Master’s Thesis
From CSR 1.0 towards CSR 2.0
Drivers, barriers and new business models
MSc in Business Administration – Strategy September 2015
Student: Bart Sneijer, № 10555757
University of Amsterdam, Faculty of Economics and Business
First supervisor: dr. Lars Moratis
University of Amsterdam, Amsterdam Business School Second supervisor: drs. Frank Slisser
TABLE OF CONTENTS Abstract 3 I Introduction 4 II Literature review 7 1. Theoretical perspectives on CSR 7 2. CSR stage development 8 3. CSR 1.0 and CSR 2.0 10
4. Drivers for CSR development 12
5. Barriers for CSR development 13
6. CSR 2.0 and new business models 14
7. A conceptualization of a ‘sustainable’ business model 17
8. Research gap and relevance for theory and practice 17
9. Conceptual model 18
III Data and method 20
1. Description of the data 20
2. Research sample 20
3. Data collection 21
4. Data analysis 23
IV Results 25
1. Grasping CSR development 25
2. Size and sector differentiation 26
3. Drivers for CSR development 27
4. Barriers for CSR development 29
5. CSR 2.0 related barriers in CSR development 31
6. Enablers of business model innovation: an internal perspective 32 7. Barriers of business model innovation: an internal perspective 34
8. CSR 2.0 and new business models 35
V Conclusions 37
1. Answers to research questions 37
2. Discussion and limitations 40
3. Avenues for future research 43
References 45
Appendices 47
A. Interview list 47
B. List of firms that participated 48
Abstract
Corporate social responsibility (CSR), a management concept whereby companies integrate social and environmental concerns in their business operations and interactions with their stakeholders, comes in many forms and shades. Some firms act as less responsible, ‘traditional’ corporations, where other firms purposefully maintain an interest among competing claimants. This process from ‘doing nothing’ to ‘doing much’ can be seen as a continuum which is inherently long-term, dynamic and evolutionary (Maon, Lindgreen and Swaen, 2010).
Visser (2010) describes that CSR, as a business, governance and ethics system, has failed. He contends that current CSR is incremental, peripheral and uneconomic. A new type of CSR is needed to address the most pressing social, environmental and ethical trends in the business environment. This new CSR – called systemic CSR or CSR 2.0 – is based on the principles of scalability, responsiveness, glocality and circularity. Sustainable, circular business models are illustrative for CSR 2.0 and a necessity to realize this ‘transformative’ CSR. This study aims to research the previously mentioned continuum and focuses on the firms located at the ‘doing much’ part: firms with integrated CSR practices and a significant societal or environmental component to their products or services. In other words, firms that bear a strong resemblance to CSR 2.0 principles and practices.
The first part of the study researches whether a more integrated, systemic type of CSR has emerged in the Dutch business environment. The results of 16 expert interviews show a shift forward in the thinking of CSR, but this shift is yet to be translated into practice.
The second part of the study researches the drivers and barriers in CSR development and assesses how they relate to practice. A classification of variables that are of strong, moderate and weak influence on CSR development was made and can be found in the results section and the appendix. Additionally, other repeating ideas on the variables were analysed and interpreted.
The third and last part researches which organizational characteristics have to be in place to reinvent a business model, and enable a firm to overcome the barrier of not being able to create business value out of CSR practises. The results show that leadership unity and strategic sensitivity are of utmost importance when rethinking a business model. Additionally, a commitment to
experimentation seems to be the most convenient way to find out what the ‘right’ business model for a product or service ought to be.
I Introduction
Corporate social responsibility, a concept which can be described as the voluntarily decision by companies to contribute to a better society and a cleaner environment, ranks high on academic research agendas and is a regular topic for discussion in boardrooms (Lindgreen & Swaen, 2010). The academic research on CSR is broad and relatively extensive. It focuses on the definition of CSR, the ethical foundations of CSR-related concepts (Windsor, 2006), the relationship between CSR and firm’s financial performance (McWilliams & Siegel, 2000), the reactive and proactive predictors of CSR actions and policies (Aguinis & Glavas, 2010), and so on.
Although the relevance and importance of CSR seems widely acknowledged among
academics and firms, there still remain questions and debates concerning both the theory of CSR and it’s practice. Critics argue that CSR is much ado about nothing: it lacks clear definitional precision and suffers from poor measurement (van Oosterhout & Heugens, 2006). Others academics argue that CSR is nothing more than a PR exercise (Frankental, 2001).
Several scholars proposed CSR stage development models to describe differences among firms in their CSR practices and CSR understanding (Maon et. al 2010; Mirvis and Googins 2006; Zadek 2004; Dunphy, Griffiths and Benn 2003). Engagement with CSR practices can vary from the previously mentioned PR reasons (such as Shell that organizes an eco-marathon) to an integrated management ideology (such as Desso’s cradle-to-cradle carpet production process), and everything in between. Dunphy et. al (2003) describe a range of corporate responses to sustainability: rejection, non-responsiveness, compliance-seeking, efficiency-seeking, strategic proactivity and a
transformational attitude. Mirvis and Googins (2006) identify five stages of ‘corporate citizenship’ (i.e. compliance, engagement, innovation, integration and transformation) and Maon et. al (2010) describe a seven-stage development process towards CSR, articulated around three cultural phases (i.e., CSR reluctance, CSR grasp and CSR embedment). All stages are characterized by different stakeholder relationships, different drivers of CSR initiatives, different barriers in CSR development, and so on.
It is this last stage, categorized as ‘transformative’, ‘systemic’ or ‘holistic’, which Visser (2010) names CSR 2.0. CSR 2.0 centres around five principles (creativity, scalability, responsiveness and glocality) and can be seen as an end-state in which businesses interactions with society are inherently sustainable and responsible. Moreover, CSR is seen as an internalized management ideology and sustainable-oriented business models are the modus operandi to make this type of CSR work.
Academics are increasingly interested in the topic of sustainable business models, with appealing reports written by Jonker (2012) and Clinton and Whisnant (2014) of think thank SustainAbility. Also in business practice firms with sustainable-oriented business models have emerged. A well-known example is Interface, a carpet manufacturer. It makes use of two business models. One is a leasing program in which Interface takes responsibility for the full lifecycle – installation, maintenance, and recovery – of the carpet for a monthly fee. The second is the ReEntry Program in which Interface reclaims existing carpet tile or broadloom and either recycles, downcycles, or repurposes it (Dobby et. al, 2006). Interface aims to eliminate any negative impact it has on the environment by 2020.
Returning to CSR stage development, Visser (2010) describes a relatively similar CSR stage development model as Dunphy et al. (2003) and Maon et al. (2010), the difference being that he classifies the stages prior to a systemic phase as ‘CSR 1.0’. He states that CSR 1.0 is uneconomic, incremental and peripheral, and transformative change is needed to redefine the role of businesses in society. Where the models on CSR stage development give an objective description of the various CSR stages, Visser (2010) argues that CSR 2.0 is the only way forward, which gives his work a more prescriptive angle.
