Corporate social responsibility: an avenue for sustainable benefit for society and the firm?

The Authors

Sharon Gyves, AIB Business Banking, Dublin, Ireland

Eleanor O'Higgins, Graduate School of Business, University College Dublin, Dublin, Ireland

Abstract

Purpose – The objective of this paper is to investigate the benefits arising from various corporate social responsibility (CSR) approaches, to determine which approach generated the most sustainable mutual benefit accruing both to the focal firm, as well as to society and the firm's stakeholders.

Design/methodology/approach – The ethnographic case studies are based on interviews with senior managers from six companies which are members of Business in the Community Ireland, a not-for-profit organization comprised of companies which are active about CSR initiatives.

Findings – Results show that for the companies interviewed, CSR initiatives that are voluntary and strategic, as opposed to coerced and/or non-strategic, generate the most sustainable mutual benefit to the firm itself and its social beneficiaries.

Originality/value – The paper presents a framework to analyze approaches to CSR, using the dimensions of strategic/non-strategic, voluntary/coerced. The study discovers ways to reconcile the conventionally competing shareholder and stakeholder mindsets. The paper concludes that if firms pursue CSR activities in a voluntary and strategic manner they can satisfy both shareholders' and stakeholders' demands.

Article Type:

Research paper

Keyword(s):

Corporate social responsibility; Corporate strategy; Stakeholder analysis.

Journal:

Society and Business Review

Volume:

Number:

Year:

2008

pp:

207-223

Copyright ©

Emerald Group Publishing Limited

ISSN:

1746-5680

What is the appropriate role for the firm in society? Today, society looks increasingly to companies for answers to many “new age” problems, such as poverty, health crises and environmental issues such as global warming.

The shareholder view of the firm insists that the sole responsibility of the firm is to increase its profits (Friedman, 1970). It should think only of its shareholders and the enhancement of the long-term value of the firm (Jensen, 2002). Pursuing any other objective is tantamount to fraud and undermines the role of the government. The Free Enterprise Action Fund exemplifies this mindset:

Left-wing social and political activists are harnessing the power, resources, and influence of publicly owned companies to advance their social and political agendas. Frustrated by their failure to advance their agendas in the public political process these activists use capitalism against capitalism under the guise of corporate social responsibility (Free Enterprise Action Fund, 2006).

In contrast, the view of the firm as a social entity perceives the firm as part of society with benefits and obligations, inextricably linked to and interdependent with its stakeholders. Justice dictates that those affected by the organization, both directly and indirectly are defined as legitimate stakeholders (Freeman, 1984; Phillips, 2003). Thus, society in general, and stakeholders in particular need to be considered when developing a strategy for the firm (Kay, 1996).

Is it possible to reconcile these two opposing views? Social initiatives that increase the competitive context and positioning for the focal firm may be the solution. Therefore, the aim of this paper is to investigate what kind of social initiatives maximize simultaneously internal benefits to the firm and external benefits to society and the firm's stakeholders.

Perspectives on CSR

The anti-CSR perspective

The neoclassical portrayal of the firm as a nexus of contracts posits that the sole responsibility of the firm is to maximize wealth for its shareholders alone. Margolis and Walsh (2003) summarize arguments suggesting shareholder wealth and corporate social responsibility (CSR) are inherently incompatible objectives. Firms already advance social welfare to the fullest extent possible, when they endeavor to maximize total firm value. The only legitimate actor to address social concerns is the democratically elected government. Any effort by the firm to pursue social ends is tantamount to theft of funds from its shareholders. The onus is on the firm to warn its constituencies in advance of undertaking CSR activities so they can “protect themselves from such corporate misadventures.” CSR may be construed as an unnecessary business risk (Martin, 2002).

Moreover, payoff for the beneficiary may not be maximized either; it could be feasible to attain more suitable resources from some other party rather than from a business enterprise (Argenti, 1997). Friedman (1970) agrees – he put forward the idea that social issue participation in the form of non-focused corporate giving can penalize stakeholders as well:

Insofar as his actions in accord with his “social responsibility” reduce returns to stockholders, he is spending their money. Insofar as his actions raise the price to customers, he is spending the customers' money. Insofar as his actions lower the wages of some employees, he is spending their money.

