The Glocalization of Corporate Social Responsibility and its Effects on Business Performance in Spain and Taiwan

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(1)The Glocalization of Corporate Social Responsibility and its Effects on Business Performance in Spain and Taiwan. by Eduardo Jesús Jiménez Moro. A Thesis Submitted to the Graduate Faculty in Partial Fulfilment of the Requirement for the Degree to. MASTER OF BUSINESS ADMINISTRATION Major: International Human Resource Development. Advisor: Cheng-Ping Shih. National Taiwan Normal University Taipei, Taiwan June, 2016.

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(3) ACKNOWLEDGEMENT Because there are some decisions in our lives that led us to unknown paths, decisions that make us leave behind everything that we love, paths that need to be faced with the strength of our minds and the support of our hearts, making us stronger for the next steps on our ways. It is walking those sinuous paths when we look around and see the people who are really there willing to give you their hand and help you when you most need it. It does not matter where they are, because you can feel them, they light your way when the day is dark and you are lost in the immensity. In this pathway I have been walking for two years, I have been able to feel the support of a few during my journey. In my academic field, I can only express words of appreciation to professors. To Dr. Yeh who gave me good advises and encouraged me to be always myself, to Dr. Lai who always put a smile on my face and provided me chocolates sweetening my time, and to Dr. Lee who taught me that with the spirit of cooperation we can change the world. Furthermore, I want to specially mention to Dr. Cheng-Ping Shih, advisor in academics, mentor for businesses and a father for life; my admiration and eagerness to learn from him drove me to Taiwan again. He has guided since I wrote the first word of this research and therefore I will always be grateful to him. Moreover, I want to mention the rest of professors Dr. Chang, Dr. Lin, the staff of IHRD and the people from the OIA that always helped me when I need it. I want to thank my football team and classmates for their company during this journey and when the sun went down, Fernando Lin, Loal Perron, Carlos Rojas and Fernando Ramos, my classmates Peter and Ruby; thank you for making my Taiwanese adventure more fun. But the way has not always been a path of roses, life is like it is and I needed to learn and grow from what I have encountered. That’s why when I stop walking and listen to my heart, the words flow and the people who are inside me appear for walking besides me..

(4) My amiga Tracy Lee who put her shoulder when I didn’t stand to cry alone anymore, the person who listened to my concerns and discussed about them, who opened her mind and shared it with me. I will always consider you as a friend. My walking partner Frances Huang, who gave me the best of her, who always supported me despite her Taipei’s temper, who hugged me in loneliness, who touched my heart and light it with her smile, my special person during the last year in Taiwan. Because of this, you will always have a friend who will support you wherever you go. But not only the people who physically supported me on my way did it, there are others I left behind and have been the engine that made me walk when my feet hurt, that made me stand up when I felt. My friends Carlos Chamorro and Ernesto Garcia, who brought me the taste of Spain with their calls and messages. My university classmates Carolina, Teresa, Juanma and Rosbén, who even if we haven’t been in contact that much, I always think about them. Besides them, I need to mention all my friends who collaborate with this research distributing the questionnaire within their companies. My psychologist Ms. Arias, who reminded me the importance of keeping real, encouraging me to go for what I really want and giving me some fresh air when my mind was blocked. And from the deepest part of my heart, my family comes out, the biggest thing in my life, the people I love, the people who will stay inside my heart forever. My brother Andrés Marina, who took me out from darkness when I was lost, who always supported me and reminded me how my laugh sounds, a piece of my heart and a great person who always walks with me. My ying when I am yang, my yang when I am ying. My grandparents who prayed for me, and always make me feel beloved even when they said goodbye to me, my guardians in the sky. My sisters Sonsoles and Carolina who taught me so much about life and make me feel so proud to be the elder brother of such wonderful sisters. Sisters who fight with an unstoppable strength, who overtake the unfairness of the world working for it, they, my reason to fight for the family united against any situation..

(5) My parents Fernando and Pilar, who gave me everything, who support me every day, who have looked for me since I born and before, who take care of me, who always gave me a reason to keep fighting. I would be nothing without them, and therefore, I owe them all. And last, I cannot close this acknowledgement without mentioning Davinia, the person who marked my heart forever, the reason of my happiness when I heard her laugh, the reason of my sadness when I didn't. The biggest light in my sky, when she shines brightly, she makes my path clear. I hope you can always shine as you have shown me.. I owe you all so much. Eduardo Jesus Jimenez Moro.

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(7) ABSTRACT This study analyzes the Glocalization of Corporate Social Responsibility in the modern society and how it affects to the Business Performance of organizations in Spain and Taiwan. In order to empirically analyze these factors, the researcher developed the Glocal CSR model including the United Nations Global Compact and the Local Influences as the main dimensions that influence CSR, and lastly relating CSR with Business Performance. The structural equation model was conducted through a quantitative approach by surveying manufacturing organizations from Spain and Taiwan. The results from both countries support the effects of the glocal dimensions on CSR while also demonstrate the influence of CSR on Business Performance in both countries. Moreover, the research includes T-test analyses comparing on one side Spain and Taiwan, while lastly comparing the self-perception scores obtained from the top managers, middle managers and employees included in the sample.. Key Words: United Nations Global Compact, Local Influences, Corporate Social Responsibility, Business Performance.. i.

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(9) TABLE OF CONTENTS ABSTRACT ................................................................................................................. i TABLE OF CONTENTS ............................................................................................ ii LIST OF TABLES ..................................................................................................... iv LIST OF FIGURES ................................................................................................... vi CHAPTER I INTRODUCTION ................................................................................ 1 Background of the Study ........................................................................................... 1 Purpose of the Study.................................................................................................. 5 Questions of the Study............................................................................................... 5 Significance of the Study ........................................................................................... 6 Delimitations of the Study ......................................................................................... 7 Limitations of the Study ............................................................................................ 7 Definition of the Terms ............................................................................................. 8 List of Acronyms ....................................................................................................... 9 CHAPTER II LITERATURE REVIEW ................................................................. 11 United Nations Global Compact .............................................................................. 11 The Local Influences of CSR ................................................................................... 17 The Necessity of Corporate Social Responsibility in the Global Society .................. 19 The CSR Concept: Evolution, Definition &Characteristics ...................................... 21 CSR & Business Performance ................................................................................. 35 CHAPTER III RESEARCH METHODOLOGY .................................................... 41 Research Framework ............................................................................................... 41 Research Hypotheses ............................................................................................... 42 Research Procedure ................................................................................................. 47 Research Method ..................................................................................................... 49 Population ............................................................................................................... 49 Sample .................................................................................................................... 50 Data Collection........................................................................................................ 51 Measurement Method .............................................................................................. 52 Pilot Study............................................................................................................... 53 ii.

