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Table of Contents

1.0 CHAPTER ONE: INTRODUCTION

1.1 Background of the Study…………………………………………………….6

1.2 Statement of the Research Problem………………………………………….7

1.3 Objectives of the Study……………………….……………………………...8

1.4 Research Questions…………………………….…………………………….8

1.5 Significance of the study……………………….....………………………….8

1.6 Scope and Limitation of the Study………………..…..……………………..9

1.7 Sources of Data Collection……………………………….…………………..10

1.8 The Outline of the Dissertation……………………….………..……………10

2.0 CHAPTER TWO: LITERATURE REVIEW

2.1 Introduction to Literature Review……………………………………………12

2.1.1 Meaning and History of CSR……………………...………………………12

2.1.2 CSR communication………………………………………………………..14

2.1.3 CSR reporting…………………………………...…………………………15

2.2 Strategic aspect of CSR…………………………..…………………………16

2.3 Motivating Factors of CSR reporting……………….………………………17

2.3.1 Reputation and Brand Management……………………………………...20

2.3.2 Ethical Considerations…………………………………………………....21

2.3.3 Profitability ………………………………………………………………22

2.3.3.1 Impact of CSR on the short-term profitability………………………………22

2.3.3.2 Impact of CSR on the long-term profitability……………………………….23

2.4 CSR across industries……………………………………………………….24

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2.4.1 Environmentally sensitive industry……………………………………………..24

2.4.2 Ethical Issue-Sensitive Industry…………………………………………………25

2.5 The Theoretical Framework on Explaining CSR…………………………...26

2.5.1 Stakeholder theory…………………………………………………………………26

2.5.2 Legitimacy Theory…………………………………………………………………27

2.5.3 Social Contract Theory……………………………………………………………28

2.6 Gap in CSR communication ………………………………………………...29

3.0 CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Research Design……………………………………………………………..33

3.2 Case Study…………………………………………………………………..33

3.3 Purpose of data collection…………………………………………………...34

3.4 Background of the chosen companies……………………………………….35

3.4.1 Alliance Boots………………………………………………………………………35

3.4.2 Barclays……………………………………………………………………………..35

3.4.3 British Petroleum ………………………………………………………………….36

3.4.4 Vodafone Group……………………………………………………………………36

3.4.5 AstraZeneca…………………………………………………………………………37

3.5 Instrument use in data collection……………………………………………..37

3.5.1 Interviews…………………………………………………………………………….37

3.6 Data collection and Analysis…………………………………………………38

3.7 Validity and Reliability………………………………………………………39

3.8 Pilot test………………………………………………………………………39

3.9 Ethical assurances…………………………………………………………….40

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4.0 CHAPTER FOUR: RESEARCH FINDINGS

4.1 Gap between disclosures and actual practice in CSR reporting ………………42

4.2 Alliance Boots …………………………………………………………………………43

4.3 Barclays………………………………………………………………………………...46

4.4 BP Plc…………………………………………………………………………………..48

4.5 Vodafone………………………………………………………………………………..50

4.6 AstraZeneca…………………………………………………………………………….52

4.7 Interview Analysis from the appendix by applying thematic analysis………….53

5.0 CHAPTER FIVE: DISCUSIONS AND CONCLUSIONS

5.1 Managerial Motives of Engaging in CSR ……………………………………57

5.2 Communication gap in CSR reporting ……………………………………….60

5.3 Recommendations ……………………………………………………………60

6.0 Appendix ………………………………………………………..…………………...62

7.0 Bibliography ……………………………………………………..………………….66

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CHAPTER ONE: INTRODUCTION

1.1 Background of the Study

Corporate social responsibility has been widely described as a concept whereby businesses

integrate social, economic, and environmental concerns in their business operations to help

address the challenges faced by the society. Most of the CSR activities revolve around solving

problems that relates to social, environmental, and economic problems (Marrewijk, 2003;

Dawkins, 2004; Morsing & Schultz, 2006). According to Weddock (2008), the social problems

that are targeted by CSR activities involve environmental pollution, resource depletion, labor

rights among other social problems. Moreover, companies are also involved in solving economic

problems such as bridging the gap between the rich and the poor by helping the economically

disadvantaged members of the society (Porter & Krammer, 2002). According to Marrewijk

(2003), CSR began in the late 19th century, when people started to discuss the role

industrialization in the society. Since the companies were benefiting from the members of the

society, the society began pressuring the industries to take their social responsibility. Today, it is

debatable whether companies should be forced by the law or by moral conventions to engage in

social responsibility. Most opponents of social responsibility argue that it can weaken the

economic growth of the companies due to huge spending involved (Du Shuili, Bhattacharya &

Sankar, 2010). Despite divergent views concerning whether the companies should take their

social responsibility, many companies are involved in social responsibility.

Due to significant engagement in CSR activities, reporting plays a significant role in expanding

the interest of the company as a responsible partner in economic, environmental, and social

issues (Morsing & Schulz, 2006). CSR reporting enables the community to recognize that a

company is involved in tackling some of the social problems they cause such as pollution and

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environmental degradation. Due to increase environmental awareness in the public arena, CSR

reporting enables organisations to effectively engage their audience in the public arena.

In as much as CSR may not adequately solve the problems experienced by the society, it is a

way through which companies forge a mutual relationship with the society (Dawkins, 2004).

This is also supported by Momin and Parker (2013) who argue that CSR activities is a move by

companies move closer to where they are conducting their businesses. Lack of dependability in

the information that is willingly reported by firms has also come into the public domain. Theory

is limited in describing the real motives of firms disclosing their CSR activities and some of the

available theoretical illustration highlights that firms are involved in CSR reporting activities in

order to prove that they are legitimate members of the society (Dowling & Pfeffer, 1975; Patten,

1991; O’Dwyer & Owen, 2005). This legitimacy enables the firms to establish a strong ground in

the society as they advocate for sustainable productivity. Since the society offers greater

opportunities for firms to apply their public resources, they have a right to receive information

concerning how the corporate sector returns some benefits accrued from them (Deegan, 2002).

1.2 Statement of the Research Problem

Several authors agree that the Corporate Social Responsibility (CSR) has gained much

momentum among the stakeholders and the society in the recent past (De Villiers & Van

Standen, 2006; Islam & Deegan, 2008). The triple bottom line approach that has been adopted by

mot business provides enough evidence that CSR activities have become a common activity.

This approach entails a sustainable business model; whereby, businesses are expected to report in

their economic, social, and environmental engagements. Whereas the benefits of CSR have been

evident, there are considerable levels of dissatisfaction, especially from NGOs, with respect to

CSR reporting. This implies that there are gaps that exist in CSR reporting and this gap is known

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as reporting-performance gap (Adams, 2004) or credibility gap (O’Dwyer & Owen, 2005). This

gap that exists from CSR reporting is expected to serve as the motive for organisations to engage

in CSR activities and to report more credible information in an attempt to assure stakeholders

that they are positively contributing to social, economic, and environmental concerns in the

society.

1.3 Objectives of the Study

The main objective of the study is to assess the managerial motives in engaging in CSR. This

study also aims to assess the perceived communication gap between disclosures and actual

practice.

Other objectives of the study are;

To contribute to the limited literature on CSR communication

To demonstrate how engaging in CSR and reporting can help organisations to

strategically achieve economic, social, and environmental results.

1.4 Research Questions

What are the managerial motives of engaging in and communicating CSR activities?

Are there gaps in CSR reporting?

How can engaging in CSR activities and reporting helps organisation to achieve social,

economic, and environmental results?

1.5 Significance of the study

Corporate Social Responsibility is a philanthropic act of companies to that is geared towards

social, economic, and environmental concerns. Unlike business ethics that is limited to the

principles and standards of behavior, CSR is concerned with the wellbeing of the society and the

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sustainability of their environment (Gomez & Chalmeta, 2011). In addition, business ethics also

involve some aspect of CSR. Whereas business ethics entails judging between the right and the

wrong, CSR involves an obligation of a business that is aimed at positively impacting the society

(Islam & Deegan, 2008).

Due to increased awareness and demand by the society that businesses should be responsible,

CSR activities have increased tremendously. The legitimacy theory of CSR stipulates that

businesses should not only look at the interest of their shareholders, but also look at the interest

of the general public. Deegan and Blomquist (2006) established that an organisation’s legitimacy

within the society can easily be threatened whenever its value within the larger social system

cannot be established. Legitimacy theory expects organisations to act within areas of their social

contact, such that they refrain from conducting their businesses in to the detriment of the society.

When this happens, the society is likely to reciprocate this to the business by establishing long-

term contact with them by buying their products and services. Since this dissertation is to

determine the gap that exists in CSR communication, legitimacy theory is important since it

highlights the gaps that may threaten the very existence of CSR activities. Stakeholder theory is

also an important component of this study since CSR activities are geared towards the mutual

interest of various stakeholders. Unlike legitimacy theory which considers the importance of

societal expectations towards organisations, stakeholder theory considers the impact of particular

groups (especially NGOs) on organisational behavior and CSR communication.

1.6 Scope and Limitation of the Study

This study aims to establish the motive of engaging in CSR activities and the perceived gap

in reporting and the actual practice of CSR activities. With respect to disclosure, the annual

report is heavily relied upon due to a high degree of credibility expected from it and from that

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fact that such document is sent to the shareholders. The internet, being an important

communication channel, plays a prominent role in CSR communication as reported by (Basil &

Erlandson, 2008).

