A review of studies in external corporate social responsibility

A REVIEW OF STUDIES IN EXTERNAL CORPORATE SOCIAL RESPONSIBILITY Bui Thu Van, MA Tran Trong Duc, MA National Economics University Abstract The world has been experiencing the greatest changes in the pr[.]

A REVIEW OF STUDIES IN EXTERNAL CORPORATE SOCIAL RESPONSIBILITY Bui Thu Van, MA Tran Trong Duc, MA National Economics University Abstract The world has been experiencing the greatest changes in the production industry over the past 100 years Professor Klaus Schwab, author of The Fourth Industrial Revolution, states that we are in the midst of the 4.0 revolution The First Industrial Revolution took place in the late 1700s and used water and steam to mechanize production The Second Industrial Revolution took place at the end of the 19th century and used electric energy to create mass production The third industrial revolution took place in the second half of the 20th century and used electronics and information technology to automate production As an indispensable process, the Industrial Revolution 4.0 is driven by advances including the intelligent manufacturing, robot, the artificial intelligence and Internet of Things (IoT) This is followed by five trends of future production: the 360 ° Production Technology, the 3D Printing Technology, the Automated Manufacturing, the Intelligent Building - Cloud Computing and the throne of the robot; however, they are still controlled by human All these trends are leading to the sustainable production and the sustainable development Therefore, how will enterprises address the issues of sustainable development? In general, companies often address these issues by following the corporate social responsibility (CSR) In this paper, I would like to clarify the theories of corporate social responsibility, especially I will focus on external CSR and use a case of Toyota Vietnam to analyze We find that CSR researchers generally follow the external stakeholders approach such as customer, supplier, community and environment when doing research about the impact of external CSR on some fields such as the employee motivation or firm performance Based on our analysis, we provide several recommendations for future studies in Corporate Social Responsibility and Sustainability Key words: corporate social responsibility (CSR), external corporate social responsibility, sustainable development, sustainability 199 Corporate Social Responsibility concepts Perception of CSR Employees are concerned about how to evaluate, react and perceive organization’s CSR practice (Rupp et al 2013) The employees’ perception of CSR has impacted on their behaviors and attitudes (Aguinis and Glavas 2012) However, Aguinis and Glavas (2013) suggest that the perception of employees about CSR might be not appropriate as they think However, the implications for employees’ perception still exist (Dijksterhuis and Van Knippenberg 1998) Rupp et al (2013) explain that the employees’ perception is likely to have more direct and stronger impacts than actual firms’ behaviors There is a wide variety of literature using employees’ perception as a measurements, for example El Akremi et al (2015) use employees’ perception to measure CSR practice Relevance of a stakeholder framework CSR has a variety of contrasting definitions, which reflect a range of practices (Welford 2004; Welford 2005; O'Riordan and Fairbrass 2008) Although scholars and practitioners have been trying to build a common definition for CSR, CSR has not one agreed upon definition (Carroll 2004a; Rahman 2011; Hack et al 2014) The concept of CSR has evolved since 1950s with the first dimension of CSR being about the obligation to the society (Heald 1957) Currently, there are an increasing number of disagreements about what the concept actually means (Matten and Moon 2008; O'Riordan and Fairbrass 2008; Skudiene and Auruskeviciene 2012) Elkington (1999 cited by Savitz and Weber 2006; Crane et al 2007; Crane and Matten 2010) considered the triple bottom line (TBL) of sustainability with three perspectives: Social (people), Economic (profit) and Environmental (planet) also known as “3Ps” Thus, a socially responsible company is an organization with economic prosperity, social equity and environment protection Werther and Chandler (2011) suggested that an organization should not only gain profits but also have an obligation to benefit society Moreover, CSR is accepted as a strategy for the sustainable development (Crane and Matten 2010; Werther and Chandler 2011) 200 Figure 1: The triple bottom of sustainability Source: Adapted from (Crane and Matten 2010) Carroll introduced a framework named “The pyramid of Global Corporate Social Responsibility” with the basic blocks of economic, then legal, ethical and philanthropic responsibility, respectively (Carroll 1979; Carroll 1999; Carroll 2004a) This framework helps managers consider the different stakeholder expectations “make profit consistent with expectations for international businesses; obeys the law of host countries as well as international law; be ethical in its practices, taking host-country and global standards into consideration; be a good corporate citizen, especially as defined by the host country’s expectations”(Carroll 2004b,p.117) However the later revised to a three-domain approach has been presented without the philanthropic component (Schwartz and Carroll 2003; Glavas and Kelley 2014) The Carroll framework could be seen as resolving for the argument of Friedman (1970 cited by Hack et al 2014) when Friedman argued that CSR of company is to generate profit Figure 2: The pyramid of Corporate Social Responsibility Source: Adapted from Carroll (2004b) 201 In contrast to Carroll’s four-part model and the triple bottom line of sustainability, the stakeholder theory of the firm approaches CSR by “looking at various groups to which the corporation has a responsibility” (Crane and Matten 2010, p 61) Sacconi (2006) focused on the wide range of stakeholders when defining CSR According to Sacconi (2006, p262): “Corporate Social Responsibility is a model of extended corporate governance whereby those who run a firm (entrepreneurs, directors and managers) have responsibilities that range from fulfillment of their fiduciary duties towards the owners to fulfillment of analogous fiduciary duties towards all the firm’s stakeholders.” Stakeholder theory suggests that managers have to develop their activities in relation to stakeholders (Freeman and McVea 2001) According to the stakeholder theory (Donaldson and Preston 1995), a cognition-based theoretical model is established in terms of perceptions of stakeholders (Bundy et al 2013), which reflect “who and what really count” (Mitchell et al 1997) Additionally, Lucea (2010) also confirms that managerial cognition on organizational behavior reflects the stakeholder groups The impact of CSR on firm’s performance is mediated by the stakeholders’ responses to CSR practice (Barnett 2007) It is acknowledged that the stakeholder approach is a useful method to help employees evaluate the external and internal activities of organizations Through combining arguments from the works of Sacconi (2006, 2007), Rahman (2011), Carroll (2004a), Aguilera et al (2007a), and others, a stakeholder-based perspective is considered as a comprehensive approach for development CSR concept External CSR This paper has considered CSR as a multidimensional concept toward different external stakeholders Scholars and practitioners defined two different dimensions of CSR but different names: internal dimension and external dimension (EuropeanCommission 2001); actions within and outside the firm (Aguilera et al 2007a); internal and external social roles (Ligeti and Oravecz 2009), intrinsic and extrinsic CSR (Story and Neves 2015)and implicit and explicit CSR (Matten and Moon 2008) The external stakeholders include customer, supplier, community, environment and the government (regulators) (Mason and Simmons 2014; Griffin et al 2015) However, in this paper, the author has focused on external CSR concept, which means moral activities oriented to external stakeholders such as customer, 202 supplier, community and environment The government plays a significant role in establishing regulations and rules by which some criticisms are raised about business ethics or CSR (Crane and Matten 2010) “In democratic societies, the government would include all legislative and executive bodies that act on the basis of parliamentary consent” (Crane and Matten 2010, p.19) The emergence of the debate on CSR is about whether or not CSR practice implemented by companies is due to the nature of the obligation or regulations of the government (Smith 2003; Crane et al 2007; Crowther and Lancaster 2009) The CSR practice tends to be legitimate and be impacted by political issues (Rotter et al 2014) For outcomes to be legitimate, CSR practice must be socially accepted (Dryzek 2010) However, the government is one of the important stakeholders, so firms have responsibilities to be concerned about government’s expectations (Sacconi 2006, 2007) Crane and Matten (2010, p 496) suggest that the government presents as “the representative of citizens’ interests and an actor with interests of its own” with regulations and rules In the Carroll’s CSR pyramid, legal responsibility (obey the law) is the second component after the foundation of the pyramid (Economic responsibility) Organization sometimes take action due to the pressure from the government or society and sometimes they because they are concerned (Crowther and Lancaster 2009; Crowther and Reis 2011) Deegan and Shelly (2014) suggest that CSR should be further implemented through the enactment of additional regulations Criticism about CSR is increasing due to the growing recognition of the failure of governments to address many social problems such as pollution or product safety (Crane et al 2007, p.38) The poorly enforced regulation and escalation of corruption, which has seen in some parts of the former Soviet Union such as Eastern Europe and Central Asia, lead to the difficulties in attracting foreign investors to enter these markets (Crane and Matten 2010, p.496) Scherer and Palazzo (2011) suggest the Political CSR concept as “an extended model of governance with businesses contributing to global regulation and providing public goods” This concept is opposed to the Political CSR definition suggested by (Garriga and Melé 2004), which is concerned about “the power of corporations in society and a responsible use of this power in the political arena” Although Mäkinen and Kourula (2012) suggest the pluralism in Political CSR, the aim of the idea about Political CSR (Scherer and Palazzo 2011) is to balance questions of power and responsibility 203 After considering the debate on the role of governments, it is acknowledged that the government has an influence on the customer, supplier, community and environment – oriented CSR practice For example, governments issue rules