(10) Validity and Reliability ........................................................................................... 53 Reliability Analysis ................................................................................................. 54 Descriptive Analysis ................................................................................................ 55 Structural Equation Modeling (SEM) ...................................................................... 55 Student T-Test for Independent Samples ................................................................. 56 CHAPTER IV DESCRIPTIVE STATISTICS AND PILOT TEST RESULTS ..... 57 Pilot Test Descriptive Statistics ............................................................................... 57 Main Study Descriptive Statistics ............................................................................ 61 Spanis’s Sample Descriptive Statistic ...................................................................... 65 Taiwan’s Descriptive Statistics ................................................................................ 67 Different Rank Employees Descriptive Statistics ..................................................... 69 CHAPTER V MAIN STUDY FINDINGS ............................................................... 73 Main Sample Results ............................................................................................... 73 Spain’s Sample Results ........................................................................................... 80 Taiwan’s Sample Results ......................................................................................... 87 Paired T-Test Comparative Analysis of Spain and Taiwan ....................................... 94 Paired T-Test Comparative Analysis of Different Rank Employees’ Perceptions ..... 96 CHAPTER VI CONCLUSIONS & RECOMMENDATIONS .............................. 105 Conclusions & Managerial Implications ................................................................ 105 Conclusions from the Comparative Analysis between Spain and Taiwan ............... 109 Conclusions from the Comparative Analysis between Different rank Employees ... 110 Future Research Recommendations ....................................................................... 112 REFERENCES ....................................................................................................... 113 APPENDIX A: QUESTIONNAIRE ENGLISH VERSION………………………121 APPENDIX B: QUESTIONNAIRE CHINESE VERSION .................................. 129 APPENDIX C: QUESTIONNAIRE SPANISH VERSION................................... 136 APPENDIX D: PILOT TEST RESULTS .............................................................. 144. iii.

(11) LIST OF TABLES Table 2.1 The UNGC 10 Principles ............................................................................. 13 Table 2.1 The 17 Sustainable Development Goals ....................................................... 19 Table 2.3 Most Used Definitions of CSR in Literature ................................................ 23 Table 2.4 Definitions of CSR ...................................................................................... 25 Table 4.1 Pilot Test Demographic (N=32) ................................................................... 58 Table 4.2 Pilot Test Descriptive Results (N=32) .......................................................... 59 Tabla 4.3 Pilot Test validity and reliability analysis .................................................... 60 Table 4.4 Pilot Test Path Hypotheses Results .............................................................. 61 Table 4.5 Main Study Demographics (N=181) ............................................................ 62 Table 4.6 Main Study Correlation Results (N=181) ..................................................... 64 Table 4.7 Descriptive Statistics of Main Study (N=181) .............................................. 65 Table 4.8 Spanish Sample Demographics (N=81) ....................................................... 66 Table 4.9 Spanish Sample Descriptive Statistics (N=81) ............................................. 67 Table 4.10 Taiwanese Sample Demographics (N=100) ............................................... 68 Table 4.11 Taiwan’s Sample Variables Descriptive Statistics (N=100)........................ 69 Table 4.12 Employee Perceptions Descriptive Statistics (N=111)................................ 70 Table 4.13 Middle Manager Perceptions Descriptive Statistics (N=55) ....................... 70 Table 4.14 Top Management Perception Descriptives Statistics (N=9) ........................ 71 Table 5.1 Main Sample Validity and Reliability Results.............................................. 74 Table 5.2 Main Study path Coefficient Analysis Results ............................................. 78 Table 5.3 Main Study Indirect Effects Results ............................................................. 78 Table 5.4 Main Study R square & Adjusted R Square ................................................. 79 Table 5.5 Spain’s Sample Study Validity and Reliability Results ................................ 81 Table 5.6 Spain’s Sample Path Coefficient Results ..................................................... 85. iv.

(12) Table 5.7 Spain’s Sample Study Indirect Effects Results ............................................. 85 Table 5.8 Spain’s Sample R Square & Adjusted R Square........................................... 86 Table 5.9 Taiwan’s Sample Study Validity and Reliability Results ............................. 88 Table 5.10 Taiwan’s Sample Path Coefficient Results ................................................. 92 Table 5.11 Taiwan’s Sample Study Indirect Effects Results ........................................ 93 Table 5.12 Taiwan’s Sample R Square & Adjusted R Square ...................................... 93 Table 5.13 Independent Sample T-Test for Spanish and Taiwanese Samples’ Results . 95 Table 5.14 Independent Samples T-Test for Employees and Middle Managers Perceptions Results ..................................................................................................... 98 Table 5.15 Independent Samples T-Test for Employees and Top Managers Perceptions ................................................................................................................................. 101 Table 5.16 Independent Samples T-Test for Middle Managers and Top Managers Perceptions ............................................................................................................... 104. v.

(13) LIST OF FIGURES Figure 2.1. The UNGC Management Model. ............................................................... 15 Figure 2.2. UNGC Performance Model. ...................................................................... 16 Figure 2.3. General model of CS/CR and its dimensions ............................................. 26 Figure 2.4. Spanish private organizations engaged with the UNGC by years. .............. 31 Figure 2.5. CSR references made by Spanish companies compared to the EU average 32 Figure 3.1 Glocal CSR Structural Equation Model ...................................................... 41 Figure 5.1 Main study Glocal CSR model results ........................................................ 75 Figure 5.2 Spain’s sample Glocal CSR model results .................................................. 82 Figure 5.3 Taiwan’s sample Glocal CSR model results ............................................... 89 Figure 4.1 PLS structural model. GCSR Model results. ............................................. 141. vi.

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(15) CHAPTER I INTRODUCTION. Background of the Study Rising as the current world largest exporter, China has developed an ambitious project -One Belt One Road- aiming to enhance Europe and Asia commercial trade by building the 21st century “Silk Road” (Central Intelligence Agency [CIA], 2015). For fulfilling this project, international common trade regulations are going to be needed fitting business operations with current policies and standards from Asian and European regions (China Britain Business Council [CBBC], 2015). In this context, Corporate Social Responsibility (CSR) has postulated as one of the biggest challenges for private profit organizations, representing a milestone to connect business operations not only in Asia and Europe but worldwide. However, CSR is not only a way to link business in a responsible way but something bigger. Following what was introduced in the “Post-2015 development agenda” from the 70th General Assembly of the United Nations held in New York, on September 2015 (United Nations [UN], 2015), strategic CSR is considered as the key to achieving a sustainable future, fulfilling the new 17 Sustainable Development Goals (SDGs), which represent a call to action for companies around the world (Global Reporting Initiative [GRI], United Nations Global Compact [UNGC] & World Business Council for Sustainable Development [WBCSD], 2015). Furthermore, the Paris Agreement on Climate Change, which on May 2016 has been signed by 19 countries, remarks the vital importance of drastically reducing the environmental impact of the private sector with the support of international and national standards and regulations (United Nations Framework Convention on Climate Change [UNFCCC], 2016). The global prime relevance of CSR for society started with the end of the Cold War, when the scenery for business became global, unlimited opportunities appeared and organizations started to cross boundaries encouraged by international open trade policies (United Nations Global Compact [UNGC] & DNVGL, 2015). It is at this moment -the 1990s-, when the globalization and CSR movements began to raise with unstoppable strength (UNGC & DNVGL, 2015). In the year 2000, the necessity for a sustainable future and the claim for CSR became global issues of concern led by the United Nations (UN) and the United Nations Global Compact (UNGC) (UNGC & 1.

