Master of Science Thesis

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Master of Science Thesis

Empirical analysis of managerial perception of stakeholder’s pressure on a

sustainable development - management control system

By

Marylu Arlene Geerman S2993007

m.a.geerman@student.rug.nl

June 20th_{, 2017}

MSc: BA-Organizational and Management Control University of Groningen

Faculty of Economics and Business Academic year: 2016-2017

Words: 12086 (excluding references and appendices) Supervisor: dr. Joanna Gusc

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Abstract

Part of the vision of developing Aruba towards a sustainable island is linked to Aruban companies and the growing interest of stakeholders on sustainable development (SD) and corporate social responsibility (CSR). As CSR is becoming a norm, the question arises if CSR initiatives are accounted for within a management control system (MCS). Additionally, are the interests of stakeholders taken into account?

The present cross-sectional study is aimed at identifying the managerial perception of stakeholder’s pressure on sustainable development - management control system (SD-MCS) of Aruban companies. The questionnaire was sent to 4.735 companies and 111 complete responses were received. The objectives are to categorize the Aruban companies according to their level of SD-MCS adoption, identify key stakeholders associated with the adopted level of SD-MCS, and to identify and define the relationship between the perceived stakeholder’s pressure by managers, on Formal and Informal SD-MCS. Empirical evidence showed that 50% of the companies are “Performers”, 23% are “Indecisives” and 27% are “Passives” in adopting SD-MCS. The findings also showed that whether Aruban companies are categorized as Performers, Indecisives, or Passives of SD-MCS adoption, they would still perceive pressure from customer, employees, suppliers & distributors, competitors, scientific communities, communities, trade unions, and NGOs. Furthermore, the results indicate that as the adoption of Formal SD-MCS increases, greater pressure is perceived from NGOs and employees; meanwhile, less pressure is perceived from communities. Likewise, the higher the adoption of Informal SD-MCS, the greater the pressure is perceived from customers and employees. This study concludes that the relationship of the manager’s perceived pressure of stakeholders differs depending on the adoption level of SD-MCS and the two different formalities of SD-MCS.

Keywords:

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Acknowledgement

I would like to express my tremendous gratitude to my supervisor dr. Joanna Gusc for all her guidance and advice provided during the writing process of this master thesis. Additionally, to my co-assessor dr. H.J. Hilco van Elten for providing me with the survey necessary for my research. Likewise, I would like to thank dr. J.D. Hans van der Bij for his advice on the SPSS analysis. As well, to the Director of the Bureau of Innovation of Aruba who provided me with great insights useful for my research. Throughout the writing procedure I had to overcome many challenges, none of which could have been possible without the support of my family and friends, here in the Netherlands and in Aruba. I also want to show my gratefulness to the new friends I have made during this venture, who encouraged me endlessly with their positivism.

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1. Introduction

The Government of Aruba1_{has made headlines in the recent years by announcing the decision to} drive Aruba towards a more green and sustainable future. Since 2010, “Green Aruba2_{” has held} annual conferences to highlight their commitment and progress towards a sustainable Aruba. During the pilot interview with the Director of the Bureau of Innovation of Aruba3_{, it was emphasized that an} important aspect of this vision has to do with CSR of companies established on Aruba. The Director continues by stating that this is due to the growing interest of stakeholders around the island regarding this topic.

The “Green Corridor” project is one of the most recognizable projects of the vision for a more sustainable Aruba. The project involves the expansion, renovation and construction of the main road between Reina Beatrix airport and San Nicolas on the east end of the island. According to the minister of infrastructure, the construction of the “Green Corridor” will provide a positive boost to the infrastructure, social and economic situation on Aruba (Arubahuis, n.d.). However, there have been some concerns regarding the environmental consequences of the construction because, the construction intersects a large area of mangroves where different animal species live. Questions have been raised, whether the company responsible for the construction of the “Green Corridor” took necessary precautions regarding this issue and if so, whose concerns have been taken into account when setting up the precautionary measure. This brings one’s attention to CSR at company level in Aruba and the influence of company’s stakeholders.

