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Corporate Social Responsibility Practices:A Comparative study of Local and Multinational Companies inSri Lanka

Farzana KhanEshani Beddewela

Abstract

This paper compares the corporate social responsibility (CSR)practices of four leading companies in Sri Lanka. It provides newinsights into how CSR is practised and managed across companies.The findings suggest that there are discernible differences betweenlocal and multinational companies pertaining to their perception ofCSR, implementation of CSR and social reporting practices.However, significant differences were not evident in relation to thekey CSR issues addressed. The paper concludes by presenting fivekey factors that influence the implementation of CSR practices ofcompanies in Sri Lanka that emerged from the data and a discussionof viable areas for future research on CSR of multinationalcompanies.

1. Introduction

Corporate Social Responsibility (CSR) signifies a corporate practice which aims toachieve the two divergent objectives of profit maximisation and social wellbeingsimultaneously (Sethi, 2003). It has been responsible for propelling organizations, totransform the way they do business by focusing upon the responsibilities that theyowe to all their stakeholders.

Sri Lankan Journal of ManagementVolume 13, Nos. 3 & 4, July-December, 2008

Farzana J Khan is currently the Head of Marketing and Corporate Communications at VirtusaCorporation. She completed the MBA (PIM) with a Merit in 2008. She has a B.Sc. in BusinessAdministration from the University of Sri Jayewardenepura, and has extensive brand managementexperience with over ten years at British American Tobacco.Eshani Beddewela is a lecturer attached to the Faculty of Management and Finance, University ofColombo. She is presently reading for her Ph.D. in Corporate Social Responsibility at the BradfordUniversity School of Management. She also has a B.Sc. in Business Administration from the Universityof Sri Jayewardenepura, Bachelor and Master of Arts from the University of Bradford.

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The CSR practices of multinational corporations (MNCs) have received greater scrutinyand analysis (Muller, 2006;Prout, 2006) than local companies in less developed countries(LDCs). This has been chiefly due to concerns about their operations in LDCs suchas: having unhealthy work environments, using child labour and causing environmentalpollution (Beschorner and Müller, 2007;Child and Rodrigues, 2003). Therefore, demandsfor a heightened level of CSR within MNCs are being promoted through regulatoryinitiatives in many countries, and simultaneously encouraged by authorities such as theUnited Nations and the Organisation for Economic Co-operation and Development(OECD) (Baughn et al., 2007).

However, if CSR and its inherent objectives are to be propagated throughout theworld, then it is essential that local companies of medium to large stature adopt CSR.Based upon this premise, the following paper presents a study which has endeavouredto answer the question 'Are there differences between CSR practices of local andMNCs within the context of a LDC?' The purpose of this paper is to add to theknowledge of CSR in Asia by presenting the results of a study that investigated theCSR practices of four companies operating in a country that has received relativelylittle attention in Asia - Sri Lanka. It begins with an overview of literature related toCSR views, CSR issues and implementation of CSR that established the theoreticalframework for this study. This is followed by a brief overview of the methodologyused and profiles of the case study companies selected for this study. The key findingsare then delineated and discussed.

2. Corporate Social Responsibility: Divergent Responsibilities

CSR is underpinned by the need for companies to behave ethically. The essence ofCSR is the view that business organisations have societal obligations which transcendtheir economic and financial obligations of producing profitable goods and services(Epstein, 1989). Corporations, like other institutions in society, are an integral part ofsociety and depend upon it for their continued existence and growth (Sethi, 1975). It isin effect 'the firm's obligation to evaluate in its decision-making process the effects ofits decisions on the external social system in a manner that will accomplish socialbenefits along with the traditional economic gains which the firm seeks' (Davis,1973:313). Therefore, companies continually strive to pattern their activities to be incongruence with the goals of the overall social system within which they operate(Sethi, 1978). It is this business response to non-market forces that is commonly termedas social responsibility.

A key problem with CSR is the lack of coherence in exactly 'what' constitutes thesocial responsibilities of a business (Frederick, 1987;Zenisek, 1979;Brice and Wegner,1989;Welford, 2004;Carroll, 1999). However, a key definitional construct for CSRwas established by Carroll in 1979:

Sri Lankan Journal of Management, Volume 13, Nos. 3 & 4

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'The social responsibility of business encompasses the economic, legal,ethical, and discretionary expectations that society has of organisationsat a given point of time' (Carroll: 1979: 500).

