1.0. Introduction

We have choose two companies such Malaysian International Shipping Company (MISC) and

MAERSK to prepare our report and to compare and analyze the sustainability and corporate

responsibility (CSR) profile of these two companies operating in a same industry.

2.0. Corporate Social Responsibility

CSR as situations where the firm goes beyond compliance and engages in ‘actions that appear to

further some social good, beyond the interests of the firm and that which is required by law’.

However, this is just one interpretation of CSR. Numerous definitions of CSR have been proposed

and often no clear definition is given, making theoretical development and measurement difficult.

CSR activities have been posited to include incorporating social characteristics or features into

products and manufacturing processes example aerosol products with no fluorocarbons or using

environmentally-friendly technologies), adopting progressive human resource management practices

example promoting employee empowerment, achieving higher levels of environmental performance

through recycling and pollution abatement example adopting an aggressive stance towards reducing

emissions and advancing the goals of community organizations example working closely with

groups such as United Way. Researchers are moving beyond just defining and identifying CSR

activities, to examine the strategic role of CSR in organizations.

2.1. Corporate Social Responsibility of MISC

For more than half a century, the MISC Group has been about value and performance. It is what

keeps them agile, successful and thriving. Working together with the best maritime as well as oil &

gas customers and partners have taught them what really matters to be the reliable and trusted

partner in delivering solutions to our customers.

Through the years, they have built our reputation with every client contact. Across more than 10,000

employees in all corners of the globe, we share the same passion of delivering the best service.

Backed by an exceptional workforce and leading technology, they are committed to creating new

value and contributing to the sustainability of the industry.

i

At MISC, they align their revenue goals with responsible operations, creating an organization that

empowers all of its stakeholders, from shareholders and employees to customers and others with the

energy for progress.

Pulling together our collective talent and passion, we balance our time between building the business

and building our people, industry and community starting with ongoing sustainability initiatives,

continuous workplace improvements, carbon footprint reduction, right up to the role we play in the

community at large.

Their Corporate Responsibility thrust falls under four main sections such health and safety, code of

conduct and business ethics, environment and community. Under health and safety, there are four

categories such as MISC Policy on HSE, MISC Policy on Drug and Alcohol and Health, Safety and

Environment Requirements for Contractors. Under code of conduct and business ethics, there are

three categories such MISC Code of Conduct and Business Ethics, MISC Code of Conduct and

Business Ethics Guide and MISC Code of Conduct and Business Ethics, Country Supplement:

Malaysia. Under environment categories, there are two categories for instance Energy Efficiency

Operational Indicator (EEOI) and Green Certificate Award. Lastly is community. There are three

categories for namely MISC Cadet Sponsorship Programme, Developing Futures and Employees

and Community.

2.2. Corporate Social Responsibility of Maersk

Maersk Group has four core businesses which include Maersk Line, APM Terminals, Maersk Oil

and Maersk Drilling. Through these companies and several others, the group employs roughly

89,000 people, and generated 47 billion US dollars in revenue in 2013.

As a group, their business success is built on a number of strengths: our size and global reach, their

financial strength, their talented employees, their time honored values, their approach to

sustainability and their drive to innovate. Combined, these strengths form a unique platform for their

continued success and future growth.

There are four categories of corporate social responsibility in MAERSK for namely global labour

principles, diversity and inclusion, community involvement and human rights framework.

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3.0. Caroll’s model of CSR applies to the companies.

These two companies can apply Carroll’s model. Carroll (1979) first presented his CSP model that

includes the three dimensions Social Responsibility Categories (which were meant to define CSR),

Social Issues Involved (an enumeration of issues such as the natural environment or product safety)

and Philosophy of Social Responsiveness (asking how the company reacts to ascribed

responsibility). His model of corporate social performance does not prescribe how far a company

should go to address social issues but by positioning ethical and discretionary obligations into a

rational economic and legal framework, it allows managers to develop planning and diagnostic

problem solving tools. According to the Iron Law of Responsibility, society grants legitimacy and

power to business and in the long run, those who do not use power in a manner which society

considers responsible will tend to lose it (Davis, 1973: 314). While customers, employees,

shareholders and government may be able to withdraw legitimacy, forcing a corporation to either

change its approach or perish, the power of other stakeholders to do so is constrained.

