This study will set out to define Corporate Social Responsibility, assess how it arose as a concept and explain its increasing importance in most of the worlds largest companies. In doing so, it will address the question as to how it is used as a tool for global business expansion with an overview of the literature of relevant thought leaders of the subject. This literature will also be analyzed in detail in order to recognize trends and key arguments. The final chapter will then summarize the overall findings and make recommendations for follow-up studies off the back of this.
Corporate Social Responsibility, or CSR as it's commonly referred to as, is a term that arose as a priority area and ultimately formal business divisions in major corporations as a means of reinforcing market and consumer confidence in their companies. This research project will explore how companies use Corporate Social Responsibility as a tool for strategic global business expansion by use of the following methodology. Firstly, it will give a general introduction of the use of Corporate Social Responsibility as a strategic tool in business expansion, a background into the concept of Corporate Social Responsibility, and an overview of the literature and methodology that will be used to make assessments, conclusions, and recommendations.
Secondly, the chosen literature will be analyzed in greater detail in order to establish an in depth academic perspective on the topic and form viewpoints on the strengths, weaknesses and trends throughout the different authorities of the subject. This will be achieved by using a combination of academic theory and relevant publications. Following this, the sources will then be outlined in greater detail specific to the central question of the study to understand the significance of the findings, build on the findings and begin to form a basis for the associated conclusions.
The concluding chapter will offer a summary of the findings from the key literature, review the methodology used, and summarize the results and findings of the research having taken these into account to construct final recommendations into how companies use CSR as a strategic tool for global business expansions.
Before going into this detail however, it is important to establish some definitions for CSR, and assess the goals and motivations companies have for implementing it. According to Mohr, Webb and Harris, becoming an increasingly important concept as companies face the twofold objective of satisfying profitability needs in addition to meeting societal expectations such as community investment and environmental protections (Mohr, Webb & Harris, 2001, p. 1).
Leonard and McAdam define the end goal of CSR as one that is designed to promote brand and value, corporate governance, ethical business practices and thought leadership. Leonard and McAdam go on to suggest CSR can include separate quality management elements which give consideration to "environmental protection, social equity and economic growth." (Leonard & McAdam, 2003, p. 27).
Dolnicar and Pomering also quote the World Business Council for Sustainable Development's definition for CSR that views it as a formal requirement for firms to play their part in "sustainable economic development, working with employees, their families, the local community and society at large to improve their quality of life" (World Business Council for Sustainable Development, 2004). Kinder, Lydenberg and Domini also develop the core areas of CSR put forth by Leonard and McAdam, describing them under 'domains' of "employee relations and diversity programs, ethical materials sourcing, product design, marketing programs, the environment, human rights, and corporate governance" (Kinder, Lydenberg & Domini, 2006, p.3). Given the variety surrounding the term CSR, this would clearly help a firm both to position itself for growth in the global market in terms of prestige and credibility, but also in terms of operational setup and ability to make a success of those markets if all the firm's employees are bought into these goals.
How CSR links into a firms' strategic global business expansion goals is a widely debated question, both as to the motives for this and the effective measurement of it. There are clear connections between CSR and economic growth, as supported by the Academy of Management's findings of the links between companies' corporate 'reputations'. This studied companies' CSR policies and their business performances, and found a clear connection between stock market returns and standard financial reports and the strength of their CSR policy, with results showing that "measures of risk are more closely associated with social responsibility than previous studies have suggested" (McGuire, Sundgren & Schneeweis, 1988, p. 1). Nearly a decade later, Burke and Logsdon made the case in their clearly entitled study 'How Corporate Social Responsibility Pays Off' that firms achieve mutually beneficial programs both in terms of business growth and operational efficiency, and that this can be broken down into their ability to give their CSR program "centrality, specificity, proactivity, voluntarism and visibility" (Burke and Logsdon, 1996, p. 495).
The fact that there appears to have been a shift in the 'formality' of the concept will be an important element of inquiry to be pursued, because as Lindgren and Swaen propose, the priority ranking given to CSR by large corporations is high, and in being so, this may represent and interesting inquiry for the core topic of how companies use, or try to use, CSR as a tool for strategic global business expansion (Lindgreen & Swaen, 2010, p. 1). Other scholars form the link between the presence of CSR as 'high ranking on research agendas' and large corporations' 'need' to not only do good and be seen to do the right thing, and also do things better' (Bhattacharya & Sen, 2004, p. 9).
This definition of 'doing things better' is also one that could be interpreted as striving for or achieving global business expansion, so this possibility will also be explored, as will the element and influence of consumer knowledge of a firm's CSR activities, which is ranked by Brown and Dacin as an important factor as to how much benefit a firm will glean from its CSR efforts. Those authors reason that the greater knowledge a company can promote into consumers as to its CSR efforts, the better outcome is likely to be in terms of business growth through consumer preference (Brown & Dacin, 1997, p. 68).
Other scholars however dispute the link between the visibility or otherwise of a company's CSR program and its overall business performance or growth, with Auger (2003, p. 281) referring to the link with consumer awareness as 'uncertain', and Maignan calling "for more research to investigate consumers' true level of awareness of firms CSR records" (Maignan, 2001, p. 57).
Now that the diverse set of definitions and the discussion points around them have been presented, the second chapter will go in to more detailed outline and analysis of the key literature on the topic.
