CSR in B2B companies

Transcription

1 CSR in B2B companies - a discussion on how B2B companies should engage in CSR and CSR communication and how they can benefit from it Aarhus School of Business Department of Language and Business Communication Master thesis - December 2008 Author: Anne Juul Andreasen (270577) Supervisor: Karen M. Lauridsen

2 Table of contents 1 INTRODUCTION AIM STRUCTURE, METHODOLOGY, AND THEORY DELIMITATIONS TERMINOLOGY CSR DEFINITION Six schools of CSR Defining CSR HOW TO APPROACH CSR Stakeholder management Integrating business with social responsibility How to choose what causes to support Six corporate social initiatives How to choose which initiatives to undertake Co-operation with NGOs WHY ENGAGE IN CSR Benefits Importance of CSR communication HOW TO APPROACH CSR COMMUNICATION The self promoter s paradox Stakeholder communication strategies The stakeholder information strategy The stakeholder response strategy The stakeholder involvement strategy CSI Definition CSI in the CSR literature The seventh corporate social initiative Benefits CONCLUSION ONLINE COMMUNICATION IMPORTANCE OF THE WEB AS A COMMUNICATION MEDIUM ONLINE TEXT

3 3.2.1 Stakeholders Importance of consistent communication Writing online text Online CSR communication LINKING ONLINE AND CSR COMMUNICATION CONCLUSION CSR IN B2B COMPANIES SYSTEMATIC Systematic and CSR WHY ENGAGE IN CSR AND CSR COMMUNICATION Systematic WHICH STAKEHOLDERS TO ADDRESS Systematic WHICH INITIATIVES AND CAUSES TO CHOOSE Systematic WHAT TO COMMUNICATE Systematic CONCLUSION AND NEW PERSPECTIVES SUMMARY LIST OF REFERENCES APPENDICES Number of characters - Chapter 1 to chapter 5: 170,790 Number of characters - Summary: 4,171 2

4 1 Introduction In recent years, the focus on the social responsibility of companies has increased. CSR has become an important concept in the business arena and is embraced by numerous companies throughout the world. Although the degree to which companies should engage in CSR is a highly debated subject, there seems to be a general consensus that most companies are expected to live up to their responsibilities. While companies understand the necessity of informing their stakeholders about their CSR efforts, they are often in doubt as to how this should be carried out (Beckmann, Morsing, & Reisch 2006, pp ). The amount of literature on CSR is immense, and companies that wish to learn more about how to approach the concept and how they can benefit from this are met with an almost infinite list of books and articles claiming to provide the reader with essential knowledge on the subject. However, the vast majority of these sources tend to concentrate on CSR in relation to B2C companies. Consequently, B2B companies may find that they are a rather uncharted area of research. Additionally, with the vast amount of literature on the subject, it is impossible for them to know where to find information that meets their particular needs as they are seldom mentioned explicitly. Also, since the literature on CSR tends to focus on the necessity of the concept, specific guidelines on how to approach CSR communication, and which benefits various media such as the web bring, are not as prevalent. The purpose of this paper is to meet this need for information regarding CSR in B2B companies and in particular the question of how they should approach CSR communication. The focus on the latter is explained by the fact that communication can be considered an essential ingredient in relation to CSR. A company that is engaged in CSR can only reap the benefits of this engagement if it manages to communicate to its stakeholders that it is living up to its social responsibility. In other words, CSR can be linked to the concept of public relations, as it allows companies to improve their images if they succeed in engaging in CSR and communicating this to their stakeholders in the right manner. This, however, is not an easy task as there are various elements to consider in relation to CSR as well as many opinions on the matter. Furthermore, CSR continues to evolve, which results in new aspects and approaches to the concept that are necessary to consider in order to gain a complete understanding of the opportunities CSR brings. One example of this is Corporate Social Innovation (CSI). CSI allows companies to approach CSR in an untraditional manner and entails a number of opportunities, especially communicative ones. Therefore, CSI is also dealt with in this paper. 3

5 1.1 Aim In order to address the above-mentioned lack of information on how B2B companies can benefit from CSR and how they should approach CSR communication, the aim of this paper is to answer the following questions: In which way can a B2B company benefit from engaging in CSR and communicating this to stakeholders? How should the company approach CSR and how should the CSR engagement be communicated to stakeholders on the company s website? Research questions: - How can CSI be of value to a B2B company? - In which way is a company s website a useful medium when communicating CSR to stakeholders? 1.2 Structure, methodology, and theory CSR and CSI are dealt with in chapter 2 for the purpose of establishing a general understanding of the two concepts. More specifically, the chapter focuses on how companies in general should approach CSR, including CSI, and CSR communication. This allows for a discussion on how companies can benefit from engaging in CSR, what to communicate to stakeholders, and how this should be carried out. Chapter 3 is concerned with online communication, that is, how companies should approach this. A basis for a discussion in chapter 4 concerning CSR in B2B companies is thus formed in chapters 2 and 3. The discussion answers the questions posed in the aim of this paper, supplemented by a case example. The structure of this paper is explained in more details below. In order to discuss how B2B companies can benefit from CSR and how they should approach this and CSR communication, it is necessary to ensure a general understanding of CSR and its benefits. This then enables a discussion on what to communicate to stakeholders. Consequently, this is the purpose of chapter 2. The chapter outlines the different schools of CSR. Based on this, it is discussed to which of these schools this paper adheres, as it is important to explicitly state one s understanding of CSR before initiating a discussion on the subject. Secondly, the chapter describes how companies should approach CSR, which includes sections describing the concept of stakeholder management as this is of vital importance to the understanding of CSR, how CSR should be an integrated part of a company s business, as well as guidelines on how to choose what causes to support through which initiatives. The benefits of CSR are also described for the purpose of establishing how the concept can be of value to companies. Additionally, the 4

