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«Sustainable at heart: Corporate Social Responsibility as a routine A multiple case study Coach: Dr Frank Wijen Department of Strategic Management and ...»

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Erasmus University Rotterdam

Rotterdam School of Management (RSM) Erasmus University

Faculty of Business Administration

Sustainable at heart:

Corporate Social Responsibility as a routine

A multiple case study

Coach: Dr Frank Wijen Department of Strategic Management and Business

Environment

Co-Reader: Ir. Maarten Dirks Department of Management of Technology and

Innovation

Master thesis by Jon van den Bremen (336037)

Master of Science in Business Administration Major Strategic Management September 2011 For Pol Sustainable at heart: Corporate Social Responsibility as a routine Acknowledgements I always felt that after finishing a Bachelor in International Agricultural Trade, Van Hall Larenstein University of Applied Sciences in 1990, a scientific fundament was missing. The latter made me choose to study MScBA at the Rotterdam School of Management Erasmus University somewhere half way my career. This proved to be the best choice I could have made, because never have I learned more about a subject, about methodology and about myself than during the last couple of years. Writing this marks the end of a Master Thesis and the end of this academic education, which is an appropriate moment to thank the following

people:

Dr Frank Wijen, for your guidance and inspiration. The idea to further link Corporate Social Responsibility (CSR) ambition to routines was in part caused by your concern that I would lose track in an endless number of possible causalities. Routines proved to be the right direction to help understand how organisations could enhance the ‘embeddedness’ of CSR.

Ir. Maarten Dirks, for guidance and support. Your challenging feedback has supported me enormously in developing central logic as well as tiny details of this project.

Since this academic education is more than this Master Thesis alone, I would like to thank:

Ir. Ton Roodink, for making the 2010 international project in Cleveland US something that made me learn more about myself than during the rest of the Master programme.

1 Sustainable at heart: Corporate Social Responsibility as a routine Table of contents Acknowledgements 1 Table of contents 2 Executive summary 3 1 Introduction 4

1.1 Background and research question 4

1.2 Literature review 6

1.3 Empirical study 7

1.4 structure of the thesis 8 2 Literature review

–  –  –

Executive Summary Much has been written about what Corporate Social Responsibility (CSR) is and why it is important. However, how to bring CSR to the core of business activities proves to be far less obvious. Since core business activities is a catch-all concept, organisational routines has been

chosen to study the impact of CSR. This resulted in the following main research question:

How does the ambition to turn CSR from a peripheral activity into a core business activity change organisational routines?

This multiple case study includes five companies: Princes, Eastman Chemical, Unilever, Tetra Pak and Farm Frites. Findings revealed CSR ambition-sensitive antecedents of organisational routines: a higher CSR ambition level leads to a lower (perceived) task complexity and uncertainty, higher motivation, more decentralisation and a lower level of decision urgency and/or decision complexity. Non-CSR ambition-sensitive antecedents do not change organisational routines, but (partly) explain the increase of collective nature of routines.

Looking at the routines itself, findings suggest that the ambition to turn CSR from a peripheral activity into a core business activity starts with a centralised developed set of instruments and targets, which lead to cognitive patterns (such as standard operating procedures and performance programmes). These centralised developed set of instruments and targets increase motivation through visibility, involvement and empowerment, which enables de-centralised actions in the next stage. Decentralisation (as the second stage) leads to a low (perceived) task complexity and task uncertainty now that cognitive patterns are synchronised with behavioural patterns, allowing actions based on local judgment. This local judgement reduces (perceived) level of decision urgency and/or decision complexity, since personnel are empowered to act (effortful accomplishment replaced mindlessness) before urgency becomes an issue and complexity becomes a problem. In other words: because uniform instruments and targets put CSR within the same business dynamic as financial or growth targets, personnel have the tools and training to act locally and embeddedness follows motivation, empowerment and decentralisation. Eventually, CSR-related activities become so intertwined with core activities, that mindlessness is the result.

The above findings can also be read as recommendations. In short: in order to embed CSR in a company’s core activities, it is recommended that a clear vision and message is developed about what CSR means within a specific business context as well as targets including company-wide instruments to measure critical points and progress. Responsibilities to materialise set targets should be decentralised as much as possible by providing personnel with the tools, training and motivation (empowerment) to act locally.





–  –  –

1 Introduction The general relevance of Corporate Social Responsibility (CSR) mainly points towards the media, consumer markets, business processes and accountability of businesses.

Media pay considerable attention to CSR or sustainability issues, e.g. fierce wind turbines debates in the Netherlands (Washington Post, 14 February 2011), Royal Dutch Shell muchcriticised operation in the Niger Delta (NRC Handelsblad, 15 January 2011), ‘private investments in green sectors top $2 Trillion’ (Ethical Markets Media, 17 February 2011 posted on csrwire.com).

Consumers can choose from a wide variety of ‘green’ products and services like eco clothing, hybrid cars and financial services from The Dutch ASN Bank which promotes fair trade, sustainable energy and campaigns against child labour and the arms industry. Trade associations and consultancy firms offer services to businesses including industry specific reports, e.g. UK based Leatherhead February 2011 report ‘sustainable sourcing on the rise but not universal’ values the global Fairtrade market at almost US$5bn in 2009, but it has tripled since 2005 (foodnavigator.com, 15 February 2011).

Business processes (and accountability) are becoming increasingly institutionalised in guidelines for environmental management systems (ISO 14001) and most public companies complement their annual reports with sustainability reports.

Definition choice: before discussing definition perspectives (chapter 2), the term Corporate Social Responsibility (CSR) is assumed to include social responsibility, sustainability, corporate sustainability, corporate societal responsibility, sustainable development, etc.