It is this relatively new research stream that will be researched in this study by interviewing CSR professionals working at firms with a good understanding of CSR and well-developed CSR programs. The first part of the study examines the perceptions on CSR 2.0. That is to say, do CSR professionals recognize a development towards CSR 2.0 and do they see this development as necessary. CSR 2.0 is a concept that has mainly been described as a theoretical construct, and it lacks a clear empirical examination. For example, Carroll and Shabana (2010) state that ‘whether CSR 2.0 turns out to be really different remains to be seen’ (p. 86). Academics and practitioners haven’t published extensively on how CSR 2.0 relates to business practice, which implies a strong relevance for both theory and practice.
Subsequently the change drivers and barriers of a potential shift towards CSR 2.0 will be described. In other words: why do firms potentially progress towards CSR 2.0 and what are the barriers in this process? The second part builds upon an extensive body of literature and will contribute to the further theory building of CSR drivers and barriers. It focuses specifically on the drivers and barriers of the shift from CSR 1.0 to CSR 2.0, which is a relatively unexplored part of CSR research. It has practical relevance since it can give firms with high CSR ambitions a better insight in
what requires ‘transformational change’, and which factors are barriers in the process of integrating CSR practices in their business.
Lastly the link between CSR 2.0 and new business models is reviewed. It focuses on the enablers and barriers of business model innovation, and provides empirical insights on successful sustainable business models. There is a considerable amount of literature on business model innovation, but this literature doesn’t explicitly focus on innovation towards sustainable business models. On the whole this study will have an mostly have an explorative character when answering the following three research questions:
1. Do CSR professionals perceive a development towards CSR 2.0? 2. What are the drivers and barriers of a shift from CSR 1.0 to CSR 2.0?
3. What are the enablers and barriers in the development of sustainable-oriented business models?
This study is structured as follows; first, a critical review of the existing literature is outlined. Second, a theoretical framework and research design are drawn. Subsequently the results are outlined, followed by a discussion section. Finally the main conclusions are drawn and the contributions to both theory and practice are presented.
II Literature review
This section will provide the theoretical background for the study. The relevant academic literature is reviewed and eventually combined in a conceptual model.
1. Theoretical perspectives on CSR
The dominant thinking of firms, till around the mid twentieth century, was to only maximize profits for the shareholders (owners). This paradigm changed from the 1960s onwards, as the expectations of society from business altered. Nowadays socio-economic actors demand more than ever that firms demonstrate their ethical, legal and discretionary responsibilities (Margolis and Walsh 2003) and corporate social responsibility (CSR) has become of primary concern to firms. The subject ranks high on research agendas (Greenfield, 2004; Maignan & Ralston, 2002; McWilliams et al., 2006; Pearce & Doh, 2005) and it seems that CSR moved from ideology to reality, with many who consider it
necessary for firms to define their role in society and apply ethical and social standards to their businesses (Lichtenstein et. al, 2004).
The concept of CSR has a long and varied history and there is still no consensus among scholars about a definitive definition, which makes theoretical development and measurement difficult (Carroll, 1999). CSR generally represents a continuing commitment by a firm to behave ethically, contribute to economic development while simultaneously improving the life of its employees, the community, and society at large (Watts & Holme, 1999). Organizations efforts’ to address a wider variety of environmental and societal problems can also be considered as CSR. Although this is just one interpretation of CSR, this is the interpretation that will be followed in this study.
The CSR field not only presents a landscape of theories but also a proliferation of approaches. To clarify the research subject and set the picture for this study the four main theoretical perspectives on CSR will be described. In essence, each CSR theory presents four dimensions related to profits, political performance, ethical values and social demands (Garriga & Melé, 2004).
A first group of theories can be classified as instrumental theories. Instrumental theories see CSR only as a strategic tool to achieve economic objectives. Wealth creation is the sole social responsibility for the corporation, and CSR is seen as a mean to the end of profits. Another group of theories focuses on the interactions and connections between business and society, the power of business and the inherently responsibility that comes with it. These theories include both political
considerations and political analysis in the CSR debate. A third group of theories address the ethical requirements that cement the relationship between business and society. They are based on theories on how to achieve a good society and elaborate on moral based decision-making. The fourth and last group of theories can be labelled as integrative CSR theories. It looks at how business integrates social demands, arguing that business depends on society for its existence, continuity and growth. As a consequence, business should take social demands into account and integrate them in such a way that the business operates in accordance with social values (Garriga & Melé, 2004). It is this last group of theories which will serve as the foundation for this study.
2. CSR stage development
Expectations from both government and society run high when it comes to CSR-related issues, and firms are under increasing pressure to expand their engagement in CSR practices (Carroll, 2004). It is clear that there is heterogeneity among firms with respect to their CSR acceptance, understanding and integration. Some firms may act as less responsible, ‘traditional’ corporations, where other firms purposefully maintain an interest among competing claimants. This process from ‘doing nothing’ to ‘doing much’ can be seen as a continuum that is inherently long-term, dynamic and evolutionary (Maon et. al, 2010). Various scholars have refined and developed various stage models of CSR development, which are relatively comparable and related (Mirvis and Googins 2006; Zadek 2004; Dunphy et. al 2003).
Maon et. al (2010) described a seven-stage development process towards CSR, articulated around three cultural phases (i.e. CSR reluctance, CSR grasp, and CSR embedment). Active
opposition against CSR practices characterizes the first cultural phase. There is no motivation for CSR development and the firm adopts a black-box posture towards its external environment. Relationships with stakeholders are purely contractual (Maon et. al, 2010).
In the second stage firms begin to progress towards CSR. Their sensitivity to CSR issues increases, and there’s a growing interest in CSR concepts and rationale. CSR is, however, still mainly used as a value protector. Firms are relatively self-regarding, but stakeholders appear instrumentally useful (Maon et. al, 2010). This second stage starts with philanthropic CSR, which is self-protecting and can be seen as window-dressing. One step further in the development model is CSR with the aim of compliance-seeking: the CSR strategy is light defensive and CSR is perceived as a duty and an
obligation. According to Zadek (2004) firms in this phase particularly try to ensure that they will not do what they agreed on not to do. The last development stage associated with the CSR cultural grasp implies that firms have understood the fundamentals of CSR management. Awareness of the
importance of CSR increases and firms are seeking for the capabilities to exploit potential CSR-related benefits.
In the third and last stage firms substantiate their CSR activities by embedding it culturally in the organization. CSR is seen as a potential value creator, and internal resources are used proactively to address CSR-related demands from the environment (Maon et. al 2010). Firms see CSR as an opportunity rather than a PR campaign or damage control (Porter & Kramer, 2006). The first stage of this cultural embedment phase can be described as ‘caring’. Firms adopt a long-term perspective focused on the external environment. The second stage, which is extensively covered by Porter and Kramer (2006), can be described as strategic CSR. In this stage CSR becomes an important part of corporate strategy: CSR is perceived as an inexorable direction to take (Maon et. al, 2010). CSR practices are understood to contribute to long-term viability and success and firms rely on
implemented CSR systems (Reidenbach and Robin, 1991). During the last CSR development stage the firm fully integrates CSR principles into every aspect of the organization and its activities. Firms adopt a ‘change the game perspective’ that is aimed at improving the human well-being and the fulfilment of the ecological sustainability of the planet. According to Maon et. al. firms in this stage perceive CSR ‘as the only initiative since all beings and phenomena are mutually interdependent. The organization adopts fully transparent postures and aims to diffuse its CSR management expertise (2010, p. 34).
