A Framework for Analysing Corporate Social Performance Beyond the Wood Model

A framework for analysing corporate social performance Beyond the Wood model E. ten Pierick V. Beekman C.N. van der Weele M.J.G. Meeusen R.P.M. de Graaff Project code 63623 October 2004 Report 5.04.03 Agricultural Economics Research Institute (LEI), The Hague I The Agricultural Economics Research Institute (LEI) is active in a wide array of research which can be classified into various domains. This report reflects research within the following domain: Statutory and service tasks Business development and competitive position Natural resources and the environment Land and economics Chains Policy Institutions, people and perceptions Models and data II A framework for analysing corporate social performance; Beyond the Wood model Pierick, E. ten, V. Beekman, C.N. van der Weele, M.J.G. Meeusen and R.P.M. de Graaff The Hague, Agricultural Economics Research Institute (LEI), 2004 Report 5.04.03; ISBN 90-5242-923-5; Price € 27 (including 6% VAT) 154 p., fig., tab., app. Many business organisations put a lot of effort in raising their performance levels in the three dimensions of sustainability - i.e., people, planet, and profit. It is therefore important to measure and weight the effects of their efforts. In this report a framework is presented that is helpful in analysing the social, environmental, and economic activities of a business firm or chain. This framework is based on Wood's (1991) model of corporate social performance. However, it is enriched by incorporating contributions by other significant scientific studies in the fields of corporate social performance and business ethics. Fur- thermore, based on a review of the scientific literature, suggestions for operationalising the framework are offered. Orders: Phone: 31.70.3358330 Fax: 31.70.3615624 E-mail: [email protected] Information: Phone: 31.70.3358330 Fax: 31.70.3615624 E-mail: [email protected] © LEI, 2004 Reproduction of contents, either whole or in part: permitted with due reference to the source not permitted The General Conditions of the Agricultural Research Department ap- ply to all our research commissions. These were registered with the Central Gelderland Chamber of Commerce in Arnhem. III IV Contents Page Preface 7 Summary 9 1. Introduction 17 1.1 Background 17 1.2 Research objective 18 1.3 Methods 18 1.4 Structure of the report 19 2. Introduction to the theoretical perspectives 20 2.1 Introduction 20 2.2 Wood's model of corporate social performance 20 2.3 Four ethical perspectives 23 2.4 Conclusion: Role of Wood's model and the ethical perspectives 25 3. Corporate social responsibility 27 3.1 Introduction 27 3.2 Description of the concept of corporate social responsibility 27 3.3 Illustration of the concept of corporate social responsibility 32 3.4 Operationalisation of the concept of corporate social responsibility 35 3.5 Reflections on the concept of corporate social responsibility (from a deontologist ethical perspective) 38 3.6 Conclusion 39 4. Corporate social responsiveness 42 4.1 Introduction 42 4.2 Description of the concept of corporate social responsiveness 42 4.3 Illustration of the concept of corporate social responsiveness 47 4.4 Operationalisation of the concept of corporate social responsiveness 50 4.5 Reflections on the concept of corporate social responsiveness (from a virtue and pragmatist ethical perspective) 52 4.6 Conclusion 54 5. Corporate social performance 57 5.1 Introduction 57 5.2 Description of the concept of corporate social performance 57 5.3 Illustration of the concept of corporate social performance 63 5.4 Operationalisation of the concept of corporate social performance 66 5 Page 5.5 Reflections on the concept of corporate social performance (from a consequentialist ethical perspective) 77 5.6 Conclusion 79 6. Discussion 81 6.1 Introduction 81 6.2 Wood's view on the interrelationship between the different elements of her model 81 6.3 Pluralist ethical comments on Wood's model 84 6.4 Conclusion 86 7. Conclusion 89 7.1 The analytical framework: Conclusions and recommendations 89 7.2 Towards a measurement model: Conclusions and recommendations 91 References 93 Appendices 1. Aupperle's (revised) instrument for measuring corporate social responsibility 99 2. Business plan by pig farmer Daandels 102 3. Hopkins' operationalisation of the third part of Wood's model 109 4. Steg et al.'s operationalisation of corporate social performance 112 5. Clarkson's entry and coding scheme 115 6. Data structure of KLD's Socrates database 123 7. GRI's sustainability reporting guidelines 132 6 Preface At the Social Sciences Group (SSG) of Wageningen University and Research Centre (WUR) one of our ambitions is to provide an understanding of the dynamic relationships between the triple bottom line, people, planet, and