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Table of Contents
1.0 CHAPTER ONE: INTRODUCTION
1.1 Background of the Study…………………………………………………….6
1.2 Statement of the Research Problem………………………………………….7
1.3 Objectives of the Study……………………….……………………………...8
1.4 Research Questions…………………………….…………………………….8
1.5 Significance of the study……………………….....………………………….8
1.6 Scope and Limitation of the Study………………..…..……………………..9
1.7 Sources of Data Collection……………………………….…………………..10
1.8 The Outline of the Dissertation……………………….………..……………10
2.0 CHAPTER TWO: LITERATURE REVIEW
2.1 Introduction to Literature Review……………………………………………12
2.1.1 Meaning and History of CSR……………………...………………………12
2.1.2 CSR communication………………………………………………………..14
2.1.3 CSR reporting…………………………………...…………………………15
2.2 Strategic aspect of CSR…………………………..…………………………16
2.3 Motivating Factors of CSR reporting……………….………………………17
2.3.1 Reputation and Brand Management……………………………………...20
2.3.2 Ethical Considerations…………………………………………………....21
2.3.3 Profitability ………………………………………………………………22
2.3.3.1 Impact of CSR on the short-term profitability………………………………22
2.3.3.2 Impact of CSR on the long-term profitability……………………………….23
2.4 CSR across industries……………………………………………………….24
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2.4.1 Environmentally sensitive industry……………………………………………..24
2.4.2 Ethical Issue-Sensitive Industry…………………………………………………25
2.5 The Theoretical Framework on Explaining CSR…………………………...26
2.5.1 Stakeholder theory…………………………………………………………………26
2.5.2 Legitimacy Theory…………………………………………………………………27
2.5.3 Social Contract Theory……………………………………………………………28
2.6 Gap in CSR communication ………………………………………………...29
3.0 CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Research Design……………………………………………………………..33
3.2 Case Study…………………………………………………………………..33
3.3 Purpose of data collection…………………………………………………...34
3.4 Background of the chosen companies……………………………………….35
3.4.1 Alliance Boots………………………………………………………………………35
3.4.2 Barclays……………………………………………………………………………..35
3.4.3 British Petroleum ………………………………………………………………….36
3.4.4 Vodafone Group……………………………………………………………………36
3.4.5 AstraZeneca…………………………………………………………………………37
3.5 Instrument use in data collection……………………………………………..37
3.5.1 Interviews…………………………………………………………………………….37
3.6 Data collection and Analysis…………………………………………………38
3.7 Validity and Reliability………………………………………………………39
3.8 Pilot test………………………………………………………………………39
3.9 Ethical assurances…………………………………………………………….40
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4.0 CHAPTER FOUR: RESEARCH FINDINGS
4.1 Gap between disclosures and actual practice in CSR reporting ………………42
4.2 Alliance Boots …………………………………………………………………………43
4.3 Barclays………………………………………………………………………………...46
4.4 BP Plc…………………………………………………………………………………..48
4.5 Vodafone………………………………………………………………………………..50
4.6 AstraZeneca…………………………………………………………………………….52
4.7 Interview Analysis from the appendix by applying thematic analysis………….53
5.0 CHAPTER FIVE: DISCUSIONS AND CONCLUSIONS
5.1 Managerial Motives of Engaging in CSR ……………………………………57
5.2 Communication gap in CSR reporting ……………………………………….60
5.3 Recommendations ……………………………………………………………60
6.0 Appendix ………………………………………………………..…………………...62
7.0 Bibliography ……………………………………………………..………………….66
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CHAPTER ONE: INTRODUCTION
1.1 Background of the Study
Corporate social responsibility has been widely described as a concept whereby businesses
integrate social, economic, and environmental concerns in their business operations to help
address the challenges faced by the society. Most of the CSR activities revolve around solving
problems that relates to social, environmental, and economic problems (Marrewijk, 2003;
Dawkins, 2004; Morsing & Schultz, 2006). According to Weddock (2008), the social problems
that are targeted by CSR activities involve environmental pollution, resource depletion, labor
rights among other social problems. Moreover, companies are also involved in solving economic
problems such as bridging the gap between the rich and the poor by helping the economically
disadvantaged members of the society (Porter & Krammer, 2002). According to Marrewijk
(2003), CSR began in the late 19th century, when people started to discuss the role
industrialization in the society. Since the companies were benefiting from the members of the
society, the society began pressuring the industries to take their social responsibility. Today, it is
debatable whether companies should be forced by the law or by moral conventions to engage in
social responsibility. Most opponents of social responsibility argue that it can weaken the
economic growth of the companies due to huge spending involved (Du Shuili, Bhattacharya &
Sankar, 2010). Despite divergent views concerning whether the companies should take their
social responsibility, many companies are involved in social responsibility.
Due to significant engagement in CSR activities, reporting plays a significant role in expanding
the interest of the company as a responsible partner in economic, environmental, and social
issues (Morsing & Schulz, 2006). CSR reporting enables the community to recognize that a
company is involved in tackling some of the social problems they cause such as pollution and
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environmental degradation. Due to increase environmental awareness in the public arena, CSR
reporting enables organisations to effectively engage their audience in the public arena.
In as much as CSR may not adequately solve the problems experienced by the society, it is a
way through which companies forge a mutual relationship with the society (Dawkins, 2004).
This is also supported by Momin and Parker (2013) who argue that CSR activities is a move by
companies move closer to where they are conducting their businesses. Lack of dependability in
the information that is willingly reported by firms has also come into the public domain. Theory
is limited in describing the real motives of firms disclosing their CSR activities and some of the
available theoretical illustration highlights that firms are involved in CSR reporting activities in
order to prove that they are legitimate members of the society (Dowling & Pfeffer, 1975; Patten,
1991; O’Dwyer & Owen, 2005). This legitimacy enables the firms to establish a strong ground in
the society as they advocate for sustainable productivity. Since the society offers greater
opportunities for firms to apply their public resources, they have a right to receive information
concerning how the corporate sector returns some benefits accrued from them (Deegan, 2002).
1.2 Statement of the Research Problem
Several authors agree that the Corporate Social Responsibility (CSR) has gained much
momentum among the stakeholders and the society in the recent past (De Villiers & Van
Standen, 2006; Islam & Deegan, 2008). The triple bottom line approach that has been adopted by
mot business provides enough evidence that CSR activities have become a common activity.
This approach entails a sustainable business model; whereby, businesses are expected to report in
their economic, social, and environmental engagements. Whereas the benefits of CSR have been
evident, there are considerable levels of dissatisfaction, especially from NGOs, with respect to
CSR reporting. This implies that there are gaps that exist in CSR reporting and this gap is known
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as reporting-performance gap (Adams, 2004) or credibility gap (O’Dwyer & Owen, 2005). This
gap that exists from CSR reporting is expected to serve as the motive for organisations to engage
in CSR activities and to report more credible information in an attempt to assure stakeholders
that they are positively contributing to social, economic, and environmental concerns in the
society.
1.3 Objectives of the Study
The main objective of the study is to assess the managerial motives in engaging in CSR. This
study also aims to assess the perceived communication gap between disclosures and actual
practice.
Other objectives of the study are;
To contribute to the limited literature on CSR communication
To demonstrate how engaging in CSR and reporting can help organisations to
strategically achieve economic, social, and environmental results.
1.4 Research Questions
What are the managerial motives of engaging in and communicating CSR activities?
Are there gaps in CSR reporting?
How can engaging in CSR activities and reporting helps organisation to achieve social,
economic, and environmental results?
1.5 Significance of the study
Corporate Social Responsibility is a philanthropic act of companies to that is geared towards
social, economic, and environmental concerns. Unlike business ethics that is limited to the
principles and standards of behavior, CSR is concerned with the wellbeing of the society and the
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sustainability of their environment (Gomez & Chalmeta, 2011). In addition, business ethics also
involve some aspect of CSR. Whereas business ethics entails judging between the right and the
wrong, CSR involves an obligation of a business that is aimed at positively impacting the society
(Islam & Deegan, 2008).
Due to increased awareness and demand by the society that businesses should be responsible,
CSR activities have increased tremendously. The legitimacy theory of CSR stipulates that
businesses should not only look at the interest of their shareholders, but also look at the interest
of the general public. Deegan and Blomquist (2006) established that an organisation’s legitimacy
within the society can easily be threatened whenever its value within the larger social system
cannot be established. Legitimacy theory expects organisations to act within areas of their social
contact, such that they refrain from conducting their businesses in to the detriment of the society.
When this happens, the society is likely to reciprocate this to the business by establishing long-
term contact with them by buying their products and services. Since this dissertation is to
determine the gap that exists in CSR communication, legitimacy theory is important since it
highlights the gaps that may threaten the very existence of CSR activities. Stakeholder theory is
also an important component of this study since CSR activities are geared towards the mutual
interest of various stakeholders. Unlike legitimacy theory which considers the importance of
societal expectations towards organisations, stakeholder theory considers the impact of particular
groups (especially NGOs) on organisational behavior and CSR communication.
1.6 Scope and Limitation of the Study
This study aims to establish the motive of engaging in CSR activities and the perceived gap
in reporting and the actual practice of CSR activities. With respect to disclosure, the annual
report is heavily relied upon due to a high degree of credibility expected from it and from that
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fact that such document is sent to the shareholders. The internet, being an important
communication channel, plays a prominent role in CSR communication as reported by (Basil &
Erlandson, 2008).