6 importance of co-operating with non-governmental organisations (NGOs) is treated because they can play an important role in relation to the CSR activities of companies. Thirdly, it is described how companies should communicate CSR to stakeholders. This includes a discussion concerning the self promoter s paradox, that is, to what extent companies should communicate their CSR engagement to their stakeholders, and a description of Morsing and Schultz s three CSR stakeholder communication strategies. Fourthly, CSI is dealt with, which includes a discussion on how it can be defined and how it can create value for companies. Because of the above-mentioned lack of literature dedicated to CSR in B2B companies, this paper discusses the subject based on information on CSR in general, thereby drawing on existing literature in order to create a more narrow focus. This also applies to CSR communication because the number of concrete tools concerning this is rather limited. Consequently, in the discussion on how to communicate CSR, the three stakeholder communication strategies and the self promoter s paradox are supplemented by the subjects mentioned above concerning CSR. This is due to the fact that these subjects implicitly provide guidelines on CSR communication. At the end of the chapter, its findings are summarised in a conclusion. Chapter 3 is concerned with online communication and describes how to approach this in terms of CSR communication as well as how to structure online text in general. The first section outlines the history of the web and its development towards becoming an important communication medium. The second section presents guidelines on how to succeed in communicating online in general as well as in relation to CSR communication. As the amount of literature on online CSR communication is somewhat limited, a general approach is necessary because this then forms the basis for a discussion on how to approach online CSR communication. As a result, the importance of defining and understanding the target audience, the importance of consistent communication, and guidelines on how to present CSR on a website are dealt with, followed by a discussion linking online and CSR communication. Finally, a conclusion outlines the findings made in this chapter. The questions posed in the aim of this paper concerning how B2B companies should approach CSR and CSR communication as well as how they can benefit from this are discussed and answered in chapter 4. Firstly, the B2B company which is used as a case example in the discussion, that is, Systematic A/S, is described, as a presentation of the company is a requisite for discussing its options in relation to CSR. Subsequently, why and how B2B companies should approach CSR and CSR communication is discussed, which includes a discussion on which stakeholders to address and how, which social initiatives to undertake, how to choose what causes to support, and how co-operating with NGOs can benefit the CSR communication of B2B companies. Each section is followed by a discussion focusing on Systematic. Also, an example of an online text illustrating how Systematic should exploit the web as a medium for CSR communication is presented. The findings of this chapter are summarised in the overall conclusion of the paper. 5

7 1.3 Delimitations The literature on communication in general has a rather limited focus on B2B companies. A number of books and articles concerned with marketing treat B2B companies. However, the literature on communication in terms of public relations does not focus on B2Bs to the same extent. Thus, as CSR can be categorised as a public relations concept, and not as a marketing concept, the lack of relevant literature means that the discussion in chapter 4 on CSR in B2B companies is based on the findings in this paper as well as arguments made by the author. Also, the general introduction to CSR in chapter 2 does not focus on B2C or B2B companies. This is due to the fact that B2C companies are not included in the scope of this paper and B2B companies are dealt with in detail in the discussion in chapter 4. In section 2.2.5, NGOs are argued to compose an important stakeholder group in relation to CSR. This paper s focus on CSI entails a need for discussing co-operation with NGOs as they often take part in the CSI activities of companies to a greater or lesser extent. Additionally, in terms of CSR communication, NGOs have proven to be of vital importance to companies who wish to emphasise elements such as legitimacy and transparency. For these reasons, a discussion on this particular stakeholder group was included as a separate section as the only one of the stakeholder groups mentioned in the paper. There are numerous national standards concerning CSR, and especially CSR reporting, all of which can be of value to companies engaging in CSR. In particular, companies who are unsure of how to approach the concept may benefit from following one or some of these standards when e.g. planning their CSR reporting. Standards such as AA1000, the Global Reporting Initiative, and the UN Global Compact, among others, are widely applied by various companies and thus utilised as guidelines as well as proof of the sincerity of their CSR engagement. However, the scope of this paper does not include CSR reporting, nor does it introduce a discussion on various standards such as the ones mentioned above. Rather, the aim of this paper is to discuss how companies can benefit from CSR in terms of communicating certain messages to stakeholders in relation to their CSR engagement and how the web can be a valuable communication medium in this connection. Hence, the aim is to discuss how B2Bs should approach CSR in general and consequently not which tools besides those of CSR communication companies can choose to apply. The various standards can be considered to be such tools, and including them would thus not be of value to the aim of this paper. The web is of course not the only medium companies can utilise in connection with CSR communication. However, as mentioned above, the aim of this paper focuses on online communication, and in order to be able to go into depth with this subject, other potential CSR communication media are not dealt with. The case discussion in chapter 4 concerning Systematic does not include an in-depth analysis of Systematic s current CSR engagement. Rather, this is briefly outlined. This is due to the fact that the aim of 6

