Increasing Stakeholder Engagement with CSR

An organization will generate the highest returns when the processes and procedures integrate CSR, and these CSR investments are communicated to the key capital market participants. (Hawn & Ioannou, 2016, 2584) It is stated that by using the engagement strategy in communication, better positive effect on employees, community and business goals may be achieved (Lim & Greenwood, 2017, 768, 774, 775) At the same time, the lack of alignment between internal and external CSR actions, the gap between CSR investments and communication, diminishes transparency and accountability to the investors, community, and effects and affects organization’s valuation negatively. (Hawn & Ioannou, 2016, 2584) If CSR investments are not communicated, a risk for market value decrease occurs.

If the gap between CSR investments and communication is as its most significant, the market value is associated to be 26,5 percent lower than the on the mean level of the gap. If the gap between CSR investments and communication is equal to 0, the market value of the organization is 36,5 % higher than the average. If the external actions are exceeding the internal ones, the market value is 45% higher than on the average. (Hawn & Ioannou, 2016, 2584) Thus, it is highly suggested to communicate CSR investments to the stakeholders.

Two contemporary CSR communication strategies are stakeholder engagement and corporate social responsiveness. These two communication strategies reflect the changing role of the CSR is moving the focus from traditional corporate image building to managing issues of reputation-based boundary spanning. Notably, the stakeholder engagement strategy seems to be effective in achieving all three goals:

business, employee and community goals from a managerial perspective. (Lim &

Greenwood, 2017, 768)

Stakeholder engagement is also crucial in the implementation CSR activities Stakeholder engagement means the process of understanding stakeholder’s needs and interests. CSR actions should be designed to meet the expectations of the stakeholders because otherwise, it is impossible to design an effective CSR program. (Lock & Seele, 2016, 186) Thus, it can be stated that by engaging stakeholders not only effective communication, but also better CSR investments can be made.

Engaging communication may be helpful in finding better CSR fit with the stakeholders. Especially marketing actions such as cause-related marketing and corporate social marketing require high stakeholder engagement (Abitbol & Lee, 2017, 797). In this, authenticity is the key element: IT needs to be defined when an organization’s CSR activities are most likely to be perceived authentic by stakeholders. To be authentic, CSR activities need to be aligned with the core mission, vision, and values. In Figure 5, the four windows of stakeholders’

perceptions about CSR are visualized. The two dimensions of distinctiveness and social connectedness are illustrated. The four windows reflect the perceptions of stakeholders of an organization’s CSR efforts: authentic, inauthentic, disingenuous and misguided. Social connectedness reflects the fact to which extent the organization’s CSR efforts are embedded in the social context. (Mazutis &

Slawinski, 2015, 137)

Figure 5: The Stakeholder perceptions of the authenticity of CSR efforts (Mazutis

& Slawinski, 2015, 144)

In figure 5, the Authentic perception requires the CSR efforts must be distinctive and socially connected. This enables an organization to engage with its stakeholders.

Inauthentic window explains the situation where an organization is not connected to the social context, and the CSR activities ignore the stakeholder goals.

Disingenuous CSR occurs when social connection works and stakeholders can determine the CSR action, but these efforts are not tied to the core values of the firm. Misguided CSR, on the other hand, means that an organization has a strong value focus and tie the CSR into these values but are lacking the stakeholder engagement. (Mazutis & Slawinski, 2015, 143-146)

Also, investments into facilitating technology that helps innovating and other activities that help in building a good reputation may improve the internal stakeholder satisfaction. (Surroca, Tribo & Waddock, 2010, 482-483) Also, new technologies can be used to enhance the workplace, create adaptations for disabled employees, create educational opportunities that bridge the digital divide, improve ethics and help society. (Salb, Friedman & Friedman, 2011, 8)

Also, the communication and engagement with stakeholders must be done consistently and credibly. Especially the external audience may assume that the firm is not engaging the CSR if it is not communicated. (Hawn & Ioannou, 2016, 2584) For the customers, the reputation is a key factor because customer misgivings about corporate conduct cause lower revenue streams or customers can even boycott the company’s products. (Rönnegard, 2013) There is a growing need for business organizations to make CSR investments. However, multiple barriers need to be conquered including globalization that disconnects organizations from places and makes the communication difficult (Mazutis & Slawinski, 2015, 148)

As mentioned earlier, there is an evidence that in most of the companies’ internal and external actions are not in sync. Organizations are not realizing the full benefits of internal actions because these actions are not externally communicated to key stakeholders and the investors. In general, organizations tend to contribute to the society increasingly but are not communicating and complementing these activities through their external actions strategically. (Hawn & Ioannou, 2016, 2569-2570) It is stated that the lack of external actions is the number one mistake organizations are making in practicing CSR because their CSR engagement value is not being reflected in their market performance. (Hawn & Ioannou, 2016, 2569-2570) There is an increasing stakeholder skepticism towards organizations’ CSR efforts and not adequate attention to the perceptions of stakeholders is not given. Thus, the stakeholders are not understanding the forms CSR activities and are also unable to evaluate the activities. (Mazutis & Slawinski, 2015, 139)