1.7 Sources of Data Collection
Primary data has greatly been relied upon on CSR related studies since it is a practice oriented
field. The common methods of primary data collection used in similar studies were interviews
and questionnaires (Adams, 2004; Deegan & Blomquist, 2006; Basil & Erlandson, 2008).
Gomez and Chalmeta (2011) also utilized secondary data sources in their study, mainly from
annual reports. A combination of both primary and secondary data is also applicable in this study
as was in the case of (Momin & Parker, 2013). In this dissertation, secondary sources will be the
main sources of data that will be collected from annual reports, books, journals, internet and
websites. This research ignores the use of primary data sources due to time and cost constraints.
Since this research is determined at establishing the possible CSR reporting gaps, such
independent and unbiased investigations will be more appropriate. This is because the survey by
the means of interviews and questionnaires may result into biased results since the relevant
stakeholders would be involved.
1.8 The Outline of the Dissertation
This paper is properly organised in acceptable dissertation standards. Chapter two focuses on the
literature review of CSR activities based on the research objectives, chapter three deals with the
methodology, the fourth chapter focuses on empirical data analysis and results developed from
the chosen methodology and the last chapter in this study entails the major findings, conclusions
and recommendations.
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Chapter Summary
Corporate social responsibility is a concept whereby businesses integrate social, economic, and
environmental concerns in their business strategy to help address the challenges faced by the
society. CSR reporting enables organisations to effectively engage their audience in the public
arena. Various interest groups have expressed some level of dissatisfaction in CSR reporting and
this implies that a gap exists between the actual performance and reporting of CSR. This study
aims to assess the managerial motives of engaging in CSR and the perceived communication gap
between the disclosures and the actual practice. Other objectives of the study involves exploring
the meaning of CSR, to determine the extent by which companies are responsible to the society,
to determine how CSR reporting helps organisations achieve economic, social, and
environmental results and to contribute to the limited literature of CSR communication.
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CHAPTER TWO: LITERATURE REVIEW
2.1.0 Introduction to Literature Review
This chapter reviews the past literature with regards to corporate social responsibility. The
literature review begins with describing the meaning and history of CSR. The literature review
also explores the motivations for CSR, strategic aspect of CSR, reputation and brand
management, ethical considerations, the impact of CSR on the short-term and the long term
profitability, and finally the theoretical factors of explaining CSR.
2.1.1 Meaning and History of CSR
Corporate Social Responsibility (CSR) is understood differently by different people since its
meaning is somehow unclear. The most widely accepted definition of CSR is the one given by
the European Commission and it states that CSR is the idea by which firms combine social and
environmental concerns in close collaboration with their stakeholders. According to Carroll
(1999), CSR involves businesses traversing beyond their legal boundary in order to help the
community who have been part and parcel of their success for years. CSR can also be described
as a self-regulation mechanism by which businesses monitor their activities and ensures that they
comply with ethical and legal norms that exists in their area of operations (Carroll & Shabana,
2010). Cochran and Wood (1984) explain that CSR activities are entitled to assist an
organisation’s mission as well as to guide them in what they stand for to its customers. CSR has
also been defined by Dahlsrud (2006) as the company’s sense of responsibility towards their
community and environment in which it operates by launching social and ecological initiatives.
This is similar to the definition given by Fredrick (2006) that asserts that CSR involves operating
a business in a manner that accounts for the social and environmental impacts created by the
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business. Hoffman (2007) and Lee (2008) agree that CSR is an activity that enables a firm to
engage in economic, ethical, legal, and philanthropic acts. Therefore, CSR enables a firm to be
accountable to their stakeholders such that they prevent and rectify any form of harm posed on
such environment (Joyner & Payne, 2002). In this manner, firms must forbear themselves from
damaging their stakeholders and adjust to it suddenly if the damage has a negative influence on
the society. Whereas the traditional CSR was mainly focused on the philanthropic aspect as its
driver, this traditional notion has been supplanted by a broad commitment to protecting and
improving the lives of the communities and the company workers. In addition, CSR addresses
the issues in the broad areas of operations such as governance and ethics, opportunity and
training, worker hiring, responsible purchasing, supply chain policies, and energy and
environmental impact (McWilliams et al, 2006). In the year 2007, the Economic Intelligence
Unit established that more than 55% of companies consider CSR activities a very high priority
and the value are expected to rise in the near future.
Rosamiaria and Padget (2011) observed the historical background of CSR in details by
reviewing several literatures from a chronological point of view. According to them, CSR
activities can be traced back to 1919 when Ford shareholders decided to allocate part of their
earnings to benefit their society (Moir, 2001). By 1954, Peter Druke established the act of social
responsibility, in his book The Practice of Management, as one of the objectives of a business
organisation. During this period, it is reported that the primary focus of CSR was on the
responsibility of the business to the society (Druker, 1884). However, Hoffman (2007) explains
that the practice of CSR expanded during the 1960s when most businesses began to realize the
importance of CSR on their operations. During this time, the decisions made by businesses were
enormous and businesses expanded tremendously. During the 1970s and the 1980s, most of the
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social interests came closer and firms became more responsive to their stakeholders (Hoffman,
2007). By 1990s, the issues of CSR had become universal due to much literature on CSR
activities. By the year 2000 to date, CSR has become an important strategy for businesses since
institutional changes made it an important source of institutional legitimacy of organisations
(McWilliams et al, 2006).
2.1.2 CSR communication
It has been argued that one of the key aspects of CSR reporting involves effective and
transparent communication channels with their stakeholders since this helps to identify issues of
concerns that the company needs to address and to report on their performance (Bebbington,
2001; Boeger et al, 2008). According to Argandona and Hoivic (2008), CSR communication is
the act of the company itself, communicating their CSR efforts to their stakeholders. Since CSR
has gone mainstream, companies need to communicate their CSR activities wisely in order to
avoid being accused of greenwashing (Albareda et al, 2008; Asaf et al, 2012). Banerjee (2007)
further advises that a key challenge for managers during their CSR reporting is to minimize
stakeholder skepticism and to communicate their CSR initiatives without being accused of
greenwashing or boomerang effect. According to Dahlsrud (200), greenwashing is the act of
promoting environmental sustainability while on the other hand engaging in activities that are
harmful to the environment. On the other hand, boomerang effect is an attempt to persuade a
group of persons who end up opposing your ideas instead. Over the years, there has been
increased pressure for establishing an appropriate communication strategy that identifies proper
communication tools and confirms the reliability of the information being communicated.
Considering that high number of CSR activities taking place, it is prudent to communicate these
achievements to stakeholders. Interestingly, Blindheim and Langhelle (2010) also advise that
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companies should avoid publicizing their achievements so aggressively since this may result in
boomerang response. In addition, Bebbington (2001) argues that most organisations have not
fully learned how to communicate their CSR activities. He points out that some of the challenges
that have arisen from the CSR communication include the structuring of their message, justifying
the explanation in their reports, and to convince the different interest groups.
2.1.3 CSR reporting
This is the act of delivering the CSR information to that consists of particulars of the physical
environment and social environment (Carroll, 1999; Boeger et al, 2008). Crowther and Aras
(2008) report that the lack of common measures of performance is one of the weaknesses of CSR
reports, and this often leads to hyperbole and greenwashing. Despite the numerous efforts by the
Global Reporting Initiatives, there is little progress that has been achieved by companies in
adopting the CSR policies and reporting. According to Drucker (1984), CSR reporting began
with environmental reporting before proceeding to social and economic reporting. In CSR
reporting, a company reveals its financial and non-financial aspects associated with the CSR
activities (Font et al, 2012). In addition, CSR reports contain particulars of physical environment,
energy, human resources, and community involvement (Glavas & Piderit, 2009). According to
Hopkins (2003), several terms have been used to describe CSR reporting such as sustainability
report, triple bottom line report, and CSR reports. Of all these terms, sustainability reports have
extensively been used to describe CSR reports since CSR activities largely involve social and
environmentally sustainable projects (Holcomb et al, 2007; Karnani, 2010; Jones et al, 2013).
The trend in CSR sustainability reports draws large debate among the stakeholders.
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2.2 Strategic aspect of CSR
Ansoff (1965) and Thorelli (1977) identified strategy as the objectives and the goals of an
organisation. A strategy can be described as the procedure, plan, and locating for a competitive
benefit for an organisation (Bebbington, 2001). Similarly, the above definitions can be used in
the CSR context to discover the strategic advantages of CSR. The effect of CSR on the strategic
advantage of the company has been studied by a few researchers. In these studies, it is apparent
that the strategic profits were not measurable as the detached contribution of the baseline
(Blindheim & Langhelle, 2010). There is a relationship between corporate economic, non-
economic, and strategic benefits, which in turn revolves around CSR activities. It has also been
established that companies can easily the significance of the societal strategies related to the
expanded use of controlling systems and environmental scanning (Banerjee, 2007). Firms are
concerned to be effective information collection systems that support generated strategies and
this inspires the line of combining the notion of CSR and corporate strategy with the
stakeholders’ model. The explanation of strategic CSR indicates that the CSR activities are in
tandem with the business strategy of the organisation (Argandona & Hoivik, 2009).
