. H. Richter, F. F. Arndt
regarding the harmful consequences of the products and
thereby legitimizing pro-social activities that are financed
with money made by selling products with a lethal nature.
BAT started to include all shareholders into a dialog that
considered the side of tobacco industry enemies and
reduced the room for opposition beyond the nature of the
product. Multiple processes have been put into place to
change the way the firm thinks about itself, its products and
accordingly who it considers stakeholders and how it
handles its stakeholders. The tobacco industry developed
CSR strategies to survive by putting processes in place that
reduce the risk for BAT to be prohibited and that are
designed to rebuild trust. These processes stand in stark
contrast to traditional CSR processes that emphasize the
product and its attributes. Instead, the participative process
approach is a reflective process that proactively seeks a
dialog with major stakeholders, particularly those opposing
a firm’s offerings. It is designed to create actions that
satisfy the concerns of those stakeholders that could
potentially endanger the legality of the product and sur-
vival of the firm and industries operating in context in
which products cannot contribute to build legitimacy.
Our approach is not without limitations. A single case
study approach—like every methodology—has some
weaknesses. By definition, we look at a particular firm in
an industry with special characteristics. While we believe
that our findings are largely generalizable to industries in
which the product is inherently illegitimate, some of our
findings may be more industry specific than we believe or
in turn, since all of these industry are highly regulated
(weapons, gaming), the institutional settings might play a
role that would benefit from further inquiry. Most of our
respondents within BAT Switzerland are accessed through
a goalkeeper. We observed the goalkeeper by encouraging
our interviewees to give a truthful account, and we trian-
gulate the data through stakeholder interviews and data-
bases, while unlikely, the possibility remains that the data
has some bias through interviewee selection or the omis-
sion of topics. Finally, we only look at the cognitive
dimension of the CSR character due to the difficulties in
operationalizing it. Building on our work, future research
could get a more complete picture of the CSR character
and possibly expand into different contexts, and to larger
samples.
Implications for Theory Building
The shift of CSR research from being descriptive to being
more prescriptive and normative reflects the increasing
need for outlining policy implications (e.g., Gardberg and
Fombrun 2006; Mirvis and Googins 2006; Smith 2003).
Firms operating in contested industries show a strong focus
on process legitimacy. The concept of legitimacy has
Cognitive Processes in the CSR Decision-Making Process: A Sensemaking Perspective
received much attention in the past, but little work has been
done in detailing the conflict between different possible
sources of legitimacy in a corporate context. Some com-
panies define themselves over a great product, process, or
an important challenge they address and the extent to
which they meet this challenge (e.g., Google’s famous
statement ‘‘to organize the world’s information and make it
universally accessible and useful’’). However, in contested
industries, companies struggle to use the same mechanisms
and logics which are at hand for companies in non-con-
tested industries.
Conclusion
In this article, we extend the sensemaking model inherent
in the cognitive dimension of the CSR character for a
systematic empirical analysis of the CSR approach of a
firm. We conclude that BAT Switzerland can be classified
as a ‘‘legitimacy seeker,’’ characterized mainly by a rela-
tional identity orientation, and legitimation strategies that
might provide pragmatic and/or cognitive legitimacy. The
understanding of cognitive processes underlying the CSR
decision-making process is of fundamental value of ana-
lyzing and changing the CSR approach of a firm. The key
finding of this study is the interrelationship between pro-
cess and product responsibility. In our case, BAT
Switzerland offers an inherently illegitimate product, so all
its efforts in legitimizing the product are via a process that
legitimizes its consumption and presence at the market.
This study is only a first step for identifying the key drivers
that allow shifting the CSR character of a company to a
more desired outcome.
This study shows evidence of a changing framing of the
cognitive dimension of the CSR character of BAT
Switzerland in a changing environment. We offer a process
perspective of how BAT Switzerland’s cognitive dimen-
sion of the CSR character transitions from an individual
orientation to a more relational framing to legitimize their
products. The case study does not only reveal some of the
dynamics within the CSR character that the framework of
Basu and Palazzo (2008) ignores, but aslo outlines tensions
within the CSR character that on the one hand trigger
changes in how BAT Switzerland thinks about the world,
and on the other hand, it shows how these cues from BAT
Switzerland’s environment translate into tangible changes
in decision-makers and decisions.
We find that the cognitive dimension of the CSR char-
acter cannot be seen in isolation when looking at product
and process responsibility. The case of the tobacco industry
illustrates that companies with inherently questionable
products have little choice, but to emphasize process as a
way of legitimization. This finding is not without
599
implications beyond the tobacco industry as it spans to
other—often very profitable industries—controversial
industries. Controversial industries may include chemical
and nuclear weapons, prostitution, pornography, tobacco,
alcohol, and gambling. Many companies in these industries
have developed very sophisticated narratives to justify their
existence, but yet, frequently find themselves challenged
by stakeholders. The very question arises if firms are able
to obtain legitimacy to fully secure their license to operate
in their respective societies. These industries have an
inherent legitimacy problem with their products and con-
sequently need to be particularly careful and considerate in
keeping an open discussion with stakeholder groups that
are directly or indirectly affected by the respective
products.