For example, Baron (2001) differentiated between altruistic CSR which a company is engaged in

without expecting any financial return and strategic CSR actions that resulted in beneficial outcomes

for the company. Hillman and Keim (2001) distinguished between stakeholder CSR and social CSR.

In their study, stakeholder CSR was correlated with financial performance whereas social CSR was

not. According to Clarkson (1995), a particular society determines what a social issue is and the

representative government enacts appropriate legislation to protect social interests. Hence, a test

whether an issue is social or not is the presence or absence of legislation.

Some theorists challenge the shareholder primacy model of the firm, arguing that focusing purely on

the economic function of the firm ignores the complexity that firms deal with along with related

inefficiencies, information asymmetries and multiple incentive problems. They propose a

stakeholder theory of the firm that broadens a firm’s role to include other external and internal actors

apart from shareholder (Donaldson and Preston, 1995; Freeman 1984).

The first reference to stakeholder was attributed to an internal memo at the Stanford Research

Institute in 1963 where stakeholders were defined as those groups without whose support the

organization would cease to exist. Probably the most widely accepted definition is Freeman’s notion

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of stakeholders whom he defined as any group or individual who can affect or is affected by the

organization’s objectives (Freeman, 1984).

First, stakeholder theory is descriptive in that it describes a corporation as interacting with a wide

range of groups with different interests and demands. Although the maxim of neoclassical

economics constructs the firm as a profit maximizing entity with a sole focus on enhancing

shareholder value, most large corporations have some sort of community engagement or

philanthropic program. Second, stakeholder theory is instrumental in that it provides a basis for

exploring a relationship between a firm’s CSR activities and other corporate performance parameters

like profitability, revenue, return on investments and so on. There is an assumption that a corporation

that takes into accounts the needs of its entire stakeholder will also be successful in traditional

performance criteria. Third, stakeholder theory is normative in that it recognizes that groups other

than shareholders, employees, suppliers and customers who may not have contractual relationships

with the firm are also legitimate stakeholders. Normative justification of stakeholder theory is

typically based on Western philosophical and moral traditions such as utilitarianism, social contracts,

fairness and reciprocity, fundamental human rights and respect for human beings.

Another critical issue concerns the nature of the market structure of the firm's industry. A key

conclusion of the McWilliams and Siegel (2001) paper was that, in equilibrium, firms that engage in

CSR will earn the same rate of profit as firms that do not engage in CSR. We refer to this finding as

the neutrality result. This finding was misinterpreted by Piga (2002) as implying that CSR can only

occur in monopolistically competitive industries, since some oligopoly models of vertically

differentiated markets predict that (in equilibrium) firms selling the higher quality product (in our

case, the firm that sells a good with a CSR characteristic) reap ‘abnormal’ profits. A

monopolistically competitive industry consists of numerous firms, some product differentiation, and

relative free entry. Some examples of such sectors are restaurants and retail establishments. On the

other hand, oligopolies are characterized by a consolidated industry structure, considerable entry

barriers, and substantial product differentiation (e.g. autos, computers).

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4.0. How does CSR profile affects practice and strategy

4.1. MISC

How does CSR profile affects practice and strategy? They have established good impacts to

consumer under CSR profile for namely health and safety, code of conduct, environment and

community.

Under health and safety, MISC shall take appropriate practicable measures to prevent and eliminate

the risk of injuries, occupational illnesses and damage to properties. They also take proactive steps

towards conversation of the environment, ensure that appropriate contingency measures are in place

to deal with emergencies and require all its employees and contractors to strictly adhere to this

policy at all times.

