CSR reporting standardization in the global supply chain of Multinational Enterprises
A multiple case analysis on the effects of CSR reporting standardization in the global supply chain of MNEs in the trade and retail industry
University of Amsterdam
Master Thesis: Final Draft
MSc Business Studies: International Management Supervisor: D.J.H.M. van den Buuse, MSc Second reader: Dr. A.E. Kourula
Student: Derk van de Burgt
Student ID: 10648151
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Abstract
This thesis investigates the influence of CSR reporting standards, that are used within Multinational Enterprises (MNEs) to control and measure sustainable standards in the supply chain. The goal was to see to what extent the standardization of the CSR reports within MNEs influence and increase the sustainable development within the supply chain. The process of measuring and controlling these standards is described annually in the MNE’s CSR reports. This research uses a multiple case study design, with data from five MNEs (Ahold, Unilever, Tesco, Metro Group, Carrefour) from the trade and retail industry. We analyze qualitative data that is acquired from secondary data sources (e.g. CSR reports, news articles, surveys). In order to complement the data, interviews with employees from the selected cases were conducted (e.g. Ahold, Unilever). The analysis of this data has led to a mixed support for the working propositions. However, it’s clear that MNEs use CSR reporting as way to respond to stakeholder demand, regarding environmental, economic and social issues (the triple bottom line), which leads to beneficial outcomes for MNEs (e.g. increase of tangible and intangible assets). Also, the main reason for MNEs to invest in CSR reporting standards is that it gives them more control, and it leads to an increase of its profits originating from their supply chains.
Keywords: CSR Strategy, CSR Reporting Standards, Supply Chain, Multinational Enterprises (MNEs),
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Acknowledgements
First, I would like to thank my supervisor Daniel van den Buuse for the pleasant cooperation and guidance during the writing of this thesis. With clear instructions and constructive comments I was able to write this thesis within a clearly structured time frame, which was exactly what I had in mind. Secondly I would like to thank my family and friends, for their support and the from time to time very much needed distraction. Allowing me to focus on my goal, which was to finish this thesis in a proper manner. Although many were very supportive, I would like to especially thank my parents for their strong support and for the opportunity to follow this master.
Finally, I would like to thank the respondents that were willing to sit down with me and discuss the topic of CSR reporting standardization. Especially their comments and remarks outside the time-frame were very helpful to improve the content of this thesis, but also helped me with my future job orientation.
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Table of contents
1. Introduction ... 6
2. Theoretical framework ... 9
2.1 MNE & Sustainability ... 9
2.2 Corporate Social Responsibility Strategy ... 10
2.3 Creating Organizational Benefits through CSR ... 11
2.4 CSR Reporting Standards ... 12
2.5 CSR in the MNE Supply Chain ... 15
2.6 Conclusion ... 18
3. Conceptual model and working propositions ... 20
3.1 CSR strategy working propositions ... 20
3.2 CSR reporting standards working propositions ... 21
3.3 CSR in the supply chain working propositions ... 23
3.4 Conclusion ... 25
4. Methodology ... 27
4.1 Research philosophy ... 27
4.2 Qualitative Research Criteria ... 28
4.3 Research strategy ... 29
4.4 Multiple case study design ... 30
4.5 Case criteria and selection ... 30
4.6 Data Collection ... 31
4.6.1 Archival and documentary data ... 32
4.6.2 Interview data ... 33 4.7 Analysis of data ... 33 4.8 Conclusion ... 34 5. Results ... 36 5.1 Within-case analysis ... 36 5.1.1 Carrefour ... 36 5.1.2 Unilever ... 40 5.1.3 Ahold... 45 5.1.4 Tesco ... 50 5.1.5 Metro Group ... 54 5.2 Cross-case analysis ... 58
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5.2.2 CSR reporting standards in the trade and retail industry ... 62
5.2.3 CSR in the supply chain in the trade and retail industry ... 66
5.3 Conclusion ... 70
6. Discussion ... 71
6.1 Assumptions ... 71
6.2 Working propositions ... 72
7. Conclusion ... 74
7.1 Limitations of this research and future research ... 75
8. References ... 76
9. Appendices ... 84
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Index of Tables and Figures
Table 1: Assumptions ... 19
Table 2: Working propositions ... 25
Table 3: Selected cases in the trade and retail industry ... 33
Table 4: Linking the assumptions and working propositions to the interview questions ... 34
Table 5: Transformation of themes, assumptions and working propositions into (sub-)codes ... 35
Table 6: Within-case results, Carrefour focus on ‘CSR strategy’ ... 37
Table 7: Within-case results, Carrefour focus on ‘CSR reporting standards’ ... 38
Table 8: Within-case results, Carrefour focus on ‘CSR in the supply chain’ ... 39
Table 9: Within-case results - Unilever focus on ' CSR Strategy ' ... 42
Table 10: Within-case results - Unilever focus on ' CSR Reporting standards ' ... 43
Table 11: Within-case results - Unilever focus on ' CSR in the supply chain ' ... 44
Table 12: Within-case results - Ahold focus on ' CSR strategy ' ... 47
Table 13: Within-case results - Ahold focus on ' CSR reporting standards ' ... 48
Table 14: Within-case results - Ahold focus on ' CSR in the supply chain ' ... 49
Table 15: Within-case results - Tesco focus on ' CSR Strategy ' ... 51
Table 16: Within-case results - Tesco focus on ' CSR reporting standards ' ... 52
Table 17: Within-case results - Tesco focus on ' CSR in the supply chain ' ... 53
Table 18: Within-case results – Metro Group focus on ' CSR Strategy ' ... 55
Table 19: Within-case results – Metro Group focus on ' CSR Reporting standards ' ... 56
Table 20: Within-case results – Metro Group focus on ' CSR in the supply chain ' ... 57
Table 21: MNE focus on ‘CSR strategy’ within the trade and retail industry ... 61
Table 22: MNE focus on ‘CSR reporting standards’ within the trade and retail industry ... 65
Table 23: MNE focus on ‘CSR in the supply chain’ within the trade and retail industry ... 69
Table 24: Results on the assumptions of CSR reporting standardization in the supply chain of MNEs 71 Table 25: Results on the working propositions of CSR reporting standardization in the supply chain of MNEs ... 72
Figure 1: MNE supply chains ... 15
Figure 2: Sustainability in the supply chain ... 17
Figure 3: Conceptual model ... 26
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1. Introduction
Corporate Social Responsibility (CSR) reporting has been used by Multinational Enterprises (MNEs) to show their level of commitment to respond to social and environmental issues. However, CSR reports have difficulty reflecting actual MNE performance. Measurement and reliability issues pose important threats to the value of CSR reporting (Fortanier, Kolk & Pinkse, 2011). The effectiveness of CSR reporting proves to be a field of research in need of more investigation. This need is supported by earlier research on the topic of CSR (Aguinis & Glavas, 2012), and a growing academic and professional interest (e.g. KPMG, 2013). Therefore, this research will dive into this research gap to understand the influence of CSR reports for multinational enterprises (MNEs).
