The goal of stakeholder dialogue : exploring the maturity in the development of stakeholder dialogue

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The goal of stakeholder dialogue

Exploring the maturity in the development of stakeholder dialogue

Laura Vreugdenhil Student number 6034179 Master Thesis

Msc. In Business Administration-‐ Strategy Track University of Amsterdam

Amsterdam Business School

Supervisor: Dhr. L. Moratis

Admission Date: 29 June 2015 Version: Final version

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Statement of Originality

This document is written by Student Laura Vreugdenhil, who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

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Abstract

Recent literature has shown that stakeholder pressure is forcing organizations to engage in CSR activities and implement CSR in the strategy of the organization. Organizations need to manage the relationship with their stakeholders, who are confronting the organization with their CSR performance. Stakeholder dialogue is an important part of the implementation of CSR and can be used to manage the relationship with stakeholders. Although the existing literature about engaging stakeholders, committing to CSR and implementing CSR recognizes the importance of the stakeholder dialogue, there is no specification of the development of the stakeholder dialogue when these factors change.

The aim of this qualitative study is to investigate to what extent the level of stakeholder engagement, level of commitment to CSR and the stage of implementation of CSR affect the development of stakeholder dialogue. Multi-‐method qualitative research has been used to collect data in order to answer this research question. A maturity model is proposed wherein the influence of the aforementioned factors on the development of stakeholder dialogue is shown. The factors of influence combined will determine the goal of stakeholder dialogue, in which the maturity of the stakeholder dialogue can be determined. Further research is needed to confirm these goals of stakeholder dialogue and their influence on the development of stakeholder dialogue.

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1 Introduction

Already in 1995, Welford wrote: “Corporate sustainability in the dynamic complexity of the twenty-‐first century economy means that businesses need to, through developing and sustaining relationships with key stakeholders, establish a corporate culture “consistent with the concept of sustainable development” (Welford, 1995, p. 114). Increasing governmental and non-‐governmental stakeholder pressure is nowadays something that organizations experience (Gonzalez-‐Benito & Gonzalez-‐Benito, 2006). Corporate Social Responsibility (CSR) is a stakeholder-‐oriented concept, defined by Khoury (1999) as the overall relationship of the corporation with all of its stakeholders (as cited in Dahlsrud, 2008, p. 7). Besides generating a profit, organizations are expected to demonstrate a positive impact on society. CSR has become a vehicle to demonstrate this positive impact to stakeholders of organizations. Stakeholders represent all groups that are involved with the organization and can be found internally and externally (Freeman, 1984).

Recently, stakeholders are pressuring organizations to implement CSR (Helmig et al., 2013), but the implementation of CSR in the strategy of an organization is a complex process that needs to be structured and guided. A mix of sustainability programs does not add up to an effective CSR strategy and implementation (Eccles & Serafeim, 2013). An important part of the implementation of CSR is stakeholder dialogue. Stakeholder dialogue is defined as; “the involvement of stakeholders in the decision-‐making processes that concern social and environmental issues” (Pedersen, 2006, p. 140). Stakeholder pressure that concerns CSR can therefore be managed in a developed stakeholder dialogue.

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Literature Gap and Research question

Substantial research has been done on both the implementation of CSR and stakeholder dialogue. Although the literature recognizes that CSR and the stakeholder approach are closely related, as they both focus on the responsibility of the organization towards society (Jamali, 2008), the development of the stakeholder dialogue is not explained in the context of the stages in the implementation of CSR. Reviewing the literature, there are several factors that seem to affect the development of the stakeholder dialogue. The first factor that seems to affect the development of the stakeholder dialogue is the level of engagement of stakeholders. Stakeholder engagement is defined as; “the practices the organization undertakes to involve stakeholders in a positive manner in organizational activities (Greenwood, 2007). Although Pedersen (2006) offers some theoretical propositions on a stakeholder dialogue for a high level of engagement, there seems to be no specification of the development of stakeholder dialogue in practice.