They also ensure all its workplaces are FREE FROM DRUG AND ALCOHOL by prohibiting the

illicit use, possession, distribution, sale, storage, procurement or manufacture of the same. MISC is

fully committed to ensure that encourage employees who are drug and alcohol dependent to

voluntarily seek professional counseling and rehabilitation. MISC have provided safety rules for

their employees to make sure the work they conduct not harm them.

Under code of conduct of business ethics, MISC are committed to making their company a leading

in energy based maritime logistics and Solutions Company of choice. They will base their progress

upon the lessons and experiences that transformed MISC into a versatile business entity, meeting the

challenges of the new millennium, and maintaining the unique characteristics of energy based

maritime logistics and Solutions Company.

While they will maintain flexibility to adapt to changing conditions, the nature of their business

requires a focused, long-term approach and the need to balance risks and rewards. They will

consistently strive to improve through learning, sharing and implementing best practices. They will

be disciplined and selective in evaluating the range of their capital investment opportunities. They

will strive to apply and extend technology through business-driven research and technical support

and assume leadership in selective areas. They will implement appropriate measures to protect their

personnel, physical assets, intellectual property and reputation.

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In their globalization quest, they will seek opportunities in regions of the world where they can

create value. They will work with existing and new partners who share their values, philosophy and

business approach.

To this end, they aspire to achieve superior financial and operating results while adhering to the

highest standards of business conduct. These objectives provide the foundation for their commitment

to those with whom they interact.

They are committed to creating and enhancing long-term shareholder value using the principles of

value-based management. The high caliber of their workforce is a valuable competitive advantage.

To build on this human capital they will strive to hire and retain the most qualified people available,

offer them good and competitive terms and conditions of service and maximize their opportunities

for success through training and development. They are committed to maintaining a safe work

environment enriched by diversity and characterized by open communication, trust, fair treatment,

and respect.

Success depends upon their ability to consistently satisfy changing customer preferences. They

pledge to continuously provide products and services that conform to requirements of both their

internal and external customers. They will seek mutually beneficial relationships with their

counterparts, contractors, suppliers, financial institutions and other entities with whom they do

business.

They pledge that MISC will be a responsible corporate citizen wherever it operates and will take into

consideration the needs and aspiration of local communities. Their measures of success are the

extent to which they meet these commitments, the long-term value they create for our shareholders,

the pride of our employees in their accomplishments, the satisfaction of our customers and all those

with whom we do business, and the extent to which communities, both local and international, judge

our activities as beneficial.

4.2. MAERSK

In recent years, they have worked to implement formalized principles and forge partnerships that

integrate social responsibility more tightly into their business and their operations. For example, they

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have created and implemented the Maersk Global Labour Principles, a code of labour standards that

applies to all their employees, wherever they work in the world.

They have also taken significant steps in the areas of diversity, disaster relief and community

involvement including forging partnerships and establishing new entities and roles within the

company. All of this work underscores our deep commitment to responsible corporate behavior and

good citizenship around the world.

This work is and will remain an on-going journey for Maersk, where they enhance and adapt earlier

initiatives an embark on new ones. In 2011, for example, they established the Maersk Human Rights

Framework which is based on the new UN Guiding Principles on Human Rights and Business and

will serve as a platform for their work in this area.

Under global labour principles, based on international conventions and designed to provide a single

set of standards for employees across diverse cultures and regulatory environments, the Maersk

Global Labour Principles span their operations worldwide, covering every Maersk employee in

every Maersk business unit. The principles ensure decent and fair labour conditions for all their

people and provide systems and processes for employees to raise concerns about their workplace.

They believe they help reduce the risk of workplace disputes and they enhance their ability to attract

the talent they depend on throughout the world.

Under diversity and inclusion, MAERSK are committed to providing positive, productive and

supportive working environments where all employees are valued and inspired to be the best they

can be. They base their diversity and inclusion work on the principles that diversity benefits business

results that they will treat every employee with respect and dignity and that they will not tolerate

discrimination or harassment of any kind. Employment related decisions are based on a variety of

relevant factors such as qualifications, skills, performance and relevant experience.