CSR is concerned with the strategic component of the organisation when it creates a large
business link between the profits and the advantages to the company by helping the core business
activities and contributing to the company’s effectiveness in completing its determined tasks
(Asaf et al, 2012). According to Moir (2001), CSR enables businesses to gain competitive
strategy by assisting them to gain benefits by discriminating the products and services. It
activates customers in an individual estimation of profits and costs of the brand in comparison to
the alternatives. While assessing the brand, the consumers, NGO’s and other active groups lead
to a benchmarking of the brand during their assessment.
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The main issue with the branding method is caused by the mismatch of whatever the brand aims
to achieve and the customers’ perception. According to Lee (2008), the brand image and the
brand loyalty have a great effect on the performance of the company. Joyner and Payne (2008)
argue that CSR helps to support and build strategies that make their companies and their brands
more prosperous during the time of crisis.
Smith (2009) established how CSR activities can adequately implement the organisation’s
objective of creating profits. In his study, Smith explained that managers below the control of
both extreme competition and economic channels usually presume the value of CSR in first steps
such as supporting education and decreasing carbon emissions. This study was informed by the
increased worry or how CSR could improve the performance of the company. Singhapakdi
(1999) looked at the relevance of CSR marketing to managers, while Lichtenstein (2004) studied
the benevolence causes of CSR. They both concluded companies engage in CSR activities with
the aim of making the world better, leading to a positive perception from their customers.
2.3 Motivating Factors of CSR reporting
Despite being a trend in the recent past, the real motives why these companies engage in CSR
disclosures is still not clear (Reich, 2008; Okoye, 2009). According to Smith (2003), several
people have wondered whether firms spend stakeholders’ money in CSR activities and reporting
some kind of returns. Hoffman (2007) also argues that it is almost impossible for companies to
engage in CSR activities without any form of economic gain, especially considering the high
cost involved. Most authors agree that one of the motivating factors for CSR reporting is the
economic gains (Zwetsloot, 2003; Dahlsrud, 2006; Frederick, 2006; Creel, 2012). Experts
consider improving the economic performance as the key motivating factor of engaging in CSR
activities and reporting. By appealing to their stakeholders and the surrounding companies,
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profitability can be boosted in organisations due to economic gains that come from increased
customer loyalty (Joyner & Payne, 2012). This is in tandem with a survey conducted Pwc in
2007established that more than 70% of the CEOs believe that CSR disclosures are essential for
the continued profitability of their organisation.
Since CSR is practiced in large scale among the UK companies, there is the likelihood of a
motivational factor that encourages organisations to engage in CSR activities. Business and the
society in which it is established are mutually related in one way or the other. It is now evident
that businesses have obligations to the society in order to enhance their mutual benefit (Hopkins,
2003). Several industries have broadly accepted to engage in CSR activities. However, they use
different terms such as corporate social responsibility, strategic philanthropy, and corporate
national, social responsibility, among others. Despite the naming, the all these SR activities
revolve around the main concept of generating “shared value” between a business organisation
and the surrounding society. For most organisations, the main aim of CSR is to generate value
for the company by sponsoring activities that benefit their customers and the society (Sprinkle &
Maines, 2010).
Wang and Chaundri (2009) advise that firms should engage and practice CSR since it presents
them with an opportunity to showcase their global existence. Karnani (2010) also advise that an
organisation’s involvement in CSR activities defends them from negative publicity and
accusations that may arise from their business operations (Sprinle & Maines, 2010). Over the
years, business organisations have also experienced a continued push from civil society members
to be responsible to the society (Moneva et al, 2006). Therefore, the convincing push from the
civil society members has also acted as a motivating factor for businesses to engage in CSR
activities. In addition, some companies tend to support their investment by engaging in ethical
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values that tend to support CSR initiatives. Therefore, CSR practicing companies find a lot of
comfort in appealing to investors (Sprinkles & Maines, 2010). These authors also add that the
discourse that a company’s involvement in CSR activities helps them to reap numerous benefits
from the society. In this regard, CSR activities enable organisations to hire, motivate, and remain
loyal employees of their organisations (Okoye, 2009). This is a significant motive for engaging
in CSR activities since it provides organisations with ample opportunity to gain substantially
from the society. It has also been noted that CSR activities motivate and give credit to the
beneficent motivations of the employees (Reder, 2008; Reich, 2008). Over the years, the
corporate heads have been the main driving power of CSR activities since they fully understand
the benefits that come with engaging in such activity. Studies also supports that differentiation is
another motive for engaging in CSR activities such that every interplay of CSR activities and
business strategies has a business value (Salama et al, 2012). Schwartz and Saii (2012) argue that
companies with the objective of constantly engaging in CSR activities are attractive to different
stakeholders with a moral of social responsibility. According to Smith (2003), the social motives
create an optimistic reputation of the company that helps them to establish a positive image and a
strong brand name. Zwetsloot (2003) further argues that an optimistic CSR reputation supports a
company by increasing the value of their products and services. In addition, the optimistic CSR
reputation allures capital investors to the firm and motivates their employees to continue with
their hard work in their organisations (Carroll & Shabana, 2010).
Dahlsrud (2006) argues that CSR activities enable companies to generate strategic resources such
as increased stakeholder relationships and optimistic CSR reputation. In addition, the economic
component of CSR is enough to generate value for the company, expand profits, delight various
stakeholders, and initiate long-term sustainable benefits to the company. According to Frederick
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(2006), the motivation of the consumers is an essential reason for companies to engage in CSR
activities. With regards to consumer behavior on CSR activities, an organisation involved in
consumer activities may induce consumers to purchase their products (Hoffman, 2007). Another
reason why companies engage in CSR activities is to reduce their production budget by
concentrating on environmental activities (Joyner & Payne, 2002; Lee, 2008). In this method, the
organisation aims at decreasing wastes and to reduce their overall budget of the production. The
environmental concern for CSR activity is mainly driven by the aim of improving new energy
saving products, reducing their budgets, appealing to customers and employees (McWilliams et
al, 2008).
2.3.1 Reputation and Brand Management
Maintaining the right balance between the brand and organisation CSR activities has been a
challenge for most organisations. Creel (2012) extensively explores the relationship between
CSR and brand equity in an organisation. According to Creel, CSR can help build brand
awareness and enhance the brand image. In addition, Fredrick (2006) also argues that CSR
evokes brand feelings, creates a sense of brand community and elicits brand engagement.
According to Lee (2008), an organisation’s reputation may be a strong reason why a company
may opt to engage in CSR activities. Moir (2001) established that about 75% of a company’s
value results from the company’s reputation. Lee (2008) also agreed that a positive exposure and
publicity arise from CSR activities due to improved reputation. A poor reputation can be a
business disaster since it can scare away the necessary stakeholders (Joyner & Payne, 2002).
According to Rosamaria and Robert (2011), a closer connection between the CSR activities
increases their brand marketing activities. The connection between brand and CSR activities was
also established by Stewart (2003) after establishing that more than 86% of consumers have a
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positive opinion of a company that is actively involved in making the society a better place.
According to Carroll and Shabana (2010), there is a close link between CSR, brand affinity,
consumer perception, and the customer loyalty and buying behavior. Reich (2008) advises that
the success of the CSR activities should be measured against their overall impact on the brand
reputation.
2.3.2 Ethical Considerations
According to Reich (2008), the word corporate social responsibility means that the business
organisations have and ethical and societal responsibilities that go beyond their economic
responsibility to their stakeholders. He has therefore established that there is a direct connection
between CSR activities and business ethics. According to Dahlsrud (2006), ethical
considerations enable businesses to be accountable to their stakeholders. A good number of
corporations are highly involved in CSR activities to provide moral and ethical support to their
surrounding communities (Fredrick, 2006; Hoffman, 2007; Lee, 2008). A good example of
ethical CSR consideration is the when an organisation decides to support climate change
initiatives in order to avoid an impending ecological collapse. In most cases, nobody pushes
these businesses to engage in CSR, but they just decide to do that as a matter of ethics. Moir
(2001) also argues that corporations are expected to engage in CSR activities to prove that the
practice their businesses in an ethical manner. Ethical approach to CSR promotes moral business
operations that extend beyond the moral legal compliance.
2.3.3 Profitability
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2.3.3.1 Impact of CSR on the short-term profitability
It has been established that CSR has an impact on the performance of the firm (Dahlsrud, 2006;
McWilliams, 2006; Lee, 2008). Some researchers have linked the impact of CSR to the short-
term profitability with the portion on the return on assets (ROA) (Hopkins, 2003). These results
have always been contradictory, with results ranging from optimism to close to pessimism.
Interestingly, some studies indicate that CSR has no effect on the short-term profitability of the
firm. However, Berman (1999) puts it differently by pointing out that CSR measures the impact
of the short-term profitability from different perspectives, which are the positive impact of for
some of the CSR measurements. According to Russo and Fouts (1997), increase in corporate
environmental performance is absolutely connected with the company’s performance as
portioned by the return on assets. Conversely, Inoe and Lee (2011) argue that CSR can only have
short term effects when the impact is either negative or unimportant.
