Case study : how a CSR strategy can parry or mitigate attacks on a corporation’s reputation

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Master Thesis | Business Studies

Case Study: How a CSR strategy can parry or mitigate

attacks on a corporation’s reputation.

Pieter van Riemsdijk

Faculty of Economics and Business

Supervisors: Prof. dr. Ms. J.L. Johnson/ 2nd_{Prof. Mr. J.B. Cullen}

Student number: 5944384 May 2012

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General overview:

Project: Master Thesis

CSR as reputation insurance

‘Case Study: How a CSR strategy can parry or mitigate attacks on a corporation’s reputation’

Student: P.F. van Riemsdijk Kreenen

Victorieplein 19/2, 1079 KL, Amsterdam University of Amsterdam

Faculty of Economics and Business Student number: 5944384

pvanriemsdijk@gmail.com (t): +31 (0) 6 14 992 555

Study: University of Amsterdam

Faculty of Economics and Business Business Studies

Marketing

Supervisors: University of Amsterdam Prof. Dr. Ms. J.L. Johnson

Faculty of Economics and Business Marketing Professor

University of Amsterdam Prof. Mr. J.B. Cullen

Faculty of Economics and Business Strategy Professor

Start: February 6th, 2011

Classification: Partial confidential Status: In progress

Date last

changes: May, 2012

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Abstract

This research investigates how an organization’s CSR strategy can contribute to the prevention of any reputational damage. By developing an efficient and effective managerial model, this study tries to standardize the CSR strategy development process in such a way that it can function as brand insurance.

By integrating theoretical and research results, this study developed a model that can function as a guideline for managers who are responsible for their company’s CSR strategy development. The managerial model concludes that there are five important steps to follow in the implementation of a CSR strategy that will help the organization prevention reputational damage.

1) The company should identify their most important CSR issues that originate from their idiosyncrasies. 2) The company should identify their definitive and expectant

stakeholders for the CSR issues that are identified in the first step. 3) The company should cooperate with their definitive and expectant stakeholders in developing the CSR strategy. 4) The organization should formulate their CSR strategy. 5) The company should integrate and communicate their CSR strategy and monitor whether CSR goals, that are formulated by the organization and their most influential stakeholders, are met.

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1. Ingredients for research

Corporate Social Responsibility (CSR) - a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis (European Commission, 2011) – gained a great deal of popularity and attention in the last decade in the media as well as among the public (Arenas, Lozano, & Albareda, 2009; Jamali & Keshishian, 2009; Porter & Kramer, 2006; Weybrecht, 2010).

CSR has increased almost tenfold over the last 20 years, and has nearly tripled since 2006 (Martin, Johnson, & French, 2011, p. 2). It is little wonder that organizations started to incorporate CSR policies into their corporate strategy and tried to gain advantage from this strategy (Munshi & Kurian, 2005; Pirsch, Gupta, & Grau, 2006).

In the Financial Industry, for example, organizations can use Socially Responsible Investment (SRI) to give indirect incentives to influence other companies or economies in order to express their social and environmental concerns. SRI is the practice whereby financial investors examine a firm’s internal operating behavior, external practices and policies as well as product line, to determine whether they should invest in the firm (Guay, Doh & Sinclair, 2004) -. Important investors include not only shareholders, but also private capital and bank creditors, who can influence CSR decisions of subjected firms. SRI gained popularity and became an important driver for shareholders. In 2008 the market offered more than 260 funds that applied social or environmental criteria to the companies within their holding (Glac, 2010). Dunfee (Dunfee, in Glac, 2010) even argued that SRI moved into the ‘mainstream’. As early as 2008 approximately one in four investors, engaged in SRI (Glac, 2008). According to Scholtens (2011) the Financial Industry mainly focuses on the social aspects of CSR, considerably more than on the environmental or financial aspects.

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In the agricultural industry, the sector has much more direct impact in the field of CSR, stakeholders - groups and individuals who can affect or are affected by the achievement of an organization’s mission’ (O'Riordan & Fairbrass, 2008, p. 746) - can directly influence the actors in social and environmental issues via CSR initiatives. The main stakeholders within the agricultural industry are considered to be the governments and the purchasers of the products, whose demands and influence are leveraged by a selection of actors, for example supermarkets and consumers, who impose their CSR demands on their suppliers account (Tallontire & Greenhalgh, 2005, p. 23-26).

NedSpice, one of the world largest pepper and spice suppliers has two large factories in Vietnam and another one in India. For years they have been suppliers of pepper and many other spices to many large multinationals, including Unilever Germany. The company CEO, A. van Gulick, reports:

‘Since a few years the demands for products which are produced sustainable have increased exponential… This year a new certificate for sustainable production of pepper and spices was created by the European Union. Now Unilever demands all their suppliers to produce all their pepper and spices with respect to this new certificate… we had to invest a lot to become the global leader in Sustainable production of pepper and spices, off course all our pepper and spice suppliers had to comply to new

legislations as well.’ (Gulick, 2011).

Also in Fast Moving Consumer Good (FMCG) – fast-selling, low unit value consumer products normally in universal demand (Webster, Beach, & Fouweather, 2006) - CSR has gained in popularity. In recent years CSR, in the FMCG sector, has focused on prices, food safety, security and sustainable production (Beale, 2008; Rana, Platts & Gregory, 2008). Many different stakeholders involved in FMCG companies influence the CSR decisions, from supermarkets, non-governmental organizations (NGOs) – formal (professionalized)

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independent societal organizations whose primary aim is to promote common goals at national or international level (Martens, 2002) – to consumers and media.

All these actors that influence the organizational CSR policy are in some cases also a threat to the organization under discussion. When stakeholders feel ignored or the

organization does not meet the stakeholders’ satisfaction, the organization’s reputation can be at stake, as the following example illustrates.

In April 2008, Claire Beale reports about Greenpeace’s attack on Unilever (Beale, 2008). Unilever’s successful commercial1 about making more women feel more beautiful everyday, is transformed by Greenpeace into a disastrous YouTube story2 about environmental

destruction resulting from Unilever subtracting palm oil for its beauty products by chopping down the rainforest. Claire Beale is doubtful whether Greenpeace’s attack will have its intended result: ´Unilever will probably now seek the counsel of its agencies on how to

promote its sustainability project more forcibly’ (Beale, 2008, p. 14). The fact is that sales of

Dove products declined substantially, and Greenpeace’s attack had a major impact on Dove’s reputation.

As this example implies, organizational reputations can be damaged overnight, and repairing reputation damage is onerous. Sometimes organizations even file bankruptcy or change their corporate name to overcome reputation damage (Speath, 2005). Preventing reputation damage is preferable to curing it, therefore companies need to take all possible measures to prevent such damage.

One possibility for preventing reputation damage is by creating an efficient and effective Corporate Social Responsibility (CSR) strategy. The first chapter will provide an overview of the most important definitions that play a role in the CSR strategy.

