CSR, Sustainability, and Leadership

Gabriel Eweje, Ralph Bathurst

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781315525952
• Edition: 1
• Topic: Business
• Subtopic: Management
• Index: Business

With the acceptance of CSR and Sustainability as important business performance indicators, it is timely now to assess the impact that leadership has on the development of these processes. CSR, Sustainability, and Leadership seeks to explore the integration of these three elements through an examination of concerns and trends in contemporary organisations. The authors discuss empirical and theoretical studies which focus on processes and practices which inform the field.

Organisations wish not only to participate in responsible behaviour, but also actively lead within their local environments. However, businesses are failing in their execution of CSR because of ineffective leadership. Business leaders are central to an organisation's purpose in the world and this book will inform a robust discussion about social issues which are pressing to scholars, policymakers, not-for-profit organisations and students.

Section B

Global Challenges and Concerns

8 Practicing Corporate Social Responsibility

Loi Teck Hui

Introduction

The world and its natural laws interact with human societies to affect the well-being of all living things. An organization, be it public or private, is not detached from the society and the natural environment. Satisfying the diverse interests of its stakeholders is dependent on a complex balance of interconnected factors. Friedman (1970) argues that the primary social responsibility of a firm is to increase its profits without deceptions. There have been growing concerns in profit-seeking enterprises which are preoccupied with their profit-maximizing goals at the expense of the greater good (e.g. Chatterjee, 2003; Jackson, Wood, & Zboja, 2013). Tensions between maximizing profit for shareholders and optimizing returns for stakeholders persist (Crane, Palazzo, Spencer, & Matten, 2014). In addition, organizational leadership is also vital for generating combined insights capable of dealing with diverse and cognitively complex situations (Finkestein & Hambrick, 1996; Ireland & Hitt, 1999). With that said, whether practicing corporate social responsibility (CSR) can generate resilient socio-economic and environmental performances merits further academic investigation.

Management process essentially is a system of interdependency. The well-configured firms will thrive (Miller & Whitney, 1999). Pragmatic management upholds the output results, often justifying the inputs in terms of the results. By neglecting non-economic dimensions in both the input and output processes, the corporate sustainability of firms can be in jeopardy (Atkinson & Field, 1995, pp. 115–121; Hui, 2008). The existing empirical works, with narrowly defined CSR constructs, have been confined largely to specific projects and products rather than the entire firm (Crane, et al., 2014; Porter & Kramer, 2011). There have also been calls for more multilevel approaches and non-Western-tradition research on CSR (Aguinis & Glavas, 2012; Godfrey & Hatch, 2007). Against the research gaps identified, this chapter aims to examine the adoption of CSR in the strategic planning process of a major governmental agency in Malaysia: Bintulu Development Authority (BDA). The goal is to identify the strategic values of such adoptions which contribute to the said firm’s positive triple-bottom-line performance, such as financial strengths, investment growth, industrialization, urbanization, core businesses with CSR added on, and environmental preservation, reflected in a subsequent section of this chapter, and the linkages of such values to the resource-based view (RBV) theory’s assertions of a valuable asset. A well-encompassing CSR definition is adopted. People are essential to managerial thinking. Having appropriate leadership is necessary to organize a firm’s strategic planning mechanisms to accomplish organizational goals and sustainability (Hamel & Prahalad, 1993; Quinn & Dalton, 2009). Along this line, the research also underlies the crucial roles top management plays in enabling the CSR adoptions which lead to better organizational performances.

This chapter has the following organization: first, we survey the related CSR and leadership theoretical foundations and adopt a well-encompassing CSR definition by the European Commission (2011); next, we present the data collection methods, data analyses, discussion on findings, and strategic implications of this research before making concluding remarks. In the data analysis and results discussion section, we examine the adoption of CSR, enabled by organizational leaderships, in the strategic planning process of BDA in four different components: (a) the strategic intent in engaging CSR practices, (b) the CSR planning that incorporates CSR strategies and programs into the organizational core businesses for implementation, (c) the control of CSR performance, and (d) the measurement of triple-bottom-line results, which addresses the tensions between the financial and the non-financial performances. The linkages between the CSR perspectives and the RBV theory are discussed in the section on implications. This exploratory study provides insight into the fact that by adhering to good citizen practices, commitments, especially from top management, to practice CSR can provide opportunities for firms to demonstrate value and to generate a form of sustainable competitive advantage or corporate sustainability supported by the larger society. There is relatively scant literature that pays attention on the adoption of CSR, with reference to leadership issues, in public-sector organizations. This research can make a positive contribution in this area.

Theoretical Framework

In this section, the adoption of CSR in the organizational strategic planning process is examined through the lens of the following CSR and related literatures.

CSR Definition

Several works have extensively reviewed the antecedents of CSR concepts and definition constructs covering the period between the 1950s and the 2010s. It seems that CSR is evolving into a highly heterogeneous literature (Carroll, 1999, 2008; Carroll & Shabana, 2010; Moura-Leite & Padgett, 2011). Carroll’s (1979) definition of a four-part CSR—namely, economic, legal, ethical, and philanthropic—embedded in a conceptual model of corporate social performance perhaps was the earliest, more established, framework of CSR (Carroll, 1999). This CSR research adopts the European Commission’s (2011, p. 6) definition of CSR:

The responsibility of enterprises for their impacts on society … To fully meet their CSR, enterprises should have in place a process to integrate social, environmental, ethical, human rights, and consumer concerns into their business operations and core strategy in close collaboration with their stakeholders, with the aim of: maximizing the creation of shared value for their shareholders and stakeholders at large; and identifying, preventing, and mitigating their possible adverse impacts.