Their Human Rights Framework also developed on the basis of the gap analysis mentioned above,

sets out the group’s “action plan” for 2012–13 in the areas of mapping and integrating measures to

prevent human rights risks, investigating the UN principles as they apply in extreme risk countries,

setting up an operational-level grievance mechanism and looking at legal and contracting processes.

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In all this work, they aim to “know and show” their impact across the group and to close gaps

wherever they find others.

5.0. Sustainability of the companies based on triple bottom line

5.1. Maersk

5.1.1. Environmental

They recognize the risks that climate change poses to society and their business as well as the need

to shift to a low carbon economy. Climate change is the key environmental issue across the Maersk

Group. Primarily due to the direct and indirect CO2 impacts related to running an oil business, as

well as the significant levels of CO2 emitted by our fleet of more than 500 container ships.

The Maersk Group has achieved an 17% improvement in CO2 efficiency since 2010, mainly driven

by large improvements in their container business. Both their relative and absolute CO2 emissions

decreased in 2013. The improvements are mainly due to Maersk Line's advancement in energy

efficiency. While CO2 emissions have received more media attention in recent years, sulphur,

nitrogen and particulate matter emissions are also sources of pollution. In addition to CO2, ships also

emit sulphur oxide (SOX, nitrogen oxide (NOX) and particulate matter (PM), and these emissions

cause local air pollution such as smog, acid rain and soot.

5.1.2. Less smog on the horizon

“Smog” is a mixture of fog or haze and air pollutants, with the main culprit being sulphur dioxide.

Originating in the residual sulphur found in fuel, SOX is emitted in exhaust gases expelled from

internal combustion engines. The amount of SOX emitted is directly linked to the amount of sulphur

in the fuel. We expect and welcome increasingly strict anti-smog legislation in the coming years.

In 2006, they implemented a breakthrough fuel switching programme in California, where vessels

approaching key ports switched to low-sulphur fuel. The initiative resulted in a 2,400-tonne

reduction in cumulative sulphur emissions between April 2006 and December 2008. In September

2010, backed by experience in California, Texas and elsewhere, they launched a fuel-switching

programme in Hong Kong the first of its kind in Asia.

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5.1.3 Acid rain and soot

While smog is caused by SOX emissions, acid rain and soot are caused by NOX and particulate

matter (PM) emissions. Unfortunately, these emissions are actually greater the more efficient an

engine is the more CO2 emissions it produces. Their work in this area is focused on new

technologies for reducing these emissions without sacrificing efficiency. The results have been

encouraging and they have already developed a new cylinder lubrication system that reduces oil

consumption and PM emissions.

5.1.4. Economical

Their work to promote responsible business practices focuses on two main areas: anti-corruption and

responsible procurement. At Maersk, their corporate values and Group policies require them to

conduct business in a responsible manner. In fact, they have always expected their people to act

fairly and with integrity in their dealings with others.

5.1.5. How we’re fighting corruption

Part of their work to promote fair, clean business dealings involves fighting corruption. They don’t

accept bribery and they oppose and aim to eliminate facilitation payments which are widespread in

many parts of the world where we do business. The fight against corruption is an on-going struggle,

and they have recently taken major steps in our journey from implementing a group wide

whistleblower system to ensuring that we meet tough new legislation in Great Britain and the United

States.

5.1.6. A more sustainable supply chain

As a global corporation with more than 100,000 suppliers in over 100 countries, Maersk has the

scale it takes to positively influence suppliers’ sustainability performance. They are doing this by

adopting internationally agreed standards for responsible business conduct and embedding these into

their supply chain through critical dialogue and cooperation, although penalties and disqualification

can be necessary at times.

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4.1.7. Socially

Their priorities for social responsibility include labour, human rights, diversity and disaster response

and community involvement.