The CSR as obligatory perspective

In contrast to the rational business perspective, Social Legitimacy Theory posits that a firm undertakes CSR to demonstrate that its actions are desirable, proper and appropriate. It does this on three main levels: pragmatic, moral, and cognitive. In doing so it faces three challenges: how to gain, how to maintain and, if necessary, how to repair legitimacy (Moir, 2001). Businesses act in certain ways not because of a commercial interest but because society implicitly expects it of them. Margolis and Walsh (2003) posit situations requiring CSR activities from a moral perspective: first, as a result of its operations the firm causes a negative externality, some form of cost, violation, or degradation that others bear. Second, the company benefits from unjust conditions already in the environment in which the firm operates. Third, “a duty of benevolence” constitutes a moral imperative to “provide aid to prevent or relieve suffering or dire conditions” (Margolis and Walsh, 2003). The main problem surrounding this point concerns when and where such a discretionary duty begins and ends (Hsieh, 2004).

Reconciling opposing perspectives – the business case for CSR

One way of reconciling the apparently opposing views is by positing a rational business case, that CSR “pays.” The CSR Network's top ten reasons why a firm might undertake CSR are as follows: increased profit; access to capital from socially responsible investment; reduced operating costs/increased operational efficiency from product/process offsets; enhanced brand image and reputation; increased sales and customer loyalty; increased productivity; increased ability to attract and retain employees; potential reduced regulatory oversight; reducing and managing risk; distinction vis-à-vis competitors.

Bonini et al. (2006) suggest that CSR awareness should be incorporated into core strategic decision making processes: to forestall long-term financial and reputation risks; to find opportunities for development of new products or marketing strategies; and to enable the firm to get a stable set of rules by pre-empting change in turbulent environments. They raise the issue of social contracts and make a critical point: social contracts and expectations are dynamic and can be elevated and formalized into legislation. It is therefore imperative for a company to keep abreast of such issues in order to remain at the fore of their industry. Waddock et al. (2002) explain how the combined pressure from various stakeholder groups demands a new “business imperative” of responsibility. Roberts and Dowling (2002) believe that CSR activities can lead to high quality intangible assets such as reputation, which can be linked to sustained superior performance, in line with the Resource Based View that builds competitive advantage around resources that are valuable, rare, inimitable, and lack substitutes (Barney, 1991).

Generally, the supposed benefits of CSR to the firm are comprised of defensive and value adding factors (Economist, 2008a). The former factors include risk management to manage social legitimacy, precluding adverse attacks from various stakeholders and activists, threats to reputation, and government attention and possible unfavorable legislation. Value adding activities concentrate building trust to become a preferred trading partner, enhancing market demand from customers and investors, staff loyalty and productivity, and operational and cost efficiency from environmentally friendly activities.

Managing CSR

As yet, there is no resounding evidence to identify a consistent directional impact or causation between CSR activity and financial performance. A more fruitful approach is to look more analytically at the avenues through which CSR can create sustainable strategic benefits, rather than to assume that there is some inevitable causation irrespective of management. Porter and Kramer (2006) advocate a strategic approach to managing CSR for ultimate reward, by mapping the social impact of its various value chain activities to identify opportunities for the firm to reduce the negative ones and find positive openings to achieve social and strategic distinction. The firm should also understand the social dimensions of its competitive context, as an integral part of its strategic management.

What level of investment in CSR should companies make? Husted and de Jesus Slazar (2006) suggest using microeconomic tools to decipher an appropriate level of CSR activity to maximize mutual benefit to the firm and its beneficiaries. McWilliams and Siegel (2001) propose that CSR investment should be regarded in the same manner as any other business investment and be decided through the use of cost-benefit analysis.

Burke and Logsdon (1996) offer five conditions for value adding CSR:

Centrality – closeness of fit to the firm's mission and objectives.
Specificity – ability to capture private benefits by the firm.
Proactivity – degree to which the program is planned in anticipation of emerging social trends and in the absence of crisis.
Voluntarism – the scope for discretionary decision-making and lack of externally imposed compliance requirements.
Visibility – observable, recognizable credit by internal and/or external stakeholders of the firm.

Mitchell et al. (1997) propose to identify which stakeholders warrant due consideration of their needs and demands by categorizing them by their degree of salience, determined by their levels of power, legitimacy and urgency, vis-à-vis the firm.

