Corporate Social Responsibility as Competitive Advantage and Strategic Necessity

118 Pages·2009·2.7 MB·English

Master Thesis

Corporate Social Responsibility as Competitive
Advantage and Strategic Necessity

Looking at Firm Vision and Stakeholder Perceptions

By
Petter Brunsæl

Advisor: Professor Joyce Falkenberg

University of Agder, Kristiansand

02.06.2009

This thesis was written as a part of the Master Program in Strategic Management at University of
Agder. The institution, the advisor, and the sensors are not responsible for the theories and methods
used, nor the results and conclusions drawn in this paper.
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Abstract

Corporate social responsibility (CSR) has been an increased concept within the today’s
business and there are different perceptions regarding the means of the concept. The theories
in the area focus on CSR as a possible source of competitive advantage, but also as a strategic
necessity. There is a debate regarding the Stakeholders’ importance when it comes to a firm’s
CSR activities. Satisfying stakeholders may be useful to increase a firm’s competitiveness, as
well as it can be seen as a necessity. This study explores whether a CSR activity can be seen
as a source of competitive advantage, or as a strategic necessity. Different views from the
firms’ CSR manager and different stakeholders are used. Further, this paper will explore if
there are any differences between the stakeholders’ perception, as well as the perceptions in
comparison with the CSR managers’ intention. The study was carried out by using two
companies with a high CSR profile: Kaffehuset Friele and Stormberg, with relevant
stakeholders.

The main findings of this paper concern CSR as competitive advantage and as a strategic
necessity, as well as rooted in the firm’s values and beliefs. Further, the findings show a more
detailed categorisation of sources of competitive advantage and strategic necessity. In
addition, the findings show that the different stakeholder groups: latent, expectant and
definitive have different perceptions of a CSR activity. Lastly, the CSR managers’ intention
and the stakeholders’ perception differ in some areas.

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Acknowledgements

This thesis is a result of several contributions.

I would like to thank Joyce Falkenberg for guiding me through the paper. I appreciate the
suggestions and comments I have received from the development of the problem definition to
making discoveries in the analysis. She has given me a new give in situations all seemed
problematic.

I would like to thank Atle Engelsen, CSR manager in Kaffehuset Friele and Jan Halvor
Bransdal, CSR manager in Stormberg for taking the time to give interviews and useful
information regarding their companies. I would further like to thank Cecilie Hultmann
(NHO), Egil Thune (NAV), Kristin Holter (IEH), Preben Madsen (Rema 1000), Steinar Olsen
(Stormberg), and Ragnhild Hammer (Fairtrade Max Havelaar) for taking their time to answer
questions regarding the two case companies.