1.7 Sources of Data Collection

Primary data has greatly been relied upon on CSR related studies since it is a practice oriented

field. The common methods of primary data collection used in similar studies were interviews

and questionnaires (Adams, 2004; Deegan & Blomquist, 2006; Basil & Erlandson, 2008).

Gomez and Chalmeta (2011) also utilized secondary data sources in their study, mainly from

annual reports. A combination of both primary and secondary data is also applicable in this study

as was in the case of (Momin & Parker, 2013). In this dissertation, secondary sources will be the

main sources of data that will be collected from annual reports, books, journals, internet and

websites. This research ignores the use of primary data sources due to time and cost constraints.

Since this research is determined at establishing the possible CSR reporting gaps, such

independent and unbiased investigations will be more appropriate. This is because the survey by

the means of interviews and questionnaires may result into biased results since the relevant

stakeholders would be involved.

1.8 The Outline of the Dissertation

This paper is properly organised in acceptable dissertation standards. Chapter two focuses on the

literature review of CSR activities based on the research objectives, chapter three deals with the

methodology, the fourth chapter focuses on empirical data analysis and results developed from

the chosen methodology and the last chapter in this study entails the major findings, conclusions

and recommendations.

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Chapter Summary

Corporate social responsibility is a concept whereby businesses integrate social, economic, and

environmental concerns in their business strategy to help address the challenges faced by the

society. CSR reporting enables organisations to effectively engage their audience in the public

arena. Various interest groups have expressed some level of dissatisfaction in CSR reporting and

this implies that a gap exists between the actual performance and reporting of CSR. This study

aims to assess the managerial motives of engaging in CSR and the perceived communication gap

between the disclosures and the actual practice. Other objectives of the study involves exploring

the meaning of CSR, to determine the extent by which companies are responsible to the society,

to determine how CSR reporting helps organisations achieve economic, social, and

environmental results and to contribute to the limited literature of CSR communication.

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CHAPTER TWO: LITERATURE REVIEW

2.1.0 Introduction to Literature Review

This chapter reviews the past literature with regards to corporate social responsibility. The

literature review begins with describing the meaning and history of CSR. The literature review

also explores the motivations for CSR, strategic aspect of CSR, reputation and brand

management, ethical considerations, the impact of CSR on the short-term and the long term

profitability, and finally the theoretical factors of explaining CSR.

2.1.1 Meaning and History of CSR

Corporate Social Responsibility (CSR) is understood differently by different people since its

meaning is somehow unclear. The most widely accepted definition of CSR is the one given by

the European Commission and it states that CSR is the idea by which firms combine social and

environmental concerns in close collaboration with their stakeholders. According to Carroll

(1999), CSR involves businesses traversing beyond their legal boundary in order to help the

community who have been part and parcel of their success for years. CSR can also be described

as a self-regulation mechanism by which businesses monitor their activities and ensures that they

comply with ethical and legal norms that exists in their area of operations (Carroll & Shabana,

2010). Cochran and Wood (1984) explain that CSR activities are entitled to assist an

organisation’s mission as well as to guide them in what they stand for to its customers. CSR has

also been defined by Dahlsrud (2006) as the company’s sense of responsibility towards their

community and environment in which it operates by launching social and ecological initiatives.

This is similar to the definition given by Fredrick (2006) that asserts that CSR involves operating

a business in a manner that accounts for the social and environmental impacts created by the

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business. Hoffman (2007) and Lee (2008) agree that CSR is an activity that enables a firm to

engage in economic, ethical, legal, and philanthropic acts. Therefore, CSR enables a firm to be

accountable to their stakeholders such that they prevent and rectify any form of harm posed on

such environment (Joyner & Payne, 2002). In this manner, firms must forbear themselves from

damaging their stakeholders and adjust to it suddenly if the damage has a negative influence on

the society. Whereas the traditional CSR was mainly focused on the philanthropic aspect as its

driver, this traditional notion has been supplanted by a broad commitment to protecting and

improving the lives of the communities and the company workers. In addition, CSR addresses

the issues in the broad areas of operations such as governance and ethics, opportunity and

training, worker hiring, responsible purchasing, supply chain policies, and energy and

environmental impact (McWilliams et al, 2006). In the year 2007, the Economic Intelligence

Unit established that more than 55% of companies consider CSR activities a very high priority

and the value are expected to rise in the near future.

Rosamiaria and Padget (2011) observed the historical background of CSR in details by

reviewing several literatures from a chronological point of view. According to them, CSR

activities can be traced back to 1919 when Ford shareholders decided to allocate part of their

earnings to benefit their society (Moir, 2001). By 1954, Peter Druke established the act of social

responsibility, in his book The Practice of Management, as one of the objectives of a business

organisation. During this period, it is reported that the primary focus of CSR was on the

responsibility of the business to the society (Druker, 1884). However, Hoffman (2007) explains

that the practice of CSR expanded during the 1960s when most businesses began to realize the

importance of CSR on their operations. During this time, the decisions made by businesses were

enormous and businesses expanded tremendously. During the 1970s and the 1980s, most of the

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social interests came closer and firms became more responsive to their stakeholders (Hoffman,

2007). By 1990s, the issues of CSR had become universal due to much literature on CSR

activities. By the year 2000 to date, CSR has become an important strategy for businesses since

institutional changes made it an important source of institutional legitimacy of organisations

(McWilliams et al, 2006).

2.1.2 CSR communication

It has been argued that one of the key aspects of CSR reporting involves effective and

transparent communication channels with their stakeholders since this helps to identify issues of

concerns that the company needs to address and to report on their performance (Bebbington,

2001; Boeger et al, 2008). According to Argandona and Hoivic (2008), CSR communication is

the act of the company itself, communicating their CSR efforts to their stakeholders. Since CSR

has gone mainstream, companies need to communicate their CSR activities wisely in order to

avoid being accused of greenwashing (Albareda et al, 2008; Asaf et al, 2012). Banerjee (2007)

further advises that a key challenge for managers during their CSR reporting is to minimize

stakeholder skepticism and to communicate their CSR initiatives without being accused of

greenwashing or boomerang effect. According to Dahlsrud (200), greenwashing is the act of

promoting environmental sustainability while on the other hand engaging in activities that are

harmful to the environment. On the other hand, boomerang effect is an attempt to persuade a

group of persons who end up opposing your ideas instead. Over the years, there has been

increased pressure for establishing an appropriate communication strategy that identifies proper

communication tools and confirms the reliability of the information being communicated.

Considering that high number of CSR activities taking place, it is prudent to communicate these

achievements to stakeholders. Interestingly, Blindheim and Langhelle (2010) also advise that

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companies should avoid publicizing their achievements so aggressively since this may result in

boomerang response. In addition, Bebbington (2001) argues that most organisations have not

fully learned how to communicate their CSR activities. He points out that some of the challenges

that have arisen from the CSR communication include the structuring of their message, justifying

the explanation in their reports, and to convince the different interest groups.

2.1.3 CSR reporting

This is the act of delivering the CSR information to that consists of particulars of the physical

environment and social environment (Carroll, 1999; Boeger et al, 2008). Crowther and Aras

(2008) report that the lack of common measures of performance is one of the weaknesses of CSR

reports, and this often leads to hyperbole and greenwashing. Despite the numerous efforts by the

Global Reporting Initiatives, there is little progress that has been achieved by companies in

adopting the CSR policies and reporting. According to Drucker (1984), CSR reporting began

with environmental reporting before proceeding to social and economic reporting. In CSR

reporting, a company reveals its financial and non-financial aspects associated with the CSR

activities (Font et al, 2012). In addition, CSR reports contain particulars of physical environment,

energy, human resources, and community involvement (Glavas & Piderit, 2009). According to

Hopkins (2003), several terms have been used to describe CSR reporting such as sustainability

report, triple bottom line report, and CSR reports. Of all these terms, sustainability reports have

extensively been used to describe CSR reports since CSR activities largely involve social and

environmentally sustainable projects (Holcomb et al, 2007; Karnani, 2010; Jones et al, 2013).

The trend in CSR sustainability reports draws large debate among the stakeholders.

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2.2 Strategic aspect of CSR

Ansoff (1965) and Thorelli (1977) identified strategy as the objectives and the goals of an

organisation. A strategy can be described as the procedure, plan, and locating for a competitive

benefit for an organisation (Bebbington, 2001). Similarly, the above definitions can be used in

the CSR context to discover the strategic advantages of CSR. The effect of CSR on the strategic

advantage of the company has been studied by a few researchers. In these studies, it is apparent

that the strategic profits were not measurable as the detached contribution of the baseline

(Blindheim & Langhelle, 2010). There is a relationship between corporate economic, non-

economic, and strategic benefits, which in turn revolves around CSR activities. It has also been

established that companies can easily the significance of the societal strategies related to the

expanded use of controlling systems and environmental scanning (Banerjee, 2007). Firms are

concerned to be effective information collection systems that support generated strategies and

this inspires the line of combining the notion of CSR and corporate strategy with the

stakeholders’ model. The explanation of strategic CSR indicates that the CSR activities are in

tandem with the business strategy of the organisation (Argandona & Hoivik, 2009).