As mentioned before the models of Maon et al. (2010), Zadek (2004), Mirvis and Googins (2006) and Dunphy et al. (2003) are relatively similar. For example, Dunphy et al. (2003) describe three ‘waves of sustainability’. The first wave contains CSR rejection and non-responsiveness towards CSR issues; firms in this phase seek business as usual and environmental resources are seen as a free good. In the second wave firms can have a compliance-based attitude towards CSR issues, with a strong focus on reducing risk, an efficiency-based perception of CSR, focused on cost-efficiency, or strategic proactivity, centred around gaining a competitive advantage. The third wave is labelled ‘transformative’: firms in this phase are ‘an integral, self-renewing element of the whole society in its ecological context’ (Dunphy et al., 2003, p.26).
3. CSR 1.0 and CSR 2.0
Similar to the previously discussed authors Visser (2010) describes CSR stage development; the difference being that Vissers’ model is prescriptive rather than descriptive. Visser (2010) labels the overlapping stages of CSR as defensive, charitable, promotional, strategic and systemic. It is this last stage, which he calls systemic CSR, holistic CSR, radical CSR or CSR 2.0, where firms should aim for.
Visser (2010) argues that progressing towards CSR 2.0 is the only way to address the world’s most pressing social, environmental and ethical trends. According to him CSR as a business,
governance and ethics system failed. Current CSR (i.e. CSR 1.0) is incremental, uneconomic and peripheral. It is incremental due to the widespread use of the total quality management model, which results in incremental improvements that do not match the scale and urgency of problems. CSR is uneconomic since it doesn’t always make economic sense to engage in CSR practices: short-term markets still reward firms that externalize their costs to society. Lastly current CSR is peripheral since it is mainly restricted to the largest firms, and mostly confined to PR, rather than being integrated across the business (Visser 2010).
CSR 2.0 focuses its activities on tackling the causes of our current irresponsibility and unsustainability. This should be done by innovating business models, revolutionizing processes, products and services and a lobby for progressive national and international policies. CSR 2.0
therefore aims to address the macro level system (society, communities, economies and ecosystems) and is built around the four elements of value creation, good governance, societal contribution and environmental contribution (Visser, 2010).
It is clear that value creation constitutes more than just financial profitability. The goal is economic development, which means improving the economic context in which a company operates. This includes investments in the infrastructure, the creation of jobs, providing skills development and so on. When institutions fail, or are not transparent and fair, everything that CSR is trying to
accomplish is undermined. This makes good governance key (Visser 2010). Societal contribution consisting of stakeholder management, community participation and supply chain integrity remains a critical element of CSR (Tang & Tang, 2012). Environmental integrity in CSR 2.0 sets the bar higher then just minimizing damage. It aims at maintaining and improving the ecosystem sustainability.
Moving from CSR 1.0 to CSR 2.0 requires adopting five new principles—creativity, scalability, responsiveness, glocality, and circularity—and embedding these deeply into an organization’s
management DNA. The essence of CSR 2.0 is that it is transformational, and offers a practical strategy for creating long-term capitalism (Visser 2010). Table 1 gives an overview of both micro-level ‘methodological’ shifts, as well as meta-level ‘ontological’ shifts.
Table 1. Comparison of CSR 1.0 and CSR 2.0 concepts as described by Visser (2010)
CSR 1.0 CSR 2.0
Micro-level methodological shifts
Charity projects Social enterprise
CSR premium Base of the pyramid
Product liability Choice editing
Ethical consumerism Service agreements
CSR indexes CSR ratings
Meta-level ontological shifts
Philanthropic Collaborative
Risk-based Reward-based
Image-drive Performance-drive
Specialised Integrated
Marginal Scalable
Several other authors described a similar concept as CSR 2.0. Zadek (2004) labels the last stage of CSR development as ‘civil’. In this stage firms promote broad industry participation,
incorporate responsibility and try to enhance long-term economic value through collective action. Mirvis and Googins (2006) label CSR 2.0 as ‘transforming’. Business and society are intertwined and firms should aim at changing the game. This requires visionary leadership and the creation of markets and social change. Maon et. al (2010) describe the last stage of CSR development as a situation in which firms fully integrate CSR principles into every aspect of the organization and its activities. In this stage firms aim at improving the human well being and the fulfilment of the ecological sustainability of the planet.
Dunphy et al.’s (2003) work comes closest to Visser’s (2010) ideas about CSR 1.0 and CSR 2.0. Dunphy et al. (2003) elaborate on both ‘incremental change’ and ‘transformational change’ in CSR practices and present ideas on how to get to ‘third-wave corporations’ (i.e. firms with
transformative CSR practices). However, they do point out advantages of incremental change, such as efficiency improvements that enable firms to move forward on the sustainability spectrum. Visser (2010) takes a bolder stance where he argues that transformational change is the only way forward for the CSR field, and labels everything prior to the transformative stage as CSR 1.0.
4. Drivers for CSR development
Researchers have identified a variety of reasons why firms start CSR programs and initiatives, which are eventually drivers of CSR development. Weber (2008) identified five main areas of CSR benefits for firms. First of all CSR practices can have a positive effect on company image and reputation. Image represents the “mental image of the company held by its audiences” (Gray & Balmer 1998, p. 696). Schwaiger (2004) found in his empirical research that CSR could influence reputation. Both image and performance can influence firm’s competitiveness by consistently performing and communicating over the years, which implies the existence of a business case for CSR.
A second area of benefits mentioned by Weber (2008) is related to the positive effects of CSR on employee motivation, recruitment and retention. Employees might draw motivation from being involved in CSR activities and these activities might increase the attractiveness of a company for potential employees. A third area of benefits is related to cost savings. Epstein and Roy (2001) described several potential efficiency gains leading from CSR: improved contacts with stakeholders leading to time savings, better access to capital due to higher sensitivity of investors to sustainability issues, and so on.
Besides cost savings CSR can also have a positive impact on a firms’ revenues, which can be achieved by higher sales or an increase in market share. This can be achieved indirectly by an
improved brand image, or directly by CSR-driven product or market development (Weber, 2008). The last and fifth area of potential benefits of CSR is related to the reduction of risks. Especially global firms face an environment that is characterized by networked operations, global value chains, empowered stakeholders and a dynamic tension among sectors. CSR provides the principles and framework for stakeholder engagement and can serve as a countermeasure against this so-called social risk (Kytle & Ruggie 2005).
