Practise what you Preach?
The Existence and Execution of Internal CSR in Social Enterprises
An exploratory study among social entrepreneurs in The Netherlands
MSc Business Administration – Marketing Specialization
University of Amsterdam
Supervisor: Mr. Dr. L.T. Moratis
MSc. Thesis
Y.M.I. Fransen – 11121289
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ACKNOWLEDGMENT
I would like to express my gratitude to the participants of my research. I feel honoured to have had the
opportunity to meet you and gain deeper insights in your business. I value your honesty and openness
on your internal business practices and the fact that you were all very interested to speak with me about
a sensitive dimension of your business. I hope the results and conclusions presented in my thesis will be
a source of inspiration to further think about and develop your internal CSR engagement, and that it will
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STATEMENT OF ORIGINALITY
This document is written by Yvette Fransen 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,
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Internal Corporate Social Responsibility is gaining importance as a strategic source of success for a firm
to conduct business, and considered as essential organizational element to be evaluated credible by
external stakeholders. Social entrepreneurs, aiming to make a social impact by business engagement,
are expected to experience a challenge to apply internal CSR due to a strong external focus. This
research examines the existence and execution of internal CSR in social enterprises in The Netherlands
from an internal perspective. A grounded theory approach is applied to develop a conceptual model,
which is refined through a qualitative, exploratory research among 23 social entrepreneurs. The study
shows that internal CSR actively exists and is consciously executed through informal practices in social
enterprises, influenced by the size and the age of the social enterprise. Social entrepreneurs are motived
intrinsically to conduct business responsibly, and organizing accordingly on an internal level is perceived
obligatory to be perceived credible as a business. This research sets out the first steps towards a
grounded theory on internal CSR execution in general, and more specifically internal CSR in social
enterprises and the relatedness to credibility.
Keywords: Internal Corporate Social Responsibility, Social Enterprise, Sustainable Business Development, Credibility
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TABLE OF CONTENT
1. INTRODUCTION ... 7
-1.1 Sustainability and Sustainable Development ... 7
-1.2 Response from the Business Sphere ... 7
-1.3 The rise of the Social Enterprise Movement ... 11
-1.4 Internal CSR engagement in Social Enterprises ... 12
-1.5 Research Gap and Objectives ... 14
-1.6 Academic and Practical Contribution ... 15
-1.7 Readers’ Guide ... - 16 -
2. LITERATURE REVIEW ... 18
-2.1 The Social Enterprise Movement ... 18
-2.1.1 Definition and key characteristics ... 18
-2.1.2 Development of the social enterprise movement ... 19
-2.1.3 Organizational dimensions of social enterprises ... 21
-2.1.4 Impact areas ... 22
-2.1.5 Stages of growth ... 23
-2.2 Internal Corporate Social Responsibility ... 24
-2.2.1 Definition and key characteristics of Corporate Social Responsibility ... 24
-2.2.2 Internal versus External CSR ... 25
-2.2.3 Research on internal CSR ... 26
-2.3 Internal CSR in Social Enterprises ... 32
-2.3.1 Existence of internal CSR in social enterprises ... 33
-2.3.2 Execution of internal CSR in social enterprises ... 34
-2.4 Organizing for internal CSR ... 36
-2.4.1 Implicit versus Explicit CSR ... 36
-2.4.2 Intrinsic versus Extrinsic motivation to engage in internal CSR ... 38
-2.5 The Relationship between internal CSR and the Credibility of a Social Enterprise ... 40
-2.6 Conceptual Model ... - 41 -
3. METHODOLOGY ... 43
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3.2 Research Sample ... 44
-3.3 Research Procedure ... 45
-3.4 Data Analysis ... - 47 -
4. RESULTS ... 48
-4.1 Existence of internal CSR in Social Enterprises ... 48
-4.2 Execution of internal CSR in Social Enterprises ... 51
-4.3 Drivers to Adopt or Reject internal CSR ... 57
-4.4 The Relationship between internal CSR and the Credibility of a Social Enterprise ... - 62 -
5. DISCUSSION AND CONCLUSION ... 64
-5.1 Answering the Research Question ... 64
-5.1.1 Revising the conceptual framework ... 64
-5.1.2 Existence of internal CSR in social enterprises ... 67
-5.1.3 Execution of internal CSR in social enterprises ... 68
-5.1.4 Drivers to adopt or reject internal CSR ... 69
-5.1.5 The relationship between internal CSR and the credibility of a social enterprise ... 70
-5.2 Theoretical and Managerial Contributions ... 71
-5.2.1 Theoretical Contributions ... 71
-5.2.2 Managerial Contributions ... 72
-5.3 Limitations and Future Research ... 73
-5.3.1 Limitations ... 73 -5.3.2 Future research ... 75 -5.4 Concluding Remarks ... - 78 - 6. REFERENCE LIST ... 79 -7. APPENDICES ... 87 -7.1 Participant briefing ... 87 -7.2 Interview guide ... 89 -7.3 Coding Schema ... 96
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7.4 Overview of nodes and references per data source... 101
LIST OF FIGURES Figure 1: Hybridization Continuum………...……….….…… - 11 -
Figure 2: The growth of Dutch social enterprises………..………...……… - 20 -
Figure 3: Organisational dimensions of social enterprises……….………..….……… - 22 -
Figure 4: Conceptual framework on the existence and execution of internal CSR in social enterprises ………..………..………..……….……… - 42 -
Figure 5: Conceptual model on the existence and execution of internal CSR in social enterprises ………..………..………..….……… - 66 -
LIST OF TABLES Table 1: Stages of growth of social enterprises ………...…….……..…… - 24 -
Table 2: Overview of academic literature and empirical studies on the dimensions and practices of internal CSR ……….………..…… - 31 -
Table 3: Applied elements of internal CSR in social enterprises ………...……..……….…… - 52 -
Table 4: Drivers to adopt or reject internal CSR ………...………..………...………..…… - 58 -
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1. INTRODUCTION
1.1 Sustainability and Sustainable Development
Global awareness is growing that the planet cannot endlessly sustain human capacity under current
consumption circumstances. The UN World Commission on Environment and Development defines
sustainability as “meeting the needs of current generations without limiting the ability of future generations to meet their own needs” (UNWCED, 1987, in Hall, Daneke & Lenox, 2010). Human living requires to exist within the limits of all natural systems it depends on. Over the last decades, sustainable
development has arisen as a pranging concept that may no longer be neglected. The heightened
awareness on pressing global problems such as climate change, environmental degradation, poverty
and social inequalities is taking a prominent role in society (Popescu, 2011). A fundamental
transformation in production and consumption is needed to stop the pressing environmental issues to
continue at this pace (Hall, et al., 2010; McDonagh & Prothero, 2014). To achieve sustainability,
economic growth has to be balanced proactively with environmental resilience and social cohesion by
governments, business and communities, so that opportunities of future generations will remain (Hall et
al., 2010; Popescu, 2011). Awareness on the significant global environmental degradation and social
inequities existing in society is gaining importance, leading to an increased focus on sustainability in
environmental legislations, governmental regulations, business strategies, research and education, and
consumer behaviour (Bridges & Wilhelm, 2008).
