A CASE STUDY OF CORPORATE SOCIAL RESPONSIBILITY A SUSTAINABLE TOOL OF COMPANIES’ DEVELOPMENT IN VIETNAM

3 A CASE STUDY OF CORPORATE SOCIAL RESPONSIBILITY: A SUSTAINABLE TOOL OF COMPANIES’ DEVELOPMENT IN VIETNAM By HOANG THUY HANG October 2011 Supervisor: Dr.. From conducting the researc

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DECLARATION OF ORGINALITY AND WORD COUNT

I declare that this graduation project is based on my original work except for

quotations and citation which have been duly acknowledged I also declare that it has not been previously or concurrently submitted for any other courses/degrees at HELP University College or other institutions The word count is 8946 words

HOANG THUY HANG

October 2011

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ACKNOWLEDGEMENT

As to complete this graduation project, I was granted a lot of support, guidance and assistance from mentors and lecturers Therefore, I want to thank to all who support, direct and motivate me during the process of completing the research

Pham Duc Hieu from International School at Vietnam National University, Hanoi who guide me in my choice of assignment

2 I also would like to thank to Ms Sumathi and Ms Shenba at Help University College, who initiated the project and give so much instruction and support

complete the survey with their enthusiastic and supporting manner

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A CASE STUDY OF CORPORATE SOCIAL RESPONSIBILITY: A SUSTAINABLE

TOOL OF COMPANIES’ DEVELOPMENT IN VIETNAM

By

HOANG THUY HANG October 2011 Supervisor: Dr PHAM DUC HIEU

ABSTRACT

With the increasing effects of ASEAN over the world, Vietnam is an ideal market for corporations Furthermore, becoming the member of WTO since 2007 is an opportunity as well as the threats for local companies Following the globalization trend, corporate social responsibility (CSR) has been the vital issue in both national and global market CSR has recently emerged in Vietnam’s market, however, the knowledge and actions of CSR is limited Many scandals occurred relating to CSR issues such as the case of Vedan Co Ltd, Sabeco Song Lam Co., and Tung Khuang

Co Ltd Public now pays more attention to CSR The objective of the research is to analyze the relationship between CSR and the company’s stainable development in the case of Panasonic Vietnam Co Ltd From conducting the research, it is able to show the understanding and awareness about CSR concept, how the company treat its different layers of stakeholders, CSR implementation process, and give the conclusion about the connection of CSR and the company’s sustainable development

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DECLARATION OF ORGINALITY AND WORD COUNT 1

