Exploring the Corporate Financial and Social Performance Relationship with Net Impact Method

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JORMA TURUNEN

Exploring the Corporate Financial and Social Performance Relationship

with Net Impact Method

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Tampere University Dissertations 488

JORMA TURUNEN

Exploring the Corporate Financial and Social Performance Relationship with Net Impact Method

ACADEMIC DISSERTATION To be presented, with the permission of the Faculty of Management and Business

of Tampere University,

for public discussion in the auditorium Pieni Sali 1 of the Festia building, Korkeakoulunkatu 8, Tampere,

on 12 November 2021, at 12 o’clock.

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Table

ACADEMIC DISSERTATION

Tampere University, Faculty of Management and Business Finland

Responsible supervisor

Professor Saku J. Mäkinen and Custos Tampere University

Finland

Supervisors Senior Research Fellow

Ulla Saari Postdoctoral Research Fellow Johanna Kirjavainen

Tampere University Tampere University

Finland Finland

Pre-examiners Director Professor

Mari Pantsar Sitra

Annabeth Aagaard Århus University

Finland Denmark

Opponent Professor

Lassi Linnanen LUT-University Finland

The originality of this thesis has been checked using the Turnitin OriginalityCheck service.

Cover design: Roihu Inc.

ISBN 978-952-03-2136-9 (print) ISBN 978-952-03-2137-6 (pdf) ISSN 2489-9860 (print) ISSN 2490-0028 (pdf)

http://urn.fi/URN:ISBN:978-952-03-2137-6

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To my unborn grandchild. Thank you, Elisa and Topi.

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ACKNOWLEDGEMENTS

What a wonderful, joyful and yet challenging a journey these three years have been!

While working on this dissertation, I found a latent feature in myself: the persistence to check through all the tiny little details over and over again, for example in ways of spelling the names of the writers of articles, decimal points and my utmost favourite, APA 7 used for registering the references of the bibliography. I would never have believed that I could do these things in such a way. In fact, if you told me 43 years ago at my graduation that the latest phase of my career is going to lead to this academic achievement, I would have asked you to check your medication.

I have always been curious and a supporter of continuous learning. I got the idea of furthering this education in the 6^th year of my assignment as the CEO of Finnish Technology Industries, when the university merger in Tampere was underway. I had served as the chairman of the nomination committee of Tampere Technical University for six years, recruiting board members and finally also the board chair.

Thereafter I also served as the vice chair of the first nomination committee of the new Tampere University. For this work I was rewarded with an honorary doctorate, which increased my curiosity in the academic world. I got the idea for the topic of this dissertation in my daily work as the lobbyist of technology industry: A member of parliament was listening to my sales pitch about how industry should be supported with a good operational environment because of the employment and taxes the industry provides. He listened carefully and asked what the industry is going to do about the problem that we are already consuming more than double the resources that the earth can provide. A light bulb lit in my head: The regulator can only have an impact in the footprints, but the handprints are the impact of companies and their innovations. A new kind of co-operation between the public sector and private sector is urgently needed. When learning about my idea of further education, a high- ranking officer in the former University of Tampere, told me that the highest degree that the university can offer is the honorary doctorate: why on earth would you want to take the trouble of preparing and defending your dissertation to receive a lower degree? I did not need more encouragement than that.

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My biggest hero in making the next steps proceed in a logical order is my supervising professor Saku Mäkinen, to whom I am overflowingly grateful. Saku takes a total grip on his doctoral candidates in a positive way, understanding where the bottlenecks are and providing proper and timely help whenever needed: When my multiple regression was in the heat of the moment, we communicated several times a day, also during the weekends. He made me feel more intelligent than I really am, asking challenging questions and letting me solve the problems: the same leadership style that I have been taught in business and sometimes even practiced myself in my own work. Saku is an empathic and positive person capable of talking about anything, and we talked about everything. But he also supervised my learning process. I owe you a golf round, Saku.

The last rector of Tampere Technical University Mika Hannula is the next one to be thanked, since he was the one to suggest that I should contact Saku. Doctors Ulla Saari and Johanna Kirjavainen acted as other supervisors and provided valuable insight in scientific writing. Laura Valtonen checked the backward elimination in my multiple regression and was very open and accessible in providing help. I would also like to thank Professor Miia Martinsuo for reading and commenting on my manuscript with excellent input, which probably saved me from additional time- consuming steps in the process.

The next thanks go to my pre-examiners, Doctor Mari Pantsar from Sitra and Professor Annabeth Aagaard from Århus University. The peer review process in the academic world really functions well: the pre-examiners from outside your own Alma Mater can really add value to a work considered acceptable before submission to the pre-examination process.

Furthermore, I would like to thank Suomen Konepajainsinööriyhdistys ry for their support, Suomen Asiakastieto Oy and CEO Jukka Ruuska for the financial data for my dataset, and Finnish Technology Industries and the CEO and founder of Upright Oy, Annu Nieminen, for support and the net impact data of my dataset. Also, Kasvuryhmä ry was helpful in providing the growth data for my dataset. Thank you all.

