Corporate Social Responsibility in Small and Medium-sized Enterprises

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Corporate Social Responsibility in

Small and Medium-sized Enterprises

CSR engagement by CSR conscious firms:

Saturated or just started?

University of Groningen

Faculty of Economics and Business

Master Small Business & Entrepreneurship

Author:

Maurice Willemsen

Student number:

1737120

First supervisor:

Dr. M.J. Brand

Second supervisor:

Ir. H. Zhou

Date:

February 2011

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PREFACE

This master thesis is the final step in completing the Master of Business Administration, Small Business & Entrepreneurship at the University of Groningen. The master fitted well in my field of interest. During the process of writing this thesis I enjoyed setting up a questionnaire and feeling the importance of a high response rate and the tension involved. After the deadline I enjoyed working on the analysis and searching for surprising results. The experience, enthusiasm and passion of my colleagues inspired me for writing this thesis. Especially, I liked the entrepreneurial atmosphere in the organization and the constant drive for sustainability.

I would like to use this place to thank a number of people. First of all Karin Jansens from MVO Nederland, who helped me setting up the questionnaire. Second Madelon Engels, who was my contact person in the second part of my stay at MVO Nederland, during the maternity leave of Karin. Especially I would like to thank my supervisor from the University of Groningen, Maryse Brand, for all the fast, accurate and pleasureful contact moments and her enthusiasm and encouragements to make the best of it.

I sincerely hope MVO Nederland will benefit from this thesis and I hope you will enjoy reading my thesis.

Loil, February 2011

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ABSTRACT

In the literature, Corporate social responsibility (CSR) in large firms has received much more attention than in small firms, in spite of the important function of smaller firms to the world economy. In this study the factors that contribute to a higher engagement of small- and medium sized enterprises in CSR are researched. An online questionnaire was sent to 782 CSR conscious organizations, most SMEs. Based on the answers of 187 organizations we conclude that the current CSR level of CSR conscious organizations is high. The satisfaction level is high too and we suppose that it is positively influenced by the current CSR level. Both CSR level and satisfaction level, just as CSR characteristics and organization characteristics, have little influence on the intention to engage more in CSR. Only norms of the social system significantly influence this variable. Although the influences are low, the intention to engage more in CSR does exist. We researched the future role of CSR for CSR conscious organizations. ISO 26000 could be an opportunity to further stimulate CSR, but its benefits for organizations depends on the promotion and guidance by governments, NGO’s and consultancy agency’s.

Key words: CSR, SMEs, CSR level, ISO 26000

1. INTRODUCTION

“The central point is not the number of people on earth. Two billion additional people is not the problem. Maybe on local or regional level, not on world scale. Until everyone becomes rich and is going to eat meat and is going to drive a car. The central issue is our consumption style and the way we produce consumption goods. Sure, the Chinese are willing to become rich. The Indians too. But they are following our ways to reach it, on a servile obedience. So WE have to change. The real problem is the western model!”

Jan Bom en Han van de Wi (P+ 1, 2010)

1.1 An introduction to CSR

To give a short comprehensive description of CSR is almost impossible. John Elkington (1994), a consultant in the field of sustainable development introduced the three P’s to make CSR more tangible: people, planet and profit are the essence of CSR. People consists of all the people in and outside an organization, planet consists of the consequences for the environment and profit consists of the creation and economic outcomes of goods and services. Nowadays, the three P’s are well known in the field of CSR and in many definitions of CSR the three P’s are involved, like that of Masurel (2007). According to him, CSR is “leading the firm in making balanced choices between profit, people and planet”.

The growing attention to CSR in practice has been resulted in a rising scientific interest too. Because new developments and new fields of interest like ISO 26000, an international standard intended to assist organizations in contributing to sustainable development, we expect that the number of studies on CSR will grow rapidly. How, to what degree and why have organizations been engaged in CSR? Are there sectoral differences? What is the role of NGO’s and governments? Since the start of this century, scholars have been trying to answer these and many other questions, but still many are unanswered and more research is needed.

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1.2 CSR in Small and medium sized enterprises

An important field of study related to CSR with many unanswered questions is the CSR engagement of small and medium sized enterprises (SMEs). In 1996, the European Union (EU) introduced a quantitative and uniform definition of SMEs, which was updated in 2004 to account for the impact of inflation and productivity changes. The definition considers three types of SMEs, each having differing employee, turnover and asset thresholds. For this research only the distinction between different employee sizes has been used. Micro-organizations are Micro-organizations with less than 10 employees, small Micro-organizations count less than 50 employees and medium-sized organizations count less than 250 employees. Organizations with 250 or more employees are called large organizations.

In 2004 the Netherlands counted 572,000 enterprises, from which 570,000 (99.65 percent) were called SMEs according to the above EU definition (European Network for SME Research (ENSR), 2002). In all other traditional 14 EU countries the percentage was above 99.5 percent too. In 2004, Dutch SMEs contributed 65 percent of the total employment. In most of the other 14 EU countries that figure is even higher. More than 99% of all European businesses are SMEs. They provide two out of three private sector jobs and contribute more than half of the total value-added created by businesses in the EU (European Commission, 2010). In conclusion, the relevance of SMEs for the economy is tremendous, but most research is based on large firms or CSR leaders/champions (e.g. Jenkins, 2006). Ignoring SMEs in research is in fact totally inappropriate, because of their extensive impact worldwide (Spence and Lozano, 2000).

The little research on SMEs in combination with the extensive importance of SMEs for the economy is especially remarkable because SMEs have their own characteristics and differ from large firms in various ways. Small organizations are independent, are managed in a personalized manner and are representing a small share of the market (Bolton, 1971). By that, they differ from large firms, which often have a complex management structure and are a price maker rather than a price taker. We suppose that such organizations for example perceive other advantages of CSR and have other motives resulting in CSR behavior. Besides, small firms are characterized as flexible, creative and innovative (Beemsterboer et al, 2001; Nooteboom, 1994; Jenkins, 2006). Small firms can gain early-adopter advantages in CSR and since they are flexible and have a flat organization structure they can increase the level of CSR engagement more easily.

In spite of the growing interest, most of the extant empirical literature on sustainable entrepreneurship focuses on large corporations rather than on SMEs (Uhlaner et al., 2010). There is a need for sector, size and location specific research to reflect diversity of SMEs concerning CSR (Jenkins, 2006). All in all, SMEs have to be distinguished from large firms and require extensive research.