ACKNOWLEDGEMENT 2

ABSTRACT 3

LIST OF FIGURES 6

LIST OF ABBREVIATIONS 8

CSR: Corporate Social Responsibility 8

1 INTRODUCTION 9

1.1 Corporate social responsibility: an overall view 9

1.2 CSR in Vietnam 11

1.3 Panasonic Vietnam Co Ltd 12

1.4 Problem statement 13

1.5 Research objective 14

2 LITERATURE REVIEW 16

2.1 Definition of CSR 16

2.2 CSR models 18

2.2.1 Social-Economic Model of CSR 18

2.2.2 The two-dimension model 17

2.2.3 Carroll pyramid 18

2.3 Stakeholder model of CSR 21

2.4 Other theories 23

2.5 CSR reporting 24

2.6 Sustainability 24

2.7 CSR in Vietnam 25

3 RESEARCH METHODOLOGY 26

3.1 Research objective 27

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3.2 Research methodology 27

3.3 Data source 28

3.4 Research tool 28

3.5 Data collection and processing 29

3.5.1 Sampling Error! Bookmark not defined 3.5.2 Questionnaires 29

3.5.3 Personal Interviews 31

3.5.4 Data Treatment 31

4 RESULT ANALYSIS 33

4.1 Respond summary 33

4.2 Description of result 33

4.2.1 Age 34

4.2.2 Gender 34

4.3 Questionnaires analysis 35

4.3.1 CSR perception 35

4.3.2 Stakeholder interest 40

4.3.3 CSR Implementation 42

4.4 Interview analysis 46

5 CONCLUSION AND RECOMMENDATION 51

5.1 Conclusion 51

5.2 Recommendation 53

5.3 Limitations 54

REFERENCES 56

APPENDIX 60

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LIST OF FIGURES

Figure 1: A two-dimensional model of CSR (Quazi and O’Brien, 2000) 19

Figure 2: Carroll’s Pyramid of CSR (1991) 21

Figure 3: Market stakeholders 22

Figure 4: Non-market stakeholders 22

Figure 5: Distribution of CSR perception 39

Figure 6: CSR Implementation 46

Table 1: Age 34

Table 2: Gender 34

Table 3: Answers for question 1 35

Table 4: Answers for question 2 36

Table 5: Answers for question 3 37

Table 6: Answers for question 4 38

Table 7: Answers for question 5 40

Table 8: Answers for question 6 41

Table 9: Answer for question 7 42

Table 10: Answer for question 8 43

7 Table 11: Answers question 9 44

Table 12: Answers for question 10 45

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LIST OF ABBREVIATIONS

CSR: Corporate Social Responsibility

GPC: Global Panasonic Corporation

3Ps: Planet, People, and Profit

PR: Public Relation

PVCL: Panasonic Vietnam Co Ltd

VCCI: Vietnam Chamber of Commerce and Industry

WTO: World Trade Organization

WBCSD: World Business Council for Sustainable Development

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1 INTRODUCTION

1.1 Corporate social responsibility: an overall view

The term “Corporate Social Responsibility” (CSR) has popularly been applied over

the world and is still on aggressive debates among corporations, governments, professionals, and communities CSR is the further development of business ethics being promoted in 1980.At first, CSR is a performance about good actions but today

it becomes the common thinking of most people and organizations

For society as a whole, CSR benefits the global market by increasing the competition among organizations across borders to comply with the standards For policy makers, CSR is the obligation of companies with customers, employees, authority agencies, and any related parties In Europe, CSR is used as an economic tool or the trade barrier in Western countries (Breitbarth et al, 2011)

For corporations, CSR is the responsibility of conducting business activities based on the commitment to balance stakeholders’ interests and contribute to the sustainable

development of organizations The goal of CSR is to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere Furthermore, CSR-focused businesses would proactively promote the public interest by encouraging community growth and development, and voluntarily eliminating practices that harm the public sphere, regardless of legality Together with other traditional factors as costs, products’

to fight with multinational companies as these companies have made a mistake Thirdly, a series of evaluation and ranking organizations put pressure on companies

to report both financial and non-financial results

CSR has three layers The first layer is charity activities Returning something to the community is considered as a "right thing to do." The second layer is the risk management Beginning in the 1980s, when environmental disasters happened such

as explosions in the pesticide factory in Bhopal (India), and Exxon case of broken Valdex ship causing oil spill near Alaska, the reputation of industrial companies had been damaged The big pharmaceutical companies were criticized for refusing to provide drugs for people infected with HIV / AIDS in developing countries In clothing and footwear companies like Nike or GAP was attacked for using child labor The companies responded by trying to manage risks They discussed with non-governmental organizations and the government to set up rules of behavior (code of conduct) and to commit to greater transparency in their activities They met with their rivals in the same industry to establish general rules, sharing of risks and opinions Implementing CSR will create value for the company

In general, CSR’s issues related to protect environment, save society’s benefits and consumers’ one, commit to the safety and the rights of employees in company, and

1.2 CSR in Vietnam

Despite the widespread of CSR implementation over the world, this term is still a new topic to the Vietnamese market As Vietnam joined WTO in 2007, Vietnamese organizations must be aware of an internationally competitive market with new strict rules and standards and CSR is one of requirements from foreign clients and partners