I have had an informal advisory board consisting of top experts in the corporate sustainability, namely Doctor Heli Arantola, Minna Aila and Eija Pitkänen. Thank you for your insight.

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I would like to thank my friend Doctor Olli Hyppänen for pedagogical discussions about the philosophy of science which have helped me understand the world - not so obvious for a business-minded engineer working with companies.

I would like to thank Siiri Hornsby for checking the language and providing important tips for my writing style in some parts of my manuscript.

Finally, we are living in strange times with Covid being present during my writing process. My older children Topi and Siiri have both gotten married during the pandemic and will remember these times for the rest of their lives. Thank you for your support. My youngest one, Christian, has kept me young and interested in the features of life important for his age. Thank you. My parents, Meeri and Matti as well as his spouse Eeva-Leena, have taught me that new phases in our lives are inevitably coming. Thank you for the opportunity to provide some daily help. This year is my 25^th wedding anniversary with my beloved Laura, to whom I am so grateful for her positive and encouraging support during this process.

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ABSTRACT

Climate change and the social problems it has caused have increased the discussion on the corporate responsibility in solving these wicked problems – paying taxes and employing citizens are no longer considered sufficient company contribution.

Traditionally, corporate social responsibility is divided into economical, social and environmental responsibilities. Financial measurements of company impacts are straightforward and comparable, but the methods for measuring social and environmental impacts are partly based on companies’ own reports on their activities. Additionally, the methods measuring social and environmental impacts are scarce, and they seem not applicable for the impact development.

In the discussion on the company responsibility, growth is regarded as a negative phenomenon, because it seen to result in a larger consumption of the Earth’s resources than zero growth. However, economical growth of companies is the fuel of modern society. Hence, according to the general opinion, growth and company responsibility contradict each other, even though growth is important from many perspectives of the development of society. The objective of this research study has been to explore the relationship between corporate financial performance and corporate social performance in the light of a new method to measure corporate social performance (CSP).

The research stance is hypothetico-deductive and, due to the selected CSP measurement method, explorative. First, the history and the present status of corporate social responsibility as well as the factors and measurement methods of CSP were researched. Also, company growth was studied with a specific focus on company high growth and growth barriers. In the empirical part, the dataset consisted of the 2014-2018 financial information of Finnish small and medium-sized technology companies as well as their corporate social performance that was measured in 2018 using the net impact method. With the net impact method, corporate social performance was studied from four different dimensions:

environment, health, society and knowledge. Through multiple regression, the net impact and its four dimensions are explained by the financial indicators of the

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companies as well as whether the company is a product or service company. The regression models of net impact and its four dimensions in different years were compared. Additionally, the impacts of company high growth and servitisation were investigated by comparing the means of net impact and its four dimensions in different company groups.

It was discovered that the different dimensions of CSP (environment, health, society and knowledge) are associated with financial indicators which are not necessarily the same for all dimensions. Therefore, the different dimensions of corporate social responsibility should be considered individually to be able to build a holistic picture of CSP and its further development. It was furthermore discovered that the dimensional temporal lags seem to vary in length depending on the dimension. The temporal lag is considered as the time lag between a CSP improvement and the registered change in the impact dimension. Previous research, in contrast, mainly considers the aggregate measures, and the most commonly found temporal lag is one year. The longest temporal lags seem to appear in health and knowledge dimensions, and the shortest ones in environmental and societal dimensions. Consequently, when optimizing CSP improvement, the dimensions to be improved must be chosen based on measurements of the performance in different dimensions and their net impact.

When designing the sustainability strategy, one also has to take into consideration the cross impacts of the different dimensions. For example, reducing the environmental burden may improve health and improve societal impacts with a time lag. The slack resources theory states that companies need to make investments in order to improve the responsibility performance, which requires earlier financial success. This requires, on the other hand, growth at some time period in the life cycle of the company, even if this research study does not provide evidence on the direct effect of growth on CSP.

Hence, the results indicate that aggregate measures are not suitable for designing the company sustainability strategy. This study, however, supports previous research with the discoveries that the CSP of service companies seems higher than that of product companies and that the most common financial indicator in CFP-CSP research, return on assets (ROA), has a positive effect on CSP. This supports the conclusion that the net impact method seems suitable for measuring CSP and developing the CSP strategy of a company.

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TIIVISTELMÄ

Ilmastonmuutos ja sen aiheuttamat sosiaaliset ongelmat ovat lisänneet keskustelua yritysten vastuusta näiden pirullisten ongelmien ratkaisemisessa - verojen maksun ja työllistämisen ei katsota enää riittävän yritysten rooliksi. Yritysvastuu jaetaan perinteisesti taloudelliseen, sosiaaliseen ja ympäristövastuuseen. Yritysten vaikutuksia mittaavat talousmittarit ovat yksiselitteisiä ja vertailukelpoisia, mutta keinot mitata sosiaalisia ja ympäristövaikutuksia perustuvat osin yritysten raportointiin omasta toiminnastaan. Lisäksi yritysten sosiaalisia ja ympäristövaikutuksia objektiivisesti mittaavia menetelmiä on vähän, eivätkä ne näytä soveltuvan yritysvaikutusten parantamisen mittaamiseen.