CSR is concerned with the strategic component of the organisation when it creates a large

business link between the profits and the advantages to the company by helping the core business

activities and contributing to the company’s effectiveness in completing its determined tasks

(Asaf et al, 2012). According to Moir (2001), CSR enables businesses to gain competitive

strategy by assisting them to gain benefits by discriminating the products and services. It

activates customers in an individual estimation of profits and costs of the brand in comparison to

the alternatives. While assessing the brand, the consumers, NGO’s and other active groups lead

to a benchmarking of the brand during their assessment.

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The main issue with the branding method is caused by the mismatch of whatever the brand aims

to achieve and the customers’ perception. According to Lee (2008), the brand image and the

brand loyalty have a great effect on the performance of the company. Joyner and Payne (2008)

argue that CSR helps to support and build strategies that make their companies and their brands

more prosperous during the time of crisis.

Smith (2009) established how CSR activities can adequately implement the organisation’s

objective of creating profits. In his study, Smith explained that managers below the control of

both extreme competition and economic channels usually presume the value of CSR in first steps

such as supporting education and decreasing carbon emissions. This study was informed by the

increased worry or how CSR could improve the performance of the company. Singhapakdi

(1999) looked at the relevance of CSR marketing to managers, while Lichtenstein (2004) studied

the benevolence causes of CSR. They both concluded companies engage in CSR activities with

the aim of making the world better, leading to a positive perception from their customers.

2.3 Motivating Factors of CSR reporting

Despite being a trend in the recent past, the real motives why these companies engage in CSR

disclosures is still not clear (Reich, 2008; Okoye, 2009). According to Smith (2003), several

people have wondered whether firms spend stakeholders’ money in CSR activities and reporting

some kind of returns. Hoffman (2007) also argues that it is almost impossible for companies to

engage in CSR activities without any form of economic gain, especially considering the high

cost involved. Most authors agree that one of the motivating factors for CSR reporting is the

economic gains (Zwetsloot, 2003; Dahlsrud, 2006; Frederick, 2006; Creel, 2012). Experts

consider improving the economic performance as the key motivating factor of engaging in CSR

activities and reporting. By appealing to their stakeholders and the surrounding companies,

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profitability can be boosted in organisations due to economic gains that come from increased

customer loyalty (Joyner & Payne, 2012). This is in tandem with a survey conducted Pwc in

2007established that more than 70% of the CEOs believe that CSR disclosures are essential for

the continued profitability of their organisation.

Since CSR is practiced in large scale among the UK companies, there is the likelihood of a

motivational factor that encourages organisations to engage in CSR activities. Business and the

society in which it is established are mutually related in one way or the other. It is now evident

that businesses have obligations to the society in order to enhance their mutual benefit (Hopkins,

2003). Several industries have broadly accepted to engage in CSR activities. However, they use

different terms such as corporate social responsibility, strategic philanthropy, and corporate

national, social responsibility, among others. Despite the naming, the all these SR activities

revolve around the main concept of generating “shared value” between a business organisation

and the surrounding society. For most organisations, the main aim of CSR is to generate value

for the company by sponsoring activities that benefit their customers and the society (Sprinkle &

Maines, 2010).

Wang and Chaundri (2009) advise that firms should engage and practice CSR since it presents

them with an opportunity to showcase their global existence. Karnani (2010) also advise that an

organisation’s involvement in CSR activities defends them from negative publicity and

accusations that may arise from their business operations (Sprinle & Maines, 2010). Over the

years, business organisations have also experienced a continued push from civil society members

to be responsible to the society (Moneva et al, 2006). Therefore, the convincing push from the

civil society members has also acted as a motivating factor for businesses to engage in CSR

activities. In addition, some companies tend to support their investment by engaging in ethical

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values that tend to support CSR initiatives. Therefore, CSR practicing companies find a lot of

comfort in appealing to investors (Sprinkles & Maines, 2010). These authors also add that the

discourse that a company’s involvement in CSR activities helps them to reap numerous benefits

from the society. In this regard, CSR activities enable organisations to hire, motivate, and remain

loyal employees of their organisations (Okoye, 2009). This is a significant motive for engaging

in CSR activities since it provides organisations with ample opportunity to gain substantially

from the society. It has also been noted that CSR activities motivate and give credit to the

beneficent motivations of the employees (Reder, 2008; Reich, 2008). Over the years, the

corporate heads have been the main driving power of CSR activities since they fully understand

the benefits that come with engaging in such activity. Studies also supports that differentiation is

another motive for engaging in CSR activities such that every interplay of CSR activities and

business strategies has a business value (Salama et al, 2012). Schwartz and Saii (2012) argue that

companies with the objective of constantly engaging in CSR activities are attractive to different

stakeholders with a moral of social responsibility. According to Smith (2003), the social motives

create an optimistic reputation of the company that helps them to establish a positive image and a

strong brand name. Zwetsloot (2003) further argues that an optimistic CSR reputation supports a

company by increasing the value of their products and services. In addition, the optimistic CSR

reputation allures capital investors to the firm and motivates their employees to continue with

their hard work in their organisations (Carroll & Shabana, 2010).

Dahlsrud (2006) argues that CSR activities enable companies to generate strategic resources such

as increased stakeholder relationships and optimistic CSR reputation. In addition, the economic

component of CSR is enough to generate value for the company, expand profits, delight various

stakeholders, and initiate long-term sustainable benefits to the company. According to Frederick

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(2006), the motivation of the consumers is an essential reason for companies to engage in CSR

activities. With regards to consumer behavior on CSR activities, an organisation involved in

consumer activities may induce consumers to purchase their products (Hoffman, 2007). Another

reason why companies engage in CSR activities is to reduce their production budget by

concentrating on environmental activities (Joyner & Payne, 2002; Lee, 2008). In this method, the

organisation aims at decreasing wastes and to reduce their overall budget of the production. The

environmental concern for CSR activity is mainly driven by the aim of improving new energy

saving products, reducing their budgets, appealing to customers and employees (McWilliams et

al, 2008).

2.3.1 Reputation and Brand Management

Maintaining the right balance between the brand and organisation CSR activities has been a

challenge for most organisations. Creel (2012) extensively explores the relationship between

CSR and brand equity in an organisation. According to Creel, CSR can help build brand

awareness and enhance the brand image. In addition, Fredrick (2006) also argues that CSR

evokes brand feelings, creates a sense of brand community and elicits brand engagement.

According to Lee (2008), an organisation’s reputation may be a strong reason why a company

may opt to engage in CSR activities. Moir (2001) established that about 75% of a company’s

value results from the company’s reputation. Lee (2008) also agreed that a positive exposure and

publicity arise from CSR activities due to improved reputation. A poor reputation can be a

business disaster since it can scare away the necessary stakeholders (Joyner & Payne, 2002).

According to Rosamaria and Robert (2011), a closer connection between the CSR activities

increases their brand marketing activities. The connection between brand and CSR activities was

also established by Stewart (2003) after establishing that more than 86% of consumers have a

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positive opinion of a company that is actively involved in making the society a better place.

According to Carroll and Shabana (2010), there is a close link between CSR, brand affinity,

consumer perception, and the customer loyalty and buying behavior. Reich (2008) advises that

the success of the CSR activities should be measured against their overall impact on the brand

reputation.

2.3.2 Ethical Considerations

According to Reich (2008), the word corporate social responsibility means that the business

organisations have and ethical and societal responsibilities that go beyond their economic

responsibility to their stakeholders. He has therefore established that there is a direct connection

between CSR activities and business ethics. According to Dahlsrud (2006), ethical

considerations enable businesses to be accountable to their stakeholders. A good number of

corporations are highly involved in CSR activities to provide moral and ethical support to their

surrounding communities (Fredrick, 2006; Hoffman, 2007; Lee, 2008). A good example of

ethical CSR consideration is the when an organisation decides to support climate change

initiatives in order to avoid an impending ecological collapse. In most cases, nobody pushes

these businesses to engage in CSR, but they just decide to do that as a matter of ethics. Moir

(2001) also argues that corporations are expected to engage in CSR activities to prove that the

practice their businesses in an ethical manner. Ethical approach to CSR promotes moral business

operations that extend beyond the moral legal compliance.

2.3.3 Profitability

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2.3.3.1 Impact of CSR on the short-term profitability

It has been established that CSR has an impact on the performance of the firm (Dahlsrud, 2006;

McWilliams, 2006; Lee, 2008). Some researchers have linked the impact of CSR to the short-

term profitability with the portion on the return on assets (ROA) (Hopkins, 2003). These results

have always been contradictory, with results ranging from optimism to close to pessimism.

Interestingly, some studies indicate that CSR has no effect on the short-term profitability of the

firm. However, Berman (1999) puts it differently by pointing out that CSR measures the impact

of the short-term profitability from different perspectives, which are the positive impact of for

some of the CSR measurements. According to Russo and Fouts (1997), increase in corporate

environmental performance is absolutely connected with the company’s performance as

portioned by the return on assets. Conversely, Inoe and Lee (2011) argue that CSR can only have

short term effects when the impact is either negative or unimportant.

