History, definition and building blocks

In this section, the history of CSR thinking is reviewed and the CSP is defined. In addition, different dimensions and categories are considered as building blocks of CSP. Furthermore, maturity levels are discussed as outcomes of different CSP strategies and factors affecting CSP are defined.

History of CSR thinking

Companies have shown signs of societal behaviour since the times of Hammurabi.

Dictators and politicians in power have expected such behaviour from companies (Amin-Chaudhry, 2016). However, the concept of CSR began to take its present shape in the 1920s when it was viewed as a “social obligation”. Dodd (1932) argued that corporations should have an obligation towards the society (Taneja et al., 2011).

Bowen (1953, p. 6) defines CSR as follows: “Obligations of businessmen are to pursue those policies, to make those decisions, or to follow those lines of actions, which are desirable in terms of the objectives and values of our society”. With his definition, the modern debate about CSR integrating a company to a society was begun (Wartick & Cochran, 1985). Keywords describing the evolution of CSR thinking are presented in Table 1.

Table 1. CSR evolution during the 20th century

Decade Keywords in CSR evolution Reference

1920s Social obligation towards the

society Dodd (1932); Taneja et al. (2011)

1950s Follow the objectives and values

of the society

Bowen (1953)

1960s Adopt CSR initiatives to receive

a social licence to operate

Frederick (1970)

1970s Beyond legal obligations Davis (1973)

1980s Sustainable development

In the 1960s, the concept was developed into companies having a “social license” to operate by acquiring “global legitimacy” through the adoption of CSR initiatives (Frederick, 1960). In the initiatives made in the 1960s and 1970s, which were voluntary, CSR was deemed to indicate that companies were going “beyond legal obligations” (Davis, 1973). The debate on sustainable development began to emerge in the 1980s, consequently leading to “sustainable development” being included in CSR (World Commission on Environment and Development, 1987). In the 1990s, financial justification became one basis for CSR activities (Wood, 1991a). At the end of the 1990s and into early 2000s, about 35% of companies worldwide were engaged in reporting their CSR activities (Kolk, 2000).

The discussion about CSR being a part of corporate strategy began in the 2000s (United Nations, 2007; Baumgartner & Ebner, 2010). Porter and Kramer (2006) considered as an absolute waste of competitive capability if the potential related to sustainability and society is not a part of corporate strategy. Halme and Korpela (2014) speak about companies considering the sustainability issue as a business opportunity. The discussion about CSR being the basis of corporate strategy began in the 2010s (Baumgartner & Ebner, 2010; Engert et al., 2016; upright.com, 2017;

Gras & Krause, 2018).

As a summary of the evolution of the CSR concept, it can be said that CSR began by being regarded as a “social obligation” and evolved into a concept that is now regarded as bringing competitive capability to a company while also being an integral part—and even the basis—of company strategy.

Corporate social performance (CSP)

In this section, CSP is defined. The dimensions and categories of CSP are discussed as building blocks that are needed for assessing of the maturity level of CSP. The maturity levels resulting from the selected CSP strategies are discussed next and then CSP strategy as part of corporate strategy is considered. In addition, the intrinsic and extrinsic factors that shape and affect CSP strategy and corporate strategy are defined.

Carroll (1978) divides CSR into four responsibilities. The first two, “economic” and

“legal”, are related to the interests of shareholders, which came first. The second

two, “ethical” and “discretionary/philanthropic”, are related to a company’s responsible position in society. The main criticism of this model refers to its lack of dynamic evolution in terms of responding to the debate, contributing to the development of CSP processes and providing the ability to modify the model accordingly (Wartick & Cochran, 1985).

Wood (1991b, p. 693) tries to answer for this lack of dynamism by providing the following definition: “CSP is a business organization’s configuration of principles of social responsibility, processes of social responsiveness and policies, programs and observable outcomes as they relate to the firm’s societal relationship”. This represents a framework of principles, internal company activities and outcomes for CSP. According to Wood (1991b), the maturity level of CSP should be assessed in order to understand where a company stands in terms of CSP.

To be able to assess a company’s CSP maturity level, the dimensions and categories of CSP need to be considered. Dimensions and categories constitute the building blocks of CSP—CSP consists of three to four dimensions, whereas each dimension consists of several, typically three to five, categories (Chen & Delmas, 2011; Bini et.

al., 2018; Baumgartner & Ebner, 2010). Each of the categories has a specific measure of its own, which can either be nominal or binary. If the measure is negative, it indicates that the category is a burden, whereas a positive measure indicates an unburdening effect. The sum of the measures of the categories belonging to a dimension add up to the measure for that specific dimension. The sum of dimensions represents the aggregate CSP measure of a company. Measuring CSP is further elaborated in Section 2.4.1. As examples of different CSP dimensions and categories, the approaches developed by Baumgartner and Ebner (2010), ESG and Bini et al. (2018) are presented in Table 2 below.

Table 2. Three examples of CSP dimensions and categories (modified from Baumgartner and Ebner (2010), ESG and Bini et al. (2018)

Baumgartner and Ebner (2010) Innovation & technology, collaboration, knowledge management, processes, purchase, sustainability reporting, resources including recycling, emissions, waste and hazardous water, biodiversity, environmental issues of the product, ethical behaviour and human rights, no controversial activities, no corruption & cartel,

corporate governance, motivation and incentives, health & safety, human capital development, corporate citizenship.

ESG (Chen & Delmas, 2011) Environmental performance (climate change, products and services, operations and management, other factors); Social performance (community, diversity, employee relations, human rights); Governance performance (reporting, structure, public policy, transparency, compensation, accounting); all divided into concerns and strengths.

