CSR and its relationship with legitimacy
building strategies: the cases of
Creating Shared Value and
Multi-Stakeholder Governance
By: Fernando Gómez Vial
#10863982
29 January 2016
Universiteit van Amsterdam
Master’s Thesis
MSc Communication Science – Corporate Communication
ABSTRACT The legitimacy of organizations is constantly being questioned and debated in the media. Scholars have argued that corporate social responsibility (CSR) plays an important role in maintaining or repairing the legitimacy of
organizations in the media (Ihlen and Pallas, 2015; Patriotta et al., 2011). This study analyzed how two CSR approaches –Creating Shared Value (CSV) and
Multi-Stakeholder Governance (MSG) – fulfill the legitimacy-maintaining role of CSR by affecting the valence of attributes portrayed by the media in its media coverage of organizations. The study addressed the missing link between specific CSR approaches and media favorability, a variable that leads to positive levels of legitimacy, a link that was missing in previous CSR research. For this, the study involved a thorough content analysis of official reports from 44 Fortune Global 500 organizations, measuring the CSV and MSG levels of their CSR initiatives, and later contrasted these scores to the organizations’ valence of attributes in their media coverage. A second objective of the study was to create a reliable measurement tool to identify the two CSR approaches under study, an issue that had not been addressed by scholars in the past. It was concluded that the CSV approach had a positive correlation with media favorability when considering CSR-related media articles only, evidencing that the impact of CSR practice in the legitimacy building process has a limited scope of action.
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There is consensus in both the strategic and institutionalist approaches to legitimacy theory (Patriotta et al, 2011) that organizations strive to achieve social legitimacy and that legitimacy enables them to continue their activities (Shocker & Sethi, 1974; Oliver, 1991; Suchman, 1995). More recently, and under the strategic approach, the addressing of these social norms and values by organizations has also been termed as gaining a “social license to operate” (Joyce & Thomson, 2000; Prno & Slocombe, 2012; Hall & Jeanneret, 2015). These processes have translated in growing expectations from publics towards organizations, pushing them to conduct more socially responsible operations if they want to maintain and improve their place in society. Corporations have addressed this call by implementing corporate social responsibility (CSR) initiatives, since through these initiatives, organizations gain
acceptance in society (Busu & Palazzo, 2008; Barkemeyer, 2007; Carroll & Shabana, 2010). Furthermore, legitimacy issues are disputed between organizations and other social actors in a public audience, mainly, in the media (Patriotta et al.’s, 2011). In fact, the media is the place where organizational legitimacy is being contested (Ihlen & Pallas, 2015), and therefore, if organizations are using CSR initiatives to address legitimacy issues, it is of the utmost importance for they to gain notoriety and for they to be presented in the media recurrently and positively.
The CSR-related concept of “Creating Shared Value” (CSV), first coined by Michael E. Porter and Mark R. Kramer in their seminal article published in the Harvard Business Review (2006), refers to practices of organizations oriented at maximizing value in a way that it is positive for both the organization and society. CSV has achieved that objective, gaining traction not only in the business ranks but also in the media. As an illustration of this, a quick search on the LexisNexis database between 2006 and 2011 (the years of publication of the two main texts of Porter and Kramer) accounted for 343 news articles in English about the concept. A second
search between the first day of 2012 and September 30th, 2015 collected 1,331 news
articles mentioning “creating shared value”. This growing interest on CSV is a response to CSV being presented as a possible solution to the worrisome levels of legitimacy and trust companies had been registering in the eyes of the public (Porter & Kramer, 2011). CSV demands organizations to develop economic value to their firms “in a way that also creates value for societies by addressing their needs and challenges” (P. 64). Several organizations from all over the world have already joined as partners or associates of the Shared Value Initiative –a web site put up by Porter & Kramer’s consulting agency–, including multi-nationals such as Nestlé, Chevron, Hewlett-Packard, Intel, Shell, Verizon, Coca-Cola and SAP. This evidences how the CSV approach has been picked-up by managers.
However, some authors have critiqued Porter and Kramer’s CSV as unoriginal and nothing more than “a nice new label and re-brand” of past CSR theories (Crane et al., 2014; Strand & Freeman, 2013). Among other things, these scholars claim that the CSV approach fails to remove the corporate self-interest motor behind CSR initiatives. This self-interest motor is claimed to be the root of the
legitimacy and trust problems organizations currently face. An alternative posited by Crane and colleagues (2014) is to focus on multi-stakeholder governance (MSG) processes, which are processes “based on democratic governing principles and the
adoption and enforcement of [guidelines] for all participating companies” (P. 153). These MSG initiatives stem from stakeholder theory (Donaldson & Preston, 1995; Freeman, 1984) and are a response to the regulatory gaps of governmental power ushered by globalization (Cutler et al., 1999; Scherer et al., 2011). These processes can take place at a local, regional or global level and are characterized by
organizations accepting to engage and discuss standards of expected corporate performance with other stakeholders (Albareda, 2008; Detomasi, 2007; Scherer et al, 2011). These forms of creating new regulations in a way where organizations share the control over the possible outcomes with other stakeholders increase the legitimacy of the decision-making and of the organization itself in the eyes of the audience (Boström, 2006; Fransen, 2012).
Both approaches, although coming from different positions, are mainly concerned about the legitimacy-building role CSR initiatives play with stakeholders and audiences (Palazzo & Richter, 2005; Du & Vieira, 2012) and are in deep contrast to the once leading tendency of CSR understood only as a tool from which to extract business gains such as consumer loyalty or brand ambassadors (Du, Bhattacharya & Sen, 2010). It has long been theorized that organizations must renounce to their exclusively economical view and start seeing themselves as part of the broader society and of the political environment (Drucker, 1973; van der Wiele et al., 2001). In a way, reflective communication management (van Ruler & Vercic, 2005) and now post-reflective communication management (Johansen & Valentini, 2013) have their grounds in this notion.
But are these new approaches on how to carry out CSR facilitating the attainment of legitimacy-building objectives? This research aims to analyze how organizations have been framing their CSR initiatives –either under a CSV approach or under an MSG approach– and what kind of impact these are having in the positive attributes, or favorability, presented by the media (being the media as the scenario where these CSR initiatives are presented in their legitimacy-repairing roles).
No research has been conducted relating CSR approaches to possible media favorability effects, a gap that will be addressed with this study. Furthermore, a link will be made between this relationship and the legitimacy-maintaining role of CSR. Analyzing the valance of the attributes, an effort linked to the second-level agenda setting power of the media (Carroll & McCombs, 2003; Hester & Gibson, 2003), will contribute in shedding a light on whether these new CSR approaches are adding or
not to the legitimacy-building objective of organizations. In other words, a main research question of this study is:
RQ1: How does the framing of CSR initiatives under different CSR approaches –Creating Shared Value or Multi-stakeholder Governance– effect the valence of attributes of organizations as presented in their media coverage?