CSR 2.0 literature describes ‘an age of responsibility’ in which firms follow a strategy that optimizes outcomes for the larger human and ecological system. This implies that top management leads internal change and provides stewardship for social issues (Castello & Lozano 2009). Mirvis and Googins (2006) support this position: they argue that CSR 2.0 needs first and foremost visionary leadership to work. ‘Management attitudes’ are not always described as a driver or barrier. In fact, CSR 2.0 as described in the previous paragraph demands a favourable management attitude.
Management attitudes may therefore be regarded as a mediating variable between drivers and barriers of CSR.
Visser (2010) makes a distinction between local and global CSR drivers. Potential local drivers could be cultural traditions (CSR often draws on deep-rooted traditions of for example business ethics), political reform, socio economic priorities, governance gaps (CSR as a way to plug the gaps left by corrupt or under resourced governments) and a crisis response (CSR can be catalysed by for example an environmental crisis). Global drivers for CSR are market access, international standardization, investment incentives, stakeholder activism and supply chain integrity.
Benn, Dunphy and Griffiths elaborate in their 2006 paper specifically on drivers for CSR change. A first driver of change is the fact that firms want to be compliant with international ‘compliance plus’ standards, such as ISO 140000 or the Eco Management and Audit Schem.
Managers see rewards in terms of influence, reputation and competitive survival for the firm in working voluntarily towards social and environmental standards. Other drivers that are mentioned are risk management and HR-considerations: as employees increasingly hunt for firms with a strong sense of values, there are rewards in becoming an employer of choice. Furthermore they point out the
importance of ‘change agents’, which can be both external (such as governmental institutions) as internal (such as visionary leadership by senior management).
This list can be supplemented by several other potential drivers for CSR such as customer demand, shareholder demand, product development and innovation as a result of CSR, compliance with legislation, an increased productivity, career development, more cost-effective supply chains and pressure from NGOs. Evidently this list is not completely comprehensive and mutually exclusive, but it covers the majority of the academic literature concerning this topic.
5. Barriers for CSR development
Little of the academic CSR literature elaborates on the barriers that firms face when executing a strategy that embeds sustainability across the whole business. Especially the barriers related to implementing and executing CSR 2.0 are relatively unknown, which makes it interesting to research.
Laudal’s (2010) literature survey states that there are three main barriers to CSR. The first barrier is an economic one: the cost-benefit ratio. If a firm finds that the costs of CSR outweigh the benefits, further engagement in CSR practices will stop. Secondly internal barriers can be identified.
Internal barriers can be related to a lack of knowledge about CSR practices or a lack of capacity. The last barrier that Laudal (2010) describes is related to the external environment of the firm. Especially smaller firms may be unable to monitor their supply chains, which lead to situations in which they cannot guarantee the societal and environmental integrity of their products or services. More generally speaking, firms may not be able to monitor their external environment and recognize relevant CSR issues.
The Accenture executive survey (2011) gives an insight in what CEOs from leading firms perceive as barriers to an integrated companywide CSR approach. The most important reported barrier is a lack of financial resources. This reflects the pressures that CEOs feel in the wake of the global downturn and a slowly recovering economy. Competing strategic priorities and a missing link between CSR and business value are identified as other critical barriers. Barriers that seem to be of less importance are the (dis)ability to extend the strategy throughout the supply chain, the
implementation of CSR strategy across business functions, a lack of knowledge, a lack of recognition from investors, extending the CSR strategy throughout subsidiaries and a lack of support from top management team.
Adopting CSR 2.0 and its principles can be very demanding for organizations, especially if a firm’s CSR development is situated before the strategic stage. This sometimes means that the whole business model must be reinvented. This is where the more general problems of organizational change come in: inadequate culture-shift planning, lack of employee engagement, flawed communication strategies and so on.
6. CSR 2.0 and business model innovation
Table 2 illustrates the concepts and terminology used in articles on CSR stage development related to the transformative, civil or holistic stage. As can be seen, the articles remain somewhat ambiguous when describing what this last stage contains and how this transformative change should be realized. This is especially the case for the articles of Maon et al. (2010), Mirvins and Googins (2006) and Zadek (2004). For example, Maon et al. (2010) state that firms ‘should go beyond the traditional business model’ (p. 34). However, what this new kind of business model should look like isn’t mentioned.
Table 2. Articles on CSR stage development and their views on business models Author(s) Terminology Concepts referred to:
Visser (2010) CSR 2.0 ‘Business models are the modus operandi of CSR 2.0’
‘Value creation by inclusive business, capital investment and sustainable and responsible goods and services’
‘Social contribution by supply chain integrity and fair labour practices’
‘Environmental integrity by ecosystem protection, renewable resources and zero waste production’ (pp. 10-20)
Maon et al. (2010) Transformative ‘Going beyond the traditional business model’
‘CSR is very deeply ingrained in the organization’ (p. 34) Mirvis and Googins (2006) Transformative ‘Visionary, ahead of the pack’
‘Business driven CSR’ (p. 108)
Zadek (2004) Civil ‘Enhancing long-term economic value’
‘Realizing gains through collective action (p. 28)
Dunphy et al. (2003) Transformative ‘Cooperation with other firms to achieve green supply chains’
‘Working with governments and communities to change rules of the game’ ‘Building human and relational capital’
‘Reinterpretation of waste’
‘Creation of business models that provide ongoing financial viability’ (pp.19-30) van Marrewijk and Werre (2003) Holistic ‘Co-creation’
‘Integration of production-consumer relations’ ‘Integrated supply chain’ (p. 116)
Van Marrewijk and Werre (2003) are more specific in describing the characteristics of a civic type of CSR, but they’re argumentation on this topic is relatively concise. Moreover, they don’t elaborate on the topic of (sustainable) business models and its relationship with holistic CSR. Dunphy et al. (2003) give the most comprehensive description of a transformative type of CSR. They also touch upon the topic of business models, arguing that ‘they should provide ongoing financial viability. Such organizations are either niche specialists in growing markets or have diversified to an extent that ensures continuity of performance for the whole organization’ (p. 19). As this citation illustrates Dunphy et al. (2003) don’t plea for the use of sustainable business models, nor do they describe the concept. On the contrary, Visser (2010) explicitly states that to make CSR 2.0 work, sustainable business models (SBMs) have to be developed. He argues that business models are the modus operandi of CSR 2.0 and describes his ideas on sustainable business models comprehensively (table 2).
A relatively new research stream focuses on this topic of sustainable business models, and their consequences for business (Jonker 2012; Schaltegger et. al 2011; Porter 2011). Their thinking is similar to that of Visser (2010): ‘modern’ capitalism, which just aims for economic growth and profit, no longer works. Firms should aim for creating ‘shared value’, in which economic growth and societal progress go hand in hand (Porter, 2011). Therefore, the key enabler of CSR 2.0 is the business model (Visser, 2010).