Carroll's (1979) definition posits these categories of social responsibilities in his taxonomyof responsibilities (see Figure 1). It presupposes that society accepts firms to fulfiltheir economic and legal responsibilities prior to the fulfilment of any other responsibility,such as ethical and discretionary responsibilities (Fisher, 2004;Carroll, 1991).Discretionary responsibilities, however, go beyond those required by social or legaledict. It includes acts of corporate philanthropy and programmes which address socialproblems. These are entirely voluntary and have been designated the least importancein Carroll's typology (Swanson, 1999).

Figure 1:- Carroll's Taxonomy of Social Responsibilities

Source: Carroll (1979)

If the social responsibilities of business include economic, legal, ethical and discretionaryresponsibilities, how these responsibilities would be manifested in the range of issuesthat companies would have to address, is a key concern for many companies.

3. Corporate Social Responsibility: Key Stakeholder Issues

CSR practices of companies are influenced by a variety of corporate stakeholders.With regard to some stakeholders such as shareholders, the social responsibility of thecompany would be confined to fulfilling its economic and legal responsibilities. However,for other stakeholders such as employees, community residents, consumers and variousinterest groups the social responsibilities of a business are far greater (Sethi and Falbe,1987). For them social returns fulfilling a company's ethical and discretionary

DiscretionaryResponsibilities

EthicalResponsibilities

LegalResponsibilities

Voluntary actions and roles undertaken by companies even thoughthey may not be a requirement legally in order for the betterment ofthe society

The expectations of society that businesses would act in an ‘ethi-cal’ manner

The expectation that the company would operate within the legalframework enacted by the society

The production of goods and services that the society needs andwants and to do so at a profit

EconomicResponsibilities

Corporate Social Responsibility Practices

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responsibilities are as important (or perhaps more important) than achieving economicreturns (ibid). Therefore, a business organisation is faced with conflicting dilemmasfor managing their CSR practices so that all or most of their key stakeholders andtheir needs are satisfied (Freeman and Gilbert, 1987;Clarkson, 1995). It is at this pointthat stakeholder issues and social responsibilities of companies become intertwined.

The World Business Council for Sustainable Development (hereafter, WBCSD)presented five key stakeholder issues which they argue companies the world overshould address if they are to be socially responsible (WBCSD, 2000: Human Rights,Workplace Issues, Community Issues, Environment issues and Supplier Relations).

By fulfilling its social responsibilities through addressing key stakeholder issues, acompany can resolve some key dilemmas pertaining to CSR (Frederick, 1987) suchas What constitutes CSR actions (What is the content and substance of sociallyresponsible actions?), What state/ position must a company reach in order to be thoughtof as socially responsible?, Are social responsibilities limited to voluntary acts onlyrather than those actions required by law? However, if companies are to address keystakeholder issues through their CSR practice, the next dilemma would be as to 'how'companies should manage and organise their CSR practices internally.

4. Managing and Organising the CSR Practice

Whilst CSR literature provides an overview of 'what' the social responsibilities of abusiness are, literature related to Corporate Social Responsiveness (hereafter, CSR)and Corporate Social Performance (hereafter CSP) addresses 'how' companies shouldactually manage and organise its CSR practice.

Addressing this need to look at how organisation - specific stakeholder issues shouldbe managed, Ackerman and Bauer (1973 and 1976) argue that each social issue hasa specific 'life cycle' which denotes its development within the organisation. Consistingof three stages - policy, learning and organisational commitment - the positioning ofeach stakeholder issue within the context of this life cycle is expected to determinecorrespondent organisational responses (Ackerman, 1973;Ackerman and Bauer, 1976).The key contribution of this model is the need to implement social /stakeholder issuesthrough the regular operations of the firm so that they are not considered to be 'externalprogrammes'.

Whilst the Ackerman and Bauer (1976) model provided a framework for managingand organising a company's CSR practice related to each specific social/stakeholderissue, a more holistic framework was presented by Wood in 1991, through her CorporateSocial Performance Model (See Figure 2).


