MANAGING CORPORATE SOCIAL RESPONSIBILITY

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W. TIMOTHY COOMBS & SHERRY J. HOLLADAY

MANAGING CORPORATE SOCIAL RESPONSIBILITY A Communication Approach

A John Wiley & Sons, Ltd., Publication

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This edition fi rst published 2012 © 2012 W. Timothy Coombs and Sherry J. Holladay

Blackwell Publishing was acquired by John Wiley & Sons in February 2007. Blackwell’s publishing program has been merged with Wiley’s global Scientifi c, Technical, and Medical business to form Wiley-Blackwell.

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Library of Congress Cataloging-in-Publication Data

Coombs, W. Timothy. Managing corporate social responsibility : a communication approach / W. Timothy Coombs, Sherry J. Holladay. p. cm. Includes bibliographical references and index. ISBN 978-1-4443-3629-0 (hardback) – ISBN 978-1-4443-3645-0 (paperback) 1. Social responsibility of business. 2. Business communication. I. Holladay, Sherry J. II. Title. HD60.C6347 2011 658.4'08–dc23 2011017060

A catalogue record for this book is available from the British Library.

This book is published in the following electronic formats: ePDFs 9781118106655; Wiley Online Library 9781118106686; ePub 9781118106662; Kindle 9781118106679

Set in 10/12 pt Sabon by Toppan Best-set Premedia Limited

1 2012

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We dedicate this book to Jeanne, Tom, and Dorothy.

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Contents in Detail ix

Acknowledgments xiii

1 Conceptualizing Corporate Social Responsibility 1

2 Strategic CSR 29

3 CSR Scanning and Monitoring 51

4 Formative Research 63

5 Create the CSR Initiative 89

6 Communicate the CSR Initiative 109

7 Evaluation and Feedback 137

8 CSR Issues 153

References 165

Index 177

Contents

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Acknowledgments xiii

1 Conceptualizing Corporate Social Responsibility 1

Box 1.1: The Sullivan Principles 2 Corporate Social Responsibility: Seeking Parameters 5

Defi ning CSR 6 Box 1.2: Defi nition of CSR 8

Benefi ts and Costs of CSR 9 Two Sides of CSR Cost-Benefi t Analysis 9 CSR Costs for Corporations 10 CSR Costs for Society 12 CSR Benefi ts for Corporations 13 CSR Benefi ts for Society 14

Winning and Sustaining Support for CSR 14 Other Conceptual Questions about CSR 16

CSR: Modern or Historic? 16 Box 1.3: Forest Stewardship Council (FSC) Standards 19 Forms of CSR 20 Where Is CSR’s Home? 22 Should CSR Standards Be Localized or Globalized? 24

Conclusion 27

2 Strategic CSR 29

Characteristics of the Corporation 31 Stakeholder Expectations and the Importance of

Organizational Identifi cation 32 Reputational Benefi ts of CSR 35

Contents in Detail

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x Contents in Detail

Perceived Motives for CSR Initiatives 38 General Strategic Guidance: Approaching the CSR Process

as Change Management 44 Everyone Loves a Good Story 45

The CSR Process Model: A Brief Preview 47

3 CSR Scanning and Monitoring 51

Issues Management 53 Scanning and CSR 54

Prioritizing CSR Concerns 54 Monitoring and CSR 57 Scanning and Monitoring in Concert 58 Stakeholder Engagement’s Role in Scanning and Monitoring 58 Conclusion and Critical Questions 60

4 Formative Research 63

Researching Stakeholder Expectations for CSR 67 Box 4.1: MyStarbucksidea CSR Suggestions 68 The Expectation Gap Approach 69 Box 4.2: IKEA Child Labour Code of Conduct 71 Origins of Expectation Gaps 73 Box 4.3: Pinkwashing Detection 75 Relevance of Operant Conditioning Theory to