Lin (2009) also pointed out that there is no important positive connection between the CSR
investment and the return on assets in big manufacturing companies. This further raised the
concerns as to whether the relationship between CSR is dependent on the type of company in
question. In addition, this study carried out by Lin ruled out the possibility of CSR on the short
term profitability of a firm. In addition, Lin, Yang and Yan (2009) also pointed out that positive
CSR activity does not necessarily extend to the firm’s profitability. Using hospitality industry to
link CSR and return on assets, Kang (2010) established that there is no essential connection
between the two. However, his study showed that a positive connection between the CSR and
profitability only exists in the restaurants and hotels. While studying the effect of CSR in the
airline industry, Kang, Lee, and Huh (2010) established that there is a negative effect of the CSR
on the profitability of the airline firms. This preposition also supports the initial idea that the
21
effect of CSR on short term profitability of the firms may be company dependent. This statement
is supported by Peloza and Papania (2008), who supports that short term effects of different CSR
activities could be dissimilar or companies in various industries. According to them, this
dissimilarity effect comes as a result of individual original stakeholders. However, Saona (2011)
painted a different result, while studying the Italian banks by presenting a positive effect on the
return on capital. Therefore, this literature review points out that there is no important
relationship between the financial performance and the CSR in the short-term.
2.3.3.2 Impact of CSR on the long-term profitability
Just like short-term profitability, researchers have also tried to establish the impact of CSR on the
long-term profitability of the firm. Inoue and Lee (2001) pointed out that there is individual
dimension that impacts the future profitability of a company with respect to CSR. The
dimensions such as environmental problems, diversity problems and community relations have a
positive effect on the future profitability of the company. However, Hillman and Keim (2001)
noticed that only community relations have a positive impact on the long term profitability of the
company. According to Barmmer and Millington (2008), larger community connection of a
business results into a bigger market share in the long term. Lin (2009) also linked CSR activities
with the long-term profitability of the company, through indirect impacts. This study thus led to
further questions whether the long-term effects of CSR have direct or indirect impacts. It was
also established by Moir (2001) that companies engage in CSR activities with the concealed
motive of long-term economic benefits to the company and this result in brighter financial
performance of the company.
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2.4 CSR across industries
Both the short-term and the long term effects of an activity should be established within an
organisation to help in decision making. In addition, there is an essential to establish both the
short-term and the long term efficiency of any activity for a company to expand their usefulness
within the corporate world. Researchers have also tried to establish the effects of CSR across
industries. Kang (2010) examined the negative and positive CSR effects on several companies
within the hospitality industry like the casinos, airline, restaurants, and hotels. Their results
showed various outcomes for different sub-industries. In this study, restaurants and the hotel
industry illustrated an optimistic effect on the CSR activities. Conversely, the study by Kang,
Lee, and Huh (2010) on the airline industry showed a negative effect of positive CSR activities
with no important impact of negative CSR on the company value.
Similarly, Inoue and Lee (2011) researched the effect of various CSR proportions on the tourism
industry and the outcome was that various CSR proportions impacts different industries. It was
thus established that company CSR activity reduces the short term profitability within the airline
industry. The above study by Inoue and Lee (2011) supports that the economic effects of CSR
activities differ across the tourism related industries. This notion also supports that there is
likelihood that the economic effects of CSR activities vary across the industries.
2.4.1 Environmentally sensitive industry
Dierkes and Preston (1997) established that CSR reporting is most vibrant in industries that are
associated with environmental problems. This is because people are becoming more
environmentally sensitive each day and would like to engage in activities with less impact to
their environment. According to Lee (2008), companies that engage in such activities such as
23
mining and exploration attempts to engage in more in CSR reporting to justify to the general
public that they care about environmental challenges. These companies attend to essentially
expand their environmental messages by engaging in CSR reporting. They are constantly
subjected to outside pressure with regards to environmental concerns and would like to
overcome the pressure by engaging in environmentally related CSR activities. Therefore, these
firms extend their revelation of their environmental efforts and accomplishment in order to
protect their good reputation within the surrounding society and to enhance the legitimacy of
their activities. It was established by Milne (1996) that environmental revelation has an
optimistic attraction to the company’s profitability. This forms the basis while companies dealing
with environmentally sensitive activities are heavily involved in CSR activities; nevertheless,
Milne (1996) established that there is no relationship between the wider range of CSR problems
and disclosing social performances as well as environmental perspectives.
2.4.2 Ethical Issue-Sensitive Industry
Some organisations engage in CSR reporting since their activities are ethically sensitive. In this
case, economic deliberations are given less consideration since the company is more concerned
with the ethical aspect of CSR (Jenkins & Yakovleva (2006). One of the most ethically sensitive
industries is the pharmaceutical industry since they deal with products that touch on the human
life. Therefore, the image of pharmaceutical industry associated with CSR activities has a
straight impact on the success of their business (Esteban, 2008). Most investors and financiers in
the pharmaceutical industries are very concerned with the levels of how the individual company
operates in the CSR activities. In addition, the pharmaceutical industry is one of the heavily
attacked industries by the NGOs and the general public with issues related to business ethics.
24
Leisinger (2005) establishes that some of the ethical problems associated with this industry entail
the high price of essential drugs, unreliable testing, and the issue related to patents of such drugs.
2.5 The Theoretical Framework on Explaining CSR
The following theories discussed below are relevant theories that have been identified to be
relevant to this study. These theories possess certain psychological elements with an economic
foundation in trying to create an advantage in an indirect way to the company.
2.5.1 Stakeholder theory
A stakeholder can described as an individual or a group of persons who affects or is influenced
by the executions of an organisations aims and objectives. There are very many different parties
that can be identified as stakeholders in accordance to how they are influenced by the company
activities. Original stakeholders are restricted to parties with exact control corporation’s output
and input. Since companies are forced to report the financial information, it is also necessary to
report broad information related to various concerns. Leontief (1986) established that the broader
group of stakeholders could destroy more than the original stakeholders can and thus, it is
necessary to disclose broad information related to various concerns that appear as part of the
CSR. The theoretical framework for this study focuses on the transformation of original view
that identified the real stakeholders in the business. Stakeholders to a business can be chosen
based on their legitimacy, urgency, and power as suggested by Mitchel (1997). The stakeholders
that lead to the behavior or structures, which is expected and accepted by the social (legitimacy),
they are significant in the terms of time criticality of the organisation require (urgency), and they
can make a decision for the company (power) (Mitchell, 1997). Stakeholder commitment gives
the business more powers to execute their mandate, which further strengthens their CSR
25
reporting. The extended power of the stakeholder groups is the main driving power of firms to
develop a new structure of participation tools such as reports. In addition, there stakeholders
change by the definite problems and this might also change across the firms for the same
problem as supported by Freeman (1984). Therefore, the operation procedure that firms can use
to manage their stakeholder relationship prepares a description power for discovering the
motivations that change by industrial sections.
2.5.2 Legitimacy Theory
According to Karmani (2010), legitimacy theory is directly concerned with CSR operations since
it supports that social and environmental disclosures are the result of crises that have occurred.
Legitimacy is the universalized perception that existing operations are suitable within the social
standards, trust, values, and explanations (Moir, 2001). This theory approaches the stakeholder
theory by advising that organisations should always attempt to satisfy that they operate within
the determined standards and borders of their particular societies. Hopkins (2003) argues that the
social contract that exists between the society and the organisation is the basic concept of the
legitimacy theory. The three main groups of organisational legitimacy can be described as
pragmatic, cognitive, and moral and the three main challenges of legitimacy management are to
maintain, obtain, and repair (Glavas & Piderit, 2009). Legitimacy administration is highly
dependent on the participation of the concerned parties. Okoye (2009) also established that
legitimacy does not just require the polite procedure for an organisation to obtain legitimacy
from the society. There are four main legitimacy theories that an organisation can apply in
meeting dissimilar legitimation menaces. The organisation can try to modify the perceptions of
the significant public without modifying the actual performance of the organisation in addition to
educating their stakeholders about aims to enhance their performance. The organisation could
26
also attempt to distract the concentration away from the problem of concern and try to operate
outside the prospects on its performance (Salama et al, 2012).
While explaining the contrast in Lindbloms theory, David explains that a business does not apply
its potential to the legitimate operation since the society allows the potential for the business. In
this case, a business that does not perform responsibly is bound to lose these potentials and this
balance the social contract between the society and the company. The practice of CSR within an
organisation is thus motivated by the alliance with social contract theory and then considered
utilizing the stakeholder theory.
2.5.3 Social Contract Theory
According to Karnani (2010), this theory supports the view that personal and political obligations
that are dependent upon a contract or agreement among them to form the society where they live.
According to Reich (2008), social contract theory embeds morality and rules that govern
behavior such that a rational person should be able to accept the rule that has already been
accepted by others. Moreover, social contract theory requires organisations to conduct their
businesses in such a way that does not harm anybody by engaging in CSR activities (Salama et
al, 2012). In addition, the social contract theory implies that organisations and their stakeholders
rely on one another and keep their agreements. Under social contract theory, each and every
organisation is committed in following the law since everyone else does. In case where the
government wants organisations to avoid environmental damage, all other organisations have to
follow like the rest does. In this arrangement, the state enforces the rules necessary for social
living while morality sets the rules that set the social way of life in the community. Okoye (2009)
argues that the theory of social contract enables organisations to follow rules that are important
to the existence of the society. Since most organisations are already involved in CSR activities
27
and reporting, then it is in the interest of the rest of the organisation to do so to contribute to
economic and social concerns in the society (Moneva et al, 2006). According to social contract
theory, any business that fails to engage in CSR activities and reporting are likely to put them in
a disadvantaged position. The social contract theory implies that there are things that are
necessary for the survival of the society and organisations are prohibited from against them.