Lin (2009) also pointed out that there is no important positive connection between the CSR

investment and the return on assets in big manufacturing companies. This further raised the

concerns as to whether the relationship between CSR is dependent on the type of company in

question. In addition, this study carried out by Lin ruled out the possibility of CSR on the short

term profitability of a firm. In addition, Lin, Yang and Yan (2009) also pointed out that positive

CSR activity does not necessarily extend to the firm’s profitability. Using hospitality industry to

link CSR and return on assets, Kang (2010) established that there is no essential connection

between the two. However, his study showed that a positive connection between the CSR and

profitability only exists in the restaurants and hotels. While studying the effect of CSR in the

airline industry, Kang, Lee, and Huh (2010) established that there is a negative effect of the CSR

on the profitability of the airline firms. This preposition also supports the initial idea that the

21

effect of CSR on short term profitability of the firms may be company dependent. This statement

is supported by Peloza and Papania (2008), who supports that short term effects of different CSR

activities could be dissimilar or companies in various industries. According to them, this

dissimilarity effect comes as a result of individual original stakeholders. However, Saona (2011)

painted a different result, while studying the Italian banks by presenting a positive effect on the

return on capital. Therefore, this literature review points out that there is no important

relationship between the financial performance and the CSR in the short-term.

2.3.3.2 Impact of CSR on the long-term profitability

Just like short-term profitability, researchers have also tried to establish the impact of CSR on the

long-term profitability of the firm. Inoue and Lee (2001) pointed out that there is individual

dimension that impacts the future profitability of a company with respect to CSR. The

dimensions such as environmental problems, diversity problems and community relations have a

positive effect on the future profitability of the company. However, Hillman and Keim (2001)

noticed that only community relations have a positive impact on the long term profitability of the

company. According to Barmmer and Millington (2008), larger community connection of a

business results into a bigger market share in the long term. Lin (2009) also linked CSR activities

with the long-term profitability of the company, through indirect impacts. This study thus led to

further questions whether the long-term effects of CSR have direct or indirect impacts. It was

also established by Moir (2001) that companies engage in CSR activities with the concealed

motive of long-term economic benefits to the company and this result in brighter financial

performance of the company.

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2.4 CSR across industries

Both the short-term and the long term effects of an activity should be established within an

organisation to help in decision making. In addition, there is an essential to establish both the

short-term and the long term efficiency of any activity for a company to expand their usefulness

within the corporate world. Researchers have also tried to establish the effects of CSR across

industries. Kang (2010) examined the negative and positive CSR effects on several companies

within the hospitality industry like the casinos, airline, restaurants, and hotels. Their results

showed various outcomes for different sub-industries. In this study, restaurants and the hotel

industry illustrated an optimistic effect on the CSR activities. Conversely, the study by Kang,

Lee, and Huh (2010) on the airline industry showed a negative effect of positive CSR activities

with no important impact of negative CSR on the company value.

Similarly, Inoue and Lee (2011) researched the effect of various CSR proportions on the tourism

industry and the outcome was that various CSR proportions impacts different industries. It was

thus established that company CSR activity reduces the short term profitability within the airline

industry. The above study by Inoue and Lee (2011) supports that the economic effects of CSR

activities differ across the tourism related industries. This notion also supports that there is

likelihood that the economic effects of CSR activities vary across the industries.

2.4.1 Environmentally sensitive industry

Dierkes and Preston (1997) established that CSR reporting is most vibrant in industries that are

associated with environmental problems. This is because people are becoming more

environmentally sensitive each day and would like to engage in activities with less impact to

their environment. According to Lee (2008), companies that engage in such activities such as

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mining and exploration attempts to engage in more in CSR reporting to justify to the general

public that they care about environmental challenges. These companies attend to essentially

expand their environmental messages by engaging in CSR reporting. They are constantly

subjected to outside pressure with regards to environmental concerns and would like to

overcome the pressure by engaging in environmentally related CSR activities. Therefore, these

firms extend their revelation of their environmental efforts and accomplishment in order to

protect their good reputation within the surrounding society and to enhance the legitimacy of

their activities. It was established by Milne (1996) that environmental revelation has an

optimistic attraction to the company’s profitability. This forms the basis while companies dealing

with environmentally sensitive activities are heavily involved in CSR activities; nevertheless,

Milne (1996) established that there is no relationship between the wider range of CSR problems

and disclosing social performances as well as environmental perspectives.

2.4.2 Ethical Issue-Sensitive Industry

Some organisations engage in CSR reporting since their activities are ethically sensitive. In this

case, economic deliberations are given less consideration since the company is more concerned

with the ethical aspect of CSR (Jenkins & Yakovleva (2006). One of the most ethically sensitive

industries is the pharmaceutical industry since they deal with products that touch on the human

life. Therefore, the image of pharmaceutical industry associated with CSR activities has a

straight impact on the success of their business (Esteban, 2008). Most investors and financiers in

the pharmaceutical industries are very concerned with the levels of how the individual company

operates in the CSR activities. In addition, the pharmaceutical industry is one of the heavily

attacked industries by the NGOs and the general public with issues related to business ethics.

24

Leisinger (2005) establishes that some of the ethical problems associated with this industry entail

the high price of essential drugs, unreliable testing, and the issue related to patents of such drugs.

2.5 The Theoretical Framework on Explaining CSR

The following theories discussed below are relevant theories that have been identified to be

relevant to this study. These theories possess certain psychological elements with an economic

foundation in trying to create an advantage in an indirect way to the company.

2.5.1 Stakeholder theory

A stakeholder can described as an individual or a group of persons who affects or is influenced

by the executions of an organisations aims and objectives. There are very many different parties

that can be identified as stakeholders in accordance to how they are influenced by the company

activities. Original stakeholders are restricted to parties with exact control corporation’s output

and input. Since companies are forced to report the financial information, it is also necessary to

report broad information related to various concerns. Leontief (1986) established that the broader

group of stakeholders could destroy more than the original stakeholders can and thus, it is

necessary to disclose broad information related to various concerns that appear as part of the

CSR. The theoretical framework for this study focuses on the transformation of original view

that identified the real stakeholders in the business. Stakeholders to a business can be chosen

based on their legitimacy, urgency, and power as suggested by Mitchel (1997). The stakeholders

that lead to the behavior or structures, which is expected and accepted by the social (legitimacy),

they are significant in the terms of time criticality of the organisation require (urgency), and they

can make a decision for the company (power) (Mitchell, 1997). Stakeholder commitment gives

the business more powers to execute their mandate, which further strengthens their CSR

25

reporting. The extended power of the stakeholder groups is the main driving power of firms to

develop a new structure of participation tools such as reports. In addition, there stakeholders

change by the definite problems and this might also change across the firms for the same

problem as supported by Freeman (1984). Therefore, the operation procedure that firms can use

to manage their stakeholder relationship prepares a description power for discovering the

motivations that change by industrial sections.

2.5.2 Legitimacy Theory

According to Karmani (2010), legitimacy theory is directly concerned with CSR operations since

it supports that social and environmental disclosures are the result of crises that have occurred.

Legitimacy is the universalized perception that existing operations are suitable within the social

standards, trust, values, and explanations (Moir, 2001). This theory approaches the stakeholder

theory by advising that organisations should always attempt to satisfy that they operate within

the determined standards and borders of their particular societies. Hopkins (2003) argues that the

social contract that exists between the society and the organisation is the basic concept of the

legitimacy theory. The three main groups of organisational legitimacy can be described as

pragmatic, cognitive, and moral and the three main challenges of legitimacy management are to

maintain, obtain, and repair (Glavas & Piderit, 2009). Legitimacy administration is highly

dependent on the participation of the concerned parties. Okoye (2009) also established that

legitimacy does not just require the polite procedure for an organisation to obtain legitimacy

from the society. There are four main legitimacy theories that an organisation can apply in

meeting dissimilar legitimation menaces. The organisation can try to modify the perceptions of

the significant public without modifying the actual performance of the organisation in addition to

educating their stakeholders about aims to enhance their performance. The organisation could

26

also attempt to distract the concentration away from the problem of concern and try to operate

outside the prospects on its performance (Salama et al, 2012).

While explaining the contrast in Lindbloms theory, David explains that a business does not apply

its potential to the legitimate operation since the society allows the potential for the business. In

this case, a business that does not perform responsibly is bound to lose these potentials and this

balance the social contract between the society and the company. The practice of CSR within an

organisation is thus motivated by the alliance with social contract theory and then considered

utilizing the stakeholder theory.

2.5.3 Social Contract Theory

According to Karnani (2010), this theory supports the view that personal and political obligations

that are dependent upon a contract or agreement among them to form the society where they live.

According to Reich (2008), social contract theory embeds morality and rules that govern

behavior such that a rational person should be able to accept the rule that has already been

accepted by others. Moreover, social contract theory requires organisations to conduct their

businesses in such a way that does not harm anybody by engaging in CSR activities (Salama et

al, 2012). In addition, the social contract theory implies that organisations and their stakeholders

rely on one another and keep their agreements. Under social contract theory, each and every

organisation is committed in following the law since everyone else does. In case where the

government wants organisations to avoid environmental damage, all other organisations have to

follow like the rest does. In this arrangement, the state enforces the rules necessary for social

living while morality sets the rules that set the social way of life in the community. Okoye (2009)

argues that the theory of social contract enables organisations to follow rules that are important

to the existence of the society. Since most organisations are already involved in CSR activities

27

and reporting, then it is in the interest of the rest of the organisation to do so to contribute to

economic and social concerns in the society (Moneva et al, 2006). According to social contract

theory, any business that fails to engage in CSR activities and reporting are likely to put them in

a disadvantaged position. The social contract theory implies that there are things that are

necessary for the survival of the society and organisations are prohibited from against them.

