Practical approach of companies towards CSR and CSI – A study of automobile manufacturing companies.

Introduction

Background to the Study

Corporate Social Responsibility has become an extensively researched topic over the last decade or two. From just being a theoretical concept on the philanthropic side, the initiative has become a complex managerial tool that can be used to build the reputation & goodwill of the company and add to the suite of competitive advantages. Today the CSR actions have become a part of the business strategy of the companies at all level. The more popular it became, the more complex it grew. With these rising complexities, the idea of Corporate Social Irresponsibility emerged. CSI is the dark side of the activities undertaken by the company as it delves into the details of the wrongful activities and irresponsible as well as damaging decisions that the managers might take during the course of decision making. This research work is an attempt to understand the thin line between the CSR and CSI activities. Basis the interaction with the CSR managers of the different corporates, a view point on the conceptualization of the CSI process will be developed and also it will be assessed as to what extent the managers are able to control the CSI actions and what are the control and governance measures that are being adopted to verify these actions. This research work will further delve deep into the availability or the requirement of a CSR / CSI related framework with which the companies can clearly target and choose their CSR initiatives.

Introduction of the Concepts

The actions that a firm engages in, in an attempt totargeting the enhancement of social welfare beyond profit maximization, is are termed within the purview of Corporate Social Responsibility (CSR) (Mcwilliams, 2000, Putrevu et al.,2012 )2012). Although there is a wide debate about the relevance of this concept within an organization’s parameters, empiricalorganization empirical evidences however show that consumers prefer to patronize firms that are socially more socially responsible there by generating more profit (Bihari and Pradhan, 2011; Tang et al., 2012). The underlying premise here is that if firms engage in activities that were are generally centeredcentred on improving employee conditions, the community they lived in, or customer satisfaction, it may increase customer patronage which will lead to increased profit.

In view of this, firms are strategically ensuring that the social, economic and environmental facet of its existence is directed at the consumer (Yaroson and Giwa, 2016). Therefore in an attempt to grow in size and ensure profitability, firms must have the ability to settle at the bottom line, where the interest of the stakeholders is well managed. This is based on the fact that successful CSR initiatives are posited to improve companies’ reputation, increase customers loyalty and strengthened brands which can ultimately boost share price and raise investments (Porter and Kramer, 2006).

Researchers have however questioned the efficacy of this concept arguing that CSR is an elusive concept that still lacks foundational elements. as such At times there are cases when the firms may do not know how to act in a corporate socially responsible manner (Armstong and Green,2013; Murphy and Schlegemelch, 2013). Also, Chatterji and Litoksin (2007), asserted that organizations will notdo not partake take part in anything that does not bring them profits. As such they spend a little token to publicize their donations and hire highly equipped CSR personnel to cover up their tracks. This came resounding when Murphay and Schekgemelch(2013) highlighted the fact that researchers had removed the ‘S’ in CSR , as such it became corporate responsibility- ‘What responsible thing a business will do for profit’.

More specifically is the argument that firms only engage in CSR activities to cover up irresponsible acts (Armstrong and Green,2013). Irresponsible acts also known as Corporate Social Irresponsibility (CSI) entails pollution, unfair treatment of stakeholders as well as the sale of shoddy products. Here only one party seeks to gain as the decision to accept an inferior alternative which will have consequences on all stakeholders in seeking profit maximization (Armstrong and Green,2013).

Jones et al., (2009), however argue that CSR and CSI are at two ends of the continuum, explaining that when it comes to ethics, environment or human resources the evidence is clear as such firms cannot engage in both. For instance, while CSI advocates that employees are resources that can be exploited, CSR suggests valuing of employees. CSI also promotes environment degradation as it is inevitable while CSR opines that although pollution of the environment may be inevitable in some cases, caution has to be taken so that no stakeholder suffers. If they are however at two ends of the continuum, why do firms engage in both practices as seen in the case of Volkswagen, the world’s leading automobile manufacturer who that produced cars that emitted emitting nitrogen dioxide at a rate ofabove 40 times more than the permitted nitrogen dioxidelevels (Dans, 2015) and at the same time engaging its acts in the initiatives related to integration of the refugees across Europe (VW Annual Report, 2015). Yet iIn same the same year the company received the award for the most socially sustainable firm (Volkswagen annual report, 2015). These facts follow the assumptions that firms in fact pursue socially responsible activities, not for profit maximization but to cover up for irresponsible acts. If these assertions stand correctly, then this study attempts to contribute to existing literature by exploring why and how firms engage in CSR instead of CSI or both.