Petter Brunsæl
June 2nd, 2009

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Tables of Contents
CHAPTER 1: INTRODUCTION 8
1.1 RESEARCH QUESTION 9
CHAPTER 2: LITERATURE REVIEW 10
2.1 INTRODUCTION TO CSR 10
2.1.1 DEFINITIONS WITHIN CSR 10
2.1.2 THE EVOLUTION OF CSR 11
2.1.3 CSR TODAY 13
2.1.4 CSR IN NORWAY 14
2.1.5 SUSTAINABILITY AND THE TRIPLE BOTTOM LINE 15
2.2 THE PURPOSE OF CSR 16
2.2.1 THE FREEMAN VS. FRIEDMAN DEBATE 16
2.2.2 MAPPING THE TERRITORY 17
2.2.3 THE THREE-DIMENSIONAL CONCEPTUAL MODEL OF CORPORATE PERFORMANCE 18
2.3 CSR AND STAKEHOLDERS 20
2.3.1 THREE ASPECTS OF STAKEHOLDER THEORY 21
2.3.2 DEFINITION OF STAKEHOLDERS 22
2.3.3 STAKEHOLDER TYPOLOGY 23
2.3.4 STAKEHOLDERS AND ITS RELEVANCE TO CSR 25
2.4 MOTIVATION BEHIND CSR 26
2.4.1 MOTIVATION AND DRIVERS FOR CSR 26
2.4.2 ARGUMENTS FOR AND AGAINST SOCIAL RESPONSIBILITY 27
2.5 CSR AS STRATEGIC NECESSITY AND COMPETITIVE ADVANTAGE 30
2.5.1 COMPETITIVE ADVANTAGE AND STRATEGIC NECESSITY 30
2.5.2 STRATEGIC NECESSITY AND CORPORATE SOCIAL RESPONSIVENESS 31
2.5.3 STRATEGIC NECESSITY 31
2.5.4 COMPETITIVE ADVANTAGE 33
2.5.5 COMPETITIVE ADVANTAGE AND STRATEGIC NECESSITY IN CARROLL’S FOUR ASPECTS 37
CHAPTER 3: THEORETICAL FRAMEWORK AND RESEARCH MODEL 38
3.1 THEORETICAL FRAMEWORK 38
3.1.1THE ASPECTS OF THE MODEL 39
3.2 RESEARCH MODEL 41
CHAPTER 4: METHODOLOGY 42
4.1 THE RESEARCH DESIGN 42
4.2 QUALITATIVE RESEARCH METHOD: CASE STUDY 42
4.3 SELECTING THE SAMPLE 43
4.4 INTERVIEW SUBJECTS 44
4.5 DATA COLLECTION 45
4.5.1 INTERVIEW 46
4.5.2 INTERVIEW GUIDE 46
4.6 DATA ANALYSIS AND INTERPRETATION 47
4.7 THE QUALITY OF THE RESEARCH 50
4.8 OTHER LIMITATIONS 51
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CHAPTER 5: CASE DESCRIPTIONS 53
5.1 STORMBERG 53
5.1.1 STORMBERG AND CSR 54
5.2 KAFFEHUSET FRIELE 55
5.2.1 KAFFEHUSET FRIELE AND CSR 56
5.3 STAKEHOLDERS 57
5.3.1 STORMBERG 58
5.3.2 KAFFEHUSET FRIELE 60
CHAPTER 6: FINDINGS 63
6.1 NATURE OF THE ACTIVITIES 63
6.1.1 VALUES AND THE ACTIVITIES 63
6.1.2 COMPONENTS OF THE ACTIVITIES 64
6.2 STRATEGIC NECESSITY 65
6.2.1 MARKET PRESSURE 65
6.2.2 NON-MARKET PRESSURE 66
6.3 COMPETITIVE ADVANTAGE 68
6.3.1 JUSTIFICATIONS FOR CSR 69
6.3.2 SOCIAL DIMENSIONS OF COMPETITIVE CONTEXT 70
6.3.3 VALUE CREATION DIMENSIONS 74
6.4 SUMMARY OF FINDINGS 76
CHAPTER 7: ANALYSIS 78
7.1 MOTIVATION BEHIND THE ACTIVITIES 78
7.1.1 THE ACTIVITIES IN LIGHT OF THE CSR ASPECTS 78
7.1.2 BENEFITS AND PRESSURE AS MOTIVATION 79
7.2 CSR ACTIVITIES AS STRATEGIC NECESSITY AND COMPETITIVE ADVANTAGE 80
7.2.1 THE ACTIVITIES AS STRATEGIC NECESSITY 80
7.2.2 THE ACTIVITIES AS COMPETITIVE ADVANTAGE 84
7.2.3 THE COMPETITIVENESS MATRIX 89
7.2.4 CSR AS GROUNDED IN COMPANY VALUES AND BELIEFS 92
7.3 DIFFERENCES AND SIMILARITIES 93
7.3.1 DIFFERENCES AND SIMILARITIES BETWEEN THE STAKEHOLDERS 93
7.3.2 THE CONTINUUM OF STAKEHOLDERS 95
7.3.3 DIFFERENCES BETWEEN THE CSR MANAGERS AND THE STAKEHOLDERS 96
7.4 REVISED MODEL 97
CHAPTER 8: CONCLUSION AND DIRECTIONS 100
8.1 CSR AS COMPETITIVE ADVANTAGE AND STRATEGIC NECESSITY 100
8.2 CSR AS ROOTED IN VALUES AND BELIEFS 101
8.3 DIFFERENT PERCEPTIONS BETWEEN THE STAKEHOLDER GROUPS 101
8.4 LIMITATIONS 102
8.5 DIRECTIONS FOR FUTURE RESEARCH 102
CHAPTER 9: REFERENCES 104
APPENDICES 108
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APPENDIX 1: THE INTERVIEW GUIDE, CSR MANAGER 108
APPENDIX 2: THE INTERVIEW GUIDE, STAKEHOLDERS 110
APPENDIX 3: TABLE FOR ANALYSIS, STORMBERG 112
APPENDIX 4: TABLE FOR ANALYSIS, KAFFEHUSET FRIELE 115

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Figures

Figure 1: The Pyramid of Corporate Social Responsibility (Carroll 1991, 42) 20
Figure 2: The Stakeholder Model (Donaldson and Preston 1995, 69) 22
Figure 3: Stakeholder Typology (Mitchell, Agle et al. 1997, 874) 23
Figure 4: The Four Elements of Competitive Context (Porter and Kramer 2002, 8) 34
Figure 5: Value Creation Dimensions (Burke and Logsdon 1996, 497) 36
Figure 6: Framework Based on Theory (The author) 39
Figure 7: Research Model (the author) 41
Figure 8: Basic Design for Case Studies (Yin 1994 in Ghauri and Grønhaug 2005, 120) 42
Figure 9: Components of Data Analysis: Interactive Model (Miles and Huberman 1994 in
Ghauri and Grønhaug 2005, 207) 48
Figure 10: The Grouping of the Stakeholders (Mitchell, Agle et al. 1997, 874), modified by
the author 62
Figure 11: The Competitiveness Matrix (the author) 91
Figure 12: The Continuum of Stakeholders (the author) 95
Figure 13: The CSR Congruence Model, Friele (the author) 96
Figure 14: The CSR Congruence Model, Stormberg (the author) 96
Figure 15: Revised Research Model (the author) 98