1.2 Response from the Business Sphere
From traditional economic perspective, a company’s main purpose is to maximize shareholder value and
company profits (Friedman, 1970; Popescu, 2011). Competitive strategies are developed and executed to
achieve these business objectives. From this point of view, social goals clash with economic goals. The
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& Kramer, 2012). The responsibility of addressing social concerns lies at the government. Investing
business resources in social issues means theft from its shareholders investments (Friedman, 1970).
This capitalistic business perspective dominated management and practice up until 2000. At this
point in time, a shift started to occur rom initial responsibility of governments towards recognition of
responsibility by the business sphere in achieving sustainability (Steurer, 2013, in Behringer & Szegedi,
2016). Companies start understanding the detrimental impact of its operations on planetary ecosystems,
leading to global climate change, increase in pollution and toxic waste, and declining rainforests
(Bridges & Wilhelm, 2008). Society increasingly views business as a major cause of the current state of
the planet (Porter & Kramer, 2012). Shifting from a purely economic perspective, companies consider
their responsibilities to go beyond making profit and obeying the law. In addition, firms are dependent
on the environment and society in which they operate, implying a fundamental connection exists
between social and economic goals (Porter & Kramer, 2002, in Popescu, 2011). A successful business
depends on a successful society that offers an operational environment and entails a demand for
products and services. The dependence and impact on society and environment leads to a current
integration of the concept of sustainability in business strategies (Hall et al., 2010).
Over the last decades, the business sphere initially responded to sustainable development by
embracing Corporate Social Responsibility, seeking for a better world in their way of doing business
(Page & Katz, 2011; Popescu, 2011;Porter & Kramer, 2012). The World Business Council for Sustainable
Development defines CSR as “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large” (WBCSD, 1999, in Popescu, 2011, p. 54). Established firms engage in CSR by going beyond their economic goal of profit maximization and
obeying the law, and integrating of the concept of sustainable development by engaging in CSR
initiatives. CSR rapidly evolved to an integral part of business and a manner to contribute to sustainable
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Within a short period of time, the question for business became not whether CSR should exist, but
rather how to implement it (Szegedi, Fülöp & Bereczk, 2016; WBCSD, 2000, in Popescu, 2011).
Until this point in time, the state and the market were held responsible for addressing the
sustainability concerns and initiating development towards sustainable solutions (Trivedi & Stokols,
2011). Academics however began to express their doubts when society showed a rise in dissatisfaction
with the ineffectiveness of these actors in addressing issues (Haigh, Walker, Bacq & Kickul, 2015).
Governments are criticized for slow and passive bureaucratic processes, and the corporate business
sector for a lacking focus on humanity and capitalistic nature, together considered not able to solve the
social and environmental concerns. Specifically, the added value of CSR engagement in achieving
sustainable development became questioned. CSR is viewed outdated: due to business’ narrow focus on
economic viability, CSR engagement entails only incremental solutions in existing business practices.
(Porter & Kramer, 2012). CSR engagement is often a response to external pressure, seen as an inevitable
expense and an act to improve a firm’s reputation (Porter & Kramer, 2012). This manner of acting
responsibly is not perceived as potential solution for the severe global sustainability phenomena,
considering the footprint of business on nature and society (Popescu, 2011; Russo, 2003, in Hockerts &
Wüstenhagen, 2010). Current economic ideas and models are considered no longer sustainable,
resulting in a search for a different movement to address socio-environmental problems (Jonker, 2012;
Salamon, 2001; in Trivedi & Stokols, 2011).
To transform the current economy to a sustainable economy, new and different forms of
organizing business are required (Jonker, 2012). New business models start to emerge that are
organized from a true sustainable core. The concept of value creation, the starting point of a business
model, is reconsidered to integrate sustainability (Jonker, 2012). Porter and Kramer (2012) propose that
business should aim for the creation of shared value: a new approach of creating economic value that
simultaneously creates value for society by addressing societal issues. Traditional business is trapped in
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creation. Capitalism considers responsible business engagement putting a constraint at the firm, that
brings costs and thus reduces profits. A transformation in thinking is needed towards viewing societal
issues as market opportunities that create shared value both for business and society. The business
sphere needs to redefine its purpose to shift away from capitalism towards a new economy that allows
for sustainable development (Porter & Kramer, 2012).
In the search for new business models that integrate sustainability and successfully address
societal concerns, a recent development is identified towards hybrid business models (Antwerp
Management School, 2017). Hybrid business models simultaneously strive to create economic, social
and environmental value, and in addition consider these three aspects as equally important (Antwerp
Management School, 2017). Different from traditional organizations that add the component of social or
shared value creation to major economic value creation, hybrid organizations are founded with the
mission to integrate for-profit and non-profit within the organization. (Kolk & Lenfant, 2016; Porter &
Kramer, 2012). Academics suggests that hybrid business models pose a solution for business to
transform to fully sustainable organizations and achieving sustainability (Alter, 2007; Antwerp
Management School, 2017; Kolk & Lenfant, 2016; Santos, Pache & Birkholz, 2015). Sustainability is the
core of a business, instead of a secondary concept at the periphery of a business. The number of hybrid
organizations is growing and practiced through various organizational forms (Alter, 2007; Haigh et al.,
2015; Kolk & Lenfant, 2016). The hybridization continuum (figure 1) classifies hybrid business on the
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Figure 1: Hybridization Continuum (Adapted from Alter, 2007 and Kolk & Lenfant, 2016)
1.3 The rise of the Social Enterprise Movement
At the intersection of the hybridization continuum lies a separate and new business movement that
emerged in the end of the 20th century: the Social Enterprise phenomenon. Social entrepreneurs start a
new dimension organizational thinking and design by pursuing an absolute focus on social concerns
while using resources in an innovative manner (Keizer, Stikkers, Heijmans, Carsouw & van Aanholt, 2016;
Pache & Chowdhury, 2012). Aiming to solve social problems, social enterprises value social impact over
profit maximization (Roberts & Colwell, 2001). The European Commission defines a social enterprise as
“an operator in the social economy whose main objective is to have a social impact rather than make a profit for its owners or shareholders” (Keizer et al., 2016, p. 3). Social enterprises differ from corporate enterprises in its core: while corporate enterprises value economic value creation as primary goal, social
enterprises value societal value creation as ultimate goal. Corporate enterprises strive for profit
maximization, social enterprises principally reinvest profits in the business to enlarge impact on society
(Cornelius, Todres, Janjuha-Jivraj, Woods & Wallace, 2007; Trivedi & Stokols, 2011). Traditional Nonprofit organizations Semi-hybrid organizations Nonprofit with Income-generating Activities Semi-hybrid firms Socially Responsible Business Mainstream social firms Corporation Practicing Social Responsibility Traditional For-Profit firms Hybrid organizations Social Enterprises Social value creation Economic value creation Hybridization Continuum Hybrid Spectrum
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The social enterprise movement is on the rise (Cornelius et al., 2007). Social enterprises are
increasingly being recognized as an independent business sector and a significant construct for a shift
to sustainable products and processes, forming a valuable contribution to solving sustainability concerns
(Hall et al., 2010; Szegedi et al., 2016). Social enterprises have proven to effectively tackle lasting issues
(Santos, Pache & Birkholz, 2015). Social enterprises enable economic opportunities and activities built
around social, cultural and environmental goals. This concept leads to community development, and is
hence perceived by academics and practitioners as a promising solution for social and environmental
concerns (Hall et al., 2010; Popescu, 2011; Szegedi et al., 2016).