Matrix model composition

The core question of the study was “Which approach to CSR generates the most sustainable mutual benefit?” By “mutual benefit,” we mean benefits that are of value to the firm itself and its owners/shareholders (internal), and to its stakeholders or the greater society (external). External benefit encompasses the intended beneficiaries of the firm's actions. The majority of these exist outside the firm's boundaries, but some, primarily employees, are within.

We propose the following matrix model in Table I to address this question.

Together, the “focus of activity” and “source of motivation” determine the orientation of the CSR project undertaken; this in turn impacts on the distribution of the benefits that may result. The focus of the activity is said to be strategic when it is central, specific, and related to the firm's mission or objectives, particularly in the long run. Of course, the approach to CSR may vary over time; activities that are originally coerced may become voluntary over time and vice versa.

The benefits produced should be sustainable, rather than temporary. In line with the literature, examples of internal benefits accruing to the firm as a result of its CSR activity could include: increased sales; differentiated products that can extract a price premium; reduced production costs; increased employee commitment/morale; good reputation; more qualified personnel; not being fined or sued. Examples of external benefits (accruing to society outside of the firm as a result of the firms CSR activity) could include: reduced pollution levels; education and skill acquisition, increased earning potential, and monetary benefits for stakeholders; and reduction in disease (Husted and de Jesus Slazar, 2006). Mutual benefit is the combined sustainable internal and external benefit produced.

This taxonomy of approaches facilitates the construction of four premises about the determination of maximum mutual benefit to the firm and society.

Coerced egoism (Husted and de Jesus Slazar, 2006) occurs when the firm is forced to comply with minimum standards. It does just enough to satiate stakeholder demands in the short-term, taking a reactive or defensive stance (Carroll, 1979). It is usually implemented as a reaction to government regulation/legislation or due to adverse stakeholder lobbying. In the absence of coercive force, the firm would not have taken the action. An example of coerced non-strategic CSR is financial donations. CSR in this form plays no part in the long-term strategy for the firm. Furthermore, coerced financial donations confer only minimum reputation benefits for the firm, as the perceived motivation for the CSR was merely to defensively forestall aggravation from stakeholders:

Premise 1a. When CSR action is coerced and not strategically focused there is a negligible increase in sustainable internal benefit.

Additionally, external benefit is minimal and non-sustainable since there is no lasting transfer of resources from the firm. Donations made on a once off basis provide, at most, a temporary boost. When financial support is withdrawn where does that leave the beneficiary?

Premise 1b. When CSR action is coerced and not strategically focused there is a negligible increase in sustainable external benefit.

The implementation of end of pipe environmental processes is an example of the minimal compliance that is a result of coercion. For example, in the case of the coerced egoist the firm views environment investments as an act of CSR that is a cost to be incurred. Palmer et al. (1995) propose that the amount of resources that the focal firm spends in complying with legislation (by meeting the minimum standard alone) does not generate enough offsets for the firm to recoup this cost. Although the CSR activity is strategically related to the firm, the only benefit to be gained by the firm is defensive – “not being fined, sued, or subject to consumer boycotts and decreased sales” (Husted and de Jesus Slazar, 2006):

Premise 2a. When CSR action is coerced and strategically focused there is a low increase in sustainable internal benefit.

Although the action is coerced, it is designed to help the parties who demand it, and is, in essence, targeted to generate a positive benefit for them. Since the action is not voluntary, firms will only do as much as required, thus resulting in a bare minimum, just enough to assuage stakeholder/regulatory demands. As legislative and regulatory requirements are determined at a non-company-specific general level, this bounded rationality suggests that they cannot ensure optimal results, tailored to stakeholder needs, on a case-by-case basis. Moreover, legislation and regulation is often minimalist, usually at standards well below those already enacted by the best practice firms:

Premise 2b. When CSR action is coerced and strategically focused there is a low increase in sustainable external benefit.

Using corporate resources for social issues not related to primary stakeholder (and consequently firm strategy) does not create significant value for the firm (Hillman and Keim, 2001). Porter and Kramer (2002) assert that corporate philanthropy that is not strategically targeted does not increase the competitive context for the firm. At most, philanthropy will increase the company's reputation, improve employee morale and generate publicity only in the short-term. It merely serves to transfer benefit from inside the boundaries of the firm to outside the firm. Thus, it generates no additional synergistic value. Non-targeted philanthropy is predominantly a distributive zero sum game, synonymous with gain in benefit for the beneficiary but not to the company (as any reputation and employee morale gains for the company are merely offset against the opportunity cost of the giving):

Premise 3a. When CSR action is voluntary and not strategically focused there is a moderate increase in sustainable internal benefit.