There is continuous debate as to whether companies that adopt CSR are doing so because of their own goodwill, or because they can use it as a legitimacy tool to counter the scrutiny they might face from the general public for their other operational practices (Miller & Michelson, 2013). Therefore, as the concept of CSR is becoming a norm, more in-depth questions are starting to come forth e.g. how are these CSR initiatives integrated and accounted for within organizations strategies and operations? Are they part of a management control system? This has basically led to companies adopting new regulations under the pressure from stakeholders (Rodrigue, Magnan, & Boulianne, 2013).

As an organization, one should take the interest of stakeholders into account during strategic and operational decision-making processes (Park, Chidlow, & Choi, 2014). For example, in order to show commitment towards an objective such as CSR, environment or any similar matter, companies

1_{Aruba is an island located in the Caribbean area and is part of the Dutch Kingdom. Total population: 1}st_{qrt-2017 is 110,576. GDP: last}

recorded in 2011 at AWG 4.626 million. Currency: Florin: http://cbs.aw/wp/

2_{“Green Aruba conference was created in 2010 as a result of the vision of the Prime Minister of Aruba, Mike Eman, for a green and}

sustainable Aruba”. Green Aruba included the participation of renowned keynote speaker Al Gore and His Majesty King Willem Alexander: http://www.pmoaruba.com/vision/green-aruba-conference/

3_{Bureau of Innovation is part of the Ministry of General affairs, Sustainable development Innovation and Science. It was established during}

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should harmonize performance with stakeholder’s expectation (Gupta, 1994). As a result, companies act proportionally to the pressures that they receives and perceives from their stakeholders.

As such, this pressure is seen as a key element for the development of strategies (Berry & Rondinelli, 1998). Stakeholders are also becoming more interested in how environmental issues are measured, monitored and reported (Rodrigue et al., 2013).

Lueg and Radlach (2016) emphasized, that in terms of SD it remains a good intent unless organizations make valiant attempts to enforce it. Further, they argue that MCS is a fundamental tool for integrating strategies such as SD in the organization by covering its social, environmental and economic dimensions (Lueg & Radlach, 2016).

Durden (2008) has stated that there is limited information on “social responsibility issues and

social accounting from the perspective of how it should fit or align with an organization’s management control system” (Durden, 2008, p. 672). Additionally, Gond, Grubnic, Herzig & Moon

(2012) also stated that attention on the role of management control system supporting sustainability is scarce. Furthermore, while past researches considered customers as key stakeholder of an organization, a relatively smaller number of studies considered multiple stakeholders of an organization (Kumar, Rahman, & Kazmi, 2016).

This study attempts to bridge the gap between two-research domains: sustainable development and management control system, which led to researching: Sustainable Development-Management Control System (MCS) together with the perceived stakeholder’s pressure on SD-MCS.This aim leads to the following research question:

What is the relationship between the perceived stakeholder’s pressure and sustainable development management control system?

The objectives of this study are to (1) categorize Aruban companies according to their level of SD-MCS adoption, (2) identify key stakeholders associated with the adopted level of SD-MCS and (3) to identify the relationship between the perceived stakeholder’s pressure by managers on Formal and Informal SD-MCS of Aruban companies. The research may be of social relevance for many, including organizations, academics and practioners that are interested in the concept of MCS focusing on SD. Furthermore, I seek to shine light on the extent in which companies on Aruba incorporate SD and stakeholders in their management control practices, which is highly relevant for the Government of Aruba as part of their vision to become a sustainable island.

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2. Theoretical background

In this chapter literature on stakeholder identification, sustainable development, perceived stakeholder’s pressure, and management control system is discussed.

2.1 Stakeholder identification and sustainable development

Stakeholder identification is a central component of the sustainable development (SD) concept, and it leads to greater corporate accountability, as it is a vital aspect of SD management system (International Institute for Sustainable Development (IISD), n.d.). First of all, stakeholder is defined as “any group or individual who can affect or is affected by the achievement of the

organization's objectives (Freeman, 1984).