The most important objective of a firm’s operation is to maximize the shareholders

wealth In order to achieve this long-term goal, corporations should not only concentrate on profit maximization but also their future image CSR will contribute

to a better goodwill and enhance the business development Vinamilk and Dutch Lady are real meaningful illustrations of CSR performance Vinamilk created a social program called “Ten millions cup of milk to children in Vietnam” And for each purchasing cup of Dutch Lady Milk, you saved a small amount of money for the rural and poor children who get the chance to receive the scholarship “Firefly Light” The two have built the good social image to the media and public, and have

received customer trust and loyalty

1.3 Panasonic Vietnam Co Ltd

Panasonic AVC Network Vietnam was firstly established in 1996 in Ho Chi Minh City as a member of Global Panasonic Corporations (GPC) In 2005, Panasonic Vietnam Co Ltd (PVCL) was known as the holding company of Panasonic Group in Vietnam It has been expanded rapidly since the establishment and controlled 6 subsidiaries including Panasonic Sales, Panasonic R&D Center, Panasonic Electronic Devices, Panasonic System Networks, Panasonic Home Appliances and Panasonic AVC Networks Following the fundamental operating concepts of GPC, CSR is the vital aspect for PVCL The slogan “a company as a public entity” is utilized through

its primary business It commits to improve society through products it produce and sell, to improve the society welfare and to protect the environment

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1.4 Problem statement

However, the CSR implementation is still limited because of the unawareness of

“How important is CSR?” and “How can CSR affect the long-term growth?” as well

as the lack of technical and financial resources (especially small and medium companies) This is the reason for the occurrence of damaging cases in recent years

According to latest statistics, out of more than 100 industrial parks in Vietnam, up to 80% are violating environmental regulations (Tap chi cong san, 2010) Ministry of Natural Resources and Environment has hold more inspection teams throughout the local, and made a "black list" of enterprises which caused serious pollution and are capable of being closed Vedan Vietnam has polluted the Thi Vai River and caused serious impacts to both the environment and nearby community In 2008, the case was exposed to the public through the caught and accusation of Environmental Polices Beside the Vedan case, food poisoning cases of Melanine Milk imported from China and 3-MCPD contained sauce, fraud in selling fuel, or hiring adolescents

to manufacturing Nike shoes are the whistle blowing for the Vietnamese government

Although a lot of research has been conducted about CSR, very few studies are taken place in Vietnam Because CSR is the hot issue, the benefits and drawbacks of CSR implementation reflect on the daily performance of organizations Thus, the paper aims to examine whether CSR is the sustainable element for the development of Panasonic Vietnam Co Ltd in Vietnam

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In order to better understand CSR of recent companies, we need to answer some following questions:

1) Why and how does CSR related to PVCL’s growth?

2) How does PVCL implement CSR?

1.5 Research objective

The paper objective is to:

- Explain what is CSR

- Access the perception and understanding of individuals of CSR concept

- Build theoretical model and inspect the relationship between CSR and the firms’ development

- Raise awareness of individual employees, investors and the company about CSR as the whole, and,

- Recommend possible solutions to improve the perception and awareness of CSR effects on the business operations

1.6 Sphere of research

Research conducting place: Panasonic Vietnam Co Ltd., Hanoi, Vietnam Objective

of the research: multinational companies operating in Vietnam

Time duration of conducting: from August 12th, 2011 to October 10th, 2011

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1.7 Research Methods

The project will use the survey and interview methods The research distributes the questionnaire and conducts the study among the managers and employees in PVCL Each individual will be questioned and then will fill the most appropriate answers in the survey The previous researches and studies are also investigated to construct the questionnaire The measurement is made in accordance with the past researches Both quantitative and qualitative are used to carrying out the research By surveying the managers and employees in PVCL; results and conclusions can be analyzed to assess the awareness and implementation of CSR of managers and employees

1.8 Structure of research

This project will be divided into five following chapters:

Chapter I: Introduction

Chapter II: Literature review

Chapter III: Research Methodology

Chapter IV: Finding and Result Analysis

Chapter V: Conclusion and Recommendation

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2 LITERATURE REVIEW

2.1 Definition of CSR

CSR is also called corporate conscience, corporate citizenship, social performance,

or sustainable responsible business Since the concept of CSR emerges in the business literature, academic researchers and non-academic advocators have given out numerous definitions According to Carroll (1999), the construction of CSR definition started in the 1950s It was widening in the 1960s and proliferated during the 1970s (Liangrong Zu, 2008) Even though there is no single commonly accepted definition of CSR Bowen (1953) defined CSR as “an obligation to pursue policies to

make decisions and follow lines of action which are compatible with the objectives and values of society” (Hussein, 2006) MaGuire (1963) expressed the view “the idea

of social responsibility supposes that the corporations have not only economic and legal obligations, but also certain responsibilities to society which extend beyond these obligations.” In 1975 Votaw and Sethi stated that CSR is “bringing corporate

behavior up to level where it is congruent with the prevailing social norms, values and expectations.”

