The purpose of this study is emphasize on exploring and identifying aspects that influence the Corporate Social Responsibility activities that lead to the pattern of the program that currently adapt by PETRONAS. The actual CSR views is depend on the objective of the company, and most of the company in Malaysia today views CSR as a important part in gaining and maintain the sustainable development for their organizational.
Since the price and demand for oil keeps increasing in yearly, every country is struggling to have enough oil reserves for their consumption for their own or exporting to others. The process of these activities has given impact to natural resources and has concern by every environmentalist in this world. According to Ali & O'Faircheallaigh (2007), oil and gas companies is classify as extractive industries where it is define as a non-renewable natural resource sector. From this, the core challenge for CSR in the extractive industries is depend on satisfying the social community to have their right in protecting the environment as well generates the economic from natural resource with limiting their business operation.
Until now, there are a lot of oil and gas companies has implemented different CSR program, however in implementing the program, it comes to the issue whether the CSR program are related to the business itself or not. The questions that arise from the issue such as "which of these community development, charity and philanthropy from a CSR program can support the sustainability development for the organization" The answer to the question is not easy to define and mostly, the activities stated by companies are not connected to the triple bottom line, which is this is a key for sustainable development and opportunity, innovation and competitive excellence (Hidayati, 2011).
CHAPTER 2: LITERATURE REVIEW
2.1 INTRODUCTION
Literature review is a directed search of published works, including periodicals and books, which discuss theory and present empirical result that are relevant to the topic at hand. While literature survey is common applied search studies, it is fundamental requirement of basic search report. (Zikmund, Babin, Carr, & Griffin, 2010). On this chapter, it will explain and support about the theoretical framework chosen and explain about Dependent Variable (DV) and also Independent Variable (IV). A good literature review thus provides the foundation for developing a comprehensive theoretical framework from which hypotheses can be develop for testing.
2.2 PREVIOUS RESEARCH
There are numerous studies of CSR concept and definition that has done by researcher and also by the company itself. According to Caroll (1991), CSR has been evolving as early as the 1930s. It defined as treating stakeholder of the firm ethically or in responsible manner. The concept is where the organizations consider the welfare of society by taking responsibility for the impact of their business activities on stakeholder as well as the environment.
However, few attempts have been made to study the specificities of industrial sector when attempting to develop and implement CSR principles (Ali & O'Faircheallaigh, 2007). In implementing CSR program it could be diverge extensively from segment to segment.
2.2.1 CORPORATE SOCIAL RESPONSIBILITY AND CORPORATE MARKETING
As mention in previous, CSR is define in many ways and no commonly accepted definition taken place(Uddin, Hassan, & Tarique, 2008), however the scope of CSR is take into account the social and environmental aspect so that community welfare can be improved(Hidayati, 2011). Some definition state the CSR is the ethical, responsible and integrated business implementation applied to all operation. Below are the several lists from various sources of definitions in different sense of CSR:
Table 2.1: CSR definitions from various sources (Dahlsrud, 2006)
Source
CSR Definition
Business for Social Responsibility, 2000
Business decision making linked to ethical values, compliance with legal requirements and respect for people, communities and the environment.
Khoury , 1999
Overall relationship of the corporation with its stakeholders. This includes customers, employees, communities, owners/investors, government, suppliers, and competitors. Elements of social responsibility include investment in community area, employee relations, creation and maintenance of employment, environmental stewardship, and financial performance.
Foran, 2001
Set of practices and behaviors that firms adopt towards their labor force, towards the environment, in which their operations are embedded, towards authority and civil society.
Different view in Corporate Marketing, where the main idea is the shift from a product and service to corporate level concern, i.e. marketing orientation should go beyond customers' want and need related to product and service (Podnar & Golob, 2007). Marketer realized that environmental resource are not infinite and societal and environmental impacts of marketing conventional should be considered which is mean process of exchange, interaction with all members of society(Podnar & Golob, 2007). The main aims in corporate marketing are to goes beyond profit maximization and include long-term business survival alongside the meeting of stakeholder needs and expectations. It is all depends upon the business organizations how they integrate the concept and adapt to it. The common idea behind CSR reflects on the perception that a CSR activity is a part of essential aspect for organization rather than remaining an option.