It is also conceivable that the firm may not be the most suitable donor of resources for the beneficiary. To fulfill the maximum capacity for benefit generation there must be a strategic match between the firm competencies and the beneficiary's needs over the long-term. If the help is not strategically designed to deploy the firm's competencies into the avenues for their best use, maximum benefit will not be produced. In other words there may be more capable/efficient donors in society that would offer greater benefit for the beneficiary:

Premise 3b. When CSR action is voluntary and not strategically focused there is a moderate increase in sustainable external benefit.

Using microeconomic tools, Husted and de Jesus Slazar (2006) advise that greater mutual output is attained through a strategic approach than pure altruism. In this scenario, the CSR that the firm undertakes is tailored to increase its competitive context, viewing CSR as a viable route to revenue generation and gaining competitive advantage. The CSR is:

[…] strategic when it yields substantial business related benefits to the firm in particular by supporting core business activities and thus contributing to the firm's effectiveness in accomplishing its mission (Burke and Logsdon, 1996).

Porter and Kramer (2002, 2006) suggest that focused CSR improves competitive context, aligning the firm's economic and social goals. Strategic CSR allows the company to change the competitive context in its favor, for example providing training skills which of which it can then avail. It also means that firms leverage their capabilities and relationships in support of causes to which they are most suited, where they possess expertise and other resources, thus offering distinctive external benefit.

Husted and de Jesus Slazar (2006) argue that strategic CSR can provide economic benefit to the firm and still benefit society when such programmes are central to the firm's mission, highly specific, proactive, visible, and voluntary. This convergence in interests occurs when the possibility exists of strategic interaction based on government intervention; where opportunities exist to differentiate products; and where cost reduction may occur within the firm.

Enlightened strategic CSR is therefore akin to a positive sum, integrative negotiation between the firm and its stakeholders, where both parties benefit but not at the expense of the other. Therefore, the interests of both shareholders and stakeholders are aligned and maximized:

Premise 4a. When CSR action is voluntary and strategically focused there is a major increase in sustainable internal benefit.

Premise 4b. When CSR action is voluntary and strategically focused there is a major increase in sustainable external benefit.

Method

An ethnographic case study method was used to allow in-depth exploration of corporate motives, actions and perceived outcomes. Personal face-to-face interviews were conducted with representatives of six participant companies. The interviews were semi-structured and involved a series of focused but open-ended questions (Appendix 1). The six companies examined were all members of Business in the Community Ireland (BITCI). This implies that they practice and are aware of CSR and would therefore be suitable to interview on this topic. BITCI is a business-driven, not-for-profit membership network that promotes CSR to companies in Ireland. BITCI has core membership of 34 of the top 100 companies in the Republic of Ireland.

Each of the interviewees is directly involved with the CSR initiatives within the company. Three of the companies were Irish (Allied Irish Bank (AIB), C&C Group, Electricity Supply Board (ESB)) and three were subsidiaries of multinationals (IBM, International Business Machine; Johnson & Johnson, Vodafone). (Appendix 2 for an overview of the six companies.) The interview transcripts were analyzed to identify commonalities with regard to the four premises. Where possible, confirmation of interviewee responses was sought through examination of the beneficiaries' published literature.

Results and implications

Coerced non-strategic

It was apparent that uptake of CSR activities of a coerced and non-strategic nature had vastly decreased in the last few years. For example, five to ten years ago, before the process was formalized, ESB would make once off charitable donations in an unstructured way to those asking for them. As a consequence, of this they were not able to measure any real return on their investments or assess their impact. The AIB head of CSR echoed this sentiment, stating that previously they were not making any significant difference to anybody involved, be it the beneficiary or AIB itself. C&C Group asserted a shift in focus to change the nature of the interaction from a financial transaction to a symbiotic relationship.