8 this paper is to discuss how B2B companies should approach CSR and CSR communication and not to discuss their, and in this case Systematic s, current approach in depth. Also, as proven in chapter 4, although Systematic does engage in CSR to some extent, the company can benefit from approaching the concept in a different manner, which is one of the reasons why Systematic was chosen as a case example. The author of this paper is currently employed at Systematic. This of course entails a need to ensure an objective approach when referring to and discussing the company, which is fulfilled throughout the paper. On the other hand, the employment also means that the author has a thorough knowledge of Systematic, which can be of value to the case discussion. 1.4 Terminology Due to this paper s focus on CSR, it is important to note that the word social in corporate social responsibility includes concerns regarding society as well as people, animals, and the environment. This interpretation of the word is employed in this paper, so, when words such as social issues, social causes, etc. are mentioned, they encompass the same meaning as social in corporate social responsibility. Moreover, the word society, when referring to society in general, also encompasses various aspects, including people, animals, and the environment. In chapter 3 concerning online communication, the word contents, i.e. online contents, is used as a synonym of text, although contents in connection with online contents normally includes pictures, graphics, etc. However, since this paper is concerned with the textual contents of websites, the broad interpretation of the word is not employed. Also, inspired by McGovern and Norton s line of thinking (2002, pp. 11, 17), a website s visitors are referred to as readers as opposed to the more commonly applied users. This is due to the fact that a visitor s primary goal is to find and read information, and it is this process that a company s website should facilitate. By referring to the visitors as readers, the importance of this is emphasised. 7

9 2 CSR The purpose of this chapter is to bring about an understanding of CSR and CSI. Furthermore, it describes how companies should approach CSR communication and how CSI can be included in this. This then forms the basis for the discussion in chapter 4 on CSR in B2B companies. Firstly, the different schools of the ambiguous concept of CSR are outlined in order to illustrate to which different understandings of the concept companies can choose to adhere. Based on this, it is established on which of the schools this paper s perception of CSR is based, as it is important to explicitly state one s understanding of CSR before initiating a discussion on the subject. Secondly, it is described how companies should approach CSR and CSR communication, followed by a discussion on how CSI can be defined and how it can create value for companies. Lastly, the findings of this chapter are summarised in a conclusion. 2.1 Definition Companies and their activities have always affected society, the employees, and the environment in a positive as well as negative manner. Consequently, the idea of the impacts and concomitant responsibilities of companies is as old as the industrial revolution. Today, CSR plays an important role on the agenda of all types and sizes of companies (Neergaard 2006, pp. 19, 29) and the concept continues to evolve. This has resulted in the fact that a corporate social norm to do good is being established as CSR has entered the mainstream of corporate dialogue as a must-do (Kotler & Lee 2005, pp. 4-6). It has even been argued to be a competitive parameter for companies (Hänselt 2007). Also, it is possible that CSR will eventually fade out in the sense that it will be an integrated part of doing business. This means that the concept may become a natural part of the activities of companies that is dealt with indirectly and not as a separated concept (Neergaard 2006, p. 32). Various authors advocate this idea of integrating CSR and business, which is elaborated in section Six schools of CSR Despite CSR s importance and impact, it remains a highly ambiguous concept (Huniche & Pedersen 2006, p. 100). In general, there are countless opinions as to what CSR encompasses and how it can be defined, both in the business world and the academic world (Neergaard 2006, p. 19). In order to clarify in which different ways CSR can be interpreted, Neergaard (2006, pp ) has defined six different schools of CSR. The dogmatic school is based on Friedman s claim that the social responsibility of business is to increase profit (Friedman 2001 cited in Neergaard 2006, p. 20). As a result, CSR activities are considered 8