Previous research on CSR reports has shown MNEs are increasingly interested in sustainability. As a result MNEs have started to develop a sustainable agenda to address its economic value for MNEs (Barnett, 2007; Barnett & Salomon, 2012; Porter & Kramer; 2006, 2011). This agenda is also influenced by other factors, for example as a response to expectations based on the triple bottom line (e.g. environmental, economic and social issues) (Haugh & Talwar, 2010), a lack of a general CSR definition (Carroll, 1999; Aguinis & Glavas, 2012), creating a ‘license to operate’ (Waddock, 2008; Perego & Kolk, 2012; Kolk & van Tulder, 2010; Russo & Perrini, 2010), CSR reporting standards (Fortanier, Kolk & Pinkse, 2011; Kolk, 2010; Waddock, 2008) and CSR supply chain management (Van Tulder, van Wijk & Kolk, 2009; Maloni & Brown, 2006; Carter & Rogers, 2008; Pruess, 2010; Perrini, Russo, Tencati & Vurro, 2011; Beske, Land & Seuring, 2014). There is a need for understanding processes and underlying mechanisms through which the writing of CSR reports can lead to positive outcomes for MNEs (Aguinis & Glavas, 2012). Therefore, this research will focus on the influence of CSR reporting standardization.
MNEs have increasingly started writing CSR reports. Expectations from the stakeholders regarding the sustainable agenda of the MNE change constantly over time, due to public opinion, regulation, competition and scientific evidence on global sustainability issues (Kolk & Pinkse, 2008). MNEs have started to write CSR reports, introduce sustainability strategies, and codes of conduct (Andersen & Skjoett-Larsen, 2009). By setting standards that can be measured through the CSR report, MNEs are trying to implement their CSR strategy (Fortanier, Kolk & Pinkse, 2011). This research will especially focus on the role of CSR reporting standardization. One of the goals should be that CSR reporting standards help to increase MNEs profitability, which is established when the costs of doing business in a sustainable matter outweigh the benefits (Buckley & Casson, 2009).
Researchers have tried to explain the structural conditions under which MNEs can profit from following a CSR strategy (Barnett, 2007). MNEs attaining increasing levels of social performance are better able to gain and profit from improved stakeholder relations, thereby transforming social investment into positive financial returns (Barnett & Salomon, 2012). However, factors that can lead to a beneficial outcome of sustainability need to be further investigated. Therefore, this research is
7 based on a combination of three themes: (a) CSR strategy, MNEs response to environmental, economic and social issues (the triple bottom line), (b) CSR reporting standards, the translation of the CSR strategy into CSR reporting standards (e.g. code of conduct, compliance policies), and (c) CSR in the supply chain of MNE, how these CSR reporting standards are used in the supply chain (Carter & Rogers, 2008; Beske, Land & Seuring, 2014). To investigate these themes a qualitative research will be conducted. As this type of research follows a descriptive approach, qualitative data is collected. The empirical evidence regarding CSR reporting standards will be analyzed through a multiple case study. The data will be examined over a longer period of time, thereby showing the development of MNEs CSR reporting standards. Overall, the aim of this thesis will be to answer the following research question:
Research question: ‘How can CSR reporting standardization improve the sustainable development in
the global supply chain of Multinational Enterprises?’
By exploring CSR reporting standards and measuring its performance in the supply chain of MNEs over a longer period of time, it should be possible to determine its influence on sustainable development (Carter & Rogers, 2008; Van Tulder, van Wijk & Kolk, 2009; Fortanier, Kolk & Pinkse, 2011). Additionally, sub questions need to be investigated and analyzed before the main question can be answered: How is CSR reporting related to the global supply chain of MNEs? What are the driving forces behind the development of CSR reporting in the global supply chain? How are CSR reporting standards implemented and managed in supply chains of MNEs? In order to answer these questions this research will conduct a qualitative research with an explanatory case study. The multiple case study will examine MNEs from the trade and retail industry, thereby making these MNEs the unit of analysis. The results will be tested regarding existing literature, with a within-case and cross-case analysis (Eisenhardt & Graebner, 2007).
An example of a research on CSR reporting within a MNE is presented by Andersen & Skjoett-Larsen (2009). They conducted a single case analysis at IKEA, while investigating the sustainability of the supply chain. By introducing a code of conduct for suppliers, a clear set of routines was introduced (Andersen & Skjoett-Larsen, 2009). This supplier code of conduct was also applied on a global level. To ensure objectivity and credibility of the CSR report, external auditing companies conducted verification of suppliers’ activities. Compliance audits revealed a low effective judgment by the suppliers and in some cases retraining of internal auditors to increase competence levels (Andersen & Skjoett-Larsen, 2009). The importance of auditing and third party assurance can be regarded as an important influence to develop accountability for sustainability (Waddock, 2008; Perego and Kolk, 2012).
8 The next chapter will focus on the theoretical framework of this research. In order to establish a comprehensive theoretical framework the literature has to be reviewed, thereby forming assumptions based on existing academic research. The literature review will discuss the main themes of this research: CSR strategy, CSR reporting standards and CSR in the supply chain. Next, the working propositions will be introduced and discussed in chapter 3. In the following chapter (methodology) the choice for qualitative research using a multiple case analysis will be further discussed. It should give a better base to build a theory regarding the influence CSR reporting standardization. In the final chapter the research conclusions will be presented and discussed, and possibilities for future research questions will be introduced.
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2. Theoretical framework
In this chapter the theoretical concepts of this research will be introduced. This will be done by addressing and discussing academic research regarding the main themes of this research; CSR strategy, CSR reporting standards, and CSR in the supply chain.
2.1 MNE & Sustainability
First, this research needs to explore the existing relationship between MNEs and sustainability. The presence in certain industries, countries, cultures and institutions may influence sustainable performance of MNEs, making it more difficult to standardize for the entire organization (Rugman & Verbeke, 2004; 2008). A CSR strategy can help MNEs to determine their sustainable standards. This strategy needs to be formed and evaluated by the MNE. In this section, the link between MNE and CSR will be explored before moving on to CSR strategy and its potential benefits.
Looking at literature regarding sustainability, the conclusion can be made that it’s a broad and evolving construct that lacks a universal definition (Haugh & Talwar, 2010). Sustainability research shows the presence of three pillars of sustainability; economic, social, and environmental, which is also known as the ‘Triple Bottom Line’ (Elkington, 1998; Schmidheiny, 1992; Rondinelli & Berry, 2000; Bansal, 2005 in Haugh & Talwar, 2010). Economic sustainability is fundamental to corporate financial success; as the MNE cannot survive if expenditure exceeds income (Haugh & Talwar, 2010). Social sustainability focuses on issues of poverty and income inequality; disease, access to health care, clean water, and sanitation; education (Haugh & Talwar, 2010). Third, environmental sustainability considers the impact of business on the quality and quantity of natural resources (e.g. global warming, waste management, emissions management) (Townsend, 2008 in Haugh & Talwar, 2010). The relationship between these three pillars is considered to be complex. Especially the balancing between the responsibility of business and maximizing returns to shareholders is difficult, also other stakeholders need to be considered (Friedman, 1970; Haugh & Talwar, 2010).