(16) DNVGL, 2015). Since then, both topics have attracted the attention of all sectors of the global society; from citizens to governors, from NPO’s to private organizations, from academia to media. As written in the UNGC guide to corporate social responsibility UNGC (2014a, p.7) “world’s challenges – ranging from climate, water and food crises, to poverty, conflict and inequality – are in need of solutions that the private sector can help to deliver”. UNGC in 2014 or the UN in 2015 along with all of its members, identified the private sector and its capacity engaging CSR as the solution for some of the most important global problems of the 21 century. A lighting of hope for these problems was expressed by the UNGC in 2014, “businesses are responding, moving beyond their basic responsibilities and going further into a strategic opportunity space. This includes business models, products and services with a joint societal and economic return; publicly advocating for government policies that advance sustainability priorities; and, importantly, collaborating with peers to make systemic changes” (UNGC, 2014a, p.7). Worldwide, private profit organizations and their stakeholders are getting more and more conscious about the necessity and benefits of strategic CSR (UNGC, 2014b). A significant evidence of this concern is shown by the Top 250 Fortune multinational companies’, which more than 80% report about CSR and are involved with CSR initiatives and actions (UNGC & DNVGL, 2015). The performance of an organization and its relationships with the society and contexts in which is operating, as well as its impact on the environment, have become critical facts when measuring the ability of this organization to perform in an effective way and keep their leading positions in the market (International Organization for Standardization [ISO] 26000, 2012). Hence, CSR has become not only a vision but a new advantage strategy for organizations sustainable development (UNGC, 2014a). Nowadays, there are no agreed-upon definitions of what CSR entails (Argandoña & Hoivik, 2009; Carrol, 1999; Dahlsrud, 2006; Garriga & Mele, 2004; Moir, 2001; Nguyen, 2014), but the disagreement among researchers contributes to making CSR one of the most popular topics within the business administration field. In the present research, a deeper discussion about CSR is introduced, and a global definition of CSR is proposed.. 2.

(17) From the last 25 years, the concept of CSR has evolved more than ever due to the changing business contexts in which organizations have operated and the yearly raised importance given from all sectors of society (UNGC & DNVGL, 2015). The result of this evolution is CSR being transformed from a ‘goodwill’ concept (Isaksson, 2012) mostly demanded by activist and visionaries, into becoming a business function, a strategic management component of vital importance to firm level success (Carroll & Shabana, 2010; ISO, 26000, 2012; KPMG, 2011; Luo & Bhattacharya, 2009; UNGC & DNVGL, 2015) and an essential part of a firm’s strategy (Bondy, Moon & Matten, 2012; McWilliams & Siegel, 2011; Noland & Phillips, 2010). In the present research, a deeper discussion about CSR is introduced, and a global definition of CSR is proposed. Although in the last 10 years researchers have found both positive, negative or neutral correlations from CSR on business performance (McWilliams Siegel & Wright 2006; Orlitzky, Schmidt & Rynes, 2003), in the last decade, CSR has moved towards a strategic concept showing its positive and direct effects on BP, as gathered the metaanalysis of Margolis, Elfenbein, & Walsh (2009) and Wang, Dou, & Jia (2015). When CSR is understood as a strategic business concept, recent studies have shown how CSR promotes and improves the financial performance of organizations (EC, 2014; Isaksson, 2012; KPMG, 2013; Nguyen, 2014; UNGC & DNVGL, 2015; Wang, Dou & Jia, 2015), benefits companies in the long term making them increasing their business performance, as well as increasing their prestigious, image, and business opportunities (Carrol & Shabanna, 2010; Mishra & Suar, 2010; Nguyen, 2014; UNGC, DNVGL, Monday Morning & Sustania [MM&S], 2015). Focusing on a Spain, in the last two decades CSR has acquired a high relevance position for the private profit sector (Marca España & Foretica, 2014; Ministerio de Empleo y Seguridad Social [MESS], 2014). Spanish manufacturing companies have not only been encouraged to adopt CSR by national and international institutions but also from private initiatives as UNGC, GRI or ISO (Fernandez, de la Fuente & Gago, 2011). Furthermore, the evolution of CSR strategies in Spain has a direct relationship with its integration process within the European Union (EU) and with the internationalization of Spanish companies (Fernandez, de la Fuente & Gago, 2011). Therefore, for understand. 3.

(18) CSR in Spain, a wider approach to CSR (including the EU influence) must be introduced. According to several researches and global indexes (KPMG CSR global survey, EU statistics, RobecoSam), Spain and its private profit organizations ranked as one of the global leaders engaging in CSR during the last decade (European Commission [EC], 2013a; KPMG, 2011; Lim & Tsutsui, 2011; RobecoSam, 2014). Furthermore, in 2008 the Spanish National Council for Corporate Social Responsibility was funded (Boletín Oficial del Estado [BOE], 2008), while in 2014 the CSR National Plan, implemented by the Ministry of Labor and Social Insurance, was approved (MESS, 2014). Both actions evidence how CSR is being promoted by National initiatives due to the attention and concern acquired within the Spanish politic scene during the last years. In addition, in 2011 the European Commission (EC) started to institutionally promote CSR, encouraging private profit businesses in the European region, as well as country members, to engage in CSR policies and actions, and in this way, increasing the international competitiveness of the region and obtaining global competitive advantages (EC, 2014). Furthermore, in 2014, mandatory directives in CSR reporting were signed by the European Parliament and all the Member States. Moving to Taiwan, it is currently ranked as the 14th most competitive economy in the world by the World Economic Forum in 2015, and recognized as one of the world’s largest producers of electronic-related products with an extensive and wellestablished network of industrial zones (Nguyen, 2014). Taiwan and its manufacturing companies, with $311.4 billion in exports income in 2014 and a drop to $262.6 billion in 2015 (CIA, 2015), will need to adapt the coming regulations if they want to remain international competitiveness. However, CSR this western concept has begun to acquire relevance in the last decade (Low & Ang, 2012) promoted by the government and the pressures of international regulations (Sharma, 2013). Although, in the last 50 years the cultural influences coming from the Confucianism, Taoism, and Buddhism ideologies predominating in Taiwan, have made the private sector to play an essential role in the development of the community and social welfares (Sharma, 2013), the concept of CSR still has a low presence within the 4.

(19) Taiwanese profit private sector (Sharma, 2013). However, the fact that CSR has globally raised as a socio-political concern for governments and business (United Nations [UN], 2015), combined with the recent Taiwanese governmental actions which encourage the private sector to engage in CSR,. have put pressure on Taiwanese. multinational companies to adopt CSR international standards (Sharma, 2013). Within these contexts, this research pretends to empirically show and compare, using the GLCSR theoretical framework, the current situation of the UNGC and CSR in Spanish and Taiwanese private profit organizations, as well as examine the influence that UNGC, the Local Influences and CSR have over the Business Performance of the surveyed organizations, with the last aim to increase their international business competitiveness and promote sustainable development for the benefit of society.. Purpose of the Study The purpose of this study is to empirically research the United Nations Global Compact and the Local Influences effects on Corporate Social Responsibility and how they influence the Business Performance of manufacturing private profit organizations operating in Spain and Taiwan by developing an SEM called GLCSR, showing what the dominant factors are, and comparing the results within these 2 countries. Moreover, the purpose also focuses on the comparative analysis of Spain and Taiwan and the variation on the perception depending on the hierarchy rank of employees.. Questions of the Study Since this research attempts to clarify the impacts and effects of United Nations Global Compact (UNGC), Local Influences (LI), Corporate Social Responsibility (CSR) on the Business Performance (BP) of manufacturing private profit organizations from Spain and Taiwan, the questions of the study are as follow:. 1. Does the UNGC have effects on CSR? 2. Does the LI have effects on CSR? 3. Does CSR have effects on Business Performance?. 5.