1_{http://www.youtube.com/watch?v=Ei6JvK0W60I} 2_{http://www.youtube.com/watch?v=odI7pQFyjso}

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1.1. Definition of CSR and CSR strategy

Corporate Social Responsibility (CSR) is a very broad and complex set of concepts. As posited by many scholars (Russo & Perrini, 2010; O'Riordan & Fairbrass, 2008; Moon, 2004; Slaper & Hall, 2011) there seems to be a range of different definitions to explain CSR. Many individuals explain CSR differently in relation to their business, in terms of their own

business responsibility and business obligations.

In the broadest sense, the term CSR implies that stakeholders and corporations represent their concerns about the ‘planet, people and profit’ (or ‘environment, social and profit’,

‘Human- Natural- and Financial-Capital’) (Swallow, 2009; Boehe & Cruz, 2010; O'Riordan

& Fairbrass, 2008; WBSCD, 2002). The aim of a CSR strategy – a plan or set of actions designed to achieve particular goals in the field of CSR (Carroll A. , 1991) - implies the quest for a profitable business in a ‘socially responsive’ way. Corporations will, for instance, try to cut costs by using energy efficiently and/ or by using as many local resources as possible.

For the purpose of this paper the definition of CSR provided by the European Commission will be used. The European Commission defines CSR as:

‘A concept whereby companies integrate social and environmental concerns in their

business operations and in their interaction with their stakeholders on a voluntary basis.’ (European Commission, 2011)

Russo and Perrini (2010) explained this definition of the European Commission as:

‘Firms that are encouraged to consider their responsibilities toward several

stakeholders with the goal of integrating economic, social, and environmental concerns into their strategies, their management tools, and their activities, going beyond simple compliance’ (Russo & Perrini, 2010, p. 208).

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1.2. Definition of Stakeholders

With regard to strategic decisions that are made within a corporation, there are many different stakeholder groups that are, to a greater or lesser extent, involved in this decision-making, either as influencer or executioner in an internal or external business environment. As was the case with CSR, the term ‘stakeholders’ is also described very broadly in the existing literature. In the most neutral sense stakeholders are described as ‘Persons or groups

that have, or claim, ownership, rights, or interests in a corporation and its activities, past, present or future’ (Clarkson, 1995). For the purpose of this study O’Riordan’s (2008)

definition of stakeholders will be used:

‘Stakeholders are groups and individuals who can affect or are affected by the achievement of an organization’s mission’ (O'Riordan & Fairbrass, 2008, p. 746).

Both definitions stress that groups or individuals ‘can have or claim to have’ an influence on the company. This means that there does not have to be a mutual acceptance of the

relationship in order for stakeholders to have an influence. The choice in favor of

O’Riordan’s definition stems from the fact that his interpretation refers to the organization’s mission. Within this study, CSR is most of the time embedded in the corporate mission.

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1.3. Definition of Sector Idiosyncrasies

The development of a CSR strategy is often regarded as a specific task, which is not easy to generalize. Some researchers have suggested that CSR is defined too broadly, and it is ‘too vague to be useful in academic debate or in corporate implementation’ (Clarkson, 1995, pp. 96-97; Marrelijk, 2003, p. 95; Russo & Perrini, 2010). This criticism does not originate in the stakeholders or in the CSR itself, but in the fact that every firm is different, and needs

specific solutions to fit the needs of the organization (Russo & Perrini, 2010). Nevertheless Hawawini et al. (2003) argue that in respect of company performance, there also is an influence from the so-called sector idiosyncrasies, elements which are mutual within certain sectors. Therefore this study might be susceptible to sector idiosyncrasies. Sector

idiosyncrasies can be defined as ‘distinctive or peculiar features or characteristics within a

specific sector’ in the business context.

The different idiosyncrasies of each sector will lead to different stakeholders and stakeholder priorities. In this study the term sector idiosyncrasies is used as the explanation for the different or unique influences on the CSR field, which are different in importance from the influences on other sectors.

1.4. Problem definition

The development of a corporation’s CSR strategy stems from multiple goals. Many of today’s theories treat CSR as a universal theory that is widely applicable to every business scenario. However, there are many different sectors, from agriculture to fast moving consumer goods, and from pharmaceuticals to the financial service sector, for example. As seen in the introduction, all sectors have different stakeholders and sector idiosyncrasies both within the corporation and in the formulation of their CSR policy. As Maignan & Ferrell argue, the identification of important stakeholders is a dynamic process that may evolve over

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time. Therefore, they advise companies to revise their set of relevant stakeholders on a regular basis (Maignan & Ferrell, 2004).

The question, on which this study will focus, is whether there is a dynamic model that incorporates the changing interests of the most important groups of stakeholders, a model that has the ability to translate and implement these dynamic changes into a solid CSR strategy. In today’s business climate the possibilities of a rapidly changing business environment and the pace at which organizational reputation can be damaged, is underexposed. Most of the times, CSR strategies lack in the ability to adjust to the business environment’s true long-term goals and general policies, which try to cover a too broad scope in the field.

In the dynamic and transparent world in which organizations currently operate, the CSR strategy should also be dynamic and should have the ability to adjust to its rapidly changing environment. Therefore, this study focuses on questions such as how the dynamic process can be more visible than in the current theories on CSR strategy development processes, how the key-stakeholders in the process can be scaled, and what the sector idiosyncrasies imply within the process. As a result, this paper will focus on the center point of where stakeholder interests and idiosyncrasies meet the business sector in terms of CSR strategy development.

1.5. Theoretical & managerial contributions

The theory on CSR is extensive. As the concept gained in popularity, literary attention also gained in popularity. Specialists have sprung up everywhere to explain what all this means, and have gained insights in all aspects of and all different ways of viewing CSR. A number of relations between individual stakeholders and CSR strategy development are examined, e.g. the influence of NGOs on CSR, or Governments and CSR. Nevertheless, no study has been conducted that focuses on the importance of a specific and dynamic set of stakeholders in relation to their influence on CSR strategy development, nor has the influence

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of sector idiosyncrasies on the formulation of CSR strategy development been studied. It is crucial, for the development of a satisfactory CSR strategy, to focus on the most influential stakeholders and the sector idiosyncrasies.

From a theoretical perspective this study will contribute as an insight for a starting point in creating a theoretical model that describes how to develop a well-balanced CSR strategy that is subjected to the dynamic field of the most important stakeholders and the sector idiosyncrasies.

If the presence or weighting of different stakeholders and idiosyncrasies in different sectors provides alternative insights into the existing CSR theory, this study will force future scholars to incorporate the importance and recognition of the dynamic group of stakeholders and sector idiosyncrasies.