1.3 Problem statement

There is an increasing attention in the literature for research on SMEs and the first results are obtained. Evidence suggests that the majority of SMEs believe that organizations like themselves should pay significant attention to CSR (Southwell, 2004). Very small and very large firms are equally motivated to participate in CSR while medium-sized firms are staying behind (Udayasankar, 2008). Other research found that CSR is no illusion for small firms and the social and environmental values and actions are integrated into the business life of all businesses, small and large (Swinkels, 2008).

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role of CSR in Dutch organizations in the coming years, especially for organizations aiming to offer advice concerning CSR to anticipate what is coming and for the government to delineate future policy. This research delivers up-to-date information about CSR engagement in Dutch SMEs that is needed. Especially interesting to predict is the intention of organizations who are already engaged in CSR to engage more in CSR. Only these organizations could divulge their current satisfaction level and it is uncertain what their future intentions are concerning CSR and whether their current CSR level could be further increased. The available empirical research on CSR under “CSR conscious” firms (Jenkins, 2006) is on a too small scale and is therefore not usable for this study. Are Dutch SMEs who are already engaged in CSR planning to reduce, sustain or extend their current level of CSR engagement?

1.4 MVO Nederland

This study is part of a larger study by order of the Dutch foundation Maatschappelijk Verantwoord Ondernemen Nederland, MVO Nederland, to be translated as ‘Corporate Social Responsibility Netherlands’. This is a well-known CSR knowledge- and network organization in the Netherlands. MVO Nederland is an organization that has about 1000 partners, members who pay a contribution fee in exchange for additional knowledge and network meetings. Because its partners are already engaged in CSR, we count them among the CSR conscious organizations. In its study, MVO Nederland researched the needs of its partners and their level of satisfaction with MVO Nederland. MVO Nederland facilitates to this study and especially contributes to the research method as we show later on in this thesis.

1.5 Research objective, research question and sub questions

The objective of this study is to understand the experiences and plans of CSR conscious organizations with regard to CSR. We want to profile the partners of MVO Nederland by investigating their current CSR level and their satisfaction level. Besides, we will find out whether partners of MVO Nederland have the intention to engage more in CSR and by which characteristics this is influenced. Finally, we want to research possibilities to encourage CSR under CSR conscious organizations. Therefore, we want to research the attractiveness of ISO 26000 for partners of MVO Nederland and show the possibilities for organizations to apply the guideline.

The main research question is the following:

- What does the future look like for partners of MVO Nederland concerning CSR? The sub questions contributing to the main research question are:

- What are the relevant characteristics of partners of MVO Nederland?

- Which characteristics influence the intention of partners of MVO Nederland to engage more in CSR and to what degree?

- How can CSR be further stimulated under CSR conscious organizations?

1.6 Explanation thesis structure

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2. THEORY

In this chapter the theory to support the research questions and the methodology will be described. Firstly, we explain what we mean in this research with CSR based on previous definitions of CSR and we explain why organizations engage in CSR and whether they are satisfied with their engagement. Secondly, we explain the current CSR level of CSR conscious organizations and we discuss the theoretical foundation of ISO 26000. Thirdly, an explanation will be given of the role of innovators and early adopters by the adoption of the innovation ‘more CSR engagement’. Fourthly, we explain which other influences are expected to be of influence on the CSR intention and on the other research questions. Finally, we present and explain our theoretical conceptual model based on the theory described.

2.1 What is Corporate Social Responsibility?

CSR is widely researched in the literature. We want to discuss existing definitions, search for similarities and by that develop our own definition to use in this study. One definition considers CSR as the balance of the 3 P’s to achieve long-term sustainability and social responsibility (Montiel, 2008). A very strange definition, because does there exist a short-term sustainability? Sustainability is an organization’s focus on the long-term. According to several studies (Albareda, 2007; Russo, 2010; Scholtens, 2006) there is no or only a small difference between sustainability and social responsibility and therefore the terms sustainability and social responsibility are used interchangeably.

We discard the definition of Montiel (2008). In our search for a comprehensive definition we encounter more elements. CSR is an integral vision on doing business with its main aim to create economic, ecologic and social value (MVO Nederland, 2010). This definition contains the already mentioned people, planet and profit, translated here respectively to social, ecologic and economic. We agree to use the three P’s as the most short but comprehensive way to describe CSR. Moreover, organizations could apply the definition easily. For example, the Ministry of Agriculture, Nature and Food quality (Ministerie van Landbouw, Natuur en Voedselkwaliteit, LNV), explains on its website: “CSR not only contributes to a sustainable society, but it can also enhance the competitiveness of an enterprise. By means of CSR an organization could send a positive signal to their own employees and to the whole society. This can influence the buying behavior of consumers and the appreciation of shareholders positively.” In its explanation of the importance of CSR, LNV makes a connection with the three P’s: employees refer to people, sustainable society refers to planet and competitiveness of an enterprise refers to profit.

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The Dutch central government has an active policy with regard to durable purchasing. In 2010 its objective is to purchase 100% durable, while provinces aim to purchase 50% durable and municipalities 75%. The objective for 2015 is to purchase completely durable, on all governmental layers (Ministry of Housing, Spatial Planning and the Environment, 2009).

Because the three layers are together a substantial player in the market, the objectives will have a tremendous impact on all types of organizations, large and small and industry-wide. But are they feasible and not overoptimistic? Clearly, in a time where the Dutch government should economize, price will likely become the most important purchase criterion. However, the vision of the government is that private companies have to take the next step and should follow the government in its strive for sustainability if they want to retain the government as a customer. If organizations really will or should take the next step, the level of CSR engagement will increase.

Just like the Dutch central government, other governments worldwide support organizations’ environmentally and socially responsible behavior through various policy instruments and subsidies with the intention of increasing international competitiveness and simultaneously supporting sustainable development (Wagner, 2010). In addition to governments, nongovernmental organizations such as the World Resources Institute (WRI), AccountAbility, Global Reporting Initiative (GRI), International Standards Organization (ISO), and the United Nations focus on measuring and improving the social involvement and performance of the world’s business community (Godfrey et al., 2010).