In 1995, Donaldson and Preston developed the Stakeholder model that conveys the message that all stakeholders are equal in regard to their relationship with the organization (Donaldson & Preston, 1995; Matuleviciene & Stravinskiene, 2015). In other words, there is no priority of one set of interest over another. The model identifies eight key stakeholders: governments, investors, political groups, customers, communities, employees, trade associations and suppliers (Donaldson & Preston, 1995). However, previous and proceeding literature have identified other stakeholders such as terrorists (Freeman, 1984), pressure groups and the general public (Carroll and Buchholtz, 2000; Clarkson, 1995), local communities (Neville et al., 2005; Post, Frederick, Lawrence & Weber, 1996), non-governmental (Gil-Lafuente & Paula, 2013; Post et al., 1996) and media (Henriques & Sadorsky, 1999; Neville, Bell & Menguc, 2005). Ultimately, stakeholders vary according to the industry, organization, geographic situation and specific problem they are situated in (Bailur, 2006; Gil-Lafuente & Paula, 2013; Mitchell, Agle, & Wood, 1997).

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Bebbington & Gray states: “Sustainable development and sustainability (and all their

underlying concepts) have been in existence for much of humankind’s history” (Bebbington & Gray,

2001, p. 559). There are various terminologies that are used synonymously to illustrate the same concept; for example, sustainable development, social responsibility (SR), CSR, and triple bottom line (Lueg & Radlach, 2016). Bowen (1953) defines SR as “the obligations of businessmen to pursue

those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society” (p.6). Whereas sustainable development has been defined

as “development that meets the needs of the present without compromising the ability of future

generations to meet their own needs” (United Nations World Commission on Environment and

Development (WCED), 1987, p. 8). Additionally, CSR is described in various forms, from maximizing profit of shareholders to economic, legal, ethical, philanthropic, and responsibilities to proper corporate citizenship (Carrol & Shabana, 2010; Jamali, 2008). Not surprisingly, there were many interpretations and definitions of CSR formulated throughout the years. The most often discussed CSR dimensions are: taking stakeholders’ points of view; social, economic and environmental dimensions (Triple bottom line— Elkington (1997)); and voluntary application (Witkowska, 2016).

Durden’s (2008) findings indicate that there is a need to develop a comprehensive articulation of goals in order for an organization to be managed ethically, with respect to the identified stakeholder groups (Durden, 2008). Likewise, many researchers highlighted the necessity to identify and analyze stakeholders for organizations as effective relation management that ensures the success of organization and the satisfaction of stakeholders (Matuleviciene & Stravinskiene, 2015). Hence, with a stakeholder analysis one could identify all necessary parties that directly or indirectly affect one’s business operation. The analysis “sets out issues, concerns and information needs of the

stakeholders with respect to the organization’s sustainable development activities” (IISD, n.d., p. 5).

Based on extensive research, Kumar et al. (2016) identified fourteen key stakeholders.

2.1.1 Identified stakeholders

The following section discusses the relevancy of each stakeholder for an organization and how the stakeholders relate to (un) sustainable activities.

Customer: has the ability to exert pressure by going against organizations’ irresponsible

practices (Lindgreen, Swan, & Johnson, 2009). Thus, organizations are challenged to operate according to the values of the society in which they operate in order to attract and retain customers or else they may lose customers to competitors (Park et al., 2014).

Community: Organizations’ actions should reflect objectives and values of our society

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community’s well being and for protecting the environment in which they are operating in (Sarkis & Daou, 2013).

Employees: are often neglected as a key and integral stakeholder group. It is important that the organizations have policies and practices that are related to their psychological and physiological well-being. These actions focuses on employees and thus may lead to increase perceived internal respect of employees towards the company (Hameed, Riaz, Arain, & Farooq, 2016).

Unions: re-enforce internal actions of CSR by supporting improved work-life balance, better

child care facilities and flexible working arrangements which might have a positive effect on employee’s motivation, retention and recruitment (Šontaitė-Petkevičienė, 2015; Boodoo, 2016). However, these activities must be done gradually as employees tend to become resistant and overwhelmed by radical change (Lueg & Radlach, 2016).

Top management (senior management level): must support organization’s activities for it to

be a long-term and sustainable commitment. Research also shows that by engaging in CSR activities top management may strengthen the company’s reputation, which has led to CSR to become one of the most important strategic practices for top managers in terms of reputation building (Šontaitė-Petkevičienė, 2015).