Sustainability is often discussed in terms of MNEs focus on corporate social responsibility (CSR). The concept of CSR has a long history. However, it has especially been developed in the 20th century (Carroll, 1999). Although CSR is currently a well-established concept, there is no general consensus on the meaning of CSR in practice (Carroll and Buchholtz, 2000; Joyner and Payne, 2002; Roberts, 2003; Ougaard, 2004 in Andersen & Skjoett-Larsen, 2009). However, the construct of CSR describes the relationship between business and society, which is considered to one of interdependency (Porter & Kramer, 2006). Aguinis and Glavas (2012) give a definition of CSR in practice: “context-specific organizational actions and policies that account stakeholders’ expectations and the triple bottom line of economic, social, and environmental performance” (Aguinis & Glavas, 2012: 933). Such policies and actions are influenced and implemented by actors at all levels of analysis
10 (e.g., institutional, organizational, and individual) (Aguinis & Glavas, 2012). This can help to determine the influence of actors on several levels.
WA1: MNEs focus on sustainability as a response to stakeholder expectations, enforced by the triple bottom line.
While MNEs have already tried to improve their impact on society most initiatives have not been as affective as they could have. By putting company goals ahead of societal the productivity of CSR initiatives were harmed (Porter & Kramer, 2006). The potential of environmental investments enables MNEs to improve performance in existing markets, enter new markets, or boost technological capabilities (Rugman & Verbeke, 2008). The next section will focus on the translation of a CSR strategy into a profitable sustainable agenda.
2.2 Corporate Social Responsibility Strategy
CSR strategies can potentially be a source of a competitive advantage or be beneficial for MNEs. Competitive advantage in strategy literature is associated with value creation. According to Porter (1986) competitive advantage can be reached by either adopting a low relative cost or by differentiation focus. The competitive advantage that is created adds value that exceed the cost of creating it (Rumelt, 2003). Following a CSR strategy can be regarded as a differentiation strategy that allows MNEs to respond to both economic as social issues.
Looking at the MNE’ perspective on CSR it has some strategic implications. The first implication is that CSR can be an integral part of an MNE business and corporate-level differentiation strategy. Therefore, it could be considered as a form of strategic investment (McWilliams, Siegel & Wright, 2006). A second strategic implication is that CSR can generate a set of predictions regarding patterns of investment in CSR across firms and industries (McWilliams, Siegel & Wright, 2006). The potential of CSR strategy for MNEs can be found by linking society and strategy together. A business needs a successful community, not only to create demand for its products but also to provide critical public assets and a supportive environment. A community needs successful businesses to provide jobs and wealth creation opportunities that are available for citizens (Porter & Kramer, 2011). This leads to the concept of shared value, which can be defined as policies and operating practices that enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates (Porter & Kramer, 2011). There are three distinct ways to create economic value by creating societal value: by reconceiving products and markets, redefining productivity in the value chain and building supportive industry clusters at the company’s locations (Porter & Kramer, 2011). Other advantages can also occur and lead to organizational benefits (e.g.
11 increased reputation, higher growth, innovation). Thus, CSR strategies have the potential to create economic value for the MNE (Perrini et al. 2011).
WA2: A successful CSR strategy creates economic value through societal value.
MNEs have to find ways to secure long-term economic performance, thereby withstanding short-term strategies that are socially harmful or environmentally adverse (Porter & Kramer, 2006). This could be called sustainable development, which doesn’t only focuses on the present but also looks at the sustainable standards of the future (Marcus & Fremeth, 2009). An important factor for sustainable development has to be profitability. However, it remains difficult to determine the level of development that improve the CSR standards (Dunning & Fortanier, 2007; Meyer, 2004 in Kolk & van Tulder, 2010). A CSR strategy should help MNEs to set targets, goals, principles, for creating sustainable development. This process will face difficulties, as it needs to prove its profitability, so a better question would be how can a CSR strategy become profitable? Understanding long-term effects of CSR strategy can help to create standardization across the MNE. The next section will explore how MNEs can create these effects over a longer period of time.
2.3 Creating organizational benefits through CSR
How a MNE can create and influence CSR benefits remains unclear. Therefore, the role of CSR strategy needs to be explored. MNE can perceive a CSR strategy as a method to increase or maintain its reputation. This section will explore how MNEs can generate these benefits.
Researchers have tried to explain the structural conditions under which firms might create profit while following a CSR strategy (Barnett, 2007). One of the problems MNEs face is that investing in sustainable development is costly. Barnett (2007) explores how CSR strategy influences corporate financial performance. CSR has a variable effect on MNEs financial performance. Equal investments over a longer period; do not return equal amounts of financial gain, which makes it a risky investment (Barnett, 2007). CSR benefits are visible in the public area (e.g. increased reputation) while at the same time the costs are private (Barnett, 2007). MNEs attaining increasing levels of social performance are better able to gain and profit from improved stakeholder relations, thereby transforming social investment into positive financial returns (Barnett & Salomon, 2012). MNEs with weak social performance aren’t able to capitalize these gains to profit from CSR. More investment in social issues for those MNEs will only lead to more losses (Barnett & Salomon, 2012). Those MNEs that are able to mobilize their stakeholders at large get the highest rate of return of investment in sustainability, thereby generating the highest financial performance while following a CSR strategy (Barnett & Salomon, 2012).
12 More conventional research on CSR strategy opposes this view. For instance, Friedman (1970) stated that the social responsibility of business is to increase its profits. Spending more on social and environmental issues is seen as unnecessary costs that threaten competitive advantages of the MNE (Friedman, 1970; Barnett 2007; Scherer and Palazzo 2011). These issues should be governmental and public sector related subjects (Perrini et al. 2011). Their overall view is that CSR activities distract attention, time and money from the firm’s main goal, doing business to generate profit (Perrini et al. 2011).
Those that advocate for the introduction of CSR strategies, provide counterarguments for this conventional view. They try to show how a CSR strategy can lead to competitive advantages (e.g. increased reputation, higher growth and innovation) (Barnett, 2007; Perrini et al. 2011; Porter & Kramer, 2011). Potential organizational benefits of CSR strategy can come in different forms. For example; social and ethical values and beliefs, materialized through specific projects, and programs, can improve employees’ attitudes and behavior (Perrini et al. 2011). Outcomes can lead to increase of commitment, higher job satisfaction, and an improved motivation, which could be described as intangible assets (Perrini et al. 2011). It can also enhance the development of an organizational attitude toward CSR and align organizational behavior with stakeholder expectations, thereby enhancing corporate reputation (Perrini et al. 2011). CSR strategy can help MNEs to increase its tangible assets (e.g. increased productivity, identification of growth and innovation opportunities, and efficiency gains through reduced cost) and intangible assets (e.g. coordination of health and safety risks, decreased absenteeism, and lower turnover) (Perrini et al. 2011). Both tangible as intangible assets help to improve MNEs sustainable development it focuses on long term profitability for MNEs (Marcus & Fremeth, 2009), which can be reached through a CSR strategy.