When talking about business models it is important to first define what a business model is. The most cited article on this topic (Margretta, 2002) describes a business model as the sum of narrative and numbers. The narrative must answer two well-known questions: Who is the customer? And what does the customer value? The numbers must explain how money is going to be made. In other words, it explains the underlying economic logic is that describes how a firm can deliver value to customers at an appropriate cost.
As mentioned before, firms who don’t have a sustainable business model but do aim for an integrative, systemic way of conducting CSR must innovate their business model. However, business model innovation isn’t something that can be done overnight. Chesbrough (2010) described several enablers and barriers in business model innovation. The main opportunity or enabler of business model innovation is the ability to experiment with new business models. This means that when it is clear that the current business model is no longer working, experimentation can help to identify a ‘new’ business model and create the data to justify it. However, firms can be constrained in their
experimentation by time and money. Doz and Kosenen (2010) propose that firms who want to innovate their business model need to be agile, which can be achieved by developing three meta-capabilities: strategic sensitivity, leadership unity and resource fluidity. Strategic sensitivity relates to the sharpness of perception of, and the intensity of awareness and attention to, strategic
developments. Leadership unity contains the ability of the top team to make bold, fast decisions, without being bogged down in top-level ‘win-lose’ politics. Resource fluidity is the internal capability to reconfigure capabilities and redeploy resources rapidly.
Besides these enablers or opportunities academics describe three main barriers to business model innovation. First, the development of a new business model may be resisted internally due to a conflict with the prevailing business model. Second, it may be resisted due to the underlying
configuration of assets that support the prevailing model. Lastly managers may not know what the right business model ought to be; if this is the case experimentation is the only way forward (Amit and Zott, 2010).
Lastly, Schaltegger, Lüdeke-Freund and Hansen (2011) relate the degree of business model innovation with a firms’ CSR strategy. Firms with defensive CSR strategies will primarily make business model adjustments, aimed at cost- and efficiency improvements. Schaltegger et al. (2011) argue that in this case there is only a small contribution to the business case for sustainability. Firms
with ‘accommodative’ CSR strategies will make business model improvements, aimed at efficiency improvements, risk management and reputation management. Here, the contribution to the business case for sustainability is intermediate. Firms with proactive CSR strategies engage in business model redesign. Business model redesign exists when an improvement leads to a completely new value proposition. While a business model might be improved without changing the value proposition to the market (e.g. shifting from own production to process licensing), a redesign replaces the underlying business logic and offers new products, services or product-service systems. In this situation the business case for sustainability is highest (Schaltegger et al., 2011).
7. A conceptualization of a ‘sustainable’ business model
Jonker (2012) captures sustainable business models in three general streams: creating, sharing and exchanging. Creating centres on the creation of win-win situations in multiple ways. It’s not just about creating value in an economic way, but also about creating value for society and the ecosystem at the same time. Business models that focus on sharing centre on cooperation in which social capital, data, human resources, ideas, products, transport and so on are being shared. In exchange business models quite often alternative ways of payments are being used (e.g. points or credits) to create demand or stimulate change in consumer behaviour. Another example is transactions without money (i.g. trading services for products, knowledge for access to a network, etc.)
Stubbs and Cocklin (2008) tried to conceptualize what a sustainability-oriented business model looks like. They propose that a SBM draws on economic, environmental and social aspects of sustainability in defining the purpose of an organization. This means that profits are ‘means’ to achieve sustainable outcomes. Profits must be made, but organizations don’t just exist to make a profit. Furthermore a SBM uses a triple bottom line approach (i.e. economic, environmental, social) in measuring performance. Lastly they point out that an SBM considers the needs of all stakeholders rather than giving priority to shareholders’ expectations.
8. Literature gap and relevance for theory and practice
The question remains whether or not CSR 2.0 is a theoretical abstraction or that firms actually progress towards this form of CSR. This question can be answered by actually speaking to firms who have integrated CSR 2.0 practices in their day-to-day business activities, or to engage into a
conversation with consultancies who advise on such matters. Hence, research question 1 is the following:
1. Do CSR professionals perceive a development towards CSR 2.0?
CSR 2.0 is a concept that has mainly been described as a theoretical construct, and it lacks a clear empirical examination. Academics and practitioners haven’t published extensively on how CSR 2.0 relates to business practice, which implies a strong relevance for both theory and practice.
The second research question builds upon an extensive body of literature and will contribute further to the theory building of CSR drivers and barriers. It focuses specifically on the drivers and barriers of the shift from CSR 1.0 to CSR 2.0, which is a relatively unexplored part of CSR research. It has practical relevance since it can give firms with high CSR ambitions a better insight in what is driving CSR and which factors are barriers in the process of integrating CSR practices in their business. Research question 2 is the following:
2. What are the drivers and barriers of a shift from CSR 1.0 to CSR 2.0?
The third research question has an explorative character and contributes to the further development of theory related to sustainable business models. Various CSR scholars (Garriga and Mele 2004; Visser 2010; Jonker 2012) argue that CSR and CSR research should be focusing more on sustainability-oriented business models. The academic work on this topic is still fairly limited. However, there is a considerable amount of literature on business model innovation, but the relationship with sustainable business models hasn’t been researched before. It is important to note that there may be an overlap between research question 2 and 3 on the topic of business models. That is to say that a missing link between CSR and business value can be described as a barrier in the process of CSR integration. This will be deepened out in research question 3, which is the following:
3. What are the enablers and barriers in the development of sustainable-oriented business models?
9. Conceptual model
The literature review and research questions resulted in the following conceptual model, which gives a comprehensive overview of the main concepts and how they relate to each other:
Integration of CSR practices and CSR stage development
Defensive Charitable Promotional Strategic Systemic
cx
Sustainable business models - Creating / Sharing / Exchanging Enablers - Commitment to experimentation - Strategic sensitivity - Leadership unity - Resource fluidity CSR 1.0
Incremental, peripheral and uneconomic
CSR 2.0
Value creation, good governance, societal contribution and
environmental contribution Drivers
External pressures: - Regulation
- Stakeholder pressure and improved stakeholder relationships - Reputation and risk managemant Internal drivers:
- Organizational culture, mission and values
- Employee recruitment, retention and satisfaction
- Cost reduction
- Innovation and development of capabilities
Market forces: - Customer demand - Attraction of investments
Barriers
- Lack of awareness, no sense of urgency
- Cost/Benefit ratio
- Lack of knowledge or capacity - Inability to monitor external environment
- Competing strategic priorities - Difficulty of implementation of CSR strategies
- Missing link between CSR and business value
Barriers - Conflicts with current business model
- Conflicts with configuration Traditional business models
III Data and method
This chapter gives an overview of the research approach. It provides the description of the data, the data collection methods and a description of the data analysis.
1. Description of the data
Relatively little empirical research has been conducted on this topic, which warrants exploratory research. Strauss Corbin (1990) argue that if little is known about a phenomenon, qualitative methods are advocated for their ability to discover the underlying nature of the phenomenon in question. The method of interviewing was chosen for its richness in data, its flexibility, and its ability to fulfil the research purpose of identifying and understanding the full range of factors that are drivers and barriers in CSR integration and business model innovation.
