Corporate Social Responsibility Reports: A Thematic Analysis Related to Supply Chain Management

Beginning of article

INTRODUCTION

As the scale and scope of human-generated activity has put immense pressure on natural systems, companies, governments and citizens have become concerned about the well-being of society and the environment (Hart 1995). Industrial activities have been linked to the declining state of the earth's physical and ecological systems and ultimately long-term environmental, health and safety (EHS) issues (Hoffman 2000; Rosen 2001). Increasing global industrial activity raises the demand for finite natural resources (Beamon 1999; Srivastava 2007), reduces availability, creates scarcity and drives up prices (Commoner 1990; Hart 1995; Shrivastava 1995; Tsoulfas and Pappis 2006).

Companies are beginning to recognize how greater social and environmental responsibility can improve firm performance (Porter and van der Linde 1995; Zadek 2004). This includes contributing to communities, improving workplace conditions, eliminating waste and using resources more efficiently. For example, Anheuser-Busch partnered with suppliers to redesign its cans to reduce wall thickness, while maintaining quality standards. The redesign reduced annual aluminum usage in 2006 by nearly 12 million pounds and improved the organization's bottom line (Anheuser-Busch 2006). New approaches to improving corporate responsibility in worldwide operations are emerging as a means for companies to improve economic, social and environmental performance; a focus on what Elkington (1998) calls the triple-bottom line. This focus is in response to a number of challenges and opportunities, including greater stakeholder demands, more government regulations, criticism from nongovernment organizations (NGOs) and increasing competitive pressure (Sarkis 1998).

As corporate social and environmental issues become more salient to stakeholders, the stakeholders seek to understand how corporate strategies integrate social and environmental improvement into the economic goals of the firm (Zadek 2004). Consumers are demanding that companies produce high-quality, safe and environmentally friendly products with manufacturing processes that are less harmful to the environment and to communities (Lash and Wellington 2007). An organization's ability to effectively communicate corporate social responsibility (CSR) strategies and policies can enhance stakeholder satisfaction (Esrock and Leichty 1998).

Many companies have responded to stakeholder expectations by publishing annual CSR reports that communicate the activities and strategies being used to address social and environmental issues (Esrock and Leichty 1998). These reports are often referred to as sustainability reports. The reports serve as a barometer of an organization's attitudes toward social and environmental responsibility, strategic planning and the level of integration in the organization's business strategic plans, both at the corporate level and functional levels (Kolk 2003; Jose and Lee 2007) such as supply chain management.

Despite interest from both academics and practitioners, there is limited research to understand how companies communicate operations and supply chain social and environmental strategies through CSR reports. Furthermore, there is limited published research exploring how companies position CSR reports and what these reports indicate about the companies publishing them. CSR reports serve as a rich source of secondary data to understand better the companies' intentions, strategies and activities, as well as the results of corporate social and environmental responsibility both at the corporate and supply chain level.

This research attempts to address three different supply-chain-related issues. First, by utilizing secondary data from the CSR reports, it seeks to fill a gap in the corporate responsibility strategy research and provide insight into how companies are addressing social and environmental issues. Second, it looks at the interface between the issues companies emphasize in CSR reports and supply chain management (SCM). Finally, it introduces Crawdad's content analysis techniques to the supply chain management literature. The research questions addressed are:

(1) What environmental, economic and social themes are leading organizations in sustainability emphasizing in CSR reports?

(2) How do these leaders in sustainability view or integrate SCM into sustainability practices?

(3) Are variations in the organizations' emphasis related to organization location, industry sector or size?

This paper begins with a discussion of the current literature streams related to corporate environmental reporting. That is followed by a detailed description of the research methodology, Crawdad and Centering Resonance Analysis (CRA). The research's results and implications are explored. Finally, limitations and future research opportunities are identified.

LITERATURE REVIEW

The three existing research streams of corporate social and environmental strategy, CSR reports and corporate social image, provide the foundation of this research. These streams of literature help to explain what motivates companies to engage in socially and environmentally responsible activities. They also explore why and how these activities are reported by the organization to the public.

Corporate Social and Environmental Strategy

Corporate social and environmental responsibility describes the actions by companies to maintain the cultural and ethical norms of the societies in which companies operate (Carroll 1979). Early researchers reached different conclusions on the role of social and environmental responsibility in the firm (Carroll 1979). For example, Friedman (1962) stated that a firm's only responsibility to society is to make a profit. Alternatively, Manne and Wallich (1972) concluded altruistic goals and behavior should be present in the corporation, but viewed separately from its economic pursuits. Carroll (1979) and Steiner (1975) argued social, environmental and economic responsibilities are not mutually exclusive or opposing forces. They created a framework that defines CSR as the integration of "economic, legal, ethical and discretionary categories of business performance" (Carroll 1979, p. 499).