WA3: CSR strategy can lead to tangible and intangible benefits for MNEs over a longer period of time.
MNEs that are capable to link their CSR strategies to core activities can provide MNEs what is called their “license to operate’’ (Waddock, 2008; Kolk & van Tulder, 2010). CSR strategy needs to be communicated, monitored and assured by MNEs. One method to show MNEs use of CSR strategies to create environmental, social and economic benefits, is by writing CSR reports (Waddock, 2008; Fortanier, Kolk & Pinkse, 2011). The next section will further explore CSR reporting as a tool for MNEs to implement their CSR strategy across the organization.
2.4 CSR Reporting Standards
Different factors of CSR can be discussed and explored, thereby focusing on factors that are used to create CSR standards that can be monitored and controlled through CSR reporting standards. MNEs have to provide evidence to assure to show that these strategies are being adopted (Waddock, 2008).
13 CSR assurance involves three distinctive elements: (a) codes of conduct, standards, and principles; (b) credible verification, monitoring, and certification, meaning ‘are MNEs doing what they say they are doing?’; and (c) Reports on environmental, social, and governance issues (Waddock, 2008). Following this distinction it could be said that (a) and (b) represent the conditions for following a CSR strategy, which are documented in the CSR report of the MNE (c). This section will mainly focus on the last part, as CSR reporting is a MNE response to environmental, economic and social issues (Triple Bottom Line). It will also discuss other elements standards need to be implemented that can be measured in the CSR report.
An important element of CSR assurance, involves MNEs showing the public what they do to address sustainable issues. Since the mid-1990s, more MNEs started to pay attention on their environmental and social impact, providing information on their sustainability policies, progress and results. The result was a wide variety of CSR reports, with substantial differences in length, approach, scope and depth of accountability (Kolk 2010; KPMG 2011; KPMG 2013). CSR reports are written different forms and with several definitions and indicators making it difficult to reflect actual performance and measure the reliability of reporting (Fortanier, Kolk & Pinkse, 2011). This could be based on a lacking of a general definition of CSR or sustainability, which was shown to be absent in research on CSR (Fortanier, Kolk & Pinkse, 2011; Andersen & Skjoett-Larsen, 2009; Aguinis & Glavas, 2012; Haugh & Talwar, 2010).
CSR reporting has several potential origins. One can be found in MNEs strategy process. Rugman & Verbeke (2004) showed that a MNE could adopt regional or a global strategy while expanding to foreign markets. The country-of-origin effect for CSR reporting is created by institutional pressures from the government, professional accounting and industry associations, and pressure groups in an MNE’s home country (Neu et al. 1998 in Elango & Sethi, 2007). The extent to which an MNE will give in to such pressures differs between MNEs in relation to cultural, political and legal peculiarities of their respective home countries (Buhr and Freedman 2001; Kolk 2005) (Fortanier, Kolk & Pinkse, 2011).
Institutional differences also affect the relation of a firm with its stakeholders. Pressure from stakeholders is relevant for CSR reporting. However, non-financial information also affects social accountability of MNEs, which are valuable for a wider group of stakeholders than shareholders alone (Meek et al. 1995 in Fortanier, Kolk & Pinkse, 2011). These pressures lead to more intensive CSR reporting. MNEs still communicate that their main objective is to generate profits. The change they have to make is that these profits can no longer be their sole objective. Their success is also based on their stakeholder relationships, which involves interests based on social and environmental issues (Russo & Perrini, 2010).
14 The importance of stakeholder management increases. Stakeholder theory defines stakeholders as “those groups who can affect or are affected by the achievement of an organization’s purpose” (Freeman, 1984, p. 49). There have been several interpretations of the stakeholder theory, but its main use is as a guide to structure operations of MNEs (Donaldson and Preston, 1995 in Russo & Perrini, 2010). MNEs do not only have to act responsibly to avoid growing stakeholder pressures, but also have to achieve a better or good society (Russo & Perrini, 2010). Therefore, it can be considered as a strategic orientation of MNEs that allows the implementation of socially responsible behaviors while pursuing their main targets. CSR reports can be used as a source to account for the MNE CSR strategy toward relevant stakeholders (Russo & Perrini, 2010).
An example of stakeholder pressures originates from MNEs home countries and institutional pressures while forming its CSR strategy. MNEs also have to consider global involvement. In that sense CSR strategy can be regarded as a set of differentiated structures and processes, which exists in the many subunits of the organization (Rosenzweig and Singh 1991, p. 344 in Fortanier, Kolk & Pinkse, 2011). To control and manage a CSR strategy at all levels of the organization, MNEs will have to strive for a degree of internal consistency (Fortanier, Kolk & Pinkse, 2011). Conformity to institutional norms creates structural similarities or isomorphism across organizations (DiMaggio and Powell 1983; Scott 2001 in Perego & Kolk, 2012). Isomorphism in this sense meaning historically created dissimilarities resulting from convergence (DiMaggio & Powell, 1983). MNEs are also influenced by coercive isomorphic pressure as a result from both formal and informal pressures by other organizations (DiMaggio & Powell, 1983). To react to these pressures research on quality management practices and standards has shown that MNEs need to aspire to a degree of global consistency (Fortanier, Kolk & Pinkse, 2011).
CSR reports are not based on a general guideline on content, format, or other reporting requirements. The result is that MNEs mainly report what they want to, leading to a variety of outcomes across the MNE (Waddock, 2008). There are however methods to deal with these reporting inconsistencies, for example standardization of CSR reports (Waddock, 2008). Also external guidelines would lead to a higher liability and validity of CSR reports (Waddock, 2008; Fortanier, Kolk & Pinkse, 2011). An example of such a guideline is presented by the Global Reporting Initiative (GRI), who developed a common reporting framework for CSR reporting. This framework allows MNEs to make cross-company and cross-industry comparisons based on a common reporting framework (Waddock, 2008).
WA4: External validation of CSR reports can help to improve its reliability and validity
15 However, the question remains how CSR reporting standards are set and what is measured in the reports. The IKEA case illustrated that a CSR strategy can be enforced through a code of conduct, which can be a helpful tool to measure employees’ performance with regard to the firm’s sustainable development (Andersen & Skjoett-Larsen, 2009). This can be an effective tool for MNEs to illustrate the effects of using CSR reporting standards with suppliers.
2.5 CSR in the MNE Supply Chain
In the last sections the focus was on CSR reporting, which can also be viewed in more detail by focusing on a specific part of the report. This research will focus on the global supply chain of MNEs. As was mentioned in the previous section MNEs operate in a global context and face an increased involvement of stakeholders. This section will give a background on the research on CSR practices in supply chains and will link it with CSR reporting.
