Corporate Social Responsibility in European Banks

By Madrakhimova, Firuza S. | Journal of Finance, Accounting and Management, January 2015 | Go to article overview

Corporate Social Responsibility in European Banks


Madrakhimova, Firuza S., Journal of Finance, Accounting and Management


Introduction

This section describes that CSR relates to how operational activities affect the principles and values related to both internal methods and processes, and the interaction with other parties and stakeholders.

The basic principle of the sustainable development and Corporate Social Responsibility is the combination of needs important both from the point of view of an institution, as well as a group of entities operating in its environment (employees, shareholders, stakeholders, borrowers, local society) within its business policy. Thus, the goal of a contemporary organization should be to maximize its shareholders' value satisfying, at the same time, expectations of other stakeholders (stakeholders' value) by integrating economic, social and environmental operations.

If one considers the current CSR landscape in the EU, the following aspects are noticeable: a far greater awareness on the part of European policy-makers; higher expectations from third parties, i.e. industry bodies, banks' clients and 'suppliers'; and increasing interest from academic experts. In addition, the climate change issue draws attention from media, politicians, the public and non-governmental organizations (NGOs) alike as to the role of business in society and how business, including financial institutions, can be 'part of the solution' rather than the problem.

CSR can be defined and limited in different ways according to which topics, levels of analysis, or parties involved. The European Commission's Green Paper from 2001 offers two definitions of CSR. Firstly, CSR is referred to as "essentially a concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment", and secondly CSR is underlined as "a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis". It is clear that any attempts to define and limit CSR are based on an assumption of the voluntary character of this type of corporate behavior.

CSR is included in the EBF Guiding Principles, to the extent that banks' work in this field should be highlighted, and that information on their achievements ought to be broadly conveyed. The aim of this paper is to make progress on collecting a non-exhaustive listing of banks' best practices, and to highlight the extent to which European banks have already made CSR a full part of their business strategy. Finally, this paper should serve as a reference point for banks wishing to further develop their CSR policy.

Literature Review

This section describes the importance of CSR, that has become an important issue for banks to address ahead of corporate scandals in the beginning of the century, which have had resulted in a side in the level of trust that they used to enjoy (Abdou et al. 2010) Corporate Social Responsibility (CSR) has received increased attention from numerous authors and international organizational bodies. Various definitions have been developed in order to specify the role of business in the society. There is no consensus as regards the term «society» (Maignan et al., 2005), thus, the concept of stakeholders personalizes social responsibilities by delineating the specific groups that a business should consider in its orientation. The Commission of the European Communities (2001) defines CSR as "a concept whereby companies integrate social and environmental concerns in their business operation on a voluntary basis". Palazzi and Starcher (2000) support that CSR is elaborated in its unique way depending on the stakeholder expectations. Kitchin (2002) mentions that CSR meaning is changing over time while Lantos (2001) supports that it are a useful marketing tool. It can ensure a long term value and gain competitive advantages mitigating a new type of risk that has emerged, known as social risk (Kytle and Ruggie, 2005).

Methodology

This section describes different methodological tools that are provided in order to measure and assess CSR performance in European Banks. …

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