A second aim of this study will be to make a methodological contribution to the CSR academy: the creation of instruments to identify to which CSR approach a specific initiative belongs. This research proposes that through a detailed and insightful content analysis certain CSR initiatives could be properly divided into belonging to a CSV approach or to an MSG approach. Some authors believe it is impossible to make this kind of distinction with a particular initiative (Crane et al., 2014). However, this study will make the attempt to address this gap considering the new literature that has been published on the CSR approaches. Therefore, a second objective of this study is to present a measuring tool with proper indicators to demonstrate that these distinctions can indeed be identified in practice.
The article will be structured as follows: first, an in-depth understanding of the “creating shared value” (CSV) approach will be introduced and its relationship to legitimacy; secondly, the existing literature regarding the multi-stakeholder governance (MSG) approach will be analyzed with its link to legitimacy clearly specified; later, the hypotheses will be introduced giving way to the presentation of the main results.
Creating Shared Value (CSV) and its links to legitimacy
Porter and Kramer (2011) define CSV as “policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the
economic and social conditions in the communities in which it operates” (P. 66). They state that CSV is not social responsibility but a transformational model that
supersedes CSR. CSV is embedded in the core of the organization and it aims to redefine the purpose of the corporation by expanding and maximizing the “total pool of economic and societal value” (Porter & Kramer, 2011; Cramer et al., 2014).
CSV is done in the following three ways: (i) by reconceiving products and markets; (ii) by redefining productivity in the value chain; and (iii) by enabling cluster development. In creating shared value through reconceiving products or markets, organizations “identify all societal needs, benefits and harms that are or could be embodied in the firm’s products” (P. 68) and explore business opportunities with these societal needs in mind. This first CSV action has led, for instance, to a number of organizations to develop products for bottom of the pyramid (BOP) users (Karnani, 2007; Gradl & Knobloch, 2010). For the case of redefining productivity in the value chain, organizations introduce technological breakthroughs and innovations in their day-to-day operations or products. Porter & Kramer (2011), present a list of value chain factors that could be addressed by organizations to create shared value, such as energy use, logistics, resource use, suppliers and inputs (termed procurement),
distribution and employee productivity. Finally, CSV by enabling cluster development refer to organizations taking action about their surrounding environment, (i.e. the local businesses, the academic institutions, communities and other associations). The organization, therefore, recognizes the weaknesses in the cluster that have a direct effect in the efficiency of the company and addresses those rather than pursuing “community-focused corporate social responsibility programs, which often have limited impact because they take on too many areas without focusing on value” (Porter & Kramer, 2011, P. 75). Actions that increase shared value in the cluster focus on enabling fair and open markets, igniting the local economy or fixing logistical and distribution problems. The possibilities for CSV are greater when the initiative is made in conjunction with other actors of the cluster and not individually.
After outlining these ideal practices for organizations to follow, Porter & Kramer address requirements that organizations must abide to for CSV to find fertile ground. Firstly, the concept presupposes “compliance with the law and ethical
standards” (P. 75). This prerequisite is in line with the bases of the legitimacy concept as defined by Suchman (1995) in terms of how legitimacy involves a generalized perception or assumption that an organization is following the set of rules, norms and values of a society. CSV then, requires an organization to hold a basic degree of organizational legitimacy to pursue CSV in the first place. Secondly, Porter & Kramer propose a change on how to treat the social arena in CSR, thinking it more as a
“productivity-driver than a feel-good response to external pressure” (P. 75). This proposition brings CSV closer to the strategic approach of legitimacy theory.
Therefore, by enabling CSV, legitimacy transforms itself into a resource of the organization, meaning it can be managed. This is what differentiates CSV from other CSR initiatives thought only as “commitments to improve well-being through
discretionary business practices and contributions of corporate resources” (Kotler & Lee, 2005). In Porter & Kramer (2011)’s view, CSR has a limited connection to business, making it hard to justify and to maintain initiatives in the long run. On the other hand, the CSV approach has the ability to “contribute greatly both to the redemption of business and to a better world” (in Crane et al, 2014, P. 150), with powers strong enough to “reshape capitalism” (Porter & Kramer, 2011). To CSV supporters, the approach would be “the best chance to legitimate business again” (P. 64).
The managerial agency of the CSV approach is therefore clear, supporting the view that CSV helps maintaining or improving the instrumentalist/strategic view of legitimacy (Ashford & Gibbs, 1990; Suchman, 1995; Patriotta et al., 2011). Testing these claims is one of the objectives of this research. Does the utilization of a CSV approach help an organization in its legitimacy building practices? If legitimacy is being addressed constantly in the media realm, what is the effect of following a CSV approach on the organization’s media favorability? A second research question therefore is:
RQ2: Is there a positive correlation between the use of a CSV approach by an organization and the positive attributes given to that organization in its media coverage?
To achieve this, a proper identification measure must be created for the CSV approach. As the Crane et al. (2014) article points out, there is uncertainty on the exact variables and characteristics that determine a CSV initiative. Nevertheless, the literature stipulates aspects of CSV that are distinctive, being first and foremost, that initiatives must belong to one of the three essential ways to create shared value mentioned above: i) reconceiving products and markets, ii) redefining productivity in the value chain, and iii) cluster development. This is the main filter used to recognize a CSV initiative. In addition, other factors from the seminal literature can be
identified, mainly: the fact that the initiative must “enhance the competitiveness” of the organization (P. 66); that they must try to solve social issues (P. 75); that they
must be regarded in terms of the benefits and costs of solving the societal issue at hand (Porter & Kramer, 2006), and that they should be data driven with a usage of clear metrics (Porter & Kramer, 2011, P. 76).
In addition, the recently published literature review about the CSV concept conducted by Dembek et al. (2015) also sheds light on what the concept is. In their analysis, the authors suggest that CSV initiatives should be analyzed from an “outcomes perspective”, meaning testing whether the outcomes of the initiatives fulfill a glaring, unmet, societal, human need. For instance, a policy or program of an organization that focuses on providing free two-day shipping to customers could be beneficial for a very important stakeholder group of the organization (e.g. consumers) and it may produce benefits for that very particular group (time-money saving
benefits), but it could hardly be argued that the initiative advances the social
conditions of that particular group or of society in general. This example clarifies that creating shared value for society goes beyond the fulfillment of “small needs” and that CSV must be related to the fulfillment of specific basic human needs. Therefore, if an initiative tackles a societal need is an indicator of a CSV initiative. Continuing, it is also of importance that the need is satisfied to a certain acceptable degree. Dembek et al. (2015) present an example of a family of farmers that earn an income below the 1.25 dollar-a-day mark that the World Bank defines as extreme poverty. If the
initiative of the organization increases the family’s income to two dollars a day, is it enough to determine whether the societal human basic need is fulfilled if with this income increase the family still cannot provide itself with three basic meals per day? It would therefore also be necessary for CSV initiatives to include a measurement of need satisfaction.