Stakeholder Challenges 77 The Alignment Approach 80

The Counterbalance: Corporate Concerns 85 Conclusion and Critical Questions 85

5 Create the CSR Initiative 89

Selecting the CSR Initiatives: Appreciating the Contestable Nature of CSR 90

Differing CSR Expectations among Stakeholders 90 Stakeholder Salience 91 Box 5.1: Stakeholder Salience 92

What Constitutes CSR? 92 Stakeholder Participation in Decision Making 94 Organizational Justice in the Engagement Process 96

The “Right Amount” of CSR 98

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Contents in Detail xi

When Employees Challenge CSR: Considering Internal Stakeholders 99

Preparing for Negative Stakeholder Reactions: Message Mapping 101

Developing CSR Objectives 101 Box 5.2: Message-Mapping Template 102 Process versus Outcome Objectives 103

Conclusion and Critical Questions 105

6 Communicate the CSR Initiative 109

CSR Promotional Communication Dilemma 110 Box 6.1: Overview of Corporate-Activist Partnerships 116

Communication Channels for CSR Messaging 116 Overview of Communication Channels for CSR 117 Box 6.2: Social Media Overview 118 Employees as a Communication Channel 122 External Stakeholders as a Communication Channel 123 Strategic Application of Social Media to

CSR Communication 124 The Overall CSR Promotional Communication Strategy 128

Annual Reports and CSR Communication 128 Conclusion and Critical Questions 133

7 Evaluation and Feedback 137

Evaluation 138 Assurance and CSR Evaluation 141

Stakeholder Engagement in the Evaluation Process 142 Box 7.1: Musgrave Group Assurance Statement 2006 143 Box 7.2: Basic ROI Formula 145 Considering Return on Investment 145

Feedback 146 Feedback from Stakeholders on the CSR Process 147 The Communication Audit 148

Conclusion and Critical Questions 148

8 CSR Issues 153

Overarching Concerns for CSR Initiatives 154 Responsibility for CSR Initiatives 155 Limitations from Industry, Culture, and Law 157

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xii Contents in Detail

Industry Standards 157 The Culture and Socioeconomic Context 158 Box 8.1: Culture and Activism 160 The Legal Context 161 Beyond Limitations 161

Parting Thoughts 162

References 165

Index 177

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Many individuals supported us along the way to make this text a reality, and to all we are very grateful. Most importantly, we thank Elizabeth Swayze, our editor at Wiley – Blackwell, for continuing to be an enthusiastic and responsive advocate for our work. This text, along with our previous publications with Wiley – Blackwell, has benefi ted from Elizabeth ’ s encour- agement and judicious feedback. Elizabeth ’ s guidance has enabled us to pursue projects that are important to our discipline, accessible to our readers, and often enable us to push the boundaries of the status quo.

We owe thanks to our production team who worked hard to get our manuscript into shape. Matthew Brown ably supervised the process and amazingly kept everyone on a tight schedule. We acknowledge Dave Nash, who worked with permissions and images to secure visual elements we believed would enhance the book. Dave persistently sought permissions from often reluctant (and sometimes completely uncooperative) sources. We also thank Cheryl Adam, our copy – editor. Cheryl ’ s competence undoubtedly makes us look better and adds to our readers ’ experiences with the material in our book.

We also thank the scholars who reviewed the early version of the manu- script and offered suggestions that enhanced the book.

W. Timothy Coombs Sherry J. Holladay

University of Central Florida, Orlando

Acknowledgments

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Home Depot, the world ’ s largest home improvement retailer, operates in the US, Canada, Mexico, and China. Home Depot supports “ Team Depot, ” a volunteer program led by store associates that participates in community programs. Courtesy of Volunteer Canada