Keskustelussa yritysvastuusta kasvu nähdään negatiivisena, koska sen uskotaan kuluttavan maapallon resursseja enemmän kuin nollakasvun. Yritysten kasvu on kuitenkin modernin talousjärjestelmän moottori. Kasvu on siis yleisen mielipiteen mukaan ristiriidassa yritysvastuun kanssa, vaikka yritysten kasvu onkin tärkeää monesta yhteiskunnan kehittämisen näkökulmasta. Tämän työn tavoite on ollut tutkia yrityksen taloudellisen menestyksen ja vastuullisuuden välistä suhdetta käyttäen uutta vastuullisuuden mittausmenetelmää.

Tutkimusote on hypoteettis-deduktiivinen ja käytetystä vastuullisuuden mittausmenetelmästä johtuen eksploratiivinen. Ensin tehtiin kirjallisuuskatsaus yritysvastuun historiaan ja nykytilaan, yritysvastuuseen vaikuttaviin tekijöihin, yritysvastuun mittausmenetelmiin sekä yrityksen kasvuun, erityisesti nopeaan kasvuun ja kasvun esteisiin. Empiirisessä osuudessa käytettiin tutkimusaineistona Suomen teknologiateollisuuden pieniä ja keskisuuria yrityksiä, joiden taloudelliset tunnusluvut saatiin vuosilta 2014-2018 ja joiden vaikutukset on mitattu nettovaikutus-menetelmällä vuonna 2018. Nettovaikutusmenetelmässä yritysvastuu jaetaan ympäristö-, terveys-, yhteiskunta- ja tiedon osa-alueisiin. Yrityksen taloudelliset tunnusluvut ja se, onko yritys palvelu- vai tuoteyritys, olivat riippumattomia muuttujia, joilla selitettiin yrityksen nettovaikutusta ja sen neljää eri osa-aluetta monimuuttujaregressiolla. Nettovaikutuksen ja sen osa-alueiden eri vuosien regressiomalleja vertailtiin keskenään. Yrityksen nopean kasvun ja

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palveluistumisen vaikutusta nettovaikutukseen ja sen osa-alueisiin tutkittiin lisäksi erikseen vertailemalla eri yritysryhmien nettovaikutusten ja sen osa-alueiden keskiarvoja keskenään.

Havaittiin, että vastuullisuuden eri osa-alueita, ympäristö, terveys, yhteiskunta ja tieto, voidaan selittää osin eriävillä taloudellisilla mittareilla. Siksi yritysvastuullisuuden osa-alueita, tai jopa niiden yksittäisiä mittareita, tulisi tarkastella erillisinä, jotta yritysvastuullisuudesta ja sen edelleen kehittämisestä voitaisiin rakentaa kokonaiskuva. Niin ikään havaittiin, että viiveet yritysvastuun kehittämistoimenpiteestä sen näkymiseen konkreettisena mitattavissa olevana lukuna, näyttävät olevan eripituisia yritysvastuun eri osa-alueilla. Aikaisemmassa tutkimuksessa on kuitenkin tutkittu pääasiallisesti kokoomamittareita ja yleisin viive on ollut yksi vuosi. Pisimpinä viiveet näyttivät esiintyvän terveys- ja tiedon tuottamisen osa-alueilla ja lyhimpinä ympäristö- ja yhteiskunta-osa-alueilla.

Vastuullisuuden parantamisen optimoinnissa tämä vaikuttaa parannettavien osa- alueiden valintaan, kun on ensin mitattu eri osa-alueiden vastuullisuus sekä niiden nettovaikutus.

Vastuullisuusstrategian suunnittelussa on myös otettava huomioon osa-alueen ristikkäisvaikutukset muille osa-alueille. Esimerkiksi ympäristöhaitan pienentäminen voi vaikuttaa viiveellä terveysvaikutusten ja yhteiskunnallisten vaikutusten positiiviseen kehitykseen. Vastuullisuuden kehittäminen edellyttää yritykseltä investointeja, mikä puolestaan edellyttää slack resources-teorian mukaisesti aiempaa taloudellista menestystä, jotta investointeihin riittäisi resursseja. Tämä puolestaan edellyttää kasvua yrityksen elinkaaren jossain vaiheessa, vaikka kasvun suorasta vaikutuksesta vastuullisuuteen ei saatukaan tässä tutkimuksessa näyttöä.

Tulokset osoittavat siis, että kokoomamittarit eivät sovi yrityksen vastuullisuusstrategian suunnitteluun. Aikaisempaa tutkimusta pystyttiin kuitenkin tukemaan siten, että palveluyritysten vastuullisuus näyttäisi olevan korkeammalla tasolla kuin tuoteyritysten sekä tuloksella, jonka mukaan yrityksen taloudellista menestystä yleisimmin kuvaavan mittarin, kokonaispääoman tuoton (ROA) ja vastuullisuuden suhde on positiivinen. Tämä tukee johtopäätöstä, jonka mukaan nettovaikutus-menetelmä näyttäisi siis olevan käyttökelpoinen työkalu yritysvastuullisuuden mittaamiseen ja sitä kautta yrityksen vastuullisuusstrategian kehittämiseen.