The other reason that may make businesses operate in a responsible way that is different from

economic concern is that society tactically expects them to manage their affairs responsibly from

the CSR perspective. According to Donaldson and Dunfee (1999), social contract theory

supports the management in making ethical decisions in accordance with all circumstances all

the time. The local communities are assisted by the split by macro social divergences. The

companies that apply the opinion of social divergences explain their connection in terms of

social expectation. However, the summary of their connection stays dubious despite it being

accepted as a motivation in the beginning. This economic advantage can be referred as the

license to operate since it provides the organisation with its legitimacy. Apart from providing an

organisation with an economic advantage, involvement in CSR activities provides a connection

with obtaining and remaining legitimate within the business world (Salama et al, 2012).

2.6 Gap in CSR communication

The credibility in CSR communications in their social, economic, and environmental

engagements is an issue that brings interesting debate. A study by GlobeScan (2012) provided

insights into CSR communication gap by reporting that the credibility of their information is a

serious problem. After conducting their study in different continents for one decade, GlobeScan

reported that less than 38% of the people believe that companies communicate their CSR

honestly. In other words, this study revealed that more than 62% are in agreement that

28

companies do not report their CSR honestly. Interestingly, more than 72% of the respondents are

more interested in the actual practice of the CSR initiatives of these companies. This study by

GlobeScan provides insights regarding the perceived communication gap between disclosures

and actual practice. Interestingly, this study revealed that such CSR communication gap be is in

developed countries like the UK. Other studies also report that most companies engage in CSR

activities not because they are genuinely committed to such initiatives, but they are in a bid to

improve their brand image. This notion is likely to create a gap in the CSR reporting and the

actual practice among companies. The above study was summarised in the diagram shown

below.

Source: (GlobeScan, 2012)

29

By not addressing the communication gap, organisations risk missing the chance to

constructively engage with their receptive public and this may negatively affect their mission and

vision. A more actual approach to CSR reporting is likely to play an important role to companies

while they are engaging their stakeholders.

The UN Global Corporate Sustainability Report 2013 is also another study that provides insights

on the perceived communication gap between disclosures and the actual practice of CSR by

companies. This UN report reiterates that there is a major gap between what companies actually

say in their sustainability reports and what these companies actually practice. The reliability of

the Corporate Sustainability Report 2013 is very high since it surveyed more than 1700

companies from 113 different countries from all the continents. Of this large number, only 50%

of the companies perform an environmental risk assessment while the rest don’t (United Nations

Global Compact, 2013). However, both companies that carry out environmental assessment and

those that don’t are actively involved in CSR reporting. This is another evidence that there is a

communication gap between what these companies say in their sustainability reports and what

they actually do. This study also affirms that bigger firms are more likely to commit themselves

to what they report than smaller firms since CSR commitments require huge financial resources

and time.

Chapter Summary

There are several motivational factors for companies engaging in CSR activities. Continued push

from civil society is one of the motivational factors for companies to practice CSR and report

their CSR activities. In addition, some companies tend to support their investment by engaging in

ethical values that tend to support CSR initiatives. CSR also helps to create an optimistic

reputation of the company that helps them to establish a positive image and a strong brand name.

30

CSR helps to support and build strategies that make their companies and their brands more

prosperous during the time of crisis. According to Creel, CSR can help build brand awareness

and enhance the brand image of a company, which in turn enhances its relationship with its

stakeholders. CSR has an impact on both the short-term and the long-term profitability of a firm

and most researchers agree that the economic effect of CSR varies across the industries. The

theoretical frameworks that can be used to explain CSR activities are; stakeholder theory,

legitimacy theory, and social contract theory. With respect to CSR communication, the literature

review establishes that a gap exists in the CSR reports and the actual practice of companies. The

literature points out that majority of people do not believe that companies report their

sustainability reports honestly.

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3.0 CHAPTER THREE: RESEARCH METHODOLOGY

3.1 Research Design

Since this study was exploratory in nature, a survey methodology was deemed appropriate in

answering the research questions. This study aims to find out the motives of engaging in CSR

and the perceived communication gap between the disclosure and the actual practice in the UK

firms. Annual reports will greatly be relied upon in the case of corporate disclosure due to the

degree of credibility reported in them. In addition, the annual reports are the only document that

is automatically sent to the shareholders with regards to corporate activities. Since internet plays

a significant role in the CSR communication, a number of websites will be assessed to in helping

to answer the research questions. Apart from the secondary data, primary data will be collected

by interviewing the management of the selected companies and a sample of their stakeholders.

The case study was selected as it provided the best avenue for the exploration of the research

questions.

3.2 Case Study

A case study research is an in-depth investigation that consists of an oral, archival, and

secondary source-based antiquity of a past or present phenomenon. The information that is, one

gets from the study encompass researcher observation and personal interviewing as well as

sourcing from the private and public collections (Yin, 2009). The phenomenon that is

undergoing research always dictates to some extent the terms that involve dissection and

examination (Silverman, 2005). The case study is a qualitative research that is commonly

employed in business research, but often without the methodological meticulousness that other

research methods receive since it lacks formal procedure the apparent obviousness of the

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outcomes (Wilkinson, 2000). A number of researchers lament that the method is restrictive

together with other qualitative methods to sociological and phenomenological research. Business

research is progressively exploring to combine qualitative and quantitative research for a more

all-inclusive approach to any organisation (Yin, 2003).

When applied to business, case study research or methodologies will adopt to the type sources

and techniques that are available, especially in a way that the method has been adopted to some

social science investigations. Case study provides a systematic way of looking at events, data

collection, and information analysis, reporting of the analyzed report (Wilkinson, 2000). The

result of the approach will help the researcher to acquire sharp intellectual capacity of why the

instance happened as it did, and what might become vital to investigate at more extensively in

the future research (Creswell, 2007). When describing the case study, some researchers argue

that the unit of analysis is the most critical aspect in the case study since apart from studying a

group or individuals; it tends to focus on the procedure or method of action. Case studies tend to

be selective, especially in focusing on one or two issues that are essential to understanding the

system that is undergoing examination (Creswell & Plano, 2007).

3.3 Purpose of data collection

The primary purpose of the study is to assess the managerial motives of engaging in corporate

social responsibility (CSR) and to assess the perceived communication gap between disclosures

and the actual practice within the UK firms. The study will also explore the meaning of CSR and

determine the extent by which CSR activities and reporting helps organisations to achieve social,

economic, and environmental results. Since most firms are involved in CSR activities, this study

will focus on five UK firms. The firms considered in this study are; Alliance Boots, Barclays,

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BP, Vodafone Group, and AstraZeneca. These five firms were selected based on the fact that

they are highly involved in CSR activities in the recent past.

3.4 Background of the chosen companies

3.4.1 Alliance Boots

This is a multinational pharmaceutical and beauty company based in over 27 countries around

the globe with operational headquarters in the UK (Boots, 2014). The company operations are

mainly split into pharmacy led health and beauty retailing and pharmaceutical wholesaling in

addition to a stand-alone contract manufacturing that intends to develop and internationalize their

brand. Over the years, the company has been associated with controversies surrounding their

product and tax evasion claims. In this company, CSR has been integral part of their business

and they have been heavily involved in CSR reporting since the year 2006.

3.4.2 Barclays

This is one of the largest financial service providers in the UK and other parts of the world

(Barclays, 2013). The company takes into account how they deal with their millions of customers

and their thousands of employees located in various parts of the country. In addition, Barclays

also takes into account how they manage their business in an ethical manner and their

responsibility to their environment. Due to this, the company has greatly invested in CSR

activities and used the Global Reporting Initiative (GRI) as a standard for reporting their CSR

activities. In the course of their operations, the company has been associated with some scandals

that have threatened their operations and profitability. The most serious of these scandals was the

interest rigging scandal that highly touched on the bank’s reputation, leading to the resignation of

one of their leading managers.

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3.4.3 British Petroleum

British Petroleum (BP) is an international company, headquartered in London, which deals in all

areas of exploration, production, refining, distribution, marketing, and trading of oil and gas (BP,

2013). In addition, the company deals in renewable energy activities such as wind power and

biofuels to complement their oil and gas suppliers. Over the years, the company has been rocked

by huge scandals that had a direct impact on the reputation of the company. Some of the scandals

that have rocked the company in the recent past include the explosion of the Texas City refinery

in 2005, the Alaskan oil spill of 2006 and the Gulf of Mexico oil spill of 2010. However, the

company has remained profitable and with a brand name and this makes people wonder whether

CSR had a role to play in the continuous rebranding of the BP Plc.

3.4.4 Vodafone Group

This is a public limited company dealing with telecommunications spread in 21 countries and

partners in over 40 countries (Okoye, 2009). The company provides telecommunications and IT

services to millions of their clients in the UK and other parts of the world. Over the years, the

company has been involved in charitable initiatives that are aimed at benefiting the vulnerable

groups in the society. Just like other companies, Vodafone has been rocked by scandals and

criticism of tax avoidance that led to a series of protests. These angry protests due to tax

avoidance let to the closure of most of their shops in Liverpool and the subsequent loss of

profitability. In Australia, the company has been associated with poor customer relations, earning

them a metaphorical name “Vodafail”.