10 to be an unnecessary expenditure. Instead, companies should focus on increasing their profit, which will then lead to the creation of new jobs and consequently also increased income and welfare (Neergaard 2006, pp ). According to the philanthropic school, companies are expected to donate money to charity, that is, be philanthropic. As with the dogmatic school, companies are expected to focus on increasing their profit. However, they are also expected to return a part of this profit to society because the philanthropic school treats CSR and contributions to charity as synonyms (Neergaard 2006, p. 21). The following definition of CSR reflects the international school s interpretation of the concept: Corporate sustainability, and also CSR, refers to a company s activities voluntary by definition demonstrating the inclusion of social and environmental concerns in business operations and in interactions with stakeholders (Marrewijk & Were 2003 cited in Neergaard 2006, p. 20). According to this school, companies engage in CSR voluntarily and the concept thus goes beyond legal expectations as well as the demands of international agreements. In addition, the importance of environmental and social issues is in focus. The triple bottom line is included in this school s interpretation of CSR as it is argued that only profitable companies can be socially responsible and sustainable. In other words, CSR is considered to be a trinity, consisting of considerations as to people, planet, and profit. Moreover, the importance of co-operating with stakeholders is emphasised (Neergaard 2006, p. 22). This is elaborated in the description of the dialogue oriented school below, as this school focuses on entering into dialogue and consequently also cooperating with stakeholders. According to the dialogue oriented school, CSR is defined as the obligations or duties of an organization to a specific system of stakeholders (Vos 2003 cited in Neergaard 2006, p. 20). This school is therefore also based on stakeholder management, which advocates the idea that a company should take all its stakeholders into account and not just focus on its shareholders when doing business. The concept of stakeholder management is elaborated in section The focus of this school is on how companies should consider and live up to the expectations of their stakeholders, which is achieved by engaging in dialogue with them. The purpose of the dialogue is to identify and define the stakeholders expectations as well as determine how all parties can participate in ensuring that these expectations are fulfilled. In other words, CSR is constructed through continuous dialogue. The dialogue oriented school can therefore be linked to the international school as they both advocate dialogue and co-operation with stakeholders (Neergaard 2006, pp. 22, 24). The Danish school is based on Karen Jespersen s 1 inclusive labour market. She introduced the concept in 1994 as she realised that the government alone could not solve the problems of the welfare state of Denmark. According to this school and Karen Jespersen s inclusive labour market, CSR is a matter of focusing on retaining as well as employing and integrating employees who have difficulties doing their job or finding a job because of age, disease, disabilities, long-term unemployment, and different ethnic origin, among other things (Neergaard 2006, p. 23). 1 Karen Jespersen was Minister for Social Affairs in Denmark from 1994 to 2000 (Folketinget). 9

11 According to the ethical school, companies should engage in CSR simply because it is ethically correct to do so. Ethics is concerned with behaviour in relation to society, that is, living up to society s customs and practices as to what is right and fair behaviour. Companies have a legal and an ethical responsibility, of which the latter is concerned with moving beyond the legal responsibility and doing what is ethically correct. According to the ethical school, this responsibility is the essence of CSR (Neergaard 2006, p ) Defining CSR As proven above and as stated by Michael Porter, CSR has become a religion filled with priests (cited in Morsing 2003, p. 41). Therefore, companies should know, understand, and consider the various approaches to the concept and decide for which reasons they wish to engage in CSR and consequently also to which school of thought they wish to adhere. By doing so, they will create a sense of consistency when working with and communicating CSR, thereby avoiding confusion internally as well as externally. Neergaard (2006, p. 24) believes that the international school is the most adequate one. However, he also emphasises that the schools are not mutually exclusive, especially not the international and dialogue oriented schools. The understanding of CSR in this paper is based on these two schools as they seem to prevail in the modern literature on CSR, as there is a tendency to focus on social and environmental issues as well as co-operation with stakeholders (Huniche & Pedersen 2006, pp ). The two schools supplement each other since both of them are based on the concept of stakeholder management. Furthermore, stakeholder management allows for a discussion on how B2B companies can benefit from CSR as opposed to how B2C companies benefit from it. This is due to the fact that it is the difference between the stakeholders of the two types of companies that separate them from each other. Also, stakeholder management is in general of great importance because it can be argued that the survival of any company depends on how its stakeholders perceive it (Cornelissen 2004, p. 9). In addition, much of the research and literature on CSR is based on stakeholder management (Neergaard 2006, p. 26). 2.2 How to approach CSR This section describes how companies should approach CSR. Firstly, the concept of stakeholder management is described as it is of vital importance to CSR and its purpose and possibilities. Accordingly, it is important that companies understand the purpose of stakeholder management and how they can improve their efforts on this matter in relation to CSR. Then, the importance of integrating business with social responsibility is dealt with as this has proven to be of vital importance to the success of a company s CSR efforts as well, as stated in section 2.1. Lastly, it is described how companies should choose what causes to 10