In a managerial perspective this study will force managers to focus on their most influential stakeholders and sector idiosyncrasies. CSR strategies should cover issues from the company’s most influential stakeholders in detail, rather than a broad set of objectives that cover all stakeholders and leaves room for gaps and non-addressed issues for its most active stakeholder groups.

Therefore, researchers and managers can learn about the extent to which a firm’s distinctive traits drive its strategies, and, in particular, its responsible behavior.

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1.6. Research structure

In order to examine the dynamics in the CSR strategy development process, this study will create a dynamic model that will be tested for usability. This model will be built like building with Lego. From the starting point on, the literature will build, expand and optimize the research model. Every block built will be displayed in blue; newly developed steps in the process will be displayed in yellow in the summarized models in the study.

The first chapter provided an overview of the main concepts on which the elements used in this study are based; CSR, stakeholders and sector idiosyncrasies all play a crucial role during this study. CSR is described with the purpose of setting the context of the study. The stakeholders and the sector idiosyncrasies play an important role in this study since they are highly responsible for the dynamics in the CSR strategy development process.

The second chapter will provide the building blocks of the research model. What does CSR involve, and how does one develop and implement a CSR strategy? What is the

influence of stakeholders on the model and why? Finally, the second chapter will describe the influence that sector idiosyncrasies have on the process.

The third chapter will provide an overview that involves the research questions. In the fourth chapter research methodology will be provided; the research field will be set, and the appropriate research methods will be provided, as well as the sources this study will use.

The results and findings will be presented in the fifth chapter, and finally there will be a discussion, conclusion and an overview of further research and management implications.

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1.7. Summary Chapter 1

The first chapter presented the context and most important concepts of the study. The key-concepts involved the definitions of 1) CSR: a company’s concern about social and environmental concepts in their business operations and their interaction with their

stakeholders on a voluntary basis, 2) Stakeholders: groups and individuals who can affect or are affected by the achievement of an organization’s mission, and 3) Sector idiosyncrasies: a distinctive or peculiar feature or characteristic of a sector.

The CSR strategy is highly susceptible to sector idiosyncrasies, which make it difficult to identify the most important stakeholders and to develop an efficient and effective CSR

strategy. This study will therefore provide managers with theoretical guidance throughout the CSR strategy development process in creating an effective and efficient CSR strategy, by investigating whether a CSR strategy can function without the explicit notice of the dynamic world of sector idiosyncrasies and influential stakeholders.

The second chapter will put the key definitions under the magnifying glass in order to gain a detailed overview of the elements that are involved during this study.

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2. Preliminary research

For the past half a decade, many large multinationals have tried to implement a proper, well-balanced CSR strategy. In the first chapter the context and key concepts were briefly presented. The second chapter will provide a detailed overview concepts introduced in chapter one.

2.1. The world of CSR

‘CRS: the term is a brilliant one; it means something, but not always the same thing, to everybody. To some it conveys the idea of legal responsibility or liability; to others it means socially responsible behavior in an ethical sense; to still others, the meaning transmitted is that of "responsible for", in causal mode; many simply equate it with a charitable contribution. (Votaw & Sethi, 1973)

As seen in the first chapter, CSR involves the expression of the responsibilities of the company’s stakeholders on social, environmental and economic issues, with the goal of integrating these issues into the business operations and their stakeholder interactions on a voluntary basis (European Commission, 2011). The way that companies formalize and communicate how they consider their responsibilities towards their stakeholders with respect to economic, social and environmental issues and how they integrate these into their

strategies, management tools and other activities (Russo & Perrini, 2010, p. 208) should be developed strategically and with great care. This process consists of several steps, which will be addressed in this section.

As mentioned, the reasons why companies integrate CSR into corporate strategy are numerous. From general literature on CSR, the authors found answers that start with

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with legislation, enhancing reputation, differentiating, satisfying customer needs, complying with manager’s ethical agenda, attracting investment capital, capitalizing on new

opportunities or meeting stakeholder expectations (Forehand, 2003; Hemmingway, 2004; Weybrecht, 2010). One might expect that the main goal of implementing a CSR strategy would be to generate profit (Freedman, 1970; Jarman, 2011). However, it is questionable whether a CSR strategy does indeed generate higher profits, in fact, there is much evidence of there being no significant (or a very weak) link between CSR and financial performance (Padro-Lorenzo, Gallego-Álvarez, García-Sánchez, & Rodríguez-Domínguez, 2008, p. 1247; Sen & Bhattacharya, 2001, p. 226; Velde, Vermeir, & Corten, 2005; Weybrecht, 2010).

As many scholars conclude, there seems to be a positive effect of CSR on consumer behavior in the marketplace (Martin & Johnson, 2010; Sen & Bhattacharya, 2001; Van de Velde, Vermeir & Corten, 2005). Nevertheless, this study concludes, as Ehrich indicates, (Ehrich & Irwin, 2005) that products which score high on ethical attributes are seldom the top sellers in their category, even though the products are widely available. Neither does the market pay an extra premium, as one would expect from reading the literature. Although consumers indicate that they will act positively towards CSR initiatives in the market place (Ehrich& Irwin, 2005; Lee & Shin, 2010), there seems to be little evidence of these intentions in consumers’ purchasing patterns. There seems to be an inconsistency between consumer attitudes towards ethical goods and the purchase of these goods. There even seems to be a phenomenon known as ‘Willful ignorance’ (Ehrich & Irwin, 2005), that implies that people do not request product information as much as they use it when it is widely available. Ehrich finds evidence that there is an under request in information on ethical attributes. In other words, there seems to be an inconsistency between the request for ethical information by consumers and their use of it. This applies especially for ethical product attributes. There seems to be even more inconsistency when the consumer indicates concern for the ethical

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issue in question. One of the management implications that Ehrich gives, is that managers, who sell products with favorable ethical attributes, should highlight these attributes in a way that makes it difficult for the consumer to be oblivious of the information and not include it in their decision making process (Ehrich & Irwin, 2005). These examples of market and

consumer response raise the question of what the benefit for the subjected organization is, if CSR attributes neither leads to top selling products, nor generates higher profits.

As indicated by Van de Velde, when all is said and done, companies that are highly rated on sustainable aspects do seem to perform better (Van de Velde, Vermeir & Corten, 2005). This cannot be traced to one source in the field of CSR, but is a result of ‘the broader’ CSR strategy. The reason for this might arise from the fact that investors seem to be willing to pay a premium for companies with good management of their shareholder relations, clients and suppliers. The contrast between the investor and the consumer can be explained by the benefits gained by the investor. Although CSR programs can be very costly, and thus must compete for the organization’s limited financial resources, they are also important for the investor (Luo & Bhattacharya, 2009). As NGOs also put pressure on large shareholder groups to take CSR seriously (Jamali & Keshishian, 2009, p. 277), Socially Responsible Investment (SRI) gained popularity and became an important driver for investors and shareholders. Due to initiatives such as the Dow Jones Sustainability Indexes, investors can measure and

compare the CSR performance of large multinationals. Hence, the SRI functions as insurance for investors in the same way that CSR works for individual organizations.