A supply chain can be defined as a series of companies, including suppliers, customers, and logistics providers that work together to deliver a value package of goods and services to the end customer (Maloni & Brown, 2006). The supply chain can be visualized as shown in figure 1. However, it does not reflect the complexity of the supply chain on a global scale. MNEs global orientation also has impact on organizational processes like an increased performance-based competition, rapidly changing technology and economic conditions (Mentzer, DeWitt, Keebler, Min, Nix, Smith & Zacharia, 2001). CSR strategy affects the relationship between the MNE and its suppliers. This is due to the fact that CSR strategies create different demands for supplies. It also sets different requirements for the products that need to be delivered by suppliers.
Figure 1: MNE supply chains
Source: Mentzer et al. 2001
As part of this development MNEs need to assist suppliers during the introduction of the concept sustainability in their supply chains. Sustainable Supply Chain Management (SSCM) allows MNEs to implement their CSR strategy practices and achieve a higher efficiency in logistics performance and resource usage while driving suppliers to introduce practices that address the triple bottom line, i.e., economic, social and environment goals (e.g., Gold et al.,2010; Carter & Easton,2011 in Beske, Land & Seuring, 2014).
16 Overall SSCM can be defined as “the management of material, information and capital flows as well as cooperation among companies along the supply chain while taking goals from all three dimensions of sustainable development ,i.e., economic, environmental and social, into account which are derived from customer and stakeholder requirements ” (Seuring and Müller, 2008a; Beske, Land & Seuring, 2014: 132). This definition calls for cooperation of the partners in the chain, which in this case would mean a close collaboration between MNE and supplier. However, it still represents SSCM from a theoretical perspective. Therefore, the effects of a closer collaboration between MNE and suppliers could be further investigated.
However, the definition of SSCM does focus on the stakeholders in the supply chain. They have to be recognized as having legitimate requirements to the supply chains activities, which include NGOs, suppliers or legal authorities (Emmehainz and Adams, 1999; Seuring and Müller, 2008a; 2009a in Beske, Land & Seuring, 2014). MNE stakeholders can be divided into two groups depending on their actual power to harm or support the organization (Madsen and Ulhøi, 2001; Buysse and Verbeke, 2003 in Beske, Land & Seuring, 2014). Since the resources to engage with stakeholders are limited for MNEs, they concentrate on those stakeholders that can actually exert a certain amount of pressure (Polonsky and Scott, 2005 in Beske, Land & Seuring, 2014)). At the same time, especially for MNEs following a CSR strategy, the majority of stakeholders need to be taken into account when operating in the supply chain (Beske, Land & Seuring, 2014). This shows that stakeholder relationships in the supply chain are complex for MNEs, especially when it tries to introduce new sustainable standards.
The need for more understanding of the effects of CSR strategies in supply chains is also visible in the paper of Carter & Rogers (2008), who present a framework (figure 2) of sustainable supply chain management. The model combines the triple bottom line (Environmental, Economic and Social performance) with organizational goals. It also shows different levels of effectiveness, showing the interaction between the three pillars of sustainability. It identifies that a combination of two axes is better for MNE sustainable performance, and ultimately a combination of all elements is the best way to improve sustainable standards in the supply chain. Translated to a definition regarding CSR in the supply chain it could be described as: “the strategic, transparent integration and achievement of an organization’s social, environmental, and economic goals in the systemic coordination of key inter organizational business processes for improving the long-term economic performance of the individual company and its supply chains” (Carter & Rogers, 2008: 368).
Supply chain activities can be combined with economic objectives. It allows the MNE to develop a clear, long-term CSR strategy enabling the organization to create a longer-lasting and less imitable set of processes, which may lead to a competitive advantage (Carter & Rogers, 2008). The implementation of SSCM strategies changes the way MNEs need to manage their global supply chain. As SSCM focuses on mid-term profitability and longer-terms sustainability, which not only affects the
17 MNE and its supply chain. It also affects the whole sector, it adds welfare orientation to MNE aim (van Tulder, van Wijk and Kolk, 2009). With the introduction of the broader concept of CSR, it orientation shifts from an instrumental and managerial approach to one aimed at managing strategic supplier network, thereby focusing on long-term relationships with suppliers (Van Tulder et al. 2009; Beske, Land & Seuring, 2014).
WA5: Sustainable supply chain management (SSCM) combines economic objectives with long term sustainability.
Figure 2: Sustainability in the supply chain
Source: Carter & Rogers, 2008
MNEs have increasingly starting to look for supplies across the globe. Forcing the MNEs to look for more effective ways to coordinate the flow of materials. They need to consider the risks and vulnerabilities of doing business with suppliers on a global level as this network is difficult to control and measure. Therefore, designing a code of conduct for suppliers can be an outcome (Van Tulder, et al 2009). CSR standards formulated in codes of conduct have multiplied not only at company level, but also on (sub-) organizational levels (Pruess, 2010). However, it is unclear what the effectiveness of a code of conduct is. In comparison, an improved relationship with suppliers through a knowledge-sharing network can lead to internal and external advantages for MNEs (Helin and Sandström, 2007; Kaptein and Schwartz, 2008; Stevens, 2008 in Pruess, 2010). MNEs could look at the specificity of the code content and the amount of monitoring and compliance, which both influence the MNEs capability to apply a supplier code of conduct (Van Tulder et al 2009; Kelman, 1958). MNEs that inactively follow a CSR strategy will have a code of conduct that is inefficient both in specificity and compliance
18 measures. Whereas the code of a proactive company, will score highly on both the specificity and compliance account (Pruess, 2010).
The performance of SSCM practices is considered to be a work in progress (Perrini et al 2011; Carter & Rogers, 2008; Beske, Land & Seuring, 2014). MNEs have started to developed new coordination and control systems both the formulation and implementation of codes of conduct are being improved. These practices are aimed at strengthening trust, reciprocity, and collaboration with suppliers (Drake and Schlachter 2008 in Perrini et al 2011). Thus, showing MNEs have increasingly been developing their codes of conducts and has started to implement CSR strategy on a large scale.
WA6: Supplier codes of conduct lead to increased trust, reciprocity and collaboration with suppliers.
MNEs have not only focused on improving the sustainable development through the development of supplier code of conduct, but they have also tried to improve supplier relationships. These benefits give MNE the ability to share knowledge and competences with their suppliers (Vurro, Russo & Perrini, 2009). Working alongside suppliers in the value chain of MNEs has created opportunities for a competitive advantage, due to knowledge sharing, improved coordination, higher innovation potential, and higher value delivered products (Frank 2004 in Perrini et al 2011). A relational approach to supply chain management forces MNEs to monitor supply chain performance, based on a set of indicators that have a larger focus than cost reduction (Perrini et al 2011). To measure and control these indicators on a large scale CSR reporting has become a useful tool as it summarizes and examines the outcomes. This allows the MNE to monitor the sustainable development in the supply chain over a longer period of time.