We explore a setting of change of the Swiss society and
reflect on the effect of this change on the cognitive
dimension of the CSR character. BAT Switzerland can be
seen as in continuous transition facing a society that is
increasingly opposed to smoking and its potential health
effects. We trace back BAT Switzerland’s initial position
as neglecting these effects to a more accepting and
proactive approach to deal with the dilemma of their
products. Core to their response is a participative respon-
sibility process that facilitates communication with stake-
holder groups that are directly affected by their products,
but also stakeholder groups with indirect or voluntary
involvement.
Appendix
Interview Guide: Company (Round 1)
This interview guide has been tested and refined based on a
pilot study.
1. Introduction
Let me give you a short introduction into the topic: I am
working on my dissertation at the HEC Lausanne, and I am
interested in understanding how corporate responsibility is
perceived both internally and externally by different groups
in society and what kind of influence companies have on
the character of this representation. I have some questions
I’d like to ask in this interview, and I would like to record
our conversation and take notes. Do you agree? You may
ask me to turn-off the recorder at any time you like.
2. Explanation of consent form
Before we start, I will walk you through the consent
form that I have prepared. It outlines what you are agreeing
to do by participating in this study. I may contact you for
another follow-up interview. I will send you the transcript
of your interview and may also ask you to review, as well
as some of my initial explanations and conclusions. The
123
600 U. H. Richter, F. F. Arndt

consent form also explains that neither you nor the com- performance with regards to corporate
pany will be identified in my study. I am going to assign a responsibility?
pseudonym to you in my study and all tapes, transcripts, (i) How systematically do you use them?
and quotes will use that pseudonym. Therefore, what you (j) What happens if an employee shows immoral or
say will be confidential, and you will remain anonymous. illegal behavior that causes problems for the orga-
3. General questions nization? Do you have a whistle-blowing policy?
(k) Is the employee rewarded for responsible behavior
(a) How long have you been working at this company?
that goes beyond the required fulfillment of daily
(b) How long have you been a manager at this
tasks? If so, how?
company?
(l) Which role does communication and dialog play for
(c) What other management experiences do you have
corporate responsibility and which form should it
outside of this company?
take ideally?
(d) How many people report to you? How many of them
(m) How important is leadership for the responsible
are managers as well?
behavior of a company and which form should it
(e) What kinds of training regarding values and respon-
take ideally?
sible behavior have you had at this company?
(n) How important are civil society groups and their
f) What is your personal interest in the topic of
activities for the perception of companies? Can you
corporate responsibility?
give me some examples?
Section 1: Corporate Responsibility
6. Questions to solicit recipe knowledge about corporate
4. Questions to solicit dictionary knowledge about cor-
responsibility
porate responsibility
(a) What is your ideal conception of corporate respon-
(a) How would you describe the responsibility of a
sibility and how should it be integrated into the
company in general?
managerial process?
5. Questions to solicit directory knowledge about cor- (b) If I were a new manager, what advice would you
porate responsibility give me about managing responsibility issues at this
company?
(a) In the past, when the company was accused of not
(c) Can you give me an example of a leader who leads
meeting its corporate responsibility, how was it dealt
corporate responsibility efforts?
with by the management? Can you walk me through
(d) Should there be a political framework for corporate
what happened? Can you give me some concrete
responsibility that sets standards and establishes a
examples?
sanction mechanism? Why or why not?
(b) What has been the main driver for the initial
(e) What are the future trends in corporate accountabil-
engagement in corporate responsibility issues in this
ity, corporate reporting, and social accounting? What
company?
do you think should change and will change?
(c) Which has been the major external factor that was
responsible for this shift in behavior? (Depending on 7. Questions to solicit axiomatic knowledge about cor-
answer to 5a)? porate responsibility
(d) When and how did you learn about the topic of
(a) What do you think are the real core values of this
corporate responsibility and how to approach it as a
company?
manager?
(b) What differentiates your company from other com-
(e) What does corporate responsibility mean for you as a
panies in your industry regarding corporate respon-
manager in the context of your daily job? Can you
sibility issues?
give me an example?
(c) Do you think this is a responsible company? Why do
(f) How did the idea of corporate responsibility change
you think so (or not)?
over time? Do you think the discussion has increased
and if so, why? Section 2: Stakeholder Concept
(g) How do you, as a manager, report on corporate 8. Questions to solicit dictionary knowledge about
responsibility issues? How is it reported to you? Do stakeholders
you take the perspective of a manager or of the
(a) What is your definition of a stakeholder?
company?
(b) Who do you consider the important stakeholders of
(h) What kinds of methods (e.g., processes, tools, or
the company? In general, and in this company?
systems) do you as a manager use for measuring

123
Cognitive Processes in the CSR Decision-Making Process: A Sensemaking Perspective
9. Questions to solicit directory knowledge about
stakeholders
(a) What do you think how should stakeholders be
treated?
(b) Can you tell me about a time when stakeholder were
not treated by the company as they ought to be?
What happened? (Depending on answer to 5n)
10. Questions to solicit recipe knowledge about corpo-
rate responsibility
(a) If it were up to you to create a stakeholder
management system, what would you want to be
sure was included?
11. Questions to solicit axiomatic knowledge about
stakeholders
(a) When the company received criticism regarding its
corporate activities in the past, were any aspects of
the management of stakeholders being done differ-
ently as a result? What do you think is the reason?
(b) Why do you think the management of stakeholders
did or did not work as you think it should in the past?
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