The other reason that may make businesses operate in a responsible way that is different from
economic concern is that society tactically expects them to manage their affairs responsibly from
the CSR perspective. According to Donaldson and Dunfee (1999), social contract theory
supports the management in making ethical decisions in accordance with all circumstances all
the time. The local communities are assisted by the split by macro social divergences. The
companies that apply the opinion of social divergences explain their connection in terms of
social expectation. However, the summary of their connection stays dubious despite it being
accepted as a motivation in the beginning. This economic advantage can be referred as the
license to operate since it provides the organisation with its legitimacy. Apart from providing an
organisation with an economic advantage, involvement in CSR activities provides a connection
with obtaining and remaining legitimate within the business world (Salama et al, 2012).
2.6 Gap in CSR communication
The credibility in CSR communications in their social, economic, and environmental
engagements is an issue that brings interesting debate. A study by GlobeScan (2012) provided
insights into CSR communication gap by reporting that the credibility of their information is a
serious problem. After conducting their study in different continents for one decade, GlobeScan
reported that less than 38% of the people believe that companies communicate their CSR
honestly. In other words, this study revealed that more than 62% are in agreement that
28
companies do not report their CSR honestly. Interestingly, more than 72% of the respondents are
more interested in the actual practice of the CSR initiatives of these companies. This study by
GlobeScan provides insights regarding the perceived communication gap between disclosures
and actual practice. Interestingly, this study revealed that such CSR communication gap be is in
developed countries like the UK. Other studies also report that most companies engage in CSR
activities not because they are genuinely committed to such initiatives, but they are in a bid to
improve their brand image. This notion is likely to create a gap in the CSR reporting and the
actual practice among companies. The above study was summarised in the diagram shown
below.
Source: (GlobeScan, 2012)
29
By not addressing the communication gap, organisations risk missing the chance to
constructively engage with their receptive public and this may negatively affect their mission and
vision. A more actual approach to CSR reporting is likely to play an important role to companies
while they are engaging their stakeholders.
The UN Global Corporate Sustainability Report 2013 is also another study that provides insights
on the perceived communication gap between disclosures and the actual practice of CSR by
companies. This UN report reiterates that there is a major gap between what companies actually
say in their sustainability reports and what these companies actually practice. The reliability of
the Corporate Sustainability Report 2013 is very high since it surveyed more than 1700
companies from 113 different countries from all the continents. Of this large number, only 50%
of the companies perform an environmental risk assessment while the rest don’t (United Nations
Global Compact, 2013). However, both companies that carry out environmental assessment and
those that don’t are actively involved in CSR reporting. This is another evidence that there is a
communication gap between what these companies say in their sustainability reports and what
they actually do. This study also affirms that bigger firms are more likely to commit themselves
to what they report than smaller firms since CSR commitments require huge financial resources
and time.
Chapter Summary
There are several motivational factors for companies engaging in CSR activities. Continued push
from civil society is one of the motivational factors for companies to practice CSR and report
their CSR activities. In addition, some companies tend to support their investment by engaging in
ethical values that tend to support CSR initiatives. CSR also helps to create an optimistic
reputation of the company that helps them to establish a positive image and a strong brand name.
30
CSR helps to support and build strategies that make their companies and their brands more
prosperous during the time of crisis. According to Creel, CSR can help build brand awareness
and enhance the brand image of a company, which in turn enhances its relationship with its
stakeholders. CSR has an impact on both the short-term and the long-term profitability of a firm
and most researchers agree that the economic effect of CSR varies across the industries. The
theoretical frameworks that can be used to explain CSR activities are; stakeholder theory,
legitimacy theory, and social contract theory. With respect to CSR communication, the literature
review establishes that a gap exists in the CSR reports and the actual practice of companies. The
literature points out that majority of people do not believe that companies report their
sustainability reports honestly.
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3.0 CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Research Design
Since this study was exploratory in nature, a survey methodology was deemed appropriate in
answering the research questions. This study aims to find out the motives of engaging in CSR
and the perceived communication gap between the disclosure and the actual practice in the UK
firms. Annual reports will greatly be relied upon in the case of corporate disclosure due to the
degree of credibility reported in them. In addition, the annual reports are the only document that
is automatically sent to the shareholders with regards to corporate activities. Since internet plays
a significant role in the CSR communication, a number of websites will be assessed to in helping
to answer the research questions. Apart from the secondary data, primary data will be collected
by interviewing the management of the selected companies and a sample of their stakeholders.
The case study was selected as it provided the best avenue for the exploration of the research
questions.
3.2 Case Study
A case study research is an in-depth investigation that consists of an oral, archival, and
secondary source-based antiquity of a past or present phenomenon. The information that is, one
gets from the study encompass researcher observation and personal interviewing as well as
sourcing from the private and public collections (Yin, 2009). The phenomenon that is
undergoing research always dictates to some extent the terms that involve dissection and
examination (Silverman, 2005). The case study is a qualitative research that is commonly
employed in business research, but often without the methodological meticulousness that other
research methods receive since it lacks formal procedure the apparent obviousness of the
32
outcomes (Wilkinson, 2000). A number of researchers lament that the method is restrictive
together with other qualitative methods to sociological and phenomenological research. Business
research is progressively exploring to combine qualitative and quantitative research for a more
all-inclusive approach to any organisation (Yin, 2003).
When applied to business, case study research or methodologies will adopt to the type sources
and techniques that are available, especially in a way that the method has been adopted to some
social science investigations. Case study provides a systematic way of looking at events, data
collection, and information analysis, reporting of the analyzed report (Wilkinson, 2000). The
result of the approach will help the researcher to acquire sharp intellectual capacity of why the
instance happened as it did, and what might become vital to investigate at more extensively in
the future research (Creswell, 2007). When describing the case study, some researchers argue
that the unit of analysis is the most critical aspect in the case study since apart from studying a
group or individuals; it tends to focus on the procedure or method of action. Case studies tend to
be selective, especially in focusing on one or two issues that are essential to understanding the
system that is undergoing examination (Creswell & Plano, 2007).
3.3 Purpose of data collection
The primary purpose of the study is to assess the managerial motives of engaging in corporate
social responsibility (CSR) and to assess the perceived communication gap between disclosures
and the actual practice within the UK firms. The study will also explore the meaning of CSR and
determine the extent by which CSR activities and reporting helps organisations to achieve social,
economic, and environmental results. Since most firms are involved in CSR activities, this study
will focus on five UK firms. The firms considered in this study are; Alliance Boots, Barclays,
33
BP, Vodafone Group, and AstraZeneca. These five firms were selected based on the fact that
they are highly involved in CSR activities in the recent past.
3.4 Background of the chosen companies
3.4.1 Alliance Boots
This is a multinational pharmaceutical and beauty company based in over 27 countries around
the globe with operational headquarters in the UK (Boots, 2014). The company operations are
mainly split into pharmacy led health and beauty retailing and pharmaceutical wholesaling in
addition to a stand-alone contract manufacturing that intends to develop and internationalize their
brand. Over the years, the company has been associated with controversies surrounding their
product and tax evasion claims. In this company, CSR has been integral part of their business
and they have been heavily involved in CSR reporting since the year 2006.
3.4.2 Barclays
This is one of the largest financial service providers in the UK and other parts of the world
(Barclays, 2013). The company takes into account how they deal with their millions of customers
and their thousands of employees located in various parts of the country. In addition, Barclays
also takes into account how they manage their business in an ethical manner and their
responsibility to their environment. Due to this, the company has greatly invested in CSR
activities and used the Global Reporting Initiative (GRI) as a standard for reporting their CSR
activities. In the course of their operations, the company has been associated with some scandals
that have threatened their operations and profitability. The most serious of these scandals was the
interest rigging scandal that highly touched on the bank’s reputation, leading to the resignation of
one of their leading managers.
34
3.4.3 British Petroleum
British Petroleum (BP) is an international company, headquartered in London, which deals in all
areas of exploration, production, refining, distribution, marketing, and trading of oil and gas (BP,
2013). In addition, the company deals in renewable energy activities such as wind power and
biofuels to complement their oil and gas suppliers. Over the years, the company has been rocked
by huge scandals that had a direct impact on the reputation of the company. Some of the scandals
that have rocked the company in the recent past include the explosion of the Texas City refinery
in 2005, the Alaskan oil spill of 2006 and the Gulf of Mexico oil spill of 2010. However, the
company has remained profitable and with a brand name and this makes people wonder whether
CSR had a role to play in the continuous rebranding of the BP Plc.
3.4.4 Vodafone Group
This is a public limited company dealing with telecommunications spread in 21 countries and
partners in over 40 countries (Okoye, 2009). The company provides telecommunications and IT
services to millions of their clients in the UK and other parts of the world. Over the years, the
company has been involved in charitable initiatives that are aimed at benefiting the vulnerable
groups in the society. Just like other companies, Vodafone has been rocked by scandals and
criticism of tax avoidance that led to a series of protests. These angry protests due to tax
avoidance let to the closure of most of their shops in Liverpool and the subsequent loss of
profitability. In Australia, the company has been associated with poor customer relations, earning
them a metaphorical name “Vodafail”.