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Figure 2: Corporate Social Performance Model

Source: (Wood, 1991)

According to Wood (1991), a company needs to firstly examine its motivation forsocial responsibility activities (i.e., the principles underlying CSP), secondly, CSR2 ofthe organisation needs to be evaluated by examining the degree to which the companymakes use of its socially responsive process, and finally, the examination of theexistence and nature of social policies and programmes designed to manage thecompany's social relationships and observable outcomes of such programmes andpolicies in terms of social impact needs to be carried out.

Having identified and discussed how an organisation's CSR practice may be organisedand managed, a theoretical framework, which integrated the key concepts from CSRliterature was drawn up.

5. Theoretical Framework

The framework depicted below (see Figure 3) associates the CSR practice of a companyas comprising three interrelated phases: the company's CSR stance, the key social/stakeholder issues addressed by the company through its CSR practice, and how thecompany organises its CSR practice to meet these diverse social and stakeholderissues. The CSR stance of the company is associated with Carroll's typology ofresponsibilities and aims to address the question 'How does the company perceive

Legitimacy

PublicResponsibility

ManageralDiscretion

ThePrinciples

ofCSR

EnvironmentalScanning

StakeholderManagement

IssuesManagement

Processesof

SocialResponsiveness

SocialImpacts

SocialPolices

Social Programs

Outcomesof

CorporateBehaviour


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CSR?’, and thus examine what key responsibilities the company aims to fulfil throughits CSR practice (Carroll, 1979).

Figure 3:- Theoretical Framework

Based upon the stakeholder theory (Freeman 1984;Clarkson, 1995) and corporatesocial responsiveness (i.e., social issues management) (Ackerman and Bauer,1976;Bauer, 1978), the next phase of a company's CSR practice questions 'What arethe key social/stakeholder issues which need to be addressed?' Nevertheless, how thecompany actually selects such stakeholder/social issues would be dependent on whetherthey take a stakeholder management stance (where the company engages itsstakeholders in dialogues and collectively decides the key stakeholder issues to beaddressed) or an issues management stance (where the company decides and prioritisessocial issues to be addressed through their CSR practices without any stakeholderparticipation or overall stakeholder participation). The final phase of a company'sCSR practice, according to existent literature, would be focused upon the managementof the CSR practice. By relating the key theoretical concepts of Corporate SocialPerformance literature (Wood, 1991;Wartick and Cochran, 1985;Wartick and Mahon,1994), one can surmise that companies should ideally have corporate policies whichoutline not only the CSR stance or CSR principles of the company related to specificstakeholder /social issues, but also outline how each issue would be managed by thecompany. Such corporate policies would act as a guide in deciding the management

The Social Responsibilities[How does the company perceive CSR]

Legal Economic Ethical Discretionary

Social/Stakeholder Issues[What are Key social issues addressed by the Company CSR

practice?]

Stakeholder Engagement[Issues identified by stakeholders]

Issues Management[Issues identified by company]

Organising & Managing CSR[How does the company manage its CSR practice]

CSR PoliciesManagement

Processes& Modes of CSR

Outcomes ofCSR practice

CompanyCSR

Stance

Key Social/Stakeholder

Issues

OrganisingCSR


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processes (i.e., the management framework for CSR practice) and the modes ofCSR. A properly organised and managed CSR practice would finally generate viableoutcomes in the guise of CSR programmes, CSR reports and sustainable initiativesand other related benefits.

Having discussed the theoretical stance established for this research, its scope andresearch context are discussed below.

6. CSR in Sri Lanka

Sri Lanka (hereafter, SL) is ranked as the most liberalized economy in South Asia(BOI, 2007). With a Gross Domestic Product of 7.0% in 2006 and a literacy rate of95.7%, SL is an attractive destination for foreign direct investment in South Asia(CBSL, 2007). Privatisation, the opening of Sri Lanka to foreign investment andincreased domestic private investment have transformed Sri Lanka's private sectorinto the country's largest employer and most important source of revenue, as hasoccurred elsewhere around the world. The private sector, which includes MultinationalCorporations, has become both the primary engine of financial growth and a majorcontributor to human resource development within Sri Lanka (International Alert,2005).

