Corporate Social Responsibility

James Weber, David Wasieleski, James Weber, David M. Wasieleski

• Publisher: Emerald Publishing Limited
• Year: 2018
• ISBN:
  9781787542617
• Topic: Business
• Subtopic: Business Ethics
• Index: Business

The Business and Society (BAS) 360 book series is an annual publication targeting cutting-edge developments in the broad business and society field, such as stakeholder management, corporate social responsibility and citizenship, business ethics, sustainability, corporate governance and others. Each volume will feature a comprehensive discussion and review of the current "state" of the research and theoretical developments in a specific business and society area. For instance, volume two focuses on research drawn from work grounded in "corporate social responsibility" and "corporate citizenship." Scholars known in this discipline contribute to a 360-degree evaluation of the theory, including cross-discipline research, empirical explorations, cross-cultural studies, literature critiques, and meta-analysis projects. As business and society is an inherently multi-disciplinary scholarly area, the book series will draw from work in areas outside of business and management, such as psychology, sociology, philosophy, religious studies, economics and other related fields, as well as the natural sciences, education, and other professional areas of study. This book series should appeal to wide range of readers - from emerging and senior business school educators researching and teaching in the business and society field to doctoral and masters level students across the business, social sciences and natural sciences seeking to learn about this multi-discipline and sustained field of management study. Business executives and managers could benefit from reading how the business and society field began, the path it has taken and the new, emerging directions that scholars envision for the field.

INVESTIGATING CORPORATE
SOCIAL RESPONSIBILITY IN
PRACTICE

Chapter 6

Much Ado about Nothing: The Glacial Pace of CSR Implementation in Practice

Daina Mazutis

Abstract

Over the last several decades, businesses have faced mounting pressures from diverse stakeholders to alter their corporate operations to become more socially and environmentally responsible. In turn, many firms appear to have responded by implementing more sustainable practices — measuring, documenting, and publishing annual CSR or sustainability reports to showcase how they are addressing important issues in this area, including: resource stewardship, waste management, greenhouse gas emission reductions, fair and safe labor practices, amongst other stakeholder concerns. And yet, research in this domain has not yet systematically examined whether businesses have, on the whole, changed their practices in tandem with the important changes in its institutional context over time. Have corporate CSR initiatives, in fact, been growing over the last 25 years or has the increased attention to CSR actually been much ado about nothing? In this chapter, we review the empirical literature on CSR to uncover that common measures of CSR such as the KLD do not support the concept that CSR practices have increased substantively over the last 25 years. We supplement this historical review by modeling the growth curves of CSR implementation in practice and find that the pace of positive change has indeed been glacial. More alarmingly, we also look at corporate social irresponsibility (CSiR) and find that, contrary to expectations, businesses have become more, not less, irresponsible during this same time period. Implications of these findings for theory are presented as are suggestions for future research in this domain.

Keywords: CSR; CSiR; institutional theory; KLD; HLM; growth curve modeling

Introduction

The rules of the game have changed: unconstrained growth under a shareholder wealth maximizing paradigm is no longer sufficient to ensure firm survival. Ethical (Enron), social (Nike), and environmental (BP) scandals have the power to financially cripple even the largest organizations. In order to gain and maintain a competitive advantage in the long run, firms must now meet a new performance standard that ensures equitable and sustainable outcomes in addition to solid economic performance (Paine, 2003; Waddock, Bodwell, & Graves, 2002). Over the last several decades, there has been a proliferation of calls for businesses to become more responsible for the negative externalities they cause, as well as more accountable for their contribution to global issues such as climate change, poverty, and conflict (Margolis & Walsh, 2003; Orlitzky, Schmidt, & Rynes, 2003; Sharfman, Shaft, & Tihanyi, 2004). Even titans of strategy have conceded that the time has come for organizations to start thinking seriously about how to engage in CSR to create shared value (Porter & Kramer, 2011).