1.4 Internal CSR engagement in Social Enterprises
Scientific literature on sustainable business development has a major focus on the external impact of
responsible business. Recently, a distinction between the internal and external dimension of responsible
business behaviour, i.e. Internal CSR and External CSR, is gaining field in academic literature (Basil &
Erlandson, 2008; Castka, Balzarova, Bamber & Sharp, 2004; Cornelius et al., 2007; Hart & Milstein, 2005;
Mory, Wirtz & Göttel, 2016; Welford, 2003). Literature and research state the increasing importance for
organizations of practicing the internal, less visible dimension of responsible business as a strategic
issue (Banerjee, 2001; Mory et al., 2017). While the external dimension encompasses policies and
practices that integrate external entities, the internal dimension involves internal stakeholders and
processes (Basil & Erlandson, 2008). The internal and external dimensions are argued to strengthen each
other, because external stakeholders perceive the organization’s internal stakeholders crucial to
successfully perform on the external CSR dimension (Cornelius et al., 2007; Mory, et al., 2016).
Institutional theory states that organizations operate in institutional environments.
Organizations have to deal with and respond to environmental pressures in order to receive legitimacy,
influencing organizational behaviour (Pache & Santos, 2010b). However, these institutional pressures are
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value creation continuously integrating competing pressures (Scott, 2001, in Pache & Santos, 2010a).
Pache and Santos (2010a) identify social enterprises operating in the institutional environments of social
impact and commercial logics from which legitimacy is derived. A social enterprise pursues a social
mission to solve a societal issue, which brings a network of support from public and social parties.
Simultaneously, commercial activity is executed in an environment of customers and partners that bring
financial viability. Academics state that social enterprises are fragile and vulnerable organisations
because internal difficulties are found to appear when trying to not drift away from the social mission
during commercial activity, and it can be demanding to become financially viable when fully devoting to
social activities (Santos, Pache & Birkholz, 2015).
Institutional environments are increasingly forcing organizations to act upon their demands
(Pache & Santos, 2010b). The recent increase in importance of internal responsible behaviour from
environmental institutions of a social enterprise puts pressure on the social enterprise to act upon this
demand. Focus on internal management could lead to a shift away from the social logic, but serve the
commercial logic when satisfying external stakeholders. Currently, little knowledge exists on the internal
organization of social enterprises and whether how social entrepreneurs deal with this conflicting
demand (Cornelius et al., 2007; Mory et al., 2016). Society increasingly questions the alignment of
internal business operations of social enterprises with its external vision (Cornelius et al., 2007; Takala &
Pallab, 2000). Due to a strong focus on a single external mission of making a social impact, less attention
is expected to be directed internally, and due to its size, lack of information and resources to invest,
research expects it to form a challenge for social enterprises to engage in internal CSR practices.
Research asks for closer investigation of internal policy and practice within social enterprises, as the
focus of attention has majorly been drawn towards the external social dimension (Al-bdour, Nasruddin
& Lin, 2010; Lindgreen et al. 2009, in Cornelius et al., 2007; Mory et al. 2017; Vlachos, Theotokis &
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However social enterprises operate in two initially conflicting institutional logics, these can
potentially become synergistic when both logics are aligned (Pache, Santos & Birkholz, 2015; Reay &
Hinings, 2009, in Pache & Santos, 2010a). A generic scepticism exists among academics and external
stakeholders on the true contribution of social business activity to sustainable development while
simultaneously undertaking commercial activity (Cornelius et al., 2007; Takala & Pallab, 2000). The
expressed need for internal alignment with a social mission paves a potential way to strengthen the
social enterprise in terms of social impact as well as financial viability. Research suggest that to be
perceived credible, an organization should be organized internally according to its external mission
(Balmer & Greyser, 2002; Cornelius et al., 2007). Acting upon the demand for internal CSR could solve
distrust among external stakeholders, leading to enhanced commercial activity and hence social impact.
1.5 Research Gap and Objectives
This research aims to contribute to the growing emphasis on internal CSR practices and the sparse
knowledge on the existence and execution of internal CSR in social enterprises. While the business
sector of social enterprises is growing and its contribution to sustainable development is increasingly
acknowledged, social enterprises are vulnerable hybrid organizations in terms of conflicting institutional
environments (Santos, Pache & Birkholz, 2015). Internal CSR engagement is expected to be a possible
valuable tool for social enterprises to prove its credibility and hence stimulate financial viability
(Cornelius et al., 2007). The research will investigate how social entrepreneurs perceive the importance
to engage in internal CSR, whether and how internal CSR is implemented in social enterprises, and
whether social entrepreneurs believe or experience this enhances the social enterprise’s credibility in
pursuing its social goal. Various factors that are expected to influence the existence and execution of
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What drives social entrepreneurs to adopt or reject internal CSR policies, and to what extent do they think such policies will have an impact on the credibility of their social enterprise?
To answer this research question, four sub questions need to be answered. This research question
contains the following sub questions:
RQ1: Is internal CSR an existing phenomenon in social enterprises? RQ2: How is internal CSR practiced in social enterprises?
RQ3: What drives social entrepreneurs to adopt or reject internal CSR?
RQ4: How do entrepreneurs perceive the relationship between internal CSR and credibility of the social enterprise?