Furthermore, Dembek et al. (2015) also take notice of the importance of defining properly if the CSV initiative focuses on one stakeholder group, multiple stakeholders, or society in general. They explain that for measuring the shared value to be created, the beneficiaries of the initiative must be clearly identified. In these cases, an initiative that helps society in general would be more valuable than one that focuses on specific needs of smaller stakeholder groups (e.g. training programs for employees that would possibly increase their own income levels in the future vis-à-vis
initiatives aimed at reducing CO2 emissions that produce a better air quality for
everyone). This additional variable is also an indicator to account for when detailing the presence of a CSV initiative.
A summary of all these common denominators for CSV initiatives is presented in Table 1 after the following section.
Increasing legitimacy through the Multi-stakeholder governance approach
The term “governance” in “multi-stakeholder governance” (MSG) refers to self-organizing networks of action that complement the effects of markets and governments in organizational agency (Albareda, 2008). The emergence of
governance from the organizations themselves is a reaction to the globalized world we currently live in, where governments and organizations cannot deal with global societal issues alone (Fransen, 2012). Corporations and other actors, therefore, engage in these collective CSR initiatives with the aim of addressing this governance gap, almost as a political reaction to the lack of governmental power (Scherer et al., 2011). These MSG processes are voluntary in nature and, in practice, go beyond the mere compliance with societal obligations identified in the initial ideas of CSR –initiatives must translate in business returns (Du, Battacharya & Sen, 2010) or fit into the mere philanthropy category (Carroll, 1991) –. In fact, according to Braithwaite & Drahos (2000), current CSR activities of organizations are more focused on global regulations and the production of public goods. In the MSG approach, organizations have become a stakeholder of a societal issue itself rather than the center of a stakeholder model devoted to address one particular issue (Crane et al., 2014).
However, a crucial step in this governance process is the interaction between the organization and its stakeholders. In order to determine which stakeholders to include in the MSG initiatives, the basic foundations of stakeholder theory (Freeman, 1984; Donaldson & Preston, 1995) have been used. Donaldson & Preston (1995)’s three perspectives on the justification of stakeholder theory can help to understand which stakeholders deserve to be present in the governance process. The first one, the descriptive approach, only classifies stakeholders and makes no value judgments on their effects on the organization, therefore, it is of no use for deciding the inclusion or exclusion of certain stakeholders in an MSG process. The next two perspectives are explained by Spitzeck & Hansen (2010, P. 380): firstly, from the instrumental justification, the governance process should include only stakeholders that are powerful enough that their contribution secures the success of the firm in the long run; the normative justification, on the other hand, states that stakeholders need to be
included in the MSG process in order to respect their moral rights, stressing that the legitimacy factor of the MSG initiative is in the process itself.
Following the instrumental justification, one of the keys to a legitimate MSG process is, therefore, the amount of power –or level of influence– of stakeholders in the corporate decision-making of the organization and what is the reach of this power. In a similar way, Fransen & Kolk (2007) make the distinction between involvement and consultation: is the outcome of the MSG process capable of generating a change of behavior on its members?
On the other hand, from the normative justification, a link could be made with moral legitimacy (Suchman, 1995). Organizations enter MSG processes when faced with uncertainty, striving to achieve legitimacy by co-creating acceptable norms of behavior with relevant stakeholders (Busu & Palazzo, 2008). Fransen (2012), in turn, includes the normative justification in his attempt to define multi-stakeholder
processes. He states that MSG processes are “initiatives governing social and/or environmental standards of production that have participants from both business and societal interest groups as members and governance structures allowing for an equal possibility of input among the different partners in steering the initiative” (P. 166). In MSG processes the division of tasks between the stakeholders given by the fact that all of them have an equal voice are key elements of the legitimacy of MSG initiatives. In addition, a legitimate MSG initiative must focus on participation of various
stakeholder groups and in procedural fairness (Utting, 2001). This increases the legitimacy of the decision-making process (Boström, 2006). The division of tasks among stakeholders during the process is a factor also reinforced by Börzel & Risse (2005) when they highlight how governance works better when people with different backgrounds participate and learn from each other’s expertise in the process of reaching a legitimate policy or guideline for the organizations involved.
The theory is clear in presenting the MSG approach and its links to legitimacy building practices. Testing this relationship is also an objective of this research. Does the utilization of the MSG approach benefits an organization’s quest of gaining legitimacy? If, as mentioned, legitimacy is being constantly fought and created through the efforts of the media, what is the effect of following an MSG approach in an organization’s media favorability? This leads to the third research question of the study:
RQ3: Is there a positive correlation between the use of an MSG approach
by an organization and the positive attributes given to that organization in its media coverage?
As in the CSV description before, a similar exercise must be done in order to create a measurable scale that helps identifying if an initiative follows an MSG approach or not. From the literature review above, an MSG process –that can be an initiative such as an assembly, a roundtable or similar (Schouten & Glasbergen 2011)– qualifies as such when it fulfills four conditions: (i) the control of the process does not lie in the organization itself, but rather in the collective, making it fair for all parties (termed in this research as degree of organizational control); (ii) the process produces outcomes that translate into new rules for all participating companies or groups (Crane et al., 2014; Spitzeck & Hansen, 2010), an aspect referred to from now on as the degree of involvement; (iii) numerous societal groups should be included, each with their unique expertise (referred to as the degree of inclusiveness); and (iv) stakeholders represented must have an equal voice and equal input on the conclusions and outputs of the process (an aspect termed in this research as degree of equality). Examples of these kinds of processes are the UN Global Compact initiative, the Forest Stewardship Council (FSC), the Social Accountability International (SAI) action and the Global Reporting Initiative (GRI) (Albareda, 2008; Utting, 2001). Table 1 summarizes the differences and similarities in both types of CSR styles.
Table 1: Comparison between Creating Shared Value and Multi-Stakeholder Governance initiatives
Testing the relationship between the CSV and MSG approaches and legitimacy
According to Carroll & Shabana (2010), the business case for conducting CSR initiatives includes the idea that CSR builds legitimacy since CSR includes the notion that the organization is “able to operate while adhering to social norms and meeting expectations of different stakeholder groups” (P. 99). For Barkemeyer (2007), as well, one of the main drivers for organizations to engage in CSR is achieving strategic legitimacy, this considering the increase of civil society pressure on organizations. Both of these statements show how organizations think of CSR as one of the key aspects in addressing legitimacy issues.
Research has also shown that the media are the main arena where these legitimacy battles are taking place (Patriotta et al., 2011). Or in Ihlen and Pallas (2015) words, “media coverage influences the interactions between corporations and their audiences or other social actors by way of translating and leveling out the
different requirements, ideas, and expectations the corporations and their stakeholders have on each other” (P. 7). In fact, much of what publics and stakeholders know about organizations comes from the news media (Chen & Meindl, 1991). The media
therefore plays a central role in building the normative foundations on which people make legitimacy evaluations on organizations.