2.2.2 DIMENSION OF CSR
According to Dahlsrud (2006), there are five dimensions of CSR on the basis of the stakeholders, voluntariness, environment, social, and economic. These dimensions provide will assist in ethical business frameworks when conducting CSR analysis. The first is stakeholder dimension refer to makes business relation with consumer, suppliers, and owners. There are two types of stake holders "primary and secondary"(Hameed, 2010). The primary stakeholders have direct command on high level of affiliation with the firm and can influence such as workers, retailers, consumers, shareholders. While the secondary ones are not directly related example such as media or press. Second is voluntariness refers to further than legal boundaries of the business based on ethical proportion of the business example such as charity, philanthropy. Third, environment dimension refers to environmental consideration in all business operations. Fourth, is social dimension refers to relationship of business and the society. The social dimension of CSR related with business and its affect on communities and the last is economic dimension refers to the financial aspect of the business it also deals with profitability in the business (Hameed, 2010).
Table 2.2: The five dimensions, how the coding scheme was applied and example phrases (Dahlsrud, 2006)
Dimension
Definition
Example phrases
Environmental
The natural environment
'a cleaner environment'
'environmental stewardship'
Social
The relationship between business and society
'contribute to a better society'
'integrate social concerns in their business operations'
'consider the full scope of their impact on communities'
Economic
Socio-economic or financial aspects including describing CSR in terms of business operation
'contribute to economic development'
'preserving the profitability'
'business operations'
Stakeholder
Stakeholders or stakeholder groups
'interaction with their stakeholders'
'how organizations interact with their employees, suppliers, customers and communities'
Voluntariness
Actions not prescribed by law
'treating the stakeholders of the firm'
'based on ethical values'
'beyond legal obligations'
'voluntary'
2.2.3 BUSINESS ETHICS
Business ethic is refer to the action taken that relate with the question of "what is right and wrong, good and bad, unsafe and useful in relationship to the decision and action in the organizational activities (Hidayati, 2011). The business ethics is special study regarding right and wrong, which aligned with the moral standard and business manner applied in the organizational.
According to Weiss (2003), application of business ethics and CSR program can be based on two principles which is utilitarian and justice principle. It is important to undertake stakeholder using the utilitarian principle, because it encourage decision makers to consider mutual benefit, to develop various alternative based on major benefit for all involved in decision-making, and estimate the cost and benefits for the parties involved. While, the justice principle is relate on justice equilibrium regarding about two things. The first thing is, each person has same right to freedom in all aspect and second thing, is justice formed when every person gets the same chance and benefit over opportunities and tension occurring in the community.
2.2.4 SUSTAINABLE DEVELOPMENT
The CSR program implemented by the organization should be sustainable development for the program, since it will give a positive impact and benefit to the business and its stakeholder. It describe the sustainable development is a development that fulfills currents trend without sacrificing the ability of future generations in fulfilling the needs (Hidayati, 2011).
According to The International Institute for Sustainable Development and Deloitte & Touche (cited in Hidayati, 2011), the sustainable development for business entities is the process of adopting business strategies and activities to fulfill the present company's needs and the needs of stakeholders as well as protecting, supporting and increasing the human and natural resources required in the future. The sustainable development does not focus on environmental issue only, but its covers three public area which is economy, social issues, and environment (Ali & O'Faircheallaigh, 2007).
2.2.5 REPUTATION
The social responsibility of one company is recognized as an aspect, an appeal, and an activity that influences reputation (Hidayati, 2011). In every organization, practices CSR will gives a good judgment of brand image and reputation and the promotion during CSR activities will help the organization in future potential.