profit, and to measure and weight the effects of efforts to raise performance levels in all three of these domains. The first part of this ambition was the subject of a research project by Slingerland et al. (2003). The present project, financed by the Agricultural Economics Research Institute (LEI) from its budget for the development of strategic expertise, contributes to the second part of the ambition. During the realisation of the project, members of the research team already got questions from colleagues on when the project would be finished and whether it was possible to get concepts (of parts) of the final report. This shows that the knowledge developed in this project is relevant to our daily practice. This relevance is also illustrated by the fact that the second edition of the tool for evaluating projects for the co-innovation programme Sus- tainable Agri Food Chains by AKK, the Dutch sister organisation of the Agri Chains Competence centre (ACC), draws extensively on the knowledge developed here (see Ten Pierick and Meeusen, 2004). Although this report is written by a core group of researchers, the research team would like to thank Koen Boone, Paul Diederen, and Jan Willem van der Schans for shar- ing their ideas. They contributed significantly to the final result of this project. Prof.Dr. L.C. Zachariasse Director General LEI B.V. 7 8 Summary Research objective The objective of this project is the development of a theoretically underpinned framework for analysing the social, environmental, and economic activities of a business firm or chain. Based on this framework, a measurement system may be developed in future research. To realise this objective, Wood's (1991) model of corporate social performance (CSP) is adopted and extended. The extensions are primarily based on a review of the aca- demic literature in two fields: - business and society; - business ethics. Wood's model of CSP Wood (1991:693) defined CSP as: 'A business organization's configuration of principles of social responsibility, processes of social responsiveness, and policies, programs, and observable outcomes as they relate to the firm's societal relationships.' Following her definition as a guide, Wood (1991) constructed the CSP model as out- lined in figure 1. Principles of corporate social responsibility Institutional principle: legitimacy Organizational principle: public responsibility Individual principle: managerial discretion Processes of corporate social responsiveness Environmental assessment Stakeholder management Issues management Outcomes of corporate social behavior Social policies Social programs Social impacts Figure 1 Wood's model of CSP Source: Wood (1991:694). 9 Corporate social responsibility The concept of corporate social responsibility (CSR1) refers to questions such as: - what are the societal expectations towards firms; - what are the obligations of firms towards society; - what are the responsibilities as perceived by the business society (in general); - what are the responsibilities as perceived by a (single) firm? Considering the objective of this project the last question is most relevant. So for the purpose of this study the concept of CSR1 refers to the responsibilities towards society as perceived by a firm or chain. These responsibilities act as principles or basic values that motivate and guide the activities of the firm or chain. The literature on CSR1 provides two typologies that are helpful in analysing business activities. First, there is Carroll's (1979) in which the responsibilities of the firm are di- vided into four categories: economic, legal, ethical, and discretionary responsibilities. Second, there is Wood's (1991) that describes three principles of CSR1: the principles of legitimacy, public responsibility, and managerial discretion. In fact, Carroll's and Wood's typology may be combined into a single one in which Carroll's categories specify Wood's principle of public responsibility. However, as indicated in the literature on business ethics, it is noted that an analysis in which this typology is used may be characterised as too abstract; it may be more fruitful to adopt a more contextual approach (e.g., with the help of Mepham's (1996) ethical ma- trix). On the other hand, also this approach has its pitfalls: the risks of: - ignoring otherwise important ethical issues; - contributing to one-sided perspectives. Corporate social responsiveness The literature offers various interpretations of the concept of corporate social responsiveness (CSR2). Some (e.g., Carroll, 1979; Frederick, 1978; cf., virtue ethics) argue that the concept refers to the capacity of a firm to respond to its environment. However, as it may be hard to determine a firm's latent or potential capacity to respond,

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