Chapter 2: Literature Review & Analysis
The first chapter will focus on introducing CSR specific to firms' use of it as a mechanism for business expansion by researching and summarizing some topical and important published literature on the subject, as well as offering critical perspective on those studies while observing trends and common themes across the authors' work. Having established a broad definition of CSR, the focus will be to break out the literature accordingly in order to achieve clarity on the following the specifics; firstly, gain insight into how firms establish or promote their CSR programs; secondly, the ways in which they use this as a tool to gain access to new markets; and lastly, the measures that are currently in place for quantifying CSR in relation to growth opportunities and a company's potential or real earnings potential as a direct or indirect result of it. Once these specific threads of CSR have been researched and analyzed more fully, a clearer picture of CSR's role in strategic global business expansion should become evident.
The first element that needs to be examined in the literature in establishing the goals companies have for their CSR programs and what can be gained for them both from inside and outside of the company. For Crosby, these goals can be viewed as the company being "dedicated to having the customer receive what was promised" and that the "company will prosper only when all employees feel the same way" (Crosby, 1986, p. 1). W. Edwards Deming's 'Out of the Crisis' elaborates this point from a company internal perspective by highlighting the benefit to companies of proactively encouraging, even mandating the merits of a company culture that facilitates interactive, respectful and productive dialogue that is not governed by hierarchy so that staff feel able to come forward with suggestions, encourage ownership of roles and establishment of an overall ethical framework, with the net results being an establishment and maintaining of "trust and openness both inside and outside of the organization, ultimately improving corporate reputation" (Deming, 1986, p.6).
The thinking amongst the academic authorities on a fundamental level would appear to suggest that for CSR to function as a tool for business growth, it is important that all the companies' employees have bought into the goals and concepts, or at a minimum are aware of CSR and the role that they individually play in it. When analyzed in the context of the question, this would be a logical assumption for example in the case of a US corporation looking to penetrate new markets such as the Middle East or Asia with culturally very different backgrounds to its own, the bedrock of setting up the operation there and achieving the growth goals would naturally need to be built on solid foundations which would give the company a foothold in gaining access to and maximizing those markets.
Another point in the key literature related to the topic of how firms promote their CSR programs is the one of consumer perception. From reviewing the literature, it becomes apparent that there is a high level of focus by companies on promoting this for a variety of valid reasons. Dawkin's 2003 poll 'The Public's Views of Corporate Responsibility' demonstrated a clear expectation from the public that firms should place special emphasis on CSR related areas of focus such as social and environmental issues, and in doing so the findings were that the firm would as a result be better 'supported' as a result (Dawkins, 2003, p.1). This demonstrates broadly that firms can use formal CSR initiatives to support this type of PR and achieve results for it in terms of business growth and establishing brand equity (Hoeffler & Keller, 2002, p. 78).
Maignan and Ferrell also highlight the importance therefore, if CSR does actually play such an influential role as Dawkin's poll suggests it does, then the priority of marketing these to consumers, particularly in new markets that it would like to access, becomes all the more important for a company. In this regard, effective CSR programs and effective promotion and publicity for them could be nearly considered a prerequisite entry path into a new market (Maignan & Ferrell, 2001, p. 457). The 'entry point' motivation is also made clear in Schuler and Cording's research that examines the likelihood of consumers to 'support' one firm above others, with the finding that companies with more active and publicized CSR initiatives are more in the forefront of consumer choice and as a result become the default or 'rational' choice (Schuler & Cording, 2006, p. 540).
The next theme across the literature that suggests that it helps firms to use CSR as a tool for strategic global business expansion is by way of influencing the consumer's thought process, through information, for purchasing and as a result influencing their view of the company's product or service quality and therefore directly influencing their purchasing behavior. Equally, a lack of 'information' or marketing influence on the consumer as to a firm's CSR programs can serve to hinder that process, so it can be seen to work both ways (Valor, 2005, p. 192). This point is further emphasized with the assertion that in order to steer consumers towards a firm and influence the complex decisions behind this, it is the role of the firm's marketing department to educate the target consumers not only about the firm's products but also the CSR initiatives and the value that these bring to the environment with a particular emphasis on the environment local to that specific consumer. This requirement for the tool of CSR is driven by consumers becoming progressively more sophisticated, and able to process such messages as increased access to changes in social environments, and because of this they have "become more knowledgeable about market offerings" (King & Mackinnon, 2001, p. 245).
Another notable trend to be found in the literature that should be analyzed in relation to how a company's CRS initiatives can be deployed as a means to accessing new markets is the consumer response to having this 'marketed' to them. On an elementary level, the consumer response to promotion of CSR efforts seems to be mixed, with Auger's highlighting of the lack of consumer understanding or appreciation of the ethical or CSR background of the companies they purchase from, and as a result could be seen to be somewhat indifferent to the presence of them (Auger, 2003, p. 282). Similarly, Schultz and Morsing's study that was carried out in the same year as Auger's work was published drew a negative connection between the promotion of CSR initiatives to consumers, and their buying habits. This is despite the fact that there was acknowledgement that the consumers, without CSR, could actually be lacking in "any detailed knowledge about a firm's CSR activities" (Schultz & Morsing, 2006, p. 323).