Without commitment of the organization to CSR, the organization is not expected to engage in stakeholder dialogue. As described in the book of Dunphy et al. (2007) the level of commitment to sustainability can be seen as continuum that varies from no commitment to sustainability to a high level of commitment to sustainability. Dunphy et al. (2007) mention that this has an effect on how the organization handles her responsibilities to the society. Stakeholders are part of society, and will confront the organization with these responsibilities. Organizations need to respond to these confrontations, but Dunphy et al. (2007) do not elaborate on the development of stakeholder dialogue. Even the article by Miller & Serafeim (2014), which specifically mentions the change in management of stakeholder relations in different types of orientations to CSR, does not elaborate on the development of stakeholder dialogue. The decision to implement CSR in the strategy of the organization is made for

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several reasons, but as aforementioned, stakeholder pressure is often important in this decision. Existing literature states that the implementation of CSR in the strategy of the organization consists of several stages (Maon et al. 2009, Maon et al., 2010, O’Riordan et al., 2008). The often-‐cited article of Maon et al. (2009) proposes an integrative framework for designing and implementing CSR in the strategy of the organization that consists of four stages. In these four stages, Maon et al. (2009) propose that there is a continuous stakeholder dialogue. Although there is a strong emphasis on the need for a developed stakeholder dialogue, there is no elaboration on how the stakeholder dialogue is developed during these stages. While the organization is progressing in the stages of the implementation of CSR, the stakeholder dialogue will have a different goal than in the first stages. For example in the stage, wherein Maon et al. (2009) propose that the organization identifies relevant stakeholders and critical stakeholder issues versus the stage wherein stakeholders are informed about CSR performance. It seems therefore strange that the literature does not mention the development in stakeholder dialogue during the implementation of CSR.

To summarize, the influence of the level of stakeholder engagement, the level of commitment to CSR and the stage of implementation of CSR in the strategy of the organization on the development of the stakeholder dialogue seems to be recognized, but to what extent these factors affect the development of stakeholder dialogue is not specified. This study will therefore try to answer the following research questions;

-‐ To what extent does the level of stakeholder engagement affect the development in stakeholder dialogue?

-‐ To what extent does the level of commitment of an organization to CSR affect the development in stakeholder dialogue?

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-‐ To what extent does the stage of implementation of CSR affect the development in stakeholder dialogue?

Theoretical and Practical Relevance

This exploratory study will complement the existing theory on stakeholder dialogue and theory of the implementation of CSR and investigate the relationship between those two areas. The relationship between the level of engagement of stakeholders, the level of commitment of the organization to CSR and the stage of implementation of CSR and the development of stakeholder dialogue will add theory to the existing literature on these phenomena and possibly highlight new areas of interest for future research.

Besides refining the literature on both implementation of CSR and the stakeholder dialogue, a significant practical contribution will be the result of this study. As mentioned by Lindgreen et al. (2009) there is a need for practice-‐oriented models, in order to understand how organizations engage in CSR. A stakeholder dialogue maturity model will be developed, which will explain the relationships between the different stages of implementation of CSR, the orientation of the organization towards CSR and the effect of these processes on the design of the stakeholder dialogue. This study will use data collected during interviews with fifteen CSR managers from organizations that are members of the ‘Grote Bedrijven Netwerk’ from MVO Netherlands.

Overview

This study will first review the existing literature on the key topics of this research; CSR and stakeholder theory. This is followed by a review of literature on stakeholder engagement, commitment to CSR and the implementation of CSR. The third chapter will describe how the existing knowledge of both topics is combined, which has resulted in hypotheses and a maturity model that show the expected relationship between the

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factors of influence and the development of stakeholder dialogue. This is followed by a description of the research strategy to collect and analyze the data. The fifth chapter will present the results of the data analysis. Finally, the main findings of this study are discussed with suggestions for future research, strengths and limitations of the research are described and this paper will end with the conclusion of the study.

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2 Literature Review

This first chapter will define the key concepts and review existing literature. First, the relationship between CSR and stakeholder theory is explained. This is followed by a short overview on stakeholder engagement, the commitment and orientation of the organization to CSR and the process of implementation of CSR. The chapter ends with a description of the literature gap and an explanation of the research questions.