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1

Conceptualizing Corporate Social Responsibility

Apartheid is an historical artifact for many people reading this book rather than a current issue or reality. Apartheid was a severe, state – sanctioned racial segregation practiced in South Africa and what was then called Rhodesia (now Zimbabwe). A white minority used apartheid to oppress the indigenous black populations. In the 1970s, Dr. Leon Howard Sullivan, a US minister, plotted a corrective course of action that became known as the Sullivan Principles. The Sullivan Principles were designed to help end apart- heid in South Africa by placing requirements on US corporations wanting to conduct business in South Africa. Box 1.1 lists the fi nal seven points to the Sullivan Principles (Leon H. Sullivan Foundation, n.d. ). The Sullivan Principles, along with the divestment campaign of the 1980s, did exert some pressure on the South African government. The divestment campaign worked in tandem with the Sullivan Principles. Investors were asked to divest (remove investments) from any US companies that did not adopt the Sullivan Principles. College campuses were a hotbed of activity for divest- ment pressures in the 1980s. Campus protests brought attention to the issue and pressured universities to cease investing in corporations doing business in South Africa. While the Sullivan Principles alone precipitated very little change, the divestment campaign is credited with having a signifi cant effect on eradicating apartheid in South Africa.

The Sullivan Principles and related divestment efforts are indicators of corporate social responsibility (CSR) making a difference on a global scale. Fair treatment of workers and socially responsible investing are recognized today as CSR. The Sullivan Principles provide a foundation for socially

Managing Corporate Social Responsibility: A Communication Approach, First Edition. W. Timothy Coombs, Sherry J. Holladay. © 2012 W. Timothy Coombs and Sherry J. Holladay. Published 2012 by Blackwell Publishing Ltd.

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2 Conceptualizing Corporate Social Responsibility

responsible investing and, therefore, comprise a form of CSR as well. The focus of the Sullivan Principles was social improvement through the elimi- nation of apartheid. The Sullivan Principles were not the fi rst CSR effort or the fi rst socially responsible investing guidelines to appear in the business world. However, the anti – apartheid efforts illustrated the potential power of CSR. Corporations were pressured to change their behavior not because their actions were illegal but because their actions failed to meet expecta- tions for responsible behavior.

On December 3, 1984, the Union Carbide India Limited facility in Bhopal, India, leaked tons of deadly methyl isocyanate (MIC) gas. Bhopal quickly became the worst industrial accident in the history of the world. Estimates place the death toll at between 3,000 and 10,000 people in the fi rst 72 hours. One estimate places the number of those who have died since being exposed at around 15,000. Between 120,000 to 500,000 people suf- fered permanent medical conditions from the exposure (Amnesty, 2009 ). Investigative reports since the accident all noted lax safety as the cause. Union Carbide ’ s own investigation identifi ed procedural violations and operating errors (Diamond, 1985 ). Many safety systems did not function, and overall the facility was in disrepair. This created a very unsafe operating

Box 1.1 The Sullivan Principles

1. Non – segregation of the races in all eating, comfort, and work facilities.

2. Equal and fair employment practices for all employees. 3. Equal pay for all employees doing equal or comparable work for

the same period of time. 4. Initiation of and development of training programs that will

prepare, in substantial numbers, blacks and other nonwhites for supervisory, administrative, clerical, and technical jobs.

5. Increasing the number of blacks and other nonwhites in manage- ment and supervisory positions.

6. Improving the quality of life for blacks and other nonwhites outside the work environment in such areas as housing, transpor- tation, school, recreation, and health facilities.

7. Working to eliminate laws and customs that impede social, eco- nomic, and political justice. (added in 1984)

Source : Leon H. Sullivan Foundation (n.d.) .

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Conceptualizing Corporate Social Responsibility 3

environment that led to tragic consequences for employees and those living near the facility (Bedford, 2009 ).

People in the United States were concerned because Union Carbide was using the same chemical at a US facility. Union Carbide reassured US citi- zens that the facility in the United States was safer. That led some people to question the original safety commitment in Bhopal (Diamond, 1984 ). Here is one description of the safety discrepancies between Bhopal and the United States.

Carbide had dropped the safety standards at the Bhopal plant well below those it maintained at a nearly identical facility in West Virginia. It is also important to note here that Carbide was able to operate its deteriorating plant because industrial safety and environmental laws and regulations were lacking or were not strictly enforced by the state of Madhya Pradesh or the Indian government making them indirectly responsible for the tragedy at Bhopal. (Trade Environmental Database, 1997 )

The US facility was slightly different as it had fewer control systems and relied more on manual rather than automatic systems (Shabecoff, 1984 ). In fact, Union Carbide documents released during litigation indicated the Bhopal facility was built using some untested technologies (Trade Environmental Database, 1997 ).