CSR research has shown that the number of media articles on CSR initiatives has risen steadily over time (Lee & Carroll, 2011), evidence that CSR practice has been fulfilling its call to make the initiatives more public in order to build legitimacy. Additional studies have shown how CSR news tends to be more positive than
negative (Zhang & Swanson, 2006), meaning that it is possible that the increase in the publicity of CSR initiatives is affecting this media valence. A logical consequence was therefore to analyze the agenda setting effects (Carroll & McCombs, 2003) of this increased CSR coverage in the salience of attributes of organizations in particular. Agenda setting posits that the news media not only presents an agenda of issues (first-level agenda setting); they also describe them and give valence to them via attributes (second-level agenda setting). These attributes possess an evaluative dimension: traits are arrayed along an affective prism, and are conveyed under a positive, neutral or negative tone. Over the years, these attributes or traits of a certain media article have been termed with different names, but one of the most commonly used is sentiment. Plenty of studies have been conducted on organizations’ sentiments present in media
articles (Kleinnijenhuis et al., 2013; Schultz et al., 2011). Another study, conducted by Neu et al. (1998), took annual reports and other types of CSR reporting as item of measurement of agenda-setting effects since these official reports “provide
organizations with an effective method of managing public impressions” (P. 279), among them, legitimacy (Stratling, 2007; Farache & Perks, 2010). Pollach (2014), for instance, also analyzed CSR reports, understanding them as one of the ways
organizations document and present their CSR activities to the community (media included). However, no research has been conducted relating particular CSR approaches and its effects in second-level agenda setting, and especially, no studies have linked these concepts to the legitimacy-oriented role of CSR.
The first hypotheses of the research can now be introduced. The two CSR approaches discussed in the previous sections of this research, CSV and MSG, are two of the ways CSR can be directly linked to legitimacy maintaining processes. The study will test how do these approaches relate to a positive attribute agenda or
sentiment –termed as media favorability in this research– in the organization’s media coverage, using the organizations’ public reports as units of analysis. The first
hypotheses therefore are:
H1a: The degree of CSV indicators an organization uses in presenting their CSR initiatives in its public reports is positively correlated to the media favorability of the organization present in its media coverage.
H1b: The degree of MSG indicators an organization uses in presenting their CSR initiatives in its public reports is positively correlated to the media favorability of the organization present in its media coverage.
On the other hand, organizations also use the media to extract the societal issues that would give them legitimacy gains (Hellgren et al., 2002). In other words, the media acts as a “propagator of legitimacy” (Pollach, 2014). Legitimacy is constructed in the media by the process of presenting corporations in terms of fulfilling legal and moral requirements, and organizations fulfill these requirements by introducing their CSR activities in the public eye (Ihlen & Pallas, 2015). This highlights the symbiotic relationship between legitimacy and media coverage and the importance for CSR initiatives to make their way into the media in specific
CSR-related topics in order for them to play out their legitimacy-maintaining role. A second set of hypotheses aims to determine if the relationship between the CSV and MSG approaches and media favorability is maintained when only considering media articles about CSR-related topics. It is expected for the correlations to be more positively related for the CSR-only media articles than the relationships obtained in Hypotheses 1a and 1b. Therefore, hypotheses 2a and 2b are:
H2a: The degree of CSV indicators an organization uses in presenting their CSR initiatives in its public reports is positively correlated to the media favorability of the organization presented in its CSR-related media coverage.
H2b: The degree of MSG indicators an organization uses in presenting their CSR initiatives in its public reports is positively correlated to the media favorability of the organization presented in its CSR-related media coverage.
As seen, the CSV approach introduced recently by Porter & Kramer (2011) is gaining popularity in the corporate ranks. But there is no data on whether this
popularity is achieving the desired outcome of producing a positive attribute
sentiment in media articles. The popularity of the CSV concept however and how it has become widely used by the most important corporations in the world could be understood as a measuring stick regarding how it makes CSR easier to understand to top-executives familiarized with the financial way of doing business. It remains to be seen however, if the CSV style serves the ultimate purpose of generating positive media coverage as efficiently as MSG initiatives. A third hypothesis therefore concerns the strengths of the effects of the previous hypotheses:
H3: The degree of CSV indicators used by an organization explains a higher degree of the variance in media favorability than MSG indicators.
Methodology and Procedures
This research consisted of a two-step study (Step A and Step B) with the first step entailing a cross-sectional quantitative content analysis of organizations’
the Fortune 500 Global ranking was used. This initial step considered in its design the utilization of only one coder (the author), with fluent domain of both English and Spanish. All analyses were performed using a manual content analysis. The aim of Step A was to create a database of CSR initiatives and to distinguish between the CSR approaches used in the portrayal/description of the initiative in the organization’s reports. The second step of the study (Step B) consisted of an automated content analysis where media articles written in English that contained mentions of the previously sampled organizations were analyzed in respect to their favorable or unfavorable sentiment, a concept linked to second-level agenda setting (Carroll & McCombs, 2003).
Procedure and Sampling
Step A
For the first step, organizations’ sustainability reports, CSR reports or annual reports from 2014 were used and from the documents, all the CSR initiatives or programs were sampled. Sustainability, CSR or Annual reports have the advantage that they summarize the most important events that an organization had in the last 12 months, meaning the CSR initiatives presented in them are the ones most valued by organizations and best to be considered as leading initiatives. In addition, these documents are usually well examined by the Executive Board, and therefore, are expected to be a good reflection of the leading orientations regarding CSR initiatives in top management. In case an organization sampled published a special CSR booklet that was public and accessible online, then this source was preferred. Some
companies included their CSR initiatives in their sustainability reports (not in their annual reports) so this was also put into consideration. In general, the final sample was made from annual reports, CSR booklets or sustainability reports, but only one source from each organization was considered.
In the study, these documents were only included for the analysis if
somewhere in the text there were references to the company’s actions related to CSR. This brought as a consequence that companies that only published their Form 10-K’s or similar governmental/financial forms as annual reports were left out of the analysis. A second selection criterion was for the required documents to be published in
English or Spanish. Finally, the third prerequisite was for the reports to be public, accessible, and available online or by request.
For internal validity reasons, it was important to include a random procedure in the selection of the organizations. For this, the design included the selection of a randomized quantity of organizations from the Fortune Global 500 list, which comprises of the highest grossing corporations from all over the world. From this ranking, 48 organizations were selected. This covered almost 10% of the total
companies included in the ranking. Of the selected cases, 2 organizations were left out of the analysis for not having a report in English or Spanish (Jiangsu Shagang Group and China General Technology, both from China) and 2 others were discarded for availability reasons (Berkshire Hathaway and Occidental Petroleum, both from the United States, did not have 2014 annual reports with mentions to CSR activities). In total, 44 organizations and their reports were finally considered.