2.1 Corporate Social Responsibility & Stakeholder theory

Corporate Social Responsibility

There is a significant amount of literature on the concept of Corporate Social Responsibility (CSR), which emerged in the 1950’s and has been researched thoroughly. This has, according to Dahlsrud (2008) led to multiple definitions in different dimensions, due to a certain bias of the authors of the definition. The dimensions; Environmental, Social, Economic, Stakeholder and Voluntariness are all used frequently, which shows that CSR is a complex, multidimensional concept. The article of Dahlsrud (2008) notes that the definition of the Commission of the European Communities 2001 is often used to define CSR:

“A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis.” (Commission of the European Communities, 2001) (as cited in Dahlsrud, 2008, p. 7)

As the above definition shows, a large part of CSR is the interaction with stakeholders of the organizations. Khoury et al. (1999) even defined CSR as:

“Corporate Social Responsibility is the overall relationship of the corporation with all of its stakeholders. These include customers, employees, communities, owners/investors,

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government, suppliers and competitors. Elements of social responsibility include investment in community outreach, employee relations, creation and maintenance of employment, environmental stewardship and financial performance. (Khoury et al. (1999) (as cited in Dahlsrud, 2008, p. 7)

The stakeholder dimension of CSR is according to Dahlsrud present in 88% of all CSR definitions, which confirms the direct relationship between CSR and stakeholders. CSR aims to define what responsibilities the organization has to fulfill and the concept of stakeholders is more about the question of to whom the business should be accountable to (Jamali, 2008). CSR and the stakeholder approach are thus closely related, as they both focus on the responsibility of the organization towards society. Jamali (2008) explains that while the CSR approach still has a certain level of abstraction, the stakeholder approach offers a practical method of assessing the performance of the firm in terms of responsibilities towards their stakeholders. As stakeholders are part of society, the stakeholder approach is for organizations an efficient method to start engaging in CSR.

Organizations decide to engage in CSR due to various reasons; (1) Reducing cost and risk, (2) Strengthening legitimacy and reputation, (3) Building Competitive Advantage and (4) Creating win-‐win situations through synergistic value creation. Organizations could pursue all four opportunities through CSR activities and therefore gain several advantages over other organizations (Kurucz et al., 2008). These opportunities enable firms to simultaneously meet the demands of stakeholders and generate a profit. Zadek (2000) mentions similar arguments and elaborates more on the strategic advantage of CSR, its proposed that engaging in CSR would improve Corporate Financial Performance (CFP). The relationship between CSR and CFP has been

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researched extensively, but the results do not show a definite relationship (Marom, 2006). Since the relationship between CSR and CFP is not proven to be positive for all organizations, it can be seen as an opportunity for organizations. Campbell (2007) states that there are certain conditions that affect the probability of organizations engaging in CSR activities, such as financial performance, environment, competition, regulation and networks. These conditions show the importance of the relationship with the stakeholders, for example, stakeholders also encompass government, which creates regulation. Another example is the financial performance, which is dependent on the ‘stakeholdergroup’ consumers.

Nowadays, the conditions in most environments are stimulating the implementation of CSR. The challenge of sustainability will affect the competitiveness of the organization (Lubin & Esty, 2010). The implementation of CSR should be seen as a strategic move and should be executed as effective as possible. The differences between organizations that have implemented CSR and organizations that have not implemented CSR are according to Eccles et al. (2012) that organizations that the organizations that have implemented CSR have cultures based on innovation and trust and they have a track record of implementing large-‐scale change and are effective at engaging with external stakeholders and employees. The recognition of the importance of the relationship with the stakeholders of the organization is therefore essential to engage in CSR.