Most of the existing explanations for implementing a CSR strategy involve it covering a CSR section that acts to the benefit of the organization’s reputation, on behalf of one of the company’s stakeholders. Therefore, the explanation for CSR as reputation builder is weighted as the most important reason for companies to participate in CSR activities in this study. Ingenlkeek & Immink (2010) state that ‘CSR standards emerge from social pressures to

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restore or improve the legitimacy of a company’s activities’ (Ingenbleek & Immink, 2010, p.

52). In this case, where it restores or improves the organization’s reputation, it functions as brand insurance (Luo & Bhattacharya, 2009; Werther & Chandler, 2005), not an insurance that pays off after a crisis, but more as a preventative and leveraging protection. When a brand faces a crisis of social character, an existing CSR strategy not only mitigates the crisis, but can also prove that the corporation is acting responsibly with respect to people, planet and profit (Luo & Bhattacharya, 2009). When corporations aim to address opportunities with respect to social, environmental and economic issues, they wish to decrease the risks, or even deflect an attack from stakeholders, if possible dilemmas are brought to light. For example, the more KLM Royal Dutch Airlines is being monitored by NGOs for their violations on the environment, the more important it is for KLM to become a world leader in CSR by, for example, leveraging this negative attention with their CO2ZERO project, in which they use frying fat as fuel.

With the knowledge of how important stakeholders are for the development of a CSR strategy, companies should take into account that stakeholders identify themselves with organizations when they perceive an overlap with personal and/or organizational attributes (Scott & Lane, 2000). When companies use a CSR strategy as brand insurance, the company must be aware of the stakeholder’s norms and values and the management processes that are required to monitor, meet and even exceed stakeholder expectations in terms of norms, values and CSR concerns (Maignan & Ferrell, 2004). The selection of the most influential

stakeholders is seen as such a critical step in the process that it is elaborated in the next paragraph; ‘The world of stakeholders’.

The implementation of a CSR strategy is only sparingly described in the literature. When a corporation has finally matched the shared goals between the stakeholders and the organization’s own set of norms, values and CSR concerns in the CSR field, these thoughts

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should be translated and developed into a CSR strategy. There are three approaches whereby marketing communication can contribute to the goal of letting the organizational CSR policy function as brand insurance: a) including CSR images in organizational communications, b) improving stakeholders’ relationships with the company based on a shared concern for a specific issue, and c) stimulating stakeholder interactions around CSR (Maignan, Ferrell, 2004). As mentioned, these CSR issues are mostly dedicated to people, planet and profit, resulting in goals such as employee welfare and sustainable production.

In most cases the CSR strategy is communicated in a separate document, as part of the overall business strategy (Carroll, 1991). The practice of CSR is increasingly evolving, and the CSR strategies nowadays extend to supply chain partners, logistics providers, and all other business units that are involved in the organization’s process (Russo & Perrini, 2010).

Kaplan and Norton (2006) argue about the difficulty of implementing a new strategy internally, in an effective way. The organization could start by creating a corporate scorecard that maps and measures the sources of corporate value creation on four levels, namely the financial, customer, process and learning and growth levels. This method allows the strategic goals to be translated into the corporate strategy. Finally, the corporate scorecard can be used in the translation to the operational level, by incorporating the CSR goals into employees’ balanced scorecards.

Figure 1 summarizes the starting point of the organizational strategy development process as can be concluded from chapter 2.1 of the study. First, the organization should monitor the stakeholder’s CSR concerns; the second step involves the formulation of the shared set of CSR concerns between the organization and its stakeholders. Finally, the CSR strategy should be implemented as a reputation builder throughout the CSR activities.

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2.2. The world of stakeholders

‘What is different today is that profits can no longer be a corporation’s sole objective, in that their success is based also on their stakeholder relationships, which encompass many interests, chief among them social and environmental issues.’ (Russo & Perrini,

2010)

As has been seen in the first chapter, stakeholders are persons or groups who have or claim to have rights, ownership or interests in a particular company. Therefore, they can have a major influence in the organizational decision-making process. As mentioned by many scholars, stakeholders also play a key role in the development of the CSR strategy (Clarkson, 1995; Glac, 2010; Harrison & Freeman, 1999; Jones R., 2000; O’Riordan & Fairbrass, 2008; Russo & Perrini,2009). For the purpose of this study it is important to know why stakeholders play such an important role in the development process and also to know what role the

stakeholders play in the CSR strategy development process.

For the concern of the corporation, stakeholders are divided into primary and secondary stakeholders. A primary stakeholder (group) is one without whose continuing participation the corporation cannot survive as a going concern. Secondary stakeholder (groups) are those

´who influence or affect, or are influenced or affected by, the corporation, but they are not engaged in transactions with the corporation and are not essential for its survival’ (Clarkson,

1995, p. 107). In terms of CSR strategy development, the stakeholders’ priorities can be different from those of the organization as a whole. For example, stakeholders can influence

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each other, and when an NGO, as secondary stakeholder, creates negative media attention, the primary stakeholders will also be affected. Therefore, the field of CSR can have a different set of primary stakeholders in the strategy development process than in the overall corporation. For this reason, it is necessary for the CSR developers to create a distinctive stakeholder priority list (Jones, R., 2000, p. 53).

The coordination of CSR activities involves both the determination of the strategic goals, as well as the guidelines on how to achieve these goals. Management must determine the strategy through many externally driven forces. Individual managers must confront the difficult task of choosing which stakeholder should be selected for a dialogue, and which practices to adopt, why, and with what intended effects (O’Riordan, 2008). This selection allows the proper CSR strategy to be developed.

The CSR strategy development process consists of five important steps. The first step in this process is to map the company’s own set of norms and values, create its vision, set its objectives and the scope of the strategy (O’Riordan, 2008). The second step is to map the stakeholders’ identity in norms, values and CSR concerns. In the third step, the organization should focus on mapping the shared norms, values and CSR concerns for each relevant stakeholder (Maignan, Ferrell, 2004 p. 10; Scott & Lane, 2000). In the fourth step, the

organization should ascertain whether there are alternatives for their own set of norms, values and CSR concerns. It may be that the stakeholder’s set of norms and values can be

incorporated into an organizational set of norms and values (O’Riordan, 2008). This fourth step is what is described in the first chapter as ‘letting stakeholders identify themselves with

the organizations when they perceive an overlap in personal and/or organizational attributes’ (p.17). The next step of the development process is the actual strategy

development. What will the priorities be? After the organization has a clear view of which CSR strategy they want to carry out, the implementation stage starts, which is indicated in the

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paragraph ‘The world of CSR’ (p. 18). Finally, the organization needs to monitor the implementation, and stay in dialogue with their stakeholders in order to avoid any

misconceptions. The organization can now start the implementation phase and monitor the results; did the CSR strategy achieve the intended goals? Did the corporation create goodwill, achieve a better reputation, improve its image, or did they improve the world (O'Riordan & Fairbrass, 2008, p. 753)?