The importance of CSR as a recognisable activity of businesses operating in the privatesector in Sri Lanka has been growing amidst scepticism of the general public towardsbusinesses (Kumar et al., 2003). As such several non-governmental organisations andprofessional associations have taken viable steps to encourage the adherence to andreporting of CSR practices through various initiatives, including the organisation ofCSR Awards (see ACCA, 2007;NCCSL, 2007).

Nevertheless, CSR research in SL is limited. A comprehensive survey examining theCSR perceptions and attitudes of the Sri Lankan public and businesses was carriedout by a leading non-governmental organisation, International Alert, in 2004. It concludedthat the understanding of CSR is still at a very low level among the private sector inSL, and that although most organisations were aware of the short-term benefits arisingfrom the practice of CSR, few were aware of the long-term benefits, including thoseof sustainable development (IA, 2005). In a more small-scale study, Rathnasiri (2003)investigated fifty private sector firms covering a wide range of industries in Sri Lanka.His study observed that there does not seem to be consensus in the corporate sectoras a whole on what is socially responsible behaviour.

The most common understanding of CSR is related to sponsorship of communityactivities and donations to good causes, and hence most people are ignorant of the


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broader objectives of CSR. Pertaining to the implementation of CSR agendas in SriLankan private sector firms, he concludes that there is little evidence of internal CSRpolicy level operations by firms, since these areas are not popular areas or themes ofpublic interest (Rathnasiri, 2003). Nevertheless, these studies whilst revealing significantissues related to CSR practices of Sri Lankan companies and the general CSR outlookin the country, do not reveal much about how CSR practices are managed internallyand possible differences or similarities that may exist between and amongst local andmultinational companies in Sri Lanka. Hence, the present study has attempted to addressthis paucity of qualitative data.

7. Methodology

This research was conducted in Sri Lanka during the months of April and May 2007.It was based on a critical realist epistemology, and as such a qualitative case studystrategy (Easton, 2000;Yin, 2003) was adopted. Prior accounts of CR researchstudies indicate that similar methodologies have been used (see Costello, 2000; Coopeyet al., 2000). The study used a multiple case design (Flick, 2002), and the unit ofanalysis was defined as a company operating within the private sector in Sri Lanka.Two contrasting types of companies based on their ownership were selected deliberately,in order to obtain a more in-depth and diverse understanding of their CSR practices.Therefore, two local companies and two subsidiaries of MNCs were selected. Purposivesampling (Silverman, 2005;Eisenhardt, 1989) was used to identify the case studycompanies based on their CSR performance as indicated by awards won by thecompanies and the reporting of CSR practices. Furthermore, the two local companiesand the two MNC subsidiaries were key contributors to the national economy in termsof revenue and financial performance.

Two main sources were used to collect data: secondary data (i.e. consisting of companydocumentary evidence in the form of CSR reports and financial reports), and primarydata (consisting of in-depth semi- structured interviews, i.e., SSI's. In using the company'sCSR reports, data related to the description of the company's CSR managementframework, social policies in place in the companies, the social issues addressed, etc.were obtained. It was considered extremely necessary to use the secondary data inthe CSR reports to verify the primary data, which was gathered from the in-depthSSI's, to enable triangulation (Bryman, 2004;Robson, 2002).

The interviewees consisted of at least two persons from each of the two companies,so as to ensure the objectivity of the data obtained. They consisted of top and middlemanagers, either directly or closely associated with the implementation of CSR practicesin each of the four case study companies (see Table 1 for a list of interviewees).


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Table 1: List of Interviewees

The data analysis consisted of using documentary analysis (Bell, 2003) and coding toconduct first, a within-case analysis for each case study organisation, and then tosynthesize the findings in a cross-case synthesis. The cross-case synthesis specificallyquestioned what similarities exist in the CSR activities between the two differentgroups of companies, what contradictions exist and why.