And there are also some other different definitions of CSR which indicated there Following Wikipedia, "Corporate social responsibility is a form of corporate self-regulation integrated into a business model CSR policy functions as a built-in, self-regulating mechanism whereby business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms The goal of CSR

is to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees,

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communities, stakeholders and all other members of the public sphere Furthermore, CSR-focused businesses would proactively promote the public interest (PI) by encouraging community growth and development, and voluntarily eliminating practices that harm the public sphere, regardless of legality CSR is the deliberate inclusion of PI into corporate decision-making that is the core business of the company or firm, and the honoring of a triple bottom line: people, planet, profit Or Mallen Baker also said that “CSR is about how companies manage the business

processes to produce an overall positive impact on society"

However, the most modern and accepted definition of CSR is built by World Business Council for Sustainable Development (WBCSD) CSR means “the

continuing commitment by business to contribute to economic development while improving the quality of life of the workforce and their families as well as community and society at large.” The emphasis of this definition is that business

activities are mandated by laws, and expected moral or ethical nature It is the voluntary commitment which demonstrates socially responsible operations and performance of the firm And the firm has to consider both human and environment aspects because CSR will benefit the firm by improving financial performance; enhancing brand image and reputation; increasing sales and customers loyalty; increasing ability to attract and retain skilled employees; risk management; reducing regulatory oversight; and somehow reducing operating costs (Fernando, 2010)

2.2.2 The two-dimension model

Quazi and O’Brien (2000) developed a two-dimension model and tested its validity

in the context of two countries: Australia and Bangladesh The model is illustrated

in Figure 1

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Figure 1: A two-dimensional model of CSR (Quazi and O’Brien, 2000)

This model has two axes The horizontal one has two extremes: Narrow CSR and Wide CSR The Narrow view demonstrates the perception of business in the classical sense that is supplying goods and services leading to profit maximization within the political regulations Conversely, the Wide view take into account a broader context, the wider expectations of society such as environmental protection, community development, resource conversation and philanthropic giving The Vertical axe shows two extremes: Benefits and Costs of CSR Action One is implementing social costs in the short term; the other is long term benefits received from social actions Thus the model has four quadrants: Classical View, Social-economic View, Modern View, and Philanthropic view

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2.2.3 Carroll pyramid

Also under the social-economic view, Carroll (1979, 1983, and 1991) developed the Pyramid of CSR model (Figure 2) Carroll’s Pyramid of CSR includes 4 responsibilities in economy, legal, ethical, and philanthropy Economy responsibility

is illustrated by the effective growing of the company It can be understood as an obligation of the company to produce what are demanded and result the beneficial profit Furthermore, the company must care about looking for sources of labor and materials, attempt to find new resources or substitutes, update the advanced technology, research and development strategies It also considered as the priority target because any company was established to earn profit Other responsibility of company must base upon the economic responsibility of company Company is treated as “a person” under the law, so obeying the law is the next responsibility of

the company Every locations and bordered areas have its own set of law and regulations for conducting and running the business This is the compulsory things that are regulated and governed by the state authorities Although the profit maximization is vital to the business operations, legal requirements is a measure of true and fair decisions to increase the trust and loyalty from customers Ethical in business is mentioned many times while in today business, some companies accept doing any things to earn profit, even they cross the basic business ethic So, besides the law, companies also must perform ethical responsibility Ethical responsibility is the expectation of the public and society to the company that is going beyond the legal requirements After all, companies should contribute back to society by doing philanthropy This is mainly about set principle and moral values in the organization’s strategies By this way, they can improve people’s life, and make their

image be more well-known This categories consist of almost business activities

groups: market stakeholders and non-market stakeholders (Adapted from Business

and Society: Stakeholders, Ethics, Public policy, 12th edition, Anne T Lawrence, James Weber, 2008) Market stakeholders (shareholders, creditors, customers, distributors, employees, suppliers, wholesalers and retailers) are those related in daily economic transactions with the company; inversely, non-market stakeholders (community, governments, activist groups, media, business support groups and general public) are those not engaged in direct economic exchange with the firm