1.1 Background and research question

Where Corporate Social Responsibility activities are obviously largely situated in the domain of businesses – although governments play an important role too -, the extent to which these activities are limited to peripheral activities or really sunk into core business activities is not so obvious. Recyclable packaging would be a peripheral phenomenon for a manufacturers of devices, whereas as it would be core to a packaging supplier. To urge employees to use personal coffee cups rather than throwing away plastic ones is nice, but has nothing to do with core CSR activities. In this study, we take the periphery-core debate as the starting point in order to find out where CSR activities reside and what this does to organisations.

For Enoch (2007), CSR is ‘progressive window dressing’, which would ultimately mean that CSR is only a peripheral activity. However, peripheral CSR activities do not necessarily come from a ‘window dressing attitude’ but could simply be the result of not knowing how to incorporate CSR in core activities or a lack of ambition.

On the other side of the spectrum, companies make environmental and social aspects drive their core activities, as exemplified by The Body Shop. Founder Anita Roddick states that ‘the business of business should not just be about money, it should be about responsibility. It should be about public good, not private greed.’ The question here remains whether this ‘should be’ is truly achieved or merely an expression of morality.

Within the above mentioned periphery-core debate, we must differentiate between a) periphery vs. core as origin of CSR actions; b) appearance or visibility of these activities and

c) the goals of these activities. It is assumed that ambition encompasses these three aspects as it deals with a) where we come from and where we want to be, b) activities to get there and c) what we are aiming at by getting there.

4Sustainable at heart: Corporate Social Responsibility as a routine

The fact that CSR does not always become part of the genes of a company is expressed by the statement by Porter and Kramer (2011) statement that ‘Most companies remain stuck in a ‘social responsibility’ mind-set in which societal issues are at the periphery, not the core. CSR may define new values for persons and for society. However, the fact that CSR is now often seen as damage control, a PR campaign, a constraint, a charitable deed or a cost factor (Porter & Kramer, 2006), such as emission prevention investments, tells us that CSR is not a core business activity in many cases.

At the same time, CSR can be seen as a source of innovation and competitive advantage (Porter & Kramer, 2006) (e.g. Toyota’s world's first mass-produced hybrid vehicle), which raises the question ‘how come, companies have a different points of view?’ The differences between companies and the way in which the necessity for CSR activities is judged is also illustrated by Wijen (2002), who argues that the environment or environmental issues can be seen as a source of resources, a constraint or as a market opportunity.

The above illustrates that CSR activities are situated at the peripheral or the core side of businesses. Within this so-called periphery-core debate, Van Tulder and Van der Zwart (2006) seem to take the discussion a step further when they come with four approaches to CSR, i.e.; In-active or Corporate Self Responsibility, Re-active or Corporate Social Responsiveness, Active or Corporate Social Responsibility and Pro-active or Corporate Societal Responsibility.

In the literature review, the definition perspectives which emerged over time will be discussed.

For example, Dahlsrud (2006) found that at least five important dimensions can be identified when comparing definitions: the stakeholder, social, economic, voluntariness and environmental dimension. Eventually, the literature review intends to seek possible answers to the question how we can distinguish peripheral CSR activities from core CSR activities in order to be able to recognise aspects of ambition to bring CSR to the core of business.

So far it has been clarified what is meant by the question: to what extent can (Corporate) Social Responsibility become part of a company’s core business activities (i.e. CSR to the heart of business activities, which is much more than just extending beyond the statutory obligation to comply with legislation). When we are able to identify when CSR does ‘sink in’, it is still not clear what it does to organisations, which brings us to the second topic of this thesis.

As the term organisation refers to a wide variety of aspects (e.g. culture, corporate governance, executive pay, ethics, leader vs. leadership development, skills), organisational routines has been chosen, because routines might be a powerful tool to help us understand how organisations could enhance the ‘embeddedness’ of CSR within their organisations.

An organisational routine is a 'relatively complex pattern of behaviour... triggered by a relatively small number of initiating signals or choices and functioning as recognisable unit in a relatively automatic fashion' (Winter, 1986). The generic term ‘routines’ includes the forms, rules, procedures, conventions, strategies and technologies around which organisations are constructed and through which they operate' (Levitt and March, 1988).

The so-called ‘lock’ aspect of routines is described amongst others by Nelson and Winter (1982, 2002), who consider routines as the basis for behavioural continuity of organisations.

On the other hand Feldman (2000) argues that organisational routines have a great potential for change, even though they are often perceived, even defined, as unchanging. This

5Sustainable at heart: Corporate Social Responsibility as a routine

seemingly paradoxical stability vs. change element of routines is expected to be important for understanding what CSR transition does to organisational routines.

One of the most comprehensive overviews of routines comes from Becker (2004), who listed characteristics ascribed to routines throughout time (i.e. Patterns, Recurrence, Collective nature, Mindlessness vs. effortful accomplishment, Processual nature, Context-dependence, embeddedness and specificity, Path dependence and Triggers), followed by their supposed effects on organisations (i.e. Coordination and control, Truce, Economising on cognitive resources, Reducing uncertainty, Stability and Storing knowledge). Becker’s (2004) overview serves as a guideline and starting point to come to a conceptualisation of possible effects on routines from CSR ambition. In order to understand the influence of CSR ambition on organisational routines, antecedents of routines act as a mediating variable. Amongst others task, network and decision structure will be discussed in chapter 2.2 Antecedents of changes in organisational routines.

In literature, little is said about CSR transition (past) or ambition (future) and effect on organisational routines, which leads to a thesis with an explorative character.



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