In recent years, they have worked to implement formalized principles and forge partnerships that

integrate social responsibility more tightly into their business and their operations. For example, they

have created and implemented the Maersk Global Labour Principles, a code of labour standards that

applies to all their employees wherever they work in the world.

They have also taken significant steps in the areas of diversity, disaster relief and community

involvement including forging partnerships and establishing new entities and roles within the

company. All of this work underscores their deep commitment to responsible corporate behavior and

good citizenship around the world.

This work is and will remain an on-going journey for Maersk, where they enhance and adapt earlier

initiatives an embark on new ones. In 2011, for example, they established the Maersk Human Rights

Framework, which is based on the new UN Guiding Principles on Human Rights and Business and

will serve as a platform for their work in this area. When a company enters a community, it creates

jobs and pays taxes but also provides a wide range of indirect benefits.

5.1.8. A lifeline for communities

From energy production and shipping to harbour terminals and inland freight, their global web of

businesses can be a lifeline for the communities where they operate. For example, a recent study of

APM Terminals’ operations at Apapa, in Nigeria shows that 72% of the company’s 2009 turnover

was channelled back into society. The resulting economic growth in these communities can in turn

create new opportunities for them.

5.1.8.1 Donations and social investments

Donations and social investments are another way of giving back to the communities that have given

them a chance to do business. Their group has a long tradition of community involvement that is

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highly decentralized and primarily carried out by their business units close to the communities

themselves.

One example of their community involvement work is their participation in the Logistics Emergency

Teams (LET) programme under the United Nations World Food Program. This forum enables them

to use their logistics expertise and equipment to assist communities when disaster strikes.

5.2. MISC

5.2.1. Environmental

They are committed to do their part to help conserve and protect the environment. To remain

sustainable and being environmentally conscious, they continued with their initiatives to reduce their

carbon footprint as they aim to further their stewardship towards a cleaner, greener MISC.

5.2.2. Energy Efficiency Operational Indicator (EEOI)

They are on a relentless quest to ensure that the energy efficiencies of their fleet are optimal and on

par with the world’s best practices. Working together with Universiti Teknologi Malaysia (UTM),

they conduct yearly studies to determine the Energy Efficiency Operational Indicator (EEOI) of

selected MISC ships.

EEOI is a mechanism developed by the International Maritime Organisation (IMO) and the Marine

Environment Protection Committee (MEPC) in an effort to reduce greenhouse gas (GHG) emissions

within the international shipping industry. The EEOI is for ship owners and ship operators to

evaluate the performance of their fleet with regards to CO2 emissions, and enable the effects of

emission reduction measures to be monitored. EEOI enables the ratio recording of mass CO2

generated per unit of transport work.

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The results of the study have shown that EEOIs of MISC ships in operation are generally lower

when compared against similar studies by IMO and other worldwide fleets. A lower EEOI value

indicates a more efficient ship, where the average CO2 emissions per tonne of cargo carried per

nautical mile is lower.

5.2.3. Green Certification Award

MISC remains committed and dedicated towards achieving high safety and environmental standards.

To date, four of our Seri “B” Class MISC LNG tankers and two of our “A” Class MISC Chemical

tankers have been accredited with Green Awards, while our Petroleum fleet has been accredited

since 2005.

The Green Award Foundation is a non-profit foundation incorporated in Netherlands and its

membership includes reputable industry bodies. Certification was ascertained through

comprehensive audits that cover a broad aspect of leadership, environmental focus, crew training

and development, vessel maintenance and Health Safety & Environmental aspects.

Ships that are Green Award certified reap various financial and non-financial benefits including a

considerable reduction on port tariffs at ports in Belgium, Canada, Netherlands, Oman, New

Zealand, Portugal and South Africa. Increasingly, other ports in the Asian region, including

Singapore and Hong Kong, are also beginning to show interest.

5.2.4. Socially

Navigate Your Career (NYC) is our unique youth development programme, dedicated towards

preparing high school students for the upcoming challenges and realities of the marketplace. The

programme features a one day interactive workshop which is designed specifically to explore the

concept of personal development, confidence building, leadership, team building and team synergy.