1.2. Research Question

Why do firms in the automobile manufacturing industry engage in Corporate Social Responsibility instead Corporate Social Irresponsibility?

More specifically the research seeks to examine: How and why do automobile manufacturing firms engage in corporate social responsibility?

Research Objectives

In view of the research question, thisThe study seeks to explore why firms engage in corporate social responsibility activities instead of Corporate Social Irresponsibility activities. The study also will attempt to examine how the firm engages in its CSR activities and which taking decision on the CSR activities, do they take any cognizance of the associated CSI initiatives within their organisation? .The research work also aims at evaluating the feasibility of an introduction of a robust CSR / CSI framework that the companies can follow in order to achieve their CSR goals.

Research Question

The research work is based on a series of questions that guide the study to attain its objectives. The major research questions that the study attempts to answer are:

• Why do companies engage in Corporate Social Irresponsibility alongside with the Corporate Social Responsibility initiatives? A research based on automobile manufacturing industry

• What is the decision-making process that is being followed by the CSR managers while deciding on the CSR initiatives?

• Do the CSR managers give equal weightage to the CSI activities while deciding on the CSR initiatives and strategy at the company level?

• Is there any framework available with the companies that is being used for evaluation and control of CSR / CSI initiatives at their end? If no, then what is the feasibility and receptibility of the introduction of a new framework on CSR / CSI activities in the companies?

Literature Review

CSR Theories

In an attempt to examine the link between CSR and CSI, the study appraises some underlying literature that may explain a firm’s intention for engaging in socially responsibly activities. The study advocatesadvocates, based on the literature thatreviewed, that agency costs, stakeholderscosts, stakeholders and conflicts of interest may beare some of the underlying reasons for firms engaging to engage in CSR activities. , bBut these reasons does not explain if it may beis an outcome of CSI. The agency theory for instance, posits that managers who acts as agents for the stakeholders are empire builders who seek theory their own interests over that of the interest of the stakeholders (Fama and Jensen, 1983; Jensen, 1993). Mantysaari (2008) had commented that taking somebody as somebody’s agent is dependent on the Principal. The Principal in turn can be anybody ranging from minority stakeholder to society at large or even the government. So the relationship between these agents need not be harmonious as the contracts in the world are written on the information asymmetries as well as risks assciated. In such a scneairo, motivating the agent to act in the best interest of the Principal is a problem and that can be a reason for the choice of CSI activities. Kraakman (2004) had further indicated that managers always try to increase the business and maximize the growth while the stakeholders are keen on a wealth creation. So this conflict of purpose can also be linked with the agency theory for CSR/CSI actions. In view of this notion, they may engage in CSR activities for profit making and may not consider the social welfare aspect or the ethical considerations geared at making profit.

On the other hand, the stakeholder’s theory advocates the importance of CSR in a firm’s activities as the success of the firm relies hugely on how its stakeholders such as employees, suppliers, customers as well as financiers are managed (Donaldson and Preston, 1995). This entails pushes thethe managers striving to achieve the firm’s bottom line while satisfying all the stakeholders. The theory however fails to highlight how managers handle conflicting interests that may arise between the different stakeholders and how managers can balance differences which may beare classedategorized as socially irresponsible (Margolis & Walsh, 2003). This further implies that in an attempt to satisfy various stakeholders such as maximizing profit and being socially responsible, managers may overlap duties which may be classed asclassified as socially irresponsible. In view of thisthese theories and the underlying basis, this study will adopt the agency theory and the stakeholders’ theory in seeking to understand CSR and CSI in the corporates, especially in the automobile manufacturing industrymanufacturing industry.

Empirical Literature

Empirical literature examining the corporate social responsibility and irresponsibility remains scanty in empirical literature. The existing ones however have failed to focus on these perks pros and underlying reasons to adopt these activities within the automobile manufacturing industry. For instance, Kotchen and Moon (2011) tried to investigate the link between CSR and CSI. In their argument, they posit that firms engage in CSR activities to offset CSI. To support their proposition, they had employed a panel of 3000 publicly traded companies for a 15 yearsyears’ period. Their findings correlate with their proposition and the hypothesis was proven.

Willander (2007) had studied three car companies – Volvo, Toyota and Ford. His study was aimed at identifying the differnce in the willingness of these companies to adapt technological changes in the production process. As a part of his study, he found that all the companies address the environmental problems in a different manner with Volvo and Ford looking out for cleaner energy sources as alternative to conventional fuel where as Toyota being innovative in designing cars for less energy demand.

