case study on social responsibility of business

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The Business Case for Corporate Social Responsibility

Matteo Tonello is Director of Corporate Governance for The Conference Board, Inc. This post is based on a Conference Board Director Note by Archie B. Carroll and Kareem M. Shabana , and relates to a paper by these authors, titled “The Business Case for Corporate Social Responsibility: A Review of Concepts, Research and Practice,” published in the International Journal of Management Reviews .

In the last decade, in particular, empirical research has brought evidence of the measurable payoff of corporate social responsibility (CSR) initiatives to companies as well as their stakeholders. Companies have a variety of reasons for being attentive to CSR. This report documents some of the potential bottomline benefits: reducing cost and risk, gaining competitive advantage, developing and maintaining legitimacy and reputational capital, and achieving win-win outcomes through synergistic value creation.

The term “corporate social responsibility” is still widely used even though related concepts, such as sustainability, corporate citizenship, business ethics, stakeholder management, corporate responsibility, and corporate social performance, are vying to replace it. In different ways, these expressions refer to the ensemble of policies, practices, investments, and concrete results deployed and achieved by a business corporation in the pursuit of its stakeholders’ interests.

This report discusses the business case for CSR—that is, what justifies the allocation of resources by the business community to advance a certain socially responsible cause. The business case is concerned with the following question: what tangible benefits do business organizations reap from engaging in CSR initiatives? This report reviews the most notable research on the topic and provides practical examples of CSR initiatives that are also good for the business and its bottom line.

The Search for a Business Case: A Shift in Perspective

Business management scholars have been searching for a business case for CSR since the origins of the concept in the 1960s. [1]

An impetus for the research questions for this report was philosophical. It had to do with the long-standing divide between those who, like the late economist Milton Friedman, believed that the corporation should pursue only its shareholders’ economic interests and those who conceive the business organization as a nexus of relations involving a variety of stakeholders (employees, suppliers, customers, and the community where the company operates) without which durable shareholder value creation is impossible. If it could be demonstrated that businesses actually benefited financially from a CSR program designed to cultivate such a range of stakeholder relations, the thinking of the latter school went, then Friedman’s arguments would somewhat be neutralized.

Another impetus to research on the business case of CSR was more pragmatic. Even though CSR came about because of concerns about businesses’ detrimental impacts on society, the theme of making money by improving society has also always been in the minds of early thinkers and practitioners: with the passage of time and the increase in resources being dedicated to CSR pursuits, it was only natural that questions would begin to be raised about whether CSR was making economic sense.

Obviously, corporate boards, CEOs, CFOs, and upper echelon business executives care. They are the guardians of companies’ financial well-being and, ultimately, must bear responsibility for the impact of CSR on the bottom line. At multiple levels, executives need to justify that CSR is consistent with the firm’s strategies and that it is financially sustainable. [a]

However, other groups care as well. Shareholders are acutely concerned with financial performance and sensitive to possible threats to management’s priorities. Social activists care because it is in their long-term best interests if companies can sustain the types of social initiatives that they are advocating. Governmental bodies care because they desire to see whether companies can deliver social and environmental benefits more cost effectively than they can through regulatory approaches. [b] Consumers care as well, as they want to pass on a better world to their children, and many want their purchasing to reflect their values.

[a] K. O’Sullivan, “Virtue rewarded: companies are suddenly discovering the profit potential of social responsibility.” CFO , October 2006, pp. 47–52.

[b] Simon Zadek. Doing Good and Doing Well: Making the Business Case for Corporate Citizenship . New York: The Conference Board Research Report, 2000, 1282-00-RR.

The socially responsible investment movement Establishing a positive relationship between corporate social performance (CSP) and corporate financial performance (CFP) has been a long-standing pursuit of researchers. This endeavor has been described as a “30-year quest for an empirical relationship between a corporation’s social initiatives and its financial performance.” [2] One comprehensive review and assessment of studies exploring the CSP-CFP relationship concludes that there is a positive relationship between CSP and CFP. [3]

In response to this empirical evidence, in the last decade the investment community, in particular, has witnessed the growth of a cadre of socially responsible investment funds (SRI), whose dedicated investment strategy is focused on businesses with a solid track record of CSR-oriented initiatives. Today, the debate on the business case for CSR is clearly influenced by these new market trends: to raise capital, these players promote the belief of a strong correlation between social and financial performance. [4]

As the SRI movement becomes more influential, CSR theories are shifting away from an orientation on ethics (or altruistic rationale) and embracing a performance-driven orientation. In addition, analysis of the value generated by CSR has moved from the macro to the organizational level, where the effects of CSR on firm financial performance are directly experienced. [5]

The CSR of the 1960s and 1970s was motivated by social considerations, not economic ones. “While there was substantial peer pressure among corporations to become more philanthropic, no one claimed that such firms were likely to be more profitable than their less generous competitors.” In contrast, the essence of the new world of CSR is “doing good to do well.” [6]

CSR is evolving into a core business function, central to the firm’s overall strategy and vital to its success. [7] Specifically, CSR addresses the question: “can companies perform better financially by addressing both their core business operations as well as their responsibilities to the broader society?” [8]

One Business Case Just Won’t Do

There is no single CSR business case—no single rationalization for how CSR improves the bottom line. Over the years, researchers have developed many arguments. In general, these arguments can be grouped based on approach, topics addressed, and underlying assumptions about how value is created and defined. According to this categorization, CSR is a viable business choice as it is a tool to:

• implement cost and risk reductions;
• gain competitive advantage;
• develop corporate reputation and legitimacy; and
• seek win-win outcomes through synergistic value creation. [9]

Other widely accepted approaches substantiating the business case include focusing on the empirical research linking CSR with corporate social performance (CSP) and identifying values brought to different stakeholder groups that directly or indirectly benefit the company’s bottom lines.

Broad versus narrow views Some researchers have examined the integration of CSR considerations in the day-to-day business agenda of organizations. The “mainstreaming” of CSR follows from one of three rationales:

• the social values-led model, in which organizations adopt CSR initiatives regarding specific issues for non-economic reasons;
• the business-case model, in which CSR initiatives are primarily assessed in an economic manner and pursued only when there is a clear link to firm financial performance [10] ; and
• the syncretic stewardship model, which combines the social values-led and the business-case models.

The business case model and the syncretic models may be seen as two perspectives of the business case for CSR: one narrow and one broad. The business case model represents the narrow view: CSR is only recognized when there is a clear link to firm financial performance. The syncretic model is broad because it recognizes both direct and indirect relationships between CSR and firm financial performance. The advantage of the broad view is that it enables the firm to identify and exploit opportunities beyond the financial, opportunities that the narrow view would not be able to recognize or justify.

Another advantage of the broad view of the business case, which is illustrated by the syncretic model, is its recognition of the interdependence between business and society. [11]

The failure to recognize such interdependence in favor of pitting business against society leads to reducing the productivity of CSR initiatives. “The prevailing approaches to CSR are so fragmented and so disconnected from business and strategy as to obscure many of the greatest opportunities for companies to benefit society.” [12] The adoption of CSR practices, their integration with firm strategy, and their mainstreaming in the day-to-day business agenda should not be done in a generic manner. Rather, they should be pursued “in the way most appropriate to each firm’s strategy.” [13]

In support of the business case for CSR, the next sections of the report discuss examples of the effect of CSR on firm performance. The discussion is organized according to the framework referenced earlier, which identifies four categories of benefits that firms may attain from engaging in CSR activities. [14]

Reducing Costs and Risks

Cost and risk reduction justifications contend that engaging in certain CSR activities will reduce the firm’s inefficient capital expenditures and exposure to risks. “[T]he primary view is that the demands of stakeholders present potential threats to the viability of the organization, and that corporate economic interests are served by mitigating the threats through a threshold level of social or environmental performance.” [15]

Equal employment opportunity policies and practices CSR activities in the form of equal employment opportunity (EEO) policies and practices enhance long-term shareholder value by reducing costs and risks. The argument is that explicit EEO statements are necessary to illustrate an inclusive policy that reduces employee turnover through improving morale. [16] This argument is consistent with those who observe that “[l]ack of diversity may cause higher turnover and absenteeism from disgruntled employees.” [17]

Energy-saving and other environmentally sound production practices Cost and risk reduction may also be achieved through CSR activities directed at the natural environment. Empirical research shows that being environmentally proactive results in cost and risk reduction. Specifically, data shows hat “being proactive on environmental issues can lower the costs of complying with present and future environmental regulations … [and] … enhance firm efficiencies and drive down operating costs.” [18]

Community relations management Finally, CSR activities directed at managing community relations may also result in cost and risk reductions. [19] For example, building positive community relationships may contribute to the firm’s attaining tax advantages offered by city and county governments to further local investments. In addition, positive community relationships decrease the number of regulations imposed on the firm because the firm is perceived as a sanctioned member of society.

Cost and risk reduction arguments for CSR have been gaining wide acceptance among managers and executives. In a survey of business executives by PricewaterhouseCoopers, 73 percent of the respondents indicated that “cost savings” was one of the top three reasons companies are becoming more socially responsible. [20]

Gaining Competitive Advantage

As used in this section of the report, the term “competitive advantage” is best understood in the context of a differentiation strategy; in other words, the focus is on how firms may use CSR practices to set themselves apart from their competitors. The previous section, which focused on cost and risk reduction, illustrated how CSR practices may be thought of in terms of building a competitive advantage through a cost management strategy. “Competitive advantages” was cited as one of the top two justifications for CSR in a survey of business executives reported in a Fortune survey. [21] In this context, stakeholder demands are seen as opportunities rather than constraints. Firms strategically manage their resources to meet these demands and exploit the opportunities associated with them for the benefit of the firm. [22] This approach to CSR requires firms to integrate their social responsibility initiatives with their broader business strategies.

Reducing costs and risks • Equal employment opportunity policies and practices • Energy-saving and other environmentally sound production practices • Community relations management

Gaining competitive advantage • EEO policies • Customer relations program • Corporate philanthropy

Developing reputation and legitimacy • Corporate philanthropy • Corporate disclosure and transparency practices

Seeking win-win outcomes through synergistic value creation • Charitable giving to education • Stakeholder engagement

EEO policies Companies that build their competitive advantage through unique CSR strategies may have a superior advantage, as the uniqueness of their CSR strategies may serve as a basis for setting the firm apart from its competitors. [23] For example, an explicit statement of EEO policies would have additional benefits to the cost and risk reduction discussed earlier in this report. Such policies would provide the firm with a competitive advantage because “[c]ompanies without inclusive policies may be at a competitive disadvantage in recruiting and retaining employees from the widest talent pool.” [24]

Customer and investor relations programs CSR initiatives can contribute to strengthening a firm’s competitive advantage, its brand loyalty, and its consumer patronage. CSR initiatives also have a positive impact on attracting investment. Many institutional investors “avoid companies or industries that violate their organizational mission, values, or principles… [They also] seek companies with good records on employee relations, environmental stewardship, community involvement, and corporate governance.” [25]

Corporate philanthropy Companies may align their philanthropic activities with their capabilities and core competencies. “In so doing, they avoid distractions from the core business, enhance the efficiency of their charitable activities and assure unique value creation for the beneficiaries.” [26] For example, McKinsey & Co. offers free consulting services to nonprofit organizations in social, cultural, and educational fields. Beneficiaries include public art galleries, colleges, and charitable institutions. [27] Home Depot Inc. provided rebuilding knowhow to the communities victimized by Hurricane Katrina. Strategic philanthropy helps companies gain a competitive advantage and in turn boosts its bottom line. [28]

CSR initiatives enhance a firm’s competitive advantage to the extent that they influence the decisions of the firm’s stakeholders in its favor. Stakeholders may prefer a firm over its competitors specifically due to the firm’s engagement in such CSR initiatives.

Developing Reputation and Legitimacy

Companies may also justify their CSR initiatives on the basis of creating, defending, and sustaining their legitimacy and strong reputations. A business is perceived as legitimate when its activities are congruent with the goals and values of the society in which the business operates. In other words, a business is perceived as legitimate when it fulfills its social responsibilities. [29]

As firms demonstrate their ability to fit in with the communities and cultures in which they operate, they are able to build mutually beneficial relationships with stakeholders. Firms “focus on value creation by leveraging gains in reputation and legitimacy made through aligning stakeholder interests.” [30] Strong reputation and legitimacy sanction the firm to operate in society. CSR activities enhance the ability of a firm to be seen as legitimate in the eyes of consumers, investors, and employees. Time and again, consumers, employees, and investors have shown a distinct preference for companies that take their social responsibilities seriously. A Center for Corporate Citizenship study found that 66 percent of executives thought their social responsibility strategies resulted in improving corporate reputation and saw this as a business benefit. [31]

Corporate philanthropy Corporate philanthropy may be a tool of legitimization. Firms that have negative social performance in the areas of environmental issues and product safety use charitable contributions as a means for building their legitimacy. [32]

Corporate disclosure and transparency practices Corporations have also enhanced their legitimacy and reputation through the disclosure of information regarding their performance on different social and environmental issues, sometimes referred to as sustainability reporting. Corporate social reporting refers to stand-alone reports that provide information regarding a company’s economic, environmental, and social performance. The practice of corporate social reporting has been encouraged by the launch of the Global Reporting Initiative (GRI) in 1997-1998 and the introduction of the United Nations Global Compact in 1999. Through social reporting, firms can document that their operations are consistent with social norms and expectations, and, therefore, are perceived as legitimate.

Seeking Win-Win Outcomes through Synergistic Value Creation

Synergistic value creation arguments focus on exploiting opportunities that reconcile differing stakeholder demands. Firms do this by “connecting stakeholder interests, and creating pluralistic definitions of value for multiple stakeholders simultaneously.” [33] In other words, with a cause big enough, they can unite many potential interest groups.

Charitable giving to education When companies get the “where” and the “how” right, philanthropic activities and competitive advantage become mutually reinforcing and create a virtuous circle. Corporate philanthropy may be used to influence the competitive context of an organization, which allows the organization to improve its competitiveness and at the same time fulfill the needs of some of its stakeholders. For example, in the long run, charitable giving to education improves the quality of human resources available to the firm. Similarly, charitable contributions to community causes eventually result in the creation and preservation of a higher quality of life, which may sustain “sophisticated and demanding local customers.” [34]

The notion of creating win-win outcomes through CSR activities has been raised before. Management expert Peter Drucker argues that “the proper ‘social responsibility’ of business is to … turn a social problem into economic opportunity and economic benefit, into productive capacity, into human competence, into well-paid jobs, and into wealth.” [35] It has been argued that, “it will not be too long before we can begin to assert that the business of business is the creation of sustainable value— economic, social and ecological.” [36]

An example: the win-win perspective adopted by the life sciences firm Novo Group allowed it to pursue its business “[which] is deeply involved in genetic modification and yet maintains highly interactive and constructive relationships with stakeholders and publishes a highly rated environmental and social report each year.” [37]

Stakeholder engagement The win-win perspective on CSR practices aims to satisfy stakeholders’ demands while allowing the firm to pursue financial success. By engaging its stakeholders and satisfying their demands, the firm finds opportunities for profit with the consent and support of its stakeholder environment.

The business case for corporate social responsibility can be made. While it is valuable for a company to engage in CSR for altruistic and ethical justifications, the highly competitive business world in which we live requires that, in allocating resources to socially responsible initiatives, firms continue to consider their own business needs.

In the last decade, in particular, empirical research has brought evidence of the measurable payoff of CSR initiatives on firms as well as their stakeholders. Firms have a variety of reasons for being CSR-attentive. But beyond the many bottom-line benefits outlined here, businesses that adopt CSR practices also benefit our society at large.

[1] See Edward Freeman, Strategic Management: a Stakeholder Approach , 1984, which traces the roots of CSR to the 1960s and 1970s, when many multinationals were formed. (go back)

[2] J. D. Margolis and Walsh, J.P. “Misery loves companies: social initiatives by business.” Administrative Science Quarterly , 48, 2003, pp. 268–305. (go back)

[3] J. F. Mahon and Griffin, J .J. “Painting a portrait: a reply.” Business and Society , 38, 1999, 126–133. (go back)

[4] See, for an overview, Stephen Gates, Jon Lukomnik, and David Pitt- Watson, The New Capitalists: How Citizen Investors Are Reshaping The Business Agenda , Harvard Business School Press, 2006. (go back)

[5] M.P. Lee, “A review of the theories of corporate social responsibility: its evolutionary path and the road ahead”. International Journal of Management Reviews , 10, 2008, 53–73. (go back)

[6] D.J. Vogel, “Is there a market for virtue? The business case for corporate social responsibility.” California Management Review , 47, 2005, pp. 19–45. (go back)

[7] Ibid. (go back)

[8] Elizabeth Kurucz; Colbert, Barry; and Wheeler, David “The Business Case for Corporate Social Responsibility.” Chapter 4 in Crane, A.; McWilliams, A.; Matten, D.; Moon, J. and Siegel, D. The Oxford Handbook of Corporate Social Responsibility. Oxford: Oxford University Press, 2008, 83-112 (go back)

[9] Kurucz, Colbert, and Wheeler , 85-92. (go back)

[10] Berger,I.E., Cunningham, P. and Drumwright, M.E. “Mainstreaming corporate and social responsibility: developing markets for virtue,” California Management Review , 49, 2007, 132-157. (go back)

[11] Ibid. (go back)

[12] M.E. Porter and Kramer, M.R. “Strategy & society: the link between competitive advantage and corporate social responsibility.” Harvard Business Review , 84, 2006,pp. 78–92. (go back)

[13] Ibid. (go back)

[14] Kurucz, Colbert, and Wheeler, 85-92. (go back)

[15] Ibid., 88. (go back)

[16] T. Smith, “Institutional and social investors find common ground. Journal of Investing , 14, 2005, 57–65. (go back)

[17] S. L. Berman, Wicks, A.C., Kotha, S. and Jones, T.M. “Does stakeholder orientation matter? The relationship between stakeholder management models and firm financial performance.” Academy of Management Journal , 42, 1999, 490. (go back)

[18] Ibid. (go back)

[19] Ibid. (go back)

[20] Top 10 Reasons, PricewaterhouseCoopers 2002 Sustainability Survey Report, reported in “Corporate America’s Social Conscience,” Fortune , May 26, 2003, 58. (go back)

[21] Top 10 Reasons . (go back)

[22] Kurucz, Colbert, and Wheeler (go back)

[23] N. Smith, 2003, 67. (go back)

[24] T. Smith, 2005, 60. (go back)

[25] Ibid., 64. (go back)

[26] Heike Bruch and Walter, Frank (2005). “The Keys to Rethinking Corporate Philanthropy.” MIT Sloan Management Review , 47(1): 48-56 (go back)

[27] Ibid., 50. (go back)

[28] Bruce Seifert, Morris, Sara A.; and Bartkus, Barbara R. (2003). “Comparing Big Givers and Small Givers: Financial Correlates of Corporate Philanthropy.” Journal of Business Ethics , 45(3): 195-211. (go back)

[29] Archie B. Carroll and Ann K. Buchholtz, Business and Society: Ethics, Sustainability and Stakeholder Management , 8th Edition, Mason, OH: South-Western Cengage Learning, 2012, 305. (go back)

[30] Kurucz, Colbert, and Wheeler, 90. (go back)

[31] “Managing Corporate Citizenship as a Business Strategy,” Boston: Center for Corporate Citizenship, 2010. (go back)

[32] Jennifer C. Chen, Dennis M.; & Roberts, Robin. “Corporate Charitable Contributions: A Corporate Social Performance or Legitimacy Strategy?” Journal of Business Ethics , 2008, 131-144. (go back)

[33] Kurucz, Colbert, and Wheeler , 91. (go back)

[34] Porter and Kramer, 60-65. (go back)

[35] Peter F. Drucker, “The New Meaning of Corporate Social Responsibility.” California Management Review , 1984, 26: 53-63 (go back)

[36] C. Wheeler, B. Colbert, and R. E. Freeman. “Focusing on Value: Reconciling Corporate Social Responsibility, Sustainability and a Stakeholder Approach in a Network World.” Journal of General Management , (28)3, 2003, 1-28. (go back)

[37] Ibid. (go back)

Nice blog. CSR has become something very important to all the corporate houses today. However, with the rising growth of CSR activities. It is very important to have an effective software that helps to keep a track of the entire exercise.

Interesting article! Perhaps nice to give Mr. Stephen ‘Gates’ his real name back? After all “The New Capitalists: How Citizen Investors Are Reshaping The Business Agenda” was written by Stephen DAVIS. I think he would like the recognition ;)

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4 The Business Case for Corporate Social Responsibility

Elizabeth C. Kurucz (Ph.D., York University) is Assistant Professor of Organizational Behaviour and Sustainable Commerce in the Department of Business, College of Management and Economics at the University of Guelph. Her research in Organizational Behaviour spans business, government, and civil society, and is focused on how organizational mindsets facilitate or inhibit progress toward more sustainable practice.

Barry A. Colbert (Ph.D., York University) is an Assistant Professor of Policy at the School of Business and Economics at Wilfred Laurier University in Canada. His work has been published in Academy of Management Review, the Journal of General Management, and Human Resource Planning. His research is centered on the ways and means by which organizations align a vision for sustainability, business strategy, and the strategic development of human capital.

David Wheeler is Dean of Management, Dalhousie University, Nova Scotia, Canada. He holds a Ph.D. in Applied Microbiology from the University of Surrey (UK). Dr Wheeler's research interests focus on the role of the private sector in international development, corporate strategy, governance and sustainability, and organizational change and sustainability. He was the principal author of The Stakeholder Corporation (Pitman), and has published more than 70 articles in the Science, Medicine, and Management literatures. Dr. Wheeler is currently Co‐chair of the United Nations Development Program Project on case writing in private sector development. He is Chair of the Foundation for Sustainable Enterprise and Development and a board member of Zero Footprint.

• Published: 02 September 2009
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The purpose of this article is to provide a general summary of the key value propositions evident in the research on the business case for corporate social responsibility (CSR), described as four general ‘types’ of the business case, or four modes of value creation. It then presents a critique of these approaches (including identifying some problems inherent in the construct of CSR itself) and offers some principles for constructing a ‘better’ business case. Its intent is not to conduct a thorough review of studies analyzing the relationship between CSR and financial performance, as that has been well done elsewhere. Rather it seeks to unearth assumptions underlying dominant approaches in an effort to build a more robust business case for CSR that can move beyond existing limitations.

The old thinking was that if you make money you can do this positive social and environmental stuff—but I think the true philosophy of sustainability is the interdependence. It's not about charity; it's about the fact that if you do the right things in the community, the community will do the right things for you. If you do the right things for the environment, you'll have a stronger business so that you can make more money. It's not about sort of a condescending view… I don't know if that's subtle or if people don't get it, but it's very important. It's about interdependence rather than balance. It's about mutual dependence or interdependence, rather than charity. It's fundamental. (Manufacturing Executive, 2005).

In business practitioner terms, a ‘business case’ is a pitch for investment in a project or initiative that promises to yield a suitably significant return to justify the expenditure. In what has become known as the ‘business case for Corporate Social Responsibility (CSR)’ the pitch is that a company can ‘do well by doing good’: that is, can perform better financially by attending not only to its core business operations, but also to its responsibilities toward creating a better society. A long tradition of scholars have examined this proposition, both theoretically ( Carroll, 1979 ; Swanson, 1995 , 1999 ; Wood, 1991 ), and empirically ( Cochran and Wood, 1984 ; Graves and Waddock, 1994 ; Mattingly and Berman, 2006 ; Russo and Fouts, 1997 ), primarily with a focus on conceptualizing, specifying, and testing some relationship between corporate social performance (CSP) and corporate financial performance (CFP). The results are decidedly mixed: a firm that dedicates resources to fulfilling what are perceived to be its social responsibilities will financially perform either better, worse, or the same as it might have done otherwise, depending on which studies we line up and consult.

In a meta‐analysis of CSP–CFP studies correcting for sampling error and measurement error, Orlitzky et al . (2003) found support for a generally positive relationship between CSP and CSF across industries and study contexts, and Preston and O'Bannon (1997) found evidence that positive financial performance either lagged or occurred synergistically with positive social performance. At the level of the individual firm, however, the question persists for both academics and practicing managers: is there a generalizable ‘business case’ for CSR, and if so, what are its dimensions?

The purpose of this chapter is to provide a general summary of the key value propositions evident in the research on the business case for CSR, described as four general ‘types’ of the business case, or four modes of value creation. We will then present a critique of these approaches (including identifying some problems inherent in the construct of CSR itself) and offer some principles for constructing a ‘better’ business case. Our intent is not to conduct a thorough review of studies analysing the relationship between CSR and financial performance, as that has been well done elsewhere ( Griffin and Mohon, 1997 ; Orlitzky et al ., 2003 ; Vogel, 2005 ). Rather we seek to unearth assumptions underlying dominant approaches in an effort to build a more robust business case for CSR that can move beyond existing limitations.

We take the view that managing a business enterprise is an increasingly complex task in an era of globalized trade and competition, exponentially faster information flow, highly fluid capital markets, and greater interconnectedness among civil society groups. Factors bearing upon the successful operation of a business are multiple, often non‐linear and stochastic (and therefore largely unpredictable), and inextricably entwined with the needs of a global society—as described by the executive business practitioner in the opening quote from recent research. If ever the separation of business concerns from those of society generally was real and justified—and we concur with those who contend that it is, and has always been, a false distinction—such a separation is now not only conceptually invalid, but is pragmatically untenable. Principles for constructing a better ‘business case’ for CSR must reflect the changing conditions for business at a global level.

This chapter is structured as follows: first we will draw on existing reviews and models to construct an overview of four general types of business case for CSR, where each type rests on a broad value proposition for corporate social responsiveness and performance; the four are: cost and risk reduction , competitive advantage , reputation and legitimacy , and synergistic value creation , focused on creating value on multiple fronts simultaneously. Here we attempt to organize much of the literature under these four value creation categories. Next we outline some underlying characteristics and basic assumptions of each general type of CSR business case. Third, we consider key critiques of the business case as highlighted in the broader CSR literature. Finally, we offer ideas toward addressing these limitations, toward building more compelling business cases for contemporary organizations operating in a complex global environment.

Four General Types of the Business Case for CSR

While there have been numerous reviews of the business case for CSR ( Haigh and Jones, 2006 ; Margolis and Walsh, 2001 ; Salzmann et al ., 2005 ; Smith, 2003 ; Vogel, 2005 ), most are focused on organizing and evaluating the evidence for establishing a link between corporate social responsibility and financial performance ( Griffin and Mohon, 1997 ; Orlitzky et al ., 2003 , Roman et al ., 1999 ). Over 120 studies have examined this link over the past 30 years with mixed results (Margolis and Walsh, 2003) , which has left some scholars in the field of CSR to question whether there is really any clear market motivation for firms to engage in socially responsible behaviour (Vogel, 2005) . It would appear then that in the real world of strategic management a solid business case cannot be built by depending solely on locating an irrefutably established causal connection between CSP and financial performance.

Given these diverse reviews, this chapter will take a different approach. Although this mixed evidence might suggest that there is no a priori reason to develop a business case for CSR, there are growing calls for business to adopt a wider range of social and environmental responsibilities—from business associations such as the World Business Council for Sustainable Development and Business for Social Responsibility (Smith, 2003) and from governments and business leaders (Wheeler and Grayson, 2001) . As the economic, political, and social power of business has grown relative to other societal institutions (governments, organized religion, for example), some argue that corporate social responsibility has expanded to the provision of the kind of services that used to be offered by governments and community organizations ( Perrow, 2002 ; Solomon, 1997 ), including the function of guarding and enabling citizens' rights ( Crane et al ., 2004 ; Matten et al ., 2003 ).