To answer the research question, 23 social enterprises in The Netherlands, varying in stages of company
age, company size, and operating areas, are interviewed on their thoughts and actions regarding
internal CSR. A grounded theory approach is applied to discover new theory from gathered data. As a
starting point for the current research, a theoretical framework is developed by reviewing existing
literature and research on internal CSR and internal CSR in social enterprises (Peirce, 1934). A
qualitative, multiple-source research allows for new, undiscovered insights in the domain of internal CSR
from the first-order perspective of the social entrepreneur. The subsequent data analysis draws
conclusions on why and how internal CSR exist within social enterprises, and how this could play a role
in the development and maintenance of a social enterprise’s credibility and viability.
1.6 Academic and Practical Contribution Academic relevance
From theoretical perspective, the contribution of this research is threefold. Firstly, this research will
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accepted definition and framework due to a lack of explorative research (Mory et al., 2017). The practical
application of internal CSR in 23 social enterprises will contribute to the conceptualization of internal
CSR, the way it is implemented and perceived within organizations. Secondly, little is known on if and to
which extend internal CSR policies and practices are evident in social enterprises. Though assumptions
are prevalent on this phenomenon (Cornelius et al., 2007; Hitchens, 2004, in Lee, 2009; Hockerts &
Wüstenhagen, 2010; Jung & Kim, 2015), little empirical field work has been done so far. Thirdly, by
considering the role of internal CSR in enhancing credibility of the social enterprise, another research
gap proposed by Cornelius et al. (2007) is addressed. This question is answered from a company
perspective, shedding light on how internal CSR is used as a tool to tackle credibility issues commonly
experienced by organizations serving a social mission.
Practical relevance
Practically, (social) enterprises can find business inspiration and opportunities from this research.
Participating enterprises will become more aware of their internal management policies and practices
during the interview. Participants will reflect upon their current stage of internal CSR, why and how the
organisation came to this stage, and if there is any space and wish for improvements for the future. The
research outcomes will likely form a source of inspiration for managers of (social) enterprises, either
participating in the research or not, regarding their internal CSR engagement by learning how other
social enterprises manage internal CRS.
1.7 Readers’ Guide
This thesis is structured as following. First, a literature review is provided on earlier relevant academic
literature and research on the development, key concepts, and relationship of social enterprises and
internal CSR. From this review, a conceptual framework and hypotheses are derived. Then, the research
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interviews. Conclusions are drawn on the obtained results regarding the research questions. Lastly,
limitations of the research are discussed, theoretical and managerial contributions are outlined, and
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2. LITERATURE REVIEW
2.1 The Social Enterprise Movement
After a short introduction on the concept of the social enterprise movement, the following section will
more elaborately discuss the existing academic literature on the definition of a social enterprise, its
characteristics, and organizational variations.
2.1.1 Definition and key characteristics
Putting social impact first is what separates social enterprises from traditional business (Keizer et al.,
2016). The European Commission defines a social enterprise as “an operator in the social economy whose main objective is to have a social impact rather than make a profit for its owners or shareholders” (Keizer et al., 2016, p. 3). While social and environmental concerns keep evolving, governments are
struggling to meet growing social needs due to a lack of required financial and human resources
(Cornelius et al., 2007). Social enterprises seek new solutions to address these problems by bringing
entrepreneurs, society and capital together.
Academic literature agrees upon the main characteristics identifying social enterprises as a
distinct and independent business form: social enterprises provide a product or service, employ a
traditional management system, are financially viable, and are risky and challenging businesses to
engage in.
Social enterprises engage in providing products and services, serving a prominent, explicit social and / or environmental goal, to a market either at low prices, or owned by poor and vulnerable citizens
who share in profits (Defoury & Nyssens, 2010; Popescu, 2011; Saatci & Urper, 2013). Social enterprises
are highly innovative compared to traditional business. Existing issues interwoven with society are
considered from an innovative perspective and solutions to the issues are translated into innovative
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However voluntarily initiated, social enterprises do feature a traditional management system (Saatci & Urper, 2013). The business activities are run, at least partly, by professionals and employees
who own salaries according to market wages while possibly also involving volunteers. Social enterprises
are autonomous as its existence depends on stakeholder participation – e.g. employees, clients, social
investors and communities. The social enterprise is responsible for the consequences of its actions –
social, environmental and economic impact – to its stakeholders and the community as a whole
(Popescu, 2011).
The key difference between a social enterprise and a charity foundation is the fact that social
enterprises are financially viable. Profits are principally reinvested in the business to achieve social goals and enlarge its impact on society, as social enterprises are not aiming for profit maximization (Cornelius
et al., 2007). Social enterprises can request for grants and donations from the public and private
companies, acquired to be financially sustainable. While not focusing on profit maximization, losses are
avoided and enterprises aim to be financially independent. The financial viability of the social enterprise
is dependent on the efforts of the management team and employees, bringing an economic risk for
investors (Popescu, 2011).
Social enterprises are considered risky and challenging because of its social purpose, requiring long-term commitment to address a cause successfully. Investments are high in terms of money, time
and energy, as there is no quick solution to the social cause (Popescu, 2011).
2.1.2 Development of the social enterprise movement
The social enterprise movement, that has its European roots in Italy emerging in the1990s, is becoming
a significant business stream in today’s economy (Defourny & Nyssens, 2010; Szegedi et al., 2016). In
2011, social enterprises were accountable for already 10% of the overall European Gross Domestic
Product. In The Netherlands, which is the geographic focus area of this research, the social enterprise
sector started its evolution in 2008 at the beginning of the financial crisis (Social Enterprise Monitor,
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developmental stage in 2011, in the five years following the number of social enterprises increased by
almost 70%, jobs in the sector increased with approximately 60%, and revenues increased with 75% (see
figure 2). A research conducted in 2016 among 130 social enterprises in The Netherlands shows
enterprises are expanding their business operations at a rapid pace: 87% of the respondents reports
growth in revenues and amount of jobs, each growing with an average of almost 25% within one year
(Social Enterprise Monitor, 2016).