Media: The way media handles the channels of communication with society cannot be

ignored (Tixier, 2003). Deterioration in public relations frequently causes serious damage to companies and hinders financial returns (Park et al., 2014).

Suppliers and distributors: It is important to work with suppliers and distributors that offer

fair trade products where the product is produced under the proper standard production process, benefits of trade, and good working conditions for employees, where environmental stress is reduced, and to meet the needs of humanity (Strong, 1997). The supplier and distributor of a company cannot be perfectly observed by the consumer; therefore it is important to maintain trust within the supply chain in order to lessen the possibility of damaging your reputation as a company (Saak, 2016).

Government: According to Singhal (2014), the government can function as a facilitator,

broker, warrantor, and regulator. As a facilitator, tax incentives, penalties or easy access to information could be provided in order to promote responsible practices that lead to social and environmental improvements. As a broker, the government can partner up with businesses and other stakeholder groups to tackle complex social and environmental challenges. And, a warrantor relates to the official policy documents, specific indicators, guidelines systems and standards (Singhal, 2014).

Regulator: As a regulator, the government can set up laws, regulation, penalties and

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companies (Park et al., 2014).

Shareholders: Monetary concerns are not the only importance for shareholders. Shareholders

have an important role to CSR as well because: “once shareholders engagement with CSR, started to

become a social movement, new infrastructure (laws, institutions, services) and reframing of what is considered to be acceptable investor behavior opened up more connections with CSR” (Glac, 2010, p.

23).

Competitors: An organization may have a high level of monopoly power but it can be

weakened due to entry of new and more dynamic competitors. Thus, it forces one to strategize because the lack of power in a highly competitive environment may force one out of business (Gond et al., 2012). In order words, continuous strategizing and investing in CSR initiatives is essential as it enables the organization to occupy the position of a market leader in its field as competitive advantage is prolonged (Sarkis & Daou, 2013). Thus, the changes in the competitors’ environmental strategies create uncertainty for one’s business (Pondeville, Swaen, & Rongé, 2013).

Non-Governmental Organizations (NGOs): NGOs activism is considered as the major

cause of ethical fairness in management and production of goods and services. The NGOs fight against irresponsible businesses and towards the development of responsible and sustainable business practices in order to motivate businesses to modify their strategies and policies (Arenas, Lozano, & Albareda, 2009; Imbun, 2007). Just as with communities, organizations are under the scrutiny of NGOs as well (Park et al., 2014).

Financial institution: Financial institution can either worsen or improve a country’s

economy financially and therefore the demand for them to act in a responsible and ethical manner is increasing. They expect to conduct sustainable business practices when doing business with others (Darusa, Mad, & Nejati, 2015).

Science community: Science is essential to meet the challenges for sustainable development.

Broad understanding of science ranging from natural sciences to engineering to social sciences and the humanities is required for sustainable development. It lays the ground for new methods, explanations and technologies to recognize, clarify and take on global challenges for the future (Scientific Advisory Board of the UN Secretary‐General, 2014).

2.2 Perceived stakeholder’s pressure

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stakeholders (Durden, 2008). Yet, Pondeville et al. (2013) argue that what actually matters is the managers’ perception of stakeholder pressures as this will determine the role of stakeholders in the development of corporate strategy and practices. Adding to that, Rodrigue et al. (2013) argue that when selecting environmental performance indicators (EPI) management must consider stakeholders’ concerns and society's expectations. Yet, it may be that the company or managers perceive each individual stakeholder’s influence differently. In their study they discuss four ways to perceive stakeholder’s influence, namely (1) mediated influence (2) direct pressure (3) joint effort and (4) environmental performance benchmarking. Similarly, in their study of “Sustainability marketing strategy”, Kumar et al. (2016) analyzed and evaluated managerial perception of influence of stakeholders and the results indicated that manager’s perception of the influences of stakeholders is significantly associated with differences in levels of adopting sustainability marketing practices (Kumar et al., 2016). Hence, there is a possibility that managers may base the identification of a stakeholder on the amount of perceived stakeholder’s pressure.