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ABBREVIATIONS

AI Artificial Intelligence

ANOVA Analysis of Variances

CEO Chief Executive Officer

CFO Chief Financial Officer

CFP Corporate Financial Performance

CSP Corporate Social Performance

CSR Corporate Social Responsibility

ESG Environment Society Government

GHG Green House Gas

FP Financial Performance

GDB Gender Diversity in Boards

GRI Global Reporting Initiative

HGF High-Growth Firm

HRD Human Resources Development

HRM Human Resources Management

ICT Information and Communication Technology M&A Mergers and Acquisitions

NGO Non-Governmental Organisation

Non-GHG Gaseous emission which is not Green House Gas

ROA Return on Assets

ROE Return on Equity

ROS Return on Sales

TFG Total Factor Productivity

VIF Variance Inflation Factor

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1 INTRODUCTION

“Business with purpose or business from purpose?”

~ Jorma Turunen

1.1 Background and motivation

Global climate change and the resulting consequences—such as desertification, which is a cause of global migration—have elevated environmental and social issues onto the public discussion agenda (Akbari et al., 2020; Ding et al., 2020). When compared to Earth’s capacity, humanity’s load was already 1.2 times greater in 1999, increasing to 1.6 times in 2018 (Worldlife.org, 2018; Wackernagel et al., 2002).

Consequently, the discussion about the role played by corporate social performance (CSP) in fighting wicked global problems has been increasing (Bubna-Litic, 2007;

Oksanen & Hautamäki, 2015). To improve the situation, tools for analysing the impact of company actions are needed (Wood, 1991a). Furthermore, measuring aggregate CSP is especially challenging and functional measures are missing (Mattingly, 2017; Callan & Thomas, 2009; Igalens & Gond, 2005).

The current corporate social responsibility (CSR) agenda mainly focuses on the Global Reporting Initiative (GRI) and ESG reporting (Querol-Areola, 2017;

Martins, 2011; GRI, 2013; Chen & Delmas, 2011). Perhaps, due to the challenges posed by measuring CSP, companies focus on minimising the downsides while sustainability reporting seems coincidental (Saka & Noda, 2013; Baumgartner &

Ebner, 2010). Sustainability report data are not driving the decision-making processes of companies (Baumgartner & Ebner, 2010; personal communication M.

Aila, 6.3.2019). Instead, the focus seems to be on compliance and both companies

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and investors find it difficult to understand the big picture and allocate resources to sustainable projects (Conway, 2019; Vartiainen, 2020).

The present economic system is based on the premise that companies want to increase their profits, which become their main objective (Friedman, 1970; Finnish Corporation Act, 2006). In addition, many companies want to grow because growth is seen as the primary means of increasing their profits. However, global climate change is one of the main reasons why company growth is increasingly considered to be a negative phenomenon (Dula, Videira, & Groessler, 2018; Akbulut, Demaria, Gerber, & Martinez-Alier, 2019; Schmid, 2019; Foster, 2017). Consequently, the issues regarding the roles played by CSP and company growth in climate change are simultaneously found on the discussion table.

High-growth companies are important for the economy because they create new jobs, have a positive effect on subsequent industry growth and create new technological knowledge (Coad et al., 2014; Henrekson & Johansson, 2010;

Mthimkhulu & Aziakpono, 2016; Bos & Stam, 2014; Colombelli et al., 2014).

Policymakers—meaning politicians and civil servants—create the operational environment of companies. Despite the good things that high-growth companies bring, there is prejudice among policymakers about their impact on society (Lee, 2014; Mason & Brown, 2013): only 3% of small companies are growth companies (Feindta et al., 2002). Furthermore, most growth companies cannot maintain their growth (Daunfeldt & Halvarsson, 2015). Therefore, new arguments are needed in order to convince policymakers about the impact of growth companies. Companies would invest, employ more people and generate more direct and indirect taxes to be paid by the employees and the companies themselves—if their operational environments provided better support (Duan & Ma, 2017; Meckling & Nahm, 2019).

Regulation could also help create new markets for sustainable products, which would create growth for companies in turn (Graafland & Smid, 2017; www.wartsila.com, 2013)

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1.2 Research objectives

Recognising these issues, the objective of this study is to investigate the relationship of different financial measures to the different dimensions of corporate financial performance using a new measurement method for corporate financial performance.

Both CSP and high-growth companies have substantially been researched, albeit separately from one another. The most commonly researched area of CSP is the link between CSP and corporate financial performance (CFP) (Makni et al., 2009; Callan

& Thomas, 2009; Waddock & Graves, 1997; Zhao & Murrell, 2016; Orlitzk et al., 2003; Choi & Lee, 2018; Busch & Friede, 2018; Gras & Krause, 2018). Calls have been made for more research to be conducted on the impact of companies in society (Wood, 1991a), on longitudinal and more recent CSP data (Chen & Delmas, 2011) and on how the relationship between CFP and CSP functions in different financial situations and in different geographies (Gras & Krause, 2019). Even though the CSP–CFP relationship has frequently been researched, high growth, in general, and high sales growth, in particular—as a CFP measure in connection with CSP—have rarely been researched (Chen et al., 2015).