Figure 2 demonstrates the key findings of this paragraph and how they should be

integrated into the current model. The evolution in the model demonstrates the impact of the strategy development process on the starting point of the organizational CSR strategy development process as indicated in figure 1. Here we can see that the step of the organization’s own CSR concerns in the process is added as well as the importance of

dialogue and monitoring the impact of the CSR output on the shareholders for which the CSR strategy is created.

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Since it is one of the purposes of this study to investigate the crucial step that is explained by O’Riordan (p. 20, paragraph 1) as ‘managers who need to select the right stakeholders’, it is important to understand how the stakeholders are prioritized.

In order to obtain a good overview of how CSR strategy development decisions arise and which stakeholder groups are of the greatest importance, one needs to understand which stakeholder groups are influencing business strategy, or in this case the CSR strategy

development process. One of the leading theories on which stakeholders are the most important for organizations are the questions that are proposed by Freeman’s Stakeholder Theory - a theory developed to address the question of who or what really counts for a corporation-. This theory is often said to be an important step towards corporate citizenship and is crucial for creating an effective CSR strategy (Jones R., 2000; Russo & Perrini, 2009). The focus of the stakeholder theory is to identify stakeholders that have an influence on the business practice. Mitchell et al. state that ‘stakeholder theory attempts to articulate a

fundamental question in a systematic way: which stakeholder groups deserve or require management attention, and which do not?’ (Mitchell, Agle, & Wood, 1997, p. 855). Freeman et al. (2004) imply that there are two core questions arising from the stakeholder theory that

managers can use to identify the most important stakeholders. First of all, what is the company’s objective? This question provides insights into what core value the business creates, and what unites the stakeholders. The second core question Freeman et al. (2004) ask is what responsibility managers have towards stakeholders. These questions provide insights into the relationships and dialogues company managers want and need to create with their shareholders (Freeman, Wicks, & Parmar, 2004, p. 364).

In response to Freeman’s first core question (what is the organization’s objective?), in this study the creation of a desirable CSR strategy is the purpose of the corporation, and the combined support of the stakeholders in creating this favorable CSR strategy are the

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objectives of the corporation. The second question (what responsibilities do managers have towards stakeholders?) can only be answered once the organization knows who their main stakeholders are.

In later research, many scholars agree that the most common group of stakeholders consists of customers, distributors, employees and local communities (Friedman and Miles 2006 in (Mish & Scammom, 2010, p. 12). For particular business units or projects, another specific set of stakeholders might be of more influence than these general four. A possibility to identify the value of the stakeholders is proposed by Jones (Jones R., 2000, p. 50). Jones created ‘The process of identifying stakeholder-value relations’, following Freeman’s

Stakeholder Theory. This process consists of three steps. First, the relevant stakeholders must be identified. Second, the value of the relationship needs to be mapped, and finally, the nature of the exchange must be identified (Jones R. , 2000).

Examples of relevant and high value relationships might be consumers, investors and local government. The organization may also be involved with secondary stakeholders, who are of minor importance for the company, but of great importance for the CSR strategy (if secondary stakeholders are not satisfied they might be able to influence the primary stakeholders (Ingenbleek & Immink, 2010)). Examples here are public opinion, media and NGOs (Arenas, Lozano, & Albareda, 2009). Nowadays, the importance of the stakeholders can change overnight. For example, when BP was confronted with the Deepwater Horizon oil spill, all the priorities of the most important and influential stakeholders shifted completely. There are many more examples where the priorities of stakeholders of large multinationals have changed completely overnight, therefore we can state that the selection of the most valued stakeholders is a dynamic process. As a result, the prioritization of the set of most important stakeholders needs to be reviewed on a regular basis (Jones, R., 2000, p. 53; Maignan & Ferrell, 2004, p. 10).

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The next step in Jones’ (2000) ‘The process of identifying stakeholder-value relations’ is to identify the value of the relationship. According to Mitchell (1997), it is important to measure the level of influence of individual stakeholder (groups) on ‘power’, ‘legitimacy’ and ‘urgency’. This allows corporations to identify the stakeholder that puts the greatest pressure on CSR strategy development (Agle, Mitchell & Sonnenfeld, 1999; Mitchell, Agle, & Wood, 1997). The ‘power’ involves the possibilities for the stakeholder to make the organization carry out an action against the will of the organization. ‘Legitimacy’ consists of the social construction of the platform of action in relation to the organization by the

stakeholder, e.g. ‘whether actions of the stakeholder are desirable, proper, or appropriate

within some socially constructed system of norms, values and beliefs.’ Finally, the ‘urgency’

is the level of importance the stakeholder claims for immediate action (Jones R., 2000; Mitchell, Agle& Wood, 1997, pp. 865-868).

The last step in the process involves the identification of the nature of the exchange. Jones identifies three types of exchange: functional, symbolic and hedonic. Functional exchange comprises the utilitarian exchanges. The hedonic exchange refers to the exchange between the brand and the consumer and involves consumer behavioral aspects such as responses of nostalgia, comfort or pleasure. Finally, the symbolic exchanges refer to the reputation and image concerns of the organization related to CSR issues (Jones, R., 2000, p. 53).

Figure 3 summarizes the stakeholder selection process in combination with the already existing model. It shows the importance of selecting only the most significant stakeholders for influencing the organizational CSR strategy development. In this way, the CSR strategy can be narrowed down to the most important CSR issues for the organization, and prevents the organization from creating too broad or ambiguous a CSR strategy.

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2.3. Stakeholder dynamics

‘Love is, when you’re in the driver’s seat’ (Casali, 2009)

As concluded from the paragraph on ‘the world of stakeholders’, this study can state that it is essential to have an accurate and up-to-date prioritization of the important stakeholders. This has been shown to be of great importance in order to develop a CSR strategy that has the ability to function as brand insurance. Agle, Mitchell & Sonnenfeld (1999) underpin their own theory about how to identify important stakeholders in terms of power, legitimacy and urgency (Mitchell, Agle, & Wood, 1997), which is used in many organizations.

Measuring this stakeholder influence on a company’s CSR strategy is complex; not only does the term CSR mean different things to different actors, the phenomenon ‘influence’ is also difficult to measure. One theory in particular offers a solution in providing a method that has the ability to overcome the problems of measuring stakeholder influence and stakeholder prioritization. This method is provided by Mitchell, Agle & Wood (1997). Mitchell created stakeholder classes with the aim of providing an organization with the tools to prioritize their stakeholders. This theory continues with the idea that a stakeholder can be influential in ‘power’, ‘legitimacy’ or ‘urgency’, or any combination of these three traits. The

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more traits a stakeholder possesses, the higher the influence of the stakeholder becomes. When a stakeholder only possesses one trait, the theory identifies this stakeholder as a latent

stakeholder, which might qualify this stakeholder as not worthy of a great deal of attention.