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3.4.5 AstraZeneca

This is one of the largest pharmaceutical companies in the UK and the world. Since the company

operates in pharmaceutical products, issues surrounding business ethics are very sensitive to their

success (AstraZeneca, 2013). Over the years, the company has been very successful, leading to

the anticipated merger with Pfizer to form a pharmaceutical monopoly. Recently, the company

was accused (and they admitted) of being involved in health fraud; whereby, they were part of a

scheme to inflate the prices paid to doctors for its prostate cancer drug. Despite the company

accepting their involvement in this fraud, it heavily touched on the company’s reputation.

3.5 Instrument use in data collection

3.5.1 Interviews

This study will employ the use of interviews in gathering primary data related to CSR activities.

The process of conducting interviews is conducted with less indicating question at initial stages

before gradually embarking on complex questions. The types of questions asked during the

interview process will help assess the managerial motives of engaging in CSR activities and the

possible gaps in CSR reporting.

Thematic analysis is one of the most important forms of qualitative research that emphasizes on

examining, pinpointing, and recording patterns and themes within the data. The themes and

patterns that are analysed within the data must always correspond with the research question.

According to Guest (2012), thematic analysis often goes beyond counting of phrases or words

within a study to identifying explicit and implicit ideas that come up within the collected data.

Usually, thematic analysis is performed in six phases to establish meaningful patterns that

answer the research questions and these phases are familiarization with the data, generation of

36

the data codes, searching of the themes among the codes, reviewing themes in the code, defining

themes, and finally producing the final report. Thematic analysis is considered by most

researchers to be a very important method of capturing the intricacies of meaning within a given

set of data collected for a particular study (Charmz, 2006; Saldana, 2009).

Creswell and Plano (2007) define a theme as a concept used in thematic analysis that captures

important things related to the research question by presenting patterned response or meaning to

the disaster. These patterns are not only determined by a quantifiable measure, but also by a

determined by the researcher’s judgement in relation to the research questions.

3.6 Data collection and Analysis

This study will use both the primary data (from the interviews) and secondary data from books,

journals, reports, and websites. The primary data were collected for a two month period using the

following by the application of interviews. Five companies were selected for the study, since a

large number would have complicated the research process. The initial phase of the interview

process involved the business executives of the five companies selected, while the second phase

of the interviews involved those persons who are in charge of the CSR activities in these

companies. This two tier data collection system was meant to capture all the necessary

information from the policy makers and the executors of the CSR activities. The research method

and process of data collection will be based on the content analysis, which involves codifying

text into various groups by the criteria developed by the researcher. Since the annual reports of

these companies contain CSR related information, coding scheme will be developed to analyze

data in the context of the research aims.

37

These data were analyzed within case analysis and across case analysis, before later being

confirmed by the expert advice. Each case analysis involved a detailed case study write ups that

contained descriptions that were structured in accordance to the constructs in the data collection.

These write ups were central in the generation of insights of each case since they are important in

managing the analysis process, particularly for large volumes of data. The importance of using

write ups, is that it enables unique patterns of data to emerge, since each case contained a

particular unique trait needed to answer the research objectives.

3.7 Validity and Reliability

A survey instrument is valid when it can measure and accurately achieve the research purpose

for which the research was designed (Creswell & Plano, 2007). Since validity is a matter of

degree, the focus should be to what extent the measuring instrument is valid or not valid since no

measuring instrument is perfectly valid (Oppenheim, 1992). Despite this, the researcher need to

choose the measuring instrument that gives me some kind of assurance that the results produced

shall be accurate and presentable. This will instill in me some confidence and the ability to

conduct the study and present his findings with less criticism.

The interview questions designed for the study was subjected to a validation process for face and

content validity in order to test its effectiveness in handling the study process. The interview

questions were also subjected to content validity to test its ability to sample the range of behavior

represented by the theoretical concept being tested. During the validation process, the copies of

the questions together with the research questions they are intended to answer were distributed to

experts to assess their ability to adequately answer such questions. The experts assessed the

research questions and the structure of the questions and suggested that this questionnaire was

effective.

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3.8 Pilot test

After validation process was done, the researcher embarked on the pilot testing with 10

professionals from five organisations that have greatly participated in CSR activities. The pilot

project was carried to assess how the subjects will react to the interview and whether the

interview items are clear and easily understandable by the subjects. According to Silverman

(2005), the pilot test enables the researcher to assess whether there is a need to include additional

items in the questionnaire or to remove unnecessary items in the questionnaire. Therefore, the

pilot test enables the researcher to determine the workability of the proposed method of data

analysis and adjust where necessary. Therefore, the pilot test enabled the researcher to determine

the ambiguity of some items in the questionnaire and modified them before the actual study was

carried out (Wilkinson, 2000).

3.9 Ethical assurances

When conducting a survey study, the researcher should be very sensitive to the ethical issues that

may surround the study (Lynn, 2009). The conventional guidelines for ethical research study

touches on the voluntary participation of the respondents, anonymity and confidentiality, no

harm to the respondents, identifying the purpose of the study, and commenting on the analysis

and reporting of the research findings. Since this study touches on businesses, their satisfaction

and ethical considerations are of great importance (Babbie, 2004; Bryman, 2008). According to

Ader, Mellenberg and Hand (2008), ethical considerations are also useful in this study to

enhance coordination between the research subjects and their institutions. Silverman (2005) also

adds that observing ethical standards by the researcher promotes values that are critical to

engaging in successful collaborative research process. Moreover, ethical considerations make the

39

researcher accountable to their readers and the general public with regards to their research work

(Creswell & Plano, 2007).

In this study, the researcher ensured that the participation of the responders is entirely voluntary

as part of ethical consideration. In this voluntary arrangement, the researcher has the task of

balancing between high and low enrollment rate of the respondents. For any potential participant,

a minimum of three email contacts was made to emphasize their voluntary acceptance of the

study. The emails containing the interview questions were sent spontaneously, such that the first

two emails forwarded to the participants contained the nature and the importance of the study.

The third email to the respondents contained a link that indicated their willingness to participate

in the study and all these mails were sent before the actual study began.

Personal details of the respondent should never be disclosed and the respondent should be

assured that the information they provide during the interview is private and confidential for

them to be open to give a response (Babbie, 2004; Bryman, 2008; Andres, 2012). The respondent

must always be assured that his response will solely be used for research and not for other

purposes for him to feel free to provide his insights concerning the research questions. Before

administering the interview, it is recommended that the researcher assess the ability of the

respondent to answer the question without bias (Silverman, 2005; Creswell, 2007).

Chapter Summary

Since this study was exploratory in nature, a survey methodology was deemed appropriate in

answering the research questions. This study aims to find out the motives of engaging in CSR

and the perceived communication gap between the disclosure and the actual practice by case-

studying five the UK firms. The primary data was collected by interviewing the management and

40

stakeholders of these five companies, while the secondary data was mainly collected from the

annual reports, in addition to books, journal articles, and websites. The methods of data

collection were subjected to validity and reliability test to determine their effectiveness in

answering the research questions. The researcher provided ethical assurances to his subject to

enhance maximum coordination between them. These data from this study were analyzed within

case analysis and across case analysis, before later being confirmed by the expert advice.

4.0 CHAPTER FOUR: RESEARCH FINDINGS

4.1 Gap between disclosures and actual practice in CSR reporting

There have been increased demands for greater transparency and accountability in CSR reporting

from various interest groups. However, this has been met with mixed reactions since some

companies oppose the move while others are comfortable with the move. These new

requirements in CSR reporting in the UK compels companies to highlight the risks they face and

how they intend to act on the risks they face while doing their businesses. The proponents of this

new CSR reporting scheme argue that it will enhance their business reputation and ensure long-

term survival of their businesses (Banerjee, 2007). There seems to be a gap between the CSR

disclosures and the actual practice and this has formed the push in the UK that demands that

CSR reporting needs to me mandatory and should follow certain guidelines. They argue that

CSR reporting needs to be taken seriously in order to avoid the pitfalls of “greenwash” that has

characterized several CSR activities and reporting.

Satisfying the needs of the various stakeholders is critical in this information technology era.

While asked whether they are totally informed, totally not informed by the CSR initiatives the

following data was obtained.

41

The above data shows signifies the CSR communication from a sample of the stakeholders of the

above five companies. From the above data, an average of 62% is totally not informed by the

CSR reports of these five companies. On the other hand, a mere 36% of the population are totally

informed of the CSR reports from these five UK companies. In this set up, only 2% of the

respondents were undecided on whether they were informed or not informed of the CSR

activities of these five companies.

4.2 Alliance Boots

The CSR concept is embedded in the Alliance Boot mission statement that states that they are

designed to be the UK most socially responsible retailer in the health and the beauty market.

Therefore, the company is constantly involved in the activities that improve the health of their

customers and communities and to protect their environment. In addition, the company also aims

to develop sustainable products and to place their customers and colleagues at the heart of their

business activities.

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Alliance Boots is aware and constantly involved in activities that are responsive to climate

change, resource depletion, youth unemployment, and other community related problems. The

scorecard of the Alliance Boots involves an extensive network of their stakeholders that involves

CSR activities and reporting in all areas of community, environment, marketplace, and

workplace.

Alliance Boots CSR scorecard (Boots, 2014t)

In their community, the company used more than $3.5 million in cash donations and non-cash

donations. The areas targeted by these donations were healthcare, education, social welfare and

others as shown below.

The distribution of CSR budget at Alliance Boots (Boots, 2014)

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Alliance Boots is also involved in an activity that promotes the safety of the environment. Over

the years, reducing the negative impact of their environment has been established as part of their

operating cultures and practices. The since Alliance Boots are involved in activities that pollute

the environment and thus need to counter this by supporting environmental protection.