12 support and through which initiatives together with the importance of co-operating with NGOs as this entails certain advantages. All of the above subjects are of relevance to CSR communication because they explain what a company should communicate to its stakeholders in relation to its CSR efforts. This is elaborated in section 2.6 and chapter 4. Furthermore, the subjects are of relevance to CSI and the discussion in section and chapter 4 on how companies and in particular B2Bs can benefit from this concept Stakeholder management As established in section 2.1.2, CSR is concerned with interacting with stakeholders as both the international and the dialogue oriented schools are anchored in the concept of stakeholder management. Stakeholder management is based on the claim that if organisations are to be successful in the current and future environment, then executives must take multiple stakeholder groups into account (Freeman 2007, p. 121). Stakeholders are defined as any group or individual who can affect or is affected by the achievements of an organization s purpose (Freeman 2007, p. 122). Thus, stakeholder management advocates the idea that companies affect and are affected by, even dependent on, their various stakeholders. Hence, they should attend to all stakeholders instead of solely focusing on their shareholders and customers (Cornelissen 2004, p. 57). In other words, companies need to understand their stakeholders concerns and interests and implement processes that satisfy the stakeholders in order to gain their support. Furthermore, companies should not just understand and know these needs and expectations but should be able to foresee and understand any changes in them as well. This should then form the basis for the companies purposes and is considered to be a prerequisite for long-term success (Freeman & McVea 2005, pp. 189, ). The means through which the above knowledge and understanding are achieved are interaction in the sense of dialogue, participation, and involvement (Morsing & Schultz 2006, p. 139). In other words, within recent years, companies have realised that it is of vital importance to engage stakeholders in long-term relationships, thereby changing the nature of the relationship from management to collaboration. As a consequence, the focus of stakeholder management is on the interaction between companies and their stakeholders (Cornelissen 2008, p. 57). How to ensure this interaction is elaborated in section Stakeholder management has become central to the strategies, actions, and communication of the majority of companies (Cornelissen 2008, p. 37) and CSR is no exception to this. Based on the idea of stakeholder management, Freeman and Velamuri state that the main goal of CSR is to create value for key stakeholders and fulfil our responsibilities to them (2006, p. 11). Furthermore, they list a number of principles of the stakeholder mindset that must be followed in order to succeed in satisfying the needs and expectations of stakeholders in connection with CSR. A company should have a deep understanding and knowledge of its stakeholders interests, priorities, and concerns. This includes viewing stakeholders as real, complex people, which does not just apply to consumers but also to suppliers, shareholders, and B2B customers, among others. Although these 11

13 stakeholders are interested in earning money and interact with the company for professional reasons, they are also human beings who are not just self-interested but who are also interested in making a difference. Furthermore, they may be specialists within their own field but that field is not necessarily the same as that of the company with which they do business. Therefore, the company should avoid employing a language that is too technical and specialised when addressing these stakeholders (Freeman & Velamuri 2006, pp ; Theaker 2004, p. 200). Companies should focus on how to serve their stakeholders and create value for them, thereby making this their reason for being. At the same time, they should balance the various stakeholders interests, which may allow for them to reinforce each other as well as seek solutions that satisfy multiple stakeholders simultaneously. In order to obtain a deep understanding and thorough knowledge of stakeholders, companies should engage in dialogue with friendly as well as unfriendly stakeholders. This is elaborated in section Companies should commit to a philosophy of voluntarism in the sense that they take it upon themselves to satisfy their stakeholders rather than responding to demands of e.g. government (Freeman & Velamuri 2006, pp ) Integrating business with social responsibility Companies tend to separate business and social responsibility when engaging in CSR. However, they should view the two as interdependent instead and ensure that their CSR engagement is anchored in their strategies, values, activities, etc. Thereby, they avoid being accused of considering CSR an add-on to their business. Furthermore, companies should not consider CSR a generic concept. Rather, it should be adapted to the strategy of each company that wishes to be socially responsible. By linking business with social responsibility, CSR can strengthen a company s long-term competitiveness as a source of opportunity and competitive advantage (Kramer & Porter 2006, pp ). Additionally, the definition of the international school advocates the idea of including social and environmental concerns in business operations and in interactions with stakeholders (Marrewijk & Were cited in Neergaard 2006, p. 20). Companies need to be more offensive in connection with their CSR activities and communication. There is a tendency to apologise and engage in CSR as a part of a defensive strategy of reacting to stakeholders accusations and demands. Also, actions that are a result of this defensive strategy of satisfying stakeholders are often in conflict with the wish of satisfying shareholders. However, by proactively integrating CSR into its strategy, a company can satisfy both its shareholders and its other stakeholders (Morsing 2003, pp ). Another argument for integrating business and social responsibility is that successful companies need a healthy society and vice versa. Consequently, the two are interdependent. 12