5.2.5. Bridging Communities

MISC employees are given ample opportunities to contribute to the local community through

Outreach Programmes. These unit driven initiatives allow for community care from within and play

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a role in enhancing their presence in the surrounding communities. Most of the programmes are

focused on reaching out to underprivileged children and improving access to education.

5.2.6. Lending a Hand

Over the years, MISC has also been involved in many philanthropic events organized by numerous

associations in the countries we operate in.

6.0. Recommendations for the changes in corporate practices and strategies from a perspective

of improved levels of CSR

Milton Friedman (1970) expressed the same sentiment and added that the mere existence of CSR

was a signal of an agency problem within the firm. An agency theory perspective implies that CSR is

a misuse of corporate resources that would be better spent on valued-added internal projects or

returned to shareholders. It also suggests that CSR is an executive perk, in the sense that managers

use CSR to advance their careers or other personal agendas.

Author(s)

Nature of

theoretical

perspective(s

)

Key argument/result

Friedman

(1970)

Agency

theory

CSR is indicative of self-serving behaviour on the part of

managers, and thus, reduces shareholder wealth

Freeman

(1984)

Stakeholder

theory

Managers should tailor their policies to satisfy numerous

constituents, not just shareholders. These stakeholders include

workers, customers, suppliers, and community organizations

Donaldson

and Davis

(1991)

Stewardship

theory

There is a moral imperative for managers to ‘do the right thing’,

without regard to how such decisions affect firm performance

Donaldson Stakeholder Stressed the moral and ethical dimensions of stakeholder theory, as

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Author(s)

Nature of

theoretical

perspective(s

)

Key argument/result

and Preston

(1995)theory well as the business case for engaging in CSR

Jones

(1995)

Stakeholder

theory

Firms involved in repeated transactions with stakeholders on the

basis of trust and cooperation have an incentive to be honest and

ethical, since such behaviour is beneficial to the firm

Hart (1995)

Resource-

based view

of the firm

For certain companies, environmental social responsibility can

constitute a resource and capability that leads to a sustained

competitive advantage

Jennings

and

Zandbergen

(1995)

Institutional

theory

Institutions play an important role in shaping the consensus within

a firm regarding the establishment of an ‘ecologically sustainable’

organization

Baron

(2001)

Theory of the

firm

The use of CSR to attract socially responsible consumers is referred

to as strategic CSR, in the sense that firms provide a public good in

conjunction with their marketing/business strategy

Feddersen

and

Gilligan

(2001)

Theory of the

firm

Activists and NGOs can play an important role in reducing

information asymmetry with respect to CSR on the part of

consumers

McWilliam

s and Siegel

Theory of the Presents a supply/demand perspective on CSR, which implies that

the firm's ideal level of CSR can be determined by cost-benefit

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Author(s)

Nature of

theoretical

perspective(s

)

Key argument/result

(2001) firm analysis

McWilliam

s et al.

(2002)

Resource-

based view

of the

CSR strategies, when supported by political strategies, can be used

to create sustainable competitive advantage firm

Waldman

et al.

(2004)

Theory of the

firm/strategic

leadership

Certain aspects of CEO leadership can affect the propensity of

firms to engage in CSR. Companies run by intellectually

stimulating CEOs do more strategic CSR than comparable firms

theory

Having a good definition of CSR, with a common terminology, would aid us in modelling the role of

organizational culture and leadership in determining the importance of CSR within an organization.

Researchers could analyse how changes in corporate control, particularly through merger or

acquisition, affect the type and level of CSR activity within firms. Alternatively, changes in top

management (CEO or team) might be examined to determine whether leadership style and

characteristics are more important than corporate control/culture for predicting CSR activity.

Understanding the role of leadership could be extended to understanding the decision making

process and how decisions about CSR activity are affected by demands from multiple stakeholders.

Asymmetric information makes it difficult to study the antecedents and consequences of CSR.