A well known example of that focus is ISO 26000, developed by the International Standards Organization (ISO) and released in October 2010. The guideline focuses on seven core themes: ‘organizational governance’, ‘environment’, ‘human rights’, ‘labour practices’, ‘fair operating practices’, ‘consumer issues’, ‘community involvement / society development’. According to the guideline, the seven core themes of ISO 26000 cover the three P’s, but it is impossible to directly connect every core theme to one P, because all P’s are connected to every core theme.

In addition to the 3 P’s, one element is often mentioned too: an organization’s interaction with its stakeholders (Agatiello, 2008; Christensen et al., 2007; ENSR, 2002, Luo and Bhattacharya, 2006). In the ISO 26000 standard there is no separate chapter on stakeholder engagement, because it has been decided that it will be a cross-cutting issue in every chapter and concerning all seven core themes. The guideline distinguishes the following stakeholder groups: (1) industry, (2) government, (3) labour, (4) consumers, (5) nongovernmental organisations and (6) service, support, research and others (SSRO) and all stakeholder groups were involved to ascertain the guidelines (SOMO, 2007).

Literature distinguishes about the same stakeholder groups as involved in the development of ISO 26000, but most researchers mention owners or shareholders/investors too (Agatiello 2008; ENSR, 2002). In addition, some researchers mention that CSR engagement mainly occurs voluntary (Christensen et al., 2007; ENSR, 2002). Nevertheless, we omit voluntarily from our definition, because we expect that stakeholder influence instead of personal drive is a growing motive for CSR engagement.

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2.2 CSR components

Practical indexes. In this paragraph, we explain underlying theories of the degree

and the extent of CSR behavior of partners of MVO Nederland. In practice, various indexes are found to ascertain the level of CSR engagement of organizations. One of the most well-known initiatives is the Dow Jones Sustainability Index (DJSI). The DJSI is an annual review based on a thorough analysis of corporate economic, environmental and social performance, in short: an analysis of the application of the 3 P’s in organizations. It assess issues such as corporate governance, risk management, branding, climate change mitigation, supply chain standards and labor practices. It accounts for general and industry specific sustainability criteria for 57 sectors. DJSI defines 19 so called “super sectors” and for every super sector a leader is assigned. Although the index gives a comprehensive overview of the degree of sustainability applied in an organization, the index is developed for investors to compare the attractiveness of large firms solely. Notwithstanding the earlier mentioned large role of SMEs in the worldwide economy, worldwide practical CSR indexes for SMEs are untraceable.

Theoretical indexes. Contrary to practical CSR indexes, theoretical CSR indexes are

scarce for both large firms as well as SMEs. There are many publications about indexes of corporate social responsible investments (Dillenburg et al., 2003; Knox, 2004; Willis, 2003; Wisebrod, 2007), but scholarly developed indexes to measure the CSR level of organizations are not available. Scalet and Kelly (2010) performed research on the impact of CSR rating agencies that assess corporations based on their social and environmental performance. They find that being dropped from a CSR ranking appears to do little to encourage firms to acknowledge and address problems related to their social and environmental performance. Whether firms are well or poorly ranked, they appear to focus on and publicly discuss their positive CSR activities.

Most of the rating models studied address the capital markets. Only a small group presents company-specific concepts (Schäfer, 2005). Márquez and Fombrun (2005) did extensive research on agencies performing CSR ratings and conclude that it is in a company’s interest to earn a favorable CSR rating and that rating agencies have an enormous responsibility to develop ratings that are perceived as valid and reliable. With respect to the company types that are to be evaluated, the majority of the models are focused on (large) companies that are listed on stock exchanges (Schäfer, 2005).

Muller (2009) measures CSR performance by including the following themes in his research: renewables, recycling, environmental training, women in management, vocational training, absenteeism, philanthropy, common relations, and internships. Several other scores are developed in the literature (Jain, 2007; Cheung, 2009; Gjølberg, 2009), but those checklists all fail to present a comprehensive overview of CSR engagement and are only focused on one or a few themes. Most CSR ratings only consist of general CSR issues in broad areas (Márquez and Fombrun, 2005).

Own CSR index. Because the lack of a validated instrument in the literature to

measure the current CSR level of organizations we constructed an own CSR index. The CSR index is developed by a combination of measurement methods from CSR research and by discussion with employees from MVO Nederland.

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Strategic importance. Some firms view CSR as vital to achieve financial objectives through the generation of competitive advantages or the control of risk. Other firms view CSR as strategic by definition, not solely in terms of its relationship to financial objectives. Still others do not place any importance on CSR within the firm’s mission (Husted and Allen, 2006). According to Ligeti and Oravecz (2009) communication of CSR should be part of the mission of an organization. Although no research has been done on the presence of CSR in the mission of organizations, we think it is important for organizations to implement CSR in the mission or objectives, because it emphasizes the strategic thinking of an organization and the importance of CSR. The first item of the CSR index is named ‘CSR in mission and/or objectives of organizations’. We included ‘objectives’, because our sample mainly consists of small firms who possibly do not have a mission.

Experience level. In our own opinion the current CSR level has to contain a level of experience composed of two items: how organizations see and assess themselves to create a mix between the actual experience and the perceived experience of organizations with regard to CSR. The actual experience level is the second item of the CSR index and reveals how many years an organizations is engaged in CSR and is named ‘Period engaged in CSR’. The perceived experience level is the third item of the CSR index and is named ‘Current CSR status’.

CSR engagement in business processes. Tencati (2004) asked in a survey among 395 proactive (in terms of attention to new managerial issues) Italian enterprises whether CSR should include the following dimensions: respect of ethical principles, codes of conduct, quality of life, transparency, marketing, clients and suppliers selection, company reputation, local community initiatives, philanthropy, human rights, equal opportunity, employee safety, environmental protection. Key findings are that CSR is considered a very broad concept, encompassing many different dimensions and no one answer was completely excluded by respondents. Philanthropy and marketing were perceived as least relevant to the subject of the survey.

Some dimensions of Tencati (2004) are themes (e.g. quality of life) and some consider business processes (e.g. marketing) and others lay in between. We think our own CSR index should contain business processes, because they give a comprehensive overview of the engagement of CSR in an organization. We translated most dimensions to business processes and, based on the business processes on the website of MVO Nederland, we added some business processes because we think they were missing. The fourth item is named ‘CSR engagement in business processes’.