When the stakeholder only has the trait ‘power’, he is considered to be a dormant

stakeholder. A stakeholder who is only ‘legitimate’, is considered to be a discretionary stakeholder. These stakeholders are known to pursue organizations in complying with

philanthropic issues; they have no ‘power’, nor the ‘urgency’ to put any pressure on the company. When ‘urgency’ is the only trait present, the stakeholder is considered to be

demanding; this group is also described as ‘mosquitoes buzzing in managers’ ears’ since they

represent urgent claims, but do not possess ‘power’ or ‘legitimacy’; they therefore do not represent any danger for organizations. When stakeholders have two or more attributes, they become expectant stakeholders, and are of considerable importance to the organization. A stakeholder who has both ‘power’ and ‘legitimacy’, is a dominant stakeholder. Here, the stakeholder is legitimate and has the ability to enact those claims. Dependent stakeholders have both ‘urgent’ and ‘legitimate’ claims, but are dependent in ‘power’. They usually depend on other powerful stakeholders to be able to influence the organizations. Many claims, like animal or environmental claims, seem to be dependent. For example, when BP experienced the recent oil spill, stakeholder claims were both ‘urgent’ and ‘legitimate’, but it required stakeholders such as the government to get the organizational attention they needed. The combination of traits, including ‘power’ and ‘urgency’, is a dangerous stakeholder. This category includes terrorist and employee sabotages. Finally a stakeholder that possesses all three traits is considered to be a definitive stakeholder, and will be regarded as a priority stakeholder by the management of the organization.

For the purpose of this study, it is important that organizations focus on their main stakeholders in the CSR strategy development process and monitor, meet and even exceed

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their expectations as indicated in the section ‘The world of CSR’ (p.17 paragraph 2). In order to avoid formulating a too broad and ambiguous set of CSR priorities, the organization should only focus on the stakeholders who are weighted as definitive and expectant stakeholders. In this way, the organization will be able to create a CSR strategy that is focused on the most influential stakeholders and addresses only the most important CSR topics. This will provide the organization with reputation insurance for the most important stakeholders and with this focus the costs will be limited to only the most important issues.

Figure 4 summarizes and combines the stakeholder selection with the already existing model. The traits ‘power’, ‘legitimate’ and ‘urgency’ are translated and weighted. Finally they result in the selection of the most influential set of stakeholders, described as the definitive and expectant stakeholders.

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2.4. The world of idiosyncrasies

As known, almost all large businesses are active in the field of CSR and as seen in the introduction, the organizations are spread in different sectors, from the pharmaceutical to the financial, and from the agricultural to the FMCG sector. For example, in the agricultural sector, stakeholders like local governments and purchasers are considered to be the main stakeholders in the field (Tallontire & Greenhalgh, 2005, p. 23-26). Local governments as well as the purchasing departments are under environmental pressures from, for example, the consumer, who motivates them to demand socially responsible production from the

agricultural sector in employee welfare as in sustainable production. Another example can be found in the FMCG sector, where consumers exert direct pressure on the organizations in terms of prices, product quality and many more aspects.

As can be seen from these examples, this study can state that there are different stakeholders and different pressures on the CSR strategy in the different sectors. These differences in pressures on the CSR strategy are largely explainable by idiosyncrasies (Russo & Perrini, 2009). Although most studies on idiosyncrasies approach them as being specific to particular companies (Luo & Bhattacharya, 2009; Russo & Perrini, 200), as mentioned, Hawawini et al. (2003) argue that in respect of company performance, there also is an influence from the so-called sector idiosyncrasies, elements which are mutual within certain sectors. Even though Hawawini’s study is focused on the overall organizational performance, their theory might also hold in the field of CSR, where common elements can be clustered into specific sector idiosyncrasies. This would provide a huge advantage in the usability of the new, to be developed, theory, since sector issues can be dealt with on a sector basis instead of on a firm level.

In this study the term sector idiosyncrasies is used to explain influences in the CSR field which are unique or which are different in importance from the influences than in other

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sectors. Examples of sector idiosyncrasies in the agricultural sector might be the control of pesticides, the financial sector with SRI or the Fast Moving Consumer Goods sector with food quality.

2.5. Summary chapter 2

The first key concept that is covered in detail is CSR. In most corporations CSR functions in favor of the organization’s reputation. CSR can lever, parry or mitigate attacks on corporate lapses when these relate to social or environmental lapses. For this aim, CSR strategies need to cover the most important issues of the most influential stakeholders. When the CSR strategy succeeds in this aim, it can be used as brand insurance. This will allow reprehensible actions that could damage the company’s reputation to be averted.

In order to be able to let the CSR strategy function as a proper brand insurance, the most important stakeholders need to be identified. The stakeholder theory can help in gaining proper insights into which stakeholders are among the most important. With the scaling of the

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stakeholders in line with Jones’ model, only the most influential stakeholders from the definitive and expectant groups of stakeholders are incorporated into the study. Finally, this paragraph described the idiosyncrasies in detail. Sector idiosyncrasies play an important role in the articulation of the stakeholder’s norms, values and concerns.

After discussing all the dynamic aspects of the CSR strategy development process there are a number of issues that surface when it comes to the main question of this thesis; can a CSR strategy function as brand insurance? These questions will be formulated in the next chapter.

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3. Research questions

The third chapter concerns the formulation of the research question. This chapter starts by explaining how to scale the organizational stakeholders, and examining how the

idiosyncrasies influence these stakeholders. Thereupon, this study will formulate the specific research questions.

3.1. Selecting the most important stakeholders

As mentioned in the literature section of this study, it is important to select the proper set of stakeholders. When the organizational CSR strategy can be directed towards the most influential groups of stakeholders, the CSR strategy has the ability to function as brand insurance, which is aimed directly towards those stakeholders. Therefore the organization needs to select the definitive and expectant stakeholder. This is because only these

stakeholders have the largest influence on ‘power’, ‘legitimacy’ and ‘urgency’.

In order to create an example of how stakeholder are selected, scaled and treated, this study will set up an example within the Fast Moving Consumer Good (FMCG) sector.

With the intention of selecting a legitimate set of stakeholders, this study focuses on stakeholders that are stated to be important in terms of brand equity (Jones, 2000). There is a similarity between the influential stakeholders for brand equity and those who have influence on CSR strategy, as both groups are important for the consumers’ perception of the

organization. Furthermore, the CSR strategy can be seen as a part of brand equity.