Overall, the literature shows a variety of opinions on the issue of consumer response to how CSR is marketed to them. This is a key point to the core of the question, for a Western firm attempting to access a new market, should it actively promote its CSR activities or refrain from such in that territory or state? Drumwright outlines the diverging opinions in the literature on this specific question with the observation that on the one side "company advertisements with social dimension have been among the most controversial of marketing approaches" or as "marketing's most unabashed exploitation", while there is other perception that advertising of CSR represents "marketing's greatest contribution to society," (Drumwright, 1994, p. 3).
Given this discrepancy, whatever the initial intent of a firm to use CSR as a strategic tool for accessing new markets, it becomes clear that for the advertising of CSR to become a genuinely positive influencing factor in helping it penetrate new markets, for this to work, it cannot afford to allow the consumer perception to be that the marketing of CSR is designed to facilitate this market access. To elaborate this viewpoint, Morsing and Schultz use the example of TDC, the Danish telecoms provider and its attempt to shift the perception of the company from one of a profit-rich, faceless entity governed by its shareholders to one of CSR values and proactive communication of these initiatives from the company's top management "has been met with skepticism, disbelief, and accusations of window dressing" (Morsing & Schultz, 2006, p. 176). In summary, it is seemingly not possible, or rather difficult, for a company to change this perception in a short space of time, which suggests the most effective use of CSR is to genuinely incorporate it into the fabric of a company, through the employees and then outwardly to its consumers.
A slightly different approach to a similar theory is put forth by McWilliams and Siegel, who's work 'Corporate Social Responsibility: A Theory of the Firm Perspective', considers CSR in relation to a 'supply and demand' model which takes into account the size of a company, its investment in research and development, its reliance of or penetration into government contracts, labor market conditions, the level the company is diversified, and finally its stage in the industry life cycle. The authors' conclusion is that each firm will have an optimal or 'ideal' level of CSR, and most importantly for the purposes of this study, "that there is a mutual relationship between CSR and financial performance" (McWilliams, A. and Siegel, 2001, p. 117). In particular, these authors' emphasis on government contracts is interesting, with the need for governments to deal with companies with high levels of CSR retrospectively obvious and a factor that could clearly have a large determination on a firm's ability to be successful in expanding globally. This would also broadly link in with Brown and Dacin's assertion that experimentation with the concept has shown a trend of consumer knowledge of a company's CSR goals and programs "may lead to a higher evaluation of the company and a more positive evaluation of the company's product" (Brown & Dacin, 1997, p. 6), research that would clearly show the value of CSR to a firm's global expansion objectives.
From these findings, it could therefore be viewed that in placing so much emphasis on the importance of ensuring consumers are aware of their CSR initiatives, companies are undoubtedly using CSR as a means for strategic global expansion. The interesting question remains as to how effective this actually is, and how the results of trying to communicate CSR can vary, as the perceived mechanism for company expansion that the aforementioned TDC case study highlighted.
The next important sub-question to extract from the literature is how to measure and quantify CSR for a firm, and the potential financial benefits to it, whether directly arising from CSR, or indirectly from gaining consumer confidence or through accessing new markets with its help. This 'effectiveness of CSR' question is also one that is addressed by Wood, who not only begins to critique CSR on the levels of institution, organization and individual, but also its origins and evolution of the concept, before arriving at the conclusion that academic thinking on the theory has not yet been able to properly integrate itself into a coherent understanding of CSR as a concept let alone be able to understand its impact, and as a result the literature in her view represents a series of "free-standing, implicitly competing ideas" (Wood, 1991, p. 691).
Shen and Chang's later and aptly entitled work 'Ambition Versus Conscience, Does Corporate Social Responsibility Pay off?' addresses this question head on, by asking the question as to whether or not CSR does 'pay'. In doing so, their methodology was to examine two hypothesis; firstly the 'social impact hypothesis', and secondly the 'shift of focus hypothesis'. Interestingly, the findings were that firms with full CSR programs that also communicate them effectively "tend to obtain significantly higher values on pretax income to net sales and profit margin", while the implementation of CSR at a worst case does "not deteriorate the performance of firms." (Shen and Chang, 2009, p. 133).
Chapter 3: Research Method and Findings
Having selected and outlined some of the core thinking on the subject of CSR overall and specifically how it relates to a company's potential growth expansion, the third chapter of the study will now focus on analyzing the themes that were found in this literature and outlining the key findings.
From analyzing the available literature on this topic, it becomes apparent that from this it is possible to deduce a broad definition for corporate social responsibility, there is a good deal of ambiguity and academic disagreement both on the benefits available to companies implementing and communicating CSR programs, and most importantly for the purposes of this study, the ways in which firms use it as a strategic tool for accessing new markets. To begin to unravel these remaining questions and search for findings from them, the first step will therefore be to outline from the top down what emphasis and investment companies are putting into CSR.
Luo and Bhattacharya's 2006 study into CSR in respect of customer satisfaction and market value is a good starting point for this question. The authors outline some revealing CSR investments of large firms and relate them as a percentage to their pre-tax profits, with the results of this outlined in the following table (Luo and Bhattacharya, 2006, p. 1).