Total Boots CO2 emissions by sources (Boots, 2014)

In the market place, Alliance Boots believes that running a successful business goes hand in hand

with providing socially valuable services. Therefore, the company strives to treat their clients

and customers fairly and to act with integrity at all times. The company has forged an alliance

with their retailers, manufactures, the government, and the waste management sector. In

44

addition, the company ensures that their products are sourced from companies that treat their

workers fairly and pays attention to environmental improvement.

4.3 Barclays

Barclays is one of the companies that have perfectly portrayed the vast gap between the company

behavior and the corporate sustainability since it puts the value of CSR reporting in question.

After the corporate scandal that threatened the reputation of the company, the bank launched

their Citizenship Plan that entails the company’s strategy to restore their stakeholders’

confidence. The company ensures that the needs of their stakeholders are met and make

decisions that are sustainable in the long-term to give a positive impact to their communities,

clients, shareholders, and customers. The Barclays CSR strategy is represented by the diagram

below;

CSR Barclays Strategy (Barclays, 2013)

With the above strategy, the bank is able to provide a sustainable success for all their

stakeholders by understanding their needs and priorities in order to put them at the centre of their

business model to enable them lower the risks associated with banking, become a more

predictable bank, and achieve higher performance.

45

In terms of the environment, Barclays is aware their business activities contribute to

environmental degradation in one way or the other and this has been summarized by the diagram

shown below.

Environmental degradation by Barclays (Barclays, 2013)

Additional energy and water usage

With regards to the nature of how they do their business, Barclays aspires to run their business in

an open and transparent manner that supports clear disclosures for all their stakeholders.

Therefore, the company focuses on improving transparency for all their customers and clients in

all the markets they operate in addition to corporate transparency that includes financial

reporting and disclosures on all areas, including tax and public policy.

46

Tax paid by Barclays (Barclays, 2013)

4.4 BP Plc

Despite being rocked by criticisms and crisis, BP has continually demonstrated to be responsible,

progressive, innovative, and performance driven. The company’s core values are part of the

social responsibility that involves responsible handling of incidences as they occur. Since safety

is paramount to people, the company aims to bring no harm to people and the environment by

initiative measures that support environmental safety. The company’s corporate values consist of

safety, respect, excellence, courage, and togetherness as they carry out their business activities.

There are three main aspects of CSR at BP that drives all their operations. First is the legal CSR

that is focused on maximizing profits while obeying the laws and regulations set by the state and

the second is the ethical CSR that focuses on the profitability and doing what is just, fair, and

rights beyond the limits set by the law. The third and final aspect of PB CSR is the benevolent

CSR that focuses on the profitability and helping the surrounding society. The largest oil spill in

the Gulf of Mexico created the largest environmental disaster and brought a test to their

Corporate Social Policy that is being applied by BP in their operations. After this incident, the

47

company accepted the responsibility, admitted safety failures and vowed to pay for the damages

caused by their recklessness. The diagram below represents the company’s measure of professed

versus their actual CSR levels.

Comparison between proffered and actual CSR (BP, 2013)

Despite BP claiming to be operating within a strong set of values, their focus seemed so much on

the profits than on their stakeholders and their environment. The oil spill crisis faced by BP is a

strong indication that the company was not operating under the guidelines of the legal CSR.

However, the company changed their CSR policies after a heavy fine by OSHA and state

organisations for their loss of lives and destruction to the environment. The new CSR initiatives

are heavily focused on safety and operational responsibility, safety drilling practices,

management of environmental footprint, risk management, and increased contribution to socio-

economic issues. In addition, the company has increased their funding for agencies such as the

American Red Cross, The Red Cross Society of China, UNICEF, CARE International, World

Food Program, and other locally based organisations. Due to their immense CSR activities, the

48

company has often been rewarded as the top responsible company by the Fortune magazine,

apart from been given top ranking among the most ethical companies in the world by other

similar organisations.

4.5 Vodafone

Vodafone believes through their CSR activities that they can build a more sustainable future by

delivering products and services that bring a positive economic, social, and environmental

impact to all their stakeholders. Since the mobile devices are a vital tool in people’s lives, the

company strives to improve the livelihoods and quality of life by brining immense benefits to

their stakeholders. The CSR strategy of Vodafone focuses on two main things; transformational

solutions and operating responsibility. After being accused of tax avoidance, the current

Vodafone sustainability report includes information on their tax and economic contribution that

is well broken done for each and every country in which they operate. The company has

partnered with US Agency for International Development (USAID) and other agencies to take

humanitarian aid to the people. Vodafone has also invested in the mobile money transfer services

(commonly known as M-Pesa) to simplify money transfer through the mobile phones without

necessarily owning a bank account. In order to reduce the energy usage, the company has

unveiled the solar powered mobile phone charger that is aimed at achieving the global initiatives

for greener energy usage. The company has also invested in protecting the consumer privacy,

freedom and rights in addition to focusing on the safety of their employees and their contractors.

Through the mobile phones, the company has launched an innovative platform that enables the

victims of domestic violence to contact emergency services and get help accordingly. In the area

of health, the company has also launched a Pediatric Epilepsy Remote Sensing System that

allows physicians to make health observations in remove areas. The diagram below represents a

49

materiality matrix that the company uses to gauge their stakeholders impact and to identify and

prioritize the key areas of their CSR operations.

Materiality Matrix used in Vodafone (Vodafone, 2013)

From the period the company began their CSR reporting in 2005 to date (2014); the company has

managed to grow their business tremendously and reduced the negative impact on their

environment. During this period, the number of Vodafone users in the UK has grown by 23%

and their energy usage dropped by 34% for the same period.

4.6 AstraZeneca

50

AstraZeneca is highly involved in CSR activities since they deal with highly sensitive

pharmaceutical products. The ethical issues touching on AstraZeneca touches on the patient

safety, research and development, employee conditions, data privacy and the information about

their products. The company highly focuses on due diligence, such that responsible business is

part of their operational culture to protect the company’s reputation. Unlike other organisations,

AstraZeneca openly discloses their information concerning all their CSR activities to enhance

transparency.

The table below summarizes CSR activities of AstraZeneca (AstraZeneca, 2013)

51

4.7. Interview Analysis from the appendix by applying thematic analysis

The initial phases of this thematic analysis involve reading and re-reading of the data produced

from the interviews conducted in this study. Initial codes were then generated through data

reductions before combining the codes into form themes.

All the companies that engage in CSR activities have their own business strategies that they use

to execute their CSR mandate. The business managers reported that they intend to be socially

responsible to their stakeholders with respect to their business functions. The managers also

reported that their CSR initiatives are mainly targeted at issues related to environmental concern,

economic empowerment, and solving community related problems.

One of the major themes that come out of the interview is that management engage in CSR as a

strategic business model that helps build their brand image and reputation. Another theme that

comes out of the interview is those managers engage in CSR to repair their broken legitimacy

from their previous actions. Such companies have experienced some major scandals such as oil

spill, environmental pollution of even tax evasion scandals. Managers also report to engage in

CSR activities as a matter of business ethics and to contribute to social, economic, and

environmental gains among their stakeholders.

When it comes to disclosure and actual practice, the interview data reveals that some gaps exist

in CSR communication. Since the manager asserts that they disclose most of the things, it means

that there are some things that they fail to produce in their CSR reports. This means that CSR

reporting does not necessarily represent the actual practice of these firms due to some issues that

are not reflected in their reports. This explains why some companies fail to conduct

52

environmental assessment of their activities, but reflect their environmental improvement efforts

in their sustainability reports.

The extent by which the managers are honest in their reports also portrays the gap that exists

between CSR reporting and the actual practice. The theme that comes out is that most managers

are somehow honest in their CSR communication. This means that the level of honesty in the

CSR reports is not 100% as expected and this portrays the gap that exist in CSR reporting. In this

arrangement, companies tend to report what they perceive to promote their interest and omit

whatever they deem unnecessary in their CSR reports.

The level by which the stakeholders trust CSR reports also portray a gap that exists in CSR

reporting. Most stakeholders agree that CSR reports do not concur with the actual practice of

these companies. The stakeholders are of the view that companies conceal some information in

their CSR reports and this presents the gap in CSR reporting. Any information that may be

damaging is often ignored in the sustainability reports and replaced with valuable information.

Due to lack of legislation in the recent past, companies often find it easier to report their CSR

engagement under their own terms and conditions.

Chapter Summary

The results indicate that gaps exist between CSR reporting and the actual practice in the UK

companies. This has been echoed by increased demands for greater transparency and

accountability in CSR reporting from various interest groups. The companies practicing CSR are

constantly involved in activities that are responsive to climate change, resource depletion, youth

unemployment, and other community related problems. Therefore, engaging is CSR and

activities and reporting enables organisations to strategically achieve economic, social, and

53

environmental results. These results indicate that organisations engage in CSR as a strategic

business model that helps them to pursue their objectives. Ethical considerations are one of the

motivations for organisations involvement in CSR activities, especially ethically sensitive

industries such as the pharmaceutical industry. The need to uplift the social status of the

surrounding communities also motivates businesses to engage in CSR activities. The concern for

the environment also motivates companies to formulate environmental strategies within their

CSR practice. Companies also engage in CSR activities to restore their stakeholder confidence,

especially after being hit by a crisis or a scandal. CSR enables a company to establish a good

reputation and a brand name, which in turn has a positive effect on the short-term and the long-

term profitability of the firm.