So here we have an apparent paradox: critics of business—and global business leaders themselves—are calling for an increased role for business in social and environmental affairs, yet there is mixed evidence of a positive ‘business case’ for CSR. Perhaps that is because most business cases seek justification on purely economic grounds. We support those who have argued that some kind of business case must be made in order to call attention and garner support from the business sector ( Joyner and Payne, 2002 ; Schmidt Albinger and Freeman, 2000 ), but we suggest that the case to be made is qualitatively different from the one that currently dominates the literature.

A necessary step towards advancing a robust business case for CSR is a close exploration of the fundamental underlying assumptions of dominant approaches, so that we can move beyond the stalemate between economic or ethical models of CSR ( Driver, 2006 ; Matten et al ., 2003 ), and build a more ‘nuanced’ business case for virtue (Vogel, 2005) . While there is no universal definition of CSR ( Carroll, 1999 ; Driver, 2006 ; Garriga and Melé, 2004 ; Smith, 2003 ; Van Marrewijk, 2003 ) this in itself is not problematic; like CSR, ‘sustainability’ has often been referred to as a ‘contested concept’ (Jacobs, 1999) and in this field of alternate meanings lies opportunity for forward‐thinking businesses that adopt this frame ( Colbert et al ., forthcoming 2008 ; Hart, 2005 ). We suggest that what is needed is a set of questions for unearthing the underlying assumptions of the various approaches in order to build a better (more robust, multidimensional, more compelling) business case for CSR, in order to address the growing need for business to become engaged in creating value on multiple fronts. In so doing we add to the call for the development of more integrative models of CSR ( Driver, 2006 ; Swanson, 1995 , 1999 ; Freeman, 2000 ), and make advances in that direction by offering a set of criteria that will begin to enable a move beyond economic and ethical conceptions of the business case through a focus on modes of value creation and the various dimensions that underlie this construct.

This section presents findings from our review of the literature focusing on the business case for CSR, which we have organized as four general types of business cases, each embodying a proposition for value creation: cost and risk reduction , profit maximization and competitive advantage , reputation and legitimacy , and synergistic value creation . As with other classification schemes, there may be disagreement on the placement of a topic under one category or another, but we hold with Bowie and Dunfee (2002) who emphasized the pragmatic usefulness of offering a classification scheme over an ad hoc approach. We do not present these as mutually exclusive categories—a firm may be involved in all four at once through a variety of policies and initiatives—but in our review of the business case for CSR literature, we identified these as predominant themes emphasized across the field of theories and studies.

In the following sections we describe these four general types of CSR business cases in terms of the focus of the approach , the topics of empirical studies and theory papers that characterize the type, as well as by the underlying assumptions about how value is created and defined in each domain.

Cost and Risk Reduction: Optimization Subject to Constraints

The focus of this approach is that the firm chooses to engage, or not, in CSR related activities in order to reduce costs and risks to the firm. A number of areas of inquiry typify this general approach to building a business case for CSR, including: the trade‐off hypothesis , the available funds hypothesis or slack resources theory , and enlightened value maximization . Each of these hypotheses can be seen as embodying a view of value creation as some form of trading interests among social, environmental, and economic concerns.

The trade‐off hypothesis, which most explicitly displays this view of value creation, was polemically defined by Milton Friedman (1962, 1970), who made a clear distinction between what he considered to be the real obligations of corporate executives: to work solely in the interests of the firm's owners, customers, and employees, and to eschew any urge toward diverting funds to improving the general social good, which he deemed ‘taxation without representation’—grounds for another revolution. His succinct libertarian view set a firm dichotomy in the debate between fulfilling fiduciary duties and social responsibility, and established a benchmark statement on the negative trade‐off view of CSR and costs to the firm: by increasing social performance for reasons of managerial whimsy, firms incur unnecessary costs and reduce their profitability—a view supported in a few subsequent studies in CSR ( Kedia and Kuntz, 1981 ; Lerner and Fryxell, 1988 ). Some studies under this approach have identified an inverted U relationship which suggests that there is an optimal level of environmental and social performance, beyond which the corporation is incurring unnecessary costs and reductions in profitability ( Salzmann et al ., 2005 ; Lankoski, 2000 ). The available funds hypothesis or slack resources theory (Waddock and Graves, 1997 a ) , also assumes a trade‐off view of CSR and financial performance by suggesting that when organizations are enjoying superior financial performance, or have slack resources, they are able to dedicate additional resources to CSR activities. The implication in this approach is that firms perceive CSR as an additional cost and thus can only afford to pursue these activities when they are not in a situation where they need to minimize costs. In terms of Carroll's characterization (1979 , 1991 ) of four categories of responsibilities (economic, legal, ethical, and discretionary or philanthropic), the slack resources theory addresses primarily the discretionary responsibilities.

A focus on enlightened value maximization (Jensen, 2002) implies that long‐term corporate value maximization occurs through the appropriate management of trade‐offs between stakeholders. Managerial decision trade‐offs are driven by the ‘agency solution’, that is, the alignment of managerial interests with those of company owners through executive compensation weighted with stock options. High incentive plans can lead to the managerial opportunism hypothesis ( Aklhafaji, 1989 ; Posner and Schmidt, 1992 ; Preston and O'Bannon, 1997 ), which identifies the potential for executives to reduce social and environmental spending, even when funds are available, in order to maximize personal compensation linked to short‐term financial performance. Instrumental stakeholder management ( Berman et al ., 1999 ; Donaldson and Preston, 1995 ; Quinn and Jones, 1995 ) describes how the firm is affected by stakeholder relations with a view to risk and cost reduction through trading off stakeholder concerns in the firm's decision‐making process. Firms view stakeholders as part of the environment to be managed, rather than as driving corporate strategic decisions (Berman et al ., 1999) , and attention to stakeholder concerns helps to reduce corporate risk by avoiding decisions that will push stakeholders to oppose the organization's objectives (Bowie and Dunfee, 2002) . Establishing trusting relationships with key stakeholders is seen from this perspective as having the potential to significantly lower costs of the firm ( Barney and Hansen, 1994 ; Hill, 1995 ; Jones, 1995 ; Wicks et al ., 1999 ; Godfrey, 2005 ). A focus on developing CSR standards and auditing CSR practices is a focus of the risk management approach aimed at building confidence among stakeholders ( Story and Price, 2006 ; Kok et al ., 2001 ); research that presents a ‘trading’ managerial view positions CSR as separate from and secondary to economic performance (Adams, 2002) and strategic management (Dick‐Forde, 2005) . How organizations respond to expressions of morality in markets is influenced by a desire to avoid consumer boycotts, liability suits, increased labour costs, and short‐term losses in market capitalization (Bowie and Dunfee, 2002) .

Under a cost and risk reduction perspective of the CSR business case, the primary view is that the demands of stakeholders present potential threats to the viability of the organization, and that corporate economic interests are served by mitigating those threats through a threshold level of social or environmental performance.

Competitive Advantage: Adapting and Leveraging Opportunities

In this general case, CSR initiatives are conceived strategically as conferring competitive advantage on the firm over industry rivals. A number of topics relate to this area of focus, including: the supply and demand theory of the firm, base of the pyramid approaches, a natural resource‐based view of the firm, and including stakeholders for competitive advantage . What is common to these perspectives is the characterization of value creation occurring through the firm adapting to its external context in order to optimize the organization's competitive advantage in its respective industry.

The supply and demand theory of corporate CSR ( McWilliams and Siegel, 2001 ; Anderson and Frankle, 1980 ; Aupperle et al ., 1985 ; Freedman and Jaggi, 1982 ) takes an adaptation perspective toward the external environment by suggesting that firms will supply only the level of environmental and social performance that is demanded of them, with a view to profit maximization. Base of the pyramid approaches ( Hart and Christensen, 2002 ; Prahalad, 2004 ; Prahalad and Hammond, 2002 ; Prahalad and Hart, 2002 ) examine how multinational firms might adapt to global drivers for change, such as population growth and poverty, in order to capitalize on the ‘fortune at the bottom of the pyramid’ (Prahalad and Hart, 2002) . Similarly, adaptations of the traditional resource‐based view of strategic management (Barney, 1991) are the ‘natural resource based view’ (Hart, 1995) , natural capitalism (Lovins et al ., 1999) and the sustainable value framework ( Hart, 1997 ; Hart and Milstein, 1999 , 2003 ) that challenge managers to adapt to global drivers of change using an appropriate set of ‘sustainability lenses’ that allow a firm to segment shareholder value creation strategies. Also in line with the resource‐based view, social and ethical resources and capabilities ( Harrison and St John, 1996 ; Hillman and Keim, 2001 ; Litz, 1996 ; Petrick and Quinn, 2001 ) are conceived in this approach as internal organizational resources that build competitive advantage by enabling a strategic adaptation to the external environment. Approaches advocating stakeholder inclusion in strategy‐making ( Hart and Sharma, 2004 ; Mitchell et al ., 1997 ; Ogden and Watson, 1999 ; Wheeler and Sillanpää, 1998 ) also take an adaptation perspective toward creation of investor value. Competitive strategic positioning is the focus of Porter and Van der Linde's (1995) view of CSR as a competitive driver to be resourced by the firm. Social investments in a competitive context ( Porter and Kramer, 1999 , 2002 ) or strategic philanthropy ( Bruch and Walter, 2005 ; Smith, 1994 ) also fall under this approach where firms elect to engage in philanthropic efforts that are supported by the core competencies of their organization, adapting to stakeholder expectations in order to generate sustainable performance with regard to stakeholder needs and their own competitive advantage.

In sum, adaptive approaches to building a business case for CSR focus on building firm competitive advantage through strategically orienting and directing resources toward the perceived demands of stakeholders. Stakeholder demands are viewed less as constraints on the organization, and more as opportunities to be leveraged for the benefit of the firm.

Reputation and Legitimacy: Building a Responsible Brand

The business case built in this domain is focused on exploiting CSR activities in order to build value through gains in firm reputation and legitimacy. Frames of inquiry associated with this view include: licence to operate , social impact hypothesis , cause‐related marketing , and socially responsible investing . These approaches are characterized by a focus on value creation by leveraging gains in reputation and legitimacy made through aligning stakeholder interests.

Licence to operate concepts can be linked to Davis's (1973) ‘iron law of responsibility’ with the idea that a business organization is a social entity that must exercise responsible use of its power, or risk having it revoked, and thereby lose control over its own decision making and external interactions (Sethi, 1979) . Social impact hypothesis ( Cornell and Shapiro, 1987 ; Pava and Krausz, 1996 ; Preston and O'Bannon, 1997 ) focuses on the importance of alignment by suggesting that failure to meet stakeholder needs has a negative impact on firm reputation and thus suggests that the costs of CSR activities are much less than the potential benefits. Other studies focus on the positive link between a firm's corporate social performance and reputation ( Fombrun and Shanley, 1990 ; Turban and Greening, 1997 ). Social cause‐related marketing ( Drumwright, 1996 ; Varadarajan and Menon, 1988 ; Murray and Montanari, 1986 ) highlights the alignment of stakeholder and firm interests by linking corporate philanthropy and marketing, showcasing socially and environmentally responsible behavior of the firm in order to generate reputational gains. Studies on ethical purchasing behavior and green consumerism ( Crane, 2001 ; Frankel, 1998 ; Peattie, 1998 ), an extension of consumer sovereignty arguments that have been employed to model citizenry behaviour in political markets ( Haigh and Jones, 2006 ; Jones, 1995 ), consider how a strong product brand or reputation acts as a marketing differentiation strategy for firms that can impact financial performance through enhancing reputation ( Smith, 1990 ; Bhattacharya and Sen, 2004 ; Brown and Dacin, 1997 ; Sen and Bhattacharya, 2001 ).

Socially responsible investing ( Barnett and Salomon, 2003 ; Domini, 2001 ; Kinder et al ., 1993 ) and ethical investing (Mackenzie and Lewis, 1999) emphasize an alignment between a potential investor's ethics and expectations of corporate social performance, suggesting a relationship with reputation and market value. Studies on the attractiveness of corporations as prospective employers ( Schmidt Albinger and Freeman, 2000 ; Waddock et al ., 2002 ; Riordan et al ., 1997 ; Turban and Greening, 1997 ; Stigler, 1962 ) emphasize the alignment between a firm's reputation in the area of CSR and its ability to attract talent. Reputation and legitimacy is also the focus of intrinsic stakeholder approaches ( Calton and Lad, 1995 ; Jones, 1995 ) that compare the approach a firm uses to interact with one stakeholder group, and its effects on stakeholder groups' perceptions. Isomorphic pressure for social responsibility is explored for its role in motivating CSR where an organization might gain first mover advantage and reap the rewards of reputational gains with dominant stakeholders (Bansal and Roth, 2000) or within industry‐specific CSR initiatives (King and Lenox, 2000) . The potential performance benefits granted through enhanced legitimation from corporate CSR disclosures ( Gelb and Strawser, 2001 ; King and Lenox, 2001 ) is another area of inquiry in this general type of business case for CSR. Supply chain pressures on firms to seek social or environmental certification in order to support their legitimacy (Cashore, 2002) is another topic area that supports a business case for CSR through concerns with impact on firm reputation.

In summary, these topics and studies, organized under an aligning perspective, focus on building competitive advantage by enhancing the reputation and legitimacy of the organization through firm CSR initiatives.

Synergistic Value Creation: Seeking Win‐Win‐Win Outcomes

The focal point of this approach is in finding win‐win‐win outcomes by seeking out and connecting stakeholder interests, and creating pluralistic definitions of value for multiple stakeholders simultaneously. Topics gathered under this approach to the business case include: positive synergy or ‘ virtuous circle ’, sustainable local enterprise networks , value‐based networks , and societal learning . A focus underlying these approaches is the view that creating connections between stakeholders by relating common interests will open up heretofore unseen opportunities for multi‐point value creation.

Positive synergy or the ‘virtuous’ circle' approach ( Pava and Krausz, 1996 ; Preston and O'Bannon, 1997 ; Stanwick and Stanwick, 1998 ; Waddock and Graves, 1997 b ) highlights positive gains generated through combining slack resources and good management. The sustainable local enterprise networks (Wheeler et al ., 2005) model emerged from examining 50 case studies of successful and self‐reliant sustainable enterprise‐based activities in developing countries, resulting in virtuous cycles of reinvestment in human, social, financial, and ecological capital. The value‐based networks conception (Wheeler et al ., 2003) describes how communities and social networks united by a sense of what is valuable create new opportunities for mutual gain. The concept of the triple bottom line of sustainability (Elkington, 1998) emphasizes synergies that can emerge for organizations, environment, and societies through integrating efforts across these domains.

Societal learning is defined as articulating new paradigms that can alter the perspectives, goals, and behaviours of social systems larger than particular organizations (Brown and Ashman, 1998) . Of the three types of learning—single, double, and triple loop (Argyris and Schon, 1978) —societal learning deals with triple‐loop learning (rethinking the rules of the business and society relationship), although it often is stymied at double‐loop learning (reflection on how to play the current game better) (Waddell, 2002) .

In summary, approaches advocating synergistic value creation are focused on seeking opportunities to unearth, relate, and synthesize the interests of a diverse set of stakeholders, broadly conceived. Because many of these emerging ideas fall outside of traditional business models, they are the least represented in our framework of value creation approaches.

Summary of Section: Four General Types of the Business Case

The business case for CSR is conceived under a wide range of topical and theoretical approaches. We have offered a typology of the chief approaches according to the basic value proposition embodied in each.

There are subtle but distinct differences between some approaches we have categorized under one type of business case or another. For example, one could argue for base of the pyramid (BoP) approaches to be situated under a synergistic value creation instead of competitive advantage view. Our rationale is that BoP advocates typically exhort multinational corporations (MNCs), primarily situated in more developed nations, to enter less developed geographies and find business opportunity by alleviating social problems, but with much of the financial value captured by the MNC. Sustainable local enterprise networks , by comparison, assume a more organic, grassroots, relativistic approach, and work with existing networks. The private sector is one player that can extract value but not necessarily the key player.

Our intent here is to draw some broad second‐level CSR value creation categories in order to examine some of the basic assumptions underpinning the various business case pitches. The next section highlights some general characteristics of each type of business case, along with some basic underlying assumptions.

Underlying Characteristics and Basic Assumptions of the Four Types of CSR Business Case

Each general type of CSR business case we have constructed embodies a number of characteristics and is underpinned by some basic assumptions. Our assessment of these underpinnings is necessarily broad, with the aim of sketching the general contours of each approach—to step back from the trees and describe the shape of the forest of CSR business case research. Characteristics we highlight are: the fundamental proposition for how value is created (and for whom); emphasis regarding a particular role for business ; a preferred level of theorizing on which it is focused; and a dominant logic under which the basic proposition is grounded. Basic assumptions include the underlying ontological stance and epistemological stance of each of these approaches, which we will highlight in order to identify opportunities to bridge traditional debates in CSR. The general shape of each type is outlined in Table 4.1 .

Key Proposition for Value Creation

The four general types of CSR business case we have described differ in their key value propositions based on the approach to dealing with elements in the organizational environment (stakeholder interests, competitive pressures, or other), each of which is succinctly captured under our four active descriptors: trading, adapting, aligning, or relating. Business cases framed as cost and risk reduction focus on trading among what are viewed generally as competing interests; competitive advantage business cases describe payoffs accrued through adapting to the competitive environment; a CSR proposition based on building reputation and legitimacy advocates aligning with political and social norms and expectations; and synergistic value creation approaches are aimed at relating disparate elements in the operating domain, and integrating those elements in novel ways.

Central Actor Role for Business

Across the theories underpinning these four broad propositions for business value creation there are, implied and explicit, a number of ‘actor roles’ for business institutions to play in society. Garriga and Melé (2004) mapped the territory of CSR theory and offered a set of four groups: instrumental theories, in which the organization is seen only as an instrument for wealth creation; political theories, which are concerned with the use of corporate power in the political arena; integrative theories, which focus on the satisfaction of social demands; and ethical theories, which are based on the responsibilities of corporations to society. These groups of theories correspond roughly to Carroll's (1991) categories (a pyramid of economic, legal, ethical, and philanthropic responsibilities) though his morality‐based perspective would fit into the latter of the theoretical groups.

If we consider these groups of general theories and responsibilities in the CSR field at large, and we view ‘business’ (we use this term in the general sense to mean the private business sector, focusing mainly on public corporations) as a value‐creating actor in the world, we can draft various actor roles that business is purported to play in global society. Both the cost and risk reduction and competitive advantage approaches take the explicit view that business is primarily an economic actor —the chief (or in the extreme, only) function of business is to efficiently convert inputs to products and services and to create financial wealth, and CSR activities are admitted as a means to that narrow end. Business cases based on a reputation and legitimacy approach highlight the political actor role for business. This includes and extends the economic role to include a complex mix of political and economic interests and dynamics. The power and position of the corporation in society is the central concern; the organization accepts social duties and rights or participates in some form of social cooperation (Garriga and Melé, 2004) as an expected part of doing business. Synergistic value creation approaches focus on the firm as an integrative social actor , which we define to embrace both the economic and political roles for business, and also extend to improving general social well‐being. This is not a new idea, but one based on the reasonable presumption that economics and politics are human constructs, and therefore integral to the broad societal domain. This conception is consistent with the ‘concentric circles’ depiction of corporate responsibility issued by the Committee for Economic Development (CED), based on the notion that ‘business functions by public consent and its basic purpose is to constructively serve the needs of society’ (1971: 11, cited in   Carroll 1999 ). The first circle holds the economic and efficiency function of a corporation, the second contains the responsibility to execute the economic function with sensitivity to context, including changing social values and priorities, and the outer circle holds the responsibility to actively improve the general social environment, including the natural environment. The outer circle contains the inner two, and is not separable. This view is all the more relevant in an increasingly globalizing business environment.

Main Level of Theorizing

The level of theory (Klein et al ., 1994) is the organizational level that the researcher is attempting to depict or describe, and is the level to which the findings are purported to be generalizable. The four general types of CSR business case vary across theoretical levels; that is, each includes and describes interactions and effects at various levels in the business system. Theorizing in the cost and risk reduction view is centered on the organization, with key variables such as CSP and CFP distinctly attached to the firm; competitive advantage approaches necessarily include consideration of the relevant industry dynamics; reputation and legitimacy business cases address elements in the political and cultural context; and synergistic value creation approaches take a wide view of all components of the societal context. Again here, these are not mutually exclusive categories; there is an accumulative expansion of variables under consideration moving left to right.

Assumed Nature of System Interactions

As the level of theory is raised above the organization level there is a corresponding assumption regarding the nature of system interaction effects across the four general types. Cost and risk reduction approaches, often involving linear regression of CSF dependent variables on CSP/CSR independent variables, generally assume linear effects; competitive advantage approaches typically involve mediating or moderating strategic variables, complicating direct linear effects; a reputation and legitimacy view acknowledges non‐linear complex effects in qualitative reputational narratives; and synergistic value creation approaches emphasize the self‐organizing tendency of complex interactive variables. ‘Complex’ in this instance ‘means more than just “complicated”; it describes a system whose component agents operate with some measure of autonomy, as well as in relation to other system components, i.e. independently and interdependently. That interaction gives rise to emergent properties that are irreducible, that exist only in relationship. As Cilliers (1998) has noted, an airliner is merely complicated ; a mayonnaise is complex ’ (Colbert 2004: 349) .

Dominant Logic Frame

The dominant logic frame describes the grounds for logical justification in each of the four general CSR business case types. A key debate in the literature turns on how to justify CSR‐related corporate activity, which we address in the next section on key critiques. In our construction of four general types we deliberately have not separated out a purely ‘moral business case’, as we adopt the assumption that morality and ethics are embedded within constructs of economy and politics: to suggest that these are value‐free realms is absurd, despite the distinctions made in much of the CSR literature. The four general types constructed here are justified on normative economic grounds, normative political grounds, or on grounds of cognitive social integration—that is, of unearthing and connecting notions of value and values in the broad social domain. The cost and risk reduction and the competitive advantage approaches appeal exclusively to economic logic and norms; the reputation and legitimacy cases find grounding in political logic—in the relative power dynamics operating in the prevailing social system, in the service of economic ends; and the synergistic value creation approach is grounded in cognitive social integration.

Relevant Ontological and Epistemological Stance

Economics‐based descriptive research, which includes the cost and risk reduction and competitive advantage business cases, is primarily founded on a realist ontology that sees reality as objective and unequivocal (Wicks and Freeman, 1998) . Both predominantly embody a positivist epistemological stance, which relies ‘on the assumption of an objective world external to the mind that is mirrored by scientific data and theories’ (Gephart, 2004: 456) . A degree of relativism is admitted under a competitive advantage approach through a post‐positivist epistemological stance, which holds that reality can only be known probabilistically; plurality is typically introduced in taking stakeholder constructions into strategy formulation processes.

Reputation and legitimacy approaches are built on an equivocal, constructivist ontology and epistemology. The social construction of reality means that social existence is a human construction, while at the same time human perspectives are shaped by social factors (Berger and Luckmann, 1966) . There are two main streams of social construction: an interactionist approach and a structuralist approach (Pfeffer, 1985) . The interactionist position is one of extreme relativism, with each event knowable only from the perspective of the individual experiencing it, whereas the structuralist sees patterns of meaning shaped by roles and shared paradigms, which both structure and constrain the interpretations that are given to interaction patterns. Reputation and legitimacy are constructs that can be framed from both an interactionist and a structuralist view.

The synergistic value creation view holds an equivocal, or relativist, ontology, but adopts a pragmatic stance that sees intersubjective realities as mediated by language, history, and culture (Wicks and Freeman, 1998) . A pragmatic epistemology rejects the categorical distinctions of positivism, and the absolute relativism of anti‐positivism, and assesses research not on grounds of ‘truth’, however constructed, but on grounds of usefulness (Wicks and Freeman, 1998) —in this case, usefulness applies to the level and range of value creation through corporate CSR activities.

Underlying Characteristics and Assumptions: Summary

The characteristics and assumptions described above and displayed in Table 4.1 help to illustrate some key differences across the four types of CSR business case. Differences across the central role of business , and the level of theorizing point to an opportunity to broaden the scope of business‐case making to explicitly include consideration of value creation at various levels—levels that are cumulatively integrated, or exist as nested systems. The range of the assumed nature of system interactions and variations in the dominant logic taken together suggest there are alternate ways in which a business case can be framed. There are also alternate ways in which one might be received by managers and stakeholders, once we admit a wider variety of sense‐making frames and processes of meaning creation. And finally, the variation in ontological and epistemological stances indicates that the methods by which we attempt to describe and justify a business case for CSR could be broader than they are typically.

General Critiques of the Business Case for CSR

Building a ‘business case’ for CSR implies we are building a coherent justification for a corporation to invest in CSR‐defined initiatives. The central debates and critiques in the CSR literature, as they relate to a business case for CSR, are therefore problems of justification. Three key problems that recur in CSR critiques are: the level of justification (organization and society); the logic of justification (economic, ethical, political, social); and the grounds of justification (positivist, anti‐positivist, and pragmatist).

Level of Justification: Organization and Society

The search for definitive causal connections between CSP and CFP has yielded inconclusive results (Griffin and Mohon, 1997) , and some have argued that the search is pointless, because there logically cannot be a consistently positive relationship between these two constructs: the working assumption of CSP research is that corporate social and financial performance are universally related, and it is an extreme, untenable proposition to assert that any management initiative is always positively correlated with financial results under any conditions (Rowley and Berman, 2000) . While generalizable justification at the level of the single organization might inherently not be possible, meta‐studies have found a positive correlation overall between CSP and CFP indicators ( Orlitzsky et al ., 2003 ; Preston and O'Bannon, 1997 ). This suggests that CSR business case arguments might be more appropriately framed at multiple levels simultaneously: we might see ‘the projects of “self‐creation” and ‘community creation’ as two sides of the same coin, and see in institutions many possibilities for different ways of living together to pursue the joint ends of individual and collective good’ (Freeman and Liedtka, 1991: 96) .

Logic of Justification: Economic, Ethical, Political, Social

The problem with the logic of justification is most often characterized as a schism between economic and ethical justifications for CSR—the implication being that economic evidence is not normative, is value free. This problem is perpetuated due to an inherent defect in the construct of CSR itself: by asserting that corporations must attend to ‘social responsibilities’ in addition to ‘business responsibilities’, we admit that the two are distinct and separable. This distinction is further amplified when we attempt to justify CSR with a ‘business case’, i.e. when we attempt to express the value of socially responsible practices in purely financial terms, which says that financial performance stands as sufficient justification for CSR‐related activity.

Swanson (1995) described several theory‐building problems with ‘economic’ and ‘duty‐aligned’ (ethical, political, social) perspectives of CSP research: incompatible value outcomes, a focus on individual choice, and narrow value orientations. Others have argued that CSR justified on economic models presents a too‐narrow idea of the corporation and of the interests of investors ( Gioia, 2003 ; Stormer, 2003 ), for whom, presumably, a business case for CSR is built.

Burrell and Morgan described a unitary view of organizations as one that tends to stress that the corporation is a cooperative enterprise united in the pursuit of a common goal. A pluralist view stresses the diversity of individual goals and interests—the formal goals of an organization are seen as ‘little more than a legitimizing façade, an umbrella under which a host of individual and group interests are pursued as ends in themselves’ (1979: 202–3). Debate between economic and ethical justifications for CSR is a debate between two fundamental conceptions of what is a corporation : a disconnected, simple entity with unidimensional, stable interests, or an interconnected, complex self with multidimensional, dynamic interests, taking responsibility for a greater common good (Driver, 2006) .