(20) 4. Are there significant differences when comparing the Spanish and Taiwanese samples μ’s? 5. Are there significant differences in the perceptions between the different professional levels within the sample?. Significance of the Study In the globalized society, it is impossible to ignore the relevance that Corporate Social Responsibility has acquired as an essential role creating a global sustainable future (GRI, UNGC & WBCSD, 2015), promoting the harmonization, from a mutual interest partnership, between the profit-organizations and the global society. In this context, the present research investigates some of the motives that drive enterprises to embrace CSR, showing what the main factors are. Besides, this research also provides a managerial tool for business to realize and explore what are the dominant factors of the included dimensions are and how they affect Business Performance. Furthermore, this study also shows the weakest factors helping managers create a guide to business operations in their way to improve and gain international competitive advantage. For academia, this research introduces the structural equation model called “Glocal CSR” with the aim to provide empirical and significant evidence of the relations between the UNGC, the LI, CSR and the BP variables. Furthermore, this model can be useful to future researchers and organizations who want to investigate the glocalization of CSR in different populations. Moreover, the research provides a global CSR definition based on the literature review, aiming to solve the controversial and changing essence of this term. In addition, scholars in recent studies have argued that the tendency toward socially responsible corporate behavior varies across countries and that much more research is required to understand why (Campbell, 2007; Maignan & Ralston, 2002). Consequently, this study is significant by using two different samples from manufacturing private profit organizations operating in Spain and Taiwan, allowing the author to compare the CSR status across countries.. 6.

(21) Lastly, the research compares the self-perceptions that employees, middle managers and top managers have over their own organizations, creating a new scenario for future researchers.. Delimitations of the Study The scope of the present thesis is limited by the characteristics of its inner research, and hence, the scope of the thesis investigation and its results are delimited to Spain and Taiwan, while it conclusions shouldn’t be generalized into other countries. Furthermore, the research has been conducted focusing on manufacturing private profit organizations in Spain and in Taiwan, implying that the results cannot be misunderstood and generalized into a macro-national level. Further delimitations are based on the research approach, which intends to examine in one hand, the relationship among the variables of United Nations Global Compact, the Local Influences, Corporate Social Responsibility and Business Performance, while on the other hand, makes a comparison between the results gathered from the Spanish and the Taiwanese samples.. Limitations of the Study The limitations of the study are based on the approach and the way in which the study has been conducted: -The quantitative approach methodology was conducted surveying executives, managers and baseline employees from manufacturing private profitorganizations operating in Spain and Taiwan. Consequently, the results and their conclusions should not be generalized to different populations. -The samples were gathered in specific dates; therefore, further researches using the same methodology can vary. -The questionnaire was used and developed as the measurement tool to collect the data from Spain and Taiwan.. 7.

(22) Definition of the Terms Business Performance (BP): In this study BP means the outcomes resulting from the interplay among an organization’s attributes, actions, and environment (Combs, Ketchen, Crook & Shook, 2005) which can be measured through a financial, customer, internal process and learning and growth perspectives. Corporate Social Responsibility (CSR): In this study CSR refers to a concept whereby companies integrate social, ethical and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis and which delivers long-term value in financial, environmental social and ethical terms. Corporate Sustainability (CS): following KPMG International Survey of Corporate Responsibility Reporting (2013), the most used terms among companies worldwide are corporate responsibility (14%) or corporate social responsibility (25%) and sustainability report (43%). Therefore, corporate social responsibility in this study involves the term sustainability and other similar terms, even if CS is a consequence of the long-term implementation of CSR. Local Influences: The local influences in this study mean the regional and local forces (avoiding international) that can influence or represent a driven force for CSR. As expressed in Hertz (2004) and McWilliams, Siegel & Wright (2006) employees, the union, community groups, NGOs and other stakeholders can be considered as a source of pressure for organizations. Stakeholders: any group or individual who can affect or is affected by the achievement of the organization’s objectives. United Nations Global Compact (UNGC): a call to companies everywhere to voluntarily align their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption, and to take action in support of UN goals and issues (UNGC & DNVGL; 2015).. 8.

(23) List of Acronyms BP – Business Performance BPCP – Business performance customer perspective BPFP – Business performance financial performance BPIB – Business performance internal business BSC – Balance Score-Card CS – Corporate sustainability CSR – Corporate social responsibility CSRCR – Corporate social responsibility communication and reporting CSRMS – Corporate social responsibility management systems CSRREM – Corporate social responsibility resources and environmental management CSRPS – Corporate social responsibility products and services CSRSM – Corporate social responsibility CSRV – Corporate social responsibility vision, values and strategy EC – European commission EU – European Union GCAC – Glocal compact anti corruption GCE – Global compact environment GCHR – Global compact human right GCLR – Global compact labour right LI – Local influences LIE – Local influences employees LIMLB – Local influences media and lobby groups 9.

(24) LIS – Local influences stakeholders SDGs – Sustainable development goals UN – United Nations UNGC – United Nations Global Compact. 10.

(25) CHAPTER II LITERATURE REVIEW This chapter introduces the theoretical support of the present academic research. An introduction to all the dimensions and factors used as variables in this study are presented and described. For this purpose, a detailed literature review was conducted to support the relations between variables. The UNGC and the Local Influences relations with CSR are explained. In addition, CSR evolution and definition are discussed, while general backgrounds of CSR within Europe/Spain, and Asia/Taiwan are described to allocate the terms in the global context. At last CSR and its relation with the business performance are described in an explanatory way. The purpose of this Chapter is to describe the theoretical evidence that support the GLCSR Model framework and its questionnaire.. United Nations Global Compact In the year 1999, the UN Secretary General Kofi Annan made a call for business representatives to support a new sustainable global economy at the World Economic Forum in Davos, showing the necessity of a global and common partnership to promote strategic CSR around the world. Citing his words on that event “I propose that you, the business leaders gathered in Davos, and we, the United Nations, initiate a global compact of shared values and principles, which will give a human face to the global market.” Kofi Annan; World Economic Forum 1999 (UNGC & DNVGL, 2015, p.47). This first call reached to the ears of global leaders and executives, who felt attracted with the idea of implementing deep changes in the way to do business. With the dream of a globalized compact shared values and principles for a global sustainable future, the United Nations started to informally discuss about launching a multi-stake holder initiative for achieving this purposes (UNGC & DNVGL, 2015). One year later, the United Nation Global Compact (UNGC) was launched in July 2000. Due to the UN high relevant position in the international socio-political scene, since the year 2000, the concept of Corporate Social Responsibility stopped to be only acclaimed by activist and NGO’s and started to receive more and more attention from 11.