Stakeholder theory

Stakeholders are, according to Freeman (1983); “Any group or individual who can affect or is affected by the achievement of an organization’s purpose.” Freeman (1983) points out that organizations should be able to recognize their stakeholders, be able to manage

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the relationship with the stakeholders and be able to decide what actions should be taken in order to satisfy the stakeholders. Gao & Zhang (2006) explain that this definition suggests a two-‐way relationship between the organization and its stakeholders, which reflects the interdependence of organizations and stakeholders. This interdependence justifies the importance of engaging stakeholders in the decision making process of the organization. Stakeholder groups can be found internally and externally, some examples of stakeholder groups Freeman (1984) mentions; Government, political groups, owners, financial community, activist groups, customers, customer advocate groups, unions, employees, trade associations, competitors and suppliers.

Stakeholder theory consists of two core questions; What is the purpose of the organization and what responsibility does the management of the organization have towards the stakeholders (Freeman et al., 2004)? Stakeholder theory advocates that organizations should not only focus on creating value for their shareholders but also on the relationships with their stakeholders. Stakeholders can be seen as elements of corporate planning due to their influence on the performance of the organization. The challenge that the stakeholder theory poses is the responsibility towards the stakeholders. How far should organizations go in order to satisfy their stakeholders, especially if the stakeholder groups have conflicting interests (Jones et al., 2007)? Donaldson & Preston (1995) recognize three approaches to stakeholder theory in literature; descriptive/empirical, instrumental and normative. The descriptive and instrumental approach is used to describe certain corporate characteristics and behaviors. The instrumental approach is used to identify connections between stakeholder management and achieving corporate objectives. The last, normative approach is used to interpret the function of the organization, the identification of moral

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guidelines for the operation and management of the organization. Donaldson & Preston (1995) conclude that the nature of the stakeholder theory is managerial and constitutes a stakeholder management philosophy. In order to manage the stakeholders, a relationship with the stakeholders needs to be developed.

Building the relationship between the organization and stakeholders

The relationship between an organization and the stakeholders does not emerge at a certain moment. A relationship with stakeholders is a complex interplay of shifting, ambiguous and contested relationships between or within diverse stakeholders and organizations (Gao & Zhang, 2006). A sustainable relationship with a stakeholder needs to be developed. The right organizational culture within the organization will allow for sustainable relationship building. Organizational culture can be described as a property of an organization and is constituted by (1) The assumptions of members of the organization, members’ taken for granted beliefs regarding the nature of reality, (2) The values of the organization, a set of normative, moral and functional guidelines for making decisions and (3) The artifacts of the organization, the practices that have developed from the assumptions and values (Schein, 1985).

Within the organizational culture, five stakeholder cultures have been identified. The stakeholder culture is described by Jones et al. (2007) as a central facet of organizational culture, which can provide the management with guidance in situations where tension is created by stakeholders that have conflicting interests with the organization, or with the other stakeholders. The stakeholder culture is defined as “the beliefs, values, and practices that have evolved for solving stakeholder-‐related problems and otherwise managing relationships with stakeholders” (Jones et al., 2007, p. 142) The stakeholder culture of an organization can vary from managerial egoism, where all

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other interests are sacrificed for the pursuit of self-‐interest to the altruist stakeholder culture, organizations that have this stakeholder culture are only other-‐regarding, in every possible situation. A detailed version of the typology of Jones et al. (2007) can be found in Appendix 1. The stakeholder culture shows the willingness of the organization to respond to stakeholder interests and will influence the relationship with the stakeholders.

However, as mentioned before, the relationship between the stakeholder and the organization is a two-‐way relationship. The organization can therefore have a strong organizational culture, without engaged stakeholders, the relationship will not develop.

2.2 Stakeholders Engagement

The engagement of stakeholders is described by Greenwood (2007), who states that stakeholder engagement is understood as ‘practices the organization undertakes to involve stakeholders in a positive manner in organizational activities. The literature on stakeholder engagement shows that there are various levels and manners to engage stakeholders in the process of decision-‐making (Gao & Zhang, 2001, Pedersen, 2006, Noland & Philips, 2010).