In parallel to the growing stakeholder pressure for corporate accountability, a plethora of new institutions (rules, regulations, organizations, policies, international agreements, etc.) have also emerged to support this increased focus on responsible business (Waddock, 2008). Academia has also responded with a significant body of research seeking to ascertain the impact, financial or otherwise, of the increasing demand for CSR (Margolis, Elfenbein, & Walsh, 2009). Yet, we still know very little, on the whole, about how companies have actually responded to these swelling institutional pressures (Aguinis & Glavas, 2012; Dahlmann & Brammer, 2011; Shropshire & Hillman, 2007). Rather, most studies in the domain of CSR remain cross-sectional thus providing only partial snapshots of firm-level determinants or outcomes of CSR at any given point in time.

The goal of this chapter is therefore to investigate whether businesses as a whole have indeed responded to these new strategic imperatives, or, if the increased focus on CSR in management research over the last several decades can be better described as “much ado about nothing?” We begin by briefly reviewing the theoretical context for this study which is rooted in institutional theory, building arguments around the predicted growth of CSR and decline of CSiR (Corporate Social Irresponsibility) over time. We then review 120 studies that have employed the KLD database as a proxy for business CSR practices to demonstrate that, from a historical perspective, the mean CSR rating of businesses has indeed not grown substantially over the last two decades. Last, we model the individual CSR and CSiR trajectories of 349 S&P500/Russel3000 firms from 1991 to 2009 using HLM7 software. With almost 25 years of data and 6,334 firm-year observations, this chapter represents one of the first longitudinal studies to explicitly model the rate of both the adoption of positive CSR initiatives over the last two decades as well as the anticipated decline in CSR concerns (Mazutis, 2011, 2013; Short, McKenny, Ketchen, Snow, & Hult, 2016). The findings reveal that the pace of change has indeed been glacial when it comes to integrating positive CSR into corporate strategy. More alarmingly, however, we find that contrary to expectations, the number of CSR concerns attributable to large corporations has grown, rather than declined, during this same time frame. As such, it is impossible to conclude that institutional forces have worked to constrain negative firm behavior. After discussing the implications of these results, we conclude with contributions, limitations, and future research directions.

Theoretical Context

Institutional Theory

Organizations are said to be limited in their strategic actions by external constraints and institutional pressures toward conformity (Oliver, 1991) which may be particularly salient in the domain of CSR (Bansal, 2005; Campbell, 2007). The institutional argument centers on the idea that there are enduring institutions in social life that effect the thoughts, feelings, and behaviors of individuals and collective actors (Lawrence & Suddaby, 2006). These institutions consist of the “cognitive, normative, and regulative structures and activities that provide stability and meaning to social behavior” (Scott, 1995) which therefore affect the strategic, legal, and ethical norms inherent in decisions of CSR. Due to mimetic, coercive, or normative isomorphic pressures to conform to taken-for-granted social rules, firms will tend to imitate the behavior of other firms in order to gain or maintain legitimacy and increase their chances for survival (DiMaggio & Powell, 1983).

Legitimacy seeking is therefore a central concept in institutional theory and is defined as what is “appropriate within some socially constructed system of norms, values and beliefs” (Suchman, 1995). With regard to the adoption of CSR practices, particularly salient is the notion of moral legitimacy which rests on judgments about whether an activity should or ought to be pursued (Suchman, 1995). Here, one could argue that regulatory, normative, and cognitive institutional pressures constrain a firm’s ability to pursue strategies that might deviate from the norms of the industry lest the firm risks harming its legitimacy (Boiral, 2007). Yet, as the norms of the industry change, from a narrow shareholder perspective to a broader stakeholder perspective, adopting positive CSR practices becomes more appropriate and maintaining harmful social or environmental practices becomes less acceptable (Chuang, Church, & Ophir, 2011; Shropshire & Hillman, 2007; Yeung, Lo, & Cheng, 2011). Rivoli and Waddock (2011) suggest that on the whole, over time, the ambiguity and uncertainty surrounding a social or environmental issue subsides and activities that would have once been considered “unheard of” (e.g., extended supply chain responsibility), become normalized, expected and even required by organizations while other issues (e.g. bribery, child labor) become increasingly stigmatized.