14 By supporting and thus enhancing e.g. education, healthcare, and equality, companies are ensured a productive workforce. By ensuring an efficient utilisation of natural resources, business becomes more productive. Furthermore, successful companies bring jobs, wealth, and innovation, all of which improve living standards as well as social conditions. Consequently, CSR creates shared value for business and society by being of benefit to both sides (Kramer & Porter 2006, pp ). Companies are not responsible for all social issues, nor are they capable of solving them all. Therefore, they should choose to support causes to which their commitment will make the greatest impact. In relation to this, it is important to note that the more a social cause is tied to a company s business, the greater is the opportunity to leverage the company s resources while at the same time creating value for society. As a result, the company is able to make a greater impact on the cause (Kramer & Porter 2006, pp ). How to choose what causes to support is elaborated in section Consequently, the goal of integrating business and social responsibility is to create a strategic approach to CSR which goes beyond best practices and creates shared value. Hence, companies are to a greater extent striving to reap as many benefits as possible when engaging in CSR, benefits that are connected to their overall business and not just concerned with responding to stakeholders demands. Ultimately, when the business and social responsibility of a company are fully integrated, CSR cannot be separated from its day-to-day operations, and the focus is on substance rather than merely image. As a result of this, CSR will not necessarily be communicated explicitly. Rather, it will be an integrated part of the overall communication of the company (Kramer & Porter 2006, pp ) How to choose what causes to support One challenge of engaging in CSR is to decide what causes to support because there are innumerable social causes that would benefit from corporate support. Kotler and Lee (2005, pp ) list a number of guidelines on how to facilitate this decision-making process: Companies should choose only a few causes to support. Thereby, the companies are more likely to have a real impact in society because their resources are focused on a limited number of social causes rather than several different ones. Furthermore, because of the strong impact, the companies are more likely to develop long-term relationships with desirable partners. Also, by focusing on a limited number of causes, they increase their chances of being associated with these causes and thus enhance their brand position as well as reap other marketing benefits. It is important that companies choose causes that are of concern to the communities in which they do business. This is due to the fact that the companies will be recruiting new employees in these communities and it is where the customers are. As a result of this, the CSR engagement will be noticed by key stakeholder groups. Also, for a company to be able to claim that it believes it is important to give back to the communities in which it does business is of great importance to its credibility. 13

15 As described in chapter 2.2.2, companies should choose causes that are consistent with their missions, values, products, and services as well as have potential to support business goals, thereby integrating business and social responsibility. Companies should choose to support causes that are of concern to key stakeholder groups such as employees, customers, and investors. Consequently, it is more likely that these stakeholders will support and engage in the company and its CSR activities. Additionally, companies should choose causes they can be engaged in over a long period of time, i.e. more than three to four years. Doing so will ensure maximum benefit because it takes a long time to solve social issues and because long-term commitment may be more economical, as a company s efforts become more effective the more experience it has in the area. Furthermore, companies that make a longterm commitment are more likely to own the cause, thereby making it a point of differentiation with which competitors cannot compete. Naturally, when focusing on establishing long-term commitments, companies should also ensure that the causes they choose to focus on will continue to be of concern to the public and especially stakeholders. Also, they should ensure that the causes remain connected to their missions, values, products, and services in the future Six corporate social initiatives In order to facilitate the process of determining how a company should engage in CSR, Kotler and Lee (2005, pp , 47, ) have defined six corporate social initiatives, including a description of how each of these can benefit a company. They argue that companies should adopt a more strategic approach to CSR and thus choose initiatives that make sense in relation to their other activities. In other words, Kotler and Lee indirectly advocate the idea of integrating business and social responsibility. Corporate social initiatives can be defined as major activities undertaken by a corporation to support social causes and to fulfil commitments to corporate social responsibility (Kotler & Lee 2005, p. 3). The six initiatives comprehend cause promotion, cause-related marketing, corporate social marketing, corporate philanthropy, community volunteering, and socially responsible business practices. Cause promotion can be a matter of providing funds or other resources in order to support fundraising, participation, or volunteer recruitment for a cause. Another purpose can be to increase awareness and concern about a cause. The promotion may be initiated by the company itself or the company may be a partner or sponsor in the promotion. Cause-related marketing is concerned with making a contribution or donating a percentage of the turnover from product sales to a cause. Often, cause-related marketing is carried out within a limited period of time for a specific product and a specific cause. It is common for companies to co-operate with an NGO in connection with this type of initiative, thereby creating value for both parties as cause-related marketing can bring financial support for the NGO s cause as well as increase sales of a specific product. Additionally, customers are enabled to contribute to a cause without spending more money than what they pay for the product. 14