2.6 Conclusion
Overall, it can be concluded that CSR strategy and CSR reporting standardization in the supply chain are interlinked (Carter & Rogers, 2008; Beske, Land & Seuring, 2014). CSR reporting is an activity by a MNE, which involves measuring, revealing, and providing accountability for internal and external stakeholders (Waddock, 2008; Kolk & van Tulder, 2010; Perrini et al. 2011), thereby addressing the environmental, economic, and social impacts (Waddock, 2008; Fortanier, Kolk & Pinkse, 2011; Perego & Kolk, 2012). The result should be that the CSR report provides a balanced and reasonable representation of the sustainability performance of a MNE. It should include positive comments (e.g. improved stakeholder relation, reputational benefits, increased profit), but also negative remarks (comments from the network, e.g. stakeholders, suppliers or as a result from internal or external compliance practices) (Perrini et al 2011; ).
As a first step the theoretical framework focused on CSR strategy and introduced a couple of assumptions. A good CSR strategy helps MNEs to react to social and environmental issues, which
19 creates CSR reporting standards that an MNE should follow. Therefore, CSR strategy should not only be a response but also an improvement of a MNE’ economic value while at the same time improving societal value (Porter & Kramer, 2011). The assumptions also show that the sustainable development should last for a longer period (Kolk & van Tulder, 2010). The assumptions from the theoretical framework are summarized in table 1.
The theoretical framework has given an introduction with regard to CSR strategy, CSR reporting and CSR in the supply chain. In the next chapter however the conceptual model will represent a framework that will explore the relationship of these themes. It will also introduce a set of working propositions that need to be examined in relationship to the qualitative research. By comparing MNEs within the same industry a multiple case analysis could give more insight and could provide examples of best practices.
Table 1: Assumptions
Category Assumptions Description
CSR strategy
WA1 MNEs focus on sustainability as a response to stakeholder expectations, enforced by the triple bottom line.
WA2 A successful CSR strategy creates economic value through societal value.
WA3 CSR strategy can lead to tangible and intangible benefits for MNEs over a longer period of time.
CSR reporting standards WA4 External validation of CSR reports can help to improve its reliability and validity
CSR in the supply chain
WA5 Sustainable supply chain management (SSCM) combines economic objectives with long term sustainability.
WA6 Codes of conduct lead to increased trust, reciprocity and collaboration with suppliers.
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3. Conceptual model and working propositions
After reviewing the literature it’s clear that MNEs response to environmental, economic and social issues has the potential to add economic value for MNEs (Porter & Kramer, 2006, 2011; Perrini et al 2011). This chapter will introduce a set of working propositions, which are based on the themes CSR strategy, CSR reporting standards and CSR in the supply chain. These themes link directly to the research question, as they represent the individual elements of the main research question. By translating them into a set or working propositions they will become useable for data analysis. The chapter will conclude with a summary of these working propositions and translate them into a conceptual model.
3.1 CSR strategy working propositions
CSR strategy can create CSR reporting standards of MNEs, that can improve the sustainable development within the supply chain (Andersen & Skjoett-Larsen, 2009; Kolk & van Tulder, 2010; Van Tulder, Van Wijk & Kolk, 2010). In order to predict the consequences of CSR reporting the driving forces behind the development of CSR reporting standards in the global supply chain need to be investigated. The key for a MNE is to focus on the creation of CSR strategy, which helps to set the CSR reporting standards that need to be implemented in the supply chain.
A consequence of implementing a CSR strategy through a global standard that guarantees a level of consistency can prove to be difficult, as social and regulatory pressures differ across the globe. In some countries these are high (i.e., countries in Europe), which increases the likelihood of adoption standards set by MNEs in comparison to countries that have lower standards (i.e. emerging markets) (Fortanier, Kolk & Pinkse, 2011). The fear that these standards and guidelines may lead to ‘green-wash’ activities might be unjustified (Fortanier, Kolk & Pinkse, 2011). In fact, standardization of CSR reporting can be seen as a guideline that acts as a managerial instrument to implement a global standard of quality management (Fortanier, Kolk & Pinkse, 2011). Regarding MNE’ CSR strategy, it is important to address the following proposition:
WP1: A CSR strategy sets a general guideline for CSR reporting standards and provides a level of consistency across the MNE.
Following a CSR strategy implies moving from short-term profitability towards long-term sustainability, with social welfare as a key orientation of the MNEs sustainable aims (Van Tulder, Van Wijk & Kolk, 2010). MNEs need to address a wide range of stakeholders based on their expectations that originate from the ‘Triple bottom line’ (Freeman, 1984; Starik, 1995 in Haugh & Talwar, 2010). Therefore, CSR strategy needs to shift from an instrumental and managerial approach aimed at managing networks focusing on relationships with stakeholders to an interactive network that focuses
21 on sustainable development (Van Tulder, Van Wijk & Kolk, 2010). The potential role of stakeholders has been discussed in the theoretical framework. Stakeholders legitimacy to influence a CSR strategy can come in two forms: first certain stakeholders can be of crucial importance to the organization (e.g. shareholders, suppliers) they have a legitimate claim to influence the MNE’ strategy, but MNEs also have the moral obligation to involve (normative) stakeholders (e.g. NGO’s, GRI) who have become strong influencers, for example for reputational reasons (Russo & Perrini, 2010; Perrini et al, 2011; Beske, Land & Seuring, 2014). Secondly the stakeholder identification is critical, as stakeholders have different relationships to the MNE, meaning stakeholders need to be informed in different ways dependent on the demand (Phillips, 2003: Dunham et al. 2006 in Russo & Perrini, 2010; Beske, Land & Seuring, 2014). Making it complex to set a global standard within the stakeholder network. Regarding this relationship with stakeholders and MNE CSR strategy, the following working proposition can be formed:
WP2: A CSR strategy enables MNEs to address pressures from several stakeholders without harming the stakeholder relationship
An outcome of forming a CSR strategy is that MNEs need to address CSR reporting standards, which is an important tool for assurance of the CSR strategy regarding stakeholder expectations (Russo & Perrini, 2010). These CSR standards need to evolve along with the strategic orientation of the MNEs while maintaining a strong relationship with MNE with all stakeholders.
3.2 CSR reporting standards working propositions
Earlier research on CSR reports showed the absence of a general guideline on content, format, or requirements for addressing triple–bottom-line issues (Waddock, 2008). Following this line of reasoning, it could be said that MNEs have a need for standardization. MNEs mainly reported what they wanted to, thereby especially focusing on activities that were beneficial. However, CSR reports should improve transparency regarding MNEs activities; set principles and standards; and engage with a range of stakeholders in dialogue, partnerships (NGOs), and action (Waddock, 2008). This could mean that negative critique should also be included in CSR reports.
From a managerial point of view, MNEs that want to improve their CSR activities could look for inspiration in global standards and guidelines on sustainable issues. Information on CSR standards can be found in networks of firms, governments and NGOs, which allow the MNEs to create a good network of (tacit) knowledge on CSR management, implementation and reporting (Fortanier, Kolk & Pinkse, 2011). Also, public expectations do change; in order to stay ahead of this change MNEs should be more proactive. They should not only try to rationalize and standardize its response to public expectations, but also participate in the creation of CSR standards (Waddock, 2008). An example of such an initiative
22 are MNEs that use the Global Reporting Initiative’s reporting framework, or MNEs that hire consultants and use monitoring agencies to inspect their CSR reporting (Waddock, 2008). That way the MNE validates its CSR report to get approval from its stakeholders. It could be interesting to see if information that is gathered from the network of MNEs can be translated to the CSR reporting standards, which can improve the validation of CSR reports. By focusing on the network and looking for input to create a CSR report standard. Regarding CSR reporting standards, it is important to address the following proposition:
WP3: CSR reporting standards are created through a knowledge-sharing network allowing organizations to improve their external validation of its CSR strategy.