Managers may perceive that many external stakeholders view CSR activity more favourably if it is

divorced from any discussion of the bottom line. With this in mind, managers may not reveal the

more practical motivations (such as product promotion, labour cost control and reputation building)

behind their CSR activities, especially in corporate publications such as annual reports. This lack of

candid information has made it difficult to distinguish and discuss the different motivations for CSR,

which may be private or social.

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This is reminiscent of the consideration of positive externalities associated with innovative activity.

An externality is defined as the impact of an economic agent's actions on the well-being of a

bystander. Pollution is a classic example of a negative externality, while innovation (whose benefits

cannot be entirely appropriated by its creator) is a classic example of a positive externality. While

the private returns to innovation (or those that accrue to the company) may be high, the social returns

to innovation (through the creation of new or improved products and processes) may be even greater.

Researchers need to use more direct methods, such as interviews and surveys, to ‘tease out’ less self-

serving information about the motivations for CSR activity and improve the precision of

measurement of the private and social returns to CSR.

In addition to understanding the motivation for the provision of social benefits, we need to

understand how the provision of these goods, through strategic CSR, affects society. An example of

strategic CSR is when a firm links the provision of a public good to the sale of their (private)

products (e.g. eco-labelling). Bagnoli and Watts (2003) model this behaviour and find that the

propensity of firms to engage in strategic CSR depends on two factors: the intensity of competition

in the market and the extent to which consumers are willing to pay a premium for social

responsibility. The authors conclude that there is an inverse relation between intensity of competition

and provision of CSR. That is, in more competitive markets, less of the public good will be provided

through strategic CSR. Conversely, in less competitive markets, more of the public good will be

provided. This is easy to understand, since more competition results in lower margins and, therefore,

less ability to provide additional (social) attributes or activity. Conversely, less competition leads to

the potential for higher margins and more ability to provide additional attributes or activity.

An analysis of the provision of public goods by private firms is a welcome addition to the

management literature on CSR, which has been primarily concerned with answering the following

question: do firms ‘do well by doing good’? Showing that a firm does well by doing good is often

referred to as making the business case for CSR. While understanding the relation between firm

performance and social performance is of primary importance in the management literature, a more

thorough understanding of the CSR phenomenon requires that we take account of other stakeholders

as well. These stakeholders include: customers, employees, governments, suppliers, taxpayers,

community groups, and underrepresented groups.

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Our understanding of CSR should be extended to an examination of the strategic use of CSR

activities. Fombrun and Shanley (1990) established that investing in CSR attributes and activities

may be important elements of product differentiation and reputation building. McWilliams and

Siegel (2001) suggest that CSR activities be included in strategy formulation and that the level of

resources devoted to CSR be determined through cost/benefit analysis.

Analysis of the strategic implications of CSR is hampered by cross-country or cultural differences in

the institutions that regulate market activity, including business, labour and social agencies.

Institutional differences lead to different expectations and different returns to activity. For firms

operating in multiple countries/cultures this complicates the process of determining which activities

to engage in and how much to invest. As the knowledge base of CSR develops world-wide, we will

be better able to analyse and advise on CSR.

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7.0. Reference

i. Abowd, J., Milkovich, G. and Hannon, J. (1990). ‘The effects of human resource

management decisions on shareholder value. Industrial and Labor Relations Review, 43,

203–36.

ii. Aupperle, K., Carroll, A. and Hatfield, J. (1985). ‘An empirical examination of the

relationship between corporate social responsibility and profitability. Academy of

Management Journal, 28, 446–63.

iii. Carroll, A. (1979). ‘A three dimensional model of corporate performance. Academy of

Management Review, 4, 497–505.

iv. Donaldson, T. and Preston, L. (1995). ‘The stakeholder theory of the corporation: concepts,

evidence, and implications. Academy of Management Review, 20, 65–91.

v. Freeman, R. E. (1984). Strategic Management: A Stakeholder Perspective. Englewood Cliffs,

NJ: Prentice Hall.

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