Throughout the CSR literature, economic and ethical justifications are separated, and the latter are called ‘normative’; we rejected that separation in our overview of the underlying characteristics of business case arguments, and used the terms normative economic and normative political to foreground the integration of ethics and values into those paradigms. All management research is normative in the sense that every paradigm rests on some (often unstated, unchallenged) assumptions about what is good and valuable and worth pursuing; CSR researchers hold that firms have real obligations to a broad set of stakeholders, and because this runs counter to the dominant ideology of shareholder primacy, they appeal to ethical arguments to substantiate their preferences (de Bakker et al ., 2005) ; this creates the appearance of a separation between ethics and economics where none exists, as the dominant view is just as ethically laden. This false separation is perpetuated when we attempt to justify positive social behaviour in economic terms, rather than as valuable in itself, and as integral to a healthy capitalist business system.

Grounds of Justification: Positivist, Anti‐positivist, and Pragmatist

A further critique occurs on epistemological grounds of justification for CSR: what has been called the ‘integration dilemma’ (Swanson 1999: 507) , of bringing together empirical (descriptive) and normative (prescriptive) approaches. Empirical inquiry investigates measurement, explanation, and prediction, while normative inquiry focuses on moral evaluation, judgment, and prescription of human action (Trevino and Weaver, 1994) . Positivistic approaches place a sharp distinction between describing and prescribing: in descriptive work, researchers stand as neutral observers, using scientific methods to make contact with ‘reality’, to report to managers ‘in an unbiased way what empirical forces are to be reckoned with in a given context’ (Wicks and Freeman, 1998: 125) . When prescription is undertaken, as it often is in the strategy discipline, it is done so on the grounds of assumed goals such as corporate efficiency and wealth maximization. An anti‐positivist epistemology (including interpretive, constructivist, and morally normative approaches) admits an intersubjective, multi‐vocal plurality to the grounds of justification, but is in danger of collapsing under the weight of the relativist dilemma, where nothing useful can be said to advance organizational practice, lest one view be privileged over another. The pragmatist approach employs the criterion of ‘usefulness’—though not in the utilitarian sense of ‘the greatest good for the greatest possible number’. Rather, useful ‘in the sense of helping people to cope with the world or to create better organizations’ (Wicks and Freeman, 1998: 129) . A pragmatic epistemology admits multi‐vocality, but finds evaluative criteria in higher order humanistic goals.

These three problems: the level , logic , and grounds of justification are critical issues to be addressed in formulating research in the business case for CSR. These problems are at some level irresolvable, and are exacerbated by the construct of CSR itself. Rather than attempt resolution, we will next offer ideas toward building more expansive conceptions of the CSR business case to embrace these apparent paradoxes.

Building a Better Business Case for CSR: Addressing the Critiques and Embracing a Social Actor Role for Business

We suggest that progression toward a more integral approach to CSR, with a focus on modes of value creation , would assist with developing a more robust rationale for why CSR matters to business theorists and practitioners. To set out some recommendations in this regard, it would first be helpful to consider three ‘eras’ of CSR research (Van Marrewijk, 2003) , and how we might envisage different incarnations of the business case for CSR in relation to those eras. We consider how research in CSR might shift in order to enable the development of a ‘postconventional’ view of the business case for corporate social responsibility. Our recommendations will address the ontological (rational to pluralistic to integral), epistemological (reductive to fragmented to integrative), and methodological (positivist to constructivist to pragmatic) transitions that we argue are required for this new ‘era’ of the business case in CSR to be fully realized.

Three Eras in CSR Research and the Business Case for Social Responsibility

Different authors have outlined historical eras in CSR in terms of a sequence of approaches ( Carroll, 1999 ; Freeman, 1984 ; Van Marrewijk, 2003 ). Rather than take this as a succession of eras, where the shareholder approach was replaced by the stakeholder approach and so on, we suggest that these approaches exist simultaneously, one building on the next and necessitating a broader business case be built (this is a matter of shifting emphasis: ‘stakeholder’‐focused management has existed since the beginning of the Industrial Revolution, 1 what is novel is that this view has been named and described, and has moved to the mainstream of management thought and practice). The first era of shareholder primacy is characterized by a view of organizations as primarily accountable to shareholders, evidenced most clearly in the cost and risk reduction approach, and to some degree in the competitive advantage view to building a business case for CSR. The second era of stakeholder management broadens the locus of reference for the firm toward incorporation of, and adaptation to, a variety of stakeholder interests. In the general types of the business case for CSR, competitive advantage and reputation and legitimacy approaches demonstrate thinking in this ‘era’ by extending the role of business beyond that of an economic actor, toward acknowledging a dual role for business: as both economic and political actor. This approach thus builds on the perspective of the previous era, rather than negating it, developing a richer and fuller view of the organization in context. The third era of social integration , or a societal approach, is represented by a move away from thinking about social responsibility toward thinking about societal responsibility (Gioia, 2003) . CSR theory and research that builds the business case for synergistic value creation begins to advance into this era by incorporating a view of business as an economic, political, and social actor (all of which embrace ethics). Each of these eras co‐exists in the social integration approach to CSR, with ‘eras’ representing waves of influence in the dominant approaches, rather than temporally distinct conceptions. In fact, the social integration perspective was embodied in the CED (1971) description of CSR more than 35 years ago, and thus does not represent a modern ‘era’, so much as a worldview toward social systems as holistic and contextually sensitive.

Eras of CSR and Development in Human Systems

In order to explore this more fully, we follow Van Marrewijk (2003) and invoke Ken Wilber's thinking on levels of development in human systems. The four value propositions identified earlier as four general types of the business case for CSR can be conceived of as four modes of value creation , underlain by several dimensions. These dimensions can be mapped across the three eras of general CSR research in order to describe a new form of the business case for CSR, one that holds the promise of advancing the field. In his map of ‘human possibilities’, Wilber (2000) describes the evolution of social systems and related evolution in culture and worldview in terms of preconventional, conventional, and postconventional states, and these can map onto the different eras of CSR. Shareholder primacy typifies the preconventional ‘corporate states’ approach to social systems reflected in a scientific rational worldview. Stakeholder approaches can be seen as the conventional state, organizing society in terms of ‘value communities’ that are embodied within a pluralistic perspective. Finally, the postconventional approach of societal integration portrays a view of social systems as an integral commons, coextensive with an integral worldview—a creative space (physical, cognitive, or virtual) to foster the coming together of humanistic interest and intention.

CSR value holarchy

In this progression, nothing is lost, but there is an increase in integrative capacity that facilitates a move toward holism—the progression is not ‘hierarchical’, but ‘holarchical’. Figure 4.1 depicts a CSR value holarchy. Each stage can be viewed as ‘higher or deeper, meaning more valuable and useful for a wider range of interactions’ (Wilber, 1998: 59) .

While acknowledging that the ‘pluralistic relativism’ of stakeholder management is a positive progression, it must be viewed as a precursor to moving to the ground for integration, or be found irrelevant; without integration, pragmatic action is stymied. Within the stakeholder management era then, the move away from dealing with a few individual stakeholders that are powerful, legitimate, and urgent (Mitchell et al ., 1997) and the increasing trend toward acknowledging a wider range of ‘fringe stakeholders’ (Hart and Sharma, 2004) holds great potential for enhancing contextual sensitivity. However, there is the danger that this new radical pluralism will collapse to fragmentation and challenge any action beyond individual agency. It is necessary to view this as a stage of development toward integralism. For business organizations, integralism occurs when deep and broad social needs are put to the foreground in re‐imagination of business strategies—when strategic planning exercises are driven from an intensive exploration and understanding of real human needs, versus commercially created wants. This move honours that difference but creates a healthy tension between agency and communion , in order to avoid what Wilber calls the ‘pathology’ of fragmentation.

Four modes of value creation in the CSR business case

In our analysis of the business case for CSR, this integral commons is approached in the move from stakeholder management to social integration through a focus on value‐based networks, with modes of value creation forming the business case for corporate social responsibility (see Fig. 4.2 ). We describe the dimensions of these modes of value creation more fully in the following three recommendations for building a better business case for CSR; that is, one that has more integrative capacity, is more holistic and allows for emergence, and thus is more valuable and useful for a wider range of interactions.

Recommendations for Building a Better Case for CSR: Dimensions of Modes of Value Creation

In this section we will discuss three recommendations for building a better business case for CSR: acknowledging complexity, building integrative capacity, and encouraging pragmatism.

Acknowledge Complexity and Allow for Emergence

To overcome the difficulty in conceiving a business case for CSR, it is essential to broaden the locus of reference for business away from an organization‐centric to an organization‐and‐society view. We argue that CSR research needs to move beyond the reductive approach of the rational view, and the fragmented challenges of radical pluralism, to a view of the organization as part of an integral complex network, ‘interdependent and complexly interactive’ (Wilber, 1998: 57) .

Causal effects in complex systems are both linear and non‐linear, and complex living systems pursue multiple goals ( Frederick, 1998 ; Colbert, 2004 ). Frederick (1998) suggests that a paradigm shift in which we move beyond existing stakeholder concepts to a view of social systems that draws on insights from complex natural systems is essential for the field to respond to urgent questions facing business and society. This complexity perspective would focus more on non‐linear emergent outcomes, rather than on more reductive or linear relationships.

Build Integrative Capacity for a more Holistic Approach

Our second recommendation for building a better business case for CSR is to focus on enhancing the integrative capacity of business in order to encourage holism. CSR needs to move beyond the economic/ethical divide through a decreased emphasis on reductive or fragmented approaches to a more integrative perspective. This integrative capacity is characterized by a move from corporate states, to value communities to a view of the integral commons—that is, by a capacity for members of the organization to view themselves and their work as a part of something larger, whether purpose‐bound or value‐chain‐defined, and then to assess whether that larger purpose is satisfactory.

Frederick (1998) comments on the ‘pre‐Copernican’ state of dominant CSR research and theorizing, advocating a move away from the organization as the central focus of CSR analysis that has led much of this research to a dead end. He draws on complexity theorist Stuart Kauffman (1992) to describe how it is essential to broaden the context within which we consider human relations and ‘decenter’ the corporation away from the normative reference for the field of social issues in management. In a similar fashion, Gioia (2003) advocates moving from the concept of ‘social responsibility’ to that of ‘societal responsibility’. This shift would emphasize the move away from creating organizational wealth, to the organization as an instrument for creating broader societal value. This view of business as an interdependent system is essential for recognizing the complexity of globalization and the interaction of systems, so that CSR becomes the foundation for strategic action rather than an add‐on (Stormer, 2003) . This requires moving beyond the stakeholder model of the firm to an inter‐systems model of business (Stormer, 2003) : shifting the assumption of corporations as autonomous or independent entities, which secondarily consider their obligations to the community, toward a view of firms as part of the communities that created them (Solomon, 2004) as an essential element of this critique. This is characterized by a shift from the ‘egoic’ view of the self as alienated and autonomous toward the ‘post‐egoic’ view of the organization self as interdependent (Driver, 2006) . Rather than focusing exclusively on the ‘responsibilities’ piece of the term, which emphasizes an ‘atomistic individualism’ (Solomon, 2004: 1029) there is a need to emphasize the social aspect as well. We argue that in order to address critiques of the dominant approaches to the business case for CSR, we need to return to some more fundamental questions about the self and communities that will allow us to envision new forms of social and economic life (Freeman and Liedtka 1991) .

Encourage Pragmatism to Enhance Value Creation

Our final recommendation for building a more robust business case for CSR deals with the importance of moving beyond positivist and constructivist epistemologies to embrace a pragmatic perspective. We have argued that each stage in the eras of development is deeper, more valuable, and useful for a wider range of interactions. From the pragmatic perspective, becoming more integral through acknowledging complexity and enabling emergence, and more integrative through building capacity and encouraging holism, is more useful because it enables a broader view of value creation, supported by this wider range of interactions. While value from this perspective may be hard to measure with traditional quantitative approaches that have an ontological view of reality that is unequivocal, more qualitative, narrative perspectives may assist with apprehending the worth of these approaches to support a business case for social responsibility.

Conclusions

We began with the view that managing a business enterprise is an increasingly complex task: that factors bearing upon the successful operation of a business are multiple, often non‐linear (and therefore unpredictable), and inextricably entwined with the needs of a global society. We suggested that a ‘better business case’ for CSR must reflect the changing conditions for business at a global level. We have drawn three recommendations in this chapter for conceiving a more robust, nuanced, and compelling CSR business case: acknowledge system complexity (move from reductive, to pluralistic, to integral conceptions of the business and value creation), build integrative capacity (in conceiving of the locus of value creation, from corporate, to value‐based communities, to seeking an integral commons), and taking a pragmatic approach (encouraging managerial experimentation with new business models for value creation).

If the four modes of value creation in CSR are viewed along a holarchic progression, where each is inclusive of the last, and if CSR objectives are defined integratively, as creating simultaneous value for organizations and society, and if the business case for CSR is framed as a pragmatic, experimental pursuit toward a better society and better organizations, then the business case for CSR would be a relevant concept, and would look quite different than it does currently. The case for socially responsible thinking and action would extend beyond the economic business case. It would attempt to connect the identity of the organization and of individual members, and it would be an argument for a more richly and deeply conceived notion of value creation.

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5 Examples of Corporate Social Responsibility That Were Successful

• 06 Jun 2019

Business is about more than just making a profit. Climate change, economic inequality, and other global challenges that impact communities worldwide have compelled companies to be purpose-driven and contribute to the greater good .

In a recent study by Deloitte , 93 percent of business leaders said they believe companies aren't just employers, but stewards of society. In addition, 95 percent reported they’re planning to take a stronger stance on large-scale issues in the coming years and devote significant resources to socially responsible initiatives. With more CEOs turning their focus to the long term, it’s important to consider what you can do in your career to make an impact .

Access your free e-book today.

What Is Corporate Social Responsibility?

Corporate social responsibility (CSR) is a business model in which for-profit companies seek ways to create social and environmental benefits while pursuing organizational goals, like revenue growth and maximizing shareholder value .

Today’s organizations are implementing extensive corporate social responsibility programs, with many companies dedicating C-level executive roles and entire departments to social and environmental initiatives. These executives are commonly referred to as a chief officer of corporate social responsibility or chief sustainability officer (CSO).

There are many types of corporate social responsibility and CSR might look different for each organization, but the end goal is always the same: Do well by doing good . Companies that embrace corporate social responsibility aim to maintain profitability while supporting a larger purpose.

Rather than simply focusing on generating profit, or the bottom line, socially responsible companies are concerned with the triple bottom line , which considers the impact that business decisions have on profit, people, and the planet.

It’s no coincidence that some of today’s most profitable organizations are also socially responsible. Here are five examples of successful corporate social responsibility you can use to drive social change at your organization.

5 Corporate Social Responsibility Examples

1. lego’s commitment to sustainability.

As one of the most reputable companies in the world, Lego aims to not only help children develop through creative play, but foster a healthy planet.

Lego is the first, and only, toy company to be named a World Wildlife Fund Climate Savers Partner , marking its pledge to reduce its carbon impact. And its commitment to sustainability extends beyond its partnerships.

By 2030, the toymaker plans to use environmentally friendly materials to produce all of its core products and packaging—and it’s already taken key steps to achieve that goal.

Over the course of 2013 and 2014, Lego shrunk its box sizes by 14 percent , saving approximately 7,000 tons of cardboard. Then, in 2018, the company introduced 150 botanical pieces made from sustainably sourced sugarcane —a break from the petroleum-based plastic typically used to produce the company’s signature building blocks. The company has also recently committed to removing all single-use plastic packaging from its materials by 2025, among other initiatives .

Along with these changes, the toymaker has committed to investing $164 million into its Sustainable Materials Center , where researchers are experimenting with bio-based materials that can be implemented into the production process.

Through all of these initiatives, Lego is well on its way to tackling pressing environmental challenges and furthering its mission to help build a more sustainable future.

Related : What Does "Sustainability" Mean in Business?

2. Salesforce’s 1-1-1 Philanthropic Model

Beyond being a leader in the technology space, cloud-based software giant Salesforce is a trailblazer in the realm of corporate philanthropy.

Since its outset, the company has championed its 1-1-1 philanthropic model , which involves giving one percent of product, one percent of equity, and one percent of employees’ time to communities and the nonprofit sector.

To date, Salesforce employees have logged more than 5 million volunteer hours . Not only that, but the company has awarded upwards of $406 million in grants and donated to more than 40,000 nonprofit organizations and educational institutions.

In addition, through its work with San Francisco Unified and Oakland Unified School Districts, Salesforce has helped reduce algebra repeat rates and contributed to a high percentage of students receiving A’s or B’s in computer science classes.

As the company’s revenue continues to grow, Salesforce stands as a prime example of the idea that profit-making and social impact initiatives don’t have to be at odds with one another.

3. Ben & Jerry’s Social Mission

At Ben & Jerry’s, positively impacting society is just as important as producing premium ice cream.

In 2012, the company became a certified B Corporation , a business that balances purpose and profit by meeting the highest standards of social and environmental performance, public transparency, and legal accountability.

As part of its overarching commitment to leading with progressive values, the ice cream maker established the Ben & Jerry’s Foundation in 1985, an organization dedicated to supporting grassroots movements that drive social change.

Each year, the foundation awards approximately $2.5 million in grants to organizations in Vermont and across the United States. Grant recipients have included the United Workers Association, a human rights group striving to end poverty, and the Clean Air Coalition, an environmental health and justice organization based in New York.

The foundation’s work earned it a National Committee for Responsive Philanthropy Award in 2014, and it continues to sponsor efforts to find solutions to systemic problems at both local and national levels.

Related : How to Create Social Change: 4 Business Strategies

4. Levi Strauss’s Social Impact

In addition to being one of the most successful fashion brands in history, Levi’s is also one of the first to push for a more ethical and sustainable supply chain.

In 1991, the brand created its Terms of Engagement , which established its global code of conduct regarding its supply chain and set standards for workers’ rights, a safe work environment, and an environmentally-friendly production process.

To maintain its commitment in a changing world, Levi’s regularly updates its Terms of Engagement. In 2011, on the 20th anniversary of its code of conduct, Levi’s announced its Worker Well-being initiative to implement further programs focused on the health and well-being of supply chain workers.

Since 2011, the Worker Well-being initiative has been expanded to 12 countries and more than 100,000 workers have benefited from it. In 2016, the brand scaled up the initiative, vowing to expand the program to more than 300,000 workers and produce more than 80 percent of its product in Worker Well-being factories by 2025.

For its continued efforts to maintain the well-being of its people and the environment, Levi’s was named one of Engage for Good’s 2020 Golden Halo Award winners, which is the highest honor reserved for socially responsible companies.

5. Starbucks’s Commitment to Ethical Sourcing

Starbucks launched its first corporate social responsibility report in 2002 with the goal of becoming as well-known for its CSR initiatives as for its products. One of the ways the brand has fulfilled this goal is through ethical sourcing.

In 2015, Starbucks verified that 99 percent of its coffee supply chain is ethically sourced , and it seeks to boost that figure to 100 percent through continued efforts and partnerships with local coffee farmers and organizations.

The brand bases its approach on Coffee and Farmer Equity (CAFE) Practices , one of the coffee industry’s first set of ethical sourcing standards created in collaboration with Conservation International . CAFE assesses coffee farms against specific economic, social, and environmental standards, ensuring Starbucks can source its product while maintaining a positive social impact.

For its work, Starbucks was named one of the world’s most ethical companies in 2021 by Ethisphere.

The Value of Being Socially Responsible

As these firms demonstrate , a deep and abiding commitment to corporate social responsibility can pay dividends. By learning from these initiatives and taking a values-driven approach to business, you can help your organization thrive and grow, even as it confronts global challenges.

Do you want to gain a deeper understanding of the broader social and political landscape in which your organization operates? Explore our three-week Sustainable Business Strategy course and other online courses regarding business in society to learn more about how business can be a catalyst for system-level change.

This post was updated on April 15, 2022. It was originally published on June 6, 2019.

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Home > Books > Corporate Social Responsibility in the 21st Century

Corporate Social Responsibility and Social Report: A Case Study in the Basque Country

Submitted: 29 April 2022 Reviewed: 23 May 2022 Published: 17 August 2022

DOI: 10.5772/intechopen.105511

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Corporate Social Responsibility in the 21st Century

Edited by Muddassar Sarfraz

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This chapter illustrates the case of the Spanish company Telefónica SA, a world leader in the telecommunication industry. The main research question is to understand if social responsibility can play a main role in an uncertain scenario. Or better, understand how Corporate Social Responsibility (CSR) can be organized, managed, and measured to be considered a sustainable choice detached from any greenwashing policy. In terms of the socioeconomic environment with the combination of external social and economic conditions that influence the operation and preformation of an organization, the company should be a system not only capable of generating profits but at the same time contributing to society and environmental protection, integrating social responsibility as a strategic investment in the framework of their competitive strategy, in their management tools and their operations. The analysis of this case study aims to offer a model of CSR analysis and measurement tools such as the social report for managers who will have to face the important challenges of sustainable growth in compliance with the 2030 Agenda and SDGs paradigm (Sustainable Development Goals).

• corporate social responsibility
• sustainability reporting
• social report
• business ethics
• environmental
• and corporate governance

Author Information

Vincenzo basile *.

• Doctor Europaeus in Business Science, Federico II University of Naples, Italy
• Economics and Business Management, Federico II University of Naples, Italy
• Master in Marketing and Service Management, Federico II University of Naples, Italy

*Address all correspondence to: [email protected]

“Responsabilidad means no perder nunca la capacidad de respuesta”.

José Ortega y Gasset

1. Introduction

If the concept of responsibility could be summed up in a single sentence, surely this quote from the Spanish philosopher would fully reflect its meaning. Responsibility, in fact, “never loses the ability to respond,” both to the challenges of current problems and the new generations. The debate on Corporate Social Responsibility (CSR or corporate social responsibility CSR, according to the equivalent meaning of the English language) has taken on a particular consistency and liveliness in recent years [ 1 ]. The CSR dissemination policies adopted by the European Commission have stimulated the comparison between the different perspectives of the definition and analysis of the concept present on the international scene, offering a multitude of concepts of great interest [ 2 ]. The concept of CSR essentially means that they decide on their initiative to help improve society and make the environment cleaner [ 3 ]. As the European Union tries to identify common values by adopting a Charter of Fundamental Rights, it is natural to expect that a growing number of companies will increasingly recognize their responsibility and consider it one of the components of their own identity [ 4 ]. This responsibility is expressed toward employees and, more generally, all parties involved in the company’s business who can, in different ways and forms, affect its success [ 5 ]. The choice of Telefónica SA is due to the position of primary importance that it has managed to acquire in the last decade on the international political and economic stage, thanks to its continuous and proactive interest in issues such as social responsibility, the environmental issue, and sustainability [ 6 ]. It is a concrete case of a socially-oriented company in the context of the Spanish one that thanks to the push toward investment and liberalization policies in the last decade have managed to achieve economic growth rates of over 3.5% per year, despite having to address the crisis that in recent years has affected the entire world economy. When CSR constitutes a process of managing its relationships with a whole series of interested parties that can affect its free functioning, the commercial arguments are clear [ 7 ]. Consequently, CSR, as well as quality management, must be seen as an investment and not as a cost [ 8 ]. Firm roach that integrates financial, commercial, and social aspects, thus developing a long-term strategy that minimizes the risks associated with uncertainties [ 9 ]. Sarfraz et al. [ 10 ] stated that CSR has a moderating role in project financing decisions and environmental risk management, stakeholder, and credit risk assessment. Companies should realize their social responsibility not only nationally, but globally, including the entire production chain. The future challenge to be met is to determine how CSR can help achieve these objectives, namely, to build a dynamic and competitive knowledge-based economy based on cohesion.

2. Corporate social responsibility at a glance

2.1 theoretical contribution.

The first official input in this regard comes from the OECD (Organization for Economic Cooperation and Development) and the ILO (International Labor Organization), international organizations that, since the second half of the seventies, define the first guidelines for companies’ multinationals. In 1992, the Rio De Janeiro Earth Summit was held to discuss the planet’s environmental problems and their links with the problems of social development. Here, various documents are approved for the commitment to environmental protection and sustainable development, including Agenda 21, or an action program for the international community (UN, States, Governments, NGOs, and the private sector) and the sustainable development of the planet. From 1994 to 1999, various resolutions of the European Parliament followed one another on specific issues relating to CSR: transparency of company relocations and restructuring and the introduction of social clauses in international agreements, social labels for categories of products, human rights, fair trade and supportive, etc. In 1998, the EU itself defined the first guidelines for large companies operating in its Member States, for more socially responsible management. The first major codification of guidelines for large companies operating in UN member states dates to 1999, with the birth of the Global Compact, an international initiative in support of nine universal principles relating to human rights, work, and the environment [ 11 ]. In 2000, the OECD drew up guidelines aimed at multinationals that contain the main cornerstones of CSR, and that involve the social partners and national governments. Through the guidelines, 30 governments require multinationals to operate in harmony with social and environmental [ 12 ] policies and expectations. In March 2000, the extraordinary European Council of Lisbon was held, dedicated to the economic and social issues of the European Union, capable of achieving sustainable economic growth with more and better jobs and greater social cohesion. With the publication of the Green Book 1 “Promoting a European framework for corporate social responsibility,” in July 2001, following the European Council of Gothenburg in June of the same year and the Communication of the European Commission relating to “Corporate social responsibility: a contribution of companies to sustainable development” of July 2002, the challenge is officially launched in determining how CSR can help achieve the Lisbon objective, opening a wide debate at international level on the very concept of CSR [ 13 ], defining the procedures for establishing a partnership aimed at encouraging the development of a European structure to promote this concept and the Community strategy for promoting it, illustrating proposals for actions aimed at the European institutions, the Member States, the social partners, business and consumer association actors, as well as to individual companies and other interested parties. Concerning the ethical notion of company economy, it is possible to identify different theoretical approaches, among which it is necessary first to mention the ethical theory and the utilitarian one [ 14 , 15 , 16 ]. According to the ethical orientation, the company should subordinate its behavior to ethical rules, even at the expense of profit [ 17 ]. The utilitarian perspective, on the other hand, argues that profit maximization contributes to better achieving collective well-being. The ethical doctrine puts in order the needs of competitiveness and profitability concerning the much nobler aims of a social nature [ 18 ]. On a diametrically opposite level, there is the utilitarian theory that refers to the iron laws of the market economy. According to this approach, it is the social ends that must be subordinated this time to economic ends. The pursuit of profit is always and in any case a duty and deserving of approval, regardless of the social repercussions it determines. It is true that the company essentially plays an economic role, consisting in producing wealth, that is, goods and services having a value greater than that of the factors used in the production process; however, for this value to be positive, the company must serve the needs of customers by enhancing and developing the resources at its disposal; otherwise, the value may also be negative, thus giving rise to the destruction of wealth. Thirdly, it would be possible to identify a logic of reconciliation based on a compromise between economic and social issues. Thirdly, it would be possible to identify a logic of reconciliation based on a compromise between economic and social issues. However, even this approach does not seem suitable for correctly identifying the corporate finalism, because it ends up not fully satisfying either type of request. Given that the knowledge first stated is now part of the cultural baggage of management, it is the last to be able to constitute a real competitive advantage for the modern company. In conclusion, it seems that the road to take is that of “an idea of ​​business development to be pursued continuously over long periods, because only in the long term does it become possible to synergistically combine needs that appear to be conflicting in the short term” ([ 19 ], pp. 792, 795; [ 20 ], p. 95).