Figure 1: CSR investments of large US firms as a percentage of pre-tax profits
Company
CSR Donation
Percentage of Pre-Tax Profits
Hospital Corporation of America
$921 million
43.3%
Merck
$921 million
11.3%
Target
$107.8 million
3.6%
General Mills
$60.3 million
3.2%
General Motors
$51.2 million
2.7%
For Luo and Bhattacharya, this level of investment demonstrates that CSR is absolutely fundamental to their overall business growth potential. This assertion and level of investment is coupled with the seemingly increasing trend for companies to fund substantial advertising campaigns with the goal of promoting their CSR work. In doing so, there is a clear demonstration that CSR is something that is carried out by companies with a proactive public relations angle in mind, perhaps in response to consumer perception in existing overseas markets, or as a pre-emptive measure prior to future expansion plans into those markets. Berner highlights the examples of the US corporations Target and Wal-Mart which have both produced and funded US-wide marketing programs solely with the purpose of promoting their CSR activity. The same author also highlights some other telling trends, such as the increase in consumer visibility to and awareness of CSR initiatives rising from 26% of people surveyed in 1993 to 80% in 2004 who were able to suggest the name of a company that they felt had strong CSR initiatives in place (Berner, 2005, p. 69).
The purpose of outlining these trends in the goal to form specific links with how companies utilize CSR as a tool for global expansion particularly into emerging markets is to highlight the dramatic shift that has taken place in CSR in recent years. The close correspondence of the rise of CSR with the onset of globalization and the apparent globalization of multinational corporations has led the Foreign Policy Centre in London to state that "the rise of the corporate social responsibility (CSR) agenda is certainly one of the most noteworthy" (Zhang, 2008, p. 2). This is in line with Craig Smith's thinking as well in terms of pinpointing firms' aspirations for return on investment from CSR initiatives. He highlights that both the variety of activities a company's CSR investment goes into (cash donations, in-kind contributions, cause marketing, and employee volunteerism programs), in addition to the upwardly trending investment into them demonstrates some evidence for companies viewing CSR as more than the "'right thing to do' but also 'the smart thing to do'" (Smith 2003, p. 52).
The Economist also offers a valuable perspective on how companies utilize CSR as leverage for expansion, while balancing it with the core interests of their shareholders. The fact that CSR is mentioned by The Economist as in any way comparable to the interests of a company's shareholders reveals that this is an important point in demonstrating just how important a tool CSR may have become for companies, and additionally, the level to which it has become a business requirement. For The Economist, the 'trick' that firms need to pull off to execute this balance correctly is one that shows the company in the light of "doing well by doing good" and as acting both in terms of society as a whole while at the same time factoring in the shareholder's requirements (The Economist, 2008).
Having established and introduced the 'importance' concept of CSR in market growth, the next findings to highlight from the literature are how companies carry this out on a tactical level, how these impact various elements of their business, and what these translate to for the areas they operate in. This will be analyzed with a particular focus on emerging economies.
As briefly mentioned earlier in the study, CSR initiatives are ones that, if carried out thoroughly, will see effect in a company's employees and their working environment, the market as a whole (if the company is of sufficient size and scale), and the environment (particularly those in which the company is directly operating). Equally, and again if executed fully, CSR initiatives can be known to "contribute to economic, social, and environmental progress in emerging countries" (The Economist, 2008). If these activities are placed in to the specific context of a US multinational corporation's operations in the Middle East as an example, the obvious goal for the company in a business growth and market penetration is to achieve at least a satisfactory if not good reputation within both the localized area of operations and the broader region as a whole in "labor standards, marketplace practices, and the environment" (The Economist, 2008).
On this last point, the Foreign Policy Centre's viewpoint is a crucial and pivotal one to the core question of this study. The Centre takes the view that companies that implement properly planned and strategized CSR initiatives have clear advantages to be gained both in terms of profits and also through the promotion of "societal welfare". In doing so, the company is then able to capitalize on a situation of a bond of interdependence between its firm's regional operations and the community in which it is operating (Zhang, 2008, p. 3). The leverage and potential for growth into overseas markets is found to be abundantly clear when laid out like this, and CSR is consequently summarized by Zhang as rather than a cost burden to a company, if implemented in such a way to achieve this equilibrium then CSR "can be a source of opportunity, innovation, and competitive advantage" (Zhang, 2008, p. 4).
Equally as important in addressing how CSR is used as a strategic tool, the study has found that companies are able to leverage it in terms of a proactive means to develop the market, and also as a tool for mitigating the risks that a company can encounter when penetrating into emerging markets, such as relatively unstable political environment and corruption, human rights considerations, security, environmental surroundings and potential impacts, and health amongst others. Yet given the market opportunity consisting of an approximately 2 billion population (in 2004) in those markets classified as 'emerging', corporations with aggressive growth and expansion goals cannot afford to pass up the market opportunity (Nelson, 2004, p. 31).
Porter and Kramer make the case in the Harvard Business Review that there are four key pillars to an effective CSR strategy, and, should these be accepted, then there are clear indications of how companies would use CSR as a means of accessing new markets. The four elements the authors propose are "moral obligation, sustainability, license to operate, and reputation" (Porter and Kramer, 2006, p.3). Crucially, the same authors also draw on the phrase "the notion of license" for companies to operate in a country or territory, which arises from the requirement, whether written and formal or not, of all firms requiring "tacit or explicit permission from governments, communities, and numerous other stakeholders to do business" (Porter and Kramer, 2006, p. 3).