The interviews were composed in a semi-structured way, which means that the interviews are organized around a set of predetermined questions, with other questions emerging from the dialogue. The individual in-depth interview allows delving deeply into the perceptions on CSR 2.0, the drivers and barriers of CSR 2.0 and it’s translation into sustainable business models.
Yin (2009) describes two types of generalization: statistical generalization and analytical generalization. Statistical generalization involves inferring the results from a sample and applying it to a population. This doesn’t fit this research method and wasn’t the aim of the research. In analytical generalization a previously developed theory is used as a template with which to compare the empirical results of interviews or case studies. The goal of this study is to make an analytical
generalization. The extensive theory on CSR stage development, CSR drivers and barriers, business model innovation and CSR 1.0 and CSR 2.0 functions as a strong theoretical framework. The
interviews are used to compare this theoretical framework empirically. The data and discussion of the data will firstly contribute to the theory building of CSR 2.0 and business model innovation. Secondly this study tries to develop a broader logic that is applicable to firms with different CSR approaches and a different CSR understanding.
2. Research sample
As observed by several authors, sampling in qualitative research is not a random exercise, but a conceptually driven process. The samples are identified in relation to a theoretical rationale and
chosen to form the scope of the research (Eisenhardt and Graebner, 2007). This research made use of a purposively sampling method, with a research sample that consists of 16 CSR professionals working for Dutch-based organizations. These firms should preferably be of similar size in order to allow better comparisons. The CSR professional was chosen as the source of data since it can be assumed that he or she is most knowledgeable about both CSR in general as well as the CSR practices of their firm.
The firms that were selected are all members of ‘De Groene Zaak’, a Dutch platform for firms with an interest in CSR practices. To obtain a membership of ‘De Groene Zaak’ a firm has to meet several conditions, such as a demonstrable interest in CSR practices and the translation of this interest into practical actions. Furthermore members need to endorse the business principles of ‘De Groene Zaak’, which are all sustainability-related. Selecting respondents from ‘De Groene Zaak’ created a certain amount of homogeneity in the group of respondents and assured that the participating firms have relatively well-developed CSR practices.
A majority (9) of the firms that participated in the research were in the consulting business. All consulting firms were specialized in providing some form of sustainability-oriented advice. These firms were chosen due to the fact that consultants have comprehensive industry knowledge and have experience with a significant amount of projects. This means that they have experienced at several organizations what drives CSR practices, what doesn’t, and how sustainable business models work. Additionally, the rest of the sample consisted of firms that actually produce or sell a service with a strong sustainable component to it. It is important to include several of these firms as well since they experienced in ‘real life’ what undertaking a sustainable-oriented business is like. These firms could also provide insights in the use, opportunities and difficulties of sustainable-oriented business models. A short description of the organizations can be found in the appendix.
3. Data collection
Data was collected by the use of face-to-face semi-structured interviews with open-ended questions. Due to the semi-structured basis of the interviews, the participants generally received the same questions and therefore comparisons between participants could be made. The ordering of the questions varied depending on the flow of the question, and additional questions were used to explore
certain topics into more detail (Saunders, Lewis and Thornhill 2001). The interviews were hold in Dutch to exclude possible language barriers and were recorded and processed afterwards.
Scientific research should be both methodologically valid and reliable. The concept of validity can be divided in internal and external validity. Internal validity refers to the congruence between what you intended to measure and what you really measure (Singleton & Straits, 2011). There are different methods to assure the internal validity in qualitative research. For this research content validity and face validity are of particular relevance. Content validity involves the extent to which a measure adequately represents all facets of a concept. Face validity refers to a personal judgment of the researcher that an operational definition appears to measure the concept that it is intended to measure (Singleton & Straits 2011). To assure these two types of validity a two pilot interviews were held. By doing this pilot interview, the researcher was able to check whether the topic list was
sufficient. The respondents were asked to give feedback, which led to adjustments on the topic list. To further assess the fit between what was intended to measure and what was really measured, the researcher made use of alternate explanations during the set-up of the coding scheme and the data analysis.
In a qualitative research paradigm external validity refers to the degree to which the results can be generalized or transferred to other contexts or settings. From a qualitative perspective transferability is primarily the responsibility of the researcher doing the generalizing (Singleton & Straits, 2011). To enhance transferability the research context is thoroughly described in this data and method section. The interview questions can be found in the appendix. Furthermore, the assumptions that are central to this research are comprehensively described in the literature review. The researcher who wishes to transfer the results to a different context is responsible for making a judgment of how sensible a transfer is.
Reliability is concerned with questions of stability and consistency (Singleton & Straits, 2011). In other words, if another researcher would repeat this research, would this yield the same results? The previously mentioned semi-structured interview method increased reliability, because the same questions were applied to all respondents. The topic list with key questions was used as guidance and as a control mechanism to ensure that all topics were discussed. Further in this methodological section both the procedure as well as an extensive description of the process and analysis of the structuring of the data is provided.
A board member of ‘De Groene Zaak’ asked the selected firms to participate and functioned as an intermediary between the researcher and the respondents. All interviews took place at the firms the respondents’ work. The semi-structured interview format was designed at the end of October. At the same time the pilot interview took place to practice and verify the questions. The interviews, which are all conducted by the researcher, took place between January and May in 2015, and took
approximately 45 minutes.
4. Data analysis
The collected data was categorized according to the qualitative methods for analysing. The process of analysing the data was an iterative and reflexive process. The data analysis was initiated directly after the data collection, as advised by several authors (Yin 2010; Miles & Huberman 1994). The analysis can be broken down into the process of transcription right after the data collection, the coding of patterns and the adjustments of interviews.
Generally speaking three approaches have been devised to create codes. A first method is to start with an a priori list of codes. A second approach is to begin with an a priori list of codes of broader categories, then read the data and attempt to devise more specific codes. In the third and last approach researchers analyse data without any preconception about codes. Codes then emerge over time, spontaneously (Yin, 2010). With regards to research question 1 this research made use of this last approach, and research question 2 and 3 were answered by making use of the second approach.
This meant the following in practice. With respect to research question 2 and 3, an a priori list of codes based on the literature was composed. A program for coding, Nvivo, was used to analyse the data. In some situations codes were renamed to better match the meaning of statements from the respondents. New codes were also generated during the data analysis process if statements could not be matched to existing pattern codes. Furthermore interview adjustments were made if certain topics were raised frequently during the interviews and weren’t sufficiently covered in the coding scheme. This emphasis on a theory-driven coding scheme resulted in a discussion section with specific recommendations on how the current academic literature could be improved.
For the analysis of research question 1 no specific coding scheme was developed in advance. This is due to the relatively open character of the research question and a lack of theoretical
process of breaking down, examining, comparing, conceptualizing and categorizing data (Strauss & Corbin, 1990). Each piece of information was divided into fragments (often quotations) and each fragment was given a code. The last step was to connect codes and discover themes and patterns. This was done by carefully reading and re-reading the data and the identification of passages that are linked to a common theme or idea (Rice & Ezzy, 1999).