(26) all the sectors of the society (UNGC, 2014a; UNGC & DNVGL, 2015). In this sense, the UNGC was one of the pioneering institutions to promote guidance for business which wanted to operate accordingly to certain corporate sustainability standards. By following the UN Global Compact definition, “the UNGC is a call to companies everywhere to voluntarily align their operations and strategies with ten universally accepted principles in the areas of human rights, labour, environment and anti-corruption, and to take action in support of UN goals and issues” (UNGC & DNVGL, 2015, p.22). The UN Global Compact works with business to transform our world, aiming to create a sustainable and inclusive global economy that delivers lasting benefits to all people, communities and markets (UNGC & DNVGL, 2015). In the past 15 years, the Global Compact has played a significant and leading role spreading the practices of corporate sustainability around the world (UNGC & DNVGL, 2015). Nowadays, it is one of the institutions with the highest impact promoting CSR to private organizations (McKinsey and Company, 2004; UNGC & Deloitte, 2010; UNGC & DNVGL, 2015). The UNGC has functioned as a global catalyst since it was launched in the year 2000 (UNGC, 2014). With the purpose to become the leading initiative for encouraging the private for profit sector to engage into CSR, the UNGC created a network of organizations highly involved in CSR strategies, where open forums and mutual support can be encounter to create a common sustainable future (UNGC, 2014b; UNGC & DNVGL, 2015). At the time this research is conducted, the UN Global Compact initiative is the leading platform for the development, implementation and disclosure of responsible corporate policies and practices (KPMG, 2011; KPMG, 2013). It is the largest corporate sustainability initiative in the world, with over 8,000 companies and 4,000 nonbusiness signatories based in 160 countries (UNGC, 2014a). The UNGC combines several mechanisms to support CSR strategies: normative principles, networks for learning and co-operation, communication and transparency about CSR activities. All these mechanisms are built around the UNGC frame of reference: The 10 UN Global Compact’s Principles. The UNGC ten principles are. 12.

(27) derived from different international declarations and institutions in pro of human rights, fair labour, environment and anti-corruption (UNGC, 2014a). The UNGC Human Rights principles were based on the UN Universal Declaration of Human Rights signed by UN member in 1948 (see Table 2.2.) The UNGC Labour principles were based on The International Labour Organization (ILO) Declaration on Fundamental Principles and Rights at Work that was adopted by governments, corporations and labor organizations of 177 countries in 1998 defines (see Table 2.2.). The UNGC environmental principles were based on the Declaration and International Plan of Action (Agenda 21) that was adopted at the Rio Conference on Environmental and Development in 1992 as well as the Brundtland Commission Report that requires corporations to avoid large-scale environmental decay (see Table 2.2.). The UNGC anti-corruption principle was based on the 2003 UN Convention against Corruption (UNGC, 2014a) (see Table 2.2.). Table 2.1 The UNGC 10 Principles Topic. Principle. Content. Human Rights. 1. Businesses should support and respect the protection of internationally proclaimed human rights.. Human Rights. 2. Make sure that they are not complicit in human rights abuses.. Human Rights. 3. Corporations should uphold the freedom of association and the effective recognition of the right to collective bargaining.. Labour Rights. 4. The elimination of all forms of forced and compulsory labor.. Labour Rights. 5. The effective abolition of child labor.. Labour Rights. 6. The elimination of discrimination in respect of employment and occupation.. Environmental Values. 7. Corporations should support a precautionary approach to environmental challenges. (continued). 13.

(28) Table 2.1 (continued) Topic. Principle. Content. Environmental Values. 8. Corporations should undertake initiatives to promote greater environmental responsibility. Environmental Values. 9. Corporations should encourage the development and diffusion of environmentally friendly technologies. Anti10 Corporations should work against corruption in all its Corruption forms, including extortion and bribery. Values Note: adapted from “Guide to corporate sustainability” by UNGC (2014a).. The UNGC principles can be thought as the epicenter of the UNGC initiatives and values. Consequently, the 10 principles work for organizations as the performance guideline in terms of CSR and CS (UNGC & Deloitte, 2010). Moreover, when UNGC encourage private profit organizations to become sustainable by engaging CSR, companies are asked to follow a five steps procedure (UNGC & DNVGL, 2015). As a first request, the UNGC demands organizations to operate responsibly in line with ten UNGC universal principles. A second request based on taking strategic actions that support the society around them. A third request establishing high commit at the managerial level of the organization. A fourth request to report annually on their efforts to promote and implement CSR. And a fifth request demanding local engagement where they have a presence (UNGC & DNVGL, 2015). Moreover, since 2000 the UNGC has been working in close collaboration with Deloitte Touche Tohmatsu to develop a management model to help, support and guide partner organizations implement their CSR guidelines successfully (UNGC & Deloitte, 2010). In 2010, the UNGC Management Model was published (see figure 2.1.) and since its releasing, it has worked as a framework to guide corporations in their implementation and achievement of CSR policies and standards (UNGC & Deloitte, 2010). The model establishes 6 steps as the framework of the CSR implementation process. The Model is flexible and should be used to guide annual strategy planning and execution efforts in relation to integrating the Global Compact principles, but as the 14.

(29) UNGC & Deloitte explain, “It can also spark innovative ideas aimed at creating value for shareholders and stakeholders over the long term” (UNGC & Deloitte, 2010 p.6). Furthermore, according to the UNGC guideline, the process of engaging CSR strategies by following the management model is a cyclic process (UNGC & Deloitte, 2010); oriented to be used in a strategic way for organizations when implementing internal and external CSR. Through a continued usage of the model, organizations will achieve long term improvement for themselves as well as for their stakeholders and shareholders (UNGC & Deloitte, 2010; UNGC & DNVGL, 2015).. Figure 2.1. The UNGC Management Model. Adapted from UN Global Compact Management Model Framework for Implementation by United Nations Global Compact (UNGC) & Deloitte, 2010, p.8. As the UN Management model indicates, when organizations want to follow and engage the UNGC principles and values, the first step of the process starts with the commitment from the leaders of the organizations.. 15.

(30) The UNGC Commitment and Leadership in the Private ProfitOrganizations Today we can affirm that leaders and managers in organizations have direct impact to the organizational culture and innovation (Jung, Chow & Wu, 2003; Robbins & Judge, 2013 p.554; Schein, 2010). Following McWilliams, Siegel, & Wright (2006, p.3) corporate leaders are mindful of the fact that business norms and standards, regulatory frameworks, and stakeholder demand for CSR can vary substantially across nations, regions, and lines of business. Therefore, they represent the first milestone in the pathway to engage in CSR. As shown in the UNGC Management Model (see Figure 2.1.) and the UNGC Performance Model (see Figure 2.2.), engaging the UNGC CSR standards starts with the vision and commitment from the leaders and shareholders of the private profit organizations (UNGC, 2007).. Figure 2.2. UNGC Performance Model. Adapted from “After the signature. A guide to engagement in the United Nations Global Compact” by United Nations Global Compact (UNGC), 2007.. 16.

(31) The leaders are the main drives of the vision throughout the organizations (UNGC & Deloitte, 2010; UNGC & DNVGL, 2015; UNGC, 2007). However, quoting the UNGC makes clear that the vision should be commonly achieved and known for all the members within an organization, “leadership commitment to improved social and environmental performance is crucial in effecting lasting change. However, to have maximum effect, this message must be widely communicated throughout the organization and beyond” (UNGC, 2007, p.11). Although top management and executives are the part of the firm who can more easily know the degree of commitment to the UNGC principles, employees are also an essential piece when referring to CSR standards, and hence, their perceptions have high value whether we want to understand the current status of CSR within organizations. Moreover, as shown by international surveys like Rowland International (2006) and conferences “HR Leadership: Workforce 2020 and the Future of Work”, there are significant differences between employees and executives on their perceptions about organizational culture, values and management strategies. Therefore, aiming to avoid a biased image of organizations, the employees in this study are understood as a key element that will allow the research to draw a better understanding of the current UNGC and CSR situation within the surveyed multinational private profit organizations.. The Local Influences of CSR There is growing interest among managers in the antecedents and consequences of CSR. Following McWilliams, Siegel & Wright, (2006, p.3) “executives in organizations are also aware that their managers are under constant pressure from employees, suppliers, community groups, NGOs, and government to increase their involvement in CSR”.. Stakeholders The local influences in this study mean the regional and local forces (avoiding international) that can influence and represent a driven force for CSR. As expressed in Hertz (2004) and McWilliams Siegel & Wright (2006) employees, the union, community groups, NGOs and other stakeholders can represent a source of pressure for organizations. 17.