Levels of engagement

Gao & Zhang (2001) make a distinction between four levels of stakeholder engagement. The first stage is the Passive level, wherein stakeholders are informed. The second stage is Listening level, wherein stakeholders are consulted in the process of decision-‐making. The third stage is the Two-‐way process level, wherein the organization is engaging in dialogue with stakeholders. The last stage is the Proactive level, wherein stakeholders guide the management. The number of stakeholders involved decreases, as the stages are higher. In the article of Gao & Zhang (2006) they state that stakeholder engagement

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is not about organizations delegate the responsibilities for their activities, but about using leadership to build relationships with stakeholders. This could improve their overall performance, accountability and sustainability.

Another view on stakeholder engagement has Pedersen (2006) who states there is a continuum of stakeholder engagement that varies from low to high on different dimensions. The first dimension is Inclusion, this dimension describes who is involved in the stakeholder dialogue, just a few key stakeholders or all relevant stakeholders. The second dimension is Openness, which describes the format of the dialogue, are there fixed questions or are stakeholders allowed to ask open questions. The third dimension is Tolerance, which describes whether new and critical stakeholders are accepted into the dialogue. The fourth dimension is Empowerment, which describes the position of the stakeholders. Is there one dominant stakeholder or are all stakeholder interests equal. The last dimension is Transparency, which describes the access to information for stakeholders about the process and results of the stakeholder dialogue.

Furthermore, Pedersen (2006) proposes that there are three filters that influence the process and outcome of the stakeholder dialogue; The selection filter determines who has access to the stakeholder dialogue, the Interpretation filter determines the transformation of the interests of the stakeholders into a limited number of decisions and the Response filter that determines the difference between the observable actions of an organization and the intentions that underlie these decisions. These filters may constrain the ability from an organization to implement an effective stakeholder dialogue and influence the quality of the stakeholder dialogue.

Motives for stakeholder engagement

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necessarily positive or negative. She explains that instead of identifying the stakeholder engagement as moral or strategic, it becomes more important to identify these two distinct types on the basis of goal, manner and method of the engagement. Noland & Phillips (2010) describe in their article two schools of thought on stakeholder engagement. The first school of thought is described as the “Habermasians’, (to the German Jürgen Habermas) who argue that stakeholder engagement that organizations undertake is per definition amoral. In their view, stakeholder engagement should be free of strategic motivation to ensure the moral legitimacy. Strategic motivation and moral motivation should be strictly separated; both are not ‘wrong’ or ‘bad’ motivations, but just different motivations. The other school of thought is called ‘Ethical Strategists’, in their view; stakeholder engagement is necessary for an organizations’ license to operate. Stakeholder engagement should lead to the achievement of corporate goals and can be used as a tool. Noland & Phillips (2010) conclude that the view of the ‘Ethical Strategists’ offers a theoretical basis for including engagement of stakeholders as a vital part of strategy. Stakeholders remind organizations of their role of pursuing good life in society. As Noland & Phillips (2010) point out, this is the starting point to proceed to environmental responsibility.

The engagement of stakeholders might indeed have as a consequence that the organization needs to rethink their stance on CSR, as the interests of some stakeholders will include that the organization behaves socially responsible. The relationship with those stakeholders will be determined by the stance the organization takes towards CSR; whether an organization is committed to CSR or not.

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2.3 Orientation to CSR

For some organizations, committing to CSR contradicts the nature of their organization, especially if the organization is focused on making solely economic profit. Commitment to CSR is therefore not about doing business as usual, rather, a change of the corporate mindset of the organization. Changing the corporate mindset requires that the whole organization, so people at all levels of the organization change their thinking, communication and behavior they face in their daily activities (Nijhoff & Jeurissen, 2011). Commitment to CSR creates tension in some organizations since trade offs are a necessary component of a true commitment to social responsibility. These trade offs include for example not undertaking some projects that would lead to a high economic profit, but would damage the environment, or increasing the costs for projects in order to produce them in a more sustainable way (Slack, 2012). Although the organizations Slack describes are organizations working in the extractive sector, one can assume that this tension created by commitment to CSR translates in other industries as well. In contrast, a model developed by Eccles & Serafeim (2013) shows the relationship between the financial performance, ESG performance and the amount of innovation. ESG performance is the performance on three dimensions; Environmental, Social and Governance. An interesting statement from Eccles & Serafeim (2013) is that in the absence of innovation, financial performance will decline, but ESG performance will improve. In order to improve financial and ESG performance, organizations should focus on the development of new products, processes and business models. As they point out: “Investment in sustainability programs often require trade-‐offs in companies’ financial performance, but this doesn’t have to be. By strategically focusing on the environmental, social, and governance (ESG) issues that are the most relevant-‐ or “material” – to shareholder value, firms can simultaneously boost both financial and