The next stage of the process included an analysis of all the written pages of the reports, searching for the CSR initiatives presented. For this, a special list of keywords was used. The words “initiative”, “program”, “policy”, “plan”, “project”, “scheme”, “strategy”, “campaign”, “guidelines”, “coalition”, “partnership” and “support” were used to mine the texts and identify the initiatives. Some reports included an index that permitted to focalize the search of the initiatives to specific sections. However, organizations were prone to repeat initiatives in different sections of the reports. This led for the sample to be cleaned after the text mining process in order to not have initiatives repeated. A pre-test was performed to check inter-coder reliability scores (whether different coders identified the same amount of CSR initiatives in the reports of different organizations). The process produced a match of 98.7% in the initiatives identified by each coder in a selection of pages from 3 organizations, deemed acceptable.
All CSR initiatives presented in the sources selected were coded individually identifying the appearance of CSV or MSG approaches. The coding used took three
weeks from December 1st to December 20th, 2015. The total number of individual
initiatives coded was 3,662 for the 44 organizations.
Operationalization and Variables: Step A
Creating Shared Value Index (CSV index): Following Table 1, the CSV index used in Step A applied the 5 indicators and the one filter variable (the three
ways of CSV introduced by Porter & Kramer) to every initiative captured from the organizations’ reports. Each indicator was given a weight of 20% on the final index, meaning each one was conceived as being of equal importance in the aim of having a pure CSV initiative. The index had values between 0 and 1, with 0 being “initiatives completely lacking creating shared value” and 1 being “a pure creating shared value initiative”. For example, a value of .57 means the initiative has a 57% of presence of CSV indicators in it. In addition, all measures of the CSV Index showed acceptable measures of Krippendorff´s alpha for inter-coder reliability in the pre-test, with the lowest being the “profit” indicator of the “enhancement of competitiveness” variable (α = .81). The 5 indicators of the index were treated as follows:
a) Degree of Enhancement of Competitiveness: According to Dembek et al. (2015), an organization can enhance their competitiveness through a CSR initiative by three ways: i) by producing more profits for the organization (related to exposing the intrinsic motives of executing the initiative (Forehand & Grier, 2003)), ii) by granting access to new or important resources of any kind (skilled labor is considered a
resource), and iii) by improving the organization’s market position vis-à-vis its competitors (organizations do this through awards, rankings, external recognitions, etc.). An initiative that in its description includes one, two or all of these factors qualifies as a CSV initiative. Each factor was given an equal weigh on the final “enhancement of competitiveness” indicator.
b) Degree of Improvement of Social Conditions: As previously stated, a CSV initiative should be focused on basic human societal needs. Hunger, education, and improving the environment qualify as this kind of needs (see the Codebook in Appendix 2 for more examples). In addition, as Dembek et al. (2015) explained, this need must include a satisfaction measurement or indicator (a survey of beneficiaries, a third-party certification or even a quote of a beneficiary stating the improvement of the living conditions applied here). An initiative that addresses a societal need and that includes a measure or statement on how that need is being satisfied qualifies as a CSV initiative. Both factors were given an equal weigh on the final “improvement of social conditions” indicator.
c) Degree of Inclusion of Cost/Benefit analysis: As Porter & Kramer (2011) and Spitzeck & Chapman (2012) affirm, CSV initiatives must be concerned with the efficacy and efficiency of the societal outcomes achieved vis-à-vis the investment
injected in the initiative. In other words, CSV initiatives must present the investment of the organization in the initiative (costs, in money terms) and to also make efforts to translate the societal benefits into the same terms (for example, by presenting the increase in profits of the new product introduced, or the savings the initiative created). An initiative that presents both of these factors qualifies as a CSV initiative. Both factors were again given an equal weigh on the final “inclusion of cost/benefit analysis” indicator.
d) Degree or amount of Stakeholders Benefitted: Dembek et al. (2015) clearly state that identifying the beneficiaries of the needs the initiative addresses is key to later measure the shared value. An initiative that tries to solve a need of a specific stakeholder group will bring less shared value than an initiative aimed at solving a need of the entire society. Three groups were identified in this indicator: i) one stakeholder group benefitted (e.g. employees of factory ABC), ii) multiple
stakeholder groups benefitted (e.g. employees and consumers), and iii) society as the beneficiary (e.g. environment, women in India, children in USA). In order to have similar indicators, the results were divided by 3 in order to work with a 0 to 1 scale. In this way, a value of 1 meant “society” as beneficiary and .33 meant “one stakeholder group” in the “stakeholders benefitted” indicator.
e) Degree of Data Use: Again following Porter and Kramer (2011) and Spitzeck and Chapman (2012), it is important for initiatives to present clear metrics and data. For example, it isn’t enough to explain that an initiative aims to train employees; it must also include the number of employees that followed the training and also the percentage of total employees involved. Dembek et al. (2015) explain that data must be used to provide a constant flow of information to see if the needs addressed by the CSV initiative are being satisfied. Therefore, apart from the metrics and data on the beneficiaries and benefits, a second use of the data is also to measure the satisfaction degree of the need. Surveys, or benchmarking certificates qualify as data-driven satisfaction measurements. An initiative that presents both of these usages of data qualifies as a CSV initiative. An equal weigh was given to both factors once again to calculate the final “Data Use” indicator.
Multi-Stakeholder Governance Index (MSG index): The indicators of MSG are also presented in Table 1 and include 3 indicators and one filter variable
the three remaining indicators, each was given an equal weigh (33.3%) in the final MSG index, again considering every indicator as equally important to achieve a pure MSG initiative. A scale was therefore created that goes from 0 to 1, with 0 being “initiative that lacks of MSG completely” and 1 being a perfect MSG initiative. In addition, all measures of the MSG Index showed acceptable measures of
Krippendorff´s alpha for inter-coder reliability in the pre-test, with the lowest being the “degree of equality” indicator (α = .83). The 3 indicators of the index were treated as follows:
a) Degree of Inclusiveness: Following Fransen (2012) and Utting (2001), it is important for MSG initiatives to include a high number of stakeholder groups into the process. The higher the number, the better the outcome of the process. A high amount of stakeholders is necessary to achieve a more legitimate outcome (Boström, 2006). This variable therefore analyzed the amount of members the MSG initiative described in the report, with a value of 2 meaning “the organization plus a different entity”, 3 meaning “the organization plus two different entities” and so on. If the description of the initiative did not include the amount of stakeholders or entities included, then a value of “9999” was given. Some initiatives, however, were clearly identified as having a global reach (e.g. UN Compact on Human Rights, Carbon Disclosure
Project, etc.) in respects to its members. When the initiative was identified as “global” it was given a value of -1. Later, after the coding was completed, they were added to the “5 different entities or more” category, which was identified as a relevant score. Values were later divided by 5 to create a 0 to 1 scale, with 0 meaning “zero
stakeholders were members of initiative” and 1 meaning “5 or more stakeholders were members of the initiative”. In this way, an initiative with a high “degree of inclusiveness” meant it had a high number of stakeholders as part of the process.