which are protection environment rules such as the companies have to cut the amount of carbon-dioxide emissions or regulations for protecting customers (Crane and Matten 2010) For example , in Vietnam, the law on environmental protection no 55/2014/QH13 stated that manufacturing companies have to invest in the process of collecting and treating the industry sewage and waste (VietLaw 2014) This also partly encourages SMEs in Vietnam to implement CSR activities However, CSR is seen as sustainability strategy of companies in Vietnam The external CSR of a company is influenced partly by laws or regulations/governments Therefore, this research does not address about the government-oriented external CSR in the framework and considers four external stakeholders: customer, supplier, community and natural environment Customer-oriented External CSR: A socially responsible company is expected to offer products and services in an efficient, ethical and environmentally manner for customers A long- lasting relationship between companies and customers is built when companies understand and meet the customers’ demand (EuropeanCommission 2001) Ethical issues related to customers such as product or marketing are mentioned by Crane and Matten (2010) or not only require correct and safe products but also opportunities to deliver suggestions and complaints for the company (Longo et al 2005) Moreover, customers prefer buying products made from socially responsible material (Longo et al 2005; Kweh et al 2014) Thus, external CSR activities have a significant effect on customer – related outcomes and customers’ attitudes to companies, which tend to affect the profit of companies Longo et al (2005, p.32) mentioned four values to customer “product quality, safety of customer during use of product, customer protection and transparency of consumer information on product” Supplier-oriented External CSR: Acting in a socially responsible way primarily implies treating suppliers and other partners in an ethical manner The company should encourage suppliers to improve their products and services through sharing the quality goals, setting high standards for suppliers and agreeing on the quality control procedures (Longo et al 2005) Selection of suppliers is not always exclusively through competitive bidding In the long run building relationships may result in fair prices, terms and expectations along with quality and reliable delivery In adopting CSR practices, all companies have to respect the relevant rules of EU and national 204 competition laws (EuropeanCommission 2001) Community- oriented External CSR: Companies practice external CSR toward local communities if, for example they educate and help children and disabled individuals, implement donating practices or recruit socially excluded people (EuropeanCommission 2001; Ligeti and Oravecz 2009); stimulate employees to participate in community development activities or volunteer activities (PapasolomouDoukakis et al 2005); provide financial assistance to social activities through sponsoring local sports or cultural events (EuropeanCommission 2001; Graafland and van de Ven 2006) External CSR practices not only bring benefits for the whole community but also for the company (Aguilera et al 2007a) Natural environment-oriented External CSR: The environment perspective is one of components in the triple bottom line (Elkington 1999 cited by Crane and Matten 2010) of the sustainability model The work of El Akremi et al (2015) suggested environment – oriented CSR practice is to take actions to mitigate pollution, save manufacturing energy and resources or to invest in renewable energy and clean technologies Background about CSR in Vietnam Recently, CSR has attracted great attention of the government, small and mediumsized enterprises (SMEs) and Multinational Companies (MNCs) in Vietnam (CSRVietnam 2015) This can be seen from various events or workshops about CSR organized to improve the awareness of organizations about CSR, especially about external CSR related to environment, community, consumer and supplier (CSRVietnam 2015) External CSR in Vietnam was introduced by MNCs under the form of a Code of conduct or social standard requirements (Pham 2011a) It has received great attention from the society and organizations in Vietnam, especially following ecological disasters by factories since 2008 (Pham 2011b) A serious example of environment protection was the pollution of Thi Vai River caused by Vedan Vietnam in 2008 (Nguyen and Pham 2012) The CSR issues are emerging in many developing countries, not only Vietnam, with concerns about low standards for working conditions, low salary, high corruption, poor provision of healthcare or environment protection (Crane et al 2007) The CSR situation in Vietnam tends to be promising with the concern from the Vietnamese Government and businesses The ”Doi Moi” and open-door policies were 205 ... the law of host countries as well as international law; be ethical in its practices, taking host-country and global standards into consideration; be a good corporate citizen, especially as defined... and external dimension (EuropeanCommission 2001); actions within and outside the firm (Aguilera et al 200 7a) ; internal and external social roles (Ligeti and Oravecz 2009), intrinsic and extrinsic... of CSR has impacted on their behaviors and attitudes (Aguinis and Glavas 2012) However, Aguinis and Glavas (2013) suggest that the perception of employees about CSR might be not appropriate as