Carroll's framework suggests that firms not only need to engage in socially responsible behavior, but also that positive financial gains can be realized in the process (Arlow and Gannon 1982). Research in the strategy literature finds that as firms integrate corporate social and environmental responsibility with economic strategies, benefits can be realized through cost savings from resource reduction and efficiency and revenue generation from improved stakeholder relations and brand image (Hart 1995; Hoffman and Ventresca 1999; Hoffman 2000). The development of social and environmental responsibility strategies has helped to usher in a new paradigm for how businesses view responsibilities to society, in relation to the overall strategies and goals of the firm.

Researchers posit that companies fall along a continuum, with respect to their social and environmental strategies, ranging from resistant or defensive to seeking value and competitive advantage (Porter and van der Linde 1995; Russo and Fouts 1997; Grayson and Hodges 2004; Zadek 2004; Porter and Kramer 2006). The strategy continuum concept predicts that companies will realize the potential gain from adopting more proactive social and environmental strategies. Ultimately, companies will progress until reaching a value and competitive advantage-seeking stage (Porter and van der Linde 1995; Ramus 2002; Porter and Kramer 2006).

Most research into corporate responsibility supports a positive link between proactive corporate social and environmental strategies and improved financial performance (Azzone and Bertele 1994; McWilliams and Siegel 2000; Aragon-Correa and Sharma 2003; Porter and Kramer 2006). Empirical studies show evidence of the positive link using a range of methodologies, including mixed methods (Sharma and Vredenburg 1998; Sharma 2000), multiple-site case studies (Maxwell, Rothenberg, Briscoe and Marcus 1997) and surveys (Klassen and McLaughlin 1996; Russo and Fouts 1997). Studies showing a negative relationship between social and environmental strategies and firm performance have typically been limited in scope and have not accurately measured both social and financial performance (Wad-dock and Graves 1997).

Members of the top 200 global companies reported having social and environmental responsibility strategies to meet corporate goals and satisfy stakeholder demands (Handheld, Sroufe and Walton 2005), as stakeholders increasingly influence corporate social and environmental responsibility strategies. Consumers and shareholders insist the strategies are based on measurable financial goals including cost reductions, increased market share, higher quality, improved manufacturing performance and continuous innovation (Wood and Jones 1995; Russo and Fouts 1997; Buysse and Verbeke 2003). Members of the supply chain are asked to work with companies to help construct and support corporate responsibility strategies to meet strategic goals (Handheld et al. 2005). Government also plays an important role in the development of corporate social and environmental responsibility strategies. An organization's ability to work with government regulation to create innovative strategies can lead to higher firm performance (Porter and van der Linde 1995).

CSR Reports

To make stakeholders aware of social and environmental activities and strategies, companies are increasingly issuing easily accessible CSR reports (Deegan and Gordon 1996; Morhardt, Baird and Freeman 2002; Kolk 2003). Nearly 60% of the top 200 global companies reported having CSR reports on their corporate websites (Jose and Lee 2007). Use of these reports is growing among investors, governments, NGOs, customers and other concerned stakeholders (Solomon and Lewis 2002). Investors, insurers and underwriters use CSR reports to gather information about socially and environmentally responsible business investments and possible risks such as fines for noncompliance. Safety information, such as the number of days lost due to injury, is looked at carefully by regulatory and watchdog groups to determine if firms are taking care of workers. Consumers, government and NGOs use the information contained in the CSR reports to gauge involvement in and commitment to social and environmental issues by comparing the reports among firms and industries (Solomon and Lewis 2002). NGOs, environmental lobbyists and other concerned stakeholders examine the reports' language and statements to determine how proactive companies are in social and environmental actions (Wilmshurst and Frost 2000).

A concern among academics and practitioners is how statements in CSR reports compare with the actual corporate commitment of addressing social and environmental issues. While the firm's level of commitment should be clear in the reports (Jose and Lee 2007), Kolk (2003) found it difficult to determine whether an organization was actually implementing the strategies and management actions or merely reporting to appease stakeholders. Similarly, Cerin (2002) identified discrepancies between the actual actions of the reporting firms and what actions are reported in CSR reports and annual reports. Germ (2002) further noted that the lack of CSR report guidelines leads to great variety and some confusion in the reports' contents. For example, few incentives exist to disclose negative or potentially harmful information (Solomon and Lewis 2002). Conversely, Montabon, Sroufe and Narashimhan (2007) found CSR reports to be a good indicator of the relationship between corporate responsibility reporting and firm performance.

Corporate Social Image

Pressure from internal actors and external stakeholders strongly influences companies to maintain a positive, socially responsible image (Hatch and Schultz 1997; Gioia, Schultz and Corley 2000; Aguilera, Rupp, Williams and Ganapathi 2007). The image that the organization projects to stakeholders and other interested parties is a strategic-level decision that affects management behavior (Gioia et al. 2000; Brown, Dacin, Pratt and Whetten 2006). Control of an organization's image by top management through communication is described by Hatch and Schultz (1997, p. 359) as "deliberate attempts to influence public impression." Companies are aware of the positive link between an image of strong social responsibility and consumers' preferences. Conversely, there is a negative link between poor social responsibility image and consumers' reactions to that organization's products (Sen and Bhattacharya 2001).