16 Corporate social marketing is an initiative that supports the development and/or implementation of a behaviour change campaign. The purpose is to improve public health or safety, the environment, or community well-being. Corporate social marketing is differentiated from cause promotion as its main purpose is to change behaviour and not just to support a cause. Often, companies and NGOs or public sector agencies co-operate on corporate social marketing. However, a company can also develop and implement a behaviour change on its own. Corporate philanthropy is concerned with making direct contributions to a cause by means of cash grants, donations, or in-kind services and is the most traditional corporate social initiative. Community volunteering is carried out when employees, partners, and franchise members are encouraged to volunteer their time to support a cause. Companies may choose to co-operate with NGOs or not. Also, the volunteer activities may be organised by the company or the employees can choose an activity by themselves. Socially responsible business practices are concerned with adopting and conducting discretionary business practices and investments that benefit society. This can be done by the company itself or in co-operation with other parties. The initiative is concerned with proactively exploring corporate solutions to social problems and incorporating business practices supporting these causes. By being proactive rather than reactive, the company demonstrates sincere commitment instead of defensive response. Typical socially responsible business practices include designing facilities that meet or exceed recommendations and guidelines on environment and safety, developing process improvements such as eliminating use of harmful waste material, selecting suppliers that are willing to adopt or maintain sustainable environmental practices, developing programs to support employee well-being, etc How to choose which initiatives to undertake Companies can choose to adopt more than one of the six initiatives and one specific campaign can thus comprise several initiatives. Alternatively, a company can also focus on a number of different social causes by means of only a few initiatives (Kotler & Lee 2005, pp ). In the following, guidelines on how to choose which initiatives to undertake when engaging in CSR are presented. First of all, a company should know the benefits and, most importantly, the major strengths of each social initiative and consequently understand the strengths and weaknesses of them all in order to determine which ones meet its objectives and goals. In other words, a company should determine which initiatives it can benefit the most from. The benefits of each initiative are summarised in figure 1 and elaborated in section 2.3.1, which describes how companies can benefit from engaging in CSR: 15

17 Cause promotion Cause-related marketing Social marketing Corporate philanthropy Community volunteering Socially responsible business practices Build strong corporate reputation Major strength Major strength Major strength Major strength Major strength Contribute to general business goals Major strength Major strength Attract and retain motivated workforce Major strength Major strength Major strength Major strength Major strength Reduce operating costs Major strength Reduce regulatory oversight Major strength Support marketing objectives Major strength Major strength Major strength Build strong community relationships Major strength Major strength Major strength Major strength Major strength Major strength Leverage current corporate social initiatives Major strength Major strength Major strength Major strength Major strength Major strength Figure 1: Kotler & Lee 2005, p The initiatives should meet business objectives and goals, thereby creating value for the company. Companies should choose more than one initiative for a cause. This is due to the fact that when a company engages in a number of initiatives to support one specific cause, it is more likely that the company will be clearly associated with it. Furthermore, the company will be able to provide more support to the cause through e.g. three initiatives than through one. Companies can benefit from choosing initiatives that represent the most potential for strong community partners such as NGOs and the public sector. Companies should choose an initiative with which they have a history of experience, thereby capitalising on that experience. Moreover, companies should choose initiatives that will leverage their resources, especially resources that are of high value to the cause and under-utilised by the company (Kotler & Lee 2005, pp ) Co-operation with NGOs NGOs importance and their number of members have increased within recent years. Among other things, this is due to the fact that NGOs receive a lot of attention in general and especially from the media, they are considered more trustworthy than companies, and their motivation is, in contrast to that of the companies, 16

18 not concerned with profit. Their influence should therefore not be underestimated when it comes to affecting the images of companies (Georg 2006, pp ). More and more companies are entering into partnerships with NGOs in their endeavours to become socially responsible (Beckmann, Morsing, & Reisch 2006, p. 22), and the six corporate social initiatives are also concerned with co-operating with NGOs to a greater or lesser extent. As a result of the above powerful influence, Georg (2006, pp ) lists five reasons for companies to co-operate with NGOs. Firstly, the ability of NGOs to focus on one specific cause or issue and gain attention together with their high credibility enables them to affect the public debate as to which companies are socially responsible and thus have a license to operate. Secondly, not only do NGOs influence the definition of good corporate behaviour, they also inform the public of which companies are socially responsible and which are not. The third reason is closely linked to the first one: Companies co-operating with NGOs will strengthen their image as they appear open and accountable, thereby living up to the public s demand of transparency. Fourthly, NGOs are not just capable of affecting the opinions of a company s external stakeholders. They can also affect the internal stakeholders and consequently act as a vehicle for internal communication, the importance of which is established in section The last reason can be closely linked to the stakeholder involvement strategy, which is dealt with in section , and states that NGOs can provide companies with a new and different perspective to company performance as well as assist in predicting future challenges of the CSR efforts of the companies. In addition, NGOs can provide companies with insight in relation to how their stakeholders perceive them and their actions as well as act as consultants on the subject of CSR in general. In other words, companies can benefit from engaging in dialogue with NGOs and including them in their work with CSR. Also, by engaging in dialogue, both parties may learn from each other In addition to engaging in dialogue with NGOs, companies can also co-operate with them in connection with e.g. community development projects and development of products that benefit society. This allows for the companies and the NGOs to focus on creating something for the common good and ensuring positive publicity for both parties instead of solely focusing on improving the images of the companies (Georg 2006, p. 224). 2.3 Why engage in CSR In the following, it is described for what reasons companies may choose to engage in CSR in order to form a basis for the discussion on how companies can benefit from engaging in CSR. In general, the public have become more interested in the activities of companies and how their products are manufactured. Companies are expected to behave in a socially responsible manner and 17