Engagement in the core themes of ISO 26000. ISO 26000 is released in October 2010 and therefore a new topic in the literature. It has been developed to harmonize terminology and principles, as well as the numerous guidance documents and initiatives developed on CSR (ISO, 2007). It aims to define guidelines for what constitutes CSR and how it should be understood at the organizational level. ISO 26000 could, like codes of conduct, arguably be justified in a global context in order to have at least some common basic ‘rules of the game of business’ (Schwartz and Tilling, 2009). ISO 26000 is developed for all organization types, irrespective of size and location. It will have a voluntary nature and will not be controlled by any type of legislation nor will it be related to a certification process.

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Studies into diffusion patterns of ISO 26000, which determine why, under what circumstances and which organizations adopt ISO 26000, will shed more light on the role of the guideline in the pursuit of the SR agenda (Castka & Balzarova, 2008). Research about the intention to engage in ISO 26000 is needed and motivations for and against ISO 26000 should be mapped to find out whether and why organizations are planned to implement the guideline and what role it can play in the CSR engagement.

In table 1 a summary of the above-mentioned items of the CSR index is presented.

TABLE 1

Summary items CSR index

Item Explanation

Strategic importance Presence of CSR in mission and/or objectives.

Actual experience level Number of years an organization is engaged in CSR.

Perceived experience level How organizations see and assess themselves; current CSR status.

CSR engagement in business processes

Degree of engagement in 11 business processes: exporting

financing

good employership and HRM housing, ICT and management purchase and chains

logistics and mobility production

research and development strategy development

transparency and responsibility marketing and communication

Engagement in the core themes of ISO 26000

Degree of engagement in the seven core themes of ISO 26000: organizational governance

environment human rights labour practices fair operating practices consumer issues

community involvement / society development

2.3 Motives and results of CSR engagement

In this paragraph, we explain the motives for CSR engagement and the satisfaction with CSR.

Motives for CSR. Research of Hemingway and Maclagan (2004) showed that while

CSR is most commonly explained in terms of the strategic commercial interest of the organization (image and reputation management, the manipulation of stakeholders and the integration of the organization into its host community) this is not always the case, because individual managers can exercise influence. Future theoretical research should explore the extent to which multiple actors’ pressures affect the intensity of CSR efforts, as well as their consequences (Aguilera et al., 2007). Swinkels (2008) did extensive research on the motivation of small firms to start with CSR. From a study under Dutch small firms she finds that the motivation with the highest frequency is the personal motivation (74%). Almost a quarter of the firms (23%) behave socially responsible because they believe CSR is related with opportunities for their firm and only 3% of the respondents mentioned one of the defensive motives as the main motivation to start with CSR.

Satisfaction with CSR. The satisfaction level of an organization could be determined

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relationships between CSR and financial performance are decisively mixed too (Margolis and Walsh, 2003). Swinkels (2008) found that although many CSR performance studies have been performed among large firms, there are no similar studies from small businesses and therefore she researched it by herself. She finds that CSR activities do not directly affect the profit or turnover of the firm (hard measures) or the satisfaction of the business owner (soft measures).

The literature described before researched the influence of CSR on the satisfaction level of an organization. Although there is some doubt about this relation under large firms, research on SMEs is still scarce. That is strange because if a high CSR level contributes to a high satisfaction level, it would be advisably for organizations to increase their degree of CSR activities. Therefore, it is important to know the degree and the extent of CSR engagement and the satisfaction level of CSR conscious organizations.

2.4 Influencers of the adoption of innovations

An innovation is an idea, practice, or object that is perceived as new by an individual or other unit of adoption (Rogers, 1995). According to this definition, the intention to engage more in CSR can be characterized as an innovation, because it is a practice perceived as new by a unit of adoption. CSR engagement in itself is not an innovation, but the expansion of CSR activities is new. In order to research which characteristics influence the intention of CSR conscious organizations to engage more in CSR and to what degree, we will research the further adoption of CSR by partners of MVO Nederland. The model of Ajzen (1991) can be used to explain the intention of a single person to adopt the innovation. In the Theory of Planned Behavior (TPB) Ajzen proposes that a person's intention to perform behavior is the central determinant of that behavior because it reflects the level of motivation a person is willing to exert to perform the behavior. The TPB mentions three factors that contribute to the intention that determines the behavior of a single person and finds that those three factors usually predict behavioral intentions with a high degree of accuracy:

- Attitude toward the behavior / personal attitude (PA) refers to the degree to which a person has a favorable or unfavorable evaluation or appraisal of the behavior in question.

- Subjective norms (SN) refers to the perceived social pressure to perform or not to perform the behavior.

- Perceived behavioral control (PBC) refers to the perceived ease or difficulty of performing the behavior and it is assumed to reflect past experience as well as anticipated impediments and obstacles.

The usefulness and application of the TPB to the behavior of a single person is confirmed in the literature. The relationship between PA and entrepreneurial intention (EI) and between PBC and EI are found to be significant and although some controversy remains, there is support for the idea that a direct SN–EI relationship might be established (Liñan and Chen, 2009).

Unfortunately, the model of Ajzen measures on an individual level and in this research we want to measure whether organizations innovate and why. Therefore, the model of Ajzen is not applicable here and we tried to find a model which had similarities with the model of Ajzen but measures on another level.

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perceived characteristics of innovations that can influence a decision to adopt or reject an innovation:

- Relative advantage is the degree to which an innovation is perceived as better than the previous solution to the problem. Rogers’ mentions that diffusion scholars have found relative advantage to be one of the best predictors of an innovation’s rate of adoption (Rogers, p. 216).

- Compatibility is the degree to which an innovation fits with the current standards and values.

- Complexity is the degree to which an innovation is perceived as relatively difficult to understand and use.

- Trialability is the degree to which an innovation can be tested cheaply and easily before it is decided to adopt or reject the innovation.

- Observability is the visibility of the innovation to others.

Of the five characteristics, particularly relative advantage, compatibility, and complexity have been found to significantly influence the adoption of innovations (Beatty, 2001; Grandon and Pearson, 2004). This result is similar to Rogers who emphasizes: “Such perceived attributes of an innovation as its relative advantage, compatibility, and complexity are especially important”. Although Rogers’ model also includes trialability and observability, these have not been as widely addressed in studies of IT innovation at the organizational unit of analysis (Beatty et al., 2001). This seems to be independent of the type of innovation, because the importance of the first three characteristics where already emphasized by Rogers and confirmed by various studies. Therefore the last two characteristics, i.e. trialability and observability, are not included in this study.