Current CSP measurement methods tend to focus on compliance and to answer the question “How are things done?” (Conway, 2019). The “de facto standard” among CSP aggregate measurement methods is the MSCI KLD 400 Social Index (MSCI KLD) (Perrault & Quinn, 2018; Choi & Wang, 2009; Wood 1991a). However, there are problems related to this method—for example, the measurement data come from various sources and are not compatible (Callan & Thomas, 2009). In some of the measurements of KLD, human involvement is possible (MSCI, 2019). There is also lack of empirical evidence about the reliability of the aggregate measure of MSCI KLD (Mattingly, 2017; Chen & Delmas, 2011; Mitnick, 2000; Rowley & Berman, 2000).

To tackle these issues, a new method for measuring CSP has been developed—the net impact method (uprightproject.com, 2020). This method aims to go further in impact analysis by answering the question “What should be done?” in order to improve company impact on society as a whole. The method calculates the burdens and positive impacts of its four dimensions (environment, health, society,

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knowledge) and sums up the result into one number. This one number—the net impact—as well as the sums of different dimensions, make it easier to compare different companies and industries with one another and to identify alternative corrective actions that can be taken to improve their impacts. On the other hand, it is essential to understand, how the different CSP dimensions need to be considered, when trying to understand the total picture of the CSP. The net impact method is used to operationalise CSP in the empirical part of this research study, which makes this research study explorative. Net impact is discussed more thoroughly in Section 2.1.4.

Little research has been conducted on the role of company growth in CSP. A key question in this study is whether a company’s growth strategy and social strategy could be combined. There is need for more research on the impact of companies (Gras & Krause, 2019; Wood, 1991a), on longitudinal and more recent CSP data (Chen & Delmas, 2011) and on different financial situations and geographies (Gras

& Krause, 2019). In this study, high financial performance serves as a proxy for a successful growth strategy because successful growth is a component of high financial performance (Busch & Friede, 2018). The first research question covers the CFP–CSP aspect of this study:

RQ1: What kind of a relationship is there between corporate financial performance (CFP) and corporate social performance (CSP)?

High-growth companies are important for the economy because: 1) a small number of high-growth companies drives the creation of a large number of new jobs (Coad et al., 2014; Henrekson & Johansson, 2010; Mthimkhulu & Aziakpono, 2016); 2) an increase in the number of high-growth companies in an industry has a positive effect on subsequent growth of that industry (Bos & Stam, 2014); and 3) high-growth companies are in a key position in the creation of new technological knowledge (Colombelli et al., 2014). Policymakers call, however, for more evidence to be provided about the impact of growth companies (Lee, 2013; Mason & Brown, 2013;

Feindta et al., 2002). This study first investigates whether growth companies are different from other companies in terms of their CSP:

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RQ2: Do high growth companies act more responsibly than non-growth or other companies, and if so, how?

Nowadays, customers require more services than before and service-oriented companies are comprising a larger share of the total company population (Kowalkowski et al., 2017). On the other hand, manufacturing companies are seeking new growth from product-based services (ECSIP, European Consortium for Sustainable Industrial Policy, 2014; Kowalkowski et al., 2017). Moreover, service companies have higher CSPs than manufacturing companies (Cheung et al., 2013;

Huang & Yang, 2014). This is true when traditional measurement methods are used.

Hence, it is important to verify whether net impact produces the same results as a CSP measure:

RQ3: How does the relationship of product companies to corporate social performance (CSP) differ from that of service companies?

The slack resource theory predicts that better financial performance would contribute to the availability of slack resources, which would in turn increase a company’s ability to invest in responsible actions, such as community, society and environment (Waddock & Graves, 1997). When financial performance is improved, then a company would have more slack resources to invest in CSP. There is a temporal lag between improved financial performance and improved CSP. In quantitative research, the most common temporal lag from the point of taking action to seeing its impact is one year (Waddock & Graves, 1997; McGuire et al., 2003;

Busch & Friede, 2018). However, the author of the present study has found no existing research about whether differences exist in the temporal lags between different CSP dimensions, which would help increase understanding of the deeper nature of the CFP–CSP relationship. As a method, net impact focuses on answering the question regarding what should be done to improve the net impact of a company by opening alternative paths for improving this net impact through the optimisation of impact dimensions (uprigtproject.com, 2020). Therefore, it is important to examine how long it takes to register changes in different impact dimensions after an improvement in CSP has been made:

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RQ4: How long is the temporal lag between improved financial performance and measured improvement in CSP?

Answering these four research questions should help illuminate what role is played by company high growth in CSP. In addition, servitisation as a growth strategy for manufacturing companies should also be analysed (ECSIP, 2014). Hence, this study ultimately aims to investigate whether services and high growth play a role in improving CSP. No prior research exists on the topic of net impact as a CSP measure for the study of the CFP–CSP relationship. Consequently, this study aims to confirm the CFP–CSP relationship using net impact as a CSP measure.