54

5.0 CHAPTER FIVE: DISCUSIONS AND CONCLUSIONS

This chapter discusses the results that are developed from the research objectives and questions.

The main objective of the study is to assess the managerial motives in engaging in CSR and to

assess the perceived communication gap between disclosures and actual practice.

5.1 Managerial Motives of Engaging in CSR

Organisations engage in and report CSR as a strategic business model. Such organisations are

actively involved and incorporate CSR into their business models and strategically benefit from

discharging CSR functions. These organisations have realized that engaging and reporting CSR

activities are of strategic importance since it promotes their interest in pursuing their company

objectives (Creel, 2012). To these organisations, CSR has become a strategic element to consider

when making the right choices. Therefore, these organisations have created CSR department,

while others have placed it under the communication department. These departments hosting the

CSR have been given the decision making authority due to their strategic role to the business.

55

Such organisations see CSR as a source of innovation and leverage for organisational learning

since it improves their efficiency.

Organisations engage in and report CSR because it is the new wave of the corporate agenda.

Such organisations have minimal intention to engage in CSR activities, but they follow the

crowd. In the recent past, most organisations have deeply engaged in the CSR activities with

various motivations. Therefore, others have found themselves in the wave and decide to join in

order to avoid being left out. According to Carroll and Shabana (2010), these organisations fear

that their failure to engage in CSR activities may paint them as irresponsible businesses, which

may affect their reputation.

Organisations engage in and report CSR because they genuinely aim to contribute toward the

development of society. Such organisations are usually social enterprises that are not geared

towards the profit generation, but profits are re-invested in projects for the benefit of society.

These organisations appreciate, that they should establish a mutually beneficial relationship with

their society since their very existence is greatly supported by the society. The CSR initiatives of

these organisations are mainly directed at social and environmental challenges that face the

society. The aim of such organisations is to see a socially upright and successful society

(Dahlsrud, 2006). The organisations support initiatives such education, healthcare, poverty

eradication, agriculture among others.

Organisations engage in and report CSR because of reputation gains. Such organisations

incorporate CSR because of certification from ethical and environmentally conscious

organisations such as fair-trade, FTSE4Good, RSPO, and ETI to mention a few. The demands

for greater accountability and transparency are quickly growing in the corporate world and this is

driven by the investors and the civil society. This study establishes that CSR is slowly moving

56

from being a voluntary activity to mandatory activity due to several organisations being formed

to control CSR activities. For UK and other countries forming the EU, the member states have

finally agreed to the requirement that large listed companies to report on their social and

environmental impacts (Chaplier, 2014). According to the European Council, this agreement will

impose a duty on these large listed companies to report on their impacts on business. As such,

those organisations within their jurisdiction will be required to report on the policies on social

issues, environment, and diversity. In this way, these large listed businesses will be forced to be

accountable to both their shareholders and stakeholders throughout their business cycle. Other

relevant bodies to CSR also want organisations to identify the risks posed by their businesses,

whether social, economic, or environmental, and report on how they are dealing with such risks.

The benefit of complying with this requirement is that it will enhance their reputation and

support their long-term survival.

Organisations engage in and report CSR in an attempt to repair legitimacy that has been

tarnished by their past business activities. Such organisations have been involved in legitimacy

threatening scandals such as child labor, animal testing, pollution, oil spills, food safety to

mention a few, and to counteract the negative publicity and deflect attention from such will

communicate CSR. This hypothesis is highly supported by this study, considering a number of

scandals that have tainted the image of most of these businesses. These businesses, such as BP,

have experienced a crisis of responsibility due to their irresponsible business activities. In such a

case, legitimacy and reputation can only be repaired when these firms formulate strategic CSR

responses to such situations. To move away from the negative reputation and greediness, these

firms must continue to work on their strategic CSR that will overturn the already worsened

situation. CSR can be used as a window dressing initiative and it needs to be aligned with the

57

firm’s business strategy in order to create permanent credibility and trust (Karnani, 2010). Crisis

that emanates from business operations and their irresponsible behavior may be the beginning of

an ethical era with priority given to CSR activities.

Organisations engage in and report CSR in an attempt to fill the reporting-performance portrayal

gap. Such organisations are particularly targeted by NGOs and are similar to organisations

mentioned above, and in some way report CSR information in an attempt to alter perception

about their performance reporting. This helps them to reduce the possible conflicts that may arise

due to performance portrayal gap. Altering their performance reporting perception makes these

companies to have a good reputation as they pursue their business objectives (Lee, 2008).

5.2 Communication gap in CSR reporting

There seems to be a communication gap between the CSR disclosure and the actual practice in

companies, which is sometimes exposed when an organisation is rocked by a crisis or a scandal.

Such a gap is evident in the case of BP; whereby, the organisation has been claiming to operate

within a strong set of values until they were his by the oil spill crisis. This exposed their

weaknesses in safeguarding the environment since their focus seemed so much on the profits as

opposed to their stakeholders and their environment.

The vast variation that occurs in CSR reporting creates a gap between what companies report and

the actual practice in these companies. It even becomes complicated to determine whether an

organisation reports what they actually do in their sustainability initiatives. In order to solve the

communication gap in the CSR reporting, some form of responsibility should be enforced on

these organisations by the concerned bodies and institutions. By formulating certain industrial

standards, the companies will be forced to adhere to these standards to ensure coherency in CSR

58

reporting. In addition, these rules and regulation are likely to improve the levels of transparency

and accountability in the CSR reports, which in turn would close the gaps available in CSR

reporting. The government can also implement some measures of control and framework

concerning CSR activities while allowing companies to do it in a voluntary manner.

5.3 Recommendations

Future research should narrow down to the motives of CSR across different industries and those

that operate in different institutional environments. This will help to assess the similarities and

differences of the motives of their CSR activities. Future research can also establish the motive

of CSR between the small and big firms as well as the levels of legitimacy and reputational

threat between the small and the big firms. It is also worth examining the customer’s perceptions

of these heightened CSR activities to establish whether it has a long lasting impact on the

business. Future research should also establish the extent by which companies that have engaged

in CSR activities to overturn their bad reputation have been successful.

59

Appendix

This study utilized both the primary and the secondary data sources. Primary data was obtained

from the interviews carried out in the five companies and their relevant stakeholders. Only the

CEO of these five companies were interviewed in initial part of the interview and a sample of 5

stakeholders for each companies in the second part of the interview.

Interview Question for the Management

This section uses the following codes and themes to carry out the interview transcription process.

Each of the codes is detailed below.

SA represents me (the researcher)

MGA, Manager of AstraZeneca

MGB, Manager of Alliance Boots

MBC, Manager of Barclays

MBP, Manager of BP

MBV, manager of Vodafone

60

Part I: Interview to the management

SA: What is your CSR strategy?

MGB: Our CSR strategy is embedded in our mission statement which states that we are

determined to be the most socially responsible retailer in the health and the beauty market. In

addition, we are constantly aware of activities that are connected with climate change, youth

employment, resource depletion, and other community related problems.

MBC: Our CSR strategy revolves around successful and vibrant finance that enables social and

economic progress to our citizens. Our company ensures that the needs of our stakeholders are

met and decisions we make are sustainable in the long-term give a positive impact to

communities, clients, shareholders, and customers.

MBP: Our CSR strategy is embedded in our corporate values that comprise of safety, respect,

excellence, courage, and togetherness as we carry out our business activities.

MBV: Our CSR strategy is to build a more sustainable future by delivering products and services

that bring a positive economic, social, and environmental impact to all our stakeholders. Our

CSR strategy focuses on two main things: transformational solutions and operating

responsibility.

MGA: Our company focuses on due diligence, such that such that responsible business is part of

our operational culture and brand reputation.

SA: What is your motive of engaging in CSR?

MGA: We are involved in CSR activities as a strategic business model that benefit us as we are

discharging our mandate.

61

MGB: We are involved in CSR since it is a new wave of corporate agenda that every big

business organisation is practicing.

MGC: We are involved in CSR activities since it helps build our reputation and brand image.

MBC: We engage in CSR an activity that since it is a strategic business model that helps build

our brand image and improves our reputation. We are also determined to contribute to social

and economic development of our society.

MBP: We engage in CSR activities with the aim of reputational gains and to repair broken

legitimacy. In addition, we are determined to contribute to social, economic, and environmental

gains.

MBV: We are determined to contribute to social and economic development of our society.

SA: Does your CSR report disclose everything?

MGA: We disclose most of the things we actually practice or intend to practice

MGB: Yes, we disclose everything we intend to do and those that we have done

MBC: We disclose most of the things we have done and everything we intend to do

MBP: We disclose most of the things we actually practice or intend to practice

MBV: We disclose most of the things we actually practice or intend to practice

SA: Do you believe you are very honest in your CSR reports?

MGA: We are somehow very honest

MGB: Yes, we are very honest

62

MBC: We are somehow honest

MBP: Sometimes we are very honest

MBV: In most cases, we are honest

Part II: Interview to the stakeholders

SA: Do you trust the CSR reports released by AstraZeneca, Alliance Boots, Barclays, BP,

and Vodafone?

Yes_ 36% of the interviewed stakeholders

No_62% of the interviewed stakeholders

63

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