Jones identifies consumers, public opinion, governments, NGOs, competitors, media, distribution partners, employees and managers as the most influential stakeholders. In order to translate Jones’ theory from brand equity into specific influencers on CSR strategy development some alterations in Jones’ model have to be made. Most researchers would identify shareholders as one of the stakeholders, and according to some scholars, these might

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even be one of the most important stakeholders for an organization (Glac, 2008; Carroll, 1991; Freeman & Reed, 1983; Keuning & Eppink, 2004). Shareholders therefore need to be added to the stakeholder matrix.

An additional point to note is that the stakeholder’s ‘employees’ will be left out of the stakeholder’s matrix. There are a number of reasons for this. First of all, employees are one of the most important subjects of a valid CSR strategy. Employee career development and well-being is one of the top listed CSR drivers. In this study, the stakeholders group

‘managers’, will also cover those employees who are actively working on executing the CSR

strategies. In this example, the set of stakeholders who are relevant for the FMCG sector in relation to creating a CSR strategy are now narrowed down to: consumers, the public, NGOs, governments, competition, media, distribution partners, managers and shareholders.

During the next step these stakeholders need to be scaled according to the traits ‘power’, ‘legitimate’ and ‘urgency’. As all the above stakeholders are specially selected as being important in the CSR strategy development process, they all possess the trait

‘legitimate’.

According to FMCG companies, the consumers, NGO, media, government and shareholder stakeholders might be more powerful than the others, because they are most likely to be able to force their will upon the company. Therefore they contain the trait ‘power’.

Finally, in this example, the NGO, competitor and media stakeholders might contain the trait ‘urgent’ in the opinion of the FMCG company, because they might have the ability to create a lot of attention for their cause, resulting in rapid reputation damage. Now we see that the media and NGO stakeholders are considered to be the definitive stakeholders in this example. The expectant stakeholders are divided into dominant stakeholders; consumers, government and shareholders and the dependent stakeholder ‘competition’. One of the

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recommendations of this study is to focus the CSR activities on those most important

stakeholders, in order to allow the CSR strategy to function as brand insurance. To focus the desired attention on the stakeholders, the organization needs to be aware of the stakeholders’ norms, values and CSR concerns, which are highly dependent on the idiosyncrasies.

3.2. The influence of idiosyncrasies

As a result of the inventory on definitive and expectant stakeholders, the organization now knows which stakeholders are the most important, and should be given the most attention during the CSR strategy development process. As the CSR concerns of the

stakeholders are different among different stakeholders and sectors, the sector idiosyncrasies are considered to have a significant effect on the stakeholder’s CSR concerns. For example, in the agricultural industry the most influential stakeholders are considered to be governments and purchasers (Tallontire & Greenhalgh, 2005, p. 23-26). Both these stakeholders might consider the control of pesticide use to be among their core CSR concerns. Now the organization knows its CSR strategy should have a focus on the control of the use of

pesticides. In the FMCG the main stakeholders, may be media and NGOs. They might have a focus on sustainable suppliers and their employee’s welfare. As a result the FMCG’s CSR strategy should be focused on these stakeholder’s concerns. This study will investigate whether there are universal idiosyncrasies in the sector and to what extent the CSR concerns, leading from the idiosyncrasies, are predictable and constant over time.

If this study’s results show that these stakeholders’ CSR concerns are predictable or constant over time, these findings will help managers to create an effective and efficient CSR strategy.

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3.3. Research questions

As mentioned, the reasons for companies to implement a CSR strategy are numerous, but for most companies the overall motivation is that it might act as a reputation builder, and can therefore be seen as a brand insurance (Luo & Bhattacharya, 2009; Werther & Chandler, 2005).

Corporate actions that violate societal expectations can damage, or even destroy brand image and reputation among networked stakeholders. A good CSR strategy has the ability to mitigate or even parry the impact of those corporate lapses. Examples of these practices are widely available. For example Nike in 1998, when The New York Times reported abusive labor practices (Cushman, 1998), Greenpeace’s attack on Unilever for using palm oil (Beale, 2008), or fast food chains that are held responsible for obesity (Bulldog Reporter's Daily Dog, 2011). A well-balanced and well-funded CSR policy can, in these cases, work as brand insurance (Luo & Bhattacharya, 2009, pp. 201-202; Werther & Chandler, 2005, p. 322).

As CSR, in this case, is used to mitigate or parry the impact of the corporate actions, that violated the societal expectations, the influence of stakeholders can be considered important, especially since they are the subject of the ‘insurance’. All goals that are formed in any CSR strategy have at least one stakeholder that is the motivation for the formation of the goal, and the stakeholders are the ones acting upon those corporate lapses which violate social and ethical expectations. Despite the acknowledgment of the importance of the stakeholders, and the volatility in prioritizing the most important stakeholders for the creation of an effective CSR strategy, current theory seems to lack an understanding of the importance of the dynamics within the process.

Another problem in current CSR literature seems to be that there might be misconception in addressing the idiosyncrasies. For now, in the literature, each company does this

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CSR strategies are very broad in topics and try to cover all aspects that are available to cover. This leads towards such a broad set of objectives that they are difficult to integrate into the daily business practice, and are becoming very costly. According to this study’s

conclusion, the CSR strategy development process is subjected to a changing set of definitive and expectant stakeholders, and the stakeholders are, in turn, subjected to sector

idiosyncrasies.

To overcome the problem of the lack of a dynamic process, and if companies truly want to use their CSR strategy as brand insurance, they need to be able to focus on the most influential stakeholder(s), they need to know their own sector idiosyncrasies, and they also need to make better choices in their CSR strategy to parry those threats. Continuing on this theory, this study will focus on the contribution and development of a theory that

incorporates the relevant dynamics into the CSR strategy development process. In other words, this study seeks a way to make CSR strategy development more efficient and effective. This study therefore examines the following questions:

1. Are there mutual idiosyncrasies within one sector that can be identified as sector idiosyncrasies?

2. Are organizational CSR stakeholders also CSR sector stakeholders? 3. What is the relation between stakeholders and idiosyncrasies?

4. To what extent are the definitive and expectant stakeholders responsible for influencing the CSR strategy development process?

5. To what extent are sector idiosyncrasies and stakeholders stable and predictable and to what extent do they fluctuate?

Given that the study will be explanatory and investigates the “how” and “why” questions relating to a successful CSR strategy development, Yin’s (2009) suggestion that a case study can be an appropriate method to investigate the problem is valid here. The research on how to

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make the CSR strategy development process more effective and efficient, involves an organizational and managerial process. A case study will allow the investigator to research real-life and complex phenomena (Gibbert, Ruigrok & Wicki, 2008, p. 1465; Yin, 2009, p.4). A case study can, indeed, therefore be considered the appropriate manner to investigate the research questions.