The perception about competitiveness, CSR will help the people to remember the organization and the words of these organizations of helping others will be advertise and remain into consumer minds. There is no evidence as research but logically this is one reason why companies practices CSR. This might happen because the possibility of performing CSR is related to publicity and it could help to increase the brand image and reputation of the organization (Selvarajh, Chelliah, Munusamy, & Pandian, 2012).
Reputation is often related to the competitive excellence for the company. It is long term combination and depend on how well the organization execute its commitments and fulfills stakeholder expectation, and how effective the organization's performance according to social-political environment.
2.2.6 ECONOMIC AND OPERATIONAL EFFICIENCY
CSR is a modern approach to maximizing efficiency, each of company is seeking the best way to minimizing the input cost and maximizing returns. Inputs would be minimized not only to reduce production cost, but also to minimize an extraction project's environmental footprint at each stage of the production change. The economic model would not only include material input, but also, for instance, the potentially positive impact of CSR policies on attracting and retaining high-quality staff and enhancing staff morale (Ali & O'Faircheallaigh, 2007). High staff turnover and low staff morale correspond to critical issues for many remote mine sites, add significantly to recruitment costs, lower productivity as a result of the loss of experienced workers and create problems in maintaining safety standards. If CSR policies can help allay the concerns of employees and potential employees concerning the industry's unpleasant environmental and social impacts, they can enhance worker loyalty and worker productivity.
CHAPTER 3: RESEARCH METHODOLOGY
3.1 INTRODUCTION
The previous research has discussed on literature of CSR and the concept of the present study. On this chapter, it will cover the research methodology and process of conducting in this study. This will includes the variables, measurement on the variables, population and sample, data collection, and data analysis. Result of a pilot study, the response rate and non-response bias of the main study are also discussed in this chapter.
3.2 STUDY VARIABLES
The variables used in this study can be categorized into two types which is dependent and the independent variables.
3.2.1 Dependent Variable
The dependent variable for this study is Corporate Social Responsibility activities.
3.2.2 Independent Variable
The independent variable for this study is business ethics, sustainable development, reputation, and economic and operational efficiency
3.3 RESEARCH DESIGN
This research is designed to investigate the relationship between dependent that is CSR and independent variables which is business ethic, reputation, sustainable development and economic and operational efficiency. In this study, it engages in hypotheses testing that will explain the certain significant correlations between CSR and four aspects in independent variables
3.3.1 Purpose of the Study
The purpose of this study is to highlight the importance to determine the 4 aspects from independent variables can affect the CSR activities in PETRONAS. The information was gathered to study deeply about variables and to understand better and to see in larger picture about the scenario faced. These task involved several processes such as identification, collection, analysis and dissemination of information. The data will be collected through distribution of questionnaires.
3.3.2 Types of Investigation
The study involved the correlation types of investigation to investigate either the variables are correlated, this investigation is to determine the 4 aspects in CSR such business ethic, reputation, sustainable development and economic and operational efficiency with CSR activities.
3.3.3 Extent of Researcher Interference with the Study
A correctional study is conducted in the natural environment in PETRONAS with minimal interference with the flow of work which it means there is maybe some disruption to normal work flow but very minimal to be compared with causal studies.
3.3.4 Unit of Analysis
The unit of analysis refers to the level of aggregation of the data collected during the subsequent data analysis stage. For this study, employees in the organization have been chosen as the unit of analysis. The data will be gathered from selected level from Tower 1& 2 PETRONAS.
3.3.5 Time Horizon
This study conducted using cross-sectional studies or also known as one-shot. The data is gathered once over a period such as days or a week in order to answer the research question.
3.4 MEASUREMENT OF VARIABLES
Business researches use many scales or number systems. Not all scales capture the same richness in a measure and not all concepts need a rich measure. Traditionally, the rank of scale measurement is seen as important because it determines the mathematical comparison that is allowable. There are four levels or types of scale measurement which is nominal, ordinal, interval, and ratio level scales each type offers the researcher progressively power in analyzed the data and testing the validity of a scale(Zikmund, Babin, Carr, & Griffin, 2010).