Charities prefer it when companies stand for something. Having rules and guidelines makes the process transparent and accessible for the beneficiary. Many of the companies indicated that donating money was of little or no sustainable value to the company or to the beneficiary when compared to the sustainable benefits that can be elicited through working in a partnership. What is the point in donating money if the people in the organization do not know how to spend it? Some of the companies also indicated the difficulties that beneficiaries must experience when financial support is withdrawn; where do they go from there?

[…] to do an ad hoc activity once and drop it makes no sense to our business […] if you don't have a strategy and a focus over one year, three years and five years you don't know where you want get to at the end; what kind of result you want to achieve […] you want to be known for something, if you keep doing ad hoc activities then you will be known for nothing.

Admittedly, sometimes a financial donation is exactly what a beneficiary might need in the short-term, but nothing compares to the support a voluntary long-term affiliation can provide.

These sentiments confirm the premises that coerced and non-strategic CSR does result only in negligible sustainable increases in both internal corporate and external social benefits.

Coerced strategic

The main examples of coerced strategic behavior arose from compliance with governmental regulation and with stakeholder demands, considered to be the lowest common denominator that would be accepted by stakeholders. It was indicated that compliance with legislation simply gave the firms a license to operate, and real benefit for the focal firm could only be achieved by going above and beyond basic requirements. The possibility of governmental regulation (that could directly or indirectly affect the focal firm) being imposed in the future served as an instigator for present action. For example, the anticipation of legislation governing the use of handsets whilst driving a vehicle, combined with stakeholder demands, prompted Vodafone to develop a Safe Driving Campaign, highlighting to the public that using a mobile phone whilst driving could be dangerous.

Another example of strategic CSR as a result of coercion was the introduction by Vodafone of the Safety Net Scheme, through the mobile phone industry association. Safety Net allows internet content on mobile phones to be screened in accordance with the age profile registered by the phone user. This was brought about from pressure by stakeholders, particularly the Parents Council, who wanted to see mobile phone operators take action to eradicate this potential problem. It is a cleverly orchestrated defensive move to protect the company's standing in society.

Interestingly, it was mentioned by several of the firms in this study that regulation, particularly regarding the environment, highlighted key areas that generated sustainable benefits for the firm when further developed. So even though coerced strategic action may not itself cause these benefits directly, it is an instigator for further action of a voluntary nature.

This corresponds to Porter and van der Lindes' (1995)) assertion that firms do not always make optimal choices as they operate on incomplete or asymmetric information. Regulation can alert companies to likely sources of inefficiencies and possible technological improvements, fostering innovation and progress. An example is cost savings from “green” practices, such as energy conservation. Coerced strategic CSR activities generated some benefits for the firm whilst it also created some tangible benefits for the beneficiary. Examples include: reduction of emissions, a safer mobile phone environment for children, and education regarding safe driving.

However, generally, coerced strategic action tends to be protective of existing assets, rather than value adding for the firm, and simultaneously limited in meeting the needs of beneficiaries. The discussion and examples presented suggest support for the premises that coerced strategically focused CSR produces some low sustainable increases in both internal corporate and external social benefits.

Voluntary non-strategic

The notion that CSR needs to be driven by something that appeals to employees was highlighted by many of the companies. Moving away from the idea of individual once off donations, many of the companies interviewed have implemented voluntary corporate giving programmes in order to coordinate their contributions under one specific heading. These programmes could be construed as social issue participation and are based on financial donations to organizations and charities. Some of the companies had also developed foundations to channel these funds effectively. These programmes were usually developed in consultation with employees. For example, ESB's Electric Aid Programme donates funds in the areas of homelessness and suicide and was conceived of by employees two decades ago. This fund serves to complement the existing staff-led initiative that makes donations outside of Ireland, primarily to developing countries. ESB cited its main benefits: positive reputation and public image impact, and the strengthening of its corporate culture. Another comparable initiative is AIB's Better Ireland Programme which focuses on social exclusion, particularly concerning children. One benefit mentioned by AIB as a consequence of having a specific programme in place is the ability to draw parameters around their corporate giving activities and in effect create boundaries on speculative requests for funds. Other benefits include heightened staff morale and employee self-development. AIB also notes public recognition as a major benefit.