Furthermore, Herzig and Moon (2013) had explored the link between CSR and CSI within the UK financial sector prompted by the economic recessions. The study had employed various discursive techniques to sense-making such as narratives and discursive strategies. The database was made developed of over 400,000 materials financial reports. The study also collected information from CSR reports, websites and other companies. From a socially constructed epistemology, the study finds found that market rationalization is necessary in aligning corporate social responsibility to irresponsibility. In view of the foregoing, this study attempts to fill the gap in literature my by providing empirical evidence on the link between the two variables from the perspective of automobile manufacturing companies. 

Research Design

Research design seeks to explain and substantiate underlying philosophy, research techniques used, how data is to be collectedcollection methods; how the data to be collected willand data analysis as well as data interpretation be analyzed and interpreted process (Yin, 2013).

3.1 Research Philosophy

The researcher’s philosophical stance influences how the researcher collects data and interprets the data (Cresswell, 2013).. In answering the research question, thisThis study will aims to adopt subjectivists’ ontology with an interpretive epistemology. Based on these approaches, (Cresswell, 2013). Here,the reality of the world is socially constructed, although the researcher and hisits view of the world are independent. The researcher therefore seeks to explore what corporate social responsibility and corporate social irresponsibility is, from the firm’s point of view and the understanding of the point of view of the CSR managers.

3.2 Research Approach

This refers to the theoretical development of the research which could be either inductive (from specific to generalization) or deductive (from generalization to specific). In an attempt to explore the link between CSR and CSI, this study will aims to adopt the inductive approach which begins from an existing review of literature towards generalization (Saunder et al., 2009). The approach will be further fine-tuned based on the responses of the CSR managers

3.3. Research Strategy

Research strategy provides broad guidelines in conducting a research and largely depends on the research question, the time available to carry out this research, the researcher’s philosophical stance as well as the available existing knowledge (Saunders, et al., 2009; Creswell, 2013; Yin, 2013). The research strategy adopted in this study will be the Case study framework which seeks to answer how and why questions: how automobile firms engage in socially responsible practices and why (if) they do. The case study is adopted as the study seeks to understand in depth real life activities and the realistic series of events. It differs from other forms of research like surveys which seeks descriptive understanding of the phenomenon (Yin, 2013). Also it is worth mentioning that the , existing research surrounding this phenomenon lacks diverse methodological approach, as most studies seek quantitative data and panel data to justify their propositions. This research work will be purely qualitative in nature and will try to understand the cognitive and behavioural approach of the CSR managers.

Although different philosophical positions can be adopted when using a case study strategy, this study will however adopt an interpretivists philosophical stand point. As such, the data collection and method of analysis will reflect the researcher interpreting the experiences and actions of the actors (CSR managers) towards sense making and generation of knowledge

3.4 Case Study Protocol.

A single sector specific case study will be adopted in carrying out this research as the study seeks depth which has been posited to be appropriate (Yin, 2013). The unit of analysis will be a single CSR managers from automobile manufacturing companies y-Volkswagen. This approach will not only distinguish between various approaches taken by multiple companies within the sector but also will add to different viewpoints of the CSR managers. firm has been chosen because although the firm engages in corporate socially responsible activities, it has in recent time been slammed by the EPA on being socially irresponsible. As such iIn seeking an attempt to explore the link between the two concepts, the study will first examine how and why this the firms behave the way they do in terms of social responsibility and then based on the discussions, the feasibility / availability of a framework will be assessed. .

3.5 Research Methods

Research methods are the techniques adopted in the research process with specific design elements (Yin, 2013). There are three methods used in social science research which are dependent on the researcher philosophical stance. Therefore from an Interpretivists philosophical view, this study will use the qualitative method in carrying out the research. This method seeks quality and not quantity. It also seeks to gain in depth understanding on the phenomenon (CSR and CSI) based on the experiences of the actors (Creswell, 2013).

3.6 Data Collection Techniques

Data will be collected from both primary and secondary sources. The secondary sources which will include official reports of the firm, news asitems as well as financial documents that will be used to complement the finding from the primary data.

