CSR activities within SME’s

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Theoretical framework

This following section includes a general and historical background of CSR. Consequently, the concept of CSR is clarified in order to enable the reader to understand the meaning of CSR. Furthermore, a presenta-tion of CSR activities within service corporations will follow. Finally, the relevant theories will be presented and discussed and later used to analyse the empirical results in the next section

Corporate Social Responsibility

 Historical development of the meaning of CSR

It is necessary to understand the historical development of CSR in order to identify the meaning of CSR. The responsibility of corporations has changed over time as a result of what society believes is necessary to address regarding different social concerns in business e.g. product safety, occupational safety, business ethics and environment. In addition, the responsibility may differ depending on the particular business being conducted and the area of time (Carroll, 1979).
When assessing the history of CSR there are three different periods in time which are sig-nificant. The first period consists of the industrial revolution in which governments started to enact legislation which improved the conditions of the workers. The second period of relevance to the development of CSR was the mid-twentieth-century welfare state. It was during this era that corporations started to be seen as an artificial person which had similar rights as the citizens. This view of a corporation resulted in an expectation that the corpo-ration should voluntarily benefit society. Another important progress during this era was that governments started to legislate in matters concerning pollution and workers rights. It was not only governments who started to influence the nature of managing corporations, outside the commercial political framework nongovernmental organisations such as Greenpeace started to take actions to obtain corporations attention in issues concerning environment. The third era, the era of globalisation, has transcended the view of CSR, as corporations taking part in international trade must acknowledge more than contingent na-tional rules. Globalisation shifts the focus of CSR from the national level to the interna-tional level (Blowfield & Murray, 2008)

Central questions within CSR

During the years of discussion there have consistently been two essential questions that have been debated:

  1. ‘Why might it be argued that corporations have social as well as financial responsibilities?’
  2. ‘What is the nature of these social responsibilities?’ (Crane et al, 2004, p. 41)

Social and financial responsibility

The traditional view of corporations‟ objectives originates in shareholder value and maxi-mizing profits (Donaldson et al, 1995). However, currently it is accepted that the scope of the corporation objective and its responsibilities is somewhat wider than merely increasing profits. Furthermore, it has been debated that a corporation that employ CSR activities, more likely has a long-term perspective. Consequently, such a corporation which employs CSR activities might be rewarded with more contented customers and therefore they will purchase products or services from that corporation to a higher extent. In addition, this socially beneficial activity may attract employees that are committed to social responsibility (Joyner & Payne, 2002). Moreover, one argument states that corporations are powerful so-cial factors that have a moral responsibility to solve social issues in the society (Crane et al, 2004)

The nature of social responsibility

There are various terminologies used in order to explain the meaning of CSR and the dis-cussion has been going on half a century (Crane et al, 2004). Nevertheless, no theory has yet established a unison framework or model, nor has any agreement been reached regard-ing the terminology of CSR (Clarkson, 1995). Consequently, there are a lot of misconcep-tions, and the discussion about the conduct of CSR is not yet entirely satisfactory. Blair (1995) argues that the absence of theoretical rigor towards CSR constitute the reason to why CSR has not yet been very successful. Consequently, there has not been enough clear guidance for managers in order to prioritize and set policies within the organisation. Carroll (1979) describes a wide spectra of different views regarding CSR e.g. profit maximization (Friedman), beyond profit maximization (Davis, Backman), beyond economic as well as le-gal requirements (McGuire) and a responsibility that concern social issues (Hay, Gray & Gates). In order to bring forward some of the opinions regarding the views of CSR, a small selection of views can be presented as following:
´it refers to the obligations of businessman to pursue those policies, to make decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society´ Bowen (1953) established one of the initial definitions of social responsibilities for manag-ers (recited in Carroll, 1999, p. 270). Furthermore, Carroll (1999) refers to Bowen as the ´Father of Corporate Social Responsibility´.
´there is one and only one social responsibility of business–to use its resources and engage in activities de-signed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud´
The scholar explains his thoughts of CSR in the ´fundamentally subversive doctrine´ (Friedman, 1970, p. 6). Friedman pragmatic point of view prevail that there is no real existence of CSR. There have been various definitions of CSR including economic, legal and voluntary activi-ties. Although, one of the most used definitions is the one that Carroll (1991) established through his model which is called the pyramid of corporate social responsibility. This model could be seen as a ground pillar of what the authors believe CSR means today.
Edit Carroll (1991), the Pyramid of Corporate Social Responsibility: Toward the Moral Management of Or-ganizational Stakeholders, p. 42, fig. 3
According to Carroll (1979) the definition to CSR is ´the social responsibility of business encom-passes the economic, legal, ethical, and discretionary (philanthropic, authors note) expectations that society has of organizations at a given point in time´. This four-part definition endeavour place the busi-ness responsibility (economic, legal) in the same context as ethical responsibilities (ethical, philanthropic). The economic responsibility states that managers should maximize profits, cut expenditures and base their decisions on financial effectiveness. Furthermore, the legal re-sponsibility is basically to comply with given legislation. However, on the one hand the leg-islation is inadequate in the terms of not covering all business issues. Ethical responsibility, on the other hand, embraces business conduct that is not codified by law. In addition, the philanthropic responsibility is voluntarily activities that are contemporary for conducting business today (Carroll et al, 2003). A more current developed definition in order to explain the concept of CSR is the EU-commissions (2006) definition:
´is a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.
It is about enterprises deciding to go beyond minimum legal requirements and obligations stemming from collective agreements in order to address societal needs´
Thus, in this research the concept of CSR is defined as „a concept whereby companies integrate so-cial and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis’

