Measuring CSR performance

According to Carroll and Shabana (2010), CSR is still a popular term even though many competing terms, such as corporate citizenship and business ethics, have been created. Another term which has gained popularity is corporate social performance (CSP). CSP deals with the harms and benefits the company has caused to its larger environment, including the social, cultural, legal, political, economic and natural dimensions (Wood 1991). CSP includes both the descriptive and normative aspects of the area, and it seeks to explain what companies have achieved through CSR policies and practices (Carroll & Shabana 2010). CSP helps to manage CSR by highlighting the results of socially responsible initiatives (Agudo Valiente, Ayerbe & Figueras 2012).

Monitoring the impacts of CSR is particularly important for CEOs, CFO’s, corporate boards and business executives (Carroll & Shabana 2010). CSR and performance measurement (PM) are both important issues for corporate management. According to Speziale and Klovienė (2014), institutional theory could be useful for managers to have a better understanding of PM and CSR. Institutional theory may allow the managers to identify institutional processes and their impacts as well as understand the impact of the institutional environment on opportunities and limitations (Speziale &

Klovienė 2014).

Currently, there are several methods for measuring CSP, such as SA8000, the Global Compact and the Global Reporting Initiative (Agudo Valiente et al. 2012). However, the lack of consistency and consensus between these mechanisms makes it difficult to compare the information they provide (Quiroz-Onate & Aitken 2007). Therefore, the data used in this study is collected from a single database, CSRHub, to ensure a fair comparison between the different regions. Companies can implement CSR in different ways and this is one of the reasons why the level of CSR performance may vary in different companies and regions. (Quiroz-Onate & Aitken 2007). CSR implementation may differ, for example, due to different cultural and institutional backgrounds.

In this study, the aspects used to examine companies’ CSR performance are environment, employees, community and governance. As mentioned before, these categories are based on CSRHub’s classifications. The environment category covers companies’ interactions with a wider environment. This includes the use of natural resources and the impact of companies on the planet’s ecosystem. This category assesses the environmental performance of companies in accordance with environmental regulations and policies. This category measures how effectively companies tackle climate change through appropriate policies and strategies, energy-efficient operations, and the development of renewable energy and other alternative environmental technologies. This category also evaluates companies’ environmental management and reporting. (CSRHub 2017c) CSRHub’s assessments are in line with other studies on measuring environmental performance. According to Ilinitcha, Soderstromb and Thomasc (1998), the company’s environmental performance can be measured through various factors, such as environmental impacts, regulatory compliance and environmental management methods. Picazo-Tadeo, Castillo-Giménez and Beltrán-Esteve (2014) suggest that environmental performance can be assessed by emissions and pollutants, eco-efficiency and environmental technologies.

The second category to evaluate companies CSR performance is employees. This category includes issues related to diversity and labor rights. These issues cover employment policies and practices which guarantee fair and non-discriminatory treatment of workers and diversity policies. Another aspect to evaluate employee-related CRS matters is benefits and compensation. Such benefits engage employees and improve employee development. The benefits and compensations must be fair

and equal to all employees. The employee category covers workers’ training, safety and health. This includes accident and safety levels, as well as job training and safety standards. This category also includes the company’s actions to support the health, well-being and productivity of all workers. (CSRHub 2017c) Remišová and Búciová (2012) emphasize the same matters, such as employees’ health and safety, work conditions and compensation. Turker (2009) also suggests that CSR to employees covers good working conditions, employee development and fair treatment of all employees.

The third category to assess CRS performance is community. This category includes the company’s commitment and efficiency in the local, national and global community where it operates. Community-related CSR matters are community development and philanthropy. These refer to charity, donations and volunteering. The community category includes the responsibility for human rights and the supply chain. This evaluates the company’s respect for fundamental human rights, such as the use of child labor, and the treatment of its supply chain. The community category also includes the company’s responsibility for the product throughout its life-cycle.

(CSRHub 2017c) According to Venturelli, Caputo, Leopizzi, Mastroleo and Mio (2017), human rights and supply chain management are useful indicators for measuring CSR performance. Mani, Agarwal, Gunasekaran, Papadopoulos, Dubey and Childe (2016) also emphasize the importance of the company’s supply chain in measuring CSR performance. According to Chen and Delmas (2011), donations to social charities affect companies CSR performance.

The fourth category to evaluate companies CSR performance is governance. This category evaluates the board of the company through several factors, including the diversity and independency of the board members, and the structure and composition of the board committee. Another aspect of the governance category is leadership ethics. This refers to how the company manages its relationships with its various stakeholders, such as consumers, regulators and society. This aspect also includes the company’s ethical decision-making culture and evaluates how social and environmental principles are integrated into the company’s operations. The governance category also assesses the company’s transparency and reporting. The transparency aspect measures the transparency of the company’s management to its

stakeholders and whether the company’s policies and practices are in line with its sustainability objectives. The reporting aspect evaluates whether sustainability reports comply with general standards, such as Global Reporting Initiative. (CSRHub 2017c) According to Venturelli et al. (2017), companies’ CSR performance can be evaluated through board diversity and structure as well as company’s transparency and reporting.

Fernandez-Feijoo, Romero and Ruiz (2014) also suggest that factors, such as disclosure and reporting, can be used to measure companies’ CSR performance.