Figure 2: The growth of Dutch social enterprises (Retrieved from Keizer et al., 2016)
Currently, social enterprises play a prevalent role in The Netherlands, being well recognized as
business sector by the public, investors and beneficiaries (Keizer et al., 2016). As the need for sustainable
business initiatives is still increasing under current sustainability concerns, the social enterprise sector is
still able to grow in amount of enterprises, jobs and revenues. Support platforms, such as Social
Enterprise NL, are founded to guide social enterprises in their development, and the amount of capital
invested in social enterprises has become threefold since 2010. A research on the Dutch social enterprise
sector performed by McKinsey (2016; in Keizer et al., 2016) estimates that due to growing demand for
social investments, by 2030 the impact on society of the social enterprise sector in The Netherlands can
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Various conceptualizations of social enterprises have been developed since the movement is growing
rapidly (Defourny & Nyssens, 2010). Because this research focuses on enterprises in The Netherlands,
the concepts developed from survey among 182 Dutch social enterprises performed by McKinsey are
followed. According to this research, social enterprises in The Netherlands are represented among
different organisational dimensions, visualized in figure 3: a social enterprise’s fundamental form and its
impact ambition. Firstly, social enterprises show to differ in its foundation. Most commonly, a social
enterprise is founded with the aim to have an impact on society, putting social impact above profit from
the moment of establishment. These enterprises have never operated from a financial value
maximization mission, therefore identified as Fundamental Social Enterprises. As the business
environment is increasingly changing towards more sustainable business models, traditional businesses
could move beyond implementing CSR initiatives by transforming towards becoming a social enterprise
(Keizer et al, 2016). An increase in transformed social enterprises is expected upcoming years. The
severity of social issues and the power of traditional business to address these issues, combined with the
criticism on CSR engagement, cause an expected transformation of corporations to social enterprises by
adjusting business practices and missions (Keizer et al., 2016).
Secondly, social enterprises can be divided into two groups based on their ambitions regarding
impact: community changers and society changers. Community changers stay within the scope of its
initial and immediate community. Ambitions to grow are absent, however these enterprises are of
essential impact to the community they serve. This form of social enterprise is a common response to
ending local subsidies to a social cause that becomes a social issue when left unserved. On the other
hand, society changers go beyond the scope of a single community and aim to change the market.
These enterprises directly compete with (commercial) companies on an established market by
implementing changes in the value chain. The impact of society changers goes beyond the direct impact
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Figure 3: Organisational dimensions of social enterprises (Based on Keizer et al., 2016)
2.1.4 Impact areas
Social enterprises operate in various and divers sectors of the economy (Popescu, 2011). The United
Nations developed 17 Sustainable Development Goals that form the sustainable development agenda
for 2030 (United Nations, n.d.). These global sustainability guidelines are translated into 7 impact areas
(Keizer et al., 2016), according to which the social enterprises can be grouped based on its social
mission:
Stimulating the circular economy and renewables
Enlarging labour market participation and equality
Improving health and well-being
Promote social cohesion
Improving the food chain
Stimulating international development
Improving education
Society
Transformed Community
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Addressed most often by Dutch social enterprises are the impact areas of ‘stimulating the
circular economy and renewables’ (25%) and ‘enlarging labour market participation and equality’ (20%)
(Keizer et al., 2016). While all social enterprises exist to serve one specific social need, most enterprises
try to make an impact beyond their main social impact area (Social Enterprise Monitor, 2016). Aiming to
do as much good as possible for society, 72% of the monitored Dutch social enterprises invest in more
than one impact area.
2.1.5 Stages of growth
Keizer et al. (2016) developed a stages of growth model of social enterprises (table 1). In 2016, half of
the Dutch social enterprises examined in the earlier mentioned research are classified as early-stage
growth. Currently, 30% reached the later-stage growth, reflecting the recent evolution of the business
sector. Due to the large number of recently established social enterprises, 20% of the total sector is
currently in seed or start-up phase.
Phase Age Definition
Seed phase 0-2 years The founding team develops the idea and translates it into a prototype product or service. Prototype funding comes from founders’ resources and/or contributions from friends, families and crowdfunding.
Start-up phase
1-3 years The team develops the prototype and brings it to market. A customer base is established and KPIs are identified. The social enterprise receives its first revenues and attracts additional resources in the form of investments or loans.
Early-stage growth
2-5 years The social enterprise aims to increase its scale through new channels and markets. It hires talent, improves quality and implements
standard management processes. Funding comes from revenues and growth capital.
Later-stage growth
>3 years Having established a reputation with stakeholders, the social enterprise looks for additional growth beyond the initial products or
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services. Several capital options are available. Some founders and/or investors may make exits.
Mature >5 years The social enterprise obtained customer validation operational validation, and financial validation. The social enterprise became self-sustainable.
Table 1: Stages of growth of social enterprises (Adapted from Keizer et al., 2016 and Lidow, 2016)
Concluding, social enterprises evolved as a promising and rapidly expanding new business
sector. Social enterprises are grouped by four common characteristics, but due to targeting one specific
social goal in a specific impact area and variance in organizational form and stage of growth, all
enterprises possess a unique identity. While in The Netherlands the sector is still growing in amount of
enterprises, and enterprises are expanding their social impact by processing through the growth stages
to a mature stage, general agreement exists on the potential of the sector to have a large influence on
sustainable development.
2.2 Internal Corporate Social Responsibility
The following section will, after shortly introducing CSR in general, elaborate on the recently emerged
focus on internal CSR, as increasingly considered as a crucial construct to successfully execute a
sustainable business strategy.
2.2.1 Definition and key characteristics of Corporate Social Responsibility
Established companies engage in Corporate Social Responsibility(CSR) initiatives to simultaneously
achieve economic, environmental and social goals by contributing to sustainable development. The
European Union defines CSR as “the responsibility of enterprises for their impacts on society” (Szegedi et al., 2016, p. 1402). The World Business Council for Sustainable Development explains CSR as “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and
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society at large” (WBCSD, 1999, in Popescu, 2011, p. 54). Last decades, large established companies started implementing CSR in their businesses to show their concerns on the environmental and social
conditions they operate in (Saatci & Urper, 2012). In today’s world full of environmental and social
challenges, the question is not whether CSR should exist, but rather how to implement it (Szegedi et al.,
2016; WBCSD, 2000, in Popescu, 2011).
Viewing CSR from a theoretical approach, stakeholder theory is often applied to explain effects
of CSR (Mory et al., 2017). Applied to CSR, the theory stresses that business should consider the needs
of all the different parties that can affect or are affected by the performance of an organization:
stakeholders (Freeman, 1984, in Mitchell, Agle & Wood, 1997). In a general sense, CSR can be defined as
the ‘business-stakeholder interface’ (Catska, Balzarova & Bamber, 2004). By considering all stakeholders
in executing CSR, not only economic, environmental and societal stakeholders should be taken into
account, but employees as internal stakeholder should be taken care of as well. A shift took place from
viewing CSR as the ‘business-society interface’ to a stakeholder perspective, emphasizing the
importance to not only focus on the external – society – dimension (Lunheim, 2003, in Catska et al.,
2004). To achieve long-term business success with CSR engagement, demands of all stakeholder groups
should be integrated in a company’s CSR orientation. Here the distinction is drawn between the external
dimension and internal dimension of CSR (Mory et al., 2017).