Table 3.1 Measurement of Variables
No.
Variables
No. of Items
Cronbach Alpha
Scales
Sources
PART A
Demographic
7
-
Nominal
PART B
Business Ethics
Independent variable
5
.755
Interval
Reputation
Independent variable
4
.696
Interval
Sustainable Development
Independent variable
4
.689
Interval
Economic and Operational Efficiency
Independent variable
5
.626
Interval
PART C
Corporate Social Responsibility
Dependent variable
5
.689
Interval
3.4.1 Nominal Scales
Represent the most elementary level of measurement in which valued are assigned to an object to identify or classify purpose only;
3.4.2 Ordinal Scales
Ranking scales allowing things to be arranged based on how much of some concept them posses;
3.4.3 Interval Scales
Scales that have both nominal and ordinal properties, but that also gain information about differences quantities of concept from one observation to another;
3.4.4 Ratio Scales
Represent the highest form of measurement in that they have all properties of interval scales with the additional attribute of representing absolute quantities and characterized by a meaningful absolute zero (Zikmund, Babin, Carr, & Griffin, 2010).
Strongly Agree
5
Agree
4
Neutral
3
Disagree
2
Strongly Disagree
1
Figure 3.1: 5-point Likert type
However, on this research for the demographic section nominal scales was used to measure demographic variables for each question. For the section in measuring independent and dependent variable the questions were asked using interval scale to measure the degree of agreement or disagreement with series of statement related to 5- point Likert scale. The scales item employ 5 point Likert-type responses as described as followed.
3.5 POPULATION AND SAMPLE
3.5.1 Population
In this study, the population was the employees of PETRONAS from Tower 1 & 2. In addition, the population element was an individual member of a population. So, the population element of this study was the employees with the random selection.
3.5.2 Sample size
Sample size referred to the number of elements included in this study. For this study, 100 respondents had been selected as a sample in order to answer the questionnaire that has been distributed by the researcher. Data were collected from the employees in PETRONAS. However, from 100 respondent only 62 respondents were returned.
3.5.3 Sampling techniques
In this study, researcher used the convenience sampling technique that attempts to obtain the information/data from the respondents. This sampling technique was chose by researcher because respondents were selected due to they happen to be in the right place at the right time. Moreover, this sampling technique was least expensive and least time-consuming of all sampling techniques. The sampling units were accessible, easy to measure and cooperative (Maholtra, 2010). To implement this convenient sampling technique, the researcher distributed the questionnaires to the employees in PETRONAS randomly.
3.6 DATA COLLECTION
The data collections will referring into two sources which is primary data and the secondary data.
3.6.1 Primary Data
Primary data are data collected by the investigators for the purposes of the study. This allows the opportunity to improve precision and to minimize measurement bias through the use of precise definitions, systematic procedures, trained observers, and blinding during data collection (Clinical Epidemiology & Evidence-Based Medicine Glossary, 2010).
3.6.2 Secondary Data
Secondary data defined as data that has been previously collected for some purpose which are gathered and recorded by someone else. Secondary data usually are historical and already assembled (Zikmund, Babin, Carr, & Griffin, 2010). In this study, there are a few of secondary data that has been referring, the list as below;
3.6.2.1 Internet
On the era of ICT, they have a lot of secondary data that has been uploaded and downloaded by the researcher to conduct the research. Based on this, to complete this research journal from database, article in website, has been refer to gather some info related with this study.
3.6.2.2 Reference Book
Information from reference book is very useful to understanding several concepts related to this study. The book that related with this researcher courses has provide the information as lot as needed.
3.6.2.3 Printed Media
Printed media such as journal, article, and annual report are very useful and support in complete this research.
3.7 PLAN DATA ANALYSIS
The data that has been collected will be analyzed and interpreted. On this research, researcher has converted all the data using the Statistical Package for Social Science (SPSS) version 20 and it will signify the basis of the study. On this research, descriptive statistic will be used to interpret the data. Descriptive statistic is the transformation of raw data into a form that will make them easy to understand and interpret, rearrange as well as manipulating the data. The analysis also included the reliability test, descriptive statistic and correlation analysis and cross tabulation.