In parallel, laws, regulations, and other structural characteristics of the industry will impose coercive isomorphic pressures on the firm to comply with accepted standards (DiMaggio & Powell, 1983). With increased legal and other institutional forces in the domain of CSR, acceptable standards in this field are evolving (Chuang et al., 2011; Haack, Schoeneborn, & Wickert, 2012; Waddock, 2008). In turbulent or uncertain environments in particular, mimetic isomorphic pressures will further push firms to copy the actions of successful organizations within their field. Several qualitative case studies have demonstrated that organizations will tend to adopt practices similar to one another over time in order to maintain legitimacy within their institutional field (Bansal, 2005; Boiral, 2007; Hoffman, 1999). For example, in a study of firms in the oil and gas, mining, and forestry industries in Canada, Bansal (2005) found that institutional mimicry (e.g., conducting an environmental audit in response to industry norms) was positively associated with corporate sustainable development over time. Empirically, the widespread diffusion of ISO 9000 standards and the adoption of same-sex partner health benefits have also been found to be the result of coercive, normative, and mimetic isomorphic pressures (Chuang et al., 2011; Yeung et al., 2011).

The increase in institutional drivers around CSR has been well documented (Waddock, 2008) such that firms today appear to face a greater degree of pressure to comply to mounting CSR demands (Waddock et al., 2002). These growing isomorphic pressures constrain firm behavior so that organizations comply with accepted standards (legal or normative) and adopt positive CSR initiatives and halt harmful practices. This represents for many organizations a strategic change. By strategic change, we mean “a difference in the form, quality, or state over time in an organization’s alignment with its external environment” that involves significant changes in resource deployments (Rajagopalan & Spreitzer, 1997, p. 49). Strategic change is an important construct in strategy research and fundamental to discussions of firm performance in so far as adapting to environmental changes is seen as a necessary condition of firm survival (Porter, 1980). In the context of today’s hypercompetitive dynamic contexts, ensuring continual fit between strategy and environment becomes even more critical to competitive advantage. With institutional pressures to take a broader stakeholder impact perspective, many companies are facing strategic change with regard to corporate social, environmental, and other stakeholder-related issues.

Although this evolution may be very slow, especially around highly contested areas such as same-sex partner employee benefits (Chuang et al., 2011) and environmental responsibility (Hoffman, 1999), on the whole, we would expect that both the overall levels of CSR initiatives as well as the rate at which firms adopt CSR initiatives should be increasing over time (Bansal, 2005). First, the pressures on firms to address or redress negative externalities have grown over the last two decades (Waddock et al., 2002); these have ranged from issues regarding exploitative labor practices in the early 1990s to ethical collapses at major corporations such as Enron, WorldCom, and Tyco in the early 2000s; from increased calls for environmental responsibility post Al Gore’s An Inconvenient Truth (2006) to the most recent progress on formal legislative equality for same-sex couples. As such, the sheer breadth of social, environmental, and other stakeholder issues that now face organizations is of a magnitude unforeseen even a decade ago (Paine, 2003).

With the increased transparency that has accompanied the Internet boom, the strength of stakeholder group pressure on firms to adopt good and limit bad CSR practices has also increased during the same time frame (Waddock et al., 2002). For example, the sheer number of emerging global standards, codes, and principles (e.g., the United Nations Global Compact, ISO 14000, and Fair Labour Guidelines) has created an expectation of corporate accountability and transparency in social, environment, and other stakeholder issue reporting, strengthening the normative pressures on all firms to comply to better operational practices and reduce negative externalities (Waddock, 2008; Waddock et al., 2002; Yeung et al., 2011).

This increased access to information and increased pressure from employees, suppliers, NGOs, communities, and governments, to be more socially responsible, has progressed such that a new set of social, environmental, and ethical rules has come to...