2.2 What is meant by social responsibility today?

The term responsibility indicates the “congruence to an assumed commitment or behaviour, as it matters and implies the acceptance of every consequence, especially from the point of view of the moral and legal sanction” [ 21 ]. The responsibility, therefore, appears, even before being a category of law, as an ethical and moral category firmly linked to the human person. It must always be borne in mind that the violation of a written norm involves easily identifiable responsibilities, while the same cannot be said in the case of social responsibility where there are no probative norms. However, a plurality of meanings is attributed to the term social responsibility, since its definition changes depending on the historical moment and the environmental context in which the company operates; therefore, over time different configurations of sociality [ 22 ] have followed one another [ 23 ]. However, it should be emphasized that the problem of CSR does not consist in repairing the damage caused to the company in some way, in repairing those damages that benefit one’s interests or even in implementing philanthropic actions [ 24 ], and so on; rather, in posing the problem of the interrelationships existing between their purposes, their structures and their organization and the purposes, structures, and organization of the other subjects of the social system considered as a whole. It is also necessary to distinguish the content of social responsibility from the tools that guarantee the morality of behavior, such as external legal regulation, self-regulation, or the creation of an ethical corporate culture [ 25 ]. These tools constitute the reference ethical system and based on the latter; the content of social responsibility is judged. Matacena [ 26 ] speaks of the life cycle of the social problem and expresses the gradual recognition of the social implications and therefore social responsibility. However, it is important to underline that the problem of CSR does not consist in repairing the damages caused to society in some way, in repairing those damages that benefit one’s interests or even in implementing philanthropic actions, and so on, rather, in posing the problem of the interrelationships existing between one’s aims, structures, and organization and the aims, structures, and organization of the other subjects of the social system considered as a whole [ 27 ]. It is also necessary to distinguish the content of social responsibility tools that guarantee morality from behavior, such as external legal regulation, self-regulation, or the creation of an ethical corporate culture. These instruments constitute the ethical system of reference based on the last one that judges the content of social responsibility. Social responsibilities can be seen under a double aspect, subjective and objective. The area of external responsibility centers on responsibilities toward external groups. In any case, given that the activity of the company is unique and unitary, its responsibility must also be this is how the concept of global corporate responsibility is introduced: The company obtains the consent and legitimacy of its work from its interlocutors based on both economic and social results. Matacena [ 28 ] rightly observes that “if companies do not take on social responsibilities consistent with the intensity and extent of the existing interchange relationships with the environment, the companies themselves could be forced into spaces that are so narrow as to be non-vital. It follows that as the company’s economic power grows, the level of the social objectives it pursues must increase.” Given the undertaking of social responsibility by the company, this must inform third parties not only of the achievement of the economic objective, thus safeguarding its image as an effective economic transformer, but also of the pursuit of its social equilibrium, so “to use the ‘information as an instrument for the protection and maintenance of a correct social and societal climate, that is, of a state of controlled conflict that does not compromise its legitimacy and therefore its survival ” ([ 29 ], p. 76). Accurate mapping and definition of the so-called stakeholders already represent a significant contribution to the management of any organization. The stakeholder (evident the analogy with “stockholder” and “shareholder,” which documents the terms the action terminate) comes from a dated 1963 of the Stanford Research Institute (USA) and defines those groups without whose support an organization ceases to exist [ 30 ]. Etymologically, the word stakeholder is composed of “stake,” which means “interest in a company,” and “ holder, ” which means “ owner, holder ”; consequently, stakeholders indicate the bearers of the company, that is, those subjects, or groups, who depend on a single individual interest, be it cooperative or competitive, in the business of the company, and which must not necessarily be economic [ 31 ]. In essence, the stakeholders are direct and indirect to the overall business of the company, who are affected by the effects of its behavior in satisfying their needs and achieving its objectives [ 32 ]. Each organization, according to its nature, therefore, has a plurality of stakeholders, which can be divided into a) primary stakeholders, that is, those without whose continuous participation in the management the company cannot survive customers, capital holders, employees, investors, and suppliers; b) secondary stakeholders, that is, those who influence the company or are known by its but are not involved in transactions with the organization and do not jeopardize its survival [ 33 ]. It is possible to represent the relations between the company and the stakeholders in Figure 1 .

Company stakeholder’s representation. Source: Own elaboration.

The company, assuming a social responsibility, must therefore proceed as a preliminary step to the detailed identification of its stakeholders, to be able to reconcile their different legitimate interests, to resolve or at least mitigate the conflictual character that distinguishes the different requests put forward by the interlocutors. To this end, in the face of conflicting interests, it is appropriate to adopt a relational logic and negotiation and contractual method, which, by assigning “relative weights” to the requests made by the various stakeholders, allows them to be balanced in the conduct of the business [ 34 ].

2.3 Research design and methodology

This chapter investigates the following research question: “How does the CSR adopted by a leading international company in the telephonic industry?” The research methodology was qualitative and based on the Telefónica Sa case study [ 35 , 36 , 37 ] and key informants’ in-depth interviews with the top management [ 38 , 39 , 40 ]. The case study represents a strategy for doing research, which involves an empirical investigation of a particular contemporary phenomenon within its real-life context [ 41 ]. Furthermore, was considered a secondary source [ 42 ] for data collection. Common sources of secondary data for social science include reports, censuses, information collected by government departments, organizational records, and company data. Secondary data analysis can save time that would otherwise be spent collecting data and, particularly in the case of quantitative data, can provide larger and higher-quality databases that would be unfeasible for any individual researcher to collect on their own [ 43 ]. In addition, analysts of social and economic change consider secondary data essential, since it is impossible to conduct a new survey that can adequately capture past changes and/or developments [ 44 ]. Three semi-structured interviews were conducted in February and April 2010 and lasted for an average of 90 min. However, the authors conducted semi-structured interviews to avoid limiting the interviewees and the possible serendipity of any additional evidence that might be used to revise or strengthen our research. In particular, the authors interviewed: (a) Director at Telefónica; (b) Head of Internal Communications; (c) Head of Marketing (d) Director of Corporate Strategy; and (e) Global Human Resources Manager. The in-depth interviews [ 45 ] concerned questions on the corporate sustainability and organization of Telefónica SA activities related to stakeholders. The objective was to shed more light on the role of the company in enhancing sustainable development, and the enablers and barriers to the adoption of social reports [ 46 , 47 ].

The interview protocol framework is comprised of four stages: (a) ensuring interview questions align with research questions; (b) constructing an inquiry-based conversation; (c) receiving feedback on interview protocols; and (d) piloting the interview protocol . The author preserved the conversational and inquiry goals of the research act by including open-ended questions and discussions diverged from the interview guide, and the experts were encouraged to interact. The author collected data through interview notes, and tape recordings were utilized to allow for more consistent transcription [ 48 ]. The author adopted the two-pass process for data verification, notated the interview comparisons with audio files, and received written approval of the transcripts from the participants. Finally, after the validation and testing of the Telefónica sustainable model by the stakeholders and the questionnaire, the model was applied to another case study regarding different country setting where Telefónica operates (e.g., Latino America).

3. The case study Telefónica

3.1 telefónica group profile.

This chapter explains the strategy that Telefónica designed and implemented concerning CSR and the tools it uses. It was chosen for this work, from among Spanish companies, because of the impact of its CSR actions and the strength and coherence of its approaches. Telefónica is not just a “plant” of strategies, policies, and CSR actions but also actively participates in the development of tools to support these issues [ 49 ]. With the analysis of a company that applies CSR, the vision is complete, and we can draw a systemic picture of the ongoing process. Telefónica focuses its social responsibility as a relationship strategy with its stakeholders, and the value of the company [ 50 ] largely depends on how to make these contacts. The corporate strategy analysis highlights that the clear goal it wishes to achieve is to increase the trust of its stakeholders and the social responsibility of the companies with which it operates, which is essentially explained by the relationship it has with these external interlocutors. Telefónica S.A. is the largest Spanish telecommunications company and operates mainly in Spain and Latin America. It is one of the largest fixed and mobile telecommunications companies and is ranked third in the world after China Mobile and Vodafone. It was created in 1924, and until the liberalization of the market in 1997, Telefónica was the only telephone operator present in Spain and held a dominant position, with over 75%, in 2004. The Spanish government privatized the telephone market in 1997 and currently, Telefónica is a public company, without a controlling shareholder. Among the largest shareholdings are those of Banco Bilbao 2 and Caixa , whose shares of 5.17 and 5.013%, respectively, do not, however, allow control of the company [ 51 ]. The year before Movistar was born, the mobile telephony division of the company, the group operates mainly in Spain, the Czech Republic (with Český Telecom), the United Kingdom, Germany, the Isle of Man (acquiring O 2 ), Argentina (with Telefónica de Argentina), Brazil, Chile (with Telefónica Móviles), Peru (with Telefónica Móviles), Colombia (with the Movistar brand), Puerto Rico (with Telefónica Empresas and Telefónica Larga Distancia), China (with a 5% stake in China Netcom)- and Morocco (with Méditel), while in Portugal and Italy, it is a shareholder of the former monopolists Portugal Telecom and Telecom Italia. The internationalization strategy of the Telefónica group provides 40% of revenues from abroad and it operates in many countries that are developing. Today, it has fixed ADSL telephone lines and mobile telephone customers in 16 countries; it has a significant presence in Latin America and does business with nearly 50 different countries. The countries in which it operates are 1) Europe: Spain and Germany; 2) America: Colombia, Mexico, Peru, Guatemala, El Salvador, Nicaragua, Ecuador, Chile, Argentina, Uruguay, Brazil, Panama, and Venezuela; 3) Africa: Morocco. Establishing a precise and unambiguous strategy for managing relations between the interested parties of the Telefónica group is a difficult undertaking, and in fact, many actors participate in this process, as the following table shows ( Table 1 ).

Number and type of interlocutors of the Telefónica group.

Source: Telefónica S.A. company Web site updated to 2020.

The methodology used to conduct this study was an empirical analysis of Telefónica and the direct observation and study of the documentation on CSR plans and verification of the annual corporate responsibility reports [ 52 ]. The development of the guides on AENOR’s 3 CSR standards starts from Telefónica , differentiated into three levels of work where it is possible to study its strategy on social responsibility and the leadership position held by the group in the telecommunications industry.

3.2 Organization of CSR in Telefónica

Telefónica has a centralized unit within its organizational structure whose function is to coordinate the CSR strategy. Social responsibility is an integral part of its global strategy for this company. It is relevant that the organizational structure created to design and manage the CSR is integrated within the general management of reputation and brand. This form of organization is also highlighted by the functions of the general manager of corporate communication ( Figure 2 ). Furthermore, the profile of the heads of the general management and the communication professionals is relevant in light of the emphasis currently placed on the “brand,” so the choice of these people is made very carefully. In this structure, at the first level of Telefónica , there are the presidents of the companies of the group and the managing directors, and the president has significant importance in the four “staff” functions. The Directorate-General for Corporate Communication (with its CSR functions) is one of the components of this staff, and from this position, it supports the whole group, including the branches of Telefónica Peru, Telefónica Moviles, and Telefónica Latin America (Graph 7).

Organization chart of the Telefónica group. * Also responsible for the Secretariat of the Executive and Steering Committee. ** Logistics, systems and T-Gestiona. Source: Telefónica S.A.

In the representation of the organizational structure of the Telefónica group, there are several business divisions and, in addition to those included for personnel, there is the Directorate General on “development, planning and regulation” and one on “finance and resource sharing.” Furthermore, these two directorates-general members are members of the management committee and the presidents of the most important companies. In this matrix structure, the strategies, management systems, and management tools used are common and derived from the top business centers. The work assigned to the general management of reputation, brand, and CSR is to reproduce an idea of leadership, the champion of a specific objective. An important coordinating role is therefore required, due to the multinational nature of the company and the diversity of the Telefónica Group. The management principles include a focus on CSR, as well as on quality, which must permeate all the processes and activities of the company because its implementation must be transversal, and to be effective the commitment of each unit should be encouraged. In groups of companies such as Telefónica , the approach to CSR must be promoted at the central level, even when responsibility is assumed by each of the peripheral units; therefore, the only efficient solution is to have a good organization capable of managing CSR in the companies of the group. However, it must be clarified that in a company of Telefónica ’s size and history and given the territorial vastness in which it operates and the different nations in which it is present, there may be various CSR policies and actions within it. In this sense, the first reference to consider is the activity carried out by the Fundación Telefónica . As indicated in the graph, there is a directorate-general (DG) of institutional relations and the social action by the group largely corresponds to the work of its foundation. Another important organizational unit whose function has been included in the broader field of social responsibility is that of environmental responsibility. In the case of Telefónica , environmental developments have been promoted by Telefónica I + D 4 , which is one of the group’s support subsidiaries and acts as a catalyst for innovation activities.

4. Discussion

4.1 the csr strategy in telefónica.

As already indicated, the CSR strategy in Telefónica is an integral part of the reputation strategy. For Telefónica ’s Director of Corporate Responsibility, the importance of reputation is underlined by the collapse of the stock market in the 90s (twentieth century). The previous system was centered on the creation of value by keeping only two parties in check, namely the investors and the media, which proved insufficient. The different approach to CSR suggests that we must address the entire environment in which the company operates, taking care of its relationships with the community, its customers, employees, and society in general [ 53 ]. Telefónica launched its Proyecto de Reputación Corporativa (PRC) in November 2001, which outlined an operational plan that was then achieved over time and is described and discussed in the following paragraphs of which Andreu 5 himself became the bearer.

4.2 Proyecto de Reputación Corporativa (PRC)

The PRC has two objectives: 1) to identify the risks that could affect the reputation of the company in its daily relationship with its stakeholders; 2) to identify the common management lines that should be implemented in all business lines and in all countries to strengthen the reputation of the Telefónica Group and minimize the potential impact of risks deriving from non-pursuit of the latter. A transversal process was launched to achieve this goal with the group’s contribution from all the areas and management. A centralized approach was not considered effective since the reputation of the company is established through the daily activity of all the units. This first objective of identifying the dangers was achieved at the end of 2003, thus obtaining the basic information required to proceed with the PRC [ 54 ]. Figure 3 shows the risk identification process in its five phases, as well as the agents involved in each process and the results achieved.

Identification of corporate reputation risks in Telefónica. Source: Own elaboration.

All the general departments participate in the identification phase of the management objectives, with a total of 15 areas of analysis, which have identified their main operational targets. In the next phase, identifying the interest groups, the Telefónica Group is considered as a whole, identifying the relationships with the 40 types of agents, and the latter are categorized into eight interest groups: Customers, Investors and Shareholders, Staff, Partners, Regulators, Providers, Agency, Media. From what we read above, the partners and the media have been included in the list, which indicates the importance that the author of the project has granted them. Each area identifies the main relationships and the main comparison interfaces in the subgroups. The classification of interest groups in Telefónica has undergone some corrections, from the first version made in 2003, to the most recent and simplified version of 2005, which is used in the ordinary management. The risk identification phase of corporate responsibility was completed with the construction of a matrix, in which the forces in order are the interest group (the eight indicated) that could be affected by different types of risks, including Financial, Communicative, and Management, Technological, Social and Legal . The risks considered relate to the possibility of causing repercussions to the central corporate structure beyond their effects on isolated units. Although risks can be localized so as not to affect other units, such as the brand, one of the ongoing consequences of the global information environment is that, with an ever-increasing percentage of risks, they affect the entire corporate structure. More than 750 risks are identified, of which over 50% are included in the operational management, corresponding to the daily activities that take place in relationship with the stakeholders. In the risk analysis, 150 were selected, considered critical, with treatment priorities, and the two selection characteristics were damage caused and probability of occurrence. To manage the risks appropriately, they have been grouped according to the intangible element that is affected; eight groups of intangible items were considered as indicated in Table 2 .

Classification of corporate reputation risks at Telefónica.

Source: Telefónica S.A .

The higher risk of intangible elements affects the strategy and organization of Telefónica with 30% of the total, but much importance is also assumed by CSR in controlling these risk factors with a 20% incidence. In the phase of “contrasting the risks identified by the sectors of competence of the company,” the relationship between consequences and their criticality was tested with the opinion of the Telefónica units that have experience in dealing with these certain risk factors. Thus, to counter the critical issues in the relationship with investors, the analysis was carried out by the Investor Relations Department with particular attention given to the shareholders of Telefónica , while the risks associated with the company regarding quality and the environmental issue, as well as the technological risks, were analyzed by Telefónica I + D. In the last phase, “contrasting the risks identified by the interest groups,” different results are presented about the quality of the work carried out and the variables involved. Through this contrast, we get a) the external perception, which is always of great interest; b) information on the situation concerning other companies in the telephony sector, from which it is possible to obtain a “benchmark” concerning the best; and c) identification of the minimum management municipalities that minimize the reputational risks. To achieve this goal, we are working in three directions: 1. the creation of a self-management model: an integrated model of corporate reputation, Modelo Integrado de Reputación Corporativa (MIRC); 2. the definition of an institutional framework for Telefónica ; and 3. a workshop on corporate responsibility.

4.3 Modelo Integrado de Reputación Corporativa (MIRC)

The MIRC was designed to have a tool capable of organizing work related to reputational risks. The purpose of this tool is to ensure balance in “bringing value for all stakeholders in the long term... it is a guide to building a risk-proof reputation” ([ 55 ] 6 ). Telefónica recognizes a dual objective in the model: external, which benefits interest groups, and internal, which benefits society because it acts as a shield for possible risks. The MIRC is structured in three levels. The first level is the one that Telefónica represents and includes the four elements that represent the foundations of a company: 1) ethics (the only basis on which an organization based on trust can be built) [ 56 ]; 2) values ​​(as the ultimate reference of the conduct of a company); 3) the vision and mission (as the ultimate goal of the company); and 4) the strategy and organization (such as the way of working and procuring resources to achieve the mission). The second level is what Telefónica does, through the three main elements of corporate responsibility: 1) social responsibility (social action, the social impact of activities, safeguarding the environment); 2) corporate identity; and 3) corporate governance: transparency, control, and monitoring mechanisms on the implementation of Telefónica ’s strategies (Grant, 2006). The third level is what Telefónica maintains: “Communication with all our stakeholders, coherent and transparent, is the greatest capacity of the Group to generate more value than is possible through the economic aspects” (Trujillo, 2003). In the above description, it is noted that the source of value lies in the communication with all the companies of the group and with the whole community. Similarly, it is observed that the ability to generate value requires communication to adopt the certain characteristics of quality and effectiveness such as consistency and transparency. This is a major challenge for Telefónica ’s communications function, and therefore, for this reason, a great responsibility. For Telefónica , the management of corporate responsibility (or RC, Responsabilidad Corporativa ) presupposes that there is consistency in the three levels indicated and that there are no differences between the three postulates “what I am, what I do and what I say I do,” which represent the mantra of the group’s basic strategic vision [ 57 ].

4.4 Definition of an institutional framework for the group

Telefónica seeks to define a strengthened institutional framework to facilitate the development of CSR and mitigate the risks. With this objective, various projects have been implemented throughout the company: a) development of corporate values; b) code of business conduct—institutional presence; and c) the Foro de Reputación Corporativa (FRC). Through these large-scale projects, Telefónica implements strategic management, and plans, and integrated them through various actions. This management is reflected in the “discussion forums” organized over the years on CSR, and this has been one of the reasons for choosing Telefónica for this job as a harbinger and implementer of active and innovative strategies on corporate responsibility. The central value identified by Telefónica for development was the “trust,” which each interest group has received and that is reflected in the choices expressed in Table 3 .

The basic tools for building trust.

Source: Own processing of information on the Informe Anual de Responsabilidad Corporativa, 2006 by Telefónica S.A.

The communication campaign carried out by Telefónica in 2004 had the importance of “trust” as its basic value. This means that the company, as has been found in the various media (newspapers, radio, TV, etc.), has given priority to this aspect for the implementation of the MIRC. The relationship between communication and corporate responsibility will be highlighted as an application value in all types of tools used by the group, including periodic reports (annual and semi-annual reporting). The reputation strategy must be established on a real basis of excellence in a service, which requires the considerable effort by the whole organization. CSR plays an important role in empowerment, and in enhancing this effort. Telefónica , being a telecommunications service provider, had to manage intangible (non-cumulative) aspects concerning those of the products according to their characteristics [ 58 ]. In services, reliability is a determining factor; in fact, more contracts are formalized with operators that from experience can give a better service, full of quality, and transparency. Quality can include the customer’s degree of indifference to a repair, the certainty of a billing error, or the fact that the line is operational without interruption. Therefore, customer satisfaction will be the result of compliance with their expectations and the quality of service offered by the company [ 59 ]. The Corporate Code of Conduct, like other tools of its kind, is a framework for the integrity of professional relationships. It is inspired by the values ​​of the Telefónica Group, which translates into principles, which in turn governs the behavior of the staff and indicates the conduct toward their main interest groups and is based on the concepts of right and duty. Therefore, it is not “compulsory” conduct, but rather, it is embodied in behavior to be followed (Trujillo, 2004). Telefónica has an institutional presence in numerous permanent job forums, holding important positions in them. Table 4 shows some of the main forums in which the company participates, and the role played in each one.

Type of participation of Telefónica S.A.

Source: Own processing of data from Telefónica S.A.

The organizations listed above form the networks that promote CSR, with the different alliance relationships; in these partnerships, each organization is integrated and in close collaboration with the others and makes an important contribution to resolving the idiosyncrasies that may occur over time. The objective of the network is to develop CSR and training tools, such as the AENOR-CTN50 7 Technical Committee, which can monitor the added results and disseminate them through corporate communication. Looking at the sectoral forums, one observes, first, the diversity among them and their complementarity. Each forum can be defined by six characteristics (areas of implementation), and for each of these, there are two types (national and international). Furthermore, it indicates the characteristics (first column) and the possible types (second and fourth column). It also summarizes the number of holes in each feature (third and fifth column); the nine national forums are thus identified, while the remaining four are international ( Table 5 ).

Characteristics of permanent job openings with the institutional presence of Telefónica S.A.

Source: Own elaboration starting from Telefónica S.A. data.

Network availability and quality

The “democratization” of communication

Development of the information society

Development of new technology

Reduction of the economic gap, which is the basis of availability

Telefónica ’s expansion strategy makes extensive use of elements that, as indicated, narrow this digital divide. The concept of social responsibility “leads to the awareness that we are a powerful force for social, economic and technological development” [ 62 ]. In these statements, the general management on social responsibility and corporate reputation of Telefónica highlights the importance of the workers themselves, aware of the social impact of their daily activities. In almost every forum that Telefónica joined, the association was already active, that is, promoted by others; only in the case of the FRC (Foro de Reputación Corporativa) did it have a promoting and founding role. This is indicative of the synergy that has been achieved in partnerships between organizations that have a common goal; the creative effort was born from some subjects, while the resulting advantage is shared by all the organizations that ally. Furthermore, the benefits of the network are greater in terms of its breadth and influence, and to this extent, its strength is often found. The relative weight of Telefónica ’s size is the activity carried out by its representatives who are holders of a strategic position and who make a significant contribution to the policies implemented by the company, communicated through the forum. For Telefónica , the creation of the FRC responds to a common vision between 11 companies of the group, which makes it possible to obtain synergies through mutual collaboration. The common vision is therefore the following: “The value of intangible assets in the company is very important and corporate responsibility is a critical component of this aspect.” The strategy to fulfill this vision consists of “unearthing intangible assets that generate a better reputation that can increase the perceived value of the company” [ 63 ]. Considering these statements, the actions proposed in 2010 by Telefónica to develop a strategy for creating a greater reputation are as follows: a) identifying the best management methodologies for RC ( Responsabilidad Corporativa ), CSR ( Corporate Social Responsibility ), and ethics, which are integral for the FRC (benchmarking); b) promoting and disseminating the knowledge and management of RC; and c) promoting the creation of a stock index (national or European) for “responsible” companies. The actions are outlined to show how large companies have implemented the sharing of experiences and knowledge of the best management methodologies in the FRC plan, obtaining advantages from this strategic option. And in fact, the information that derives from it would seem more qualified and coherent than that obtained through external “benchmarking,” as used today by many companies. The second action of the FRC indicated by Telefónica relates to the promotion and dissemination of knowledge as well as the management of RC. It is therefore a general action for the promotion of RC on management concepts and systems. This type of generic promotion has an impact on all intangible assets, the value of which depends on widespread acceptance [ 64 ]. The third action proposed in the FRC concerns the creation of an equity index, in which the criterion of differentiation is CSR. In analyzing the impact that this index can have, it should be noted that this tool, like all those of this type, implies the following: I) the assessment of the reputation achieved by each company; II) the classification of company valuations and the reporting of the levels that need to be included in the stock index; and III) the increase in demand in the stock market and the valuation of the shares of companies that have a good score on the liability index. Once the desired results are achieved, an increase in the value of the company should be achieved through its intangible assets, which is the point of view held and shared by the companies that have implemented the FRC. It is noted that Telefónica , as a company committed to full immersion in this field, needs concrete results that allow it to make subsequent efforts by quantifying the results achieved. One of the most revealing findings from the analysis carried out in the previous table is that all the forums in which Telefónica participates develop some type of tool for the promotion of CSR. Among these, the Pacto Mundial , the GRI, the AENOR, and the Reputation Institute were created precisely for this purpose, or in them, the promotion of the CRS is at the center of the activity carried out. These, once involved in the analysis of the CSR, propose the measurement tools or guidelines to facilitate the implementation of strategic conduct [ 65 ]. A special case, different from the others, is the “forum of experts on corporate social responsibility” of the Ministry of Labour and Social Affairs 12 , which, although not aimed at developing tools, carries out an information-gathering activity that could be an advantageous opportunity to achieve, shortly, the enactment of a law on corporate social responsibility in Spain. The promotion of a stock index, such as the one described above, did not seem outlined in the previous proposals as key points of application were more general : “Valuing intangible assets. Definition of development indicators and measurement systems for corporate reputation or related to quantifying the impact of corporate reputation policies: ethics, social responsibility, identity, brand, and corporate governance. Influence and interaction after between are the main intangible variables of corporate reputation” [ 55 ]. These measurement objectives are aimed at verifying the effectiveness of the actions undertaken and selecting the variables with the greatest impact; they are therefore the objectives of improving the methodology before 2004 the Telefónica Group was included in the Dow Jones Sustainability Index (DISI), after having achieved a score of 75 points for its leadership with sustainability criteria. Moreover, at the European level, the minimum is 72 points and global with the minimum of 70 points and starting from 2004 with the inclusion in the FTSE4Good 13 index, which uses, for the selection of companies, ethical, social, and environmental criteria applied through quantitative indicators. The latter consideration is so strong that there is a negative relationship between boardroom gender diversity and a firm’s financial performance. According to Ajaz et al. [ 66 ], females in boardrooms either cause negative effects or have no impact on the firm’s financial performance. Similarly, there is no significant relationship between the presence of women in boardrooms and a firm’s reputation.

4.5 Corporate Reputation (CR) workshop

The implementation of the plans described by Telefónica ’s CR requires sharing and implementation by all management areas in the various countries where the group operates. Therefore, the general manager has set up a series of workshops 14 to facilitate the learning of methodologies to promote responsibility in the different areas. This is done through the analysis of “best practices,” through the strategic analysis of future growth scenarios in terms of sustainability and development, but also thanks to other more creative techniques such as brainstorming where problems are analyzed to give shared answers that are accepted by the whole organization.

5. Practical implication

5.1 the management of csr in telefónica.