IV Results
In this section the key inter-related themes are discussed. A rich, contextually bound and theoretically informed narrative will be outlined to eventually answer the research questions in the section hereafter. The topics discussed are in chronologic order with the topic list, which can be found in the appendix, and the three research questions. To ensure the respondents’ anonymity their names aren’t displayed.
1. Grasping CSR development
All respondents confirmed that CSR scores high on the agenda of businesses. Firms are aware of both micro-level developments that stress the importance of CSR, such as an increasing customer demand for green products, as well as shifts on a global scale such as climate change. However, the respondents had different ideas on the progress that has been made and what the current state of CSR is. A generalization into two groups can be made.
The first group of respondents stressed that they’ve identified real and objectively measurable progress when it comes down to the adaption and integration of CSR practices. This group had a rather positive outlook on the changes that have been realized and the progress that has been made. All of them explicitly stated that a new way of thinking related to CSR has emerged. One of the respondents explains it like this:
“ (…) I definitely see a change in the way we’re thinking about CSR... We’ve passed the traditional way of thinking about CSR a long time ago. (…) You can basically say that traditional CSR is dead. A more holistic approach is needed – and is currently used by significantly more businesses in industrialized, Western countries. “
Another respondent illustrates:
“(…) The last 10 years the concept and understanding of CSR has broadened and widened. Especially the larger firms go way further in their CSR practices than they used to. (…) In the Netherlands a lot of interesting stuff is happening – look at Desso, Unilever, Philips and so on and so forth. These firms are really making a difference and pushing their competitors and industry forward.”
The second group of respondents acknowledged that significant progress on the topic of CSR has been made. They explicitly pointed out that their own firms are good examples of how CSR should be practiced. However, related to their external business environment they were rather sceptical:
“(…) The development towards a new type of CSR is definitely something that is inevitable. However, very, very little firms fully embrace it. I think you can count these firms on one hand.”
Another respondent described it as follows:
“(…) Managers and CEOs are aware of the growing importance of conducting business in an ethical and environmentally friendly way. But if you take in mind that the Club of Rome already addressed these points some 40 years ago, what real progress has been made? (…) The vast majority of the firms still see CSR as a luxury, a more or less promotional activity.”
2. Size and sector differentiation
Although it lies not within the scope of this study to make sector or size comparisons, many
respondents mentioned the differences that exist in CSR practices between private firms and public organizations. Another difference that came up during multiple interviews was related to firm size. More specifically, respondents argued that CSR practices and understanding differ significantly between SMEs and MNEs.
According to the respondents, public organizations in general have incorporated CSR to a higher degree in their organization than private firms. The rationale is rather self-evident: public organizations serve society as a whole and are therefore willing to engage in CSR activities. Furthermore financial considerations seem to play a role. As one respondent explains:
“(…) Local governments are really keen on doing things green and responsible. When they start a new project or policy there’s always a green component to it. (…) Obviously it has to do with the fact that they are not driven by short-term profits. (…) Many private firms still see CSR as something that costs money, and therefore it is one of the first thing they’ll quit with when business isn’t doing well.
With respect to the differences in firm size three general observations can be made. First, respondents mentioned that SMEs in general have a shorter time horizon than MNEs. Again, since a lot of managers still have the perception that CSR costs money, it ranks low on the strategic agenda of SMEs who don’t have a societal or environmental component to their product or service. Second, respondents mentioned that today’s founders’ of start-ups more often have some societal need in mind. Incorporating CSR in their businesses is seen as something normal. Third, respondents agreed on the fact that MNEs generally have embraced the concept of CSR and have incorporated CSR practices to a certain degree in their organization. The respondents describe the CSR practices of MNEs however as mostly promotional or strategic. The following quotes illustrate these observations:
“(…) Due to the current economic climate a lot of SMEs are only concerned with surviving. However, what you do see is this whole new ‘green industry’, filled with start-ups offering biological food, energy efficiency consultancy, and so on.”
And:
(…) Basically all western-based MNEs have this CSR department, working on CSR policies, promoting these activities and trying to make their own employees enthusiastic about CSR. Most of the time these firms see it as something they can advertise with, as a promotional activity. (…) Established firms are really having a hard time to incorporate CSR in their DNA. I would definitely say that most of them should be classified as promotional.”
Obviously these are generalizations don’t apply to all SMEs and MNEs. However,
organizational characteristics play an important role further on in this study when the topic of business model innovation is discussed, which makes it worthwhile to address this topic now.
3. Drivers for CSR development
After this broad assessment of the state of CSR, the topic of drivers and barriers will be discussed. This section is theory driven and during the interviews it was the aim to specifically relate these drivers and barriers to the concept of CSR 2.0.
From the broad range of potential drivers the respondents were asked to assess if the
proposed variables are of strong influence, medium influence or weak influence on CSR development. Plain and simple counting led to the following distribution of variables among these three categories.
The respondents argued that the following variables are of strong influence on CSR
development: reputation and risk management, organizational culture, values and mission, and cost reduction. Risk and reputation management was mentioned most often as the most important CSR driver, and was several times specifically linked to MNEs and resource scarcity. A respondent explains it likes this:
“(…) Multinationals have a long time horizon and plan ahead for years. They are aware of the fact that resources that are vital for their production are becoming increasingly scarce (…). They try to hedge away this risk by diversifying towards more sustainable product lines.”
Another respondent about reputation risk:
“(…) The clichés about reputations are actually quite right… It takes years to build a reputation and it can be ruined in 5 minutes. For example, firms are increasingly concerned with child labour in their supply chains. “
“ (…) This firm is founded with the mission to make a more sustainable world. So obviously CSR is completely embedded in our values and culture. (…) In my opinion more and more firms that start nowadays take a societal need in mind; CSR is seen as something normal at current start-ups.”
A majority of the respondents referred to the so-called “low-hanging fruit” when the subject of cost reduction was proposed. This makes it less valuable for this study because this is not necessarily related to CSR 2.0. An employee of an energy provider explains:
“(…) Firms have widely accepted the notion that CSR leads to cost reduction. Obviously increased energy-efficiency is something that firms see as “CSR”, but I see it as incremental changes. (…) When I talk to managers and explain their energy savings potential they always want a follow-up.”
The respondents concluded that of medium influence are regulation, customer demand and stakeholder pressure. What characterizes this group is the fact that the respondents confirmed that the proposed variables play a role in CSR development, but that this role is limited or offset by a certain complexity and ambiguity of the variable. As one respondent explains:
“(…) Regulation and governmental policy is way to complex to simply say if it’s positively or negatively correlated with CSR. This differs per industry and the level of governance. For example, you really can’t compare a municipality with the ministry of economic affairs. Moreover, some industries are really well regulated on CSR issues, and other industries just aren’t… (…)”
Another respondent on regulation:
“(…) The Dutch government is obsessed with minimising the regulatory burden on firms. Imposing tough environmental legislation is not something they are very keen on in The Hague, especially not in the current economic climate. (…) I think the statement of Feike Sijbesma, CEO of DSM, at the World Economic Forum of 2013 is very illustrative. He formed a coalition with five Dutch multinationals, which all pledged that they would fulfil a leadership role on the topic of CSR. For me this is a clear indication that the government is lagging behind, also because he stressed that this transformation can only come from the private sector, and not the government.”
