Corporate Social Responsibility and Stakeholders: Review of The Last Decade (2006-2015)
Corporate Social Responsibility and Stakeholders: Review of The Last Decade (2006-2015)
Corporate Social Responsibility and Stakeholders: Review of The Last Decade (2006-2015)
1 | 2017
Abstract
Background: Globalization, strong development of information-communication
technologies and the emergence of new burning challenges for the global
communities enabled the concept of corporate social responsibility to be perceived
as a business model that allows for successful differentiation of companies, as well
creating sustainable competitive advantage. Objective: The goal of the paper is to
offer a short overview of the role of internal and external stakeholders within the
concept of corporate social responsibility and point out the importance of quality
relationships between the company and its stakeholders with the aim of improving
the standard of living of all community members. Methods/approach: The paper is
based on a systematic analysis of previously published relevant international
scientific papers in the field of corporate social responsibility, stakeholder theory and
information-communication technologies. Results: This paper demonstrates that the
concept of corporate social responsibility has gone, in its several decades of
existence, from the "unnecessary dependency" phase to the critical business model
phase. Conclusions: As there is a natural connection between the concept of
corporate social responsibility and the stakeholders, it can be concluded that the
quality of the relationship between the company and its stakeholders represents a
key factor that affects the success of the company in its notion of differentiating itself
from competitors and creating sustainable competitive advantage.
Keywords: corporate social responsibility, stakeholders, information-communication
technologies, differentiation
JEL classification: M14
Paper type: Research article
Received: Jan 04, 2017
Accepted: Mar 18, 2017
Citation: Baric, A. (2017), “Corporate social responsibility and stakeholders: Review of
the last decade (2006-2015)”, Business Systems Research, Vol. 8, No. 1, pp. 133-146.
DOI: 10.1515/bsrj-2017-0011
Introduction
The modern world presents many different and burning challenges to the entire
population of the world, as well as profit and non-profit organizations every day. The
neglect of set challenges can lead to societal, economic, ecological and cultural
catastrophes and change the global picture of society as we know it. In everyday
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company and fulfilment strategic goals. He pointed out that the shareholders,
employees, consumers, suppliers, financial institutions, non-government groups and
government institutions were the most important stakeholders of an organization
(Freeman, 1984). Ullmann (1985) highlights three key factors that affect the
relationship between a company and a certain group of stakeholders: (i) the power
of the stakeholders, (ii) strategic orientation of management towards the concept of
corporate social responsibility and (iii) former and present financial results of the
company. The importance of certain groups of internal and external stakeholders for
the business operations of the company changes frequently and depends on the
phases of the business operations, as well as characteristics of the market and the
community (Jawahar, McLaughlin, 2001).
The concept of corporate social responsibility, in times when social values change
rapidly, can present the means of bringing together organizational values and
values of the stakeholders. The prerequisite for the success of such a process of
convergence is including the interest of the stakeholders in the socially responsible
strategy that presents a key segment of the business strategy of an ever-greater
number of companies (Saeed, Arshad, 2012). Within the concept of corporate social
responsibility, stakeholders are portrayed as groups of persons towards whom the
company's business and socially responsible activities are oriented. Today, it is almost
impossible to discuss the concept of corporate social responsibility without taking
note of the stakeholders of the company (Sun et al., 2010). A quality and strong
relationship with stakeholders increases competitiveness because it directly improves
the reputation of the company through perception of the stakeholders. Key
stakeholders determine the conditions in which the company does business by
creating opportunities and threats for survival and growth. For this reason, while
developing strategy the management must encompass the needs, interests and
motives of key stakeholders as per the concept of corporate social responsibility
(Rosinka-Bukowska, Penc-Pietrzak, 2015). The quality of the corporate social
responsibility strategy, and as a consequence the generation of financial and non-
financial benefits from conducting and communicating socially responsible
activities, depends directly on the success of filtering ideas and guidelines geared
towards the company by the key groups of stakeholders in the communication
process (Frostenson et al. 2011). Based on the aforementioned, it is concluded that
there is a link between the idea of socially responsible business operations and the
stakeholders of every company (Godfrey et al., 2009).