2.2.2 Internal versus External CSR
Approximately fifteen years ago, attention started to be drawn to the importance of addressing the
organization’s internal dimension to successfully execute a sustainability policy (Banerjee, 2001;
Cornelius et al., 2007). The internal dimension of CSR became a strategic focus within organizations, as
agreement exists on the fact that to successfully execute an external impact mission, support of the
internal stakeholders is crucial (Cornelius et al., 2007). Research and academic literature on the
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Paper by the Commission of the European Communities to promote a framework for CSR in Europe, a
clear distinction was drawn on the internal and external dimension of CSR (Commission of the European
Communities, 2001, p. 9, p. 13):
“Internal: Within the company, socially responsible practices primarily involve employees and relate to issues such as investing in human capital, health and safety, and managing change, while environmentally responsible practices relate mainly to the management of natural resources used in the production. They open a way of managing change and reconciling social development with improved competitiveness.
External: Corporate Social Responsibility extends beyond the doors of the company into the local community and involves a wide range of stakeholders in addition to employees and shareholders: business partners and suppliers, customers, public authorities and NGOs representing local communities, as well as the environment.”
While engagement in the external dimension of CSR is highly visible to the external stakeholders
involved, the practice of internal CSR is far less visible from an outsider perspective (Basil and Erlandson,
2008). As no external party is involved, internal CSR practices are less often checked by external
stakeholders, leading to a lack of knowledge to outsiders on whether a business does or does not
engage in internal CSR policies and practices. The Commission calls upon business for a holistic
approach to CSR, actively participating in and integrating both dimensions. While a general recognition
by the business sphere exists on the importance to engage in both dimensions of CSR, in 2001
management practices to integrate CSR throughout all dimensions of the business seem to be lacking
(Commission of the European Communities, 2001).
2.2.3 Research on internal CSR
Field work has started to emerge since to analyse involvement in the internal of CSR. Castka et al. (2004)
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by observing the behaviour of SMEs in the United Kingdom. Inspired by the dimensions of internal CSR
outlined in the definition of the Commission of the European Communities, they identify six dimensions
of internal CSR applied: human capital management; health and safety standards; quality of management; adoption to change and innovation; managing environmental impacts and natural resources; and managing finances. Among the SMEs involved in this study, large focus on practicing internal issues is found to exist, though little attention is yet drawn to the environmental dimension. A
longitudinal study from 2003 – 2006 by Basil and Erlandson (2008) is the first one to identify different
internal CSR categories. An analysis of 159 companies in Canada on CSR activities results in the coding
of three internal categories: code of ethics, environmental policy focusing on minimization of negative environmental impact or maximization of positively benefiting the natural environment, and health and safety in the workplace. This study shows a stronger growth for internal CSR engagement than the growth for external CSR engagement. Participation in all three internal CSR categories at least doubled
within the three years of research, the strongest growth happening in code of ethics.
While different categories on internal CSR are identified and proven to be addressed, however
varying in attributed weight, the fieldwork on internal CSR conducted so far is most often considered
from an employee perspective. Therefore internal CSR is most often identified and applied as practices
related to employee management. Employees are an important asset on which the success of an
organization largely depends, and should therefore be carefully addressed by internal CSR policies and
practices (Mory et al., 2016). Welford (2005) conducted fieldwork in large companies on a global scale.
By observing practices applied internally among employee management, he identifies six themes
belonging to internal CSR according to which the practices can be classified: non-discrimination, equal opportunities, fair wages, vocational education, association and human rights. Mory et al. (2016) identify the applied practices of internal CSR from an employee perspective within a large established German
company in renewable energy, who consider internal CSR management to consist of 6 activities:
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involvement and empowerment. Al-bdour et al. (2010) conducted a comparable research among employees in Jordan, considering internal CSR to exist as the same dimensions and practices as Welford
(2005) and Mory et al. (2016).
Graafland, van de Ven and Stoffele (2003) are exceptional by viewing CSR from a different
perspective than employee management. Here CSR is viewed as the practice of organizing ethics in
order to act responsibly to all stakeholders, which is in line with the theoretical outline written by
Brammer, Millington and Rayton (2007) who consider one of the two elements of internal CSR to be
procedural justice. To ensure for ethical behaviour and practices on an internal level, several instruments were identified in 111 small- and large businesses in The Netherlands engaging in CSR: an internal social handbook to clarify the position of employees within their labour conditions, a confidential person for employees to call upon in cases of abuse, an ethics committee in larger firms or board member responsible for internal communication of ethical issues, and employee training on core values of the firm. The research shows that the use of these instruments depends on the size of the firm, with small
firms making relatively little use of these instruments due to an informal culture which relies on
dialogues with its internal stakeholders to address the ethical needs considered most important. The
larger a firm, the more instruments are applied to ensure for and align ethical behaviour.
However some field work is conducted aiming to identify and conceptualize internal CSR, all
researchers call for further research on the concept of internal CSR as a generally accepted definition
and framework are still lacking. The results of the consisting fieldwork are dispersed and unrelated to
each other. The majority of studies view internal CSR as employee directed management activities
(Al-bdour et al., 2010; Mory et al., 2016; Mory et al., 2017; Welford, 2005), often considered from an
employee perspective, while other dimensions of internal CSR are proposed and considered important
(Brammer et al., 2007; Graafland et al., 2003), with only a few researchers integrating and linking the
different categories (Basil & Erlandson, 2008; Catska et al., 2004). The International Organization for
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extensive set of guidelines and recommendations on both external and internal CSR. Regarding the
dimensions of internal CSR, on top of addressing employee management by the categories responsible
labour practices and managing human rights, it does agree with Basil and Erlandson (2008) and Catska
et al. (2004) regarding environmental policies by writing guidelines on engagement in pollution
prevention, sustainable resource use, climate change mitigation and adaptation, protection of the
environment and restoration of natural habitats. In line with the findings of Graafland et al. (2003), the
Standard addresses a fourth category of general internal policies and management, addressing
accountability, transparency, ethical behaviour, respect for stakeholder interests and respect for rule of
law. A chronological overview on the conducted research on the different dimensions and organizational
elements of internal CSR is outlined in table 2. A categorization is made based on the findings, resulting
in three categories: general internal management, environmental management, and employee management.
Concluding, agreement exists on the distinction between the internal and external dimension of
CSR by scientific literature, the European Commission and the DIN-ISO26000 Standard. They all suggest
an increase in importance of internal CSR policies and practices in organizations in general. A strong
internal organization is seen as a source of success for a firm to perform its business, therefore
investments in the internal side of an organization are considered essential (Cornelius et al., 2007; Mory
et al., 2016). While for a long time being considered unrelated, internal and external CSR reinforce each
other in making an impact (Calveras, 2013). Engaging in the dimension of internal CSR is considered
necessary to successfully execute external CSR activities (Basil & Erlandson, 2008; Cornelius et al., 2007).