b) Degree of Involvement: As Crane et al. (2014) and Spitzeck & Hansen (2010) explain, an MSG initiative should also be able to produce or generate a change of behavior on the participating members, just as the definition for MSG of Fransen (2012) stipulates. Literature makes a distinction between MSG processes that are purely of a consultative nature and those whose outcomes translate into definite guidelines or ways of conduct for its members to follow. In this study, initiatives were coded as to the presence of key words linked to a consultation process vis-à-vis processes that were capable of influencing behavior of the group members (see the
lexicon used for the codebook in Appendix 2). A value of -1 was given when consultative words were present, and a value of 1 was given when the influencing lexicon was recognized. A value of 0 was given when no words of the lexicon appeared, making it difficult to identify the initiative as consultative or influencing. After the coding, these values were transformed to a 0 to 1 scale in order to
homogenize it to the others. Therefore, an initiative with a score of 0 in the “degree of involvement” scale means it was of a consultative nature, while an initiative with a score of 1 means it was capable to influence an organization’s behavior.
c) Degree of Equality: As the Fransen (2012) definition states, members must allow for an “equal possibility of input in the steering of the initiative”. This means that although the control of the process lies not on a specific group, all members of the initiative must have an equal chance of affecting the outcome of the initiative or process. Therefore, initiatives that have a board of directors or organizations that identify themselves as having a hierarchical position in the administration of the group fail to qualify on this equality indicator. On the other hand, establishing the dialogistic nature of the initiative, its roundtable-form, or democratic establishment does qualify as equality. A lexicon of words was again produced and used for the coding to identify whether the initiative or process was equal or unequal in this way (see it in Appendix 2). Again, a value of -1 was given when unequal words were present, while a value of 1 was given when lexicon words from the equal list were recognized. A value of 0 was given when the description did not include any of the words and the classification into the equal/unequal category was not possible. After the coding, these values were transformed to a 0 to 1 scale in order to homogenize it to the other indicators. A value of 0 meant that the initiative did not give an equal opportunity to all members to affect the outcome of the process, while a score of 1 meant that the initiative had definite equality procedures where all members could affect the direction of the initiative.
Step B
The second step of the sampling process of the research was based on the sample collected in Study A and had as an objective the collection of media articles from the organizations in order to analyze their media favorability. Most of the initiatives analyzed in the previous study (Step A) were from the year 2014 or from the early months of 2015. The hypotheses of this research describe a possible effect of
the CSR approaches an organization uses on media favorability. Since this process is not supposed to be automatic, taking a media article sample of the same year that the organization’s sustainability, CSR or annual report was covering could not be the optimal procedure. Therefore, it was decided to sample for media articles from the first six months of the year 2015 only.
The LexisNexis newspaper database was used for the search of all newspaper
articles in English between January 1st and June 30th of the year 2015. No keywords
were used in the search engine, but the parent company of the organization selected in Step A was used as a filter in the “company index” section of the LexisNexis engine. This process was repeated for the 44 companies selected in the previous step. A maximum amount of 1,000 articles was also put in place, since 1,000 was considered a big enough sample of articles for one organization. Some organizations filled this
quota before June 30th and therefore the amount of time covered for them was shorter.
In addition, not all of the articles captured after the search were considered. Some of them informed about patent requests for specific products that therefore, had no relevant impact on favorability. Furthermore, articles that spoke of announcements for companies’ quarterly results, stock offerings statements or stock options sold or bought, or strictly financial news wires were left out of the collection since it was determined that they had no bearing on the specific measures of interest for the study. This process led to a final sample of 8.774 newspaper articles, an average of 199,4 media articles per organization.
These articles were later cleaned and transformed to .txt files in order to be automatically coded for their sentiment value. The software chosen was
SentiStrength, a software that allows a sentence by sentence measure of sentiment for each article. The software uses an Emotion List of words with values from -1 to -5 for negative sentiment words and from 1 to 5 for positive sentiment words. This Emotion List of words was updated with the more complete Lexicoder Sentiment Dictonary (Young & Soroka, 2012), available online. SentiStrength also has a list of negations that flips the sentiment sign of words when one of these negations precedes or follows the sentiment. The software evaluates every word of the sentence and keeps the maximum value for positive and negative words after each line. The SentiStrength software, therefore, was deemed useful to measure the sentiment value of the selected articles and to create a media favorability measure for each organization.
Operationalization and Variables: Step B
Media Favorability: Media favorability was measured using the positive and negative sentiment list of words from the SentiStrength software, as stated above. This list was updated with the more complete Lexicoder Sentiment Dictonary (Young & Soroka, 2012). The software calculated the maximum positive sentiment and the maximum negative sentiment for each sentence of the screened media articles. For instance, a sentence with a value of (3, -1) meant that in the sentence there was a positive word that scored 3 (in a 1 to 5 scale, with 5 being very positive and 1 mildly positive) and also a negative word that scored 1. A final sentence sentiment score was then obtained by adding both values (in the example, the sentence would have scored +2). An aggregated score of the all the sentences of the media articles of an
organization was then obtained and this was considered as an organization’s media favorability.
CSR-related topic media article sample: To build the CSR-related sample of media articles used to test hypotheses 2a and 2b, the original list of articles from every organization was screened in order to select news related to corporate social responsibility issues. The list of words from Step A for identifying the initiatives from the organizations’ reports was used. The number of total articles sampled decreased to 1.085 (12.3% of the initial sample).
Results
Descriptive Statistics
The data collected describes clear differences in the number of initiatives belonging to each of the approaches and also differences between countries and industry sectors. Table 2 presents the descriptive statistics of the 3.662 initiatives studied, showing that the vast majority (76.9%) of the initiatives qualified as fulfilling the CSV Index filter variable (belonging to one of the ways in which shared value is created). On the other hand, only 16.3% of the initiatives presented characteristics of MSG processes. This result confirms that CSV is more popular among organizations. However, the same table presents the average of both approaches’ indexes, and it shows a clear difference between the CSV index mean (M = .33) and the MSG index mean (M = .66; M = .70 in initiatives where both approaches were present). These
results indicate that although CSV is being used more often by organizations, it is actually the MSG approach that is presented better and more effectively. The fact that the CSV index had 2 more indicators than the MSG measurement could have played a role in the lower scores of the CSV index.
Table 2: Descriptive Statistics CSV and MSG Initiatives
Starting with the data relative to CSV, the mean of .33 means that, on average, initiatives that qualified as having CSV traits only fulfilled one-third of the indicators recognized in the literature. Table 3 presents the frequency tables of appearance of the CSV and MSG indicators.