Cerin's (2002) case study analysis indicated that firms issue CSR reports as a marketing tool to enhance brand image among stakeholders. Firms seek and obtain legitimacy from stakeholders by proactively discussing social and environmental responsibility and performance (Wilmshurst and Frost 2000; Cerin 2002). Legitimacy theory suggests companies publish CSR reports to benefit from an improved corporate image among stakeholders and other concerned parties (Wilmshurst and Frost 2000).

While companies strive to project a positive image to stakeholders (Russo and Fouts 1997; Esrock and Leichty 1998), reputation is the stakeholders' actual view of the firm (Brown et al. 2006). Thus, companies seek to enhance image in order to create a positive reputation. This reputation may also correlate to higher long-run organizational performance (Fombrun and Shanley 1990). Using survey methodology, Russo and Fouts (1997) found that an organization's social and environmental reputation can act as an intangible, inimitable resource for the firm. Similarly, Fombrun and Shanley (1990) found a positive correlation between corporate reputation and an organization's greater social responsibility and contributions to social welfare. Both of these studies suggest that companies seek to attain or maintain a positive corporate social reputation as part of corporate goals. For example, Sharp, in a 2006 Environmental and Social Responsibility Report, specifically notes that it is "earning the trust of society through corporate social responsibility" (Sharp 2006, p. 4).

METHODOLOGY

Content analysis was used to assess the information in 100 carefully selected companies' CSR reports. Content analysis is typically used to systematically evaluate the theme of recorded communications (Kolbe and Burnett 1991). Content analysis allows researchers to synthesize texts with a large number of words into smaller categories (Weber 1990; Stemler 2001). This research uses CRA, a specific type of content analysis, which is discussed in detail in the paragraphs below.

Organization Selection

Like Pagell and Wu (2009), this research focused on companies that are relatively advanced in their sustainability activities, in order to report on what leaders in this area are doing. Thus, companies were first identified based on membership in the Global Environmental Manufacturing Initiative (GEMI 2008), mention in the Global Reporting Initiative (GRI 2008) and frequent mention in the public press. Additional candidate companies were also identified using the data from Roberts Environmental Center, specifically in the under-represented industries such as Utilities and Finance. Once identified, availability of the CSR reports was verified at corporateregister.com (Corporate Register 2008). When possible, the level of sustainability activities and performance was verified using the scores posted at Roberts Environmental Center. This center has developed strict criteria for scoring the CSR reports using the Claremont College's Pacific Sustainability Index (Roberts Environmental Center 2008). The scoring includes an evaluation of the firm's environmental and social intent, reporting and performance based on a set of predetermined criteria. When companies had similar scores, preference was given to those with frequent citing as good environmental citizens in academic and practitioner literature, as well as the public press.

The candidate companies were selected iteratively, until it appeared the database was saturated with companies that were actively engaged in sustainable supply chain management practices. This saturation occurred when it became difficult to identify additional firms in an industry based on mention in any of the above data sources. Companies were then classified by industry using information based on S1C/NAICS code categories, as identified for each organization in the MergentOnline Business database (MergentOnline 2008). Our sample contained firms from the following industry segments: Consumer Goods (15 total firms), Financial Services (8), Healthcare (13), Industrial Goods (14), Materials (13), Services (11), Technology (15) and Utilities (11) (see Table 1). After the list of candidate companies was finalized, the most recent CSR report was downloaded from corporateregister.com (1).

TABLE 1

Organization and Industry Included in Sample

Industry  Consumer Goods      Services   Industrial Goods  Finance

          Adidas              Amtrak     Agilent           ABN AMRO

          Anheuser-Busch      BNSF       Cargill           Bank of
                                                           America

          BMW                 Carnival   Caterpillar       Barclays

          Cadbury-Schweppes   McDonalds  Deere and Co.     Citigroup

          Coca-Cola           Office     DENSO             Credit
                              Depot                        Suisse

          Con Agra Foods      Starbucks  International     Goldman
                                         Paper             Sachs

          General Mills       Target     Johnson Controls  Morgan
                                                           Stanley

          Herman Miller       Tesco      Louisiana         Wells
                                         Pacific           Fargo

          Honda               UPS        Obayashi

          Kimberly-Clark      Verizon    Rockwell-Collins

          Kodak               Wal-Mart   Rohm and Hass

          Kraft                          Smithfield Foods

          Nike                           Visteon

          Procter and Gamble             Weyerhaeuser
          Toyota

Total     15                  11         14                8

Industry  Utility            Materials  Healthcare       Technology

          Alliant            3M         Abbott           DELL

          American           Advanced   Allergan         Freescale
          Electric-Power     Micro
                             Devices

          Centrica           Alcan      AstraZeneca      HP

          Consolidated       Ashland    Baxter           IBM
          Edison

          Duke-Cinergy       BASF       Bayer AG         Intel

          Endesa             Bemis      Bristol-Myers    Motorola …