(32) For this study, we have highlighted the Employees and the Media & Lobby Groups influences to remark the impact of these groups among the other stakeholders of the organizations.. Employees In addition to leaders, employees, as individuals inside the organization, are also key contributors for organizational development and change (Robbins & Judge, 2013). Quoting Robbins & Judge (2013, p.555) employees are great connoisseurs and contributors of organizational culture due to the socialization process. Therefore, employees also represent a driven force to engage in CSR. Furthermore, McWilliams, Siegel & Wright (2006) assumed employees as one of the main factors for companies to engage in CSR.. Media and Lobby Groups From the 1990s, lobby groups, as NGOs and activist platforms, have represented the biggest claim against corporations’ human rights and environmental abuses, corporations’ corruption scandals and other facts that have impacted the image and overall perceptions of the private for profit sector (Hertz, 2004). All these cases have been published by international and local media, impacting the image of corporations – in 2001, the multinationals companies were the least trusted institution in Europe far behind the Church, the local media or the European Union (Hertz, 2004). Furthermore, with the irruption of internet, and the access to unlimited information, activist and NGOs have increased their scope and made a bigger call to society for realizing the impact that the private sector was having. In this context, international institutions as the United Nations or the World Economic Forum, national governments and citizens demanded corporations to increase the consciousness of their actions and impact in the global society. As a response, corporations awarded of the critical situation regarding with society, reacted and have followed the trend to engage in CSR actions (UNGC, 2014a). But not only external forces were the agents of awareness. Inside organizations, the trade union has represented the main voice to claim in pro of CSR (McWilliams, Siegel & Wright, 2006).. 18.

(33) The Necessity of Corporate Social Responsibility in the Global Society The statement extracted from the speech of the Secretary General of the United Nations Ban Ki-Moon in 2015 denotes the emergency to attract the private sector in the commitment for a common responsible and sustainable future. “….[W]e need companies to gear up for implementation of the SDGs. Scalable partnership models aligned with the goals will be essential. But, significant progress will result only when companies go further, and integrate the goals into business strategies, research and development and new product development” (GRI, UNGC & WBCSD, 2015, p.9). In addition, the year 2015 has represented a milestone in the pathway to achieving a sustainable future. The 69th United Nations General Assembly held in New York on September 2015, gathered 193 member states and the heads from other international institution, who formally agreed to the 70.1 resolution “Transforming our world: the 2030 Agenda for Sustainable Development” which included 17 Sustainable Development Goals (SDGs) (See Table 2.1.), in a call to global business to understand their key role in the future society.. Table 2.1 The 17 Sustainable Development Goals Goal. Sustainable Development Goals. 1. End poverty in all its forms everywhere. 2. End hunger, achieve food security and improved nutrition and promote sustainable agriculture.. 3. Ensure healthy lives and promote well being for all at all ages. 4. Ensure inclusive and equitable quality education and promote life-long learning opportunities for all.. 5. Achieve gender equality and empower all women and girls. 6. Ensure availability and sustainable management of water and sanitation for all. 7. Ensure access to affordable, reliable, sustainable and modern energy for all (continued) 19.

(34) Table 2.1 (continued) Goal. Sustainable Development Goals. 8. Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all. 9. Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation. 10. Reduce inequality within and among countries. 11. Make cities and human settlements inclusive, safe, resilient and sustainable. 12. Ensure sustainable consumption and production patterns. 13. Take urgent action to combat climate change and its impacts. 14. Conserve and sustainably use the oceans, seas and marine resources for sustainable development. 15. Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss. 16. Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels. 17. Strengthen the means of implementation and revitalize the global partnership for sustainable development. Source: The United Nations General Assembly. 70/1. Transforming our world: the 2030 Agenda for Sustainable Development. United Nations (UN), 2015.. As the UN Global Compact did it in the year 2000, the UN is making a call for a multi-stakeholder partnership to support the SDG’s. In this call, the private sector is considered as the key engine to embrace sustainable development and future (GRI, UNGC & WBCSD, 2015). In addition, as business interests are increasingly overlapping with societal interests and human development objectives, responsible business practices and crosssector partnerships play an essential role in the way to achieve a common social and environmentally sustainable development (UNGC, 2007). Therefore, promoting a more 20.

(35) inclusive and stable global market through the active engagement of businesses in CSR will be essential to achieve the SDG’s. But furthermore, the role of business and the industry in international development is not anymore limited to mobilizing financial resources (United Nations Development Group [UNDG], 2015). It lies more fundamentally in the impact of their core operations on the issues covered by the proposed SDGs. The private sector has traditionally been the driver of scientific and technological development, representing a dynamic and powerful force in innovative capacity (UNDG, 2015). And hence, the private profit organizations are understood by the United Nations, as instrumental in knowledge sharing and technology transfer, which are crucial to sustainability and economic development (UNDG, 2015). Consequently, these arguments are considered motivated the United Nations to make a call for partnership with the private profit organizations in pro of CSR, while also a call for the UN state member was done to enhance the national and international regulations and standards of CSR.. The CSR Concept: Evolution, Definition &Characteristics The history and evolution of CSR are related with the history of humans and our concern for a sustainable and an inclusive future. The origin and early interest in the academic field about the concept of CSR is still confused, different researchers propose different dates and authors as the first developer of the concept. Some studies date back the origins of CSR to the XVIII century, when in 1713 Hans Carl von Carlowitz coined the concept of sustainability using the example of forest management (UNGC, 2014b).. Half century later, the. concept of Corporate Responsibility appeared when the father of the liberal economy Adam Smith introduced it in his writing “The wealth of nations” in 1776 (UNGC, 2014b). Moreover, further studies date the origins of CSR and its academic interest in the middle of the XIX century (Doane, 2005; Duran & Radojicic, 2004). Moving into the XX century, in the 1930s, the debate of CSR begun between US scholars, with the Columbia professor Adolf A. Berle and Harvard professor E. Merrick Dodd (Cochran, 2007). However, the majority of authors understand and attribute the 21.