CSR – Voluntary ethical activities beyond the law

The European Commission define that CSR is voluntary apprehends the fact that a corpo-ration‟s CSR activities is separated from corporate accountability. The notion that CSR is voluntary might result in a corporation neglecting their CSR risk management strategies which constitutes something that a corporation should have to consider (Ward, 2003).
When CSR risk management originates from decisions made of values which go beyond the law, the management question becomes a discussion about business ethics. Business ethics can be described as the outcome of the decisions that the employees within a corpo-ration are making. By examining the outcome of the decisions and asking the question whether the decision is right or wrong, an employee can decide if the decision is ethical or not (Wise, 2006). The analysis whether a decision is right or wrong originates from the question if the undertaking will be morally right or wrong and not if the undertaking is stra-tegically right or wrong (Crane et al, 2004).
One of the managerial difficulties consists of the mere fact that the definition of the term morality differs between people. To overcome this problem the management often write standards which are to be applied by the employees (Bonnedahl, Jensen & Sandström, 2007). By examining what kind of values, norms and believes that is of significance to the stakeholders, that are affected by the corporations undertakings, the management can ap-prehend a general idea of how to draft the corporation standards. This kind of research will result in a substantial foundation from which the management can build an ethical theory which gives them the underlying data to make ethical decisions (Crane et al, 2004). An ethi-cal decision theory is based upon an analysis which examines the outcome of the action in terms of justification and result (Beauchamp & Norman, 2004).
Crane et al (2004) emphasize that CSR activities is a form of conduct that goes beyond what the law demands and are more or less up to corporations to decide whether or not this ethical behaviour should be implemented. As Figure 2 presents, there is a grey area which involves behaviour which might be difficult to establish whether it is right or wrong business of conduct. It is in this area which the conduct of CSR can be placed. Therefore, when corporations conduct CSR activities it might be regarded as the right business ethical behaviour but not demanded by the law (Crane et al, 2004).
Edit Crane and Matten (2004), Business Ethics, A European Perspective Managing Corporate Citizenship and Sustainability in the age of Globalization. Oxford: Oxford University Press, p. 9, fig. 1.

CSR activities within manufacturing corporations

In a manufacturing process there is sometimes a by-product such as toxic waste. Because of the public awareness regarding activities damaging the environment, manufacturing cor-porations need to overlook how they can reduce their polluting activities (Fairchild, 2007). The industrial output has a significant impact, since the sector is responsible for between 30 % and 40 % of gross domestic product within the EU. Furthermore, the extent of envi-ronmental impact depends on the raw material used, their technology, distribution et cetera (Williamson, Lynch-Wood & Ramsay, 2006). The Marshall report (1998) (recited in Wil-liamson et al, 2006) estimated that 60 % of the total carbon dioxide originated from SME‟s in the UK.
A study established through a quantitative research within different sectors, show that the manufacturing sector is more actively using formal instruments, such as code of conduct, ISO certification, social reporting et cetera, rather than the financial service sector (Graafland, van de Ven & Stoffele, 2003). Consequently, it can be argued that manufactur-ing corporations need to employ more formal instruments compared to service corpora-tions in order to please the stakeholders. Figure 3 presents how sectors use CSR strategies “Compliance [the bold words is the authors note] (1) fixed standards with controlling and re-warding systems, Integrity (2) stimulate the awareness of clear standards without controlling or sanction-ing mechanisms, Dialogue (3) a dialogue with stakeholders from which we determine new aspects of cor-porate social responsibility that we want to realize, Non-applicable (4) no strategy.´ (Graafland et al, 2003, p. 51).
Edit Graafland, van de Ven & Stoffele (2003), Strategies and Instruments for Organising CSR by Small and Large Businesses in the Netherlands. Journal of Business Ethics, table IV , p 51 Comment of Figure 3: It seems as the financial service sector employ strategies more con-nected to dialogue with stakeholders in attempt to stimulate the awareness compared to the metal manufacturing that have fixed standards (Graafland et al, 2003).
Williamson et al (2006) employed a research where 31 SME manufacturing corporations in the UK and their environmental activities were examined. The respondents explained that environmental issues are costly and one manager said ´you have to weigh everything you use, it’s money´. The result from the study showed that 11 of the 31 corporations spent ´a lot of time on environmental issues´ while 8 of the 11 corporations monitored the business activities. Wil-liamson et al (2006) argue that the result is not surprising considering it is a free market and that activities connected to environmental issues is often expensive and optional to some extent. The conclusion from this study was that manufacturing SME‟s will not go beyond what the law demands when it comes to environmental issues but Williamson et al (2006) argue that ´SMEs will not exceed regulatory standards because their market-based decision -making frames are incompatible with beyond compliance behaviour.´ Furthermore, Williamson et al (2006) argues that the meaning of CSR is more reputation building for the small corporations.