In the CSR management systems in Telefónica, two issues are of particular interest for this survey, as they relate to the measurement of progress in the level of CSR obtained and because the relationship with the interest groups depends on the evaluation of the company: a) the interest that progressive accreditation has for society and the types of policies and actions envisaged for the gradual progress toward its objectives; and b) management systems about its stakeholders, with particular reference to suppliers and the introduction of CSR criteria.

5.2 The challenge of progressive accreditation

This section provides a general reflection on the impact that progressive accreditation has on Telefónica . The implementation of a gradual and progressive accreditation is highly appreciated by companies and organizations that have become spokespersons for the adoption of a management system based on CSR. It arises as a cumulative process, which makes it possible to maintain a medium-term objective, following an action plan to advance in the implementation of the subsequent phases. In many forums that have been created to promote strategies and actions, CSR highlights the need for elements of verification to ensure the truth of what organizations communicate and advertise. As CSR policies tend to produce greater value in a company’s intangible assets (such as brand and reputation), there is a need for effective enforcement and verification mechanisms that are accepted by the organizations represented. The gradual introduction of social responsibility management systems is seen to increase the very feasibility of CSR; the approach with progressive advancement is also valid for relations between interested parties. Although it is a challenge to accept that everything can be divided into distinct parts and that there is a way to advance through a series of distinct stages, it is plausible that each one involves difficulties and costs, such as in justifying the achievement of even partial goals. Those responsible for the implementation of CSR in companies are also interested in “partial recognition” as a clarifying tool, both for themselves and for senior management, that can facilitate their work and increase the probability of giving continuity to the strategic plan pursued. However, important issues to be outlined include the minimum coverage of each stage, the speed of implementation and the type of recognition possible, as well as the conditions for its use. In general, progressive-type solutions are suitable for collaboration strategies, with many interested parties, where each one offers a different contribution, and one crucial factor is the need to go slowly in gaining trust among the participants, while also considering the cost-benefit that everyone gains with the alliance. Furthermore, when the field of action is new or its scope unknown, caution is advised in the implementation of the progressive system. The basic alternatives for progressive implementations are I) partial scope, where the standard is subsequently applied to various parts of the organization [ 67 ]; and II) subsequent assumption of principles or requirements and assessment of the degree of conformity. These two basic progression options can be combined in mixed solutions. The two schemes were applied, respectively, for the ISO quality and environmental standardization systems (with subsequent partial certifications) and the excellent management systems (with initial self-assessment and external assessments, as in the case of EFQM 15 ). The partial field of application can be achieved according to various criteria: 1) structural differentiation of organizational units (departments, business units, subsidiaries of a group, work centers); 2) for the processes of the activities; and 3) for the interest groups involved. An easy way to measure progress is to list the tools and developments that are required for the implementation of the comprehensive, previously known, and accepted management system—for example, the policy approved by the board of directors, the creation of a body in the organizational structure that will be responsible for the process. Some evaluations include not only the results but also giving some evaluation of the performance predictions. This strengthens the systematic organizational commitment to progressive advancement, but it can be at risk of overestimation. This approach was applied in the “implementation and continuous improvement questionnaire” aimed at organizations that have formalized their adhesion to the Pacto Mundial in Spain. Some authors 16 also propose another dimension or point of evaluation of CSR strategies and policies: philosophies or attitudes adopted, generated between proactive and reactive. However, it has been observed that if it is claimed that this categorization measures the variables involved in degrees or levels, this can have difficulties and objective aspects that are difficult to evaluate and quantify. Following the “model for the gradual implementation of CSR” designed and implemented by Telefónica , we note that it has had a significant impact on the company’s operational strategy and has also served to promote both inside and outside the company’s social policy. It is not intended to convey a summary of the actions taken by the company at each stage, but only to highlight some facts that are considered representative and relevant for the analysis. The comments provided are general in scope and do not refer directly to the Telefónica company, but to all the research, and are a good example for observing design variables and problems to be overcome. The MIP model is like other systems designed for management and is a circular, feedback model, such as the PDCA 17 cycle, although it is adapted to the specific interests of the CSR system ( Table 6 ).

Phases of the Modelo de Implantación Progresiva (MIP) in Telefónica.

Source: Own processing based on Telefónica data.

Phase 1. To make this commitment public, the Informe Anual de Responsabilidad Corporativa 2003 begins with a letter from the president regarding the requirements of the GRI. In his message to the reader, he indicates that the vision of the company is aimed at being a “trusted operator” and that the only way to access this trust is to fulfill one’s commitments and maintain a position of proximity in understanding the needs and the expectations of customers, shareholders, employees, suppliers, or simply citizens. The CSR approach, to be effective, should be promoted as a value and a strategy that starts from the top management, through a plan to be implemented in all company activities. This push from top management must include the provision of necessary resources, how much they will have to compete with other objectives, and the correct priority among objectives for the allocation of resources. Therefore, the level within the organizational structure of the company and those responsible for each process are the important factors in resolving conflicts, but at the end, it will be the top management who will have to decide between the strategies if there are valid operational solutions. The formal organizational structure created for the management of CSR is often a sublevel of general management or corporate management in large companies, as indicated in the case of Telefónica . As for the informal structure, its proximity to the presidency and its mandate as the executor of a particular strategy, in practice, increase the level of enforceability. However, the level indicated refers only to the few companies that have bet heavily on CSR, as in many large and small businesses, the functions are shared. CSR managers are often told that their most challenging work begins with the work of internal conviction and in the rest of the structure in responsibility, personal commitment, and effort in resources. This difficulty is like that of the closest management systems such as the quality of the environment. The design of an incentive system for managers and employees is necessary so that they have a utility function consistent with the objectives of the company. However, the incentives can cause unexpected side effects, which can heavily affect the internal balance of the company or firm on the market. For example, stock options have been used to try to reduce the agency problem, which links executive remuneration to the value achieved through shares; however, they were also the cause of an increase in accounting fraud in the main listed companies in the late 1990s. These practices resulted in the loss of reputation of the company in which they were carried out and a significant loss of confidence in the market system 18 . It is this loss of confidence that is one of the main reasons why large companies are developing CSR strategies. Phase 2. Given the size and complexity of the company, the activities that the different business units carry out in the field of CSR are brought together, forming a sort of catalog. This collection made it possible to carry out, first, an analysis of the situation, the identification of evident absences, and the assignment of priorities to the initiatives. It also facilitated the identification of best practices, so that they could be exported to other units. The first consequence of this methodology is the internal benchmarking procedure, which is useful in large companies with different operating units and various geographical areas. Among the companies that were consulted in this research, it becomes clear that the initial diagnosis phase presents great difficulties, deriving mainly from the uncertainty of the very concept of CSR, from the presence of various definitions of CSR, relating to the inclusion or exclusion of principles, as well as the degree of participation of the interested parties. The managers of the company have different functions and are often of opposite opinions, and therefore, they are forced to choose one among them to create a common culture and conduct internal awareness campaigns. However, significant progress has been made to clarify the concepts and actions that need to be taken to implement a CSR system. The creation of economic value from the CSR strategy is based on certain requirements or expectations of its stakeholders to allow it to obtain a competitive advantage (Porter, 1985). These include a trust that the customer does not change supplier, proximity capable of decreasing the image of distance that a multinational can have; the issue of human rights compatible with the growing pressure of society against violations of privacy and abuse of a person; the image of efficiency and devotion of the company to reduce the advantage of competitors in the reference competitive sector; and the relationship with public institutions of the state. Phase 3. Based on this survey, the strategy was defined in Telefónica , assessed through the resources for implementation and the necessary organizational structure. It corresponds to the organizational structure to plan the methodology to be applied. If we compare the MIP model with the general management scheme, we see that planning and organization activities are included in the implementation phase. They have been concentrated; this does not mean the realization of a smaller number of phases, but an attenuation of the importance given to the other phases. Phase 4. The information systems that existed before 2002 in Telefónica provided only part of the information required by the new area of CSR, so it was necessary to create a specific information network. An “integrated management system” was launched in the field of CSR and it was necessary to work diligently to systematize the information, which was dispersed and uneven. To select the indicators, the guidelines of the Global Reporting Initiative were used together with the ratios and data pertinent to the specific activity; Telefónica itself participated in the development and organization of the GRI as well as in the creation of the reference guides for the telecommunication sector. To ensure the quality of the information, a determining factor has been identified: the accountability that provides information [ 70 ]. Furthermore, a double control was used, guaranteed, and made possible by the organizational structure of the company: the participation of the heads of each operational line or corporate center and the involvement of the company departments. CSR must be developed through a transversal management system that penetrates the various activities, integrated with other management systems. Therefore, the variables and results relating to CSR are combined in the management control systems of branches and business units [ 71 ]. For standardization, an internal regulation has been developed for carrying out CSR reports and the internal control department has participated in its elaboration. The control phase, which in general models, is usually identified as unique, and in Telefónica ’s CSR MIP, on the other hand, unfolds in three phases: measurement, communication, and verification. This approach is indicative of the importance that communication plays in the management of CSR since its development is correlated with interest groups. Based on the decision to consider verification as a separate phase, the argument supported by the various companies in the forums could be indicative: There is still little maturity in the field of CSR and it is necessary to proceed slowly and safely, identifying the groups of interest. It should be noted that the difficulty of obtaining homogeneous information on CSR in large companies motivates the choice to finalize the first stages of the implementation of the strategy in the creation of the information system. The same experience described for the telephone operator was compared among BBVA and other large companies. However, in PYMES 19 this part of the process would be much easier. The responsibility of the information generators is indicated in the sustainability report [ 72 ]. Indeed, one of the steps that have been considered most effective since the financial scandals of the 2000s is the clarification of personal responsibility in the information provided, which is institutionally promoted. The result measurement phase is closely linked to the principles of transparency and anti-corruption that accompanies CSR. Likewise, it is also essential in any management system for results and continuous improvement. The strategy and entrepreneurial activity can simultaneously influence relations with the various stakeholders. For example, if anticompetitive practices are used, reference is made to the interest group of competitors, the relationship with the public administration and customers, even if it is only a reflex moment. In many cases, it is not easy to determine where the commercial practice ends and those that are not accepted begin. Phase 5. The “Annual Report on Corporate Responsibility of Telefónica S.A.” was released in 2007, 2008, and 2009, and every year, there was a notable improvement in the contents and in the processing of information, as well as in its dissemination. Phase 6. Within the Telefónica MIP are the following steps in the verification process: internal audit on the correctness of the information; external audit; certifications; and verifications [ 73 ]. All the processes relating to the customers of Telefónica and Telefónica Moviles in Spain are certified according to the ISO 9001/2000 20 standard, and in Telefónica America Latina, they were carried out in 2004. Two characteristics can be observed in the design of these certifications: a) The development achieved is measured in proportion to the certified processes; and b) the priority of certification is assigned to the processes closest to the customer, who is the main beneficiary of quality. These continuous quality improvement plans include “service indicators” and “strategic quality indicators, with objectives of improvement and comparison with the quality perceived by the customer.” Six Sigma 21 is the reference methodology for process improvement and staff training. These systems include internal controls. In 1996, Telefónica of Spain acquired the environmental commitment of ETNO (European Telecommunications Operators), and in 1999, the development of an “environmental management project” takes the UNE EN ISO 14001 standard as a model. The environmental management system for Telefónica Moviles in Spain covers all its activities and is certified by AENOR by the UNE EN ISO 14001 standard. The various collective agreements of the company are applied to more than 100,000 employees of Telefónica . It is important to underline a way of expressing and communicating the ISO certifications that were used in the report produced by Telefónica . The reference to the percentage of processes subject to certification is clear information and should be standardized by quality managers (certifiers, consultants, and companies with quality systems). The 2000 edition of ISO 9001 provides for the focus of society as an integrated set of processes, and it is this vision of integration that should be strengthened. And this contrasts with the widespread practice among companies of citing the number of certificates earned (on quality, on the environment) as to their merit, without referring to what they represent for all processes in society. Thus, the reader could interpret a company, A, with four certificates as being in a better position than another company, B, with a single certificate, when the reality may be that company B has certified all its processes, and only some of these. Phase 7. The improvement phase is seen as the analysis of, and reflection on, the overall path and includes external recognition. This recognition can be evaluated in terms of awards obtained and by other means or methods that the market and institutions can design and use. Finally, in this phase of improvement, and through a DOFA 22 analysis, the diagnosis is fed, with which the next cycle begins, before continuing toward excellence. Telefónica has received many awards and recognitions for its commitment and its application to the principles of CSR. However, the field of international recognition of the progress achieved in social responsibility will never be complete without a common interpretation and evaluation of information by interest group representatives. There are at least four elements of variation, and they are difficult to interpret: the agent who subsidizes it; the means used for the assessment; the characteristics; and the degree of recognition granted. Concluding the discourse on the progressivity in the analysis of the Telefónica case and on the other elements observed, it is shown that the progressive advancement systems for the establishment and accreditation of the CSR are of a mixed nature, including progress in the unity of the organizational structure, in the processes, and in assessing compliance with the principles [ 74 ]. As a detail on the possible developments during the evaluation, the improvement in the quality and transparency of the communication is highlighted, which is to report the percentage covered by a certification process, rather than the number of certifications. Progress is also being made in the standardization, measurement, and accounting of the results achieved with CSR, particularly for the improvement and expansion of the reports made by the GRI [ 75 ], which with its guides since 2002 has started the elaboration of an articulated reporting on the sustainability [ 76 ]. However, it is still a process that requires a lot of development, especially in the use of measurements and in annual and cross-cutting improvement. It is internally validated that the reports are made according to the GRI guidelines, but they are not being carefully checked.

5.3 Focus on interest groups in Telefónica 23

Telefónica ’s approach to its stakeholders is to recognize legitimate interests and try to demonstrate their commitment and earn their trust. The following statement, which is exhaustive of the policy implemented by the Spanish group toward all its interlocutors, is reported on the company Web site on Telefónica ’s corporate responsibility: “A company of this size generates, every day, millions of contacts with groups that, directly or indirectly, maintain a legitimate interest in it: customers, shareholders, investors, employees, partners, media and suppliers. Furthermore, following these relationships, the Telefónica Group also maintains close contacts with all the companies and countries in which it operates. Each of these relationships is an opportunity to demonstrate Telefónica’s commitment to its interest groups … and therefore it is a chance, whether or not to win your trust.” 24 The previous quotation highlights a direct relationship with the six interest groups, while the reference to contacts with companies and the countries in which the company operates is presented because of relations with those groups. In the classification of Telefónica ’s interest groups, the following distinctive features must be noted: 1) special mention, to divide shareholders and investors even if it is considered the same interest group; 2) express reference to shareholders and consideration as an interest group; 3) governments (regulators) are excluded from the interest groups; 4) it includes the means of communication (mass media); and 5) no specific consideration of the “company” as an interest group but derivative of the relationships with the seven interest groups. Furthermore, they do not mention the concept of “company,” but a plural and diversified “company and countries in which it operates.” Telefónica has recognized, in its sustainability communication, suppliers as one of its stakeholders. The procurement process is a process that has standardized the Telefónica group, with standardization being carried out through the application of a “common management model,” already applied by 100 companies from the group, called the Sistema Avanzado de Compras (SAC). The SAC is a manual of conduct that states “the importance of intervening with rigour, objectivity, transparency and professionalism in the purchasing function, and which reflects the principles and guidelines that should guide actions with suppliers.” This manual is mandatory for all people involved in the procurement process, whether in commercial areas or working in different units. The manual includes 13 general principles, including those most directly connected with the principles of CSR, and the six approaches are as follows: I) customer satisfaction [ 77 ]; II) compliance with commitments; III) transparency in the procurement process; IV) equal opportunities for suppliers; V) objectivity in the decision-making process; and VI) contribution to the development of society. To strengthen the implementation of these principles, the manual underlines the “guidelines to be followed in situations deriving from the relationship with suppliers that can generate conflicts of interest” and indicates what to do in the working relationship with Telefónica suppliers and in other situations of constraint with a supplier, as well as the prohibition of accepting gifts or personal benefits associated with purchases ( Figure 4 ).

The Telefónica procurement process, CSR approach. Source: Own elaboration from Telefónica S.A. data.

The procurement process has five stages or phases, as shown in Figure 4 ; these phases are represented by their principal or actor, and in the same way, it is indicated in each phase how to proceed with the distinctive approach in CSR, resulting from the application of the six principles of the conduct manual (SAC). Telefónica has classified the acquisitions necessary to satisfy any type of need in five product lines (network infrastructures, services and works, products, market information systems, advertising, and marketing) in the definition of the requirements considering the global policy of sustainable development of society. Homogeneity is applied in requests for offers so that the information provided to suppliers (through the purchasing area) is the same for everyone to ensure equal opportunities for all interested groups. Another principle is contributing to the development of society, so the policy aims to promote the country’s economic activity, which influences purchases. The whole process up to the tender requires the supplier to be approved. The approval of suppliers is achieved by registering in the “supplier catalog,” which includes a presentation of the company and the opening of a register managed by the corresponding SAC process unit (there is at least one in each of the 19 countries in which Telefónica operates), to the verification process after inclusion in the catalog or to rejection. For the approval or rejection of the supplier, among other things, the criteria set out by the CSR are considered. Purchasing management is done through seven purchasing tables, which are in Madrid, São Paulo, Rio de Janeiro, Buenos Aires, Santiago de Chile, Lima, and Mexico City. Some products require technical approval before being used and therefore require a specific approval process. The specifications of the products/services being assessed include elements of social responsibility, such as those relating with respect to the environment. The negotiation phase is governed by a set of guidelines to ensure compliance with the supplier’s treatment, transparency, and objectivity; here are some guidelines for specific situations: a) Limit the requisites required for suppliers, without using the purchasing power of Telefónica because the supplier accepts abusive conditions well below the market; b) no offer will be negotiated without any possibility of awarding; c) confidentiality of information obtained from the supplier on offers and other aspects of the purchase tables; and d) there will be no meals or recreational activities during the negotiation period. The trading phase is carried out using the method of trading cycles or auctions. The management of the purchases of some product categories is carried out through an electronic commerce platform: e-Sourcing Adquira 25 , with over 4,300 affiliated providers. The ratio of products purchased by these means is not identical in the seven purchase tables and includes a series of items for each of the five product lines. This platform allows the management of bids and negotiation, as well as the implementation and management of purchase auctions. Transparency and objectivity are the principles of CSR that directly affect this phase. It must also ensure that the contract entered reflects what is negotiated with the supplier. In the final phase of contract implementation, the affected areas that they manage must strictly abide by the agreement and check that the supplier complies with its commitments. For the award, the calendar and the specifications of the offer will be considered. As the main aspect of the process analyzed in Telefónica , the principles of transparency and objectivity are preferred for the IT solutions that are transforming the company’s purchasing system. They point out that there is also an improvement in the efficiency of the system by reducing process costs, which affect both the supplier and the buyer. Telefónica is automating all purchasing processes in the value chain with the supplier. Together with the e-Sourcing, the e-Procurement company platform supports all internal procurement cycles (post-purchase), including the delivery of orders.

6. Communication on CSR in Telefónica : the annual reports on social responsibility

The first social report published in Spain was that of Banco Bilbao 26 in 1978, and this was followed by other large companies such as Telefónica , RENFE, 27 and Construcciones Aeronáuticas 28 . These relationships represent the aspect of social, not economic, indicators referring to customers, employees, the environment, and the community. However, this effort was soon stopped, due to the accentuation of a purely financial approach in the 1980s, which emphasized the relationship with investors, shareholders, and the media. The increase in CSR, as well as the importance within it of the information provided to interest groups, motivated Telefónica to decide to present the reports on corporate responsibility, for which it adopted the methodology of guidelines of the Global Reporting Initiative (GRI). Telefónica has also undertaken an attitude of active participation in the GRI, forming part of its Stakeholder Organization (SO) and being represented in its Stakeholder Council by its General Management of Reputation, Brand and Social Responsibility. Telefónica creates an integrated corporate responsibility report for the whole group, but it has also left certain freedom to the companies that want it to carry out their reports independently on sustainability; in fact, the following five companies appear in the list of Spanish companies in the GRI database: Telefónica S.A., Telefónica de España, Telefónica Móviles España , Telefónica Publicidad y Información, S.A. (TPI), and Telefónica Investigación y Desarrollo ( Telefónica I + D). The logic of this plurality of relationships is that companies have considered it as an element of competitive advantage relevant to their strategy in every sector. In other groups of companies (Ferrovial, BBVA, and Repsol YPF), this proliferation does not occur. The GRI database has a temporary delay concerning the publication of the reports on the Web site of each company; this may be due to the request of the GRI to grant the status of “in accordance” with the reports, which implies a review by this organization. Telefónica ’s reports are increasingly complete and sophisticated in trying to achieve the stated goal of more transparent information. Similarly, the effect of the improvements in the tool used is felt, following the publication of the 2008 edition of the GRI guidelines. El informe anual de responsabilidad corporativa 2008 29 by Telefónica begins with the president’s statement 30 and with a specific chapter for each interest group. The information is structured and standardized according to guidelines provided by the group and contains indicators both on the general commitment and on specific areas in the field of telecommunications. The list of indicators (referring to the 2008 report) is shown in its content in the following tables and graphs. In addition to the ratios, the company’s annual report includes the company profile, structure, governance [ 78 ], stakeholder engagement, and global policies. It should be noted that there are several indicators of social performance suitable for analyzing working conditions, respect for human rights, the relationship with society, and product responsibility because the company is very committed to this type of policy as also demonstrated by the annual report produced by the OSE 31 . Telefónica is a driving force for economic, technological, and social development in the countries where it operates. In 2008, the company generated more than 69,000 million euros in revenue. These revenues made it possible to pay 6,767 million euros to its employees (5% more than in 2007), 10,336 million euros to public administrations (4% more than in 2007), 32,832 million euros to its suppliers (2% more than in 2007), and approximately 6,700 million euros to its shareholders (22% more than in 2007). This is how society has distributed the wealth created. In 2008, Telefónica set aside more than 4,600 million euros for technological innovation, which represents a 6% increase compared with 2007. From this amount, 668 million euros were invested in research and development (R&D), meaning that Telefónica ranked sixth in the world in this category and first among Spanish companies, with an amount dedicated to investments that were four times than those of the runner-up in this ranking 32 . Significant progress in some areas of the group in the field of corporate responsibility and the need to improve implementation in others, together with the objectives set for 2011, constitute the reference target for 2009; this is the central message of the 2008 annual report by Telefónica . Here are the “milestones”: Corporate Responsibility and Business Principles . At the end of 2008, about 50% of the group’s employees (excluding Atento teleoperators) had received training in Business Principles , which represents 60,219, double the figure for 2007. The aim of promoting dialog with employees on business principles was achieved through the development of forms of internal communication such as publications (e.g., Somos magazine), and a variety of presentations in various locations and forums. Abdullah et al. [ 79 ] suggest that employees who value CSR campaigns and other practices identify with their company to a greater degree, work with more devotion and loyalty, and show more creativity in their work performance. Or better CSR practices have a significant influence on employee performance in terms of relationships between employee perception of CSR and employee outcome for firms [ 80 ]. Training initiatives were launched for employees in Ecuador, while CSR continued its consolidation process in the remaining countries where it had begun to be applied in 2007. Thematic panels were promoted in Peru on social inclusion in the sector of telecommunications, the Intégrame Project , and the 1st Forum on Antennas and Health. Telefónica O2 Germany 33 confirmed its status as the best company in relations within the group and the online dialog issue ( Figure 5 ).

Driving force of progress in Telefónica. Source: Annual Corporate Responsibility Report Telefónica S.A. 2008.

To encourage initiatives aimed at ensuring responsible behavior by interest groups and to help consolidate the companies and the good perception of Telefónica , the CSR guidelines have been developed for 10 countries, including the 2008 targets. Environment: An Environmental Management System has been developed for the entire group based on the ISO 14001 standard. A model that emphasizes the energy efficiency of equipment and products has also been implemented by suppliers in the work area of the OCC. Hang et al. [ 81 ] identified a significant and positive impact of CSR and green product innovation on organizational performance. Accordingly, green product innovation positively influences competitive advantage. Competitive advantage mediates the relationship between corporate social responsibility, green product innovation, and organizational performance. Measures aimed at improving energy efficiency, promoting the use of renewable energy and Green IT models, have been developed and implemented as part of the activities of the work area in the Climate Change Office 34 . The year 2008 marks the development of the Telefónica Environmental Performance Index (EPI) 35 based on a balanced scorecard 36 of environmental indicators. The rules that are expected to be implemented in 2009 and 2010 in all operations were designed in 2008 as part of the Global Environmental Management System 37 . These regulations cover aspects such as waste management, noise pollution control. Customers: Efforts invested in the Customer Experience 38 methodology that was introduced in 2007 resulted in an improvement in the Customer Satisfaction Index, bringing it up to 6.92% with an improvement of 2%. According to a pre-established work plan, in 2008, advice was distributed to customers and the public on the responsible use of technologies, with recommendations on safety, recycling, the use of technologies by children, intellectual property, and the use of technology in public places. The analyses include surveys involving approximately 85,000 children from 800 schools in Argentina, Brazil, Chile, Colombia, Mexico, Peru, and Venezuela; the conclusions were recorded in the White Book and will form the basis for the development of future educational initiatives. Ten principles that constitute the golden rules on advertising have been defined and are included in the Agencies Evaluation Model and are applied as part of the contractual conditions with these agencies. Employees : The ongoing initiatives have led to an improvement in the Employee Satisfaction and Commitment Index, bringing it up to 69%, three percentage points more than in 2007 and with participation in questionnaires equal to 70.4%. Progress has been made in dissemination and implementation tasks across the internal areas that will constitute the future Diversity Committee. The Telefónica Group work accident analysis procedure was developed to establish a set of common criteria to analyze the working conditions in all companies that belong to the Telefónica Group. Providers: Telefónica has more than met its 2008 target of assessing the risks of the value chain of 1,000 suppliers and carrying out 50 audits, reaching figures of 1,100 and 55, respectively. Community: Nearly 107,602 children were introduced to primary schools in 2008, doubling the previous year, in Latin America. The EducaRed 39 model was used to provide teachers, pupils, and families with the technological tools necessary to guarantee access to learning processes and teaching quality. Progress has been made in the following areas covered by the Accessible Telefónica Plan: accessibility of Telefónica mobile phones, ease of the integration process in the workplace, accessibility of procurement procedures, web accessibility, accessibility in stores, accessibility of digital TV, and accessibility of hardware. In addition to these results, communication actions and consolidation of the network of collaborations have been launched with other interested parties as well as constant support for innovation initiatives. At this point, it appears essential to analyze the strategic system of Telefónica ; corporate responsibility is considered an integral part of its objectives for the group and how it conducts its activities is based on doing business in the “right way.” Its initiatives are in the correct balance between positive and negative effects to prevent the adverse impacts affecting the value chain for each stakeholder. Telefónica ’s vision is to “improve people’s lives and business performance, as well as the advancement of the communication technologies in which it operates, offering innovative services based on information and communication technologies” (ICT). The objective of the strategy is to contribute to the sustainability of its business in the long term through the implementation of policies in favor of ethics and honesty, which in turn contributes to improving the satisfaction of customers, employees, shareholders, and, above all, the community, as summarized in the diagram below ( Figure 6 ).

Reference framework for the management of social impacts in Telefónica. Source: Adaptation from the Corporate Responsibility Report 2008, Telefónica S.A.