The table shows that 48.8% of the CSV initiatives presented some kind of data use, an issue on which Porter & Kramer have made strong demands. However,
organizations are still wary to make their intrinsic motives public in their CSR descriptions, as a mere 5.8% (163) of the CSV initiatives made allusions to “profit making”, 4.9% (138) of the CSV initiatives only referenced “access to new
resources”, 5.0% (141) of the CSV initiatives only spoke about “improving market position”, and a mere 20 initiatives (0.7%) used more than one of the above
“enhancement of competitiveness” measures. This indicator and the “cost/benefit analysis” indicator were the lowest scoring indicators of the CSV Index. In the latter case, only 2.3% of the CSV initiatives analyzed openly discussed the financial benefits for the company brought by the implementation of the CSR activity, while a much higher percentage (13.0%) preferred to inform the financial costs the initiative entailed. On the other hand, and a positive note, organizations indeed tried to address societal needs in pursuing their initiatives: 96.4% (2.714) of the initiatives fulfilled this condition. For the MSG numbers, of the 595 initiatives, 26.9% (160) of them involved processes that included 5 or more different entities in it, making it the largest group. However, for almost 47.1% of the initiatives the amount of members and participants of the process could not be determined. For the other indicators, of note is that the influencing MSG initiatives were the majority (68.7%) but that the equality indicator was more evenly distributed.
Continuing with the descriptive analysis, Figures 1 and 2 present the data results for the CSV and MSG indexes under the country and industry sector variables.
Figure 1: CSV-MSG Index scores; By Country
1
Venezuela did not have MSG initiatives; its MSG score is 0.
Figure 2: CSV-MSG Index Scores; By Industry Sector
The quadrants created by the mean score of both indexes in Figure 1 show firstly, that English-speaking countries like United Kingdom, the United States and
M = .66 U LSCJIRV GBNFSB 0,2 0,4 0,5 C M… M = .33 U LSCJIRV GBFSB N 0,2 0,4 0,5 C M… M = .33 U LSCJIRV GBFSB N 0,2 0,4 0,5 C M… M = .66 U LSCJIRV GBFSB N 0,2 0,4 0,5 C M…
the Republic of Ireland are located in the upper quadrant of high scores (along with Switzerland, and with Australia also very close) for both approaches. On the other hand, Asian countries like Japan, China and South Korea are located in the lower quadrant of scores. This indicates that the CSV and MSG approaches have found a more fertile ground on Anglo-Saxon countries, the language of publication of the seminal articles on the matter. Looking at Figure 2 that makes the same exercise by industry sector, the data shows that organizations in sectors that deal with customers and consumers in a daily basis (Food & Drug Stores, Transportation,
Telecommunication and Food & Beverages) score higher in both indexes, while organizations with a low-exposure to mass consumers (Wholesalers and Healthcare Supplies) are in the lower quadrant.
Another finding from the data concerns the ways of creating shared value organizations most focus on, them being i) reconceiving products and markets, ii) redefining productivity in the value chain, or iii) cluster development. Table 4 presents the details in this regard, showing that most of the initiatives addressed adjustments in productivity in the value chain (53.1%). In fact, from this total, more than half of the initiatives focused on the organizations’ own employees, highlighting the importance corporations are giving to training programs and educational activities in its own workforce. Another pertinent finding is the lack of initiatives oriented to creating or changing distribution practices (0.2%). Porter & Kramer (2011) present the example of Unilever’s Project Shakti, a program that allowed women
entrepreneurs in India easy access to hygiene products for them to re-sell later in far-to-reach regions. Unilever was one of the companies selected for the analysis but Project Shakti was not present in their sampled report. However, Unilever did have one of the distribution initiatives, as they indeed described a hand-washing products distribution initiative in Bihar, India of similar nature to Project Shakti. The other two companies who performed distribution-oriented initiatives were China National Petroleum (CNPC) and ArcelorMittal.
Table 4: Initiatives and its Ways of Creating Shared Value
Also of note is that organizations who are openly and recognizable linked to Porter and Kramer’s CSV theories –whether by being part of the Shared Value Initiative or by being clients or funders of the FSG consultancy agency led by Mark Kramer- are indeed in the upper-half of the table in CSV index scores. In fact, the highest scoring organization of the study is Unilever (CSV score = .40) and Goldman
Sachs (9th), UPS (17th) and Allianz (20th) also locate themselves over the mean
average score. The only organization publicly committed to CSV that failed to surpass the CSV index score average was Intel Corporation. The full list of organizations studied with their index scores and with examples of their higher and lower scoring initiatives, is included in Table A of Appendix 1.
Finally, results showed that articles overall presented a neutral sentiment towards organizations, since the sentiment averages hovered between the 0 and +1 marks. In fact, the minimum value of media favorability of an organization was -.21 (China National Petroleum, CNPC), while the maximum score was +.88 by the American technology supply store “Best Buy” (in this case, it is possible that purely the organization’s name influenced the positive sentiment score since “best” was indeed valued as a positive sentiment). The average for the sentiment was +.28, meaning the sentiment score was very close to being “neutral” for the organizations sampled. Doing the same exercise excluding all “neutral” sentiment sentences from the media articles, the sentiment averages changed but not exponentially: the
minimum score was again held by CNPC with -.36 and the maximum score was also held by Best Buy with +1.20. The mean increased to +.47, still a more neutral score than expected. This may be explained by the fact that there wasn’t a thorough
an empirical evidence of the “objectivity” of the media. However, in light of these results, Best Buy was indeed identified as an error and it was not considered in the statistical analysis.
Hypothesis Testing
For testing hypotheses 1a and 1b, a correlation analysis was conducted in order to confirm if the CSV and MSG indexes were indeed positively related to media favorability. The results showed that CSV did not have a statistical relationship with media favorability, since the results proved not to be significant. The relationship between media favorability and the MSG index was also absent, with again non-significant relationships.
The analysis was repeated now considering only sentences of media articles that had a positive or negative media favorability value (neutral sentences were discarded). However, this did not show significant relationships between the variables. With these results hypotheses 1a and 1b were not confirmed.
A simple linear regression was then planned in order to check which of the indexes explained more variance in the media favorability variable. Since both indexes were found to have non-significant relationships with media favorability, Hypothesis 3 could not be tested.
These results may reflect that the two CSR approaches were unable to generate an impact on the organizations’ legitimacy as portrayed in the media, using the organizations’ media favorability as an indicator for this. The criteria of selection of the media articles included articles of the day-to-day operations of organizations. Organizational crises, scandals, operational outcomes or other factors could also have played a role in media favorability, making the effect of CSR descriptions in the sentiment of general articles non relevant. For testing this, the media articles sample was analyzed with the objective of identifying only the CSR-related media articles of the organizations. It was also hypothesized that both CSR approaches were positively correlated with CSR-related communication only. If a significant relationship is found, it means that CSV or MSG are able to affect an organization’s legitimacy levels, only in a much more limited scope as thought, limiting its reach to CSR communication related topics. Table 5 presents the regression findings of this additional step.
Table 5: Regression Coefficient Summary
Note: * Significant at the .10 level (p < 0.10) or 90% confidence.
The results show that for one regression model, there is a significant relationship. CSV was indeed related to media favorability in CSR-related news articles (discarded neutral sentiment sentences). The data shows that the model is significant with F(1, 38) = 3.402, p = .073. This means the CSV index can be used to predict the media favorability of organizations in their CSR-related communications, but the strength of the prediction is rather low since it only explains almost 6% of the
variation (Adjusted R2 = .059). The relationship between the variables is medium-low,
but a positive correlation is found, since b* = .29, t = 1.844, p = .073. This means hypothesis 2a could be partially confirmed, since the CSV approach had an effect in media favorability when only analyzing CSR-related communication. No significant relationships were found between the MSG approach and CSR-related
communication media favorability.