The managerial contribution of this research is related to helping combine socially responsible and growth strategies of a company. This research also intends to present different perspectives as to whether servitisation could affect CSP as part of a company’s high-growth strategy. Studying temporal lags of different CSP dimensions helps to increase understanding of alternative impacts of sustainable actions in different impact dimensions and to select the right path for improving the net impact.

1.3 Scope and delimitations

CSR refers to the social behaviour of companies and is discussed in more detail in Chapter 2.1. CSP refers to how companies perform and how their performance is measured when they act in a socially responsible manner. CSP is also discussed in more detail and defined later on in the paper, beginning in Chapter 2. As demonstrated in the theoretical part of this study, the relationship between CFP and CSP is the most researched CSP topic and constituted the scope of this research.

Company growth and company high growth are discussed in Chapter 2.2.

Figure 1 demonstrates the scope of this research. The aim is to approach combining high growth as a CFP measure and CSP from two angles in the literature review.

First, CSR, CFP and the relationship between CFP and CSP are discussed. Second, company growth—with a specific focus on high growth—is considered. Next, in the

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empirical portion of the study, the CFP–CSP relationship is examined using a sample of high-growth and other companies.

Figure 1. Research scope

The scope of the research is delimited in three ways. First, in the theoretical portion, corporate social performance and growth are considered as components of the corporate competitive strategy. Hence, other building blocks of the corporate competitive strategy, which may interact with the considered components, are not discussed. Second, the industry of the dataset is limited to Finnish small and medium sized technology companies. Third, only quantitative statistical methods are use in the analysis of the data.

1.4 Research structure

Chapter 1 is the introductory chapter that describes the background and the motivation of the study, presents the objectives of the research—including the research questions—and discusses the scope and limitations of the study. Chapter 2 outlines the theoretical background and consists of three sections. In its first section, the history, background and definitions of CSR and CSP are presented. Dimensions

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and categories, as building blocks of CSP, are discussed and then different CSP strategies are considered as the means through which different CSP maturity levels can be reached. Subsequently, the intrinsic and extrinsic factors that affect CSP are considered. This first section of Chapter 2 concludes with a review of the various CSP measurement methods and their development as well as with a comparison of the MSCI KLD and net impact methods. The second section of Chapter 2 discusses company growth and how it is measured as well as what its drivers are. The discussion then moves on to the characteristics of company high growth and the barriers of growth. The third section of Chapter 2 describes the research model and development of the research hypothesis.

Chapter 3 presents the research methods and data used in the study, starting with a description of the sample and its relevance within Finnish technology industries.

Data and selection of variables are discussed in the 2nd section of Chapter 3.

Research methods are described in the third section of Chapter 3. Chapter 4 describes the quantitative research process and the results. Chapter 5 presents the discussion of the key results obtained and the contribution of the research study as well as its implications to management. In addition, validity and reliability are analysed. Finally, the limitations of the study are discussed in more detail and recommendations for future research are presented.

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2 THEORETICAL BACKGROUND

The purpose this chapter is to present a literature review of CSP, CSP strategy and high-growth company theories in order to increase understanding of what the elements of socially responsible strategy and growth strategy are. The CSP portion reviews the history of CSR thinking, presents CSP definitions, discusses dimensions and categories as building blocks of CSP and examines different CSP strategies that lead to different CSP maturity levels. It also analyses the extrinsic and intrinsic factors that affect CSP as well as the current CSP measurement methods.

Subsequently, the market leader of the measurement method, MSCI KLD 400 Social Index, is compared to the net impact method used in the empirical portion of this study. The growth company section begins with existing measurements and definitions of growth and moves on to analyse what makes companies grow.

Furthermore, the characteristics of high-growth companies and the barriers of growth are considered. Finally, research hypothesises are developed and the research model presented on the basis of the given literature review.

2.1 Corporate social responsibility (CSR) and corporate social performance (CSP)

2.1.1 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.

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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

World Commission on Environment and Development (1987)

1990s Financial justification, reporting CSR activities

Wood (1991a); Kolk (2000)

2000s CSR as part of the corporate strategy

United Nations (2007); Porter and Kramer (2006); Baumgartner and Ebner (2010)

2010s CSR as the basis of the

corporate strategy

Baumgartner and Ebner (2010);

Engert et al. (2015); upright.com (2017); Gras and Krause (2018);

Halme and Korpela (2014)

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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

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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,

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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

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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.

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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

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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.

2.1.2 Intrinsic factors of CSP

This section is looking inside the company and describes the intrinsic factors, which are related to and affect CSP. These are the CSP-CFP relationship, firm characteristics and the corporate governance CSP antecedents.

The relationship between CFP and CSP

Corporate financial performance (CFP) describes how well a company can use its assets and generate revenue. It also describes the financial health of a company over a certain time period (Investopedia.com, 2021). The various measures of CFP are considered later in this section.