3.7.1 Reliability Test
The reliability and validity of the measure were tested is using Cronbach's Alpha. It is a reliability coefficient that indicates how well the items in asset are positively correlated to one another. It is computed in terms of the average inter correlations among the items measuring the concept. It is important to note that all the negatively worded items in the questionnaire should be reversing first before the items are submitted for reliability tests. Unless the items measuring a variable are in the same direction, the reliabilities obtained will be obtained. The closer Cronbach's Alpha is to 1, the higher the internal consistency reliability (Sekaran & Bougie, 2003). The reason the researcher used this technique is to indicate how well the items have strong relationship to one and another. Moreover, it is an adequate test of internal consistency reliability. In general, reliabilities less than 0.6bis considered poor, those in the 0.7 range considered acceptable, while those in the range considered acceptable, while those in the range 0.8 and above are considered acceptable and reliable.
3.7.2 Correlation Analysis
Correlation analysis involve measuring the closeness of the relationship between two or more variables (Churchill G.A, Jr, laobucci D, 2002 ). Furthermore, the researches often like to know how one variable is relating to another. (Sekaran & Bougie, 2003). That is, in this study, the researcher would like to see the nature, direction and significance of the bivariate relationships of the variables used in this study. A Pearson correlation matrix will indicate the direction, significance and strength all variables in this study. The Pearson- Correlation is used because the researcher wants to know how the variable is related to each other.
3.7.3 Descriptive Statistics
Descriptive statistics such as maximum, minimum, means, standard deviation and variance will be obtained for interval-scaled independent and dependent variables.
3.7.4 Standard Regression
Regression is another technique for measuring the linear association between dependent and independent variable. Regression assumes that the dependent variable is predicatively linked to the independent variable.
5.3 RECOMMENDATION
Based on the findings of this study, several recommendations are developed in order to improve the four aspects that contribute to the CSR success in PETRONAS. In order to explain in details, researcher has done with the second correlation tables that gives the different views to enable researcher identify the most suitable recommendations.
5.3.1 Business Ethics
Business ethics is related to what is right or wrong for the PETRONAS and good or bad to confront the issues surrounding the organizational activities and decision to undertake. From a second co relational analysis has been done, most employee has agreed with CSR is "equivalent for corporate governance". As it means, good governance is all about principles rather than regulations. CSR is how those principles manifest among employee in a PETRONAS environment. A good conception of corporate governance is often negates with necessitate of CSR. In other words, CSR is easy to counterfeit but different with Corporate Governance it is not. As a recommendation to CSR be practical, good governance is necessary. CSR and CG are often related to the values at a level of governance that often requires reclassification of boundaries of business ethics. So that, PETRONAS should be maintain their level of corporate governance at the same time improve at the certain level to create the trust in conducting the CSR to the community well being. In other words, if the budget of CSR has been allocated, the total of the budget must be utilized and reach to the end-user.
5.3.2 Reputation
Reputation is referring to the most important competitive excellence a company can have. As PETRONAS is one of the largest oil and gas company that has generate high income, it is very aggressive in conducting the CSR activities within is operating location around the world. Since it has generate lots of profit, the company has undertake the action with providing or allocate several regular financial support to gain the reputation among is industries in conducting CSR. As the result in second correlation table, it is found that this is the element that has proving with providing the financial support, each of the reputation is belong to the PETRONAS compare to others in his similar industries. From this factor, recommendation in continually providing regular financial support should be adapt by PETRONAS, but it should look onto the CSR activities that most related to their core business. As the researcher noticed, PETRONAS is very aggressive in CSR, but it focuses more on non-direct activities. It is recommended the PETRONAS should allocate financial support with start practicing the real CSR by reducing and stopping environmental damage caused by its operations.
