CSR sensemaking – a process defined by leadership A case study of an oil company on how the CSR character of the organization evolves and how leadership matters Master thesis by Ani Georgieva, MSc International Business and Politics Supervisor: Itziar Castelló, Department of Intercultural Communication and Management Copenhagen Business School, October 2012 Number of characters: 178.798 1 Abstract The research of this paper focuses on identifying a relatively new organizational process, namely CSR sensemaking in a company. Although the practice of corporate social responsibility in large companies has had an increasing significance, the focus on studying and evaluating CSR initiatives has primarily been on the CSR itself in the form of voluntary sustainability reporting. Paradoxes have been previously pointed out stating that companies with immaculate sustainability reports experience major setbacks or end up in a socially irresponsible deed. Such paradoxes usually show in content-based analyses, i.e. when CSR initiatives are evaluated based on reporting and actual philanthropic engagements. The current study, however, takes the less beaten path of understanding the sensemaking in an organization regarding CSR. Through a discourse analysis, we can find out how the company perceives itself with regards to its stakeholders and its own purpose in business and as a result, define its CSR character. Three periods with three different executive managements give the framework as to how and why the CSR character of the company changes and what are the implications stemming from these changes. Further, the research proposes interdependence between the CSR sensemaking and the leadership of the organization. Key words: CSR sensemaking, responsible leadership, stakeholder relations, organizational identity 2 Acknowledgements This thesis marks the end of a two-year study in Master of Science in International Business and Politics. It has been several exciting months filled with challenges of learning new concepts, understanding more profoundly the theories, and identifying new opportunities for developing the research. I am happy with the learning process and I would wish to thank my supervisor, Itziar Castelló, for the support and the guidance in this learning experience. I hope that this study provides some interesting findings, which could be implemented further. _______________________________ Ani Georgieva 30 October, 2012, Copenhagen 3 Table of Contents 1. Introduction ............................................................................................................................................... 5 1.1 Introduction to the topic: ........................................................................................................................ 5 1.2 Background and research question: ........................................................................................................ 5 1.3 Justification for the research ................................................................................................................... 7 1.4 Scope and delimitations .......................................................................................................................... 8 1.5 Structure of the Thesis ............................................................................................................................ 9 2. Literature review ..................................................................................................................................... 12 2.1 CSR – definition.................................................................................................................................. 13 2.2 CSR and Sensemaking – understanding the “Basu and Palazzo CSR process model” ....................... 16 2.3 CSR and stakeholder theory .............................................................................................................. 22 2.4 Ethical leadership .............................................................................................................................. 26 2.5 Summary ............................................................................................................................................ 28 3. Methodology ............................................................................................................................................... 30 3.1 Introduction ....................................................................................................................................... 30 3.2 The research process ......................................................................................................................... 32 3.3 Limitations ......................................................................................................................................... 41 4. Analysis .................................................................................................................................................... 45 4.1 Introduction to the case: ................................................................................................................... 45 4.2 Empirical Findings .................................................................................................................................. 53 4.2.1 During Lord Browne’s term ............................................................................................................ 54 4.2.2 During Hayward’s term ................................................................................................................... 60 4.2.3 During Dudley’s term (present) ...................................................................................................... 64 5. Discussion ................................................................................................................................................ 71 5.1 Main challenges in business perspective .......................................................................................... 71 5.2 Main opportunities ............................................................................................................................ 77 6. Conclusion ............................................................................................................................................... 80 6.1 Main findings ............................................................................................................................... 80 6.2 Summary ................................................................................................................................................ 84 6.3 Recommendations ............................................................................................................................. 84 6.4 Limitations and future research ........................................................................................................ 85 References ....................................................................................................................................................... 87 4 1. Introduction 1.1 Introduction to the topic: “What we do comes from what and how we think”, wrote the American scholar Jeffrey Pfeffer (2005).In order to understand why some companies undertake certain actions, it is essential to study the shared understanding of meaning within their organization. Achieving such insight can be done by applying a sensemaking perspective. In an environment when companies from the same industry face similar if not identical challenges, they might take completely divergent approaches and follow a different insight as to what is appropriate to do. Faced with severe challenges or crisis management, divergent approaches may appear in the same company. Those approaches can be better understood by looking at the way the company thinks and perceives itself with regards to important issues and its stakeholders. This can, as a result, provide a better understanding of the decisions an organization takes, which concern major corporate activities. 1.2 Background and research question: The concept of organizational sensemaking was entirely new to me and I discovered the theory when I started working on the thesis. In the process of clarifying the topic with my supervisor, after having picked British Petroleum (BP) as a case study organization, I realized there were many paths to pursue and many opportunities to investigate. It took some time to think through what I was truly interested in finding out about this company in relation to the setbacks it had experienced. In the beginning, I was asking the question why a company that had immaculate records on sustainability and that was one of the first oil companies to declare commitment to combating climate change experienced such setbacks that undermined what BP claimed it stood for. My interest in this matter was inclined towards the meaning that the company was giving to the issue of CSR. That is how I considered the theory of sensemaking valuable to my research. The area of interest for the thesis stems from my academic and potentially professional interest in corporate social responsibility and it is an attempt to explore a research area that has not been as widely studied and applied previously. That is another rationale as to how the perspective of sensemaking has 5 been selected as a tool to better understand corporate decisions and to explain significant events that mark not only the