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CSR activities within SME’s

The customers in high-income countries tend to demand more rigid involvement in CSR activities. Furthermore, the agenda concerning CSR activities are often shaped by and ad-dressed to large corporations (Fox, Ward & Howard, 2002). Moreover, large corporations have more resources with regard to time and money. They can therefore engage CSR ac-tivities without negative impacts within the organisation. In addition, the image of large corporations is to a larger extent scrutinized. With the higher profile follows an awareness (EU Commission, 2002). Although, the discussion also needs to be moved towards the SME‟s since they, after all, represent 99 % of all corporations within the EU and therefore affects stakeholders on a large scale (EU Commission, 2005). Finally, considering the eco-nomical contribution of SME the discussion of SME‟s involvement in CSR is appropriate. A study from the EU Commission (2002), entail that ´48 % amongst the very small enterprises to % and 70 % amongst the small and medium-sized enterprises´ of the European SME‟s are in-volved in social responsibilities.
Even though SME‟s have different prerequisites there are no obstacles to conduct CSR ac-tivities. However, it has to be pinpointed that SME‟s, with regard to CSR activities, differs in engagement when compared to large corporations. In most SME‟s the management and ownership are controlled of the same person who consequently engages them as the most important factor whether or not the corporation is involved with CSR activities. The local commitment to the community and the stakeholders is usually strongly embedded. Consequently, SME‟s holds the local reputation as an important factor and therefore engage in the com-munity‟s stability. Furthermore, SME‟s ´often lack personnel, financial and time resources´ and also affects by the economical conjuncture. Finally, SME‟s frequently have a more personal rela-tionship with the stakeholders in order to build a trustworthy business (EU Commission, 2002).

 The meaning of CSR within service corporations/law firms

It is argued that service corporations need to be more proactive compared to other sectors. Thus, it is important for service corporations to predict the requirements of the stake-holders. In contrast, it is argued that manufacturing corporations has a higher degree of re-semblance regarding their managerial decisions about the conduct of CSR activities and therefore enables more positive effects. Due to this effect, service corporations need to be aware of the direct link with other corporations and therefore present their conduct of CSR activities as genuine as possible and hopefully reach unanimity (Calabrese & Lancioni, 2008).
In Sweden, there are rules which regulate how a lawyer should act because of the position as commission of trust. These exhaustive rules stipulate e.g. how a law firm should conduct its business, how a law firm should set reimbursements, what moral standards a lawyer has to follow, that a lawyer has to be independent towards the other party and consider the cli-ents best interest. To be able to control that the law firms and lawyers are following these rules an organisation called „Advokatsamfundet ‟ has the power to exclude a lawyer who is in breach of the rules when practicing law, as a lawyer. Advokatsamfundet is therefore a nor-mative authority and all lawyers have to be members of Advokatsamfundet and they are obligated to follow the standards set within the organisation (Wiklund, 1973).
There are, however, no obstacles for persons that are not lawyers to offer legal services. Furthermore, there are no requirements of any particular education or experience. How-ever, these persons cannot call themselves lawyers. These jurists can instead label them-selves as business lawyers or corporate lawyers (Advokatsamfundet, 2009).