Some other key findings from Porter and Kramer's work are their insights into how a company can use a properly applied CSR strategy not only to access emerging markets but also thrive in them. In order to thrive, in the authors' view, a CSR program cannot merely be reactive, as this leads generally to rhetoric about being good corporate citizens and managing any negative publicity arising from such topics as environmental or social impacts to name two examples. Companies that adopt a more proactive CSR strategy can, in the view of Porter and Kramer, leverage CSR to position themselves as 'solvers' of a broad range of social issues. Yet still only a relatively small number of companies capitalize on the opportunity to make a true positive impact in this respect, despite the authors assertion that companies known to arrive at sound decisions of well thought out, proactive and structured "social initiatives in concert with their core strategies will increasingly distance themselves from the pack" (Porter and Kramer, 2006, p. 13).
Further to the impact that is available on a consumer and government 'access' level into emerging markets, another angle that makes CSR a valuable tool for firms to strive for global growth is in making them more attractive to analysts. This could be both on a security level of relatively unstable emerging markets and their ability to set up viable business operations in those regions. Equally from the analyst perspective, benefits of CSR can be gathered through the imparting of positive influence on analysts due the positive effect it can have on a firm's customers, employees and even shareholders. If these stakeholders react positively, then naturally the analysts' position would be positive. Secondly, in their insight into the impact of CSR on investment recommendations, Ioannou and Serafeim highlight the fundamental point that "many mutual funds invest in socially responsible firms" (Ioannou and Serafeim, 2010, p. 3). They substantiate this by citing the levels of funds that were invested into firms that could be defined as 'socially responsible' (i.e. those with substantial and credible proactive CSR strategies); in 2007 this amounted to over $2.5 trillion dollars in the US, $2 trillion in Europe, $500 billion in Canada, $100 billion in Japan and $64 billion in Australia (Ioannou and Serafeim, 2010, p. 3).
There are also schools of thought that are prevalent in the subject's literature and highlighted by Loannou and Serafeim that see CSR as having other downstream peripheral benefits. These include Cochran and Wood and Waddock and Graves's views that the ability to obtain better resources through more sustainable buying processes and access to funding is achievable through CSR; Turban and Greening's reasoning that a fuller CSR program helps companies to attract and facilitate the hiring of a higher quality of employees, and Moskowitz and Fombrun's theory that it leads to more credible and therefore more effective marketing of a company's products or services (Cochran and Wood, 1984, p. 42), (Waddock and Graves, 1997, p. 303), (Turban and Greening, 1997, p. 660), and (Moskowitz and Fombrun, 1972, p. 71).
Other authors go even further in seeing the peripheral benefits of CSR, with Dorfman and Steiner and Milgrom and Roberts in particular making interesting observations that CSR can have indirect demand generation effects for a company, through generating additional levels of demand for the company's goods in a similar way but slightly different method than advertising does, and also, importantly, through mitigating the price focus of consumers by convincing them to buy 'ethical' brands with good CSR programs (Dorfman and Steiner, 1954, p. 827) and (Milgrom and Roberts, 1986, p. 796).
A final peripheral observation to highlight which may be a particularly relevant one for firms aspiring towards global expansion and growth are the potential for CSR to limit the output of waste in its production processes. When considered more fully, this point is potentially a very important one for CSR, because the pressure that a fully funded and operated CSR department would put on the production department of the same firm to be more efficient in its materials and processes would likely be significant enough to drive genuine improvement in that regard. When penetrating new markets, especially emerging ones with particularly sensitive environmental considerations such as the Brazilian rainforest or highly populated Asian river delta regions, firms with lower wastage outputs into the local community could conceivably find it easier to obtain market acceptance from local people and governments than those with less focus on such initiatives (Konar and Cohen, 2001, p. 282) and (Porter and Van Der Linde, 1995, p. 98).
Another key finding in the literature is some potentially negative aspects of CSR that could actually serve to inhibit a firm's growth potential should they not be implemented in the correct way. One of these is proposed by several scholars including Friedman (1970), Aupperle et al., (1985), McWilliams and Siegel (1997) and Jensen (2002), who all make the case that over-extensive CSR strategies, initiatives and departments unnecessarily raise a firm's costs, thus setting them up in a situation of competitive disadvantage from their competitors. In companies with expansion aspirations into emerging markets, should this theory be accurate, then it could have the paradoxical potential to improve the firm's ability to setup operations and gain a foothold and credibility in the region, while at the same time increasing its cost base so as to put it at an immediate competitive disadvantage.
Overall, when looking at the wider picture of CSR and its potential to positively impact a firm's growth aspirations, it must be noted that the prevailing theme across the scholarly literature of the subject is one of positivity, with a broad consensus seeming to be in place that suggests the potential benefits of a strong, proactive and well-funded CSR program comfortably and clearly outweigh the negatives. These findings will now be discussed and elaborated in greater detail in chapter four.
Chapter 4: Data Analysis and Comments
Having analyzed some of the key literature on the subject and outlined the key findings and positive or otherwise potential of CSR initiatives to shape a firm's global expansion goals, this chapter will now focus on a deeper assessment and analysis of the data and whether or not this suggests a positive or negative trend of impact for CSR. On the highest possible level, the literature and data analyzed so far suggests that firm's goals for CSR programs can include meeting regulatory compliance criteria, meeting and surpassing of key stakeholder demands, competitive advantage and more favorable stock market results (Waddock and Smith, 2000, p. 75).