8. Case Study Company Profiles

Company A

This is a local conglomerate, involved in manufacturing, agriculture & agro business,transportation, and consumer & leisure businesses. It accounts for 2.7% of Sri Lanka'sexport income, 2.2% of GDP and 3.2% of market capitalization on the Colombo StockExchange. The company has been the overall winner in two sectors of the NCCSL'sBest Corporate Citizen Awards consecutively

Company B

This is a local public quoted company, and is the largest listed conglomerate on theColombo Stock Exchange. The company operates in the key industry groups oftransportation, leisure, property, food and beverage, financial services and informationtechnology. It was named overall runner up at the NCCSL's Best Corporate CitizenAwards, and the maiden Sustainability Report published with the Annual Report 2004/2005 was named the best CSR Report at the ICASL Annual Report Awards, while itwas joint winner of the ACCA Award for Sustainability Reporting.

Case Study Company Interviewee

Company A � Group Human Resources Manager

� Team Member CSR

Company B � Head of Corporate Communications

� Manager Company B SocialResponsibility Foundation

Company C � Stakeholder Engagement Manager

� Corporate Brand Manager

Company D � Marketing Manager

� Marketing Communications Manager


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Company C

A leading multinational, this company is the sole legal producer and marketer oftobacco products in Sri Lanka. It was listed among the Ten Best Corporate Citizensfor 2007 in Sri Lanka by the Ceylon Chamber of Commerce, and was the winner in2006, of the Best Sustainability Report awarded by ACCA, Sri Lanka.

Company D

This is a leading multinational company that operates in the insurance industry, cateringto general insurance, life insurance and asset management services. The companywas hailed as one of the ten Best Corporate Citizens in Sri Lanka by the CeylonChamber of Commerce.

9. Company CSR Stance

The four companies seem to have worded their perception of CSR or sustainabledevelopment quite eloquently within their CSR reports or Annual Reports:

Company A states in two consecutive Annual Reports:'Sustainability is a two-way process; we have also realised that being aconglomerate in Sri Lanka, we can influence and lead others towards making adifference to their stakeholder genres and we know that sustainability is aconstantly evolving process … Our policy of social responsibility benefitscommunities in many ways … It is renowned for its efforts and contributions tosociety and the environment' (Company A - Annual Report, 2006/2007:5)

'Empowering suppliers, employees and impacting society at large, theconglomerate has pursued a consistent CSR focus. Companies that constituteCompany A are encouraged to contribute in areas they are engaged in, and inways in which they know best.' (Company A - Annual Report, 2006/07: 58)

Company B's Sustainability Report states:'We acknowledge that as we expand our operations, we will have an increasingimpact on our stakeholder groups … Working in an environment of transparencyand accountability, touching the lives of people who are one with us.' (CompanyB - Sustainability Report 2005)

Company C's Social Report reiterates:-'We adopt our head offices policies and best practices, wherever applicable, inthe achievement of excellence in operations and corporate governance … We


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are proud to be a part of this global initiative of transparency, accountability andresponsibility.' (Company C - Social Report 2001)

Company D's Annual Report reiterates:'Company D's corporate citizenship is a reflection of the spirit of caring, andhas earned the trust and respect of all its stakeholders.' (Company D - AnnualReport, 2006)

These thoughts were again reiterated during the interviews with various managers ofthese companies.

Company A's Group Human Resource Manager stated:'The purpose behind CR is to give back to society as much as we take from it… We don't do CSR just for the sake of saying that we do CSR; we getinvolved in whatever we do' (Group HRM - Company A, 2007)

Company B's Head of Corporate Communications stated:'As a group we are committed to sustainable development and social responsibilityin all of our actions and decisions. We have through our business activitiescontinued to promote the sustainable development of both our businesses andthe lives of our stakeholders …. We have shifted over the past few years to astakeholder-oriented framework that has helped us ingrain in our businessesthe need to be conscious of the impact our actions have, not just on the bottom-line, but also on our role as an employer, provider, investor or neighbour.' (Headof Corporate Communications, Company B, 2007)

Company C's CSR Manager stated:'We follow a very scientific process, and map out all our stakeholders. Thisprocess is known as SMC, which stands for Stakeholder Mapping andClassification' (Corporate Brand Manager, Company C, 2007)

Company D's Marketing Manager stated:'At Company D, being socially responsible is a way-of-life and 1% of annualprofits of the previous 3 years are set aside for all its CSR endeavours.'(Marketing Manager - Company D, 2007)