In the CSP literature, the relationship between CSP and CFP is a widely researched topic. Consequently, the CSP–CFP relationship has been found to be positive, negative or neutral (Busch & Friede, 2018). Some scholars have also studied the bilateral relationship of CSP and CFP. This means that, while CSP positively affects CFP, CFP also positively affects CSP. In this section, the relationship between CFP and CSP is considered.

As far as the positive relationship between CSP and CFP is concerned, the good management theory is considered first. It focuses on the role of committed management as a CSP driver and is considered to be the most important predictor of a positive relationship between CSP and CFP (Orlitzky et al., 2003; Thomas &

Simerly, 1994; Weaver et al., 1999; Slater & Dixon-Fowler, 2009; Dixon-Fowler et al., 2013; Isaksson & Woodside, 2016). In the good management theory, the management of a company is committed to high CSP, leadership is important and processes—such as human resources management (HRM)—are working properly.

The financial success is ultimately the result of good management. Second, the stakeholder theory focuses on the influence of stakeholders in shaping CSP. It states that companies engage themselves and invest in CSR activities under the scrutiny of

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various stakeholders, such as politicians, civil servants, customers and the public opinion driven by social pressure and media. (Clarkson, 1995; Chin & Sharfman, 2011; Baron, 2009; Brower & Mahajan, 2013; Agudo-Valiente et al., 2015). As a result, company reputation is improved and a company hopes to boost its financial performance in this manner (Makni et al., 2008). Third, the slack resource theory focuses on the excess financial resources as main CSP drivers. It predicts that better financial performance would contribute to the availability of slack resources, which would increase a firm’s ability to invest in responsible actions in the community and society as well as towards the environment (Waddock & Graves, 1997).

Of the theories that relate to the negative relationship between CSP and CFP, the trade-off hypothesis assumes that there is a negative impact of social performance on financial performance—CSP nets only a few economic benefits but has numerous additional costs, thus reducing profit and shareholder wealth (Waddock

& Graves, 1997). Similarly, the managerial opportunism hypothesis also assumes a negative impact of CSP on CFP. This approach relies on the following logic—

management wants to maximise profit and would use all resources to achieve this purpose (Weidenbaum & Vogt, 1987). In addition, the Friedman doctrine (1970) states that a business’ social responsibility is to deliver profit to shareholders.

Friedman’s doctrine represents the managerial opportunism approach at its best.

Scholars who have studied the bidirectional CSP–CFP relationship (Busch & Friede, 2018; Orlitzky et. al., 2003; Adegbite et al., 2019) tend to use the positive synergy hypothesis. According to it, a high level of CSP would lead to improved financial performance, which would in turn allow the company to invest more in CSP. This would again lead to better financial performance and the circle is continued, which Waddock and Graves (1997) call a “virtuous circle”. In contrast, according to the negative synergy hypothesis, a higher level of CSP could lead to lower financial performance, which could then prevent a company from making new CSP investments—thus forming a “vicious circle” (Makni et. al, 2008). The bi-directional nature means that CSP positively affects CFP, explained primarily by the positive synergy hypothesis above. Moreover, primarily according to the slack resource theory, CFP positively affects CSP. Some scholars consider the CSP–CFP relationship to be neutral (Koh et al., 2014; Lee et al., 2009; Zhao & Murrell, 2016;

Kyaw et al., 2017; Xie & Wang, 2017).

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How can these different—sometimes even completely opposite—results be explained? To begin with, the context of each research study is different. Companies are in different phases of their life cycle, represent different sizes, geographies and industries and the samples for the study datasets are taken in different ways (Zhao

& Murrell, 2016; Stanwick & Stanwick, 1998; Agudo Valiente et al., 2012).

Furthermore, measuring CSP is challenging (Igalens & Gond, 2005) and the CFP–

CSP result is not a direct result (Xie & Wang, 2017). Also, the feedback loops subsequent to a specific CSR action are missing in many cases (Witek-Hajduk &

Zaborek, 2016). In addition, CEO and management team attitudes towards CSR play a key role when assessing whether or not CSR will be a part of company strategy (Weaver et al., 1999).

As can be seen from the above, the impact of CFP on CSP is complex. One reason for this complexity is that there are many CFP measures, which seem to have an impact on CSP in different ways. CFP measures are divided into accounting-, growth-, risk- and market-based measures (Busch & Friede, 2018). Of the accounting-based measures, the most common financial performance measure is return on assets (ROA) in the slack resources literature (Daniel et al., 2004). It is also very commonly used as a financial performance measure in the CSP literature (Busch

& Friede, 2018; Makni et al., 2008; Callan & Thomas, 2009; Waddock & Graves, 1997). Other accounting-based measures used in the CSP literature are return on equity (ROE) and return on sales (ROS) (Callan & Thomas, 2009; Waddock &

Graves, 1997; Makni et al., 2008). Growth-based measures—sales growth and personnel growth—are seldom used in the CSP literature; however, sales growth is often used in the growth company literature (Chen et al., 2015; Ahlström &

Ficekova, 2016; Moreno & Castillas, 2007; Colombelli et al., 2014). An example of a risk-based measure is debt per equity, while an example of a marked-based measure is company valuation or price per share (Busch & Friede, 2018).

