CSR in international organizations

Egri and Ralston (2008) point out that relatively low number of researches exists which deal strategic approaches of CSR in the context of international business, especially in developing countries where huge demand for CSR due to poverty, environmental degradation is and institutional governance issues (Park, Song, Choe & Baik, 2015). Usually CSR is studied in developed economies where income is higher and societal issue level is lower compared to developing countries. Researches focused on developing countries have usually focused on unethical labor practices, improving public policies and monitoring systems that are preventing issues (Park et al., 2015).

CSR has gained a lot of interest and researches during the recent years due to the rise of globalization (Park et al., 2015). Still, there is lack of theory on how multinational organizations should execute corporate social responsibility (Hah & Freeman, 2014).

According to Rodriguez, Siegel, Hillman and Eden (2006) many studies have shown that there is a relationship between multinational enterprises (MNEs) and their part in society is from the most part affected by large changes that are happening in the global business environment (Hah et al., 2014). Lack of research is due to the difficulty to define CSR,

because MNEs operate in many different environments and cultures (Rodriguez et al., 2014).

Arthaut-Day (2005) points out that to control CSR actions in MNEs requires CSR management on a global level and in addition, the cultural differences must be considered (Hah et al., 2014). CSR actions must be set in a global level for the awareness of various cultures to be adopted in every organization. Tan and Wang (2011) show that MNEs are influenced by the host by the degree to which their parent organization includes CSR into its strategy (Hah et al., 2014).

Organizations which are expanding to international market meet with both the foreign country (Zaheer, 1995) and with possibly hostile environment (Zahra & Garvis, 2000) with grown requirements from increased amount of stakeholders (Attig et al., 2016). This expansion of focus compels organizations to develop their CSR actions to answer new stakeholders and overall environment. Freeman’s (1984) stakeholder theory represents that socially responsible company focus simultaneously to the interests of all important stakeholders rather than only giving attention to the interests of company’s shareholders (Hah et al., 2014). Both stakeholder theory and institutional theory has been applied with the study of MNEs and CSR (Hah et al., 2014).

Firms often want to be socially responsible because of the benefits of gaining credibility and legitimacy (Hah et al., 2014). Jamali (2008) mentions that this desire is higher for the companies that are operating in foreign host country where they want to be socially responsible operator in the shared environment (Hah et al., 2014). Subsidiaries may need to offer different ethical responses to pressures given by local stakeholders (Hah et al., 2014). This supports the whole MNE’s and its subsidiaries to achieve coherent common ground on CSR actions.

Burke and Logsdon (1996) report that strategic CSR is more effective than responsive CSR in building sustainable business in foreign markets (Park et al., 2015). Porter and Kramer (2006) divided CSR approaches in two groups of responsive CSR and strategic CSR.

Responsive CSR is about being a good citizen and alleviation of harm caused by different value chain activities. Strategic CSR is more focused on investments in the competitive context and transforming value chain activities for more sustainable. (Park et al., 2015).

Investing in competitive context stands for company’s actions of investing both tangible and intangible infrastructure in the local community (Park et al., 2015). This kind of functions will benefit both the community and also the firm to achieve sustainable growth in that certain area. Strategic CSR supports the organization to better position itself as a trustworthy and

socially responsible corporate citizen in its community (Park et al., 2015). This also improves the credibility of the organization in the minds of their stakeholder groups. Morand and Rauman-Bacchus (2006) notion that continuing inspection and evaluation are key things in order organization to keep the credibility of policy connected to external stakeholders.

In international markets, organization’s CSR management should combine the strategic capabilities of headquarter with the local knowledge of the foreign subsidiary in order to build a CSR system that will similarly benefit both business and society in the foreign market (Park et al., 2015). According to Morand and Rauman-Bacchus (2006) the universal policy originates from the headquarters by absorbing corporate value framework, even if implementation is partly localized. Many multinational companies collect feedback from subsidiaries and then ultimately shared by the headquarter (Morand & Rauman-Bacchus, 2006). Park et al. (2015) highlight that applying strategic CSR program can be an effective entering strategy for emerging market. In this situation, program must be planned in a way to serve the host country’s social requirements and support the important strategic problems of the sponsoring firm in the foreign market (Park et al., 2015).

Attig et al. (2016) point out that all arguments towards CSR are in favor with statement that internationalization of corporate activities is positively associated to CSR activities. There is also other side to the matter that argues that increased diversity and growth of stakeholder requirements would result in internationally diversified companies that locate in countries with lower CSR levels / standards (Attig et al., 2016).

Sanders and Carpenter (1998) mention that as internationalization level increases, company’s success is dependent on the capability to survive with high levels of complexity that are originated from various cultural, institutional and competitive environments and in addition the necessity to coordinate and integrate their geographically divided resources (Attig et al., 2016). The amount of stakeholder’s increases and the geographical area widens which sets new demands for the organization. Generally the response for this new diverse environment is to increase employee satisfaction and grow the investments on CSR activities (Attig et al., 2016).

Internationalization brings different kind of companies together with different kind of requirements and environments. According to Falkenberg and Brunsael (2011) different industries possess certain CSR activities and have become a critical activities especially in those industries. In addition to this, different countries have their own requirements for CSR activities (Falkenberg & Brunsael, 2011). The need for these certain CSR activities to

certain countries and certain companies are based on reduction of costs for the specific firm (Falkenberg & Brunsael, 2011). Other requirement for these specific CSR activities are the needs of stakeholders (Falkenberg & Brunsael, 2011). Companies must evaluate and prioritize the CSR actions required by their industry, overall environment or their stakeholders. These certain CSR actions become compulsory over time, because lack of the activities would create a strategic disadvantage to the firm. (Falkenberg & Brunsael, 2011)

Morand and Rayman-Bacchus (2006) point out that multinational organizations (MNCs) have grown their power in the business world due to the strength to make strategic decisions as for example locating production areas, organizing distribution, transferring funds and information around the world. Brinkman and Brinkman (2002; Morand & Rauman-Bacchus, 2006) also note that the development of corporate global power is complex and it is changing economic and social policy, political behavior and cultural change.

Kumar and Steinman (1998; Morand & Rauman-Bacchus, 2006) tell that the main issue in CSR is to find a balance between profitability and responsibility which depends organization’s own consideration. Organization’s battle between consideration of the amount of investments in CSR and how much to pursue profitability in the business strategy.

However, legislation is setting more and more of the minimum standards directed to performance standards of organizations (Morand & Rauman-Bacchus, 2006). CSR don’t depend anymore by the consideration and want of the organization but about the legislation in countries. Morand and Rayman-Bacchus (2006) impart that multinational organizations should “think global, act local” in the global environment. In addition, Morand and Rayman-Bacchus (2006) mention that there is a contradiction between globalization which contains universal policies compared to localization that includes the recognition and respect of local priorities, traditions and conditions.