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ESG performance” (Eccles & Serafeim, 2013, p. 5). Organizations can thus be committed to CSR without losing financial performance.

Commitment to CSR or sustainability in the organization is described in the literature as a process, with different stages, levels or types of commitment. The organization is expected to develop and grow in their commitment to CSR.

Development of Commitment to CSR

The book of Dunphy et al. (2007) describes three waves of sustainability. These waves describe the transformation of the way that the organization treats the human and natural resources it employs. The first wave consists of two phases; Rejection (The organization disregards environmental impact) and Non-‐Responsiveness (The organization lacks awareness of environmental awareness). The second wave consists of the phases Compliance (The organization reduces the risk of sanctions for environmental damage) and Efficiency (Inside the organization there is a growing awareness of advantages of sustainable practices). The third wave consists of Strategic proactivity (Sustainability is a part of the business strategy to maximize profits) and the sustaining corporation (The organization has the ideology to work for a sustainable world).

Miller & Serafeim (2014) propose three different stages in the development of commitment to CSR. They describe three different orientations of the organization to CSR and they emphasize the role of the Chief Sustainability Officer (CSO). Miller & Serafeim (2014) and Dunphy et al. (2007) have a different approach in their description of the development of commitment towards CSR. Where Dunphy et al. (2007) focus on the response of the organization to CSR, Miller & Serafeim (2014) focus on what CSR means to organizations and why they would engage in CSR activities. The level of

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commitment to CSR can be a result of the motive for CSR, so these two approaches are closely connected.

Beside different approaches, there are also some similarities that can be recognized. Miller & Serafeim (2014) do not include the first wave of Dunphy et al. (2007), which seems fair, since the organization would not have an orientation on CSR if they reject or not respond to CSR. Their first orientation is Compliance, which corresponds to the first phase in the second wave of Dunphy et al. (2007). Their second orientation Efficiency roughly corresponds with the second phase in the second wave of Dunphy et al. (2007). This orientation consists of a move towards a more strategic approach to CSR, development of the business case for CSR and, which is an interesting difference, the engagement of internal stakeholders in interactions. In the third orientation Innovation of Miller & Serafeim (2014) the organization has a proactive and transformational approach to sustainability and is actively managing the relationship with stakeholders. The difference with Dunphy et al. (2014)’s approach is that Miller & Serafeim (2014) specifically mention the value CSR can add to an organization in the form of innovation, while Dunphy at al. (2014) mention that CSR is a mechanism to maximize profit.

Stakeholder management

The fact that Dunphy et al. (2014) point towards the role of the change agents, who are in their view critical in the different phases, confirms the importance of the relationship with the stakeholders. Change agents include those who work in the organization and those who wish to influence the organization, and can be considered stakeholders. Miller & Serafeim (2014) emphasize the importance of stakeholders even more. They explain that relationships with stakeholders become increasingly important as the

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orientation changes and the relationships need to be managed. Their article explains the importance of the CSO, who needs to either manage, or instruct employees on how to manage the stakeholders and their expectations of the organizations.

Managing the relationship with stakeholders becomes significantly important when stakeholder expectations and demands are not feasible for the organization. The notion of Dunphy et al. (2007) that organizations do not necessarily go through all these phases and might start in a ‘higher’ phase or stop in a certain phase makes the situation that stakeholder expectations do not fit the level of commitment of the organization to CSR possible. Organizations that are willing to satisfy stakeholder demands should manage the relationship with that stakeholder in order to avoid or decrease stakeholder dissatisfaction or increase their commitment to CSR. An increase in commitment to CSR will result in the implementation of CSR in the strategy of the organization, which might also help changing the corporate mindset.

