Getting to the heart of Corporate Social Responsibility

The term Corporate Social Responsibility (CSR) has become a buzzword in the business world. However its practical meaning and application are sometimes unclear. The RESPONSE project researched 20 companies and many more stakeholder organisations to investigate CSR and, on the basis of the results, proposed an extension of the EU definition of CSR and stronger measures to encourage its integration into all aspects of business.

Building a stronger partnership between business and society is an established objective of the European Commission, set out in its communication of March 20061 and also implicit in the Treaty of Lisbon2. The three-year RESPONSE project involved over 300 managers in 20 multinational companies in 8 sectors, and representatives from over 180 stakeholder organisations. Examples of stakeholder organisations include NGOs, shareholders, employees, customers, media and industry associations.

The research compared the views of managers and stakeholders to investigate the concept of ‘cognitive alignment’, or shared view. This is the degree of alignment between companies and their stakeholders about CSR within their business. Results from 427 interviews indicated that there was a wide gap in the understanding of what constitutes CSR:

  • Roughly 80 per cent of managers see CSR as reducing negative impacts on society (‘do no harm’) rather than more proactively attempting to have positive impacts on society (‘do good’). Stakeholders show a roughly 50/50 distribution between the two.
  • Two-thirds of managers view the role of the firm in society as separate from the well-being of stakeholders and the global community. Only 20 per cent consider the firm to be a network of independent stakeholders and 15 per cent view the firm as a global corporate citizen. Stakeholders are divided equally between these three views.
  • About 80 per cent of managers believe stakeholders comprise just three groups: shareholders, employees and customers. 90 per cent of stakeholders have a more diverse list including communities, suppliers and NGOs.

Further investigation indicated a link between the cognitive alignment and several measures of social performance. To understand this link better the research explored the influence of internal and external factors on the degree of cognitive alignment.

External factors of influence were type of industry, regional context and level of stakeholder pressure. High tech and banking industries have better cognitive alignment, as do companies located in Anglo-Saxon regions i.e. USA and UK compared with those in Northern and Southern Europe. Firms with greater pressure from external stakeholders also demonstrate better alignment between management and stakeholders.

Influential internal factors were business strategy, integration of CSR principles and motivation for CSR. Firms with tailored, high margin products have better cognitive alignment than those with standardised, high volume products, as do firms where CSR is integrated into many business operations. Companies that encourage CSR by highlighting its positive impact on a product have better cognitive alignment than those that use risk minimisation or cost-efficiency as motivations for engaging in CSR.

Finally the research compared the impacts of different types of managerial training on socially responsible behaviour. Results indicated that meditation-based coaching stimulated ‘do good’ behaviour and shifted decision making criteria from broadly self-interest minded criteria (profit, reputation etc.) towards prioritising social and environmental impacts. In comparison, traditional educational training was ineffective in producing a shift towards greater socially responsible behaviour.

RESPONSE provided recommendations for business leaders, stakeholder organisations, management education institutions, future academic research and for policy makers. The recommendations for policy and standards include:

  • Extend the definition of CSR to: ‘a concept whereby companies integrate social and environmental concerns in their strategic decision making processes in their business operations and in their interactions with their stakeholders on a voluntary basis’.
  • Encourage firms to apply this definition to its full extent and integrate it into all aspects of business.
  • Articulate and focus on concrete, desired outcomes of the partnership between business and society. This could be done in several areas: the establishment of partnerships, the integration of CSR in day-to-day work, the setting of clear goals agreed upon by stakeholders and companies, and the evaluation of CSR.
  • Involve a range of stakeholders, including employees, customers, suppliers, business partners, shareholders and communities.
  • Further develop the new model of academic research into CSR instigated by the RESPONSE project.
1 http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2006:0136:FIN:en:PDF
2 http://europa.eu/lisbon_treaty/index_en.htm

RESPONSE - Understanding and Responding to Societal Demands on Corporate Responsibility (duration: 1/6/2004 – 31/10/2007) was a Specific Targeted Research Project funded under the 6th Framework Programme for Research of the European Union, Thematic Priority 7 - Citizens and governance in a knowledge-based society.

See: http://www.insead.edu/v1/ibis/response_project/

Contact: Prof. Maurizio Zollo, floriana.mulazzi@unibocconi.it