2.3 Management control system (MCS)

The SD concept needs to be integrated into policies and processes of a company if it is to follow SD principles. However, new methods do not necessarily need to be invented, but a new cultural orientation and an extensive refinement to systems, practices and procedures needs to be undergone in order to apply and fulfill SD principles (IISD, n.d.). Supporting this, Durden (2008) claims that in order to keep track if organizations are operating according to the SD goals developed, an organization needs to have a management control system in place (Durden, 2008); which shows that the organization is making a valiant attempt in regards to SD, instead of only having it as a good intent (Lueg & Radlach, 2016).

MCS are “systems, rules, practices, values and other activities management put in place in

order to direct employee behavior” (Malmi & Brown, 2008, p. 290). It is also seen as a system that

collects and utilizes information of performances of various organizational recourses e.g. human capital, and monetary capital. It evaluates the organization as a whole, taking into account the organizational strategies (Armesh, Salarzehi, & Kord, 2010). According to Gond et al. (2012), traditional MCS e.g. strategic planning, budgeting, financial measurement system, evaluation and rewards, were developed to align organizational and behavioral structure with the intention to improve economic performance. It seems that these MCS focuses on the interest of shareholders, leaving behind other stakeholders as well as environmental and social issues. However, recent research has indicated that non-financial information is equally important as financial information for strategy development and implementation (Gond et al., 2012).

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formal, information-based routines and procedures that managers use to maintain or alter patterns in organizational activities, specifically concerning the environmental aspects of organizational performance” (Pondeville et al., 2013, p. 318). Considering that organizations have multiple

objectives, they adopt MCS in order to align all of these objectives in one place (Lueg & Radlach, 2016). Finally, Durden (2008) argues that MCS is steered by two formalities, the formal and informal control.

2.3.1 Formal management control system

First of all, involving employees in the SD processes can exert control, which can also be an opportunity for employees to take over responsibility and accountability for performance (Meyer, 1994). Each organization has an ideal type of system related to the institutional structures referring to the governance structure of a company (Marrewijk, 2004).

Formal controls reflect rules, performance evaluation, rewards criteria, and budgeting systems to control results through feedback systems (Langfield-Smith, 1997; Norris & O'Dwyer, 2004). It acknowledges the importance of precise measures and of systematic monitoring of socially responsible practices (Durden, 2008). Environmental procedures, rules and integration of objectives into planning system are common mechanisms to integrate with EMCS. This will endorse environmental performance by ensuring that environmental criteria are integrated with decision-making (Pondeville et al., 2013). However, these mechanisms only forms part of control if it creates goal congruence and reinforce employees’ commitments of these plans (Malmi & Brown, 2008). Continuing, the planning system can be split into action planning which has a tactical focus and long-range planning which has a strategic focus (Malmi & Brown, 2008). Other mechanism has also been identified e.g. the inclusion of environmental performance indicators in reward systems, external environmental communication and conducting audits in order to compare results to objectives (Pondeville et al., 2013). The latter, also reflects more or less the concept of cybernatic control introduced in the past and defined as “a process in which a feedback loop is represented by using

standards of performance, measuring system performance, comparing that performance to standards, feeding back information about unwanted variances in the systems, and modifying the system’s comportment” (Green & Welsh, 1988, p. 289).

2.3.2 Informal management control system

The informal control refers to unwritten policies of the organization, which is often derived from artifact of the organizational culture and therefore not consciously designed (Langfield-Smit, 1997). Furthermore, it includes high levels of professional and cultural controls (Cravens, Lassk, Low, Marshall, & Moncrief, 2004). According to Durden (2008) informal control acknowledges how formal control and monitor should be embedded in the organizational culture e.g. “the formal

organizational mission or objectives may reflect the values and beliefs of the dominant culture”

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less observable and revolves around beliefs, shared values, norms, cultures and self-control.

Informal control is considered to be an important aspect of MCS, more importantly; the effectiveness of formal control is reliant on the nature of informal control in place (Langfield-Smit, 1997). Furthermore, Norris and O’Dwyer (2004) found that informal controls have dominant influence on employee behavior. They argue that the employee’s personal values have a perceived congruence with the culture of the organization (Norris & O'Dwyer, 2004). Moreover, it serves as an important orientation to guide the focus of employees towards strategic and operating goals (Durden, 2008). Likewise, Pondeville et al. (2013) discusses the importance of an informal EMCS. It promotes employee and top management engagement as it serves as support for managers and employees by trusting the participation of employees, involvement of the managers and teamwork to solve difficulties. It allows the involvement and participation of employees in environmental decisions and thus are part of a continuous performance improvement. It enables managers to create an environment where they stimulate the idea that environmental performance is fundamentally the responsibility of the employees (Pondeville et al., 2013).