When referring specifically to the role that CSR can play in giving firms an advantage in accessing new global markets, another crucial point that should be elaborated is the overlap that CSR can have with product advertising and demand generation capabilities if marketed proactively and correctly, as this can 'link to consumers' positive product and brand evaluations, brand choice, and brand recommendations" (Handelman and Arnold, 1999, p. 34). This 'soft' demand generation angle that CSR can drive for products and services angle becomes even more abundantly clear with Webster's premise that consumer demand is being increasingly driven by consumers' duty of social responsibility to spend their money with moral businesses, and as a result of this, from a company perspective there is an increasingly important need to ensure that the marketplace is informed as to its CSR initiatives (Webster, 1975, p. 188).
Dirk Matten and Andrew Crane also present a very different line of thinking on the role of CSR in the establishment of a firm's overseas operations, and this model is one that requires a slightly deeper analysis in the context of this study because of its relevance to emerging markets and corporations aspiring to grow into them either to open up new consumer markets and / or to access the cheap labor in those countries.
Matten and Crane position CSR as an extension of the broader definition of 'citizenship', including the fundamental social, civil, and political rights, and where 'ownership' or rights for them reside in the context of corporation or a country's government. For the authors, the rights of individuals in a country such as this have rights to be respected, and that "corporations could be viewed as powerful actors that have a responsibility to respect individual rights" (Matten and Crane, 2005, p. 166). So, whether a good thing or not, the interconnected and global world that we now live in can be seen as representing some relative shift of protection of the rights of an individual or citizen from being exclusively that of a government to other stakeholders including the media, consumer power, non-governmental organizations, and most importantly in the context of this study, corporations.
For Matten and Crane, because of the erosion of state influence in setting and preserving the rights of citizens, particularly in emerging markets, CSR has increasingly been used as a tool by corporations to provide this support mechanism due to the double reasons that they are extremely powerful players in the societies they operate in, while being the primary drivers in the phenomenon of globalization which, in this sense could be viewed as the drive to contribute to global business expansion. So in this sense, the strategic tool for global expansion for the large corporations is the ability of CSR to position the company as an advocate of civil society and a "guarantor of citizenship" in the absence of governments being able to fully offer that (Matten and Crane, 2005, p. 166).
Similarly, CSR can act as an enabler for companies to establish presence, and from there, market share in new and emerging global markets. Remaining with Matten and Crane's research to illustrate this point as well, the void these authors see in the implementation and enforcement of rights of consumers and citizens by companies as opposed to governments is something that can be illustrated by the example of the privatization of welfare reforms. Another example that could be used is the privatization of healthcare. This is a clear example of decentralization of power from government to corporate, and in doing so, governments would naturally only be in a position to hand such sensitive functions to companies with effective CSR programs and track records.
Interestingly, Matten and Crane also go one step further than even this theory, to give the suggestion that in some cases it is companies that at the very least work hand in hand with, and at the most actually serving to set the agendas for issues such as working times, ages and working conditions in sweatshops (Matten and Crane, 2005, p. 167). Again, CSR would obviously play a huge part in this, and would require a combination of strategy, implementation and arguably promotion of those initiatives by the company in order to make this credible in the markets in which they are operating. This point is also supported by other scholars work including Vorhies and Morgan, Barney, Penrose, Wernefelt and Day, who all find commonality in the idea that it is a blend of "external CSR initiatives and internal corporate abilities likely generates and sustains financial value for the firm" (Luo and Bhattacharya, 2006, p. 15), (Barney, 1986, p. 1231), Wernerfelt, 1984, p. 171), (Day, 1994, p. 37), and (Vorhies and Morgan, 2005, p. 80).
To return briefly to the example of corporations being seen to shape civil society and the core role of CSR in facilitating the credibility of them doing so, Luo and Bhattacharya emphasized that to beyond this and really understand the role of CSR, there is a need to get past the notion of a "simple, universal effects of CSR and explore contextual situations that moderate the associations between CSR and market value" (Luo and Bhattacharya, 2006, p. 15). This could be a fundamental factor in understanding a dynamic such as the role that CSR can play for corporations as a way of 'cutting across' state borders to access new markets, both in terms of transgressing borders and also its potential role in the "creation of transnational institutions and global codes of conduct" (Matten and Crane, 2005, p. 168). Because of this, CSR can be seen to have evolved from being a mere business function designed to achieve good press coverage for a firm, but more as a proactive instrument of not only global market development but also to give the means of proactively managing and implementing "citizenship rights for individuals and away from considering the corporation a citizen to one where the corporation administers some rights" (Matten and Crane, 2005, p. 174). To illustrate better the drive and motivations that corporations may have for using CSR in this way to manage citizenship rights and arguably wrestle some control of this away from governments, Matten and Crane use the following flow table to illustrate the concept (Matten and Crane, 2005, p. 174):
Figure 2: Drive and motivations for corporations to use CSR to manage citizenship rights
Social role of the corporation in administering citizenship rights
↓
Social Rights: the Corporation as a provider
+
Civil Rights: the Corporation as an enabler
+
Political Rights: the Corporation as a channel
This flow view outlines how corporations, through proactive CSR initiatives, can leverage access to emerging markets through the concept of corporate citizenship, and having achieved this status, how corporations are then able to function within this status and use it to their advantage. Increasing formality of CSR is also helping to reinforce this position, and as a result recent years have seen an increase in the expectations that consumers have for business ethics, "and how it contributes to tackling wider societal problems" (Grayson, 2003, p. 10). Centrally for the core question of the study, CSR plays a crucial role, even being described as "the driver by which organizations can meet these expectations" by Leonard and McAdam, 2003, p. 31).