From the definition, a firm has an obligation to embed the elements of moral, social, environmental, legal, and stakeholder interests into its mainstream operations, while finding solutions to address its economic self-interests and stakeholder expectations. The definition corresponds with the holistic approach taken in this chapter—i.e. analyzing the adoption of CSR in a firm’s strategic planning process and the associated triple-bottom-line results.

CSR and Strategic Intent

Managers are leaders who have specific roles to play within the management hierarchy. Having some forms of flexible hierarchical arrangements in an organization can assist it in fulfilling its obligations better (Denning, 2014; Mintzberg, 1975). Firms develop a clear set of goals within their organizational hierarchy of objectives, just as there is a hierarchy of managers to prevent drifting into an uncertain future. Resulting from an understanding of their internal organizations and external forces, they develop strategic intent and a strategic mission to form the basis of communication to their stakeholders (Hitt, Ireland, & Hoskisson, 2001). The vision and mission statements, externally focused, describe the central purpose of firms and guide the direction of their strategy formulation and implementation (Ireland & Hitt, 1992; Leuthesser & Kohli, 1997). If well crafted, the statements can also provide the impetus for influencing attitudes from the organizational leaders to the bottom of the organization and the powerful forces for organizational change (Mullane, 2002; Williams Jr., Morrell, & Mullane, 2014). Reconciling a firm’s organizational ends to its means through strategic intent is necessary to achieve success. Strategic intent is the leveraging of firms’ internal resource capabilities and core competences in relation to attaining their goals. It intimately ties firms’ self-interests to their stakeholders’, which reflects the unique ways firms can exploit competitive advantage (Hamel & Prahalad, 1989, Hamel & Prahalad, 1994; Sherman, 1995). It is also synonymous with the manner envisioned for making a vision a reality (Macmillan & Tampoe, 2001). Bartkus and Glassman (2008) argue that all stakeholders are interested in understanding how firms’ CSR positions affect their well-being. They expect firms’ actions are consistent with their publicized statements.

CSR and Strategic Planning

Strategic mission and strategic intent are not the end goals of CSR. For any CSR plans to be meaningful, firms will need to translate them into action, via their organizational strategic planning process, for value creation. In the case of BDA, two master development plans with structured development and action plans have guided the organization, since its formation, in drafting and implementing all of its business and CSR plans. A more detailed account of the subject matter will be discussed later in this chapter. A strategic planning process consists of three core components—namely, strategic analysis, strategic implementation, and strategic control. Forming strategic vision, setting objectives, conducting organizational strategic position analysis, and crafting a strategy for desired outcomes are the major agendas in the strategic analysis stage. The strategic implementation stage involves implementing and executing the chosen strategy effectively. On the other hand, evaluating performance and initiating corrective actions are the concerns of the strategic control stage (Hitt, et al., 2001; Thompson & Strickland, 1998). Crane, Matten, and Spence (2008, p. 417) indicate that some typical steps in integrating CSR into strategic planning would be a planning phase, an implementation phase, and an evaluation phase. In addition to these steps, leaders are also strong predictors of the degree to which organization members are guided by an established plan and the use of planning tools (Drago & Clements, 1999). Their commitment matters to organizational justice and social responsibility (Tatum & Eberlin, 2007). The financial return for major firms grows with sophistication in their strategic management (Miller & Cardinal, 1994; Pekar & Abraham, 1995). Hence a broad adoption of CSR plans would require the integration of such plans, with top management commitments, into firms’ strategic planning process.

CSR Performance and Resource-Based View

In view of the limitations of financial return in measuring multifaceted aspects of firm performance, Elkington (1994, 1998, 2007) coined the notion of the triple-bottom-line concept, which considers the interdependencies of environmental, social, and economic aspects in achieving business sustainability and common good. The corporate social performance–relevant outcomes should include the following triple-bottom-line categories: economic, social, and natural environment impact (Wood, 1991; Wood, 2007). Appropriate leadership characteristics are necessary to positively affect these attributes (Ashley & Patel, 2003; Ireland & Hitt, 1999). The triple-bottom-line principle has become an influential approach in major firms and countries (Elkington, 2007; The Global Reporting Initiative, 2002; Markus & Rob, 2013; Mintz, 2011).

By contrast, Carroll (1979, 1991) hints that fulfilling economic obligations is the primary concern of a business organization. The four-part CSR definition is presented as a CSR pyramid with economic responsibility depicted at the base of the pyramid and then built upward through legal, ethical, and philanthropic responsibilities. Existing research findings show a mixed result concerning the impact that CSR initiatives have on firms’ financial performance. Positive results seem to be more dominant than mixed and negative results.¹ For firms to achieve the triple bottom line simultaneously, it is necessary that the three dimensions be reflected in their strategic planning process.

Maximizing returns for both shareholders and stakeholders represent huge challenges, requiring firms to develop unique resource capabilities in order to meet such challenges. The RBV relies heavily on assets that are specific, non-tradable, rare, non-substitutable, inimitable, and valuable. Firms may sustain their competitive advantage over a longer period of time if one, or any combination, of the following conditions exists: (a) they enjoy better expectations of future resource value, (b) the resource capabilities are path dependent or causally ambiguous, and (c) there is social complexity in which two or more different social and business systems combined to create excessive variations for a system to emulate accurately (Barney, 1986, 1995; Dierickx & Cool, 1989; Mahoney & Pandian, 1992; Peteraf, 1993).

CSR and Leadership

The attitude of top management toward CSR is one of the crucial factors in integrating CSR into strategy and culture. When the organizational leaders perceive CSR as an opportunity to maximize their firms’ capabilities and...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of Illustrations
• List of Contributors
• Acknowledgements
• Foreword
• Section A Leading for Sustainability
• Section B Global Challenges and Concerns
• Index