CSR reporting standards need to be evaluated and measured, the CSR report that MNEs write on annual base should reflect these outcomes. By combining measurements on CSR reporting over a longer period of time a MNE should be able to show its sustainable development. An important instrument to determine effectiveness of CSR reports are codes of conduct. A clear definition of a code of conduct can be summarized as “a policy document that defines the responsibilities of the corporation towards its stakeholders and/or the conduct the corporation expects of employees” (Kaptein, 2004, p. 13). These codes can be classified along two dimensions: specificity and compliance. The specificity of a code shows: how extensive it’s on several dimensions, including which issues are covered, what the focus is, reference to international sustainable standards and guidelines, and how the standards of the code are measured in the CSR report (Van Tulder, van Wijk & Kolk, 2010).
Compliance on the other hand is a concept that occurs when an individual, or in this case a MNE, accepts influence from another actor while trying to achieve a favorable reaction (Kelman, 1958). A CSR report is written to create organizational gains, like a specific rewards or approval from stakeholders. At the same time MNEs hope to avoid punishments or disapproval (Kelman, 1958). Compliance of codes of conduct by MNEs involves clear monitoring systems, which are combined with a more independent position of the monitoring agency, for instance an external organization that files a compliance report (Van Tulder, Van Wijk & Kolk, 2010). These organizations also have the possibility to formulate and implement sanctions (Van Tulder, Van Wijk & Kolk, 2010). Meaning CSR reports are validated by an external actor, that has the power to either reward or punish MNEs for their efforts (Kelman, 1958). While regarding CSR reporting standards, it is important to address the following proposition:
WP4: Specificity and compliance of codes of conduct allow CSR reports to show more reliable results and validate MNEs efforts.
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3.3 CSR in the supply chain working propositions
CSR reporting standards can be translated to the supply chain of MNEs. In the supply chain a complex and intensive network is coordinated and controlled by the MNE, which was also discussed when introducing the concept of SSCM (Sustainable Supply Chain Management) (Maloni & Brown, 2006; Carter & Rogers, 2008; Beske, Land & Seuring, 2014). In order to influence, monitor or control this network a supplier code of conduct can be introduced (Pruess, 2010; Fortanier, Kolk & Pinkse, 2011). This code should provide an incentive for suppliers to improve their sustainable development.
When MNEs introduce a code of conduct the regulation to control and monitor supplier code of conduct increases at the same time. Still suppliers are giving a certain amount of freedom and are checked through internal and external compliance policies (Van Tulder et al. 2009). Compliance policies by MNEs can potentially provide a positive societal effect (Kelman, 1958; Van Tulder, Van Wijk & Kolk, 2010). Introducing a supplier’s code of conduct is surprisingly accompanied by less specificity of codes and higher levels of compliance (Van Tulder et al. 2009). Meaning MNE control and monitor the activities of suppliers on a larger scale, but grant them a certain level of freedom with regard to the rules they have to follow. Regarding CSR in the supply chain, it is important to address the following proposition:
WP5: A supplier code of conduct leads to less specificity of codes and higher levels of compliance.
The importance of stakeholder relationships with regard to SSCM was also discussed in the theoretical framework (Carter & Rogers, 2008). To influence the development of CSR standards in the supply chain it was suggested that MNEs could introduce a supplier code of conduct. However, these CSR codes for suppliers are not only influenced by stakeholders of the firm, but also by a variety of forces that influence the development of a global sustainable standard (Kolk & Pinkse, 2008). These factors also influence the willingness of suppliers to develop or improve their CSR standards. MNEs can be considered to be an important first mover of this sustainable development through their code of conducts for suppliers (Kolk & Pinkse, 2008). The problem is how to translate these kinds of external pressures into their code of conduct, and at the same time implement them in their supply chain without comprising the willingness of suppliers’ to use CSR reporting standards.
As stated earlier suppliers are often giving a certain amount of freedom in the code and are controlled through compliance policies of MNEs (Van Tulder, Van Wijk & Kolk, 2010; Kelman, 1958). This creates a discrepancy between managerial perceptions of CSR in the supply chain versus liability of suppliers’ willingness (Van Tulder et al 2009). MNEs are responsible for a large number of suppliers and a variety of products, thereby directly linking it to the MNE store and brand image (Perry & Towers 2009; Wagner, Bicen, & Hall 2008 in Elg & Hultman, 2011). Making it a vital source for a MNEs
24 competitive advantage, which can either harm or strengthen the store and brand name or reputation (Fuchs & Kalfagianni 2009; Gupta & Pirsch 2008 in Elg & Hultman, 2011). The result is that it will be difficult to effectively anticipate and develop a supply chain CSR strategy and operational practices that address all these issues (Maloni & Brown, 2006). Therefore, a good relationship with the suppliers is important as the balance between regulation and freedom to operate for suppliers has to be protected. Regarding CSR in the supply chain, it is important to address the following proposition:
WP6: A supplier code of conduct for suppliers’ takes the unique supply chain characteristics into consideration without harming the relationship between suppliers and the MNE.
There is another way to implement a supplier code of conduct and force suppliers’ to follow CSR standards set by the MNE. This argument is based on the size of a MNE, which can be an important factor for MNEs to force their will on suppliers (Rahbek, Pedersen 2009 in Andersen & Skjoett-Larsen, 2009). MNEs have the resources to develop comprehensive CSR strategies. This allows them to monitor and assist suppliers, but also to influence their behaviour (Elg 2008; Fuchs and Kalfagianni 2009; Gaski 1984; Perry and Towers 2009in Elg & Hultman, 2011). Following this line of reasoning, it could be stated that large firms have the power to impose their will on their suppliers. This is only possible when suppliers are dependent on maintaining the relationship with MNEs (Elg & Hultman., 2011). It also results in extra work for the MNE, as it has to spent more resources to produce reports and systematically measure the results (Elg & Hultman, 2011). To enforce or increase its impact MNEs can use the supplier dependency to speed up the implementation of the supplier code of conduct. Following this reasoning the regarding CSR in the supply chain, it is important to address the following proposition:
WP7: The size of MNEs forces suppliers’ to accept a supplier code of conduct.
The interdependency between MNEs and suppliers is clear. However, using force to let suppliers accept the implementation of a supplier code of conduct could potentially backfire on the MNE. Still, the code as an instrument to implement a CSR strategy has the potential to create competitive advantages for the MNEs (Kolk & van Tulder, 2010; Barnett & Salomon, 2012). MNEs approach CSR as a factor in their relationships with suppliers. However, it seems that few of them systematically report on CSR performance or practices with regard CSR related issues (Elg & Hultman, 2011). MNEs that walk the walk of CSR and focus on creating, supporting, and reporting on social and environmental issues are those profiting most of this strategy (Elg & Hultman, 2011).