Primary data will be collected with the use of Semi structured face to face Interviews. This aims at exploring how and why the firm engages in CSR. The research instrument will be semi structured interviews because it will consist of key questions which will aid the researchers in exploring issues around the concept but not deviating too far away from it. The interviews will be conducted on a face to face basis as the interview is geared towards obtaining depth as well as meaningful insights into the phenomenon (Ritchie and Lewis, 2003). The respondents’ will be the CSR managers of the firms. Also the beliefs / experiences of the respondents regarding sensitive issues surrounding CSR may bewill investigatedbe investigated further for illumination/ amplifications without forgetting the majorwithin the boundaries of aims of the research.

A key benefit of this form of data collection is the richness of data gathered as the possibility of discovering information from spontaneous responses is high. The response rate for this form of data collection technique is relatively high as well. However, this method is extremely expensive and time consuming as compared to the use of quantitative techniques. This study however seeks to gain more insight on issues pertaining CSR and CSI as such will opt for qualitative techniques, as quantitative techniques are employed for confirmatory purposes of an already explored phenomenon or for descriptive purposes (Cresswell, 2013). Qualitative research is geared at generating subjective understanding of how and why people perceive, reflect, role-take and interpret experiences (Baker et al., 2012).

 3.7. Population size.

The population will consist of Corporate Social Responsible (CSR) managers. An attempt will be made to approach multiple CSR managers of the automobile industries. But this purely depends on the time availability and occupancy level of the CSR managers of the companies. None the less, to begin with, the researcher aims at targeting CSR managers from at least 5 automobile companies. This would give a view point of almost 10 odd managers which would be a good point to begin with.

3.8. Sampling Techniques

In seeking to answer the research question, the purposive sampling technique will be employed. This sampling technique entails the conscious decisions to select informants based on the characteristics of the informant. It is a non-random method of sampling that does not require theories to establish criteria for informant selection (Palys, 2008). In other words, the researcher seeks what needs to be known from the people that have the information and are willing to provide it. The purposive sampling will be used as a sampling technique, as conducting of the interview requires interviewing key players in Volkswagen the automobile industry pertaining to CSR and can provide rich information (Cresswell, 2013).

3.9. Data Analysis

One of the most widely used forms of data analysis in qualitative research is thematic analysis. It entails recognizing patterns in the data collected, analyzing this these patterns and reporting this these patterns (Braun and Clarke, 2006). It enables you to organize and describe data in rich detail and offers flexibility. As such there is no clear agreement about how to carry the analysis. Thematic analysis differs from other analytic methods that seek to describe patterns across qualitative data –Here themes emerge from the data set in thick details. For the purpose of this, an inductive thematic analysis will be used. An inductive approach means the themes identified are strongly linked to the data themselves. Inductive analysis is therefore a process of coding the data without trying to fit it into a pre-existing coding frame, or the researchers analytic preconceptions. In this sense, this form of thematic analysis is data driven.

This study therefore, will adopt a two-step approach in arriving at concrete themes. The first step will be to identify general patterns after transcription of the data. The second step entails regrouping the patterns into key themes towards generalizability.

3.10. Research Timeline

 Ethical Issues

Research ethics entails that research is conducted in a w way that is morally correct and responsible, as well as ensure that the respondents and participants in the study are not negatively affected (Saunders et al., 2009). Before undertaking any research, it is advisable to consider ethical issues that may arise as result of the study in term of data collection, and when studying real life events. Such events include but not limited to protection of identity of potential respondents, protection of vulnerable groups; adherence of protection of information obtained and confidentiality of information. Although this study maybe consideredlconsidered low risk in terms of ethical issues, all ethical issues as set out by the university’s ethical code will be adhered to. Participants’ information sheets will be distributed alongside the consent form, where participants will be permitted to voluntarily make informed consent. These consent forms and the research instrument will have to undergo scrutiny and approval from the university’s ethics committee before the research is actually commenced to ensure that no participant suffers.

Due to the sensitive nature of information to be acquired, as well as the difficulty that the researcher may encounter in gaining this information, a confidentiality of information slip will also be given to the participant to convince them that information derived will be used strictly for the research at hand.

Conclusion

The aim of this report is to provide a framework to be employed in answering the research question. The study seeks to examine why companies carry out CSI activities instead of CSR and how these companies engage in the various activities. The study will use the agency theory and stakeholders’ theory as a backdrop for the research. Qualitative techniques will employed as the methodology with face to face interviews as the instrument for data collection. Data collected will be analyzed using inductive thematic analysis, however, the underlying philosophical position of the research which is social constructionism (interpretivism) will be the guiding light in reporting and framing the findings of the study.

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