While it is clear that the internal dimension of CSR is gaining importance in the fields of research
and management, a clear, generally accepted definition and conceptualization of the elements of
internal CSR is not yet derived (Mory et al., 2016; Mory et al., 2017). Research asks for further empirical
- 30 - Categorization and Elements of Internal CSR
Authors & year
of publication General Internal Management Environmental Management Employee Management Other
Commission of the European Communities, 2001
Adaptation to change
Balance and consider interests and concerns of all those affected by changes and decisions
Open information and consultation
Safeguard employees’ rights
Vocational retraining
Ensure employability of staff
Reducing consumption of resources
Reducing polluting emissions and waste
Human resource management
Attract and retain skilled workers o Life-long learning
o Empowerment of employees
o Spread of information throughout the company o Work-life balance
o Workforce diversity
o Equal pay and career prospects for women o Profit sharing and share ownership schemes o Concern for employability and job security
Responsible recruitment
o Non-discriminatory practices Health and safety at work
Occupational health and safety performance
Qualities of products and services
Measuring, documenting and communicating safety
Certification schemes and labelling products and equipment
Graafland, van de Ven & Stoffele, 2003
Internal social handbook on values and norms
Confidential person
Ethics committee
Employee training on core values
Castka, Balzarova, Bamber & Sharp, 2004
Quality of management
Adoption to change and innovation
Managing environmental impacts and natural resources
Human Capital Management
Working environment and health & Safety
Managing finances
Welford, 2005 Protection of human rights within the company’s own
operations
Non-discrimination in the workplace
Equal opportunities
Fair Wages, normal working hours, maximum overtime
Staff development, in-house education, vocational training
Right of freedom of association, collective bargaining and complaints procedures
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Brammer, Millington & Rayton, 2007
Procedural justice
o Processes of employee performance evaluation
o Fair treatment of employees regarding gender and race
Employee training
Basil &
Erlandson, 2008 Code of Ethics Environmental Policy Minimizing negative environmental impact
Positively benefiting the natural environment
Health and Safety policy
Ensuring safety of surrounding communities
ISO/DIS26000 International Standard, 2009 Accountability Transparency Ethical behaviour
Respect for stakeholder interests
Respect for rule of law
Prevention of pollution
Sustainable resource use
Climate change mitigation and adaptation
Protection of the environment
Restoration of natural habitats
Labour practices:
Employment and employment relationships
Conditions of work and social protection
Social dialogue
Health and safety at work
Human development and training in the workplace Human rights:
Due diligence
Human rights risk situations
Avoidance of complicity
Resolving grievances
Discrimination and vulnerable groups
Civil and political rights
Economic, social, and cultural rights
Fundamental principles and rights at work
Al-bdour, Nasruddin & Lin, 2010
Health and safety
Human rights
Training and education
Work-life balance
Workplace diversity
Mory, Wirtz &
Göttel, 2016 Employee stability Working environment
Skills development
Workface diversity
Work-life balance
Tangible employee involvement
Empowerment
Table 2 Overview of academic literature and empirical studies on the dimensions and practices of internal CSR (Based on Al-bdour et al., 2010, Basil and Erlandson, 2008, Brammer et al., 2007, Catska et al., 2004, Commission of the European Communities, 2001, Graafland et al., 2003, ISO, 2009, Mory et al., 2016 and Welford, 2005)
- 32 - 2.3 Internal CSR in Social Enterprises
While the social enterprise movement is on the rise, little knowledge exists on the internal organization
of social enterprises (Cornelius et al., 2007; Mory et al., 2016). Empirical work is lacking, but as the
emphasis on internal responsible practices is growing, inferences are made on this phenomenon by
looking at comparable business forms. Comparative research on social enterprises and commercial
SMEs concludes they face many similar challenges because they share many commonalities in
organizational characteristics (Bornstein, 2004, in Cornelius et al., 2007). While earlier the claim
dominated that SMEs were little involved in executing CSR activities, the European Commission stated
in 2002 that “many SMEs already practice social and ecological responsible management even if they are not familiar with the CSR concept of regularly communication about their practices. For many SMEs such practices are simply a consequence of responsible entrepreneurship” (Observatory of European SMEs, 2002, in Cornelius et al., 2007, p. 361). This would mean that social enterprises would
unconsciously engage in internal CSR practices as a consequence of its responsible business mission.
On the other hand, a research conducted among charitable organisations, that differ in business form
from social enterprises but are similar in addressing social or environmental concerns, show a lack in
internal CSR and ethical practices that match external values and goals (Foote, 2001, in Cornelius et al.,
2007). Correspondingly, a research conducted in Korea (Jung & Kim, 2015) found that a business
participating in a social mission does not automatically imply that internal processes are organized
accordingly. Taken together, social enterprises would be expected to naturally engage in internal
responsible behaviour, however in practice this may not always be the case.
Research has drawn little attention yet to the existence and execution of internal CSR in social
enterprises (Cornelius et al., 2007; Hitchens, 2004, in Lee, 2009; Hockerts & Wüstenhagen, 2010; Jung
& Kim, 2015; Mory et al., 2016). The discussed research on internal CSR in section 2.3.3 differ in scale of
growth and scope of operations, however none of them addresses social enterprises. Based on the
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challenge for social enterprises to practice sustainable practices internally on top of an external social
mission caused by several reasons (Cornelius et al., 2007; Hitchens, 2004, in Lee, 2009; Hockerts &
Wüstenhagen, 2010). Firstly, the aim to solve or contribute to a social issue drives every single aspect
of social enterprise. With an external mission as reason to exist and execute business, social enterprises
tend to direct as much attention and resources as possible to carry out their mission. In addition, by
founding a new business to address a social cause, social enterprises often have to operate within a
limited scope of human- and financial resources. It is already a challenge itself to run a business within
these constraints. Lastly, a social enterprise’s viability depends on its stakeholders, who engage with a
social enterprise because they feel connected to the social cause being addressed. To serve their
interests and strengthen the relationship, communications are fully directed to envision the social
enterprise’s mission and impact, contributing to the creation of an externally focused tunnel vision
within the social enterprise (Hockerts & Wüstenhagen, 2010). This all draws towards a single external
focus. Due to this focus, social enterprises are expected to direct less attention and resources to
internal CSR practices, and to consider internal policies and practices as less important. Apart from
these suggestions in academic literature on social enterprises being expected to draw little attention
on its internal dimension, researchers call for investigating the existence of internal CSR in social
enterprises (Cornelius et al., 2007; Hockerts & Wüstenhagen, 2010; Mory et al., 2016).