Discussion
The hypotheses aimed to find a possible effect of CSR approaches in media favorability, and through this, an effect in organizational legitimacy. The expected relationship were not found, meaning that the CSR approaches studied did not appear to be related to the building of organizational legitimacy. However, a detailed look of the CSV approach data showed that there was indeed a low-to-medium, positive correlation (r = .29) between the CSV Index and media favorability in CSR-related communication. This implies that the CSV approach does have an effect on the favorability shown by the media to organizations in CSR-related news items. The objective behind CSR practice and, especially, in CSV and MSG approaches, is for the activities to permeate the public arena and for them to transform themselves into organizational legitimacy. Although the results were vague in this respect, the finding of a relationship between the CSV approach and media favorability in CSR-related
communication is evidence of the possible effects of these CSR approaches in legitimacy, only in a scope more limited than expected (only CSR-related news). However, these results are proof from which to build stronger research models that may shed a clearer light on this relationship.
Nevertheless, the lack of results of hypotheses 1a and 1b may be a reflection of a conceptual error of the proposed model. This study works under the premise that an organizations’ actions –including their CSR activities- are given a sentiment or attribute grade as they enter the media cycle, and that this attribute “agenda” then generates legitimacy in the eyes of the public. However, it may be the case that media favorability is actually a response of organizational legitimacy. This would mean that an organization is more favorably covered in the media because it has a higher legitimacy. It could be that legitimacy exists before media favorability, or even that they exist in conjunction, with one affecting the other constantly. If legitimacy comes indeed before media favorability, the CSR approaches in this study would have to be tested in relation to the organizational legitimacy of the organizations and investigate whether or not CSV or MSG influences the degree of organizational legitimacy an organization possesses. However, creating a reliable measure of organizational legitimacy is a daunting task, considering how the concept has always been interpreted as a “social construct” and in constant motion and negotiation between actors (Suchman, 1995; Patriotta et. al, 2011).
Furthermore, the results of the research may be affected by an additional variable not included in the study: the decisions and actions of the organizations’ public relations departments. The study analyzed official reports of the organizations’ CSR activities, but not all of the activities analyzed are worthy of being considered for a press release by the organizations’ PR staffs. This has two consequences: i) not all of the initiatives studied entered the media realm and where therefore not relevant in affecting media favorability; and ii) there is no way to know in this study how much of the MSG or CSV indicators identified in the official reports were replicated in the press releases of the CSR actions that were indeed considered worthy of a press release. Future research in respect to CSR approaches and legitimacy should include an analysis of the organizations’ press releases and check whether the CSV and MSG levels are comparable between reports and press releases. This analysis also helps identifying the CSR initiatives with high levels of news value –at least in the PR
staff’s eyes-, that are therefore more likely to affect media favorability and legitimacy.
On the other hand, the results of the study are valuable because they shed light on the measurement of CSR approaches. Based on recent literature, a thorough scale or index was built both for Creating Shared Value (CSV) and for Multi-Stakeholder Governance (MSG) processes. These measurements, that include 5 indicators for CSV –plus a filter variable– and 3 indicators for MSG, are the first attempt of its kind to answer the academic call of creating a reliable scale for concepts that are still somewhat questioned in CSR scholarship. There has been criticism towards CSV for not being an “overarching theory” but instead being a copy or recycling of previous well-known concepts (Crane et al., 2014). However, this study was able to create an index of indicators CSV initiatives must include in order for them to be acknowledged as such. These indicators included the use of data, for the initiative to: solve a societal need, enhance competitiveness, be described in terms of benefits and costs, and effect the largest group of people possible. From all these indicators, it was found that organizations did some of them with regularity (like focusing on a societal need, or explaining the initiative’s benefits using data and metrics). Nevertheless,
organizations didn’t express their initiatives in strictly financial terms, monetizing the benefits and costs of the initiative for the company. Of course, it is not difficult to guess why. For some, it could be strange to mix an announcement of the good outcomes an initiative will bring with the cold cost/benefit numbers the organization is engaging in the initiative. However, the concept of shared value is very strict in stating that it goes beyond mere philanthropy, and its of no use for the company –and society in general, for that matter– to invest an exorbitant amount of money in an initiative that will solve a limited-in-its-reach societal need. That is why it would be important to publicly inform (or at least make available in public reports), even in the risk of appearing calculating, the benefits of the initiative in terms of its costs. If this is not done, a situation may be created where the societal need addressed by the CSV initiative of an organization could be solved through different actions that involve fewer resources, which would transform that CSV initiative into one that loses shared value instead of one that creates shared value.
The same could be said for the “enhancement of competitiveness” indicator, that in general, had a very low score along the organizations sampled (Table 2). It is clear that corporations haven’t committed to making their intrinsic motives public in
embarking on a given initiative. Although Forehand & Grier (2003) showed that organizations are much better off explaining both their intrinsic and extrinsic motives when performing CSR initiatives, this research showed that just 1 in every 20
organizations chose to inform their audiences that the initiative they are promoting helps them in creating more profits, in giving them access to new resources (being future employees the most common resource mentioned), or in improving their market positioning vis-à-vis their competitors. With organizations facing more and more skepticism in this hypermodern world (Lipovetsky, 2015), legitimacy is
threatened more often. Now is therefore the right time for organizations to begin more honest and straightforward communications with their stakeholders. From the CSV perspective, this would include stating from the beginning the reasons behind the implementation of a particular CSR activity, and whether it is oriented in enhancing the competitiveness of the organization in one of the ways Dembek et al. (2015) discovered in their thorough literature review.
In addition, results showed that although organizations were correctly focusing their initiatives in solving societal needs, very few of the initiatives (8.5%) included a measurement of whether the satisfaction was being met. This is important to consider because without knowing the beneficiaries of the initiative, it is
impossible to tell if shared value is indeed created. In turn, this could be another reason why so many CSR initiatives are received with disdain, skepticism or cynicism (Du, Bhattacharya & Sen, 2010). If audiences do not get to hear from the beneficiaries themselves, why would they believe an organization’s efforts to inform them about their goodwill activities? The CSV index indicator regarding this issue gave higher scores to organizations that did this. In fact, if organizations showed their satisfaction outcomes through the use of survey data, or benchmarking processes, it was given an even higher score since the “data usage” indicator also included this aspect in its calculation. This discussion shows that the efforts of organizations to create shared value did not address the main conditions for social value to be measured and created. These reasons also help to explain the low CSV index scores obtained.
Looking at the Multi-Stakeholder Governance index data, results showed that organizations actually fared much better in describing them in correct MSG terms, with the mean of the index reaching .66 for all organizations. As previously noted, this means that organizations are much more effective in demonstrating the results of MSG initiatives, that often result in some sort of guideline, code of behavior, or