Thus, across all four companies the perception of CSR as consisting primarily ofcommunity welfare and philanthropy, is marked. The overarching responsibility is thatof Carroll's ethical and discretionary responsibilities. Herein again, where the term'stakeholder' is mentioned, different companies tend to have different perceptions asto 'who' should be the stakeholders of that company. While Company B and CompanyA think of stakeholder in relation to community, in divergent contrast Company C,


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identifies stakeholders as all those groups that would influence its operations. Thisdistinction is quite important as how a company perceives its social responsibilities interms of scope, would be directly dependent upon its definition of 'stakeholders'.Furthermore, in relation to Company C the fact that its core business itself can beviewed as being 'socially irresponsible' may have propelled them to adopt an all inclusiveapproach to the management of stakeholders and their issues, in order to ensure aviable reputation.

The recognition of the ethical and legal responsibilities of business is evident only inCompany B and Company C, as their CSR stances mention issues of 'transparency,accountability' (i.e. Corporate Governance). Another key finding is that only onecompany (Company B) mentions 'sustainable development'. Whilst it depicts thecompany's concern about a more long-term oriented CSR practice, the question hereis to explore whether sustainability/CSR is integrated into the strategic managementframework of the company. The key emergent themes from the analysis of datapertaining to the CSR stance of these companies ranged from a social developmentstance to a stakeholder-oriented CSR practice. Whilst social development was largelycharacterised by philanthropic CSR, the stakeholder- oriented CSR practices werefocused chiefly on the treatment of community as a key stakeholder group. One can,therefore, surmise that the specific CSR stance does not vary overmuch across MNCsand local companies. An exception to this was Company C which perceived stakeholder-oriented CSR practice as including all salient stakeholders of the company, largely dueto high head office influence in formulating their stakeholder-based CSR processes.Having analysed the CSR stances of the companies, the next section discusses theCSR management processes in each of the case - companies.

Table 2:- Key Emergent Themes pertaining to Company CSR Stance

Case Study Company A Company B Company C Company DOrganisation

Key EmergentThemes

Social develop-ment (giving backto society)

Welfare ofCommunities andCommunitydevelopment

Stakeholder -based framework

Sustainabledevelopment

Transparency andaccountability -CorporateGovernance

Stakeholder- basedframework

CorporateGovernance

CSR and theCompany brand

CSR as way of lifeat the company


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10. Management and Organisation of CSR

The organisational management processes for CSR practices seem to be institutionalisedin two different ways amongst the case - companies (see Table 3). Both the localconglomerates have established a core centre (i.e. a non-profit arm of each company),through which funds and projects are channelled to the various business units of thegroup. A key finding here is that their perspective of CSR that is concentrated towardsdiscretionary responsibility, has been the driving force for these two companies toestablish this structure to manage and operationalise their CSR activity. Thus, CSR asan activity at both the local conglomerates tends to be viewed as a 'supporting activity',and, therefore, has not been integrated into the strategic management framework ofall the group companies.

However, in marked contrast, at Company C the whole framework for establishing,operating and reporting CSR within the company has been provided, and establishedby their head office (the holding MNC). Therefore, the unique stakeholder modelused by them to operationalise and integrate CSR into their strategic managementframework, is being controlled and coordinated by their head office. Hence, a strategicfocus can be seen, and CSR is handled at the corporate level of the company. However,Company D again depicts a stark contrast as there is no formal CSR managementprocess although it has been involved in philanthropic activities over time. This maybe due to the constant change in the ownership and management of the companythrough several MNCs. The company, furthermore, does not integrate its CSR practiceinto the strategic management framework of the company, and there is an ad hocselection of CSR initiatives.

With regard to established policies for CSR, again formalised policies and principleswere found only within Company C. Although Company A does have formal policiesthey are limited to only two CSR issues: environment and employee relations. CSRreporting too differs widely among the four companies. While Company C hasestablished KPI's and follows the GRI guidelines and AA1000 standards in its socialreports (largely due to established reporting mechanisms of its head office), CompanyA does not report its CSR practices. Although Company B reports on its 'sustainability'practices it does not have established KPI's for the purpose. Company D has only anonline social report and does not have viable measures in place.