35
3.4.5 AstraZeneca
This is one of the largest pharmaceutical companies in the UK and the world. Since the company
operates in pharmaceutical products, issues surrounding business ethics are very sensitive to their
success (AstraZeneca, 2013). Over the years, the company has been very successful, leading to
the anticipated merger with Pfizer to form a pharmaceutical monopoly. Recently, the company
was accused (and they admitted) of being involved in health fraud; whereby, they were part of a
scheme to inflate the prices paid to doctors for its prostate cancer drug. Despite the company
accepting their involvement in this fraud, it heavily touched on the company’s reputation.
3.5 Instrument use in data collection
3.5.1 Interviews
This study will employ the use of interviews in gathering primary data related to CSR activities.
The process of conducting interviews is conducted with less indicating question at initial stages
before gradually embarking on complex questions. The types of questions asked during the
interview process will help assess the managerial motives of engaging in CSR activities and the
possible gaps in CSR reporting.
Thematic analysis is one of the most important forms of qualitative research that emphasizes on
examining, pinpointing, and recording patterns and themes within the data. The themes and
patterns that are analysed within the data must always correspond with the research question.
According to Guest (2012), thematic analysis often goes beyond counting of phrases or words
within a study to identifying explicit and implicit ideas that come up within the collected data.
Usually, thematic analysis is performed in six phases to establish meaningful patterns that
answer the research questions and these phases are familiarization with the data, generation of
36
the data codes, searching of the themes among the codes, reviewing themes in the code, defining
themes, and finally producing the final report. Thematic analysis is considered by most
researchers to be a very important method of capturing the intricacies of meaning within a given
set of data collected for a particular study (Charmz, 2006; Saldana, 2009).
Creswell and Plano (2007) define a theme as a concept used in thematic analysis that captures
important things related to the research question by presenting patterned response or meaning to
the disaster. These patterns are not only determined by a quantifiable measure, but also by a
determined by the researcher’s judgement in relation to the research questions.
3.6 Data collection and Analysis
This study will use both the primary data (from the interviews) and secondary data from books,
journals, reports, and websites. The primary data were collected for a two month period using the
following by the application of interviews. Five companies were selected for the study, since a
large number would have complicated the research process. The initial phase of the interview
process involved the business executives of the five companies selected, while the second phase
of the interviews involved those persons who are in charge of the CSR activities in these
companies. This two tier data collection system was meant to capture all the necessary
information from the policy makers and the executors of the CSR activities. The research method
and process of data collection will be based on the content analysis, which involves codifying
text into various groups by the criteria developed by the researcher. Since the annual reports of
these companies contain CSR related information, coding scheme will be developed to analyze
data in the context of the research aims.
37
These data were analyzed within case analysis and across case analysis, before later being
confirmed by the expert advice. Each case analysis involved a detailed case study write ups that
contained descriptions that were structured in accordance to the constructs in the data collection.
These write ups were central in the generation of insights of each case since they are important in
managing the analysis process, particularly for large volumes of data. The importance of using
write ups, is that it enables unique patterns of data to emerge, since each case contained a
particular unique trait needed to answer the research objectives.
3.7 Validity and Reliability
A survey instrument is valid when it can measure and accurately achieve the research purpose
for which the research was designed (Creswell & Plano, 2007). Since validity is a matter of
degree, the focus should be to what extent the measuring instrument is valid or not valid since no
measuring instrument is perfectly valid (Oppenheim, 1992). Despite this, the researcher need to
choose the measuring instrument that gives me some kind of assurance that the results produced
shall be accurate and presentable. This will instill in me some confidence and the ability to
conduct the study and present his findings with less criticism.
The interview questions designed for the study was subjected to a validation process for face and
content validity in order to test its effectiveness in handling the study process. The interview
questions were also subjected to content validity to test its ability to sample the range of behavior
represented by the theoretical concept being tested. During the validation process, the copies of
the questions together with the research questions they are intended to answer were distributed to
experts to assess their ability to adequately answer such questions. The experts assessed the
research questions and the structure of the questions and suggested that this questionnaire was
effective.
38
3.8 Pilot test
After validation process was done, the researcher embarked on the pilot testing with 10
professionals from five organisations that have greatly participated in CSR activities. The pilot
project was carried to assess how the subjects will react to the interview and whether the
interview items are clear and easily understandable by the subjects. According to Silverman
(2005), the pilot test enables the researcher to assess whether there is a need to include additional
items in the questionnaire or to remove unnecessary items in the questionnaire. Therefore, the
pilot test enables the researcher to determine the workability of the proposed method of data
analysis and adjust where necessary. Therefore, the pilot test enabled the researcher to determine
the ambiguity of some items in the questionnaire and modified them before the actual study was
carried out (Wilkinson, 2000).
3.9 Ethical assurances
When conducting a survey study, the researcher should be very sensitive to the ethical issues that
may surround the study (Lynn, 2009). The conventional guidelines for ethical research study
touches on the voluntary participation of the respondents, anonymity and confidentiality, no
harm to the respondents, identifying the purpose of the study, and commenting on the analysis
and reporting of the research findings. Since this study touches on businesses, their satisfaction
and ethical considerations are of great importance (Babbie, 2004; Bryman, 2008). According to
Ader, Mellenberg and Hand (2008), ethical considerations are also useful in this study to
enhance coordination between the research subjects and their institutions. Silverman (2005) also
adds that observing ethical standards by the researcher promotes values that are critical to
engaging in successful collaborative research process. Moreover, ethical considerations make the
39
researcher accountable to their readers and the general public with regards to their research work
(Creswell & Plano, 2007).
In this study, the researcher ensured that the participation of the responders is entirely voluntary
as part of ethical consideration. In this voluntary arrangement, the researcher has the task of
balancing between high and low enrollment rate of the respondents. For any potential participant,
a minimum of three email contacts was made to emphasize their voluntary acceptance of the
study. The emails containing the interview questions were sent spontaneously, such that the first
two emails forwarded to the participants contained the nature and the importance of the study.
The third email to the respondents contained a link that indicated their willingness to participate
in the study and all these mails were sent before the actual study began.
Personal details of the respondent should never be disclosed and the respondent should be
assured that the information they provide during the interview is private and confidential for
them to be open to give a response (Babbie, 2004; Bryman, 2008; Andres, 2012). The respondent
must always be assured that his response will solely be used for research and not for other
purposes for him to feel free to provide his insights concerning the research questions. Before
administering the interview, it is recommended that the researcher assess the ability of the
respondent to answer the question without bias (Silverman, 2005; Creswell, 2007).
Chapter Summary
Since this study was exploratory in nature, a survey methodology was deemed appropriate in
answering the research questions. This study aims to find out the motives of engaging in CSR
and the perceived communication gap between the disclosure and the actual practice by case-
studying five the UK firms. The primary data was collected by interviewing the management and
40
stakeholders of these five companies, while the secondary data was mainly collected from the
annual reports, in addition to books, journal articles, and websites. The methods of data
collection were subjected to validity and reliability test to determine their effectiveness in
answering the research questions. The researcher provided ethical assurances to his subject to
enhance maximum coordination between them. These data from this study were analyzed within
case analysis and across case analysis, before later being confirmed by the expert advice.
4.0 CHAPTER FOUR: RESEARCH FINDINGS
4.1 Gap between disclosures and actual practice in CSR reporting
There have been increased demands for greater transparency and accountability in CSR reporting
from various interest groups. However, this has been met with mixed reactions since some
companies oppose the move while others are comfortable with the move. These new
requirements in CSR reporting in the UK compels companies to highlight the risks they face and
how they intend to act on the risks they face while doing their businesses. The proponents of this
new CSR reporting scheme argue that it will enhance their business reputation and ensure long-
term survival of their businesses (Banerjee, 2007). There seems to be a gap between the CSR
disclosures and the actual practice and this has formed the push in the UK that demands that
CSR reporting needs to me mandatory and should follow certain guidelines. They argue that
CSR reporting needs to be taken seriously in order to avoid the pitfalls of “greenwash” that has
characterized several CSR activities and reporting.
Satisfying the needs of the various stakeholders is critical in this information technology era.
While asked whether they are totally informed, totally not informed by the CSR initiatives the
following data was obtained.
41
The above data shows signifies the CSR communication from a sample of the stakeholders of the
above five companies. From the above data, an average of 62% is totally not informed by the
CSR reports of these five companies. On the other hand, a mere 36% of the population are totally
informed of the CSR reports from these five UK companies. In this set up, only 2% of the
respondents were undecided on whether they were informed or not informed of the CSR
activities of these five companies.
4.2 Alliance Boots
The CSR concept is embedded in the Alliance Boot mission statement that states that they are
designed to be the UK most socially responsible retailer in the health and the beauty market.
Therefore, the company is constantly involved in the activities that improve the health of their
customers and communities and to protect their environment. In addition, the company also aims
to develop sustainable products and to place their customers and colleagues at the heart of their
business activities.
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Alliance Boots is aware and constantly involved in activities that are responsive to climate
change, resource depletion, youth unemployment, and other community related problems. The
scorecard of the Alliance Boots involves an extensive network of their stakeholders that involves
CSR activities and reporting in all areas of community, environment, marketplace, and
workplace.
Alliance Boots CSR scorecard (Boots, 2014t)
In their community, the company used more than $3.5 million in cash donations and non-cash
donations. The areas targeted by these donations were healthcare, education, social welfare and
others as shown below.
The distribution of CSR budget at Alliance Boots (Boots, 2014)
43
Alliance Boots is also involved in an activity that promotes the safety of the environment. Over
the years, reducing the negative impact of their environment has been established as part of their
operating cultures and practices. The since Alliance Boots are involved in activities that pollute
the environment and thus need to counter this by supporting environmental protection.