The philosophy of business excellence , that is, doing business in the “right way,” is the key principle of Telefónica ’s CR policy and underlies the whole context of its strategy. The company uses various indicators to measure its degree of implementation in these dynamics: in addition to the Customer Satisfaction Index , there is the Employee Satisfaction Index and the RepTrak ™ 40 , further highlighting the need to keep the focus on excellence, keeping the commitments made with customers. “Honesty and transparent management aimed at minimizing the negative impact of the value chain, through a commitment to ethics and honesty.” This represents the basic set of rules set out in the Business Principles , aimed at generating policies and regulatory frameworks necessary for the fulfillment of these objectives. The following graph better defines the role of corporate responsibility in the public and social aspects together with the economic and environmental impacts in a dynamic framework of variables. It must be emphasized that Telefónica tends to underline these objectives in its annual report precisely to highlight and guarantee its maximum transparency. Telefónica contributes to progress by maximizing the positive impact of its business and thus offering a contribution to improving the lives of people and other companies with which it enters a relationship. Educational programs for the use of ICT also have a positive impact on the environment and the productivity of businesses due to their ability to help reduce the consumption of natural resources and promote the fight against climate change. Social and cultural activities reinforce the impact of social action, allowing anyone, regardless of social position or cultural condition, to enjoy the benefits of progress. These activities are carried out through the Fundación Telefónica , ATAM 41 , the politics and sponsorships of Telefónica Europa, the Proniño project 42 , EducaRed, and other important initiatives such as Telefónica Voluntarios , Debate y Conocimiento , and Arte y Tecnología . Improving the benefits of CSR through initiatives of transparent communication and constructive dialog with stakeholders in Telefónica helps to define a guide and an economic, technological, and social progress force. The Spanish group publishes annual reports on CSR in 17 countries where it operates, which are compiled using the GRI standards, with 12 of these reports also being screened by the AA1000AS standards. In contrast, social and cultural action is evaluated with the LBG standards. To ensure that the initiative keeps pace with stakeholder expectations, an ongoing dialog with these interest groups is essential. The general objective is to move away from a mono-stakeholder strategy to implement a multi-stakeholder approach, which allows the company to develop a closer understanding of the interests of all these groups and to identify the most significant aspects and existing criticalities ( Figure 7 ).

Interrelations between public and private aspects with the economic prospectus. Source: Adaptation from the Corporate Responsibility Report 2008, Telefónica S.A.

7. Study limitation

Empirically [ 82 , 83 ], it was demonstrated that qualitative research helps entrepreneurs and small businesses understand what drives human behavior. It is also used to see how employees feel about workflows and tasks. However, qualitative research has many limitations that include possible small sample sizes [ 84 ], potential bias in answers [ 85 ], self-selection bias [ 86 ], and potentially poor questions from researchers [ 87 ]. It also can be artificial or unusual because in terms of it is not typical to observe participants in focus groups, ask them questions at work, or invite them to partake in this type of research method [ 88 ]. The significant limitations of this chapter’s contribution are associated with the study’s theoretical nature and the qualitative inquiry due to the unique case study analyzed [ 89 ].

8. Conclusions

Through this work, we have tried to bring some order to a subject characterized by a strong and constant evolution, in need of certain points of reference, from which to start for a better and more rigorous methodological definition. First, it emerged quite clearly how, at least in the medium to long term, the assumption in the field of social communication of a superficial, or even elusive, attitude toward the expectations of stakeholders can determine unfavorable consequences not only in terms of image but also from an economic/financial point of view, especially in large companies. Based on these considerations, it is necessary to ask what the most effective tools are for communicating the assumption of responsibility of the company. The ongoing debate on the methods and tools most suitable for representing and disseminating corporate responsibility in the social, environmental, and economic fields is going through a crucial phase. After a series of effective initiatives by public or private organizations, the impression is that among business representatives there is a real desire to collect the disjointed results produced so far in an organic project. At an international level, efforts are being made to re-organize the various standards and models developed in the context of economic, environmental, and social sustainability (the so-called “triple bottom line”). The broad process of involvement and consultation of stakeholders is fundamental, as they are the real arbiters of corporate success. Some of these initiatives (such as the AA 1000 of the ISEA or the “Guidelines” of the GRI) are characterized by an appreciable dynamic character, of a “work in progress” one could say, since “they do not foreshadow a final and definitive solution,” but rather involve a voluntary and continuous process of verification and review. This is more important the more one reflects on the problematic, and perhaps uncertain, the definition of the areas of responsibility of the company. The hope for the coming years is that principles and general criteria can be defined in a univocal or widely shared way, which can guide any organization, regardless of geographic location, size, and activity, in accounting processes, auditing, and reporting. If the various initiatives in progress converge into a single project, which integrates them efficiently, the dispersion of efforts and ideas on the subject, as happened in the past, could be avoided [ 90 ]. It is with this spirit that the study group for the establishment of the principles of drafting the social report (GBS) is working in Italy [ 91 ]. Founded in 1998, bringing together the main scholars and operators in the sector, the study group is still working to disseminate and improve social communication, based on certain principles and procedures for creating the social report [ 92 ]. The document presented in last May represents only the first step toward a more organic definition of the controversial subject under consideration. However, we can affirm that some critical problems in the field of social reporting have already been identified; these are the following aspects: a) poor standardization in content and subsequent difficulty in making inter-company and inter-temporal comparisons; b) poor reliability and credibility of social reporting tools; and c) difficulties for SMEs (small- and medium-sized enterprises) in adopting these tools due to the scarce economic convenience in drafting them. About the first point, the solution could be to start from a single aspect (e.g., through the creation of thematic balances), normalize their content by pursuing certain guidelines, and then progressively incorporate the other aspects, to arrive at a more complex and complete tool such as the social report [ 93 ]. In this process, the guidelines defined by the GBS and the GRI should be followed: In this way, companies would be stimulated and incentivized to adopt a single reporting model, while those that intend to depart from it would at least be required to explain their reasons. As regards the low credibility and reliability of corporate documents, which for a long time have been translated into simple “books of good intentions,” it is necessary to proceed in the direction of certification (auditing). Both are based on standards recognized by international organizations and by these certificates (HDE index, SA 8000, etc.), and by having external auditing firms certify the social financial statements. About the latter, an important role is played by the added value, which allows the social balance to be anchored to certain accounting data, as it derives from the financial statements. Finally, as regards the last point outlined above, it will be appropriate for SMEs to prepare a simple social report formed, for example, by the added value account and the surplus account; these are immediate processing that even the smallest company can conduct with very low costs since it simply requires a reprocessing of accounting data already collected. In conclusion, it is appropriate to clarify how the various social reporting tools and the social report serve not only to bring out the issues discussed so far in a public and transparent way but also to verify how they have been dealt with (through the comparison of subsequent documents) and what steps have been taken to resolve them. Specifically, it is necessary to encourage correct disclosure among companies of the principles and purposes of the social report, to avoid distortions in its interpretation [ 94 ]. It cannot be seen as a simple means of protecting or promoting the corporate image, but rather as an effective communication, management, and control tool that renders an effective service to the management of the company and its stakeholders. From these premises and other observations relating to the issues analyzed during this work such as CSR, sustainable development, and social ethics, Telefónica has built within it a “system of values,” based on a structure capable of fully merit understanding and responding to the new economic and environmental challenges of the international scene. The Telefónica case, therefore, represents a successful example of the integration of commercial, social, and environmental policies that find their strategic position within the group. This does not create critical issues but becomes the basis for building the “new competitive proposal,” where natural and energy resources tend to run out inexorably; in the not-so-distant future, the only way to be able to compete will be in social and environmental performance.

Acknowledgments

This work is based on research carried out in the Basque Country during a 6-month Erasmus study period abroad. The research was the subject of the master’s degree final thesis in the Business Economics course of the Federico II University of Naples. I thank the University of the Basque Country and my Italian tutor of Federico II University of Naples, Professor Riccardo Viganò, for the opportunity. I also thank the company Telefónica S.A. for the valuable interviews and company materials provided for the drafting of the chapter.

Conflicts of interest

The author declares no conflict of interest.

www.bbva.es

www.bilanciosociale.it

www.bilanciosociale.com

www.bitc.org.uk

www.bvqina.com

www.csreurope.org

www.educared.net

www.ethics.org

www.ethicscan.on.ca

www.ethicsinaction.com

www.foretica.es

www.fundacion.telefonica.com

www.globalreporting.org

www.hdr.undp.org

www.kld.com

www.iso.org

www.obrsc.org

www.orsadata.it

www.sa8000.info

www.sa-intl.org

www.sustainability-index.com

www.telefonica.es

www.tt.mtin.es

www.smaer.it

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• The Green Paper is communication with which the European Commission illustrates the state of a particular sector to be regulated and clarifies its point of view regarding certain problems; it is part of the so-called "atypical acts" envisaged but not governed by the EEC Treaty, and this type of communication can have an informative, decision making, declarative, or interpretative nature, and is subject to the advertising regime.
• Banco Bilbao Vizcaya Argentaria (BBVA) is a Spanish multinational banking group with a strong regional origin (Basque Country). Its origin dates to the merger of Banco Bilbao Vizcaya and Argentaria in 1999, which led to the creation of the second-largest Spanish bank, behind Banco Santander Central Hispano. It is the 10th European bank by capitalization with 64.6 billion capitalizations and is highly sensitive to issues of social responsibility and environmental sustainability, and in fact, according to the President of the BBVA Foundation Francisco Gonzàles Rodrìguez, as well as the Guggenheim and Fine Arts Museum of Bilbao: "There can be no sustainable development without a sustainable financial system."
• AENOR is a private, independent, and non-profit Spanish organization recognized nationally, in Europe, and internationally that contributes to the improvement of quality in companies, their products and services and to the protection of the environment, and, consequently, to the well-being of the company, through the development of standardization and certification of company activities.
• Telefónica I + D is the innovation company of the Telefónica Group. Over the past few years, Telefónica I + D has grown within the global market to become a network of centers of technological excellence that extends far beyond the Spanish borders, starting its R&D activity up in its offices located in Barcelona, Granada, Huesca, Madrid, Valladolid, São Paulo, and Mexico. In addition to the numerous technical awards, it has won since its founding, the company received the Príncipe Felipe for Business Excellence Award in 2002.
• Graduated in Law from the Pontifical University of Comillas, he was an MBA from the Instituto de Empresa and at this School of Business he began his career in the research department and went on to become Associate Professor of Organization of Behavior and Communication. He is a member of the Committee of CSR experts of the Ministry of Labour and Social Affairs, of the Spanish Commission of the United Nations Global Compact, of the Patronage of the Chair of Ethics Javier Benjumea of ICADE, on the boards of directors of the Institute of Analysis of Intangibles and the Spanish Forum for the Main Brands.
• Esther Trujillo is the Head of Territory Development of the Sol Meliá hotel chain but has developed much of her career in the Telefónica Group, where she has worked for the past 12 years, mainly in the network management and institutional participation in social responsibility initiatives and sustainable development. She has edited for the Spanish telephone group the annual reports on the management model of the RSC and the complications in its application in the value chain.
• Comité Técnico de Normalización 50 AENOR-CTN50 Documentación; the main functions of the committee (in the abbreviation AEN / CTN50) are the development and updating of the documentation related to UNE-EN ISO 9001 (the brand used to indicate the certifications issued by AENOR), as well as monitoring the reports on the work of technical committees on quality and safety, proposing opinions and comments through technical documents and nomination experts and national delegates participating in international meetings.
• Ethical commitment initiative, intended for companies in all countries of the world that adopt the 10 principles of behavior and respect for human, labor, and environmental rights as an integral part of their strategy and conduct and are working to fight corruption. The idea of a United Nations Global Compact in the field of corporate social responsibility was launched by UN Secretary-General Kofi Annan at the World Economic Forum in Davos on January 31, 1999. In recent years, platforms and local networks in many countries of the world the principles on which the organization is based have been acknowledged and shared by all institutional and corporate members as well as by civil society [60].
• An organization that strives for the global economy as a force for economic growth, job creation, and prosperity. Because national economies are so closely intertwined today, government decisions are much stronger internationally than in the past. The ICC as the only global contact states that it is more determined to express opinions on the businesses in progress. Its activities cover a broad spectrum of functions, from arbitration to dispute resolution, to promote free trade and make the market economy system transparent: from self-regulation to the fight against corruption and commercial crime. The ICC has direct access to national governments around the world through its national and international committees and is based in Paris.
• Ministry of Labour and Immigration (Ministerio de Trabajo y Inmigración de España).
• The specific interests of small- and medium-sized enterprises are represented by the Spanish Confederation of Small and Medium-sized Enterprises, a national organization and member of the CEOE. An organization for progress, the CEOE continuously analyzes the socioeconomic activities of Spain, in order to improve and propose the best competitive solutions for companies. The CEOE is active internationally through the presence of offices in different parts of the world. Another sector activity of the CEOE is that of protecting the artistic heritage and what it represents as well as the interest in the research and development of a country.
• In the Spanish government, the Ministerio de Trabajo y Asuntos Sociales is managed by the Undersecretary of Labour and Social Affairs of the Ministry of Labour and Immigration, established by royal decree on May 8, 1920.
• The FTSE Group (FTSE) is a world leader in the creation and management of more than 120,000 stocks, bonds, and alternative asset class indices. With offices in London, Frankfurt, Hong Kong, Beijing, Boston, Shanghai, Madrid, Paris, New York, San Francisco, Sydney, and Tokyo, the FTSE Group works with partners and clients in 77 countries around the world. FTSE is an independent company jointly controlled by the Financial Times and the London Stock Exchange. These FTSE indices are widely used by a variety of investors, such as advisors, asset owners, fund managers, investment banks, exchanges, and brokers. The indices are used for the purposes of investment analysis, performance measurement, an asset at the location, risk-hedging profiles, and the creation of fund monitoring indices.
• For further study, the Talleres de Reputación Corporativa held by Telefónica S.A. can be considered, periodically, the workshop of the Conferencia Interamericana de RSC de la Empresa held in Panama on October 28, 2003, on Reputación y Responsabilidad Social Corporativas.
• The foundation aims to promote a reference model in order to improve company performance through a more extensive and articulated overall approach than the classic ISO 9000 models. In the EFQM model, the company is analyzed based on many elements, which are then grouped into nine main criteria, each with its own weight. The grade obtained with respect to each criterion then contributes, based on the weight envisaged by the model, to the final evaluation of the company.
• In this regard, it is possible to consult the publications on the subject produced by important corporate responsibility scholars Carroll [68] and Joyner and Payne [69].
• It serves to promote a culture of quality that is aimed at the continuous improvement of processes and the optimal use of resources. This tool starts from the assumption that in order to achieve the highest quality, constant interaction between research, design, testing, production, and sales is necessary. To improve quality and satisfy the customer, the four phases must constantly rotate, with quality as the main criterion. Edwards Deming in Japan in the 1950s. In those years in Japan, quality production was ensured simply by the testing phases. Post-process inspections only made it possible to discard the defective parts and, following this logic, the increase in quality would have meant an increase in inspections and consequently in costs. Waste and costs were not in tune with the concept of quality sought by Japan. Edwards Deming, to introduce tools to ensure a progressive improvement in quality. The Japanese subsequently reinvented the Deming wheel and called it the PDCA Cycle, constituting a method to be applied to all phases and situations. Now, the concept of constantly spinning the Deming wheel to generate continuous improvement is extended to all phases of management, and the four stages of the wheel correspond to specific activities.
• For an in-depth analysis, see the paper "Determinants of collateral" in which the authors conduct an extensive examination of the effects of information asymmetries and of the relationships of the financial and banking market in the various economic cycles: GABRIEL JIMENEZ (Banco de España), VICENTE SALAS (Universidad de Zaragoza and Banco de España), and JESUS SAURINA (Banco de España), February 2004.
• Acronym corresponding to the Italian PMI (small and medium enterprises), PyMEs (pequeñas y medianas empresas).
• The standard that specifies the requirements for a quality management system in which an organization must demonstrate its ability to consistently supply products that satisfy the customer and the applicable regulatory requirements, aiming to increase customer satisfaction through the effective application of this system, including processes for continuous improvement and customer compliance assurance. All requirements of this international standard are generic and are intended to be applicable to all organizations, regardless of the type, size, and product supplied.
• This denomination indicates a quality management program based on the control of the mean square deviation, which aims to bring the quality of a product or service to a certain level that is particularly favorable for the consumer. This variability is so limited that initially the common opinion was that it was impossible to achieve, and many believed that a three-sigma strategy might be acceptable. This guarantees a direct impact on the customer, intended as a user of the process or product.
• The analysis can concern the internal or external environment of an organization. The usefulness of SWOT analysis is not limited to organizations for profit. SWOT analysis can be used in any decision-making process where the desired end state has been defined.
• With this expression, Telefónica wants to include all the subjects and interested parties who meet the company; this expression could also be translated with the common term of Anglo-Saxon derivation "stakeholder."
• The text is taken from the Telefónica Web site in the specific section dedicated to RC and sustainability 2009 (www.telefonica.com/es).
• Adquira is the leading trading and provisioning solutions company in Spain, striving to facilitate business relations between businesses through an integrated e-commerce platform. Its mission is to enable companies to take part in e-commerce, meeting their procurement needs, allowing them to do business with significant competitive advantages and offer reliable solutions. Adquira began operating in 2000 as an initiative of four of the largest companies in Spain: BBVA, Telefónica, Iberia, and Repsol YPF; the company has a very full database of more than 4,500 suppliers in Spain, in order to improve the purchasing processes of its customers. Its activity, with almost 10 years of experience in the market, allows it to offer specialization, experience, and guarantee of service.
• Bank founded in Bilbao in 1857 that gave rise (through subsequent mergers) to the current BBVA group (Banco Bilbao Vizcaya Argentaria, S.A.).
• The Red Nacional de Los Ferrocarriles Españoles is a Spanish state structure of railway transport founded in 1941 and in force until 2004–2005, which was divided into ADIF (Spanish railway infrastructure management body) and Renfe Operadora (the company that deals with the railway service).
• The Empresa Construcciones Aeronáuticas S.A. (CASA) created by José Ortiz Echagüe on March 3, 1923, was the first Spanish company in the aerospace sector.
• Telefónica presents in this annual report on corporate responsibility its behavior toward customers, employees, shareholders, suppliers, society, and the environment. The content is part of the company’s CSR strategy and includes information on Telefónica’s achievements in this area, its objectives, and challenges for the future.
• Cesar Alierta Izuel graduated in Law from the University of Zaragoza in 1967 and after 3 years earned a master’s in business administration from Columbia University in New York, United States. Executive President of Telefónica S.A. since July 26, 2000, he has contributed significantly to the growing development of the Spanish telephone group in recent years.
• The Observatorio de la Sostenibilidad en España is an independent project in operation since February 2005, based at the University of Alcalá, and starts its activities following an agreement signed with the Ministry of the Environment, the Foundation for Biodiversity, and the General Foundation of the University of Alcalá.
• The 2008 EU Industrial R&D Investment Scoreboard.
• Telefónica O2 Germany GmbH & Co. The company offers its German private and commercial customers fixed and mobile telephone services with prepaid contracts, as well as innovative mobile telephone and data transmission services based on GPRS and UMTS technologies, thus becoming an integrated high-speed communication provider, the leader in Germany by market share. In it, the communications company provides information on key performance indicators for 2009 and its commitment to customers, employees, and the community, as well as its CSR goals for 2010.
• The Office of Climate Change was established in September 2006 in the UK to help and support the analysis work on climate change and the development of policies and strategies for the future. The organization’s goal is to reduce the environmental impact deriving from "hardly responsible" choices by companies and to promote and raise public awareness of issues of great interest today, such as human health and sustainability.
• The EPI aims to give the company a more accurate picture of the state of environmental progress, for each company, by providing reliable quantitative information; the index will help evaluate the measures taken so far and facilitate decision making for the future. These indicators reflect characteristics such as environmental objectives, ongoing legal proceedings, and employee training.
• For an extensive discussion of the BSC as an "integrated dashboard of indicators" see Vigano, "The value of the company. Historical analysis and determination objectives" 2001, chap. 3, pp. 93–101.
• In 2008, the company designed an Environmental Management System in accordance with the international standard ISO 14001 to set environmental management guidelines for all group companies. The documents that make up the Environmental Management System worldwide are the environmental policy, the Basic Standard, nine specific environmental management standards, and the Environmental Sustainability Index.
• The CSI is an "average" synthetic indicator, built based on the assessments given by customers on the individual aspects that put the customer in a relationship with Telefónica and on the level of importance that the individual aspects have for each customer. For a careful analysis of the index, see Bryant and Fornell, "American Customer Satisfaction Index, Methodology Report," April 2005.
• This program, sponsored by the Fundación Telefónica, aims to encourage the use of the Internet as a tool for innovation and pedagogical training for teachers, parents, and students of primary, secondary, high school, and intermediate training cycles. To do this, for 10 years, it has operated through a dedicated portal signed by more than 12,000 Spanish centers and holds an international congress every 2 years with an influx of thousands of teachers.
• The tool is used by the Reputation Institute to measure the reputation among stakeholders, interested countries, and industry. The Reputation Institute is involved in an ongoing effort to measure and monitor the corporate reputation of companies around the world. The Global Pulse project measures the overall reputation of the world’s largest companies by capturing consumer data in 27 countries using the core of the RepTrak™ model. In 2006, the RI did a multicenter, national study to understand how reputation had evolved over the previous decade.
• State non-profit association, declared to be of public utility, with the agreement of the Council of Ministers, adopted at the meeting of 09/12/1977. Its purpose is to coordinate and support disability prevention efforts and protect the rights of disabled people by providing resources whose primary objective is the social integration of people with disabilities. It focuses its activity based on the following approach: "... to be the first prestigious reference in the world on disability, as an institution that provides complete assistance for people with disabilities, to offer our beneficiaries a personalized, professional, efficient continuous and fully satisfactory, throughout their life path."
• The social action program of the Telefónica Group, managed by its Foundation with the mobile phone operators of 13 Latin American countries, contributes significantly to eradicating child labor in the region. The program is aligned with the regional objectives of the Organización Internacional del Trabajo (OCT), seeking to eliminate the worst forms of child labor by 2015, and all child labor by 2020.

© 2022 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution 3.0 License , which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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Home » Management Case Studies » Case Study: Corporate Social Responsibility of Starbucks

Case Study: Corporate Social Responsibility of Starbucks

Starbucks is the world’s largest and most popular coffee company. Since the beginning, this premier cafe aimed to deliver the world’s finest fresh-roasted coffee. Today the company dominates the industry and has created a brand that is tantamount with loyalty, integrity and proven longevity. Starbucks is not just a name, but a culture .

It is obvious that Starbucks and their CEO Howard Shultz are aware of the importance of corporate social responsibility . Every company has problems they can work on and improve in and so does Starbucks. As of recent, Starbucks has done a great job showing their employees how important they are to the company. Along with committing to every employee, they have gone to great lengths to improve the environment for everyone. Ethical and unethical behavior is always a hot topic for the media, and Starbucks has to be careful with the decisions they make and how they affect their public persona.

The corporate social responsibility of the Starbucks Corporation address the following issues: Starbucks commitment to the environment, Starbucks commitment to the employees, Starbucks commitment to consumers, discussions of ethical and unethical business behavior, and Starbucks commitment and response to shareholders.

Commitment to the Environment

The first way Starbucks has shown corporate social responsibility is through their commitment to the environment. In order to improve the environment, with a little push from the NGO, Starbucks first main goal was to provide more Fair Trade Coffee. What this means is that Starbucks will aim to only buy 100 percent responsibly grown and traded coffee. Not only does responsibly grown coffee help the environment, it benefits the farmers as well. Responsibly grown coffee means preserving energy and water at the farms. In turn, this costs more for the company overall, but the environmental improvements are worth it. Starbucks and the environment benefits from this decision because it helps continue to portray a clean image.

Another way to improve the environment directly through their stores is by “going green”. Their first attempt to produce a green store was in Manhattan. Starbucks made that decision to renovate a 15 year old store. This renovation included replacing old equipment with more energy efficient ones. To educate the community, they placed plaques throughout the store explaining their new green elements and how they work. This new Manhattan store now conserves energy, water, materials, and uses recycled/recyclable products. Twelve stores total plan to be renovated and Starbucks has promised to make each new store LEED, meaning a Leader in Energy and Environmental Design. LEED improves performance regarding energy savings, water efficiency, and emission reduction. Many people don’t look into environmentally friendly appliances because the upfront cost is always more. According to Starbucks, going green over time outweighs the upfront cost by a long shot. Hopefully, these new design elements will help the environment and get Starbucks ahead of their market.

Commitment to Consumers

The second way Starbucks has shown corporate social responsibility is through their commitment to consumers. The best way to get the customers what they want is to understand their demographic groups. By doing research on Starbucks consumer demographics, they realized that people with disabilities are very important. The company is trying to turn stores into a more adequate environment for customers with disabilities. A few changes include: lowering counter height to improve easy of ordering for people in wheelchairs, adding at least one handicap accessible entrance, adding disability etiquette to employee handbooks, training employees to educate them on disabilities, and by joining the National Business Disability Council. By joining the National Business Disability Council, Starbucks gains access to resumes of people with disabilities.

Another way Starbucks has shown commitment to the consumers is by cutting costs and retaining loyal customers. For frequent, loyal customers, Starbucks decided to provide a loyalty card. Once a customer has obtained this card, they are given incentives and promotions for continuing to frequent their stores. Promotions include discounted drinks and free flavor shots to repeat visitors. Also, with the economy being at an all time low, Starbucks realized that cheaper prices were a necessity. By simplifying their business practices, they were able to provide lower prices for their customers. For example, they use only one recipe for banana bread, rather than eleven!

It doesn’t end there either! Starbucks recognized that health is part of social responsibility. To promote healthier living, they introduced “skinny” versions of most drinks, while keeping the delicious flavor. For example, the skinny vanilla latte has 90 calories compared to the original with 190 calories. Since Starbucks doesn’t just sell beverages now, they introduced low calorie snacks. Along with the snacks and beverages, nutrition facts were available for each item.

Also one big way to cut costs was outsourcing payroll and Human Resources administration . By creating a global platform for their administration system, Starbucks is able to provide more employees with benefits. Plus, they are able to spend more money on pleasing customers, rather than on a benefits system.

Commitment and Response to Shareholders

One way Starbucks has demonstrated their commitment and response to shareholder needs is by giving them large portions. By large portions, Starbucks is implying that they plan pay dividends equal to 35% or higher of net income to. For the shareholders, paying high dividends means certainty about the company’s financial well-being. Along with that, they plan to purchase 15 million more shares of stock, and hopefully this will attract investors who focus on stocks with good results.

Starbucks made their commitment to shareholders obvious by speaking directly to the media about it. In 2004, Starbucks won a great tax break, but unfortunately the media saw them as “money grubbing”. Their CEO, Howard Shultz, made the decision to get into politics and speak to Washington about expanding health care and the importance of this to the company. Not only does he want his shareholders to see his commitment, but he wants all of America to be able to reap this benefits.

In order to compete with McDonalds and keeping payout to their shareholders high, Starbucks needed a serious turnaround . They did decide to halt growth in North America but not in Japan. Shultz found that drinking coffee is becoming extremely popular for the Japanese. To show shareholders there is a silver lining, he announced they plan to open “thousands of stores” in Japan and Vietnamese markets.

Commitment to Employees

The first and biggest way Starbucks shows their commitment to employees is by just taking care of their workers. For example, they know how important health care, stock options, and compensation are to people in this economy. The Starbucks policy states that as long as you work 20 hours a week you get benefits and stock options. These benefits include health insurance and contributions to employee’s 401k plan. Starbucks doesn’t exclude part time workers, because they feel they are just as valuable as full time workers. Since Starbucks doesn’t have typical business hours like an office job, the part time workers help working the odd shifts.