Moving beyond financial donations, companies may also deploy company skills and resources towards deserving causes in society. Vodafone's project with the Blood Transfusion Board illustrates effective partnership in action. The Irish Blood Transfusion Service (IBTS) and Vodafone Ireland have announced a new text message initiative to encourage more blood donations. The service provides the option for blood donors to receive a text message reminding them to give blood on the day a clinic is in their area. Vodafone involved its employees on a personal level and reinforced this relationship by inviting the transfusion service to their company premises so their employees could have the opportunity to donate blood. The benefit obtained for Vodafone includes: public relations attention which bolsters their reputation (blood donation is a fundamental societal need); brand association (Vodafone and the Blood Transfusion Boards logos are both similar and branded red). For Vodafone this is a cost effective way to generate these benefits as free text messaging is a relatively inexpensive service for them to provide resources.

Thus, internal benefits that were mentioned from voluntary non-strategic actions include: reputation building, increased levels of employee morale and pride, increased ability to attract and retain staff, brand enhancement and PR, and advantage when tendering for business. Yet in order to determine the real long-term sustainable benefit the true acid test remains: if there was no publicity would it still be worth it (Porter and Kramer, 2002)? There is no doubt that the external benefit that can be elicited through voluntary non-strategic CSR is greater than the previously discussed coerced cases. However, as these individual projects are not linked to the long-term strategy of the focal firm, their lifespan is generally predetermined. So what happens when initiatives draw to an end? Where does the beneficiary go from there? Therefore, social issue participation may merely provide a medium term and limited solution to a long-term problem.

The information and opinions provided by the companies involved indicates support of the premises that voluntary but non-strategic CSR produces a moderate increase in both sustainable internal corporate and external social benefits.

Voluntary strategic

All the companies indicated that they now aim to undertake CSR activities through a more formalized planned process, to seek real benefit. The desire to develop a working relationship with a beneficiary organization, to move towards volunteerism is paramount. For example, the Vodafone Ireland CSR Manager explained the need to seek out a partner and conduct a pilot scheme first to measure the benefit, because not all relationships work. Companies need to know how the project fits into their strategy and value chain activities. This is not possible unless the effort is designed to focus on the core strengths of the parties concerned. For C&C Group, establishing a level of trust between the company and the beneficiary is viewed as crucial to success.

An exemplary case of a strategic voluntary CSR is IBM's On Demand Community. This initiative was developed from ideas generated by IBM employees in a 72 h computer mediated forum: IBM World Jam. On Demand Community is a dedicated web site stocked with IBM technology tools, online training manuals and support material to enable IBM volunteers to help non-profit community organizations and schools, offering tailored help “on demand.” Thus, in addition to donating their time, IBM employees develop and learn skills that they can, in turn, pass on to people when and where it counts. One of their programs is KidSmart; this introduces IBM technology to preschool children, their parents and teachers. The main benefit for the community is education, whilst IBM has mentioned the following benefits for itself as a company: employee pride and involvement, increased skill level in the marketplace, government recognition, and an enhanced business image. As stated in IBM's corporate education policy:

[…] to remain successful in an increasingly competitive and global marketplace, IBM must have a highly skilled workforce. We must also have a well educated base of customers who ultimately create a demand for our products and services.

AIB recently invested a considerable amount of time and money in training staff on how to educate and orientate customers with their internet banking site, as a practical service that can make banking more accessible and efficient for the many people who use it. It simultaneously enables AIB to offer a more streamlined service for customers who still choose to visit branches. In another AIB initiative, in partnership with the small firms association, AIB provides free business advice and information to Ireland's expanding sector of small firms. AIB is involved in the Better Business Show; this is a master-class in best practice that offers firms the opportunity to improve their business potential. AIB also offers a plethora of free business tools on its business banking internet site.

Many of the voluntary strategic CSR initiatives undertaken by companies are focused on improving efficiency. For instance, Vodafone operates a complete waste management action plan whereby all wet, dry and confidential waste is segregated and recycled. An environmental management team oversees this action plan in conjunction with its handset recycling and energy efficiency campaigns. For this system to work, achieving staff buy-in is compulsory. Vodafone fostered this by having an environmental month at work that included information on recycling and composting in employees own homes. This helps to engender a mindset whereby if people recycle at work, they may begin to recycle at home. In essence it elicits a change in behavior. Benefits to Vodafone include: staff involvement, reduced costs, ability to ask employees to be more CSR friendly in other areas, reputation, advantage when tendering for business.