In respect of the key CSR issues addressed by the four companies, apart from CompanyC which addresses specific issues identified through their stakeholder dialogue sessions,within the other three companies, Education, Environment and Community are denotedas key CSR issues. However, the most marked finding is that almost all of theseissues are directly business- related (i.e. specific CSR projects have been undertakenin communities where the companies would have viable business practices). Thus,


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how 'ethical' these companies' CSR practices are is a key question. Finally, the strategicintegration of CSR within three of these companies is quite weak, with the two largelocal conglomerates viewing CSR as a separate business support practice, togetherwith Company D. However, Company C has integrated its stakeholder- based CSRpractice into the overall strategic framework of the company.

Table 3:- Summary of Management and Organisation Practices related to CSR

Company A Company B Company C Company D

OrganisationalProcess of CSR

Strong.

The CSR processis managed by aseparate non profitfoundation,

CSR plans ofSBUs are assessedand approved forimplementation bythis organisation.

Strong.

The CSR processis management bya separate nonprofitorganisationaffiliated to thecompany,

The Foundationreports directlyto the top Boardof Directors ofthe company andapproves CSRproject proposalssubmitted to itby differentSBUs of thecompany.

Strong.

A process ofstakeholder- basedCSR managementknown as'StakeholderMapping andClassification' isconducted by thecompany once intwo years.

All relevant CSRissues are decidedupon afterconsultation withthe relevantstakeholders inthis process.

CSR is handled atthe corporate levelin the organisationwith participationfrom differentorganisationallevel managers

Weak.

Ad hoc CSRprocess. CSR ismanaged by themarketing divisionand specific CSRinitiatives areallocated trustfunds for theircontinuousmaintenance.


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Company CSRPolicies enactedto addressdifferent CSRissues

CSR Reporting& Measurement

Yes

But limited only totwo areas:Environment andEmployeeRelations only

WeakReporting

No social reportingconducted by thecompany

Weakmeasurement

KPI's notestablished formeasuring socialperformance.

CSR is measuredby achievingtargets in differentprojects

No

CSR is viewed asa project -basedactivity.

Although thefoundation doeshave keyobjectives.

StrongReporting

The CompanypublishesSustainabilityReports from2004/05.

Weakmeasurement

CSR performanceis not measuredwith KPI's

Yes

The localsubsidiaryfollows theStatement ofBusinessPrinciplesestablished by thehead office.

Polices enactedby the head officein relation toEmployment,Child Labour,SupplierRelationshipsManagement,Employee Healthand Safety andBiodiversity arealso adopted bythe local office.

Very StrongReporting

The companyreports onSustainabilityReporting usingthe AA1000standard and GRIguidelines.

Strongmeasurement

CSR performancemeasured againstpre-identifieddeliverables(KPI's)

No

Polices are notestablished forCSR issues

Very WeakReporting

No CSR reportingdone by thecompany

Weakmeasurement

CSR performanceis not measuredand success isdeemed to havebeen achieved onimplementation ofplanned CSRprojects.


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SocialResponsibilityProgrammes

Strategicconsideration ofCSR

Yes, conducted infour (4) areas:-� Customer and

SupplierRelations

� EmployeeRelations

� CommunityRelations

� EnvironmentIssues

Weak.

CSR is viewed as'philanthropy' anda not for profitactivity.

Yes, conductedrelated to five (5)areas:-� Education� Health� Environment� Community

Development� Arts and

Culture� Disaster Relief

Weak.

CSR is viewed as'philanthropy'and socialperformance only

Yes, but differsbased upon issuesidentified throughstakeholderengagement.

Strong.

CSR is not viewedas philanthropyonly but isrecognised andintegrated into theoperational andstrategicmanagementframework of thecompany.

Yes, restricted totwo key areas:-� Safety� Education� Other -

Employeeawards, blooddonationcampaigns etc

Very weak.

CSR is totallyfocused uponinitiativesconsidered to beof a social nature.