The models of Ajzen and Rogers are explained above. It is possible to connect the characteristics of both models. The first characteristic of Rogers is relative advantage, related to attitude toward the behavior of Ajzen. Relative advantage compares an innovation with a previous solution to a problem and with that an attitude toward the innovation (the behavior) is created.

Rogers’ other four perceived characteristics of an innovation (compatibility, complexity, trialability, and observability) all roughly correspond with perceived behavioral control of Ajzen. Perceived behavioral control reflect past experience and impediments/obstacles. Rogers’ perceived characteristics all need past experience and/or reflect the degree of obstacles.

Finally, Rogers’ norms of the social system is one of the prior conditions of Rogers’ innovation-decision process. Rogers (1995) has explicitly identified perceived social norms as an operational measure of social systems in his model. Norms of the social system strongly corresponds with Ajzen’s subjective norms, both have about the same meaning: the perceived social pressure from stakeholders. A critical mass, real or perceived, is the key threshold for a diffusion process (Zhu et al., 2002).

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2.5 Other influences on CSR-intentions

An important question to be answered in this research is what factors determine whether an organization intends to engage more in CSR. In addition to the already discussed CSR characteristics & management support and the current CSR level and its degree of satisfaction, the intention to engage in more CSR mainly depends on an organization’s individual circumstances. It is likely that firm size is an important influencer, because earlier research found a U-shaped curve. Small and large firms engage more in CSR than medium-sized firms (Udayasankar, 2008). It is interesting to find whether the influence of firm size on the CSR behavior under CSR conscious organizations is characterized by a U-shaped curve too.

In addition to firm size, we want to show whether firm age is of influence on the intention to engage (more) in CSR. No research has been found on the relation between CSR engagement and firm age. We want to use firm age as a control variable to ascertain whether younger or older CSR conscious firms engage more in CSR.

The population shows an overrepresentation of firms who offer durable services and the interest of CSR in most industries differs from firm to firm so we decided not to use industry type as a control variable. We expect the importance of CSR on the most important markets, the market relevance, to be of influence on the intention to engage more in CSR. Are organizations more engaged in CSR and ISO 26000 and are they more satisfied with CSR if it is relevant to their most important markets? We have not been able to find earlier research aiming to answer this question.

2.6 Reproduction and explanation of the conceptual model

We will research which characteristics influence the intention of partners of MVO Nederland to engage more in CSR and to what degree. A specified overview of the questions of the questionnaire in this study related to the measurement of all variables, sub variables and items is shown in appendix 1. In figure 1 the theoretical conceptual model is presented as a result of the theory in this chapter. An explanation of the model is stated below.

The first variable to investigate is the current CSR level to ascertain the degree of engagement in CSR by CSR conscious organizations. Our CSR index contains the strategic importance: the presence of CSR in the mission and/or objectives. We decided to add the actual and the perceived experience level to the index and we made use of Tencati (2004) to ask for engagement in eleven business processes. Finally, we adopted engagement in ISO’s seven core themes.

The second variable is the satisfaction level of partners of MVO Nederland. Although there is much literature about the satisfaction level as an outcome of CSR activities, there is no research available on the influence of the degree of satisfaction on the intention to engage more in CSR. In addition, we research the influence of the current CSR level on the satisfaction level of CSR conscious organizations.

The third variable consists of several CSR characteristics, which are derived from the innovation adoption approach of Rogers and the Theory of Planned Behavior of Ajzen. Various CSR characteristics hinder or stimulate the intention to engage more in CSR.

The fourth variable is management support. Beatty et al. (2001) found in the literature that management support is of influence on the adoption of innovations.

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FIGURE 1 Theoretical conceptual model

3. METHODOLOGY

3.1 From conceptual model to the questionnaire

In the previous chapter we described theory resulting in a theoretical conceptual model. In this paragraph the empirical conceptual model tested by empirical research will be explained and will be presented in figure 2.

We expect a positive relationship between the current CSR level and the intention to engage more in CSR, because we think that organizations who have a high CSR level are convinced that CSR will contribute to their organization in a certain way and are intended to increase their CSR level.

We expect that organizations who are satisfied with the results of the CSR activities see opportunities to benefit from a higher CSR engagement, so we expect a positive relationship between the satisfaction level and the intention to engage more in CSR. We think a high CSR level will result in a higher satisfaction level, because in most other studies researching the relationship between CSR actions and firm performance a positive influence was found.

We expect that ‘Relative advantage’ positively influence the intention to engage more in CSR, because organizations who perceive many reasons to extent their CSR activities will have a higher intention to engage more in CSR. We expect that ‘Norms of the social system’ will also have a positive relation with the intention to engage more in CSR, because we think CSR conscious organizations are responsive to pressure from stakeholders. We expect that ‘Compatibility’ will stimulate the intention to engage more in CSR, because if CSR fits with the organization the management and the employees are more motivated to engage in CSR. We think ‘Complexity’ will have a negative relationship with the intention to engage more in CSR, because if the management and the employees perceive difficulties with CSR engagement, the motivation, and as a consequence the CSR intention, will be diminished.

We think management support will result in more resources and communication of the management in- and outside the firm. Therefore we expect that if the management shows its support for CSR engagement, the intention to engage more in CSR will be higher.

A survey was conducted to collect data that is analyzed with SPSS. In the following paragraphs the procedure and sample, the measures, a test for representativeness and an explanation of the data analysis are presented.

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FIGURE 2

Empirical conceptual model

3.2 Procedure and sample

The sample was composed of organizations who are paying partners of MVO Nederland. MVO Nederland has a fast-growing network of Dutch partners who pay a contribution fee in exchange for services based on its extensive database of knowledge and its large network. A survey was conducted among 782 partners. On 1 July 2010, MVO Nederland had about 1000 partners, organizations who are registered as paying members, but excluded from the survey are some special types of organizations: NGO’s, charity organizations, trade organizations and organizations without employees.

The sample received an e-mail message with a short introduction of the study and a link to the online questionnaire. After the first e-mail invitation 86 respondents responded, which is a response rate of 11%. 12 days later a reminding e-mail to the non-respondents and respondents who did not fully complete their questionnaire followed to increase the response rate. After the reminder, the absolute number of respondents was 155, corresponding with a response rate of 19,8%. A second and final reminder was sent 8 days after the first reminder. The absolute number of respondents increased to 187 and a response rate of 23,9% was reached.