Another way Starbucks shows their commitment to employees is by treating them like individuals, not just number 500 out of 26,000 employees. Howard Shultz, CEO, always tries to keep humanity and compassion in mind. When he first started at Starbucks, he remembered how much he liked it that people cared about him, so he decided to continue this consideration for employees. Shultz feels that a first impression is very important. On an employee’s first day, he lets each new employee know how happy he is to have them as part of their business, whether it is in person or through a video. His theory is that making a good first impression on a new hire is similar to teaching a child good values. Through their growth, he feels each employee will keep in mind that the company does care about them. Shultz wants people to know what he and the company stand for, and what they are trying to accomplish.

Ethical/Unethical Business Behavior

The last way Starbucks demonstrates corporate social responsibility is through ethical behavior and the occasional unethical behavior. The first ethically positive thing Starbucks involves them self in is the NGO and Fair Trade coffee. Even though purchasing mostly Fair Trade coffee seriously affected their profits, Starbucks knew it was the right thing to do. They also knew that if they did it the right way, everyone would benefit, from farmers, to the environment, to their public image.

In the fall of 2010, Starbucks chose to team up with Jumpstart, a program that gives children a head start on their education. By donating to literacy organizations and volunteering with Jumpstart, Starbucks has made an impact on the children in America, in a very positive way.

Of course there are negatives that come along with the positives. Starbucks isn’t the “perfect” company like it may seem. In 2008, Starbucks made the decision to close 616 stores because they were not performing very well. In order for Starbucks to close this many stores in one year, they had to battle many landlords due to the chain breaking lease agreements. Starbucks tried pushing for rent cuts but some stores did have to break their agreements. On top of breaching lease agreements, Starbucks was not able to grow as much as planned, resulting their future landlords were hurting as well. To fix these problems, tenants typically will offer a buyout or find a replacement tenant, but landlords are in no way forced to go with any of these options. These efforts became extremely time consuming and costly, causing Starbucks to give up on many lease agreements.

As for Starbucks ethical behavior is a different story when forced into the media light. In 2008, a big media uproar arose due to them wanting to re-release their old logo for their 35th anniversary. The old coffee cup logo was basically a topless mermaid, which in Starbucks’ opinion is just a mythological creature, not a sex symbol. Media critics fought that someone needed to protect the creature’s modesty. Starbucks found this outrageous. In order to end the drama and please the critics, they chose to make the image more modest by lengthening her hair to cover her body and soften her facial expression. Rather than ignoring the media concerns, Starbucks met in the middle to celebrate their 35th anniversary.

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Ethics and CSR in Business: A Review and Future Research

• First Online: 02 March 2024

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• Xingxing Wang 3 ,
• Chatchawan Chaiyasat 3 &
• Voralux Vorapuksirikool 3  

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In recent years, corporations increasingly adopt socially responsible business activities, policies, and processes. Corporate social responsibility (CSR) has attracted a great deal of scholarly attention in business-related fields such as business administration, human resource development, organizational development, marketing, and so on with the general acknowledgment of its benefits to an organization’s reputation, stockholders, employees, consumers, community, environment, society, and the country at large. This paper aims to present a brief detail of CSR development, the CSR concept, and the counterargument of CSR criticism regarding its role of emphasis on firms’ reputation and redirecting the resources for stockholders. Further, it appears that CSR is generally viewed as an ethical means of business organizations’ strategies, aiming to make a great contribution to society through various kinds of socially responsible activities, initiatives, and practices. The related ethical concepts, three different approaches to CSR in business contexts, and some significant issues for business in CSR; therefore, were briefly discussed. In order to create a better understanding of the role of CSR in business operations in a systemic way, this paper also proposes the four-interrelated step conceptual framework for CSR in business. Interestingly, the ideas for future research on CSR in related topics under the concept of Green Human Resource Management (GHRM) and Green Human Resource Development (GHRD), consumer behaviors, stakeholder influence, and corporate reputation were also provided.

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Wang, X., Chaiyasat, C., Vorapuksirikool, V. (2024). Ethics and CSR in Business: A Review and Future Research. In: Russ-Eft, D.F., Alizadeh, A. (eds) Ethics and Human Resource Development. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-38727-2_14

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The effects of business ethics and corporate social responsibility on intellectual capital voluntary disclosure

Journal of Intellectual Capital

ISSN : 1469-1930

Article publication date: 9 March 2021

Issue publication date: 17 December 2021

This study aims to examine the potential effect that business ethics (BE) in general and corporate social responsibility (CSR) more specifically can exert on the voluntary disclosure (VD) of intellectual capital (IC) for the ethically most engaged firms in the world.

Design/methodology/approach

The research design is based on an inductive approach. As part of the global quantitative investigation, the authors have analyzed the impact of BE and CSR on the transparent communication of the IC. The data under analysis have been investigated using multiple linear regression.

Based on a sample of 83 enterprises emerging as the most ethical companies in the world, the results have revealed that the adoption of ethical and socially responsible approach is positively associated with the extent of VD about IC. This finding may help attenuating the asymmetry of information and the conflict of interest potentially arising with corporate partners. Hence, IC-VD may stand as an evidence of ethical and socially responsible behaviors.

Practical implications

Global and national regulators and policymakers can be involved by these results when setting social reporting standards because they suggest that institutional and/or cultural factors affect top management's social reporting behavior in the publication of the IC information.

Social implications

Direct and indirect stakeholders, if supported by ethical and socially responsible behaviors of the company, could assess more in detail the quality of the disclosed information concerning the IC.

Originality/value

Most of the studies that have been conducted in this field have examined the effect of BE and CSR on the firm's overall transparency, neglecting their potential effect on IC disclosure. This study is designed to fill in this gap through testing the impact of ethical and socially responsible approaches specifically on IC-VD.

• Business ethics
• Corporate social responsibility
• Voluntary disclosure
• Intellectual capital
• Transparency

Rossi, M. , Festa, G. , Chouaibi, S. , Fait, M. and Papa, A. (2021), "The effects of business ethics and corporate social responsibility on intellectual capital voluntary disclosure", Journal of Intellectual Capital , Vol. 22 No. 7, pp. 1-23. https://doi.org/10.1108/JIC-08-2020-0287

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Copyright © 2021, Matteo Rossi, Giuseppe Festa, Salim Chouaibi, Monica Fait and Armando Papa

Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode

1. Introduction

Over the last few decades, firms have been generating value not only from securities and financials but also from other intangible elements, such as skills of employees (human capital), novelty in technology (structural capital), relationships with customers (direct relational capital) and reputation on the market (indirect relational capital or social capital), all forms of potential intellectual capital (IC), whose contribution, however, is probably riskier than industrial assets ( Su, 2014 ; Cruz-González et al. , 2014 ). In fact, the impact of IC on the business results is uncertain, and in addition, it is often more difficult to identify and measure its characteristics ( Murray et al. , 2016 ).

The uncertainty about its representation and measurement still poses issues related to accounting, evaluation and governance ( Hussi, 2004 ; Guthrie et al. , 2006 ; Hamed and Omri, 2014 ). To limit these problems, managers may choose voluntary disclosure (VD) to reduce the asymmetry of the information ( Branco and Rodrigues, 2008 ).

IC is a driving factor and creator of lasting value ( Lin et al. , 2015 ; Vaz et al. , 2019 ), and disclosure by applying ethical and social principles improves the trust of information and reduces the conflict of interest ( Alves et al. , 2012 ; Chung et al. , 2015 ; Al Maskati and Hamdan, 2017 ). These behaviors may exert a positive effect on the global quality of the IC-VD ( Melloni, 2015 ), and in this study, more specifically, VD of nonfinancial information about IC are assumed to be positively influenced by ethical and socially responsible behaviors of the company's decision-makers ( Corvino et al. , 2019 ).

In this respect, interest in the development of business ethics (BE) and corporate social responsibility (CSR) in accounting, evaluation and management has gained increasing attention in the academic literature ( Nahapiet and Ghoshal, 1998 ), and the last 20 years (or even more) of empirical research on these issues have generated vast literature ( Gray et al. , 1995 ; Chen and Gavious, 2015 ; Singh and Gaur, 2020 ). Accordingly, the quality of the information published by companies about their IC has received an ever more peculiar interest in managerial research ( Ousama and Fatima, 2012 ; Muttakin et al. , 2015 ; Devalle et al. , 2016 ; Bellucci et al. , 2020 ), with specific concerns about the effect of BE and CSR on the quality of the disclosed information on voluntary or mandatory basis, also considering several financial scandals that have added doubts about relevance and reliability of some company data ( Lehnert et al. , 2016 ).

Subsequently, a critical question is the following: is it adequate, opportune and reliable to take into consideration only the accounting information that mandatorily concern IC, especially considering that this entity is so difficult to identify and measure? This issue seems deserving huge attention particularly in the current context, constantly and continuously marked by the rise of BE and CSR, with consequent effect also on the relevance of the quality of the disclosed information.

For example, the legitimacy theory provides some contributions regarding environmental reputation, and the related effect of VD on reputational capital ( Alvino et al. , 2020 ). In this respect, the reputation of the company is a social construct stemming from the process of legitimization ( Bond et al. , 2016 ).

However, empirical studies investigating the effect of BE and CSR on VD have proved mixed results, mostly because of the different meaning about ethics and responsibility in each institutional and cultural context ( Ting et al. , 2020 ). The current study aims to combat this diversity and its consequences in terms of value creation, analyzing more specifically the potential effect of BE and CSR on the VD of IC ( Giacosa et al. , 2017 ).

The perimeter of the research regards the companies that are ranked by the Ethisphere Institute – most probably the global leader in the world for defining and advancing the standards of ethical and social practices that fuel corporate character, market trust and business success – as the most ethical companies in the world. More precisely, the contribution of the study is in checking whether the companies' behavior about IC disclosure is influenced by BE and CSR, aspect that has been often neglected in other studies.

In this respect, a research concerning companies displaying high level of ethical and socially responsible commitment has been conducted, with two main ambitions. First, results should enable to explicitly identify the characteristics that are more likely to influence the diffusion of information about IC in the annual reports through adoption of BE and CSR; second, it should help exploring the contribution of the several company characteristics as assessed in terms of ethics-based scoring.

The empirical evidence emerging from the research has demonstrated that the adoption of approaches that are based on BE and CSR noticeably help in enhancing the disclosure extent of the IC information as figuring in annual reports. Thus, this study should serve to provide further recommendations to the companies intending to adopt codes of ethics, or to put forward CSR practices, encouraging these behaviors also from the point of view of the IC disclosure (and consequent accounting, evaluation and management).

The structure of this paper is organized as follows; Section 2 presents the basic theoretical background and the hypotheses that have been developed: in this section, the relationship between the potential effect of BE and CSR on the VD of IC has been analyzed. Section 3 displays the methodology that has been adopted, while the empirical results are exposed and discussed in Section 4 ; finally, the discussions of the findings, the concluding remarks and their implications are provided in Section 5 .

2. Theoretical background and hypotheses development

As aforementioned, the following investigation is about the effect of BE and CSR on IC-VD, also for clarifying the distinct influences that may arise from concepts that sometimes are considered in ambiguous connection ( Fassin et al. , 2011 ). Therefore, the first step of the research is about a general analysis of the studies focusing on the association between ethical as well as socially responsible behaviors and IC-VD as core aspect of a more global knowledge management approach that cutting-edge enterprises should adopt to succeed ( Serenko and Bontis, 2013 ).

2.1 Theoretical background

To present main reasons and usefulness of the VD of information about IC, the theory of planned behavior has been adopted as fundamental approach. In fact, although extensive research has focused on the variables that externally and internally may influence the managers' decision about disclosing information on IC, few studies have examined in this respect the psychological factors and have used a theoretical decision-making framework ( Coluccia et al. , 2017 ; McPhail, 2009 ).

The theory of planned behavior, largely used to explain the process of individual decision-making behavior ( Ajzen, 1991 ), can emerge as a theoretical framework for investigating the psychosocial factors stimulating the managers' decision to disclose IC information in a mandatory and/or voluntary way. In addition, this model has demonstrated its superiority over other theoretical approaches in many contexts of VD, including IC ( Zhang et al. , 2019 ).

This theory assumes that when individuals, considering altogether internal attitudes and external considerations, perceive a manageable activity as capable of providing business benefits, such as those that may arise from IC-VD, they receive intention, support and encouragement in adopting that specific behavior, also making assumptions about their ability to perform the task ( Passaro et al. , 2018 ; Mura et al. , 2012 ).

For example, Armitage and Conner (2001) examined 185 empirical studies that were conducted prior to 1997, finding that about 39 and 27% of the variance of intention and behavior, respectively, was caused by the theory of planned behavior. In fact, this theory is a rational decision-making model, which is mainly used to predict the potential behavioral intentions of the managers (in this specific case, adopting VD of IC).

Three key independent variables are at the basis of this framework: (1) the attitudes toward a particular behavior; (2) the perceptions of others' approval or disapproval of a particular behavior (subjective norms) and (3) the perceived behavioral control about easiness or difficulty in performing a particular behavior ( Ajzen, 1991 ). This configuration is adopted as methodological basis for the theoretical model in which assessing the following hypotheses.

2.2 Hypotheses development (H1) : BE and VD of IC

Transparent and reliable communication is essential to reflect the true image of a company ( Bhimani, 2008 ): with this regard, financial transparency is a necessary condition for a firm that is involved in the BE process. In the specific context of disclosure, several authors have recognized that BE rooted in organizational culture has a tremendous influence on the development of IC-VD ( Branco and Rodrigues, 2008 ).

For example, Jo et al. (2008) have analyzed the development of ethical standards in the business to improve the quality of the disclosed information, finding that entrepreneurs and managers that consider the promotion of ethical behaviors are urged to ensure permanent disclosure of the company's IC. Later, Navid et al. (2015) have found that unethical behaviors are at the basis of corporate financial scandals, workplace frauds and harassment or misleading financial reporting: such issues have raised awareness about the positive benefits of ethical behavior, also in improving VD (and then, also about IC), to limit the problems of the agency theory.

Mouritsen (2004) has found a significant gap between the market value and the book value resulting from the failure of the companies' hidden value in their annual reports: consequently, BE oriented to IC-VD would limit the problem of the business undervaluation (more specifically, VD of information about IC is positively influenced by the ethical behavior of the company's decision-makers).

On the other hand, the complexity and uncertainty of strategic decision-making require different combinations of data, information and knowledge. In this respect, some research has been conducted to examine the factors influencing disclosure of IC: Ferreira et al. (2012) have found that ownership concentration and firm size have a positive influence on the disclosure of IC, and ethical behaviors also positively influence this disclosure.

Several studies suggest that there are many benefits to acting ethically, such as improving the financial and nonfinancial performances as well as creating a sustainable competitive advantage ( Goel and Ramanathan, 2014 ; Khondkar et al. , 2016 ). In addition, in highly risky and uncertain contexts, policymakers are forced to select powerful tools over VD.

BE behaviors have positive impact on the extent of the IC-VD.

2.3 Hypotheses development (H2) : CSR and VD of IC

The economic value of the company is expressed not only by its means of production but also by the global impact that fundamentally derives from its IC ( Campanella et al. , 2014 ), activating human, structural and relational resources to generate shared value ( Porter and Kramer, 2011 ) at business, social and environmental level ( Elkington, 1998 ). As result, a new path on IC reporting sustains that all companies are increasingly required to be socially responsible and to better manage their environmental impact ( Aslam et al. , 2018 ).

In this vein, organizations have developed accounting and management systems and improved their disclosure practices according to social and environmental principles ( Khondkar et al. , 2016 ). In part, this has been due also to the fact that companies may have incentives for adopting globally responsible approaches and operating socially responsible initiatives ( Gangi et al. , 2019 ); however, a study by Türkel et al. (2016) on the European Union has provided evidence that CSR is a mean that companies may voluntarily decide to adopt to contribute to better society and cleaner environment.

From one side, Sun et al. (2010) have found that companies that need to pursue a strategy of VD of IC are brought to value CSR, and this should be positively interpreted by the various stakeholders. On the other side, regarding the potential asymmetry of information and conflict of interest that may exist, CSR should constitute a behavioral method that would have positive effect on the corporate behaviors, as it promotes transparency, also with regard to the potential VD of IC ( Beretta et al. , 2019 ).

Coherently to the dynamic resource capability perspective of (Bamel and Bamel, 2018) , Luthan et al. (2016) found that in an uncertain world, the adoption of a CSR approach could help reducing uncertainty, especially if the company discloses information about its IC. Similarly, some researchers argue that CSR is a very broad domain, and VD of IC should be considered as a social responsibility action ( Chan et al. , 2014 ).

Polo and Vázquez (2008) have described the relationship between CSR and the VD of information, to ensure the sustainability of the business in general and its operational goals more specifically. In other words, CSR is an asset for the company and the various stakeholders ( Fukukawa et al. , 2007 ) because of its direct contribution to IC (indirect relational capital, for example), with consequent influence on the relevance of the information provided by the company about its IC and knowledge properties more in general ( Rechberg and Syed, 2013 ).

Moreover, as aforementioned, Khondkar et al. (2016) have studied the effect of CSR on the quality of the information disclosed in companies' annual reports. They have found a positive relationship between the level of disclosure and the intensity of CSR, concluding that greater disclosure is a form of socially responsible behavior, thus directly and/or indirectly impacting IC ( Vrontis et al. , 2020 ).

CSR behaviors have positive impact on the extent of the IC-VD.

3. Research design

3.1 sample construction and data collection.

Being the main purpose of this study to explore the effect of BE and CSR on IC-VD, a sample of firms already involved in the process has been selected. In other words, the selectable companies have been detected among those with evident commitment and involvement in ethical and social behaviors.

Several statistical institutes are responsible for making an appropriate classification in this specific field: however, since 2007, the Ethisphere Institute ( Ethisphere.com ) has been analyzing the global market to identify, sector by sector, the most committed companies in the field of ethical behaviors, drawing up a list of the most ethical companies in the world and gaining at international level high reputation in the field ( BusinessWire.com ).

Then, the following investigation has been grounded on the Ethisphere Institute database, which considers more than 100 criteria; the most important are social responsibility, good governance, environmental impact, implementation of code of good behavior, commitment of the direction to questions of ethics and CSR, setting up of internal monitoring indicators, citizen investment and so on (it also considers negative criteria, such as the existence of disputes or infringements to sector regulations). This database provides a global overview, and the list of elected representatives reveals a real geographical diversity with several companies located outside the United States, such as the United Kingdom, Australia, Sweden, Germany, India, Guatemala, Poland, Switzerland, Saudi Arabia, Portugal and Belgium.

The data under investigation have been obtained from the Global-100 KPI 2015 database published by the independent Ethics Expert Group of the Ethisphere Institute (secondary, which have been then summarized into composite indexes, and not empirical data have been used to avoid any potential bias deriving from individual interviews concerning BE and CSR, most of all in the context of the planned behavior theory). Considered as one of the most authoritative indexes in the world due to its methodology and reliability, the Corporate Knights Global 100 designates each year the top 100 companies (out of several thousands) that are the most responsible in terms of ethical behavior.

The year 2015 has been chosen so that the data under analysis could be taken as definitively reliable, considering the time that sometimes is necessary to validate all the accounting information, most of all from a social and environmental point of view. Thus, the 2015 database, to the best of the authors' ability, is the latest publicly available for which it has been possible to collect all the necessary information for implementing the current investigation, but evidently the methodology can be replicated for any other year, when all necessary data would be available (for example, searching for the adequate data starting from WorldsMostEthicalCompanies.com ).

The initial population consisted of 4,353 companies (candidates); in a second step, 4,253 companies that did not meet the classification criteria for the first 100 companies were excluded. From the 100 best ranked companies, for the specific scope of the current research firms that are part of the financial sector, considering the very peculiar rules that govern this industry, have been excluded (i.e. 17 companies); thus, the final sample has included 83 firms, with Table 1 summarizing the sampling selection criteria.

Tables 2 and 3 describe the distributional profiles by country and by sector, respectively: the sample includes 18 developed countries belonging to 35 industries, according to the 48 industry group affiliations as figuring in Fama and French (1997) , with most firms that are based in the USA, the UK and France (these three countries make up 54.28% of the total sample).

The companies from the USA are at the top of the list, with 25% of the sample (20 firms out of 83, 24.09%): French and British companies are entitled of the second position in this ranking, respectively, represented with 10 companies on an equal basis. Then, Canada ranks fourth, since it is represented with eight firms, corresponding to 10% of the total sample (hence, these four countries account for almost 60% of the total sample).

In Table 3 , the most represented sectors are Oil, Gas & Consumable Fuels (eight firms), Pharmaceuticals (seven firms) and Chemicals (four firms), respectively. Concerning other sectors, the number of companies is more limited (three or less).

3.2 The regression model

DISC_SCO: composite index about IC-VD, calculated as combination of several elements (cf. Table 4 ).

ETH_SCO: composite index about BE, calculated as combination of several elements reflecting ethical principles.

CSR_INDEX: composite index about CSR, calculated as combination of 40 indicators reflecting principles of individual and collective social responsibility.

INVT: the degree of innovation intensity is the ratio between research and development (R&D) costs and the turnover (concerning 2015).

TAX_PAID: the effective tax rate is the ratio between tax expenses and earnings before interest and taxes.

ETH_COUNTRY: the scores about this variable range from 1 to 7, with 1 indicating a very low level of country ethics and 7 indicating a very high level of country ethics.

WOM_BOARD: this variable measures the proportion of women that are present in the boards of directors.

LEG_SYST: the legal system works as a binary variable, which numbers 1 if the company belongs to the Anglo-Saxon legal system (globally recognized as stricter), and 0 otherwise.

LEVE: the level of indebtedness is the ratio between long- and medium-term debts and total assets.

POL_SECTOR: the pollutant sector works as a binary variable, which numbers 1 if the company belongs to the polluting sectors (more regulated), and 0 otherwise.

3.3 Variables definition

To operationalize the hypotheses under test, all the variables that have been included in the empirical model are defined and commented as follows.

3.3.1 Dependent variable (“DISC_SCO”)

To measure this dimension, Li et al. (2008) have adopted a content analysis method, investigating the annual reports of selected companies to derive the qualitative, quantitative, financial as well as nonfinancial data relating to IC. In Table 4 the several components for human, structural and relational capital are reported.

In the current research, according to the measure used by Li et al. (2008) , cited also in Maaloul and Zeghal (2015) , the variable “DISC_SCO” has been adopted as a proxy of IC-VD, concerning published items about IC. Based on the examination of the annual reports, this dimension appraises the disclosed information on IC.

3.3.2 Independent variables

As aforementioned, several categories of explanatory variables have been selected to test their combined effects on the VD of IC. In the empirical model under analysis, to test H1 and H2 , two explanatory variables are naturally the most relevant, namely, BE and CSR.

3.3.2.1 BE (“ETH_SCO”)

The ethical measurement has been differently implemented in different contexts because this concept is highly complex and relates to several nonmeasurable dimensions. In addition, several studies have recently operationalized this measure by various means, originating from several international organizations.

In this research, the Ethisphere Quotient developed by the Ethisphere Institute has been adopted to measure the BE of the firms, as result of an investigation that consists of a series of multiple-choice questions that count the company's ethical performance. It is a composite index based on the combination of several items, reflecting each company's level of ethical principles.

3.3.2.2 CSR (“CSR_INDEX”)

In the current study, this measure has been derived from Dias et al. (2017) , who have constructed a list of indicators for measuring the CSR associated practices. The construct involves 40 CSR indicators categorized into three CSR dimensions (5 economic, 15 environmental and 20 social), as shown in Table 5 , thus providing a global view on the CSR of each firm.

The choice of the 40 indicators has been influenced by the most widely adopted standards on CSR disclosure (CSRD), i.e. the Global Reporting Initiative (GRI) Guidelines ( Bebbington et al. , 2008 ). Dias et al. (2017) have primarily focused on the GRI core indicators representing the well-established CSR indicators, and the selected items have been adapted to avoid penalizing companies that do not apply the GRI model.

CSR_INDEX = Level of CSR disclosure

e j  = Attributed analysis (1 if the disclosure item is found, and 0 otherwise)

e  = Maximum number of items a company can disclose (40).

3.3.3 The control variables: characteristics about the firm and the environment of the firm

BE and CSR are not the only factors that may influence the VD of IC. A control has been operated about other determinants of VD that have been documented in prior studies and that might explain the effects of financial and economic peculiarities of the firms on the scale and design of voluntary, and sometimes even mandatory, disclosure of IC ( Ribeiro Lucas and Costa Lourenço, 2014 ).

More specifically, control variables related to the characteristics of the firm are the following: the degree of innovation intensity (INVT), the effective tax rate (TAX_PAID), the percentage women on board of directors (WOM_BOARD), the leverage level (LEVE) and the pollutant sector (POL_SECTOR). Control variables related to the characteristics of the environment of the firm are the following: the level of country ethics (ETH_COUNTRY) and the legal system (LEG_SYST) because the sample includes several countries.

Generally, positive signs should be expected for INVT, WOM_BOARD, ETH_COUNTRY and LEG_SYST, whereas negative signs should be expected for LEVE, and POL_SECTOR, while no directional prediction is assumed for TAX_PAID. Finally, for an overall overview about the model variables composition, cf. Table 6 .

4. Empirical results and discussion

The current research, although engineered for testing specific hypotheses, has an explanatory purpose, aiming at identifying the potential determinants for the VD of the IC through ethical-and-social responsibility approach. As a result, a linear relationship could be established between the variable to be explained (IC-VD) and the potential explanatory variables (BE and CSR).

4.1 Descriptive analysis

Sections A and B, as figuring in Table 7 , provide the descriptive statistics characteristics concerning the continuous and dichotomous variables under investigation. Section A depicts mean, standard deviation, minimum and maximum relevant to the continuous variables, whereas Section B provides the frequency of the dichotomous variables; globally speaking, the sample seems to be evenly distributed.

Starting with the analysis of Section A in Table 7 , the descriptive analysis provides evidence that the mean level of IC-VD (DISC_SCO) is 0.59; this score is high with respect to the Maaloul and Zeghal (2015) reached index (0.46), relevant to a sample of US companies in 2013. Moreover, the current sample encloses firms that should also tend to improve their informational capacity related to IC.

The BE score (ETH_SCO) has a mean value of 0.608. Most companies in the sample tend to be more involved in BE activities.

The CSR scores range from a minimum of 0.15 to a maximum of 0.95, with a mean of 0.698. A higher CSR score denotes that the company displays a better CSR performance ( Hassan and Guo, 2017 ).

As regards the control variables, the following considerations may arise. The intensity of innovation (INVT) displays an average of 0.068, with a minimum of 0 and a maximum of 0.745; whereas the mean level of debt (LEVE) scores 33.3 (that seems an appreciable level of indebtedness), and the effective tax rate (TAX_PAID) exhibits an average of 0.166.

Regarding women's percentage on directors' boards (WOM_BOARD), it has been discovered that, on average, 0.223 of board members are female, with a minimum and a maximum value of 0.10 and 0.429, respectively. Consequently, there is predominance of men in the boards of directors.

As concerns the measure of the level of the country ethics (ETH_COUNTRY), Finland (6.4), Denmark (6.2) and Japan (6) rank as the most ethical, while Spain (3.8), Canada (3.51) and South Korea (0) exhibit the lowest ethical values. This finding is very relevant, affecting the potential influence of the countries' ethical approach on the adoption of IC-VD policies on behalf of enterprises.

From the analysis of Section B in Table 7 , highlighting the binary variables related frequencies, as regards the legal system (LEG_SYST) most of the companies in the sample turn out to pertain to the Anglo-Saxon rules (55%). Additionally, concerning the pollutant sector variable (POL_SECTOR), 51% of the companies in the sample appears to belong to nonpolluting sectors.