Literature review
Corporate social responsibility
Today, more so than ever before, companies implement socially responsible
activities in order to ensure the survival of the global society as we know it today, all
the while ensuring the sustainability and prosperity of their own business operations
(Skarmeas, Leonidou, 2013). Even though the concept of corporate social
responsibility originated in the developed Western democracies, today the concept
itself is considered a global movement that encompasses and unifies different
aspects of society, from legislative and non-governmental to the cultural and
business aspects (Sriramesh et al., 2007). The rapid spread of the concept of
corporate social responsibility from Western countries to countries in transition and
other countries throughout the world stimulated the creation of a new dimension of
corporate social responsibility, the increase in complexity, as well as further
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popularization of the concept itself (Brammer et al, 2012). It can be concluded that
the concept of corporate social responsibility in the past seventy years
encompassed the key problems of the global community and created perhaps the
most important link between society and the business world. Besides spreading the
concept on a global level and the emergence of new dimensions of corporate
social responsibility, new burning problems and challenges of the global
communities are additional reasons for the increasing complexity of the concept of
corporate social responsibility (Moura-Leite, Padgett, 2011). In accordance with the
continual increasing of complexity and ever-increasing pressure by various groups of
internal and external stakeholders, achieving and sustaining responsibility towards
the community is becoming an increasingly difficult process for the company's
management (Carroll, Shabana, 2010).
Positioning of the company on the market, as a socially responsible organization,
demands detailed knowledge of the concept of corporate social responsibility and
adequate models of digital communication by the management, but also by the
rest of the internal stakeholders, who are a key, reliable and transparent
communication channel towards external stakeholders (Polonsky, Jevons, 2006). The
success and efficacy of conducting socially responsible activities also depend on
adapting the strategy of corporate communication to the rapid development of
information-communication technologies as well as to the development of social
networks and the Internet (Dutot et al., 2016). Digital transformation in
communicating social responsibility started in the middle of the 1990s (Isenmann,
2006), and enabled the stakeholders with computer skills to easily find timely and
prompt information about corporate social responsibility, but also the overall
business operations of the company (Cho et al., 2009).
Apart from the simpler discovery of information related to the company's
corporate social responsibility, strong development of information-communication
technologies and the emergence of social networks allowed for a continuing and
two-way exchange of information between individual and profit and non-profit
organizations throughout the world (Bicen, Cavus, 2011). As the nature of the
Internet is unpredictable and allows for a speedy transfer of information within the
global community, the consequences of such two-way communication are
impossible to predict or control, therefore management and internal stakeholders
must be very careful in expressing personal attitudes on websites and social
networks. It can be concluded that digital transformation, and consequently the
emergence of websites and social networks, significantly changed the power
structure in communicating corporate social responsibility between profit and non-
profit organizations and their stakeholders (Fieseler et al, 2010). Successful
communication of socially responsible activities towards stakeholders enables the
creation of a more positive reputation of the company. Companies with a more
positive reputation achieve better results than their competition that offers products
and services of similar quality and price. Positive reputation, which presents valuable
immaterial assets of a company, is almost impossible to completely copy from
competitors, because it is a result of a whole array of different activities, the key
activities being socially responsible activities (Boyd et al., 2010).
In order for companies on domestic or global markets to successfully establish a
positive reputation, it is necessary to ensure that the entire supply chain of the
company operates in accordance with social and environmental standards so the
stakeholders, by communicating with the company, could successfully differentiate
the company from its competition (Boehe, Barin Cruz, 2010). The result of the
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possibilities for profit and non-profit organizations and stakeholders are emerging
daily (Bicen, Cavus, 2011).
Besides the financial inability of certain groups of stakeholders in underdeveloped
countries to reward socially responsible businesses, the increase of skepticism in
certain stakeholders presents an increasingly big problem for management
(Carvalho et al., 2010). In order for management to successfully prevent the
appearance of skepticism in stakeholders and achieve sustainable competitive
advantage through differentiation based on socially responsible activities, it is
necessary to know the characteristics of key stakeholders as well as design an
adequate communication strategy towards them. Sometimes a decade-long
process of building a positive reputation can be destroyed in a matter of days,
especially in situations where management neglects the interests of key stakeholders
and thus motivates them to disclose negative attitudes towards other stakeholders in
a digital global network (Vanhamme, Grobben, 2009).
Methodology
This paper functions as a brief overview of the concept of corporate social
responsibility, as well as the role of the stakeholders within the concept itself, for the
period between 2006 and 2015. Special attention was paid to the importance of
corporate social activities that enable differentiation from competitors and creating
sustainable competitive advantage. Stakeholders are viewed as key and
inseparable determinants of the concept of corporate social responsibility, with a
separate review of the connection between socially responsible activities and
internal and external stakeholders. The paper is based on the systematic analysis of
previously published relevant international scientific papers from the fields of
corporate social responsibility, stakeholder theories and information-communication
technologies. In the theoretical part of the paper, methods of analysis and
compilation have been used in order to present the importance of the concept of
corporate social responsibility within the global business and social community, as
well as the influence of corporate social responsibility on the development of quality
relationships with primary and secondary stakeholders. The method of deduction has
been used in order to reach conclusions about the importance of the concept of
corporate social responsibility for the business result of the company, and in order to
ascertain the importance of stakeholders within the concept itself.