Bini et al. (2018) Environmental impact (air, energy, environmental protection, raw materials, waste, water); Societal influence (corruption and lobbying, human rights, local community engagement); Organisational culture (labour conditions, local employment, opportunity and equality, recruitment and bargaining, training).

There are a lot of similarities between these approaches. As can be seen in Table 2, Baumgartner and Ebner (2010) do not consider the dimensions separately but list only CSP categories, whereas the other two examples group the categories under three dimensions. Later on in this study, the net impact approach—which contains four dimensions and nineteen categories—is introduced.

Next, the dimensions and categories are assessed in the context of Wood’s (1991b) CSP definition above in order to define at which CSP maturity level a company is.

There are four different CSP maturity levels: 1) beginning, 2) elementary, 3) satisfying and 4) sophisticated/outstanding (Baumgartner & Ebner, 2010). The assessment addresses the concern about the lack of dynamic evolution presented earlier by Wartick and Cochran (1985). The maturity level is an outcome of the CSP strategy selected by a company.

Consequently, there are four types of company CSP strategies, which lead to different maturity levels: 1) introverted, 2) extroverted, 3) conservative and 4) visionary strategies (Baumgartner & Ebner, 2010). In introverted strategy, the focus is on the compliance with legal and other external standards and on avoiding company

risks in environmental and social issues. In extroverted strategy, the focus turns to external relationships in order to acquire a licence to operate. In conservative strategy, proactivity on eco-efficiency and cleaner production start are the focal points, while the visionary strategy employs a holistic approach in which all business activities are looked at through the sustainability lens. In visionary strategy, competitive advantages emerge from differentiation and innovation, which can be viewed by customers as unique offerings. Visionary strategies can occur in two different forms:

in a conservative or a systemic manner (Baumgartner & Biedermann, 2007). The conservative visionary strategy utilises emerging market opportunities in an opportunistic manner, whereas the systemic visionary strategy goes further and adds an inside–out perspective by planting sustainable thinking deep into an organisation.

The concept of CSP maturity levels helps in understanding the contribution of CSP strategy to the corporate strategy of a company (Baumgartner & Ebner 2010; Bini et al., 2018). According to this view, many companies seem to be in the beginning and elementary CSP stages when CSP has not yet played any proactive role in their company strategies.

Finally, to paint the picture of CSP more fully, the internal and external environment of a company shapes and affects the CSP strategy and corporate strategy also needs to be considered (Orlitzky et al., 2017; Luth & Schepker, 2017; Cai et al., 2016; Muller

& Kolk, 2010).

CSP has been divided into micro-, macro- and meso-level factors (Orlitzky et al., 2017). Micro-level refers to the company level, macro-level to the country level and national business system factors and meso-level factors refer to the industry-level factors, such as the effects of different industrial branches. At the industry level, companies exhibit higher CSP if the dynamism of the industry and product differentiation are high (Luth & Schepker, 2017). At the country level, for example, economic development, culture and institutions have been selected as the research basis (Cai et al., 2016). According to Muller and Kolk (2010), CSP factors can be divided into extrinsic and intrinsic factors. Extrinsic factors refer to a company’s external stakeholders affecting CSP, while intrinsic factors itemise a company’s internal environment and thus impact CSP.

In Table 3, CSP is classified according to intrinsic and extrinsic factors.

Table 3. The summary of intrinsic and extrinsic factors of CSP along with examples of authors who have considered them

Intrinsic factors Examples of authors

CSP–CFP, CFP–CSP Clarkson (1995); Makni et al. (2008); Waddock and Graves (1997); Orlitzky et al. (2003); Zhao and Murrell (2016);

Busch and Friede (2018)

Firm characteristics Stanwick and Stanwick (1998); Aquilera-Caracuel et al.

(2015); Patrisia and Dastgir (2017); Cheung et al. (2019) CEO and top management Thomas and Simerly (1994); Weaver et al. (1999); Petrenko

et al. (2016); Tang et al. (2015); Dixon-Fowler et al. (2013) The role of innovation Ruggiero and Cupertino (2018); Yang et al. (2010); Hull and

Rothenberg (2008); Pavelin and Porter (2008); Rothenberg et al. (2017)

The role of middle management Directors’ Institute of Finland (2019); Dentchev (2004);

Tuppura et al. (2013); Surroga and Tribo (2008)

Employees Albinger and Freeman (2000); Sun et al. (2018); Arnoux-Nicolas et al. (2016); Wong et al. (2017)

The role of board of directors Ortas et al. (2017); Boulouta (2013); Macaylay et al. (2018);

Fernandez et al. (2019); Francouer et al. (2019) Extrinsic factors

Investor-related issues Liao et al. (2018); Chun and Shin (2018); Cox et al. (2004);

Wang and Chen (2017); Busch and Friede (2018)

Ownership-related issues Johnson and Greening (1999); Bingham et al.(2011); Aoi et al. (2015); Labelle et al. (2018)

Measuring CSP Igalens and Gond (2005); Chen et al (2015); Querol-Areola (2017); Chen and Delmas (2011); Hardyment et al. (2011);

Kravanja and Cucek (2013); uprightproject.com (2019) Other (secondary) stakeholders and

regulation

Gallear et al. (2012); Chiu and Sharfman (2011); Graafland and Smid (2017); Baron (2009); Gras and Krause (2018) Consumers (customers) Schuler and Cording (2006); Perera and Hewege (2016);

Isfianadewi and Mahdi (2018); Walker and Wan (2012)

In the following sections these intrinsic and extrinsic factors are discussed more in detail. CEO and top management, the role of middle management, employees and the role of board of directors are grouped together as antecedents of corporate governance CSP and are discussed one after another. The role of innovation is

considered to be a capability that belongs in the CEO and top management section.

Investor- and ownership-related issues are discussed in the same section.