4.2 Correlations analysis

The Pearson coefficients were computed to examine the associations between the independent variables. According to Gujarati (2004) , if the pair-wise comparison between two independent variables is over 0.8, serious multicollinearity exists.

The maximum pair-wise value in the current investigation is 0.2649 (cf. Table 8 ); thus, multicollinearity should not be a concern for the regression analysis. Nonetheless, the null hypothesis of autocorrelation can be accepted because the explanatory variables are weakly correlated with each other, indicating that autocorrelation is not a problem. Table 8 presents all the correlation coefficients between the various explanatory variables that have been adopted in the empirical model.

The intercorrelations for all the explanatory variables have been examined by applying the variance inflation factors (VIF) analysis, which revealed no sign of multicollinearity. In fact, the VIF values corresponding to all the independent variables ranged from 1.05 to 1.47, very far below the acceptable upper bound of 10 ( Hair et al. , 2006 ).

The VIF values have been reported for each regression to demonstrate the model stability. Finally, both tests suggest that the regression estimations are not degraded by the presence of multicollinearity.

4.3 Regression analysis

The empirical results reveal that 32.5% of the variation for the level of IC-VD is explained by BE, CSR and control-related variables (cf. Table 9 ). As per Fisher's ( F ) statistics, equal to 2.8, the model's reliability is confirmed at a significant threshold lower than 0.01, and consequently, we tend to reject the null hypothesis, and assume that regression has significant potential to exist.

As expected, the empirical findings, even though with not definitive statistical values, in accordance with the exploratory nature of the research, show some evidence about supporting the research hypotheses ( H1 and H2 ), as further analyzed in detail. Thus, it can be concluded that the model is statistically significant and somehow fruitful for exploring the phenomenon under investigation.

4.3.1 Empirical evidence on BE impacting IC-VD ( H1 )

This hypothesis has been assumed to verify whether the ethical behavior of the companies under analysis positively influences the level of VD of IC: examination of the statistical tests (beta coefficient, t -test and p -value) shows that this variable has a positive and significant effect on the VD of IC. Indeed, the study of causal relationships shows that the coefficient associated with the link between BE and IC-VD is positive (0.485) and statistically significant (the value of the associated t is 1.99 with p  = 0.045), corroborating the hypothesis predictions ( H1 ).

It could be noted the existence of some similarity between these findings and those published by Wirth et al. (2016) . In addition, the results show that divergence of interests and information asymmetry are issues that hinder the success of the enterprise ( Rubinstein et al. , 2001 ); similarly, the rigidity of the corporate governance system could also prevent managers from disclosing information about IC.

The problems of moral hazard and adverse selection are obvious; nevertheless, the results found in this study show that the abovementioned risks are not constraints that prevent the company from disclosing information on IC. These results turn out to be in-line with those reported by Goel and Ramanathan (2014) .

As a further result, the company's commitment in the BE process is a trigger for improving VD of IC, corroborating the results found by Areal and Carvalho (2012) on a sample of the most ethical companies in the world, as these companies can have advantages over others because of three distinct effects, namely, culture, diversity and reputation. This attitude positively influences the level of IC-VD, suggesting for example that these companies may benefit from special protection in the event of a crisis.

4.3.2 Empirical evidence on CSR impacting IC-VD ( H2 )

This hypothesis has assumed that CSR has a positive influence on the level of VD of IC. The statistical tests analysis shows that this variable positively and statistically influences the VD of information.

The estimated coefficient of CSR_INDEX is positive and statistically significant (0.116, p  < 0.01), meaning that CSR influences the VD of the IC. This corroborates the hypothesis predictions ( H2 ).

These results turn out to be in-line with those reported by Branco and Rodrigues (2008) and Dias et al. (2017) . In this respect, CSR is positively interpreted by the various stakeholders via its effect on the decisions made by the company's organs and on the cognitive and mental patterns of the managers as well as on the legitimacy of the decisions ( Fontana et al. , 2019 ).

Likewise, these results align perfectly with the conclusions about the legitimacy of the company's managers ( Bond et al. , 2016 ). Thus, in some cases, and more specifically those based on the postulates of the agency theory, the manager who engages in specific activities related to CSR seems to reduce asymmetric information adopting these actions.

Indeed, the current findings support the view suggesting that VD of information about IC is sustained by CSR, in a mutual influence. Nevertheless, the commitment of the company in the activities of social responsibility, also when impacting IC-VD, is an asset that improves the confidence of investors in the business in the long run ( Saeidi et al. , 2015 ).

These results show the potential existence of a link between CSR and socially responsible disclosure and therefore, the transparency of information. Indeed, as shown by Su (2014) , engagement in social responsibility is a form of commitment to sustainable development and integration into VD that is needed for the most innovative companies.

In addition, as indicated by Garcia-Sanchez et al. (2016) , the company's commitment to social responsibility activities may affect the level of VD and promote financial transparency. Therefore, engagement in social responsibility activities could be dominated by a strategy of transparency and reliability, which may have significant impact on IC-VD.

4.3.3 Complementary considerations

Regarding the control variables, not all the related coefficients show the expected signs. The degree of innovation intensity (INVT) is positively and significantly associated ( p  < 0.1) with VD of IC: this finding suggests that the most innovative firms worldwide have adopted more VD practices about IC; in fact, innovative firms are often under greater pressure from the part of investors and financial analysts to disclose IC relating information.

In addition, the influence of pollutant sector (POL_SECTOR) turns out to be negatively and significantly correlated ( p  < 0.1) with the IC-VD, as expected. Similar confirmation can be found also as concerns the ethical level of the country (ETH_COUNTRY), positively associated with IC-VD.

However, the legal system relevant to each country (LEG_SYST) seems to be involved in controlling the corporate transparency, but this variable appears to be negatively correlated and statistically significant ( p  < 0.05) with IC-VD. Most probably, and differently from what expected, stricter legal system may stimulate in reinforcing potential conflicts of interest and information asymmetry.

Similarly, the percentage of women on boards of directors and the level of indebtedness present directions that are contrary to what expected. Globally speaking, these potential contradictions about the control variables estimations suggest caution and confirm the initial assumption about the exploratory nature of the research.

5. Theoretical and practical implications

The overall results of the research show some applicative potential. From a scientific point of view, essentially, the study helps highlighting the persistence of several connections associating corporate ethics and the extent of IC-VD, within a context characterized with a new tendency of the companies to be responsible in this respect. From a managerial point of view, furthermore, the current study can be useful to promote the implementation of BE and CSR-related strategies, enabling to protect majority or minority shareholders through an enhanced high-quality disclosure of IC.

Ethically, nevertheless, companies should allot greater engagement about the necessity and importance of transparent and reliable communication helping reflecting the firm's true image ( Mathuva et al. , 2017 ). In this respect, financial transparency constitutes a necessary condition for the effective promotion of a firm involved in ethical and socially responsible behaviors, and with this regard, several studies have acknowledged that global ethics, as engraved within the organizational culture, has a remarkable impact on the development of VD, and specifically on the various components of IC ( Luthan et al. , 2016 ).

For example, Rezaee et al. (2020) have stressed the promotion of ethical standards within the company to improve the quality of disclosed information. Indeed, it has been recently discovered that the companies envisaging to promote ethical behaviors are called upon to adopt a rather intensive disclosure policy regarding their IC characteristics: in other words, the quality of disclosed information about IC contributes to outline the social legitimacy ( Slack and Munz, 2016 ).

The quality of information disclosed about the company's IC as based on corporate ethics should necessarily help improving the confidence of the user of the information, while enhancing the firm's social legitimacy. In this context, Su (2014) has found that companies involved in stakeholders' ethical issues can gain a competitive advantage and higher performance attracting excellent employees, as concerns human capital, and enhancing the brand image, as concerns relational/social capital ( Pedrini, 2007 ).

The VD program is an organized process that abides by specific rules conforming to the company's social approach and the executive's behavior. In this respect, the agency theory helps only partially reflecting the reality of the company, as it outlooks other aspects of the business value, especially within the new context of the knowledge-based economy ( Long Kweh et al. , 2014 ).

More particularly, managers are representative agents that rationally respond to the firm's economic stakeholders and the control mechanisms/contractual motivations ( Bamber et al. , 2010 ). Yet, the enterprises' decision-makers are not interchangeable, and companies' actions are a reflection of the values, skills and cognitive competences of the human capital ( Rodriguez Perez and de Pablos, 2003 ); thus, as an organizational option, VD is rather potentially dependent on other considerations than on just the firm's environmental characteristics.

Moreover, the process of communication is complex, as it involves judgments and arbitrations that account for the various constraints relating to the environment of the company, and managers act on the basis of their personal interpretations of the strategic situations they encounter. These interpretations are therefore based also on the individual and organizational values that the manager enjoys ( López-González, 2019 ).

To this end, the theory of planned behavior has been considered as means whereby the disclosure decision about IC could be influenced by several attitudes about BE and CSR. Indeed, it helps understanding a certain behavior in individual's psychological processes, as subjected to various influences, particularly to ethical and social factors.

Like any other behavior, information disclosure about IC also rests on perceived opportunities as well as probable outcomes, as entirely based on managers' values and proper knowledge. Moreover, the generated and disseminated information highly depends on the capacity of the company's information systems not only in terms of quantity but also in terms of growth and ability to account for the needs issued by parties that are external to the company, along with other organisms' requests, ever more with respect to IC.

At even more practical level, the reached findings appear to provide effects for global regulators and policymakers intending to install social reporting standards. They may provide ground that institutional and/or cultural factors affect top management's social reporting behavior or ethical/social values more in general, influencing the quality of published information about IC.

6. Research limitations and future avenues

The study shows several constraints, and two seem quite relevant. First, the research sample corresponds to firms without homogeneous characteristics, especially with regard to their pertinence to two different legal systems (the selected sample encloses several countries with two distinct legal system assumptions), probably affecting the companies' behaviors in terms of VD (mandatorily for sure); for this reason, it seems very desirable to control more thoroughly the legal system's effect, for example, subdividing further research samples into subsamples on the basis of the legal system pertinence. Furthermore, it could be useful to implement a comparison of the investigated model between companies pertaining to civil law or common law, since the legal system directly influences the accounting system, and then, the quality of the financial information.

Second, this finding appears to demonstrate that VD depends highly on corporate culture rather than the respective countries' accounting culture: this should also highlight that IC-VD stands as a form of socially responsible behavior, or an outcome of ethical behavior regarding the entirety of partners, more than mere legal constraint. Thus, further research on cross-cultural management influence could be useful, along with longitudinal analyses that could support major reliability of the global research.

7. Conclusion

This study has explored the impact of BE and CSR on the process of IC-VD, concerning a sample including 83 of the most ethical companies in 2015 in the world. Among the research motivations, it is to highlight that very few empirical studies appear to demonstrate the persistence of a relationship between ethical and social approaches and IC-VD: attempting to fill such a noticeable gap, the current study has been conducted to investigate, empirically, the relationship binding both variables.

Findings support arguments that companies with ethical behaviors and socially responsible practices appear to be highly committed to VD about their IC. It could follow, therefore, that IC-VD can also be considered as a form of ethical and socially responsible behavior.

The results achieved in this research afford empirical evidence as to the extent of external disclosure practices in the global context, also considering ever more frequent interfirm networks, providing useful means for investors seeking profitable investment opportunities and for financial report users, acting as operative orientations of knowledge management and IC strategy ( Del Giudice and Maggioni, 2014 ). In this respect, an ethical behavior (structural capital), influenced by personal values (human capital), affects IC-VD and then, practically, also the relational/social capital of the organization.

Sample selection process

Note(s) : *, ** and *** represent significance at 0.1, 0.05 and 0.01, respectively

Source(s) : Authors' calculation

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Acknowledgements

The article is based on the study funded by the Basic Research Program of the National Research University Higher School of Economics (HSE) and by the Russian Academic Excellence Project “5-100”.

Corresponding author

About the authors.

Matteo Rossi is an Associate Professor of Corporate Finance at the University of Sannio, Benevento, Italy, where he received the PhD degree in Management. He is also an Adjunct Professor of Advanced Corporate Finance at LUISS, Rome, Italy. Dr Rossi is the Editor-in-Chief for the International Journal of Managerial and Financial Accounting and for the International Journal of Behavioral Accounting and Finance.

Giuseppe Festa is an Associate Professor of Management at the Department of Economics and Statistics of the University of Salerno, Italy, EU. He holds a PhD in Economics and Management of Public Organizations from the University of Salerno, where he is the Scientific Director of the Postgraduate course in Wine Business and the Vice-Director of the Second Level Master's in Management of Healthcare Organizations – Daosan. He is also the Chairman of the Euromed Research Interest Committee on Wine Business. His research interests focus mainly on wine business, information systems and healthcare management.

Salim Chouaibi is a PhD Student in Accounting at the Faculty of Economic Sciences and Management of the University of Sfax (Tunisia).

Monica Fait is an Assistant Professor of Management at the Department of Management Economics Mathematics and Statistics of the University of Salento, Lecce (Italy), where she teaches Business Economics and Management. Her research looks at the effects of Information and Communication Technology (ICT) on company behavior, knowledge sharing and sustainability. She is the author of several scientific publications and papers on the Web 2.0 marketing strategies, and her studies have been published on international journals like Technological Forecasting and Social Change , Journal of Knowledge Management and British Food Journal . She also serves as reviewer for several international journals and is a speaker at national and international conferences and industry forums.

Armando Papa is an Associate Professor of Management at the Faculty of Communication Sciences of the University of Teramo (Italy) and at the National Research University Higher School of Economics (HSE) of Moscow (Russian Federation). He received the postgraduate master's degree in corporate finance from IPE (Naples, Italy) and the PhD degree in management from the “Federico II” University of Naples. He is an Associate Editor for the Journal of Knowledge Economy (Springer) and an Editorial Assistant for the Journal of Knowledge Management (Emerald).

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15.14: Case Study- Social Entrepreneurship at Tom’s Shoes

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Learning Objectives

• Give examples of corporate social responsibility

While there is no universally accepted definition of social entrepreneur , the term is typically applied to an individual who uses market-based ideas and practices to create “social value,” the enhanced well-being of individuals, communities, and the environment. Unlike ordinary business entrepreneurs who base their decisions solely on financial returns, social entrepreneurs incorporate the objective of creating social value into their founding business models.

Social entrepreneurship has become exceedingly popular in recent years and a number of prestigious business schools have created specific academic programs in the field. It is often said that social entrepreneurs are changing the world. They are lauded for their ability to effect far-reaching social change through innovative solutions that disrupt existing patterns of production, distribution, and consumption. Prominent social entrepreneurs are celebrated on magazine covers, praised at the World Economic Forum in Davos, and awarded millions of dollars in seed money from “angel” investors, and applauded as “harbingers of new ways of doing business.”

Social entrepreneurs are thus often hailed as heroes—but are they actually effecting positive social change?

Undeniably, social entrepreneurship can arouse a striking level of enthusiasm among consumers. Blake Mycoskie, social entrepreneur and founder of TOMS Shoes, tells the story of a young woman who accosted him in an airport, pointing at her pair of TOMS while yelling, “This is the most amazing company in the world!” Founded in 2006, TOMS Shoes immediately attracted a devoted following with its innovative use of the so-called One for One business model, in which each purchase of a pair of shoes by a consumer triggers the gift of a free pair of shoes to an impoverished child in a developing country.

The enthusiasm associated with social entrepreneurship is perhaps emblematic of increased global social awareness, which is evidenced by increased charitable giving worldwide. A 2012 study showed that 83 percent of Americans wish brands would support causes; 41 percent have bought a product because it was associated with a cause (a figure that has doubled since 1993); 94 percent said that, given the same price and quality, they were likely to switch brands to one that represented a cause; and more than 90 percent think companies should consider giving in the communities in which they do business.

Despite the eager reception from consumers, critics of social entrepreneurship have raised concerns about the creation of social value in a for-profit context. Thus, TOMS is sometimes mistaken for a charity because it donates shoes to children in developing countries, yet it is also in business to sell shoes. The company earns an estimated $300 million a year and has made Mr. Mycoskie a wealthy man. While companies are starting to look more like charities, nonprofits are also increasingly relying on business principles to survive an uncertain economy in which donors expect to see tangible results from their charitable contributions.

Our understanding of social entrepreneurship is complicated by the absence of any consensus on ways to measure social outcomes. As a result, there is little concrete statistical data available on the impact of social entrepreneurship. Indeed, there is not much agreement on a precise definition of social entrepreneurship, so it becomes difficult to say to what extent any given company is an example of social entrepreneurship. TOMS’ Chief Giving Officer, Sebastian Fries, recently told the New York Times that the company is “not in the business of poverty alleviation.”

Does this mean that increased social value is merely a happy by-product of the business of selling shoes? If so, what makes Blake Mycoskie a social entrepreneur?

Some critics go so far as to suggest that social entrepreneurs are merely using public relations tactics to engage in social or environmental greenwashing—taking advantage of consumers’ desire to do good. In some cases, it has been argued, social entrepreneurs can even do more harm than good. Lacking a full understanding of the socioeconomic and cultural dynamic of the developing countries in which they intervene, social enterprises can undermine fragile local markets and foster dependence on foreign assista nce. But in the end, the individual impact of social entrepreneurial ventures may outweigh some of these concerns.

Contributors and Attributions

• Revision and adaptation. Authored by : Linda Williams and Lumen Learning. License : CC BY-NC-SA: Attribution-NonCommercial-ShareAlike
• Good Corporation, Bad Corporation: Corporate Social Responsibility in the Global Economy. Authored by : Guillermo C. Jimenez and Elizabeth Pulos. Provided by : Open SUNY Textbooks. Located at : pressbooks.opensuny.org/good-corporation-bad-corporation/chapter/5/. License : CC BY-NC-SA: Attribution-NonCommercial-ShareAlike
• Toms. Authored by : Danielle Henry. Located at : https://www.flickr.com/photos/waterandglass/5826939576/ . License : CC BY-SA: Attribution-ShareAlike
• TOMS - Gives new shoes to children in need. One for One. Provided by : TOMS. Located at : https://youtu.be/7MV3HWQHl1s . License : All Rights Reserved . License Terms : Standard YouTube License
• Thank You Notes From The Field. Provided by : TOMS. Located at : https://youtu.be/7b05syjxe2E . License : All Rights Reserved . License Terms : Standard YouTube License

CSR is a core business function. It’s time to treat it that way

This commentary is from Everfi from Blackbaud. Tom Davidson is founder and CEO of Everfi from Blackbaud and Executive Vice President of Corporate Impact at Blackbaud. In recent years, there’s been a clear shift in how companies think about and execute corporate social responsibility (CSR), also known as corporate social impact. Gone are the days of CEO passion projects buried in adjacent foundations and disconnected from key corporate goals. Today, top-performing companies and organizations are taking a highly strategic, operational approach to their social impact work, using software, AI, and data to identify needs and assess results. 

Forward-looking organizations like the NFL, Accenture , Edward Jones , Guardian, CAQ, HCA Healthcare , and others are creating social impact programs with high visibility in the C-suite that are aligned to key business metrics such as customer acquisition and retention, employee recruiting and retention, brand building, and regulatory requirements. 

These companies know that far from being “charity” or a virtuous side hustle, corporate social impact initiatives have become a business imperative.

Those with an outdated understanding of how social impact initiatives can meet core business goals are wasting an opportunity, and the cost of doing so is likely to rise as younger consumers become a larger percentage of buyers and decision-makers in the years ahead.

Purpose-driven businesses achieve better results

A company’s purpose is the reason for existing that goes beyond making a profit. Yet, companies with a strong sense of purpose perform better across several important business metrics.

For instance, consumers are four to six times more likely to buy from, trust, champion, and defend companies with a strong purpose. Purpose-driven companies witness higher market share gains and grow on average three times faster than their competitors while achieving higher employee retention and customer satisfaction.

These trends are poised to accelerate in the coming years, as Millennials and Gen Z quickly become the largest spending force and the majority of the US workforce. Consider that after learning a brand supports a social cause or is socially responsible, 85 percent of Gen-Z consumers are likely to trust it, 84 percent are likely to buy its products, and 82% are likely to recommend that brand to their friends and family. Or that 64 percent of Millennials won’t take a job if their employer doesn’t have a strong CSR policy, and 83 percent would be more loyal to a company that helps them contribute to social and environmental issues. And almost eight in every 10 Gen Z workers say it’s important for them to work for organizations whose values align with theirs, making purpose the number-one driver in career decisions.

Companies are getting the message.

Increasingly, industries such as the financial sector are coming together to discuss and strategize how to use CSR to rebuild trust and transparency, meet regulatory requirements, foster more wealth-building opportunities, and, yes, increase profits.  

Companies that continue to ignore CSR initiatives are simply missing a major opportunity to meet core business goals.

Getting started 

If your company’s CSR programs are misaligned with core business metrics, here’s how to ensure your efforts are measurably more impactful both internally and externally for the causes you’re supporting.

First, understand your company’s core goals as they relate to brand, reputation, regulatory requirements, employee engagement, and recruiting top talent. Think about what values you want to communicate to customers and the broader public and how they connect to the products and services you sell. Understand what issues are authentic to the business yet are focused enough to make an impact. Determine which of these issues are of interest and could resonate with various stakeholders such as employees, customers, regulators, and your C-suite. 

Then, look at peer companies in your industry and determine if there are opportunities to collaborate. Many companies within the same industry have partnered to undertake assessments of what the actual needs are on the ground in the communities where they operate. These assessments consider the opinions and voices of local charitable partners that can best articulate the community’s true needs. By undertaking this type of assessment up front, companies can ensure more meaningful impact, with programs that actually “move the needle” in their communities. Ensure that whatever program is decided upon aligns with the broader corporate strategy identified at the outset. 

Next, understand where programs will fit within the company. Will you have a signature social impact program addressing a specific community need, such as education or mental health? Will you offer a platform for employees to choose and contribute to social impact initiatives? Even with the best of intentions, many companies find that their social impact initiatives are sprawled throughout an organization, making it difficult to understand who is responsible for what and the overall impact of a company’s efforts. It’s best to think of social impact initiatives as one portfolio , with visibility and preferably even management in the C-suite. By centralizing and elevating social impact programs, companies can provide better results and more visibility for those successes. 

Lastly, be purposeful about exactly what’s being measured and reported. Often, it’s those very metrics that drive what gets done. Be sure that any solution you select efficiently tracks the impact your investment has against the core business metrics you defined at the outset. Technology can help here and today’s advances in AI can simplify or even automate measurement and reports. It’s why we created Blackbaud Impact Edge , our AI-powered social-impact-reporting and storytelling solution for teams of all sizes.

A rare business opportunity

The next phase of corporate social responsibility is here. Companies of all types have an incredible opportunity to meet core business objectives through purposeful corporate social impact programs. 

Companies across diverse industries have found that by taking a highly strategic, operational approach to corporate social impact, they can increase profits, meet regulatory requirements, reinforce community trust, nurture new customers, and bolster their brand, all at the same time. Today, these forward-looking organizations are proving that focusing on community needs can also help their bottom line and much more.

The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of  Fortune .

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Global Branding and Cultural Considerations

Introduction to global branding and cultural considerations.

In today's interconnected world, brands increasingly operate on a global scale, reaching consumers across diverse cultural contexts. To succeed in international markets, brand managers must navigate the complexities of cultural differences, adapt their strategies accordingly, and develop a deep understanding of local preferences, values, and norms.

Common Terms and Definitions

Global Branding : The process of developing and maintaining a consistent brand identity, positioning, and strategy across multiple countries and cultures.

Cultural Adaptation : The practice of modifying a brand's messaging, products, or services to better align with the values, beliefs, and preferences of a specific cultural context.

Localization : The process of adapting a brand's content, such as marketing materials, packaging, or website, to suit the language, cultural norms, and legal requirements of a specific country or region.

Standardization : The strategy of maintaining a consistent brand identity, positioning, and marketing mix across all international markets, with minimal adaptation to local cultures.

Glocalization : A hybrid approach that combines elements of global standardization and local adaptation, allowing brands to maintain a consistent core identity while tailoring certain aspects to specific cultural contexts.

Key Considerations for Global Branding

• Cultural Values and Norms: Understand the unique values, beliefs, and social norms that shape consumer behavior and preferences in each target market.
• Language and Communication: Adapt brand messaging, slogans, and content to ensure clarity, relevance, and cultural appropriateness in each local language.
• Visual Identity and Symbolism: Consider the cultural significance of colors, symbols, and imagery when designing brand logos, packaging, and marketing materials for different markets.
• Product Adaptation: Modify product features, ingredients, or packaging to meet local preferences, regulations, and cultural expectations.
• Market Research: Conduct thorough research to gain insights into local consumer behavior, competitive landscape, and cultural nuances that may impact brand performance.
• Partnership and Collaboration: Foster relationships with local partners, influencers, and cultural experts to gain valuable insights and build credibility in each market.

Strategies for Cultural Adaptation

Localized Marketing Campaigns : Develop marketing campaigns that resonate with local cultural values, humor, and aesthetics, while maintaining brand consistency.

Culturally Relevant Product Development : Create products or services that address the unique needs, preferences, and cultural contexts of each target market.

Inclusive Brand Messaging : Ensure that brand messaging is inclusive, respectful, and sensitive to the diverse cultural identities and experiences of global consumers.

Local Influencer Partnerships : Collaborate with local influencers, celebrities, or thought leaders who embody the brand's values and can help build trust and relevance in each cultural context.

Case Studies

Coca-Cola's "Share a Coke" Campaign : Coca-Cola's personalized name campaign was adapted for different countries, using popular local names and phrases to create a culturally relevant and engaging experience.

IKEA's Cultural Adaptation : IKEA adapts its product offerings, store layouts, and marketing strategies to suit local cultural preferences and living spaces in each international market.

Nike's Inclusive Messaging : Nike's global brand messaging emphasizes diversity, equality, and cultural inclusivity, resonating with consumers across different cultural contexts.

Common Questions and Answers

How can brands balance global consistency with local adaptation?

Brands can adopt a glocalization approach, maintaining a consistent core identity and values while adapting certain aspects of their products, messaging, and marketing to suit local cultural contexts. This allows brands to build a strong global presence while remaining relevant and authentic in each market.

What are some common pitfalls to avoid when adapting brands for different cultures?

Common pitfalls include relying on stereotypes or cultural assumptions, failing to conduct thorough research, neglecting to test localized content for cultural appropriateness, and prioritizing standardization over cultural sensitivity. To avoid these pitfalls, brands should invest in deep cultural understanding, collaborate with local experts, and prioritize authentic engagement with each target market.

How can brands measure the success of their global branding and cultural adaptation efforts?

Brands can measure success through a combination of quantitative and qualitative metrics, such as sales performance, market share, brand awareness, customer satisfaction, and social media engagement in each target market. Additionally, brands should seek feedback from local partners, customers, and cultural experts to gain insights into the effectiveness of their adaptation strategies and identify areas for improvement.

In an increasingly globalized world, brands must navigate the complexities of cultural diversity to succeed in international markets. By understanding the key considerations, strategies, and best practices for global branding and cultural adaptation, brand managers can develop culturally sensitive approaches that resonate with consumers across different contexts. Through a combination of research, collaboration, and authentic engagement, brands can build strong, enduring relationships with global audiences while maintaining a consistent core identity.

Practical Exercises and Brand Management Simulations

Case studies in successful brand management, emerging trends and future of branding, brand crisis management and reputation repair, sustainable branding and corporate social responsibility, brand extensions and line extensions.