(36) first CSR definition to Howard R. Bowen, who in 1953 published his book Social Responsibility of the Businessman (Garriga & Mele, 2004; Nguyen, 2014), and establishing the new era of CSR (Carroll, 1999) in a context where the Stakeholder Theory was just developed by Edward Freeman in his book Strategic Management: A Stakeholder Approach. In this context, when CSR discussions started, ethical and moral arguments were the drivers. Since then CSR activities have become more holistic and professional (UNGC, 2014a) trying to be integrated into the strategic vision of private profit organizations. Moving forward, during the XX century, there has not emerged any widely accepted definition, although a lot of academic research and development has been made within the CSR field (Argandoña & Hoivik, 2009; Carroll, 1991; Dahlsrud, 2006; Garriga & Mele, 2004; Moir, 2001; Nguyen, 2014). To give an appropriate context for this situation, it is needed to understand the constant changes that business models and private profit organizations need to implement if they want to adapt themselves when crossing boundaries (Robertson, 1995; UNGC, 2014a) and especially during the last 25 years with the globalization; however we realize that the topic has been on the table for almost a century now due to the impact for the society. During the decade of the 1990s, the concept of CSR has experienced an exponential growth in relevance for governments and organizations, it has as well coped many researches within the business management field (UNGC & DNVGL, 2015). A global market appeared as a consequence of the end of the Cold War, and hence the world become a smaller place (Huntington, 1993), or “flatter” as the author Thomas Friedman wrote in 2005. As a direct consequence, markets were enlarged and the tactics and strategies of producers worldwide were projected accordingly. Our globalized world contributes to overcoming spatial barriers (Robertson, 1995) corporations take the chance to operate globally and therefore need to adopt different CSR regulations. CSR is a concept that needs to be contextualized (Maon, Swaen & Lindgreen, 2015). The present research locates the concept of CSR in the modern global society in the European and Asian regions. When we say that there is not a unique definition for CSR (Argandoña & Hoivik, 2009; Carrol, 1999; Dahlsrud, 2006; Garriga & Mele 2004; Moir, 2001; Nguyen, 2014), is also assumed that not having a homogeneous construct of CSR can lead to confusion 22.

(37) among scholars. Consequently, that’s the main motive of why this research has followed one of the latest meta-analysis investigating the definition and evolution of CSR (Dahlsrud, 2006) in Europe, and departing from this point, had built and acquired a definition of the concept. According to the work done by A. Dahlsrud (2006) on his paper “How corporate social responsibility is defined” (see Table 2.3), the most expanded and used definition of CSR among the academic researches was proposed by the Commission of the European Communities (CEC) in 2001. Table 2.3 Most Used Definitions of CSR in Literature Definition source. Definition. Frequency count. Commission of the European Communities, 2001. A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.. World Business Council for Sustainable Development, 2000. Corporate social responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large.. 286. 156. Note. Adapted from “How Corporate Social Responsibility is defined: an Analysis of 37 Definitions” by Alexander Dahlsrud A. 2006. Copyright 2006 John Wiley & Sons, Ltd and ERP Environment Following Dahlsrud (2006) work, we have taken some key elements that according to the research framework we understand that should be presented when talking about CSR: the consideration of ethical social and environmental concerns in business operations, the concept of interaction with stakeholders, and a concept of the voluntary essence of CSR. Therefore, when analyzing the CEC (2001) definition of CSR, it includes the social and environmental considerations fitting the UNGC of CSR. However within this definition, there is no mention to an ethical dimension. Thus, with the purpose to add the concept of ethical concerns, the definitions of The Business for Social 23.

(38) Responsibility (2000) (see table 2.3) and the definition made by the UN Global Compact are going to be included in our CSR definition for this research. However, since the Commission of the European Communities definition was published in 2001, the concept of CSR has not stopped to evolve. The result of this evolution is CSR being transformed from a ‘goodwill’ concept mostly demanded by activist and visionaries (Isaksson, 2012), to becoming a business function, a strategic management component of vital importance to firm level success (Carroll & Shabana, 2010; ISO, 26000, 2012; KPMG, 2011; Luo & Bhattacharya, 2009; UNGC & DNVGL, 2015) and an essential part of a firm’s strategy (Bondy, Moon & Matten, 2012; McWilliams & Siegel, 2011; Noland & Phillips, 2010). Consequently, the concept of CSR should have a direct relationship with the business strategic orientation of organizations (Bondy et al., 2012; Carroll & Shabana, 2010; Isaksson, 2012; ISO, 26000 2012; KPMG, 2011; 2013; Luo & Bhattacharya, 2009; McWilliams & Siegel, 2011; Noland & Phillips, 2010; UNGC & DNVGL, 2015). To add the strategic value of CSR, and since we are taking the UNGC guidelines and principles as a main factor of influence; we propose a definition including what the UN Global Compact introduced about the strategic dimension of CSR. Therefore, understanding the term “strategic” as a successful long-term vision, we agreed upon the UNGC definition that states “CSR delivers long-term value in financial, environmental social and ethical terms” (UNGC, 2014a, p. 9) (see table 2.4.).. 24.

(39) Table 2.4. Definitions of CSR Source of the definition. Definition of CSR. Commission of the European Communities, 2001. A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis. World Business Council for Sustainable Development, 2000. Corporate social responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as the local community and society at large.. Corporate sustainability is a company’s delivery of longterm value in financial, environmental, social and ethical terms. Note: Adapted by the author for the research purposes of the study. UN Global Compact, 2014. The result from the combination of the definitions from Commission of the European Communities (2001), World Business Council for Sustainable Development, 2000 and UNGC (2014) (see table 2.4.) is what this research adopted as CSR. Understanding CSR as a concept whereby companies integrate ethical (WBCSD, 2000), social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis (CEC, 2001) and that delivers long-term value in financial, environmental social and ethical terms (UNGC, 2014a, p. 9). Implementing long-term CSR actions, would allow achieving corporate sustainability as introduced in the General model of Linnanen & Panpanaan (2002) and Van Marrewijk (2003) (see Figure 2.2.). For this reason, in the present research, the CSR definition has combined corporate social responsibility and corporate sustainability rising as a single concept.. 25.

(40) Figure 2.3. General model of CS/CR and its dimensions. Adapted from “Concepts and Definitions of CSR and Corporate Sustainability: Between Agency and Communion” by van Marrewijk, M., 2003, p.102.. Corporate Social Responsibility in the European Union With the look in the future, and following the global trend of CSR, in April 2014 the European Parliament adopted pioneering mandatory regulations on the disclosure of nonfinancial and diversity information by certain large companies established in the EU (UNGC, 2014b). The directive, introduced measures that will strengthen the transparency and accountability of an estimated 6,000 companies, which will be required to report on key human rights and environmental issues (UNGC, 2014b, p.187). As the Member of the European Parliament Raffaele Baldassarre expressed in (UNGC, 2014b, p.187) “The new rules will enable forward looking business leaders to address this demand and to fully make use of the huge potential of CSR in order to increase their competitiveness while contributing to smart and sustainable growth in Europe”. With the idea of gain international competitiveness while building a sustainable future, the European region postulates CSR as a key element for business operations.. 26.

(41) However, the European business environment has long been characterized by the presumption that corporations have certain obligations with the civil society, and they should transcend their responsibilities to the stakeholders (Doh & Guay, 2006). Nowadays, the demand by investors and civil society for greater transparency and accountability of undertakings is very strong in Europe (UNGC, 2014b). But it is from the 1990’s, when Europe started to present pioneering records promoting and supporting CSR within the region. Innovative reporting actions were developed more than 20 years ago (Adams, Hills & Roberts, 1998). Initiatives like The French bilan social (Christophe & Bebbington, 1992), The eco-balance sheets from the Danish Steel Works (Bank-Jorgensen, 1993), The quantified environmental balance sheet produced by EniChem (Bartolomeo, 1994) or The BSO/Origin’s financially quantified environmental accounts (Gray & Symon, 1992; Huizing & Dekker, 1992) has made Europe a global reference in the CSR field. Moreover, the tradition of CSR raised its importance supported by the European Commission (Habisch, Jonker, Wegner & Schmidpeter, 2005). After the global implementation of the Millennium Development Goals (MDGs), the European Commission has actively supported the development of CSR as a way to achieve the MDG’s worldwide (EC, 2014). One of the milestones in the promotion of CSR across Europe occurred in 2011, when Compendium on Public CSR policies in the EU was published to showcase CSR activities across EU state members (EC, 2014). As appear in European Commission (2014), in October 2011 the EC launched Communication on a Renewed EU Strategy 2011 – 2014 for CSR which stressed Corporate Social Responsibility as the responsibility of enterprises for their impacts on society. From this strategy, “governments are still seen to be important facilitators of CSR but beyond this, businesses are encouraged to be the ‘agents of CSR” (EC, 2014, p.9). Hence, sociopolitical drivers contributes bridging macro-level, socio-political facets of CSR with its meso-level (Maon, Swaen & Lindgreen, 2015). Nowadays Europe and European business hold a CSR leading position in the world (Isaksson, 2012; KPMG, 2011; 2013; UNGC & DNVGL, 2015), partly due to the emphasis placed on responsible business included in the EU policy agenda (EC, 2014),. 27.