The following respondent explains the ambiguity of stakeholder pressure:
“(…) Stakeholder pressure is quite a broad concept. Concerning the internal stakeholders the most important for CSR are the management team, owners and/or CEO. If they believe in CSR it will eventually work out. (…) The most important external stakeholders are the government and pressure groups. Especially these well known pressure groups such as Greenpeace and WWF are rather influential. (…) I find it very hard to make generalizations on this subject; the influence of stakeholders is mostly industry- or firm specific. “
The last moderate driver is customer demand. As mentioned before, the respondents agreed that there’s an increasing demand for environmentally responsible products and services. However,
The respondents argued that the following variables have a weak influence on CSR development: employee recruitment, retention and satisfaction, the attraction of investments and innovation and development of new capabilities. One respondent on these three variables:
(…)”Employee recruitment and satisfaction is a goal for us, but I see it as completely unrelated to CSR. That’s not why we’re in business at all. (…) I understand that investors don’t want to invest in firms that get into these environmental scandals, but they’re not necessarily interested in firms that have well-developed CSR programs. In the end investors just want to obtain their required rate of return. (…) The development of new capabilities is a nice side-effect when established firms start practicing CSR, but again, I wouldn’t consider it as a driver of CSR.”
Several other respondents made interesting remarks about how current CSR relates to the attraction of investments:
“ (…) The ‘traditional banks’ are quite reluctant in providing loans nowadays. Especially when your business model is new and you only have some cash flow projections it is quite hard to find financing. This is definitely an extra hurdle green entrepreneurs have to take.”
And:
“(…) Publicly listed MNEs should ensure compliance with international CSR standards to remain attractive for investors. But a real driver of CSR activities? No, especially not of the type of CSR we discussed before.”
4. Barriers for CSR development
The respondents were asked to comment on the proposed barriers and to assess whether they think it plays a role in CSR development. Similar to the previous paragraph a theoretical angle is used to assess a potential relationship, and the questions were specifically related to CSR 2.0.
A straightforward classification into two groups of variables can be made: a group of variables that respondents see as barriers of CSR, and a group of variables that respondents don’t see as barriers of CSR. The barriers are a lack of awareness, an unfavourable cost-benefit ratio, competing strategic priorities and an inability to monitor the external environment. Of limited or no role seems to be a lack of knowledge to incorporate CSR, and the difficulty of implementation of CSR strategies. The last barrier, a missing link between CSR and business value, will be discussed into more detail in the subsequent paragraphs.
Starting with the lack of awareness, it can be said that this maps onto the scepticism on CSR 2.0 that was raised by the respondents in the first paragraph. That is to say that many respondents argued that their own firms are doing really well on CSR, but that firms in their external environment
just don’t care that much about how their operations affect society and environment. As a consultant explains:
“(…) Firms don’t really care whether temperatures rise with 2 or 3 degrees. I was in a meeting last week where a manager said that there’s nothing that businesses can do about global warming. That made me really sad. I strongly believe that only businesses can transform the economy and I realized at that moment that there’s a complete lack of urgency at a lot of firms.”
Another respondent working for a sustainability think-tank:
“(…) I would say it’s also about deliberately denying publicly available information. Firms are aware of environmentally harmful side-effects of their operations, but they more or less deny pressure groups when they propose certain changes.”
An unfavourable cost-benefit ratio and a missing link between CSR and business value are two variables that several respondents characterized as intertwined. In the previous paragraphs it has already been mentioned several times that, according to the respondents, CSR is still seen by many firms as something that costs money. Creating business value has everything to do with business models and will therefore be discussed in the next paragraphs, when CSR 2.0 and business model innovation is discussed into more detail.
The fourth barrier is related to the strategic priorities of businesses. Again, this maps onto the first paragraph where this topic is also discussed. The main take-away is that respondents argue that CSR in many cases is seen as something that, especially among MNEs, is conducted ‘on the side’. Respondents concluded that CSR isn’t an absolute strategic priority when they assessed their external business environment and clients.
The fifth and last barrier derived from the conceptual framework is related to an inability of firms to monitor their external environment. The respondents were rather comprehensive on this topic and mentioned several things to keep in mind. A first thing that respondents noticed was the concept of bargaining power. One consultant explains it like this:
“(…) When you’re just a small player in a long supply chain it is of utmost importance that you have bargaining power. For example, suppose you’re a small chicken farmer supplying to the big Dutch supermarkets. If you want to increase living standards for your chickens this will increase your price. The big supermarkets will just buy at other chicken farms. In other words, without a bit of bargaining power you’re production is dictated by the market.”
Another thing that respondents pointed out is the fact that certain products are extremely complex to produce, which makes it almost undoable to monitor the whole supply chain. One respondent explains:
“(…) The average car consists of 10.000 components. You buy these components from suppliers, and these suppliers also have their own suppliers. If you go back just long enough you’ll probably end up at a firm which doesn’t meet your CSR standards.”
A majority of the respondents argued that of limited or no role are a lack of knowledge to incorporate CSR, and the difficulty of implementation of CSR strategies. A CSR advisor on the lack of knowledge:
“ (…) I’m not very convinced when firms argue that they don’t have the organizational knowledge to practice CSR. You can learn a lot by doing, and if you really don’t have a clue there’s a whole lot of CSR consultancy firms that you can hire.”
Another respondent on the difficulty of implementation of CSR strategies:
“(…) Implementing and executing a well-developed CSR program can be a tough one. But I don’t think it can be considered as a real barrier. If organizations really want to go for it, it will eventually work out. And if they face problems they can always hire external advisors or consultancies; there’s so much information and knowledge on CSR available nowadays. “
After the discussion of these variables several respondents stressed that this wasn’t enough. Several new barriers were proposed, which showed a stronger resemblance with CSR 2.0 than the previously discussed variables. These other variables will be discussed in the next paragraph.
5. CSR 2.0 related barriers in CSR development
A first term that was thrown up several times during the interviews was ‘linear lock-in’. A linear business model follows a take-make-waste process, which basically means that producing and selling larger quantities results in increasing profits. Respondents argued that today’s global economy is dominated by multinationals with a linear agenda, which makes it hard for firms with circular business models to gain a competitive advantage. This lack of competitiveness has a variety of reasons. A first reason is the fact that negative externalities are not priced in. As one respondent explains:
“ (…) The price of coal doesn’t include the costs it imposes on society and environment at all. When coal is mined and used to generate power, water is polluted, air is polluted, ecosystems are damaged, and so on and so forth. (…)Renewables are more expensive in market prices but impose limited negative externalities on the