Unfortunately, in the past no comparable surveys are sent by order of MVO Nederland, so the response rate cannot be compared. The survey was sent in July (when many Dutch organizations have a holiday), without an incentive and response takes more than 10 minutes. Considering the average response level of 15%-20%, our response rate is quite satisfactory. The representativeness will be further discussed in paragraph 3.4 ‘Test for representativeness’.

3.3 Measures

A questionnaire, presented in appendix 2, was used to obtain the data for this study. An explanation of how the variables are measured is stated below. The sample is not representative for all SMEs in the Netherlands, because partners of MVO Nederland already deal with CSR in a certain way and pay a contribution fee to be a partner.

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Current CSR level Complexity Compatibility Management support

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Intention to engage more in CSR

Firm size Firm age CSR market

importance Satisfaction level

Relative advantage Norms of the social system

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CSR level

Because the lack of a validated measurement instrument in the literature, a CSR index is developed by a combination of measurement methods from CSR research and by discussion with employees from MVO Nederland. With our CSR index every respondent attains a score on the degree to which CSR is integrated in the organization. Every item can attain maximal 3 points and from all the five individual items the means will be counted and these means will be summed resulting in the CSR index, showing the current level of CSR engagement in the organization. The questions 4 till 8 are used for the CSR index. The last two of the five survey questions are respectively interview question 7 concerning CSR engagement in 11 business processes and interview question 8 concerning engagement in 7 ISO 26000 core themes. Engagement in each business process and in each core theme will be given 3 points. For both items the mean will be calculated and used for the CSR index. The answer ‘not applicable’ is excluded from the mean score. The questions and answer possibilities and the contribution to the CSR score are showed in table 2.

TABLE 2

Measurement method CSR index

Item (one survey question) Answer Points

Presence of CSR in mission and/or objectives Yes 3

No/other 0

Number of years an organization is engaged in CSR < 1 year 0

1 to 3 years 1

3 to 5 years 2

> 5 years 3

Current CSR status Beginning 0

Advanced 2

Leading 3

CSR engagement in 11 business processes Yes 3

No, but planned to do 0

No 0

Not applicable 0

Engagement in the 7 ISO 26000 core themes Yes 3

No, but planned to do 0

No 0

Not applicable 0

Satisfaction level

The measure of satisfaction level is composed of two items. We are inspired by Aupperle (1985) who measures the satisfaction level with hard measures and by McGuire (1990) who measures with soft measures. The first item is whether an organization is satisfied with its own CSR-results, on a range from ‘very dissatisfied’ (1 point attributed) to ‘very satisfied’ (5 points). The second item is the effect of the CSR-policy of an organization on its business results, asked on a range from ‘very negative effect’ (1 point) to ‘very positive effect’ (5 points). For both items, the answer ‘unknown’ is recoded to ‘neutral’. The sum of the average score on the two items is the score for ‘satisfaction level’, so a minimum of 1 point and a maximum of 5 points could be attained. The questions 11 and 12 are used to measure the satisfaction level.

ISO 26000

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to compare the score on ISO 26000 with the average of the seven core themes to find whether organizations who are engaged in the core themes are using ISO 26000 too. Differences concerning firm size, firm age and CSR market relevance will be determined.

The organizations who indicated that they are ‘already engaged in ISO 26000’ or ‘planning to engage in ISO 26000’ are asked to select the motives for this engagement. Organizations who selected ‘not planning to engage in ISO 26000’ are asked to select all the motives against ISO 26000. After several discussions with employees of MVO Nederland the motives for and against ISO 26000 are determined. The main motives ‘opportunistic’, ‘defensive’ and ‘personal’ of Swinkels (2008) are adopted as main motives for ISO 26000.

CSR characteristics & management support

CSR characteristics consists of the concepts: ‘relative advantage’, ‘norms of the social system’, ‘compatibility’ and ‘complexity’. These concepts are asked with questions 14 till 17 and are explained below.

Relative advantage. For this variable a list of ten possible CSR advantages of Jenkins (2006) is used to decide what the relative advantages of the respondents are. All the items were measured on a five-point Likert scale ranging from ‘completely not applicable‘ (1 point) to ‘completely applicable’ (5 points).

Norms of the social system. This variable measures the norms of the social system by asking the respondents to declare from eleven dimensions whether they are determining reasons to increase the range of CSR activities in the coming years. The list of 11 dimensions is developed by a combination of ISO 26000, measurement methods from theory about stakeholders (Agatiello 2008; ENSR, 2002) and by discussion with employees from MVO Nederland. The items were measured on a five-point Likert scale ranging from ‘completely not determining‘ (1 point) to ‘completely determining’ (5 points).

Compatibility. Huizingh and Brand (2009) use reflective scales from existing literature (Grandon and Pearson, 2004) to measure compatibility. We adopt that and therefore compatibility is divided into three items: ‘organization culture’, ‘desired working method’ and ‘standards & values’. The items were measured on a five-point Likert scale ranging from ‘completely disagree‘ (1 point) to ‘completely agree’ (5 points).

Complexity. Huizingh and Brand (2009) use reflective scales from existing literature (Venkatraman, 1991; Premkumar and Roberts, 1999; Beatty et al., 2001) to measure complexity. This variable is divided into the items ‘development of CSR is difficult’, ‘integration of CSR into work processes is difficult’ and ‘executing CSR policy is difficult’. The items were measured on a five-point Likert scale ranging from ‘completely disagree‘ (1 point) to ‘completely agree’ (5 points).

Management support. Huizingh and Brand (2009) use reflective scales from existing literature (Premkumar and Roberts, 1999; Beatty et al., 2001) to measure management support. It is measured by five items related to the viewpoint of the management from the responding organization with regard to CSR. The concept is asked with question 18. The respondents were asked to indicate on each item whether CSR fits with it. All items were measured on a five-point Likert scale ranging from ‘completely disagree‘ (1 point) to ‘completely agree’ (5 points).

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Intention to engage more in CSR

To determine the influence of the independent variables on the intention to engage more in CSR in the coming two years, the respondents are asked to rate on a range from 1 (much less) to 5 (much more) whether they are willing to perform more or less CSR in the next two years. The answer ‘unknown’ is recodes as ‘neutral’. This question researched the change in CSR engagement and includes new activities as well as extension of current activities. Question 13 is used to ask the intention to engage more in CSR.

