Add Thesis

Finding the CSR Sweet Spot

Establishing a Measurement for the Consumer Demand for CSR

Written by J. Annell, F. Terman

Paper category

Bachelor Thesis

Subject

Business Administration>Marketing & Sales

Year

2016

Abstract

Thesis: The history of corporate social responsibility This section reviews the historical perspectives of corporate social responsibility. 2.1.1. The classic view of corporate social responsibility In the past 50 years, the concept of corporate social responsibility has been theorized to a large extent. Levitt (1958) was one of the earliest contributions to this debate. He criticized corporate social responsibility by comparing business with war; he declared that "...it should be brave, bold, and most importantly, Not morally.” (page 50). Another classic view on corporate social responsibility is that as long as value is created through legal means, the company’s only responsibility is to create value for its shareholders (Friedman, 1970). This view may not be as straightforward as Levitt (1958), but it supports the same thing, mainly because the company has no ethics or social responsibility. Instead, the government should be responsible for social issues, because the company's resources should only be used for internal value creation (Friedman, 1970). 2.1.2. Stakeholder Theory In the following decades, it has become increasingly clear that shareholders are not the only parties interested in the company's business. Because there are other stakeholders who are also interested in the company. Freeman (1984) pointed out that stakeholders are all people who are affected by the company's goals or may affect the results of the company's goals. Internal stakeholders such as employees, owners and investors, as well as external shareholders such as customers, suppliers, governments, and non-governmental organizations should be recognized by the company as essential to achieving goals. Their business (Freeman, 1984). Donaldson and Preston (1995) expanded on the importance of management’s response to stakeholder requests, claiming that not listening to stakeholders’ opinions is “... ethically untenable ." (page 88). Therefore, the stakeholder theory increases the scope of a good CSR discussion because it shows that being responsible and meeting the needs of stakeholders can create financial benefits for the company (McWilliams et al., 2006). In addition to how stakeholder theory contributes to the discussion of corporate social responsibility, Carol (1979) further contributed by introducing a framework to define corporate responsibility. Carroll (1979) believes that corporate social responsibility should be divided into four different types of responsibility, namely, economic responsibility, legal responsibility, ethical responsibility and discretionary responsibility. Carroll (1991) re-examined the 1979 framework and created the corporate social responsibility pyramid, changing discretionary responsibility to charitable responsibility. This framework is useful for executives and managers when dealing with shareholders and stakeholders; because it can show all the responsibilities of the company (Carroll, 1991). The basis of the pyramid is reminiscent of how Friedman (1970) believed that the company's only responsibility was to make a profit. However, Carroll (1991) believes that economic responsibility should only be seen as the first step on a higher ladder. 2.2. CSR era This section describes the importance of CSR insociety. 2.2.1. CSR communication In the 21st century, the world has entered a new era of sustainable development, because consumers pay more attention to environmental issues (Ellis, 2010). Environics International Ltd (1999) conducted a survey to explore consumer expectations for the new millennium. The survey concluded that corporate social responsibility activities are important for consumers in forming a company’s impression (Environics International Ltd, 1999). Schmeltz (2012) pointed out that consumer expectations for corporate social responsibility activities are difficult to define, because consumers’ awareness of corporate social responsibility communication has not been fully explored. In order to fill this gap, Schmeltz (2012) conducted a survey It is found that consumers require companies to communicate more directly and openly about their CSR activities. For example, 42% of respondents are positive about vague and firm corporate social responsibility statements such as "...we have been actively working to reduce carbon dioxide emissions" (Schmeltz, 2012, p. 41). And 72.5% of the respondents agreed with more direct and firm statements, such as "...We have reduced carbon dioxide emissions by 15%-in ten years we will reduce it by 50%." (page 41). Obviously, companies need to communicate corporate social responsibility 2.2.2. Sustainability reports Sustainability reports are a common way for companies to communicate CSR activities, usually accompanied by the company's annual report (Ellerup Nielsen & Thomsen, 2007). While sustainability reports are used to create transparency, Ellerup Nielsen and Thomsen (2007) believe that companies may present information in different ways to emphasize the beneficial results of their CSR activities. Delmas and Burbano (2011) believe that companies may mislead consumers and other stakeholders by falsifying information about sustainable activities or not communicating CSR activities at all. This is often referred to as practical green bleaching, and it is a way for companies to seem to meet the needs of stakeholders for green products and services (Delmas & Burbano, 2011). Legitimate companies use different standards when reporting CSR activities, because it is important to inform all stakeholders of the reasons and methods of company investment because of the high cost of conducting CSR activities (Ellerup Nielsen & Thomsen, 2007). In order to ensure a higher standard of sustainability reporting, the Global Reporting Initiative (GRI) (http://www.global-reporting.org) helps companies build sustainability reports by forming widely used standards. 2.3. Supply of CSRM cWilliams and Siegel (2001) defined the supply of CSR as the capital, labor, and materials that companies spend on CSR activities. However, participating in corporate social responsibility activities can be challenging because companies need to weigh the trade-offs to succeed, and deciding what to do is as important as not to do. Read Less