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4. Methodology

This section outlines the research design for the study, related to figure 6. The research focuses on whether the process of the CSR strategy development can be more efficient and effective, with the aim of letting the CSR strategy function as brand insurance (Werther & Chandler, 2005). First, the company develops its own set of values, vision and set of objectives and scope of the strategy. Second, the organization maps the importance of its stakeholders, and prioritizes the level of influence that they have on the organization. In the third phase, the company develops its CSR strategy with respect to the stakeholder’s input. The final phase consists of checking whether the most important stakeholder has the largest priorities in the actual CSR policy.

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4.2. Case Study method

As the research on CSR strategy efficiency and effectiveness involves an organizational and managerial process, a case study allows the investigator to research real-life and complex phenomena in depth (Gibbert, Ruigrok & Wicki, 2008, p.1465;Yin, 2009, p.4). Especially the ‘how’ and ‘why’ questions lend themselves particularly well to this type of research (Yin, 2009). According to Schramm (in Yin, 2009, p. 17) a case study can be defined as:

The essence of a case study, the central tendency among all types of case study, is that it tries to illuminate a decision or set of decisions: why they were taken, how they were implemented, and with what result.

Case studies are also considered to be the most appropriate tools in the critical, early phases of a new management theory, when key variables and their relationships are being explored (Gibbert, Ruigrok & Wicki, 2008). Given this, research in the form of a case study is the appropriate method for investigating how a CSR strategy can function in its own context. This research is an exploratory study, which may provide new insights or new management theory. Although most data will be qualitative in the form of eight interviews, and CSR reports, a small survey will also provide some quantitative data. This study will explore the CSR strategy development process within companies.

Over the past few years there has been a lot of criticism of qualitative research. Scholars argue that it must be subjective and the legitimacy of the research is questioned. Additionally, when experts are interviewed the sample size is often small. This encourages the debate of generalization and validity (Saunders et al., 2009). In relation to the sample size, the validity and the meaningfulness of the study Fresle et al. state that in qualitative research the selection of cases and the information derived from these cases is more

important than the sample size. Within qualitative research there are no rules for the sample size; it is dependent on what one wants to know and the purpose of the research (Fresle,

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Hodgkin & Hardon, 2004, p.64). Nevertheless, Eisenhardt (1989) states that a set of four to ten cross-case analyses may provide a good basis for analytical generalization (Eisenhardt, 1989, p.537; Gibbert, Ruigrok&Wichi, 2008, p. 1468). Furthermore, qualitative studies are more difficult to replicate and their reliability is therefore questioned. During this research many precautions have been taken to overcome these criticisms.

In order to provide validity and reliability in a case study, these criteria need to be set out in a strict manner. Internal validity, construct validity, external validity and reliability have to be safeguarded in the study (Gibbert, Ruigrok & Wicki, 2008, p.1465;Yin, 2009, p. 4).

Internal validity:

Internal validity describes the logical ‘blueprint’ of the study where both a plausible causal argumentation and logical reasoning will be provided, that are powerful and compelling enough to defend the research conclusions (Eisenhardt, 1989, p. 542; Gibbert, Ruigrok, & Wicki, 2008, p. 1466; Yin, 2009, pp. 40-45). In order to safeguard the internal validity, a research framework should be added to demonstrate that variable x leads to outcome y. However, according to Yin (2009), this is not applicable for exploratory studies as a

framework might limit the exploratory approach. Pattern matching might be the only manner in which to overcome the problem of a lack of internal validity. In order to ensure the internal validity, this study has created an expanded research model in order to provide visual insights into the essence of the research. Via multiple interviews within five multinationals in the FMCG sector this research can conclude whether conclusions are endorsed by multiple sources. Furthermore, this research uses multiple sources within individual companies. Additionally, all transcripts are analyzed and structured via the pattern matching method with the NVivo 9 data analysis program. An overview of all developed nodes will be provided in the results section under ‘Pattern matching’.

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Construct validity:

Construct validity describes the quality of the conceptualization or operationalization of the relevant concept. Does the research investigate what it claims to investigate? (Gibbert,

Ruigrok, & Wicki, 2008; Yin, 2009). To overcome the pitfall of lack of construct validity, the case study should use multiple sources of evidence, establish a chain of evidence and

possibly have key informants review the case study reports (Yin, 2009, p. 41). In order to overcome the pitfall of lack of construct validity, all transcripts were typed out shortly after the interview and e-mailed to the interviewee to be checked for correctness. Furthermore, this study used multiple sources within one company. Within Company 2 this study uses three sources to investigate whether there is consistency within the company, also in different levels within the firm. Within Company 1 this study used two sources. Within these companies the cohesion was large enough to be able to state that there is construct validity within the sources.

The comparison of the influential stakeholders within different FMCG companies is tricky. In order to create a comparison between the stakeholders, this research aims to compare the individual stakeholders on the traits of ‘Power’ and ‘Urgency’. In order to be sure that there will be no misconceptions during the analysis of the data, all interviewees will be e-mailed afterwards with the request to rank the stakeholders on a three-point Lickert scale on ‘Power’ and ‘Urgency’ in their respect of influence in the CSR strategy development process. These questioners will contain the following definitions of Power and Urgency. ‘Power’ involves the possibilities for the stakeholder to make the organization carry out an action against the organizations will. Examples are governments who have the power to force their will upon the organization by rules and regulations, or Media with high exposure, consumers during a boycott. ‘Urgency’ is the level of importance the stakeholder claims for

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immediate action. Examples are the BP oil spill where animal and environmental issues required an immediate response.

Finally, CSR reports from all companies researched were taken into account when analyzing the interviews.

External validity:

External validity, or generalizability, answers the question of whether the research is

applicable for only this case, or if the conclusions are also applicable for other cases (Gibbert, Ruigrok, & Wicki, 2008; Yin, 2009). For the purpose of creating external validity a different range of employees from different FMCG multinationals will be interviewed. Three

interviewees held managerial functions in the field of CSR for their company, four interviewees worked on CSR initiatives on a daily basis on an operational basis and two interviewees worked in more general functions. This method allowed the present study to observe all levels of CSR implementation, from development to execution. Five interviewees are employed in the Netherlands, two in Germany and one in Nigeria. This means that the research will not only have focused on the Netherlands. Furthermore, all interviews are transcribed and all sources are deliberately selected because of their expertise in CSR and FMCG companies. Via this manner, the reader can follow the path of the research and can check its validity.

Reliability:

Reliability refers to whether the research is transparent and whether it can be repeated

(Gibbert, Ruigrok, & Wicki, 2008; Yin, 2009). Case studies are often criticized for lacking in reliability and being dominated by subjective interpretations. Protecting oneself against subjective interpretation is easier said than done. One course of action that can be taken

Case study : how a CSR strategy can parry or mitigate attacks on a corporation’s reputation

Master Thesis | Business Studies