Previous research in the service sector

There is a limited amount of research concerning CSR activities and service corporations. Although, an empirical study of 17 service corporations was conducted in Estonia, in order to develop ´the hypotheses that the more extensively an organization engaged in CSR activities, the less likely would task-orientation exceed relationship-orientation in this organization and second, organizational culture in general would be stronger´ (Jaakson, Vadi & Tamm, 2009). The result could however not strengthen or confirm the hypothesis that a strong organisation plunge a higher con-duct of CSR activities. It is in addition worth to mention that, during the research, the pri-mary focus was set on the main stakeholders: managers and employees (Jaakson et al, 2009).
Another quantitative research was conducted in Italy and identified whether there is a rela-tionship between the commitment of CSR activities within banks and the satisfaction of the stakeholders. On the one hand, the result of the research did not confirm that there ex-ists a relationship. But, on the other hand, the research demonstrated that implementing conduct of CSR activities within banks strengthen the relationship towards the stake-holders. It can therefore be argued that the banks are implementing CSR solely to develop the brand equity, rather than trying to improve the relationship towards the stakeholders. Furthermore, through the research result the conclusion could be drawn that the lesser de-gree of specified CSR activities, the lesser degree of appreciation by the stakeholders (Calabrese et al, 2008).

The stakeholder theory

The stakeholder theory is closely connected to CSR (Freeman, 1984). The stakeholder the-ory identifies and explains towards whom corporations may have a responsibility. Because of the progress of CSR it is not surprising that stakeholders demand more from the corpo-rations today (Weiss, 2006).

 Primary stakeholders

Wheeler and Sillanpää (1998) has divided primary stakeholders into the group of social stakeholders such as investors (shareholders), employees and customers and the group of non-social stakeholders which do not involve a human relationship such as the natural en-vironment and future generations.
The primary social stakeholders are directly affected by corporations‟ activities regardless whether they are positive or negative and therefore are influential (Carroll et al, 2003).

Secondary stakeholders

The same definition of social and non-social follows the secondary stakeholders. However, the social stakeholders include e.g. governments and regulators and the non-social stake-holders include environmental pressure groups and animal welfare organisations (Carroll et al, 2003)

The stakeholder theory in general

The stakeholder theory emphasizes the relationship and responsibility with external groups, unlike the focus of CSR that emphasizes the corporations‟ responsibility other than finan-cial (Crane et al, 2004). The fundamental idea of the stakeholder theory advocates that a frame of ethical principles towards the stakeholders may generate a competitive advantage. Freeman (1984) explains the stakeholder theory as corporations have on the one hand in-ternal groups, investors, customers, employees and suppliers (see Figure 4). On the other hand, corporations should also have responsibility towards the external groups, governments, politi-cal groups, communities and trade associations (see Figure 4). Although this model is only used as a model and is not to be seen as an extensive list of all stakeholders. The stakeholders are external groups that have an interest or share in the corporation and therefore are affected by the corporation and its policies, activities and procedures. The interest does not neces-sarily have to be financial, but also physical or other implications. Consequently, the stake-holder theory implicates a „win-win‟ situation and beneficial results for all parties, if the corporations base their decisions on an ethical basis (see figure 4). However, it is difficult to be certain of an outcome such as a „win-win‟ situation (Weiss, 2006).
It has to be considered that different stakeholder has different degrees of interest within the corporation. If corporations discriminate all stakeholders, when conducting CSR activi-ties it may damage their accountability. It may be argued that ´being accountable to all is being accountable to none´. If the conduct of CSR activities is not being directly addressed to e.g. customers, that group of stakeholders may feel ignored and does not appreciate the corpo-rations CSR responsibilities. Furthermore, if there is any discrepancy between the CSR pol-icy and the conduct of CSR activities it may undermine the social and political view if that particular corporation (Calabrese et al, 2008)

1 Introduction 
1.1 Background
1.2 Specification of problem
1.3 Purpose
1.4 Research questions
1.5 Definitions
2 Theoretical framework 
2.1 Corporate Social Responsibility
2.2 CSR – Voluntary ethical activities beyond the law
2.3 CSR activities within manufacturing corporations
2.4 CSR activities within SME’s
2.5 The meaning of CSR within service corporations/law firms
2.6 Previous research in the service sector
2.7 The stakeholder theory
3 Method 
3.1 Qualitative vs quantitative method
3.2 Deductive vs inductive approach
3.3 Research design
3.4 Data collection
3.5 Interviews
3.6 Delimitation and limitation
3.7 Validity and Reliablity
3.8 Data analysis
3.9 Criticism of method
4 Empirical findings
4.1 Organisational presentation
4.2 The separation of law firms
4.3 Activities labelled as CSR
4.4 CSR strategy as value adding
4.5 Responsibility towards stakeholders
4.6 The future of CSR
5 Analysis
5.1 Activities labelled as CSR
5.2 Difficulties with CSR activities
5.3 CSR strategy as value adding
5.4 Responsibility towards stakeholders
5.5 The future of CSR
6 Conclusion
6.1 Further research

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