Accounting-based CFP is more strongly related to CSP than growth-, risk- or market-based CFP (Busch & Friede, 2018). Return on assets, turnover per person and value add per person are used in the empirical part of this research as accounting- based CFP measures, while the accounting-based ROA is used as the proxy measure of slack resources. This research uses accounting- and growth-based measures of CFP because they were readily available in the dataset.

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In addition to the fact that different CFP measures make the CFP–CSP relationship complex, there is another aspect that makes the CFP–CSP relationship difficult to understand—slack resource scholars share the opinion that there is a lag from social investment to the moment in which it can actually be registered as an improvement in social performance (Ahlström & Ficekova, 2016; Yilmaz, 2013). As is demonstrated above, the slack resource theory states that excess financial resources allow a company to invest in social responsibility either when solving environmental, social or health issues or when coming up with new sustainable products and services, which then help get the virtuous circle spinning. According to the good management theory, the company management then uses slack resources in order to improve CSP (Orlitzky et al., 2003). The most common lag applied in quantitative research is one year (Ahlström & Ficekova, 2016; Yilmaz, 2013); however, Moore (2001) concludes that one year might be too short to avoid the distortions caused by rogue figures. Most of the previous research agrees that “prior” CFP affects CSP more positively than concurrent CFP (Moore, 2001). In addition, most often in temporal lag research, the aggregate value of CSP is used as a measure (Waddock &

Graves, 1997; McGuire et al., 2003; Busch & Friede, 2018; Adegbite et al., 2019;

Ahlström & Ficekova, 2016; Yilmaz, 2013). Busch and Friede (2018), however, find that social CSP has a stronger relationship with CFP than environmental CSP, but the difference is insignificant. On macro level ecological time-lags have been researched (Watts et. al., 2020). It is obvious, however, that the company level temporal lags are shorter than in macro level conservation projects. Hence, it seems that time lags in different CSP dimensions have rarely been researched in relation to CFP.

Firm characteristics and CSP

Firm characteristics used in this study include the size, company age, level of internationalisation and the industry of a company. Many researchers have found a positive relationship between company size and CSP (Stanwick & Stanwick, 1998;

Arminen et al., 2018; Agudo Valiente et al., 2012; Bouquet & Deutsch, 2008; Moore, 2001) and between the level of internationalisation and CSP (Symeou et al., 2018;

Aquilera-Caracuel at al., 2015). The larger a company is, the higher its CSP. Company size often relates to how international the company is—thus, the more international a company is, the higher its CSP. Research has provided evidence from 44 countries about the role internationalisation plays (Attig et al., 2016).

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As far as company age is concerned, Moore (2001) and Roberts (1992) provide evidence that the older a company is, the higher its CSP. This is related to a company’s brand image—the more known a company is, the higher its stakeholder expectations are, which then motivates the company to act in a responsible manner.

On the other hand, one might also think that the younger a company is, the younger its entrepreneurs and management are—who would be more interested in responsible operations than older entrepreneurs. Nevertheless, there is no previous research on this topic.

As far as the industry of a company is concerned, industry level diversification does not seem to have an impact on CSP (Patrisia & Dastgir, 2017). What does seem to matter, however, is whether the company is in the product or service business. To elaborate on this, a product is a tangible item that can be put on the market for consumption, attention or acquisition. Service, on the other hand, is an intangible item that results from the output of one or more individuals (corporatefinanceinstitute.com, 2020). However, the portfolio of many manufacturing companies consists of both products and product-based services (Kowalkowski et al., 2017). A simple way to divide manufacturing companies into product and service companies is to look at how their turnover is divided between product and service components. If the product component turnover exceeds 50%

of the total turnover, then the company is considered to be a product company. The same principle is applied to the service component (Finnish Technology Industries, 2019). Consequently, according to previous research, service sector companies have higher CSP than non-service sector companies (Cheung at al., 2013; Huang & Yang, 2014; Witek-Hajduk & Zaborek, 2016).

The following section discusses CSR from the point of view of the CEO and top management, middle management, employees and the board of directors. These organs design, shape and implement CSP in a company and determine how it is communicated to other stakeholders.

The role of the skills and values of the CEO/top management

Organisations are reflections of their top managers (Thomas & Simerly, 1994;

Hambrick & Mason, 1984). Thus, top management commitment enables an

Exploring the Corporate Financial and Social Performance Relationship with Net Impact Method

JORMA TURUNEN

Exploring the Corporate Financial and Social Performance Relationship

with Net Impact Method

JORMA TURUNEN

Exploring the Corporate Financial and Social Performance Relationship with Net Impact Method

ACKNOWLEDGEMENTS

ABSTRACT

TIIVISTELMÄ

CONTENTS

ABBREVIATIONS

1 INTRODUCTION

1.1 Background and motivation

1.2 Research objectives

1.3 Scope and delimitations

1.4 Research structure

2 THEORETICAL BACKGROUND

2.1 Corporate social responsibility (CSR) and corporate social performance (CSP)