25 This comes down to the question: does it pay to be green? Barnett and Salomon’s article (2012) suggest that improving social standards has similarities with a learning process. In order for some firms to increase their capacity to benefit from investments in social responsibility, they might have to endure a period of decreased financial performance (Barnett & Salomon, 2012). Improving financial performance through social investments is not as simply applying certain CSR practices. It involves MNEs that are committed to improve stakeholder relationships over a longer period of time before gains of such investments become visible (Barnett & Salomon, 2012). This might be a barrier for the MNE suppliers, as they are sometimes incapable or unwilling to make such investments. MNEs should assist suppliers in order to help them to raise their standards. Regarding CSR in the supply chain, it is important to address the following proposition:
WP8: MNEs provide assistance to help suppliers to invest in sustainable development both could profit but a longer commitment is needed.
3.4 Conclusion
Following the theoretical framework this chapter introduced the working propositions. As was shown in the introduction the aim of this research is to investigate CSR reporting standardization in the global supply chain of MNEs, thereby showing to what extent CSR reporting standardization helps to improve the sustainable development? The working propositions that should help to answer this question are summarized in table 2.
Table 2: Working propositions
Category Working propositions Description
CSR strategy
WP1 A CSR strategy sets a general guideline for CSR reporting standards and provides a level of consistency across the MNE.
WP2 A CSR strategy enables MNEs to address pressures from several stakeholders without harming the stakeholder relationship
CSR reporting standards
WP3 CSR reporting standards are created through a knowledge-sharing network allowing organizations to improve their external validation of its CSR strategy.
WP4 Specificity and compliance of codes of conduct allow CSR reports to show more reliable results and validate MNEs efforts.
CSR in the supply chain
WP5 A supplier code of conduct leads to less specificity of codes and higher levels of compliance. WP6 A supplier code of conduct for suppliers’ should consider the unique supply chain
characteristics without harming the relationship between suppliers and the MNE. WP7 The size of MNEs forces suppliers’ to accept a supplier code of conduct.
WP8 MNEs provide assistance to help suppliers to invest in sustainable development. Both could profit but a longer commitment is needed.
26 This research will follow the influence of CSR reporting standards and the sustainable development in the supply chain, as a result of implementing a CSR strategy. The conceptual model (shown in figure 3) summarizes the assumptions and working propositions. The model combines the effects of introducing a CSR strategy, setting CSR reporting standards and the translation of these standards in the supply chain of MNEs. It suggests that CSR reporting standardization will lead to an increased sustainable development in the supply chain. This means that suppliers will be able to generate competitive advantages, without compromising the ability of future generation to create and reach sustainable standards of their own (Marcus & Fremeth, 2009).
The next chapter will focus on the methodology. MNEs from the trade and retail industry will be compared with regard to their CSR reports. Therefore, it will important to see if CSR reporting standards can be standardized across the MNE. As this research will be conducted through a qualitative research using a multiple case analysis it will also be useful to explain: how the data was collected, the cases selected, on which level (individual, organizational or global) the analysis was conducted, and how the within and cross-data analysis was performed.
Figure 3: Conceptual model
27
4. Methodology
This chapter will describe and discuss the design of the methodology. It contains a description of the research criteria, research philosophy, research strategy, multiple case study design, data collection and analyzing techniques. It will also give describe the strengths and limitations. A multiple case study design will be used, with qualitative data that will help to research an explanatory case study (Pratt, 2009; Yin, 2009). This research will try to explore and explain the link between CSR reporting standardization and sustainable development in the supply chain of MNEs. The main research question will be: ‘How can CSR reporting standardization improve the sustainable development in the global supply chain of Multinational Enterprises?’ Qualitative research is a good method that allows to answer this “how” question rather than “how many”, and helps to understand the perspective of those studied, examining and analyzing the processes of CSR reporting (Pratt, 2009; Yin, 2009). The methodological components of this research are presented in the diagram below:
Figure 4: Methodological structure
Source: Author
4.1 Research philosophy
Research philosophy includes important assumptions on how research observes or views social constructs. In this case an inductive approach is used to examine CSR reporting standardization in supply chains of MNEs. The use of this inductive approach, while conducting a qualitative research, is related to theory generation. In order to successfully conduct a qualitative research, it’s important to know what the ontological and epistemological assumptions are for this research (Myers, 2013).
Epistemology is a theory of knowledge and concern of what is considered as acceptable knowledge in a particular discipline (Bryman, 2008). Epistemological assumptions can be regarded as a concept that is associated with the nature of knowledge and the method through which that
28 knowledge is gained (Saunders et al. 2011: 132). Realism is a type of epistemology that focuses on the collection of data and the understanding of it. Two forms of realism can be contrasted: direct, what you see is what you get, and critical realism, which is a representation of what is real (Saunders et al. 2011). This last form will be applicable for this research. It focuses on explaining a reality or knowledge within a context(s) (Saunders et al. 2011: 140).
Ontology is concerned with the nature of reality, which raises questions of the assumptions researchers view on the world and its commitments to these views (Saunders et al. 2011: 130). Ontological assumptions are defined as a theory that gives a description of the nature of reality (Bryman, 2008). For qualitative researchers it’s important to accept the idea of multiple realities instead of a single reality (Cresswell, 2007 in Bahari, 2012). Ontological assumptions come in two forms: objectivism and subjectivism. In this case objectivism is applicable, as this research is interpreted through social conditioning, which can be described as a critical realist perspective (Saunders et al. 2011: 140). The reality in this case is presented by an examination of CSR reporting standards that are examined from an outsider’s perspective. Ultimately this research aims to objectively evaluate MNEs efforts to set CSR reporting standards that are applicable in their supply chains.
Researchers using a critical realism perspective will only be able to understand what is going on in the social world if they understand the social structures that accompany the phenomena. The critical realist position is a result of social conditioning and cannot be understood independently of the social actors involved (Dobson, 2002 in Saunders et al. 2011: 136). Research can approach a research from multiple levels (e.g. individual, group and organizational level), each of these levels can change the researchers understanding of that what is being studied (Saunders et al. 2011). This research will focus on an organizational level. Therefore, it could be argued that the critical realist perspective acknowledges that the social world is constantly changing, and is much more in line with business and management research (Saunders et al. 2011).
In order to apply both the objectivist and critical realist perspective the next step is to determine and describe the research criteria and strategy. In the next sections the development of this research process will be discussed.
4.2 Qualitative Research Criteria
It’s important to create a good balance between theory and data. By trying to make qualitative research appear more quantitative the reliability and validity of the research may be increased (Pratt, 2009). When doing this some pitfalls need to be avoided. Rather than showing raw data, an interpretation of the data should be presented (Pratt, 2009). This needs to be taking into account when examining the data for this qualitative research, which should be relevant, timely, significant, or interesting (Tracy, 2010).