Control variables

Firm size. For the analysis of this research, we asked the respondents to give the number of working persons who work for more than 15 hours per week for the organization. Graafland et al. (2003) do not follow the EU definition, because they believe that for their research objective a rather rough distinction between small and large firms suffices. The main aim of this research is to investigate the group of SMEs and their difference with large firms, so we follow Graafland et al. in their argument. Therefore, organizations with 100-250 working persons will be moved from the group of medium-sized organizations to the group of large firms (what from now on contains all firms with > 100 working persons) and so the group called medium-sized organizations now consists of organizations with 11-100 working persons. The organizations with 2-10 working persons are divided into a group of 2-5 working persons called micro-organizations and a group of 6-10 working persons called small organizations. This distinction is made because the number of respondents in the group of micro-organizations is high and we show a more detailed overview of the differences. For most analyses the above-mentioned classes are used, but for some analyses we made use of the exact number of working persons.

Firm age. The founding year of the organization was asked in the questionnaire with an open question. For the analysis we reformulated the founding year to the age of the organization and we categorized the organization ages. The following age categories are distinguished: less than 11 years, 11 to 20 years, and more than 20 years old. For most analyses the above-mentioned classes are used, but for some analyses we made use of the exact number of working persons.

Market relevance. The interest of CSR on the most important markets was asked in the questionnaire. Answer possibilities were ‘an essential part’, ‘not an essential part but it increases the value of our products/services to customers’, and ‘no clear added value’.

3.4 Test for representativeness

To test whether the results of the sample of this study can be generalized to the population, a few tests were conducted to test representativeness. We first used Chi-Square tests to compare demographics of respondents with the population (appendix 3). The population is represented by all organizations who are registered as partner of MVO Nederland except NGO’s, charity organizations, trade organizations and organizations without employees. No significant differences where found with respect to the number of working persons (χ² = 0.46; p < 0.95), the industry (χ² = 0.36; p < 0.90) and the region (χ² = 4.00; p < 0.90).

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3.5 Data analysis

Independent variables. For the current CSR level, the satisfaction level, the four CSR characteristics and management support (all independent variables) we measured if there were any differences between organizations from different size classes, age classes and market relevance. The concepts and their underlying items were measured with the One-Way ANOVA test.

The items of questions 4 and 6, contributing to the CSR index, were measured for differences concerning firm size, firm age and market relevance with the Chi-Square test because the variables were scaled nominal. The items of question 5, contributing to the CSR index too, were measured with the Kruskal-Wallis test because the variables were scaled ordinal. In addition, we analyzed the influence of the current CSR level on the satisfaction level with the T-test.

Intention to engage more in CSR. The main investigation of the empirical research is to what degree and in which direction various independent variables influence the intention to engage more in CSR (the dependent variable). A linear regression was applied to measure this. To find out if organizations from different sizes, ages and market relevance differ in their intention to engage more in CSR, the One-Way ANOVA test was conducted.

ISO 26000. In addition to the conceptual model, we investigated the impact of ISO 26000 under the CSR conscious organizations in our sample. We calculated the average of the seven themes and we compared it to the score on ISO 26000. From both ISO 26000 as well as the average of the seven core themes differences concerning firm size, firm age and market relevance were measured with the One-Way ANOVA test. To find out if firms from different firm sizes, firm ages and market relevance differ in their motives for and against ISO 26000 the Chi-Square test was conducted, because the motivation is a nominal variable. In addition, because for some motives the chi-square test was not suitable due to the required minimum of 25%, the T-test was used.

4. FINDINGS & ANALYSIS

Before the findings of this study are presented, we want to refer to appendix 5 which presents the frequencies of the variables firm size, firm age, and market relevance. The respondents are mainly organizations with less than 100 working persons (81%). 38% of the responding firms are not older than 10 years and 37% of the firms are more than 20 years old. For 42% of the responding firms CSR is essential on its most important market, while for 52% CSR is of interest but not essential. Appendix 6, 7 and 8 show a detailed overview of the answers on the questions concerning the independent variables. Appendix 9 shows an analysis of the items of the independent variables.

4.1 Characteristics of CSR conscious organizations

The purpose of the first research area was to identify characteristics of CSR conscious organizations and to find out if there were any differences of this related to firm size, firm age and market relevance.

CSR index. In table 3 the means of the CSR index are showed. Although the mean of

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which CSR increases the value of their products/services to customers score much higher on the CSR index than firms for which CSR is not an essential part, but again the difference is not significant.

TABLE 3

One-Way ANOVA test of the CSR index

Size class N Mean F

Micro-firms 2-5 working persons 63 2.36

Small firms 6-10 working persons 32 1.98

Medium-sized firms 11-100 working persons 56 2.21

Large firms > 100 working persons 36 2.29

1.588

Age class N Mean

Young firms <11 years old 71 2.20

Middle-aged firms 11-20 years old 46 2.13

Old firms > 20 years old 70 2.34

1.507

Market relevance N Mean

An essential part 78 2.28

Not an essential part, but it increases the value

of our products/services to customers 98 2.25 Not an essential part 11 1.74

5.822

* p < .05; ** p < .01; *** p < .001

Satisfaction level. The objective of this paragraph is to identify the characteristics of

CSR conscious organizations in the Netherlands. The level of satisfaction is one of those characteristics. To have a closer look at the satisfaction level among the respondents the One-Way ANOVA test is performed to find any differences concerning firm size, firm age and market relevance. In table 4 the means of the subgroups are presented. Most striking is the lower mean of the satisfaction level of small firms. Satisfaction level, like the CSR index in the previous paragraph, seems to have a U-shaped relationship with firm size. The sample of this research suggests that older firms are more satisfied with CSR than younger firms and firms for which CSR is an essential part of the market are more satisfied than firms for which CSR is not essential on their most important markets but the differences are not significant.

TABLE 4

One-Way ANOVA test of the satisfaction level

.546

Age class N Mean F

.871

Market relevance N Mean F

2.766

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Influence of CSR level on the satisfaction level. One interesting question is

whether organizations that are more engaged in CSR are more satisfied than others. If an empirical relationship between the CSR level and satisfaction can be demonstrated, this may be an extra motivation for small firms to put more effort in CSR. A T-test was used to compare the mean of the first half of the sample, the respondents who achieved the lowest CSR score, with the second half of the sample, those organizations who achieved the highest CSR score. The median of the CSR level is calculated to be 2.19. The first group consists of organizations who scored lower than 2.19 on the CSR index. The mean satisfaction level of these organizations is 3.44. The second group scored a mean satisfaction level of 3.96, significantly higher than the first (p = .000).