2.4 Implementation of CSR

The decision to implement CSR in the strategy of an organization is made for different reasons. Some examples have been previously mentioned; legislation, changing the image of the organization, growing commitment to CSR, etc.. These examples are all the result of stakeholder expectations and demands; Legislation from the government, the image for consumers, growing commitment to CSR of employees or owners of the organizations. Organizations expect that when they are ‘doing something for the society’, they will be rewarded financially by their stakeholders. As argued by Eccles & Serafeim (2013), an effective strategy for an organization should address interests of all stakeholders.

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different levels of integration and impacts on elements of the strategic framework of an organization. To integrate CSR in the strategic framework, the core elements should be altered, starting with the vision, strategic plan, strategic measurement system and compensation system (Pedrini & Ferri, 2011). In contrast, Eccles et al. (2012) explain another approach in the change towards an organization engaging in CSR activities. In their view, the transformation to an organization engaged in CSR activities is a change in the identity of the organization. The article of Eccles et al. (2012) provides a roadmap to change the identity, which incorporates the aforementioned change in the corporate mindset by Nijhoff & Jeurissen (2011). Their roadmap explains the need for commitment to CSR, external engagement, communication about CSR goals and achievements and support for the new identity, which should be noticeable by stakeholders. As Eccles et al. (2012) point out, an important factor in the codification of the new identity is the presence of an organization-‐wide mechanism that helps convey the new identity.

The contrast between those two articles illustrates the complexity of the process of implementation of CSR. Besides changing organizational elements, human factors such as the type of orientation towards CSR, the engagement of stakeholders and support for the new identity all need to be managed. To help organizations understand and structure the processes needed in order to implement CSR, maturity models and frameworks have been developed.

Process of CSR implementation

The integrative framework of Maon et al. (2009) is an often-‐used framework to display the implementation of CSR. The framework is inspired by the model of Lewin and consists of four stages, with nine steps that explain what the stage in practice entails.

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The first stage is Sensitizing. In this stage, management becomes aware of the importance of sustainability and there is a search on how to overcome the resistance of change. The second stage is Unfreeze, where managers are required to unfreeze past practices and a CSR orientation is developing. The third stage is Move, wherein the organization is guided towards new assumptions, ideas and projects and is implementing CSR in practice. The fourth stage is Refreeze, where the organization should refreeze the new assumptions. After the refreeze, the CSR practices can be improved through going through the phases again.

The engagement of stakeholder is described in the steps. Step 2 consists of the recognition of key stakeholders and critical stakeholder issues and a box with arrows is used to emphasize the importance of a continuous stakeholder dialogue. It is assumed that the continuous stakeholder dialogue already exists before stage 1 and continues to exist. What should be noted is that step 7: “Communication about CSR commitments and Performance”, prescribes communication with stakeholders, but there seems to be no effect on the continuous stakeholder dialogue. The integrative framework of Maon et al (2009) can be found in Appendix 2.

In 2010, Maon et al. propose another model wherein they specify a score for every stage of CSR development on three dimensions; Knowledge and Attitudinal dimensions, Strategic Dimensions and tactical and Operational Dimensions. The difference with their integrative framework is the emphasis on the importance of the stakeholders. In this article, they state that CSR stems from social expectations and therefore requires organizations to think of themselves as members of a network. A stakeholder perspective needs to be taken, which means that the organization has to interact constantly with converging, competing and varying interests of stakeholders and society. They compare several models of CSR development, which all; “describe a

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CSR-‐related development that consists of a progressive integration of social concerned into organizations’ decision-‐making processes”(Maon et al., 2010, p. 15).