Business Firm

Figure 3: Market stakeholders

Media

Activist group

Business Support groups

General public

Governments Communities

Business Firm

Figure 4: Non-market stakeholders

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Under the Stakeholder Theory, a company has to consider the two aspects: ethic and management According to Deegan (2009), all stakeholders have the right to be treated fairly under the ethical perspective That means the organization’s

responsibility is not to give the power for preferential stakeholders but all However, under management view of Stakeholder Theory, Buhr (2002) stated that the company only responds to these stakeholders that affect its daily operation The more power stakeholders possess, the more probability the company acts on their interests and expectations (Friedman and Miles, 2002) Therefore, the non-market stakeholders are receiving little or even no attention as the market stakeholders

2.4 Other theories

The theory of three Ps (Planet – People – Profit) is related to the Carroll’s “Pyramid

of CSR” Three Ps are Planet, People, Profit, and this theory linked to how the

company performs its business Depended on the strategy of companies, those three

Ps can be replaced in some different ways They can be Planet – People – Profit, means that company cares about the whole environment, people in the society, and its last attention is profit Other replacement can be Profit –People – Planet, which means the priority of the company is profit, after that is people, and the last thing they care is the planet Based on how the company places those three Ps, we can understand the priority in its business performance

Other concept which is usually mentioned with CSR is Public Relation (PR) PR can

be understood as the action using media to perform effective transfer messages to public This action is performed with the purpose of changing the public's actions by influencing their opinions PR also helps companies supporting their brand name

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among many competitors in market Thus, PR is one of managing functions which helps company building and maintaining the relationship with society and customers Through good implementation of CSR, a company can make good PR about itself then consolidate its brand in market

2.5 CSR reporting

CSR report is voluntary statement CSR report can be a framework to present a good image for the shareholders and stakeholders CSR reporting is positively related to the activities of companies and enterprises are paying more attention to such reports CSR reporting framework is to improve corporate governance and competitive advantage to achieve sustainable development Carroll & Buchholtz (2000) comment

on the finding that CSR has brought some changes in the relationship business and social approach to stakeholder management is a necessary response CSR reporting has increased significantly improved with the period from 2002 to 2005 CSR reporting form has seen a big change from full environmental report for sustainable development (including issues of social, environmental and economic) Businesses with annual CSR reports agree that business should look at CSR as one of two aspects for business solutions such as reducing risk and create competitive advantage CSR has just such an exception in social ethics and an exception to exist and compete in business

2.6 Sustainability

The objective of profit maximization, nowadays, is not the first priority for the firms’ operation There is a movement from profit in the short-run towards the value

to treat equally to all employees The company also provides the satisfied remuneration package to motivate the employees’ performance Planet element is

about the environment The company has been prohibited from the unethical activities so that can cause damages to the environment Thi Vai River’ pollution is

a whistle-blowing for all firms operate in Vietnam Any activities leading to pollution and destruction of natural resources will result a bad reputation To enhance the view of public and media, some companies improving their responsibility by building parks and holding social events like preservation environment campaigns The final aspect contribute to the sustainability of firms is profit By acting ethically, firms save fined costs and gain opportunities cost from an ethical reputation This is an increase for the firm profit

2.7 CSR in Vietnam

The literature of CSR has been emerged in Vietnam in recent years Since Vietnam is till a developing economy, most businesses in small and medium-scale adoption and