(42) but also due to the labour of private initiatives which are enhancing European businesses to behave in sustainable and social responsible ways (UNGC, 2014b). Furthermore, as published in the European Commission (2014), a particular priority for the region was to align the European and global CSR approaches improving European interests and opportunities abroad. This willingness has been promoted by calling EU enterprises to adopt internationally recognized CSR guidelines such as the UN Global Compact (EC, 2014). In addition, the European Commission has been monitoring the commitments of European enterprises into such international CSR guidelines (EC, 2014). A research from the EC on March, 2013 showed up that 68 % of the sample businesses referred to “corporate social responsibility” or an equivalent term, and 40 % referred to at least one international CSR instrument in their business strategies (EC, 2013a). In addition, findings revealed that the UN Global Compact is the most commonly referenced instrument within the region (EC, 2013a), and consequently, the initiative with the highest impact for European profit organizations when engaging and implementing CSR. Overall, the European context and its institutions have shaped CSR making it an essential consideration to European businesses and other organizations willing to operate within the region.. Corporate Social Responsibility in Spain After experiencing a long-term recession from the global financial crisis of 2008, in 2014 Spain marked the first full year of positive economic growth in seven years (CIA, 2015). As a consequence of the global financial crisis Spain's GDP contracted by 3.7% in 2009 ending with a 16-year growth trend (CIA, 2015). Furthermore, Spain’s economy has continued suffering the consequence of the economical earthquake and it has kept contracting without recovering the levels of 2007 (CIA, 2015). In 2013 the government used public expenditure to rescue the struggling banks exposed to bad-governance, the collapse of Spain's depressed real estate and construction sectors - and in January 2014 completed an EU-funded restructuring and recapitalization program (CIA, 2015). 28.

(43) Following data from the CIA (2015) and Spanish Ministry of Economics 2015, credit contraction in the private sector, fiscal austerity, and high unemployment weighed on domestic consumption and investment until 2014. The unemployment rate rose from a low of about 8% in 2007 to more than 26% in 2013, but labor reforms prompted a modest reduction to an overall 22% in 2015, however the unemployment rate for population under 25 remain in a 45% level. Facing this crude economic situation, the central government through the Ministry of Employment and Social Security (MESS) 2014) has identified CSR as a way to fight unemployment finding new business opportunities and increasing the international competitiveness of the country (MESS, 2014). According to the data collected in the CIA factbook (2015) “Exports were resilient throughout the economic downturn and helped to bring Spain's current account into surplus in 2013 for the first time since 1986, where it remained in 2014-15. Rising labor productivity and an internal devaluation resulting from moderating labor costs and lower inflation have helped to improve foreign investor interest in the economy and positive FDI flows have been restored”. Spain’s economy is in a phase of profound adjustment due to large imbalances in its macroeconomic during recent years (Marca España & Foretica, 2014). However, this phenomenon should not overshadow the country’s potential for sustainability and long term global competitiveness. As expressed by Fernandez, de la Fuente & Gago (2011), the evolution of CSR in Spain has a direct relationship with its integration process within the EU and with the internationalization of Spanish companies. Although CSR is linked to a voluntary basis, the latest directives from both European institutions and Spanish government over the last decade have significantly contributed in the promotion and implementation of CSR among Spanish profit organizations (EC, 2013b). In 2008, it was approved the creation of the CSR State Council (Boletín Oficial del Estado, 2008), and in 2011 the 2/2011 national regulation for Sustainable Economy was approved promoting and enhancing CSR at a national level. Moreover, in 2014 the CSR National Plan was published by the Ministry of Labour and Social Insurance as an innovative initiative from the central government. The aim of these national measures. 29.

(44) was to engage and promote CSR among both public and private organizations in Spain (MESS, 2014). From the central government there exists a clear aim to promote CSR due to the positive and significant outcomes that involve. As expressed from the National Government, Corporate social responsibility can be a tool to help and enhance the resilience of the Spanish economy, which after years of financial crisis, have led to a significant loss of employment (MESS, 2014). Therefore, it is understood CSR as a strategic tool that can help improving the Spanish overall situation in both the macro and the micro economies. But not everything has been positive in the way of CSR in Spain. Indeed, the crisis of the financial system started in 2008 has shown signs of inadequate implementation of CSR and malpractice in the management of corporate governance linked to a political class that dominated the management of the national savings banks, accounting for nearly 50% of the national financial system (EC, 2013b), and that led Spain to the current situation of high national debt. Fortunately,. the. leading private. Spanish banks were outside the problem and have significantly contributed to support the financial system as a whole (EC, 2013b). In a global scan, Spain holds leading positions in the most reputable global CSR rankings. With the largest Spanish companies occupying leading position in rankings like Dow Jones Sustainability Index (DJSI) and the FTSE4Good Index which measure sustainability performance (EC, 2013b; KPMG, 2011; 2013; MESS, 2014; Marca España & Foretica, 2014; RobecoSam, 2014). Besides, other European countries show high results in these indexes with large companies from Italy, Spain and the UK leading the world for the quality of CR reports (KPMG, 2013). In an overall perspective, Spain can be seen as a global reference on the CSR field; furthermore, when referring to the UNGC engagement Spain presents the highest results within the European Union (see Figures 2.4 & 2.5) (EC, 2013; MESS, 2014). In 2013, one of the most prestigious surveys made at a national level, including 147 leading private profit organizations operating in Spain, showed great CSR scenery for the private sector. Results showed that the UN Global Compact principles were included in the 48% of the strategic business orientation of the Spanish private 30.

(45) organizations (Club de Excelencia en Sostenibilidad CES, 2013). 86% of the companies quantified the tangible and intangible results of all projects of CSR. Comparing with the 2011, there has been a slightly increase on the percentage of the companies who has a CSR management system (50%) (CES, 2013). While when we talk about the communication of CSR, there has been a significantly reduction of the number of companies (only 5% of the total) that do not provide information on corporate responsibility (CES, 2013). Furthermore, 79% of companies have sponsorship activities related to research and education, while 93% of the organizations have implemented cultural patronage practices (CES, 2013).. Nº of Spanish organizations reporting following GRI standards. Nº of Spanish organizations engaged with the UNGC.. Figure 2.4. Spanish private organizations engaged with the UNGC by years. Adapted from “Estrategia española de responsabilidad social de las empresas” Ministerio de Empleo y Seguridad Social. Gobierno de España. [Ministry of Employment and Social Security. Spanish Government.] 2014, p.13.. 31.