19 document this behaviour, that is, there is a demand for transparency. If the companies do not succeed in behaving socially responsible in a transparent manner, they risk being criticised by their stakeholders (Huniche & Pedersen 2006, p. 98). Furthermore, not only are companies held responsible for their own actions but they are also held responsible for those of their suppliers and customers. Consequently, all companies risk being involved in legitimacy problems at some point, regardless of whether or not they can be said to be at fault. By engaging in CSR, companies may reduce this risk of being accused of not living up to their responsibilities (Morsing & Schultz 2006, pp ). However, companies may also engage in CSR for other reasons. The benefits of CSR were listed in section and are described in detail the following section Benefits CSR builds a strong corporate reputation because the concept allows for companies to portray themselves as socially responsible and good corporate citizens. In other words, CSR brings about positive publicity. Engaging in CSR can contribute to the overall business goals and e.g. the strategy of a company by e.g. opening new markets, building long-term relationships with stakeholders by engaging them in the CSR initiatives, and ensuring increased sales and market share, among others. People are more likely to buy products and services from companies that are socially responsible, especially if the company supports a cause that is important to them. In general, people have a more positive image of companies that are engaged in CSR. CSR ensures an increased ability to attract, motivate, and retain employees. Corporate values are as important to employees as salary, job description, opportunities for promotion, etc. Furthermore, by engaging in CSR, companies provide their employees with the opportunity of being involved in something they care about (Kotler & Lee 2005, pp. 16, ; Willard 2002, pp , 34-35, ). Individuals search for a meaning of life, that is, they want to make a difference. CSR gives value to employees in the sense that when a company engages in CSR, it makes a difference, and if the employees are involved in this, which they will be as employees in the company, they feel that they make difference as well. This will motivate them in their day-to-day work (Drejer 2006, p. 198). Moreover, CSR strengthens a company s identity and builds identification among internal stakeholders, which results in loyal employees that support the company (Morsing 2006, p. 173). CSR can result in reduced operating costs, for instance when companies adopt environmental initiatives to reduce the level of harmful waste, reuse materials, recycle, and conserve water and electricity. Advertising expenditures can also be reduced because of the increased free publicity mentioned above. Furthermore, employees who work with something they believe in or at least work for a company whose values and activities they believe in are far more productive than others. With productivity comes innovation as productivity is as much a matter of working smarter as working harder, and employees who are excited about their work because they believe they make a difference are more likely to be creative and innovative (Kotler & Lee 2005, pp. 17, 237; Willard 2002, pp. 49, 53, 60-82). 18

20 By engaging in CSR, companies can increase the confidence of regulatory agencies as well as build strong relationships with them. This is achieved by co-operating with them in the process of meeting or exceeding guidelines. Consequently, the strengthened confidence and relationship can reduce regulatory oversight. Engaging in CSR can also support the marketing objectives of a company by strengthening its brand position, building a strong corporate reputation, creating product differentiation, reaching niche markets, attracting new customers, etc. This is due to the fact that stakeholders, and especially consumers, are asking for and are drawn to socially responsible companies as they are seeking self-realisation. Through CSR, companies can build strong community relationships with organisations such as NGOs that result in increased expertise and increased campaign reach as companies gain access to the members of the organisations. Furthermore, such relationships result in credible endorsement of the efforts and commitment of companies to a cause as proved in section For companies that are already engaged in CSR, dedicating even more time and effort to a cause through new initiatives can also leverage current social initiatives and investments, as this will further connect the companies to the cause. Accordingly, the chances of making a difference as to the social issue and ensuring a greater return on current investments are increased (Kotler & Lee 2005, pp , ). In addition to the benefits described in Kotler and Lee s figure in section , CSR can increase the appeal to investors and financial analysts, especially since engaging in CSR can reduce exposure to risk in the sense that the company reduces the risk of being accused of not behaving socially responsible by the public (Kotler & Lee 2005, pp. 10, 17; Willard 2002, p. 123) Importance of CSR communication Business is built on a foundation of solid, honest, and open communication (Freeman & Velamuri 2006, p. 18). The importance of CSR communication should therefore not be underestimated, especially since there is an increased focus on CSR in society in general (Beckmann, Morsing, & Reisch 2006, pp ). Since a company s stakeholders expect it to engage in CSR, it is important to communicate such commitment to them, thereby ensuring them that the company lives up to their expectations. As to the benefits of CSR mentioned in the previous section, external together with internal CSR communication is the means through which companies can reap the benefits of engaging in CSR. In general, all benefits mentioned in section can be directly linked to CSR communication in the sense that, if a company does not communicate its CSR efforts, it cannot reap any of the benefits because its stakeholders would not know of its CSR activities. Internal CSR communication allows for companies to increase the possibility of motivating and retaining employees. In general, employees have proven to be a vital target audience of CSR communication, and CSR should consequently also be a part of the internal communication of a company. However, employees 19