This formalizing of CSR is the next key finding from the literature that will be analyzed in greater detail. This is for the reason that in doing so, it may be possible to gain some further insight both into how companies look to leverage CSR for purposes of market penetration, and also to look at how the measurements themselves may have been implemented in order to formalize, and in doing so, aiding, companies' ability to leverage CSR to their own end.
The formal 'standard' for making CSR quantifiable is the International Organization for Standardization's (ISO) ISO 14000, which in conjunction with the auditing practice of ISO 9000 serves to reflect an increasingly close relationship of environmental management and quality audit and highlight "the increasing importance of environmental management systems to quality" (Leonard and McAdam, 2003, p. 30). The ISO itself was founded due to the need to create a framework of global standards so as to serve and protect individuals, local communities, and attempt to proactively manage social and environmental issues before they become problematic. By including topics such as human rights monitoring, occupational health and safety, unethical practice in business, corporate and organization/company governance, and environmental sustainability, the ISO is positioned both as a tool to provide support in these areas, but also as a tool for firms to benchmark themselves against as a means of firstly gauging their CSR activities, but also positioning their company against an established and consistent international benchmark so as to help in the public relations and the all-important marketing of the CSR itself. In its own words, the ISO can be described as a means to allow companies a route for dealing with "economic, social and environmental issues in a way that aims to benefit people, communities and society" (ISO, 2003).
So as an organization founded on the principles of establishing business ethics and values which underpin the concept of CSR, part of the ISO's objective is to provide a framework or environment in which solid foundations for businesses can be laid and through which firms are afforded the starting point for establishing footholds for business operations particularly in the more emerging markets of the world. As a result, the ISO has helped to position CSR as "a major influence in the business world and is growing in importance as it is increasingly supported by business models and standards" Leonard and McAdam, 2003, p. 28).
The purpose of laying out the guiding principles of the ISO in relation to this study is to outline the benefits that the organization offers to corporations in the realm of CSR. This is an important point and one not to be under estimated; because the tangibility and ability to quantify CSR in a way that is both visible to and respected by the public is naturally an important one for firms seeking to expand their network of operations. Naturally, this setup can be known to cause questions to be asked by consumers (otherwise known as the public) into the integrity of the ISO and whether it is a mere instrument for the corporate powers that have arguably helped to shape it and helped to create it. This is a phenomenon described by Business Week as companies, particularly the large corporate take measures to be seen to 'do the right thing' with regards to CSR by "adding more outsiders to boards, beefing up crucial committees and recruiting financial experts to bolster their audit panels" (Borrus, McNamee, Symonds, Byrnes and Park, 2003, p. 40).
Interestingly on this topic of the level of consumer trust (or otherwise) that is prevalent for corporations overall and in particular their CSR strategies and policies, the ISO felt it necessary to commission an assessment of the international standards that are applied to CSR. This is interesting from the angle that there was clearly both an acknowledgement by corporations that this would be a good thing to happen, yet it also represents an recognition that there was more to be gained from this exercise being supported because the outcome would be a broad and clear set of international standards of CSR which would of course enable the outcome of greater consumer support due to a wider framework as opposed to separate companies all attempting to push their own separate agendas (ISO, 2001). There are also other standards being considered by the ISO, which is in line with both the ever-increasing focus on CSR, the development of the topic as more of an exact science, and the increasing consumer scrutiny that companies are 'doing the right thing'. In other words, it is in the corporations' interests to have the ISO on board and reinventing itself and its standards to reassure consumers and in doing so helping to retain or open access to new markets.
Going back a level, the structure and setup of the ISO that can be found in the literature also offers some insight into how companies can benefit from this in expanding their operations. The scope of the SA8000 management system is set up and built around the following core pillars of measure (from ISO, 1997):
Management review
Company representatives
Planning and implementation
Control of suppliers
Addressing concerns and corrective action.
Outside communication.
Access for verification.
Records
Laying out this list in such a way it becomes apparent how a quantifiable measure of these criteria can be a positive tool for companies to use for global expansion. It adds a dimension of credibility to the measures given that the company cannot be perceived to be measuring itself and setting measures and resulting PR off the back of this. The Baldrige quality framework was implemented to this end, as a defacto and international standard for known as the Malcolm Baldridge Criteria for Performance Excellence. The element of CSR within this gained in importance, and it now has its own clause, and leads the efforts for a focus on companies to have their senior management acting as role models for "business ethics and protection of public health, safety and the environment" (Baldridge, 2003, p. 1).
By way of a point of summary in this chapter, it should be surmised that the rise of CSR and the increasing formality of it in terms of international recognition should be respected, and this is certainly a theme that is to be picked up on with deeper review of the literature. The international standards such as ISO have generated increased levels of consumer expectation into the standards of business conduct of big firms, both "in terms of how a business runs its core activities and also how it contributes to tackling wider societal problems" (Grayson, 2003, p. 11). For Grayson, the way in which CSR helps to facilitate companies' expansion goals is by acting as the 'driving point' through which companies can strive to meet these new wave expectations.