Total Boots CO2 emissions by sources (Boots, 2014)
In the market place, Alliance Boots believes that running a successful business goes hand in hand
with providing socially valuable services. Therefore, the company strives to treat their clients
and customers fairly and to act with integrity at all times. The company has forged an alliance
with their retailers, manufactures, the government, and the waste management sector. In
44
addition, the company ensures that their products are sourced from companies that treat their
workers fairly and pays attention to environmental improvement.
4.3 Barclays
Barclays is one of the companies that have perfectly portrayed the vast gap between the company
behavior and the corporate sustainability since it puts the value of CSR reporting in question.
After the corporate scandal that threatened the reputation of the company, the bank launched
their Citizenship Plan that entails the company’s strategy to restore their stakeholders’
confidence. The company ensures that the needs of their stakeholders are met and make
decisions that are sustainable in the long-term to give a positive impact to their communities,
clients, shareholders, and customers. The Barclays CSR strategy is represented by the diagram
below;
CSR Barclays Strategy (Barclays, 2013)
With the above strategy, the bank is able to provide a sustainable success for all their
stakeholders by understanding their needs and priorities in order to put them at the centre of their
business model to enable them lower the risks associated with banking, become a more
predictable bank, and achieve higher performance.
45
In terms of the environment, Barclays is aware their business activities contribute to
environmental degradation in one way or the other and this has been summarized by the diagram
shown below.
Environmental degradation by Barclays (Barclays, 2013)
Additional energy and water usage
With regards to the nature of how they do their business, Barclays aspires to run their business in
an open and transparent manner that supports clear disclosures for all their stakeholders.
Therefore, the company focuses on improving transparency for all their customers and clients in
all the markets they operate in addition to corporate transparency that includes financial
reporting and disclosures on all areas, including tax and public policy.
46
Tax paid by Barclays (Barclays, 2013)
4.4 BP Plc
Despite being rocked by criticisms and crisis, BP has continually demonstrated to be responsible,
progressive, innovative, and performance driven. The company’s core values are part of the
social responsibility that involves responsible handling of incidences as they occur. Since safety
is paramount to people, the company aims to bring no harm to people and the environment by
initiative measures that support environmental safety. The company’s corporate values consist of
safety, respect, excellence, courage, and togetherness as they carry out their business activities.
There are three main aspects of CSR at BP that drives all their operations. First is the legal CSR
that is focused on maximizing profits while obeying the laws and regulations set by the state and
the second is the ethical CSR that focuses on the profitability and doing what is just, fair, and
rights beyond the limits set by the law. The third and final aspect of PB CSR is the benevolent
CSR that focuses on the profitability and helping the surrounding society. The largest oil spill in
the Gulf of Mexico created the largest environmental disaster and brought a test to their
Corporate Social Policy that is being applied by BP in their operations. After this incident, the
47
company accepted the responsibility, admitted safety failures and vowed to pay for the damages
caused by their recklessness. The diagram below represents the company’s measure of professed
versus their actual CSR levels.
Comparison between proffered and actual CSR (BP, 2013)
Despite BP claiming to be operating within a strong set of values, their focus seemed so much on
the profits than on their stakeholders and their environment. The oil spill crisis faced by BP is a
strong indication that the company was not operating under the guidelines of the legal CSR.
However, the company changed their CSR policies after a heavy fine by OSHA and state
organisations for their loss of lives and destruction to the environment. The new CSR initiatives
are heavily focused on safety and operational responsibility, safety drilling practices,
management of environmental footprint, risk management, and increased contribution to socio-
economic issues. In addition, the company has increased their funding for agencies such as the
American Red Cross, The Red Cross Society of China, UNICEF, CARE International, World
Food Program, and other locally based organisations. Due to their immense CSR activities, the
48
company has often been rewarded as the top responsible company by the Fortune magazine,
apart from been given top ranking among the most ethical companies in the world by other
similar organisations.
4.5 Vodafone
Vodafone believes through their CSR activities that they can build a more sustainable future by
delivering products and services that bring a positive economic, social, and environmental
impact to all their stakeholders. Since the mobile devices are a vital tool in people’s lives, the
company strives to improve the livelihoods and quality of life by brining immense benefits to
their stakeholders. The CSR strategy of Vodafone focuses on two main things; transformational
solutions and operating responsibility. After being accused of tax avoidance, the current
Vodafone sustainability report includes information on their tax and economic contribution that
is well broken done for each and every country in which they operate. The company has
partnered with US Agency for International Development (USAID) and other agencies to take
humanitarian aid to the people. Vodafone has also invested in the mobile money transfer services
(commonly known as M-Pesa) to simplify money transfer through the mobile phones without
necessarily owning a bank account. In order to reduce the energy usage, the company has
unveiled the solar powered mobile phone charger that is aimed at achieving the global initiatives
for greener energy usage. The company has also invested in protecting the consumer privacy,
freedom and rights in addition to focusing on the safety of their employees and their contractors.
Through the mobile phones, the company has launched an innovative platform that enables the
victims of domestic violence to contact emergency services and get help accordingly. In the area
of health, the company has also launched a Pediatric Epilepsy Remote Sensing System that
allows physicians to make health observations in remove areas. The diagram below represents a
49
materiality matrix that the company uses to gauge their stakeholders impact and to identify and
prioritize the key areas of their CSR operations.
Materiality Matrix used in Vodafone (Vodafone, 2013)
From the period the company began their CSR reporting in 2005 to date (2014); the company has
managed to grow their business tremendously and reduced the negative impact on their
environment. During this period, the number of Vodafone users in the UK has grown by 23%
and their energy usage dropped by 34% for the same period.
4.6 AstraZeneca
50
AstraZeneca is highly involved in CSR activities since they deal with highly sensitive
pharmaceutical products. The ethical issues touching on AstraZeneca touches on the patient
safety, research and development, employee conditions, data privacy and the information about
their products. The company highly focuses on due diligence, such that responsible business is
part of their operational culture to protect the company’s reputation. Unlike other organisations,
AstraZeneca openly discloses their information concerning all their CSR activities to enhance
transparency.
The table below summarizes CSR activities of AstraZeneca (AstraZeneca, 2013)
51
4.7. Interview Analysis from the appendix by applying thematic analysis
The initial phases of this thematic analysis involve reading and re-reading of the data produced
from the interviews conducted in this study. Initial codes were then generated through data
reductions before combining the codes into form themes.
All the companies that engage in CSR activities have their own business strategies that they use
to execute their CSR mandate. The business managers reported that they intend to be socially
responsible to their stakeholders with respect to their business functions. The managers also
reported that their CSR initiatives are mainly targeted at issues related to environmental concern,
economic empowerment, and solving community related problems.
One of the major themes that come out of the interview is that management engage in CSR as a
strategic business model that helps build their brand image and reputation. Another theme that
comes out of the interview is those managers engage in CSR to repair their broken legitimacy
from their previous actions. Such companies have experienced some major scandals such as oil
spill, environmental pollution of even tax evasion scandals. Managers also report to engage in
CSR activities as a matter of business ethics and to contribute to social, economic, and
environmental gains among their stakeholders.
When it comes to disclosure and actual practice, the interview data reveals that some gaps exist
in CSR communication. Since the manager asserts that they disclose most of the things, it means
that there are some things that they fail to produce in their CSR reports. This means that CSR
reporting does not necessarily represent the actual practice of these firms due to some issues that
are not reflected in their reports. This explains why some companies fail to conduct
52
environmental assessment of their activities, but reflect their environmental improvement efforts
in their sustainability reports.
The extent by which the managers are honest in their reports also portrays the gap that exists
between CSR reporting and the actual practice. The theme that comes out is that most managers
are somehow honest in their CSR communication. This means that the level of honesty in the
CSR reports is not 100% as expected and this portrays the gap that exist in CSR reporting. In this
arrangement, companies tend to report what they perceive to promote their interest and omit
whatever they deem unnecessary in their CSR reports.
The level by which the stakeholders trust CSR reports also portray a gap that exists in CSR
reporting. Most stakeholders agree that CSR reports do not concur with the actual practice of
these companies. The stakeholders are of the view that companies conceal some information in
their CSR reports and this presents the gap in CSR reporting. Any information that may be
damaging is often ignored in the sustainability reports and replaced with valuable information.
Due to lack of legislation in the recent past, companies often find it easier to report their CSR
engagement under their own terms and conditions.
Chapter Summary
The results indicate that gaps exist between CSR reporting and the actual practice in the UK
companies. This has been echoed by increased demands for greater transparency and
accountability in CSR reporting from various interest groups. The companies practicing CSR are
constantly involved in activities that are responsive to climate change, resource depletion, youth
unemployment, and other community related problems. Therefore, engaging is CSR and
activities and reporting enables organisations to strategically achieve economic, social, and
53
environmental results. These results indicate that organisations engage in CSR as a strategic
business model that helps them to pursue their objectives. Ethical considerations are one of the
motivations for organisations involvement in CSR activities, especially ethically sensitive
industries such as the pharmaceutical industry. The need to uplift the social status of the
surrounding communities also motivates businesses to engage in CSR activities. The concern for
the environment also motivates companies to formulate environmental strategies within their
CSR practice. Companies also engage in CSR activities to restore their stakeholder confidence,
especially after being hit by a crisis or a scandal. CSR enables a company to establish a good
reputation and a brand name, which in turn has a positive effect on the short-term and the long-
term profitability of the firm.