2.3.1 Existence of internal CSR in social enterprises
This research will investigate whether internal CSR exists within social enterprises. The existence of
internal CSR is expected to depend on several factors. The size of the social enterprise will very likely
influence the existence and extensiveness of internal CSR engagement. The smaller the social
enterprise, the less likely it is that resources and attention are directed to internal CSR (Cornelius et al.,
2007). The larger a social enterprise, more attention will be directed to formal development of internal
practices and explicit internal policies. The size of the social enterprise will be labelled small, medium
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scale (local, regional, national, international). The existence of internal CSR is expected to be formed
by the size of the enterprise in the following manner:
H1a: The smaller the size of the social enterprise, the less likely internal CSR exists
In line with the expected influence from the size of the social enterprise, the age of the social
enterprise is expected to be of similar influence. Age of the social enterprise will be labelled according
to the stage of growth framework of Keizer et al. (2016) proposed in section 2.2.5 (start-up, early-stage
growth, late-stage growth, mature) and the current age of a firm since foundation. From the stage of
growth framework proposed earlier, the seeds phase is left out in this research, as enterprises that are
not active in the market yet are not considered in this research. The age of an enterprise is expected to
influence internal CSR existence as following:
H1b: The less mature the social enterprise, the less likely internal CSR exists
2.3.2 Execution of internal CSR in social enterprises
Based on previous literature and field work on internal CSR, the conclusion can be drawn that a
generally accepted definition and framework of internal CSR is lacking. Disagreement exists on which
categories and activities belong to the execution of internal CSR. This research will contribute to the
development of a definition and framework by examining how internal CSR is viewed and executed in
social enterprises. As a starting point to analyse internal CSR in social enterprises, the categorization
based on previous literature created in section 2.3.3 will be used in drawing hypotheses: general
internal management, environmental management, and employee management.
The execution of internal CSR is likely to depend on several factors. First of all, the impact area
a social enterprise is operating in is expected to influence the execution of internal CSR. While seven
impact areas are identified by Keizer et al. (2016) this research will make a distinction between
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mission. Due to a higher awareness and focus on either a social or environmental issue, it is expected
that the external mission will influence internal practice. The external mission is likely to be translated
and practiced internally to a larger extent than other internal dimensions that do not correspond with
the external mission, leading to the following hypotheses:
H2a: Social enterprises operating in social impact areas (environmental impact areas) will
have a stronger (weaker) focus on employee management
H2b: Social enterprises operating in environmental impact areas (social impact areas) will
have a stronger (weaker) focus on environmental management
Size and age of the social enterprise are expected to influence the extensiveness of internal
CSR. When a social enterprise is still small and/or less mature, the social enterprise is more likely to
execute internal CSR to a lesser extent. When growing bigger and older, and thus expanding in impact,
the social enterprise is expected to apply internal CSR to a broader extent throughout its business.
Thus, enterprises with an environmental focus are expected to initiate internal CSR by environmental
management engagement. When expanding, employee- and general internal management might gain
equal attention.
H3a: The smaller the size of the social enterprise, the less extensive the execution of internal
CSR
H3b: The less mature the social enterprise, the less extensive the execution of internal CSR
Furthermore, based on the research by Graafland et al. (2003) it is expected that enterprises
will not actively engage in general internal management when small and immature, as ethical
management is proven to increase with age and size. This implies the following finding is expected:
H3c: The larger the size of the social enterprise, the larger the focus on general internal
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H3d: The more mature the social enterprise, the larger the focus on general internal
management
2.4 Organizing for internal CSR
CSR is an overarching term for a wide variety of behaviours that differ across multiple dimensions, the
distinction between internal and external CSR representing one dimension (Basil & Erlandson, 2008).
Companies engaging in CSR apply the concept to their own interpretation, in first instance determined
by the corporate governance structure, and heavily influenced by the external context in terms of the
operational location, environmental events and national regulations (Popescu, 2011; Rasche, Bakker &
Moon, 2013). Executing internal CSR is not simply a matter of choosing to implement or not, but rather
a complex internal decision making process, influenced by the size of a social enterprise and the extent
of internal awareness and external focus (Cornelius et al., 2007).
2.4.1 Implicit versus Explicit CSR
Matten and Moon (2008) make a distinction between implicit and explicit CSR. Explicit CSR is practiced
through voluntary programs and strategies that address specific societal goals that belong to the
social responsibility of a firm. Explicit CSR practices are often explicitly written down in policies and
communicated to external stakeholders. Implicit CSR, on the other hand, is reflected in corporate
values, norms and rules that define and regulate corporate actions and reactions in a broader sense. It
reflects a firm’s institutional environment. Implicit CSR is less often articulated in communications to
external parties, as implicit CSR is less often outlined in policies or even viewed internally as CSR
activities at all. Two different enterprises could engage in the same explicit CSR activities as these are
initiated by deliberate corporate decision making. Those two enterprises are however very unlikely to
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While CSR practices in Europe were formerly implicit in nature, a recent shift towards explicit
CSR is becoming clear due to the change and institutionalization of organizational processes (Matten
& Moon, 2008). Changing CSR practices from implicit to explicit is thought to enhance legitimacy.
According to Matten and Moon, this shift is occurring due to three reasons: 1) external codification of
implicit CSR enhances legitimacy; 2) educational and professional authorities create pressure by setting
standards for legitimate organizational practices; and 3) due to increased uncertainty and complexity
of the business climate, it becomes more important to perform well compared to other players in the
market. Firms start to engage in more specific activities, viewed as belonging to the responsibility of
the firm, and more actively articulate these activities as CSR. Nevertheless, the implicit CSR nature of
the firm stays untouched as this is deeply incorporated in the firm’s culture and its daily activities.
Social enterprises are responsible enterprises by nature, different from traditional business.
Therefore, a lack of familiarity with the concept of CSR and internal CSR is expected, however this does
not mean that social enterprises do not engage in internal CSR activities (Cornelius et al., 2007). A
distinction is made between internal CSR policy and internal CSR practice. While practices follow from
a policy and a policy is designed to control practices, practices, in contrast, can exist without linkage to
a policy. Internal CSR practices are expected to exist implicitly in social enterprises as a logical
consequence of its responsible mission, either consciously or unconsciously (Matten & Moon, 2008),
posing the following hypothesis:
H4: Internal CSR is more (less) often organized implicitly (explicitly) in social enterprises
Policy development occurs in the formalization and professionalization of an organization.
Initially at the phase of foundation, organizations are little formal and make little use of policies. When
expanding, policies are developed and explicitly outlined to organize and align business practices.
Expected is that social enterprises when larger in size and at later stages of growth will become more
likely to possess explicit internal CSR policies following from implicitly existing internal practices.