Results
External stakeholders
Socially responsible and sustainable business operations create a series of benefits
for the community and the environment, but also for the company's business
operations (Carvalho et al., 2010). The company, which is perceived within the
community as socially responsible, has the potential to create positive reputation,
more possibilities in retaining quality employees, continuing protection against risk
from bad managerial governance and the ability to use new types of differentiation
from the competition. Conducting, as well as adequate and transparent
communicating of socially responsible activities, positively affects the satisfaction
and trust of consumers, which allows them to identify with the values nurtured by the
company (Martinez, del Bosque, 2013). Partial or complete adherence to the
company's values and a high level of loyalty affect the willingness of the consumer
to pay a higher price for the company's products and services, and therefore
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enable the generation of direct financial benefits for the company (Pirsch et al.,
2007).
Peloza (2006) conducted a research according to which he points out that
corporate social responsibility in business has an increasingly positive effect on the
company's reputation with its stakeholders; and that such a positive reputation
ensures stability and sustainability of business operations by the day, and sometimes
even generates certain financial benefits. Of similar opinions are Lin and coauthors
(2009), who present results through which they point out that the differentiation
based on corporate social responsibility may not always increase profitability in the
short them, but that it will positively affect protection from risks of bad managerial
decisions, and thereby ensure existing profitability or even increase it in the long
term. Therefore, an ever-increasing number of companies in the world are
implementing socially responsible activities in order to obtain certain benefits and
improve their reputation with external stakeholders. Besides, the vehemence of
media and non-government organizations for uncovering socially irresponsible
business operations has significantly increased in recent years, turning the degree of
corporate social responsibility more and more into a means of positive or negative
differentiation from the competition in the industry. As media coverage of socially
irresponsible business operations increases, so does the number of external
stakeholders who are skeptic towards conducting socially corporate activities
(Skarmeas, Leonidou, 2013). Modern technology, development of the Internet and
easily accessible global media space allowed the external stakeholders to not have
to rely only on the media and non-government organizations when expressing
attitudes about corporate social responsibility of companies, but by using websites
and social media they can send short informative posts which can set off an
avalanche of events that can shake the company to its core, as well as society in
general (Lyon, Montgomery, 2012). Dissatisfaction of key external stakeholders in one
of the markets in which the company operates can rapidly spread onto other
markets, and thus endanger the business operations in markets in which the
company was perceived as successful and socially responsible (Bhattacharya et al.,
2008).
Internal stakeholders
Even though the concept of corporate social responsibility is primarily oriented
towards external stakeholders, the organization's management must not neglect the
effect of socially responsible activities on the internal stakeholders and their role in
the concept. The efficacy of conducting socially responsible activities equally
depends on external and internal stakeholders (Waddock, Googins, 2011). Palmer
(2012) points out that the key task of the management, in the context of
implementing the concept of corporate social responsibility and generating
benefits, is to achieve a balance in the complex network of relationships towards
stakeholders. That is not a simple task, seeing as the management is faced with the
oftentimes incompatible interests of internal and external stakeholders, which
sometimes makes it very hard to choose activities that will satisfy all key stakeholders
(Pedersen, 2006). Aside from the positive effect on profitability and economic
growth, it has been proven that the concept of corporate social responsibility
positively affects the satisfaction, motivation and loyalty of employees, while
allowing the management to extract the best qualities from every employee, which
directly contributes to the creation of positive business trends (Torugsa et al., 2012).
Ali and coauthors (2010) come to a similar conclusion, stating that a higher level of
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Conclusion
Summary of research
Implementation, conducting and communicating of the concept of corporate
social responsibility is becoming a topic that is more and more important for the
management of modern global companies. The number of internal and external
stakeholders who are influenced by the level of corporate social responsibility of the
company when making decisions about using their products or services is constantly
increasing. For that reason, many companies use differentiation based on corporate
social responsibility to obtain a sustainable competitive advantage and generate
certain benefits. For the process of differentiation to be successful, the management
must identify the needs and interests of key stakeholders and adapt the choice and
communication of corporate social responsibility activities towards the stakeholders.
It can be concluded that socially responsible business operations positively affect
the company's reputation, employee motivation, consumer loyalty, protection from
bad managerial decisions and long-term profitability.
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Research limitations
This paper is based exclusively on secondary data and available international
scientific literature. Quality of the research would be much greater if the research
had been conducted by using a questionnaire or interview with persons in
companies who are familiar with overall business operations and the aspect of
corporate social responsibilities in business. By using the primary research approach it
would be possible to generate higher quality results and a more complete image for
the reader.
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