Chapter 5: Conclusions and Recommendations
The final chapter of the study will now focus on concluding the key findings from the material that has been reviewed, and an assessment of overall choice of topic.
Overall, the study has sought to review a range of literature of sufficient breadth and depth to ascertain a valid picture into how companies utilize corporate social responsibility as a strategic tool for global business expansion. The topic itself was chosen as a platform from which to investigate the huge levels of funding that some companies put in to CSR, their motivations for doing it, and the true nature of the reasons for them doing it.
Some very interesting concepts have arisen in doing so, as well as some encouraging trends of academic agreement in key areas of CSR across the key scholars on the subject. The first of these trends to highlight should be that CSR is not so much a means to access a market simply in terms of a PR stunt or generic rhetoric, but, for the company to be successful, then a genuine CSR strategy needs to be in place for it not to be shown up quite quickly as being window dressing. This has been made possible by the implementation of such standards as the ISO, which serve the dual purpose of achieving a common set of standards and laying the groundwork for fit and proper collaboration across governments and the private sector, but also in giving some reassurance to consumers that there is indeed some proper framework in place governing corporations on these standards to avoid the risk of it being rhetoric. This is arguably even more important in emerging markets where community skepticism can be prevalent regarding the negative points of large multinational corporations, so the ISO standards and CSR as a whole can help to alleviate that according to some of the findings in the literature.
Luo and Bhattacharya's analysis into the levels of investment going into CSR was telling, and was also a useful platform on which to base the study, because with some of the numbers that were highlighted, it became quickly apparent the level of importance and emphasis with which some of the big corporations place on CSR.
Matten and Crane's insight into the convergence of governments and corporations in regard to setting and enforcing basic standards such as citizens' rights was a very interesting and topical aspect of the study, as it took the level of analysis one step further by really drilling into the importance of CSR as a tool for expansion. In doing so it found it to be not only a vital one for gaining access in the first place to emerging markets, but once there, as a platform for fundamental acceptance and some level of credibility amongst the local population (even if naturally still somewhat guarded). But the key point is that CSR is indeed not only a tool for expansion, but for helping the transition to a solid operational setup in those markets.
Another element of CSR study that was prevalent throughout the literature was the use of CSR by firms not just as a means for accessing new markets and expanding globally, but that increasingly there is the need to ensure that these values genuinely permeate through the company in order to make them genuine. With the international standards that are in place and the level of scrutiny that now takes place on companies in all markets including emerging ones, no company can afford to rest on its laurels if it has true global aspiration plans. Deming points out that this approach can be jeopardized in terms of its effectiveness in the situation where CEOs and executives do not place a high priority on CSR, and instead are "in business to make money rather than products and service"; in doing so with the level of scrutiny, the value of well planned and executed CSR is abundantly clear (Deming, 1986, p.6).
So in this sense, CSR is used not so much as a tool to help in the pursuit of global expansion, but more as a prerequisite for access, establishment, and acceptance particularly in more challenging markets. For it to be successful in the modern era, the consensus among scholars is that senior management would be best served by outlining and promoting, both internally and externally to their company, the core values and standards that their company sets out to achieve and abide to. In doing so, this is, both in terms of internal ethics, buy in and support from employees and in terms of public relations from an external perspective, a successful firm with expansion aspirations could then be in a position to leverage CSR by "having a sense of purpose and a set of values that guide everyday actions" (Bernstein, 2001, p. 94). In a similar observation, Collins reinforces this point with his observation of how the world's largest and greatest corporations can really harness the concept of CSR on a highly fundamental level to ensure that they "don't exist merely to deliver returns to shareholders; instead, in a truly great company, profits and cash flow become like blood and water to a healthy body: They are absolutely essential for life, but they are not the very point of life" (Collins, 2001, p. 1).
Broadly speaking, through the literature review and analysis of said literature, this study has found that because of the emergence and advances in Corporate Social Responsibility as not only a 'nice to have' but instead as very much a prerequisite for any company or corporation serious about overseas or global expansion. Another interesting theme was the realization within the literature that the implementation and proper execution of a highly professional CSR program fundamental needs to function correctly from both within a company through its own employees, and from outside of the company by way of PR and promotion of the concept to ensure that potential consumers, shareholders and other stakeholders are fully aware as to the extent and success of the CSR program. This is required because there is a definite sense of necessity to these levels of penetration and visibility of a firm's CSR program to its success or otherwise in expanding into new markets.
An interesting development on this study would be to examine the contrasting fortunes, assuming that were to be the case, of two corporations; one with a fully developed and implemented CSR program that is perceived to be successful by the stakeholders that have been identified as key to its success, and the second one with a less mature or non-existent CSR program. It would make for an interesting follow up study to compare and contrast the fortunes of the two companies in their growth efforts particularly in emerging markets where conditions have been shown in this study and the theory studies in researching it to be much more conductive to companies with strong CSR programs.
In conclusion, this study has found that fundamentally CSR is used heavily by multinational corporations as a multi-faceted means of facilitating entry into new overseas markets, enabling a locally accepted operation once established, and then attempting to retain strong environmental, social and civic values to retain credibility and maximize market potential in those markets. In doing so, it has been found that CSR is not to be underestimated in terms of a company's goals and investment priorities and returns and foregoing such could serve to hold it back in more ways than may be apparent on face value.