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implementation of social responsibility of business has not been interested and broadly applied Vietnam's economy mainly centers around agricultural and forest products apart from mining and manufacturing The CSR awareness and perception are vague and many companies believe that it is an added and unnecessary expense rather than a cost-saving measure The greatest difficulty of Vietnamese enterprises today is information, leading to confusion and unclear direction where to start CSR implementation According to The CSR Vietnam Forum, in order to bring CSR into actions, companies answer the two following questions: "1 The quality of their management - both in terms of people and processes (the inner circle); and 2 The nature and quantity of their impact on society in the various areas" The Global Compact Network Vietnam (GCNV) recently held a meeting in Hanoi to discuss the ideas of CSR implementation into businesses The three step stage is given our in order to increase the profile of CSR which at the first level argue about how to implement the basics of CSR At the second level, companies will have to include the Global Compact framework to use CSR as a business strategy And the final layer is about companies showing their commitment towards CSR and how to improve its profile within the organization

In order to support Vietnamese companies, the government has attempted to raise the business awareness about the importance and effects of CSR over the long-term development The establishment of global standards for the firm’s operations is the

basic step in the process Moreover, many preferential policies have been applied to encourage the application of CSR

3 RESEARCH METHODOLOGY

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3.1 Research objective

Since Vietnam is an ideal market (a huge and cheap workforce, encouraging policies for development, cheap source of raw materials and so on), many multinational corporations has been set up in Vietnam PVCL is one of these and it has a great impact on the Vietnamese market Therefore the research intends to investigate the relationship of CSR and the sustainable development of SMEs It evaluates: 1) the management attitude and perception toward CSR, 2) how the firm consider stakeholder interests through its performance, 3) CSR implementation in business, and 4) the relationship of CSR implementation and the corporate performance

Nowadays, managers use CSR as a tool to increase their organizations' reputation; to improve the relationship of organization with society, consumers, workers; to increase the efficiency and effectiveness in their operation However, managers in Vietnam organization do not have enough knowledge about the importance of CSR,

so there is only little amount of companies in Vietnam integrate CSR

3.2 Research methodology

There are two main types of methodology which are quantitative and qualitative Quantitative method is “to generate statistics through the use of large-scale survey research, using methods such as questionnaires or structured interviews” while qualitative method is is “to explore attitudes, behavior and experiences through such methods as interviews or focus groups” On one hand, quantitative method obtains

meanings from numbers All collected data are numerical and standardized, and then are used to conduct diagrams and statistics On the other hand, qualitative method

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mainly derives meanings through words Qualitative data which are non-standardized are classified into different categories The analysis results from the use of conceptualization (Saunders et al 2009) In the research, the mix of quantitative and qualitative methods is more used

3.4 Research tool

Primary data is widely collected through research survey In the paper, the questionnaires and personal interview are used

sample is close to the mean of population known as the law of large numbers The

required sample size is a function of the precision of the estimates one wishes to achieve, the variability or variance, one expects to find in the population and the statistical level of confidence one wishes to use Therefore, in the research, the sample size is 20 managers and 110 employees

3.5.2 Questionnaires

There are two patterns of the survey: managers and employees The questionnaires are randomly sent to managers and employees of PVCL The survey includes 10 questions and is divided into 3 parts: perception and attitudes toward CSR, awareness

of stakeholder interest, and CSR implementation The Five-points Likert scales which is includes: 1= "strongly disagree"; 2= "disagree"; 3 = " neither agree nor disagree"; 4 = " agree"; 5 = "strongly agree" will be used for three pattern survey

The questionnaires have been designed as four parts (Appendix) The first section is the personal information including: age and gender The second one is questions about CSR perception and attitude including:

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Question 1: I know about the term “ CSR”

Question 2: I fully understand about the term “ CSR”

Question 3: CSR is rather the obligation of large multinational companies than of SMEs

Question 4: CSR is more relevant for the manufacturing industries than for the service sector

The next part is about the awareness of stakeholder interest as the following:

Question 5: The Company pays attention to the need and expectation of market stakeholders (customers, employees, creditors, suppliers, distributors, etc)

Question 6: The interest of non-market stakeholders (community, media,) is NOT important to the company

And, the final section is about the CSR implementation

Question 7: The Company implements a code of ethics

Question 8: A responsible company is a firm that strictly abides to labour and environmental laws

Question 9: Responsible businesses go beyond what is required by law to make a positive impact on society and the environment

Question 10: The company reporting systems encompass the environmental and/or sustainability reporting