Tables

Table 1: Concepts Used in Relation to CSR 11
Table 2: Stakeholder Actions (Papasolomou et al. 2005 in Jamali 2008, 218), modified by the
author 26
Table 3: Arguments for Social Responsibility (Davis 1973, 313-317), modified by the author
29
Table 4: Arguments against Social Responsibility (Davis 1973, 317-323), modified by the
author 30
Table 5: Case Firms 44
Table 6: Stakeholders, Stormberg 45
Table 7: Stakeholders, Kaffehuset Friele 45
Table 8: Summary of Main Findings, Kaffehuset Friele 77
Table 9: Summary of Main Findings, Stormberg 77

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Chapter 1: Introduction

“Globalization at the advent of the 21st century has thrust business to the high ground in our
society where new roles, responsibilities and expectations are reshaping the face and nature
of business. In effect, the social contract which defines the roles and responsibilities of private
and public sectors reflects the growing economic, social and environmental pains of
developed and developing countries, resulting in a time of transition, with much debate and
too little purposeful dialogue.”
Bradley Googins, Director, Boston College Center for Corporate Citizenship
(UNGlobalCompact 2008)

Today, there is an increased focus on what role a corporation should have in the society.
Corporate social responsibility (CSR) as a term has been developed during the last decades
and there is an ongoing debate whether firms should focus its business in the area of creating
profit, or whether a firm should be concerned about activities going beyond the economic
aspects of the firm. The today’s extensive debate and focus on CSR have formed many
directions for responsible behaviour, and the UN global compact’s focus on the care for
climate (UNGlobalCompact 2009), as well as the “Oslo Business for Peace Award” 2009
(BusinessWire 2009) are evidences of an increased focus on the role of businesses in the
greater society.

Even though there are initiatives for an increased role of a caring business, several
corporations seem to get lost in their focus on CSR. Two recent scandals are the cases of
Enron and WorldCom, where the accountability of large businesses can be questioned. As a
contradiction to the recent trends, there are indeed several businesses focusing on creating
profit, rather than being social responsible. Looking at the Enron scandal, it can be said that
the end of the firm happened due to its lack of social responsibility and lack of ethics, among
other reasons. This shows the importance of social businesses in order to survive in the
today’s competitive arena. As a contrast, the large Swedish furniture corporation IKEA has
been able to use its social awareness in the competitive arena. The firm has responded to
social pressures based on negative media coverage (IKEA 2009). Further, by having a large
CSR focus, the firm combines the need for creating profit among with the need for social
responsible behaviour (Economist 2009). In accordance to Goggins, in the quote above, new
roles and responsibilities have re-shaped the nature of business. It is possible to ask: if
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corporations are to be responsible, to whom should they be responsible to? The questions
regarding CSR and stakeholders are given much attention in the today’s CSR debate. Many
researchers outline the importance of stakeholder evaluations regarding the firms’ CSR
activities.

While there is literature suggesting CSR as a source of competitive advantage and as a
strategic necessity, there is little evidence to find regarding how a CSR activity is perceived.
This paper will look at two CSR activities from Stormberg and Kaffehuset Friele regarding
the activities as a source of competitive advantage and/or as a strategic necessity. Further,
views from stakeholders and the CSR managers will be used in order to better understand the
nature of the activities. Further, by looking at the stakeholders, it will be possible to detect
differences between the perceptions.

1.1 Research Question
The purpose of this paper is to explore why firms are engaged in CSR activities, and how the
activities are viewed. The first question that will be addressed is: Do firms engage in CSR
activities due to competitive advantage or due to strategic necessity? And secondly, is the
firm’s intention in congruence with the stakeholders’ perception, and are there differences and
similarities between the stakeholders? In addressing the motives behind a CSR activity and
including different stakeholders, this paper will contribute to the work on CSR by addressing
CSR as competitive advantage and/or strategic necessity. In addition, differences and
similarities between the firms’ intention and the stakeholders’ perception will be outlined, as
well as any differences between the stakeholders will be highlighted.

To address the proposed questions, relevant CSR theory will be outlined in chapter two.
Based on the existing theory and research, this paper will suggest a theoretical framework and
a research model (chapter three). Further, there will be an outline of the methodology (chapter
four) and a description of the cases in chapter five. The findings will be explained in chapter
six, the analysis in chapter seven, and there will be a conclusion and suggestion for future
research in chapter eight.

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