In this study we find that organizations that are more engaged in CSR are more attractive to potential employees and show a higher employee satisfaction. We suppose that a high attractivity to potential employees contributes to the appointment of better employees who contribute to higher business results, for example because they are more experienced or they have more knowledge. We suppose that a higher employee satisfaction will contribute to a higher motivation what in its turn increases the satisfaction level. In addition, a high CSR level could also result in lower costs through waste reduction or reduction of energy costs or absenteeism. Finally, we formulated our questions to find the influence of CSR on satisfaction and not to find the reverse relationship and in most other studies a positive relationship between CSR engagement and satisfaction is demonstrated too. In short, there are many reasons to assume that a positive relationship between CSR engagement and satisfaction exists, but we do not exclude a limited reverse relationship.

CSR characteristics and management support. In this part the findings and

analysis of the CSR characteristics ‘relative advantage’, ‘norms of the social system’, ‘compatibility’ and ‘complexity’, and of the organization characteristic ‘management support’ are presented. In table 5 the means of the subgroups on the before-mentioned variables are presented.

The first independent variable is ‘relative advantage’. 10 possible advantages were presented to the respondents, who had to mark whether the mentioned possible advantages could be a reason to engage more in CSR. Relative advantage is highly significant for all control variables: the higher the number of working persons in the organization (p = .005) as well as the older the organization (p = .001) as well as the more important CSR is for the market of the respondents (p = .015) the more relative advantages the respondents perceive. The second variable is ‘norms of the social system’. 11 possible reasons for respondents to expand their CSR activities in the coming years were presented. Norms of the social systems is highly significant for all control variables: the higher the number of working persons in the organization (p = .001), the older the organization (p = .008), and the more important CSR is for the market (p = .000) the more social pressures respondents have to expand their CSR activities in the coming years.

The third variable is compatibility. Compatibility is measured by three items asking for the compatibility of CSR with ‘organization culture’, ‘desired working method’, and ‘standard and values’. Compatibility is only significant for the market relevance (p = .005): the more important CSR is for the market of the respondents, the more the organization is compatible with CSR. No significant differences were found for firm size and firm age.

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Management support is measured by five items asking for the role of the management concerning CSR in the responding organization. Management support is only significant for the market relevance (p = .039): the more important CSR is for the market, the more the organization perceives management support concerning CSR. No significant differences were found for firm size and firm age.

TABLE 5

One-Way ANOVA test of the CSR characteristics & Management support Size class

(in working persons) N

Relative advantage

Norms of the

social system Compatibility Complexity

Management support Micro-firms 2-5 63 3.54 3.16 4.29 2.34 3.96 Small firms 6-10 32 3.80 3.36 4.10 2.76 4.01 Medium-sized firms 11-100 56 3.77 3.41 4.11 2.67 3.97 Large firms > 100 36 3.99 3.66 4.26 2.92 3.76 F 4.359 5.910 .802 2.840 .920 Significance ** ** * Age class

(in years old) N

Relative advantage

Norms of the

Management support Young firms <11 71 3.53 3.20 4.11 2.55 3.86 Middle-aged firms 11-20 46 3.87 3.46 4.28 2.51 4.00 Old firms > 20 70 3.87 3.47 4.23 2.78 3.97 F 6.784 4.908 .771 1.253 .614 Significance ** ** Market relevance N Relative advantage Norms of the

Management support

An essential part 78 3.85 3.58 4.37 2.60 4.05

Not an essential part, but it

increases the value. 98 3.70 3.25 4.12 2.62 3.92 Not an essential part 11 3.74 2.91 3.67 2.85 3.24

F 4.310 3.508 5.553 .285 6.302

Significance ** *** ** *

* p < .05; ** p < .01; *** p < .001

Intention to engage more in CSR. In table 6 the One-Way ANOVA test of the

intention to engage more in CSR in relation to the control variables is presented. Only one of the three control variables was found to be significant. We see that organizations for which CSR is important for the market have a higher intention to engage more in CSR (p = .004). In addition, it seems that large firms have a higher intention to engage more in CSR and that younger firms have a lower intention to engage more in CSR, but both results are not significant.

TABLE 6

One-Way ANOVA test of the intention to engage more in CSR

1.588

Age class N Mean

1.507

Market relevance N Mean F

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The results described above demonstrate that CSR conscious organizations have a high current CSR level. The experience level (consisting of ‘period engaged in CSR’ and ‘current CSR status’) scores not as high as the other three items of the CSR index. Many organizations do not have much experience or feel their CSR level could be increased. Although not significant, we found some differences in relation to the control variables. We assume a U-shaped relationship of the current CSR level concerning firm size and firm age.

In addition to the high current CSR level, CSR conscious organizations in this study have a high satisfaction level. We assume a U-shaped relationship concerning firm size and a positive relationship with firm age. Finally, we assume a positive relationship between the CSR level and the satisfaction level, so the more CSR conscious organizations are engaged in CSR, the more satisfied they are with CSR. Although we gave arguments for the likeliness of our assumption, caution is needed because the reverse relationship could exist too.

Firms with more working persons, firms who are relatively older and firms for which CSR is important for the market perceive more relative advantages of CSR. Besides, they are more influenced by stakeholders in the intention to extent their CSR-activities in the coming years. The compatibility and support of the management is higher for organizations for which CSR is important for the market. The larger the size of an organization, the more complex its employees perceive CSR.

Finally, the higher the market relevance, the more intentions organizations have to extent their CSR-activities in the coming years.

4.2 Determinants of CSR intention

In the previous paragraph we analyzed the dependent variable and all independent variables: the current CSR level, the satisfaction level, CSR characteristics and management support. The second research question is related to the influence of those independent variables on the intention to engage more in CSR. A regression analysis is performed to measure this.

The intention to engage more in CSR concerns only interview question 27, asking respondents to indicate whether their company is planning to engage more or less in CSR in the coming two years on a scale from 1 to 5. From the previous paragraph we know that almost all responding organizations score very high on the CSR intention. This high score results in difficulties to show by what independent variables the CSR intention is influenced, because all organizations have a high CSR intention, the differences are small.

Corporate Social Responsibility in Small and Medium-sized Enterprises