54
5.0 CHAPTER FIVE: DISCUSIONS AND CONCLUSIONS
This chapter discusses the results that are developed from the research objectives and questions.
The main objective of the study is to assess the managerial motives in engaging in CSR and to
assess the perceived communication gap between disclosures and actual practice.
5.1 Managerial Motives of Engaging in CSR
Organisations engage in and report CSR as a strategic business model. Such organisations are
actively involved and incorporate CSR into their business models and strategically benefit from
discharging CSR functions. These organisations have realized that engaging and reporting CSR
activities are of strategic importance since it promotes their interest in pursuing their company
objectives (Creel, 2012). To these organisations, CSR has become a strategic element to consider
when making the right choices. Therefore, these organisations have created CSR department,
while others have placed it under the communication department. These departments hosting the
CSR have been given the decision making authority due to their strategic role to the business.
55
Such organisations see CSR as a source of innovation and leverage for organisational learning
since it improves their efficiency.
Organisations engage in and report CSR because it is the new wave of the corporate agenda.
Such organisations have minimal intention to engage in CSR activities, but they follow the
crowd. In the recent past, most organisations have deeply engaged in the CSR activities with
various motivations. Therefore, others have found themselves in the wave and decide to join in
order to avoid being left out. According to Carroll and Shabana (2010), these organisations fear
that their failure to engage in CSR activities may paint them as irresponsible businesses, which
may affect their reputation.
Organisations engage in and report CSR because they genuinely aim to contribute toward the
development of society. Such organisations are usually social enterprises that are not geared
towards the profit generation, but profits are re-invested in projects for the benefit of society.
These organisations appreciate, that they should establish a mutually beneficial relationship with
their society since their very existence is greatly supported by the society. The CSR initiatives of
these organisations are mainly directed at social and environmental challenges that face the
society. The aim of such organisations is to see a socially upright and successful society
(Dahlsrud, 2006). The organisations support initiatives such education, healthcare, poverty
eradication, agriculture among others.
Organisations engage in and report CSR because of reputation gains. Such organisations
incorporate CSR because of certification from ethical and environmentally conscious
organisations such as fair-trade, FTSE4Good, RSPO, and ETI to mention a few. The demands
for greater accountability and transparency are quickly growing in the corporate world and this is
driven by the investors and the civil society. This study establishes that CSR is slowly moving
56
from being a voluntary activity to mandatory activity due to several organisations being formed
to control CSR activities. For UK and other countries forming the EU, the member states have
finally agreed to the requirement that large listed companies to report on their social and
environmental impacts (Chaplier, 2014). According to the European Council, this agreement will
impose a duty on these large listed companies to report on their impacts on business. As such,
those organisations within their jurisdiction will be required to report on the policies on social
issues, environment, and diversity. In this way, these large listed businesses will be forced to be
accountable to both their shareholders and stakeholders throughout their business cycle. Other
relevant bodies to CSR also want organisations to identify the risks posed by their businesses,
whether social, economic, or environmental, and report on how they are dealing with such risks.
The benefit of complying with this requirement is that it will enhance their reputation and
support their long-term survival.
Organisations engage in and report CSR in an attempt to repair legitimacy that has been
tarnished by their past business activities. Such organisations have been involved in legitimacy
threatening scandals such as child labor, animal testing, pollution, oil spills, food safety to
mention a few, and to counteract the negative publicity and deflect attention from such will
communicate CSR. This hypothesis is highly supported by this study, considering a number of
scandals that have tainted the image of most of these businesses. These businesses, such as BP,
have experienced a crisis of responsibility due to their irresponsible business activities. In such a
case, legitimacy and reputation can only be repaired when these firms formulate strategic CSR
responses to such situations. To move away from the negative reputation and greediness, these
firms must continue to work on their strategic CSR that will overturn the already worsened
situation. CSR can be used as a window dressing initiative and it needs to be aligned with the
57
firm’s business strategy in order to create permanent credibility and trust (Karnani, 2010). Crisis
that emanates from business operations and their irresponsible behavior may be the beginning of
an ethical era with priority given to CSR activities.
Organisations engage in and report CSR in an attempt to fill the reporting-performance portrayal
gap. Such organisations are particularly targeted by NGOs and are similar to organisations
mentioned above, and in some way report CSR information in an attempt to alter perception
about their performance reporting. This helps them to reduce the possible conflicts that may arise
due to performance portrayal gap. Altering their performance reporting perception makes these
companies to have a good reputation as they pursue their business objectives (Lee, 2008).
5.2 Communication gap in CSR reporting
There seems to be a communication gap between the CSR disclosure and the actual practice in
companies, which is sometimes exposed when an organisation is rocked by a crisis or a scandal.
Such a gap is evident in the case of BP; whereby, the organisation has been claiming to operate
within a strong set of values until they were his by the oil spill crisis. This exposed their
weaknesses in safeguarding the environment since their focus seemed so much on the profits as
opposed to their stakeholders and their environment.
The vast variation that occurs in CSR reporting creates a gap between what companies report and
the actual practice in these companies. It even becomes complicated to determine whether an
organisation reports what they actually do in their sustainability initiatives. In order to solve the
communication gap in the CSR reporting, some form of responsibility should be enforced on
these organisations by the concerned bodies and institutions. By formulating certain industrial
standards, the companies will be forced to adhere to these standards to ensure coherency in CSR
58
reporting. In addition, these rules and regulation are likely to improve the levels of transparency
and accountability in the CSR reports, which in turn would close the gaps available in CSR
reporting. The government can also implement some measures of control and framework
concerning CSR activities while allowing companies to do it in a voluntary manner.
5.3 Recommendations
Future research should narrow down to the motives of CSR across different industries and those
that operate in different institutional environments. This will help to assess the similarities and
differences of the motives of their CSR activities. Future research can also establish the motive
of CSR between the small and big firms as well as the levels of legitimacy and reputational
threat between the small and the big firms. It is also worth examining the customer’s perceptions
of these heightened CSR activities to establish whether it has a long lasting impact on the
business. Future research should also establish the extent by which companies that have engaged
in CSR activities to overturn their bad reputation have been successful.
59
Appendix
This study utilized both the primary and the secondary data sources. Primary data was obtained
from the interviews carried out in the five companies and their relevant stakeholders. Only the
CEO of these five companies were interviewed in initial part of the interview and a sample of 5
stakeholders for each companies in the second part of the interview.
Interview Question for the Management
This section uses the following codes and themes to carry out the interview transcription process.
Each of the codes is detailed below.
SA represents me (the researcher)
MGA, Manager of AstraZeneca
MGB, Manager of Alliance Boots
MBC, Manager of Barclays
MBP, Manager of BP
MBV, manager of Vodafone
60
Part I: Interview to the management
SA: What is your CSR strategy?
MGB: Our CSR strategy is embedded in our mission statement which states that we are
determined to be the most socially responsible retailer in the health and the beauty market. In
addition, we are constantly aware of activities that are connected with climate change, youth
employment, resource depletion, and other community related problems.
MBC: Our CSR strategy revolves around successful and vibrant finance that enables social and
economic progress to our citizens. Our company ensures that the needs of our stakeholders are
met and decisions we make are sustainable in the long-term give a positive impact to
communities, clients, shareholders, and customers.
MBP: Our CSR strategy is embedded in our corporate values that comprise of safety, respect,
excellence, courage, and togetherness as we carry out our business activities.
MBV: Our CSR strategy is to build a more sustainable future by delivering products and services
that bring a positive economic, social, and environmental impact to all our stakeholders. Our
CSR strategy focuses on two main things: transformational solutions and operating
responsibility.
MGA: Our company focuses on due diligence, such that such that responsible business is part of
our operational culture and brand reputation.
SA: What is your motive of engaging in CSR?
MGA: We are involved in CSR activities as a strategic business model that benefit us as we are
discharging our mandate.
61
MGB: We are involved in CSR since it is a new wave of corporate agenda that every big
business organisation is practicing.
MGC: We are involved in CSR activities since it helps build our reputation and brand image.
MBC: We engage in CSR an activity that since it is a strategic business model that helps build
our brand image and improves our reputation. We are also determined to contribute to social
and economic development of our society.
MBP: We engage in CSR activities with the aim of reputational gains and to repair broken
legitimacy. In addition, we are determined to contribute to social, economic, and environmental
gains.
MBV: We are determined to contribute to social and economic development of our society.
SA: Does your CSR report disclose everything?
MGA: We disclose most of the things we actually practice or intend to practice
MGB: Yes, we disclose everything we intend to do and those that we have done
MBC: We disclose most of the things we have done and everything we intend to do
MBP: We disclose most of the things we actually practice or intend to practice
MBV: We disclose most of the things we actually practice or intend to practice
SA: Do you believe you are very honest in your CSR reports?
MGA: We are somehow very honest
MGB: Yes, we are very honest
62
MBC: We are somehow honest
MBP: Sometimes we are very honest
MBV: In most cases, we are honest
Part II: Interview to the stakeholders
SA: Do you trust the CSR reports released by AstraZeneca, Alliance Boots, Barclays, BP,
and Vodafone?
Yes_ 36% of the interviewed stakeholders
No_62% of the interviewed stakeholders
63
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