11. Conclusion

This paper presented an in-depth analysis of how four companies perceive CSR andhow it is implemented at organisational level via company organisational processes.Several key findings have been noted: firstly, five key influencing factors were derivedfrom the comprehensive data analysis as being key determinants of CSR practices ofcompanies operating within Sri Lanka. (see Figure 4)

Figure 4:- Key influencing factors determining the CSR practices of Sri Lankan companies

Organisational

Corporate

Social

Responsibility

Practice

CSR Value Stance of the Company

Degree of Stakeholder Engagement

Level of strategic integration ofCSR into the company

Perception of CSR - PhilanthropyVs Business Practice

Information on CSR in Sri LankanCorporate Sector


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The first three factors are company specific, whilst the last two are country specific.Thus, it emerged from the analysis of the data in this research that any CSR programmeis influenced by the company values, the emphasis laid on stakeholder engagement,and the drive for strategic integration of CSR into the corporate management andplanning structure. As was discernible in the findings of this research, where a company(either local or MNC) perceived CSR to be a key value of the company, and wantedto achieve all four responsibilities as defined by Carroll (1979) - social, ethical,discretionary and economic - the companies tended to have a stakeholder engagement- based CSR practice linked to the overall strategic management framework. WhereCSR was viewed as a mere supporting activity, companies (in the research) tended tobe biased towards implementing ad hoc projects more as a community developmentinitiative.

The country - specific factors that influenced the CSR activity of these organisationshad to do with perceptions of CSR and the level of CSR knowledge in the corporatesector in Sri Lanka. What was evident in this study was that the unique culture of SriLanka influenced by the Buddhist principles of 'doing good to people', which is entrenchedin the core mind-sets of managers, tend to propel them to perceive CSR as beinglimited to 'philanthropy'. Hence, local companies, especially, concentrate greatly onestablishing and managing projects aimed at enriching the lives of the community inwhich they operate. Secondly, the lack of information pertaining to the strategic natureof CSR practices and related business benefits has been a key factor in shaping theway company's CSR practices are being implemented and managed in Sri Lanka. It issuggested that the model presented here needs to be further verified through more in-depth research, possibly through a survey.

The second key finding is that there are significant differences between MNCsubsidiaries and local conglomerates with regard to their perception of CSR,operationalization of CSR, and social reporting practices. However, significantdifferences were not discernible in the key CSR issues addressed. MNC subsidiarieswere able to establish and manage more strategically focused CSR practices, largelydue to the knowledge transfer from their head offices where western CSR practicesare transferred to the subsidiaries, thus forcing them to establish formal mechanismsand management practices to operationalise the CSR activity.

These findings taken together with some key debates in the global CSR literatureoffers scope for further research. Global corporate social responsibility strategiesand their implementation by large MNCs have become a key point of discussion inrecent times. Muller (2006) argues that due to the unique multidimensional environmentfaced by MNCs, they inherently face an integration - responsiveness dilemma withregard to the management of Global CSR. MNC operations in LDCs have always


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been criticised for exploitation of cheap labour and natural resources in minimalistregulatory regimes (Prout, 2006).

Another key discussion in global CSR and public policy arena concerns the extent towhich the regulation, norms and definitions of what is good CSR should be developed,controlled and monitored, and by what party - primarily by corporate actors, by thestate or by civil society organizations (Kertis Sahlin- Anderson, 2006). Although thereis an extensive regulatory framework - predominantly voluntary, soft and self- regulatory,a key concern pertaining to its development and extension would be how effectivesuch a soft regulatory approach is in actual practice, and in at LDC setting where thelack of proper governance structures at national level, may mean that global publicpolicy may be the chief way for better regulating CSR.

Therefore, taken together with the findings of this research, the following key areasare proposed for future study: firstly, as evidenced through the research data, MNCsare controlling and coordinating (at different levels/degrees) their subsidiaries' CSRactivities. Future research studies should investigate how MNCs control and coordinateCSR practices and the extent to which 'localization' of CSR practices occur at subsidiarylevel; secondly, if global public policy is to influence MNCs and local companies toadhere to a more strategic CSR activity by treating CSR as a key factor in operationalas well as strategic decision-making in an organisation, then there needs to be moreresearch into investigating how local companies are adhering to national and globalpublic policy (for example, how lower - end suppliers are ensuring human rights andemployee rights in their factories), and how MNCs are disseminating adherence toglobal public policy through control and coordination of the CSR activities of theirsubsidiaries.

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