The ‘Seven-‐stage CSR Development Model’ from Maon et al. (2010) shows the change in stakeholder culture throughout the phases. In the first stage, the CSR Cultural Reluctance phase, the stakeholder culture is identified as “Corporate Egoist’, which means that there is short term self-‐interest at the organization and there is no support for CSR. In the second stage, the CSR Cultural Grasp Phase, the stakeholder culture is identified as enlightened self-‐interest. The organization is gradually assimilating CSR principles due to the desire to meet compliance objectives. In the third stage, the CSR Cultural Embedment Phase the organization is increasingly other-‐regarding in their decision making. The stakeholder culture is described as broadly moral and organizations are holding on to moral principles that apply to all stakeholders. The development model of Maon et al. (2010) can be found in Appendix 3. The development model of Maon et al. (2010) offers a review of stage models of CSR development and combines these with models originating from other disciplines, such as psychology, organization and business and society research. They explicitly state “in order to generate innovativeness and creativity required to develop a sustainable business over the long term, an organization must progressively become a site for dialogue and collaboration” (Maon et al., 2010), which makes one assume that the organization must develop their relationship with their stakeholders, in order to develop a sustainable business. In their development model, this is illustrated by the different stakeholder cultures in different stages.

Combining the development and the implementation of CSR described by Maon et al. (2009) and Maon et al. (2010) makes the notion of ‘continuous stakeholder dialogue’ in the integrative framework of Maon et al. (2009) to rough. The model of

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Maon et al. (2010) clearly shows that the stakeholder culture and the relationship with the stakeholder changes. It seems fair to conclude that the stakeholder dialogue will change as the relationship with the stakeholder changes.

Stakeholder dialogue

Stakeholder dialogue is defined as “The involvement of stakeholders in the decision-‐ making processes that concern social and environmental issues” Pedersen (2006), which is the result of the relationship between the organization and stakeholders. Kaptein & Van Tulder (2003) elaborate more on the stakeholder dialogue; they explain that in the dialogue with primary and secondary stakeholders, opinions are exchanged, future interests and expectations are discussed and standards for business practice are developed that have the approval of stakeholders.

Different forms of dialogue with stakeholders are described by Morsing & Schultz (2006). They link stakeholder relations to three CSR communication strategies. The first communication strategy is the stakeholder information strategy, which describes the situation wherein the organization provides its stakeholders with information and stakeholders can show their appreciation by their loyalty. The second strategy is the stakeholder response strategy, which is basically a form of asymmetric communication. The organizations are providing the stakeholders with information and receive feedback from their stakeholders in the form of polls or surveys. The organization is only attempting to change their reputation and stakeholders are only passively responding to initiatives from the organization. The third and recommended strategy is the stakeholder involvement strategy. This strategy advocates the stakeholder dialogue, wherein the relationship with the stakeholder results in a situation where the stakeholder changes the organization. Stakeholder involvement is

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necessary to adapt and change in line with stakeholder expectations, especially stakeholder expectations regarding CSR. Managers should improve their CSR communication strategy in order to create an effective stakeholder dialogue.

An effective stakeholder dialogue does not only enhance the sensitivity of an organization towards the environment, but also increases the understanding of the environments of the dilemmas that an organization faces in their decision-‐making process. A well designed stakeholder dialogue could thus improve the transparency, the sharing of information, could inspire society to work together and could help develop Key Performance Indicators (KPI’s) (Kaptein & Van Tulder, 2003).

2.5 Literature gap & Research question

Literature gap

As pointed out in the former chapters, the level of stakeholder engagement, the type of orientation to CSR and the stage of implementation of CSR all seem to affect the relationship and dialogue between the organization and stakeholders. There is a substantial amount of literature on the importance of stakeholders for organizations and what the relationship and dialogue with stakeholders can do for organizations (Ballantyne, 2004, Berman et al., 1999), there are even articles that explain how to build relationships though social media (Waters et al., 2009, Lovejoy, 2012), and many articles offer guidelines for designing an effective stakeholder dialogue, (Kaptein & Van Tulder, 2003, Pedersen, 2006). In contrast, there seems to be no research available that explains how the aforementioned factors affect the development of the dialogue with stakeholders in the organization. This study will address this literature gap.

Research Question

The goal of stakeholder dialogue : exploring the maturity in the development of stakeholder dialogue