These examples show that voluntary strategic activity involves ongoing development of ever more helpful measures, if firms and their beneficiaries work and learn together. Thus, it was overwhelmingly evidenced that the most sustainable mutual benefit was produced through the voluntary strategic avenue, where there is a convergence of interests between the focal firm and the beneficiary. Therefore, it was confirmed that voluntary strategically focused CSR action produces a major increase in both sustainable internal corporate and external social benefits.

Discussion and conclusions

The apparent confirmation of the four premises helps to reconcile the competing shareholder and stakeholder views by identifying a mutually beneficial approach. The research investigated the internal company benefits and the external social and stakeholder benefits arising from various CSR approaches. The results allow a comparison between the relative merits of each approach. Therefore, an order of merit can be established, rating CSR initiatives can be rated from lowest to highest on sustainable mutual benefit produced as: coerced non-strategic, coerced strategic, voluntary non-strategic, voluntary strategic, as seen in Figure 1.

We concluded that the “voluntary strategic” approach proves the most feasible avenue to promote both shareholder and society/stakeholder demands. Firms should operate predominantly within this domain to maximize sustainable benefit both for their shareholders and stakeholders. The benefits gained from voluntary strategic activities create a virtuous cycle that motivates the firm to continue developing its initiatives while encouraging ongoing collaboration with beneficiaries.

As previously discussed, the empirical relationship between CSR and financial performance remains largely unsolved. Consistent with the views of Burke and Logsdon (1996), of Husted and de Jesus Slazar (2006) and of Porter and Kramer (2006), the relationship between CSR and financial performance really depends on how CSR is managed. According to the results of this paper, internally initiated CSR by the firm can simultaneously provide the most sustainable benefits for the firm itself, its particular stakeholders and society at large, to increase the chances of creating a win-win situation.

CSR should not be viewed as an additional extra to complement core business activity. For voluntary strategic CSR to generate sustainable mutual benefits it needs to be part of the fabric of the firm, incorporated into the value system and value chain of the company. This may also help the firm to develop a “personality” in a world of faceless corporations.

This paper studied the advantages from CSR derived for the focal firm engaging in it, largely from the perspective of enlightened self-interest (Economist, 2008b; Ruf et al., 2001). It has to be recognized that CSR should have an ethical dimension, i.e. to behave responsibly and do the right thing for its own sake, but this aspect was not explicitly part of the study. Future research should study this distinction more directly, highlighting the distinction between formal rationality, based on economic criteria and substantive rationality. The latter is based on values and ideals that motivate action (Becker and Potter, 2002).

The study looked at a small sample of large firms from different industries. Perhaps, a larger study that examines firms within the same industry, taking account of industry specific social issues might yield further insights. Examples are supply chain issues in the garment industry or environmental considerations in energy companies. Wokutch and Spencer (1987) provided suggestive findings of industry differences in propensity to commit corporate crimes or to behave philanthropically. An investigation of small to medium size firms is also a possibility to see if the same factors and possibilities for mutual benefits apply as those found in our study, although Orlitzky (2001) has found that size does not matter with respect to corporate social performance.

Our study examined company perspective and opinions. Checking the beneficiaries' perspectives from their published reports and websites provided another perspective but was not always feasible as beneficiaries did not always constitute a discrete identifiable group. Future research should also seek systematically the views of the companies' beneficiaries as to the benefits bestowed by the companies' CSR activities. Also, a replication of this study, confined to one distinct pillar of CSR (workplace, environment, community, or marketplace), may offer more specific insights into the dynamics of the situation.

This study goes some way toward explaining the inconsistent relationships between corporate social performance and financial performance, since the strategic nature of social performance may determine its economic benefits for the firm. However, corporate social performance must be placed in context as other factors, like fundamental product-market positioning can also impact on financial performance and this should be taken into account. In our study, the companies all had robust strategic leadership positions.

In conclusion, the ethnographic case study approach used in this study is a promising one, but it requires replication in different populations of organizations to further understand the suggestive findings and to discover whether there are any contingencies or conditions that bolster even further the means and techniques of achieving mutual advantages from CSR.

Figure 1

Table IApproaches to CSR activities

References

Argenti, J. (1997), "Stakeholders: the case against", Long Range Planning, Vol. 30 pp.442-5.