Bhopal should not be forgotten so that it is never repeated. Bhopal stands as an appalling example of the exploitation of developing countries. The same deadly chemical was present in Bhopal, India, and in the United States. In Bhopal, the safety standards were lax from the start and were allowed to deteriorate. In the United States, the safety standards were maintained to a higher standard. Why the neglect in Bhopal? The answer is fi nancial gain. Union Carbide saved money by requiring less rigorous safety stand- ards in India and by not investing in preventative maintenance (Bedford, 2009 ). We cannot assume corporations will naturally act in a responsible or even a humane manner. This is not to say that all corporations are inher- ently evil and callous toward constituent safety. Bhopal reminds us that CSR may not be naturally occurring within the corporate environment. The allure of profi t sometimes can be deadly for constituents.

Nike remains the leader in the athletic shoe and garment market globally. The brand is widely recognized around the world and associated with winning. In the 1990s, Nike became associated with sweatshops and exploi- tation of workers. Many nongovernment organizations (NGOs), such as Global Exchange and Sweatshop Watch, began to complain about the treatment of workers in facilities that supplied Nike with products and materials. This mix of religious, student, and labor groups noted problems with corporal punishment, low wages, forced overtime, inhumane working

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4 Conceptualizing Corporate Social Responsibility

conditions, and child labor (Team Sweat, 2008 ). An awareness campaign used public relations to inform constituents about the origin of Nike prod- ucts. Combining the Internet with traditional news expos é s, the NGOs were able to exercise a signifi cant amount of pressure on Nike to reform its practices. Constituents increased public awareness of supplier practices, and this created negative publicity and pressure for Nike to change (Carty, 2002 ). We should note that the sweatshop issue was (and continues to be) endemic to the entire garment and shoe industry, not just Nike. Nike was targeted because activists know that confronting the market leader maxi- mizes the attention that activists attract for their efforts.

NGOs included universities in the United States as their targets for the Nike effort. Students used various public relations tactics to pressure admin- istrations into changing contracts if Nike did not alter its business practices. US universities have lucrative athletic shoe contracts with major shoe manu- facturers such as Nike, Adidas, and Reebok. The Nike labor case illustrates how public relations becomes translated into political pressure via fi nancial threats. Negative attention on the supply chain created policy changes (Bullert, 2000 ). O ’ Rourke (2005) notes that the NGOs used public relations and marketing campaigns to alter global production and consumption. The public relations efforts shifted demand from “ problematic to improved products ” (O ’ Rourke, 2005 , p. 116). In essence, socially responsible con- sumption was creating more socially responsible corporate behavior – con- sumers were pushing for CSR.

These three vignettes are all pieces of the mosaic that comprise corporate social responsibility. They offer different insights into CSR and its trans- formative potential while reminding us that CSR transpires within a busi- ness landscape, not some abstract utopia. In these three cases, corporations engaged in “ bad behavior ” while experiencing economic success. But the public scrutiny of their actions contributed to outrage and pressure for change. As we shall see, pressure for “ responsible behavior ” may originate from inside the organization (e.g., it is seen as central to its mission), or they may emanate from pressures outside the organization as we saw in the three cases at the beginning of this chapter.

The challenge in discussing CSR is that it is not reducible to one simple concept. Our examples illustrate how irresponsible corporate behavior may take many forms. Similarly, responsible behavior is not easily defi ned. Nor can concerns surrounding CSR be traced to one common history. CSR is a composite of activities drawn from different academic and professional disciplines. Moreover, what constitutes CSR actions will differ from country to country. The complex nature of CSR results in a challenging fi rst chapter that explains the conceptualization of CSR we have developed for this book, identifi es costs and benefi ts for the corporation and society, and demon- strates the value of a communication – centered approach to CSR.

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Conceptualizing Corporate Social Responsibility 5

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