2.4 Conceptual Model

In this section a brief summary of the literature discussed is given together with the formulated hypotheses.

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H1: There is a relationship between perceived stakeholders pressure by managers and Formal Sustainable development-management control system

H2: There is a relationship between perceived stakeholders pressure by managers and Informal Sustainable development-management control system

Figure 14_{shows the two main concept of this research namely the perceived stakeholders} pressure and SD-MCS. The conceptual model illustrates the main relationships examined within this research. Next to these two relationships, this study also examines the adoption level of SD-MCS and analyzes if there are stakeholders associated to these adoption levels.

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3. Methodology

In this chapter the specific steps taken to carry out the research is described. A pilot interview will be conducted with the Director of Bureau of Innovation of Aruba (DR5_{), which serves as a} starting point for this study. In order to perform this research a theory testing approach is taken. Theory-testing process is suitable for companies who are faced with a business phenomenon that has not been fully addressed by the academic (Aken, Berends, & Bij, 2012). The details of the instrument development, sample selection and description and the concept measurements are presented in the following sections.

3.1 Data collection – Instrument development

The primary data will be collected through a survey tool in the form of a questionnaire. For this study only a part of the pre-existing questionnaire is used. The pre-existing questionnaire is developed during previous research at the University of Groningen. The benefit of using an existing survey is that one does not have to develop a complete new concept and that the questions have confirmed validity and reliability. However, using pre-existing questions may indicate lack of originality in the academic and research world (Hyman, Lamb, & Bulmer, 2006). The pre-existing survey is based on extensive review of environmental management literature conducted by Pondeville et al. (2013). However, within this study the focus will be on Informal and Formal SD-MCS. Furthermore, the list of stakeholders stated within the pre-existing questionnaire will be adapted to a more comprehensive list based on Kumar et al. (2016). The measurement items of this study are found in Appendix A.

The questionnaire (Appendix B) will be administrated through Qualtrics, an online survey tool. The advantages of using an online tool are that there is no need to transfer the data received from paper based to a spreadsheet. Furthermore, you can access wider potential respondents at the same time. However, when using an online tool it is difficult to confirm who filled in the questionnaire (Wilson & Sharples, 2015). Since sample population will be companies on Aruba making use of Qualtrics is the most convenient tool for this study.

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3.2 Data collection – Sample

A complete company listing is purchased at Aruba Chamber of Commerce and Industry that encompasses 16329 companies registered on Aruba with details such as branch, address and contact information. Not all companies provide contact information, thus, a convenience sampling will be used based on companies that provide email contact information of either the director or the owner. According to Khalid, Hilman, & Kumar (2012) convenience sampling, sample of units or people is obtained, who are most conveniently available. This sampling method reduces the sample size to 4735 companies. The questionnaire will be send to companies registered in Aruba, across different industries making it a cross-sectional study. In total three reminders are sent after the original email and after five weeks the survey is officially closed (22/03/2017 to 27/4/2017).

3.3 Data- Measurements & analysis

The concepts measured are based on the conceptual model provided in 2.4. The measurements for both concepts are performed according to methods followed by Pondeville et al. (2013) and Kumar et al. (2016).

3.3.1 Sustainable development management control system

The measure of SD-MCS includes seven statements (items) for the Informal SD-MCS and nine items for the Formal SD-MCS (Appendix A). These items are based on Pondeville et al. (2013) research. They are measured on a five-point Likert scale (1 = “strongly disagree” to 5 = “strongly agree”). Likert scale is suitable to measure participants’ perception on a specific statement (Cooper & Schindler, 2011).

Following the steps of Kumar et al. (2016) and Pondeville et al. (2013) an exploratory factor analysis (EFA) will be performed to remove unnecessary items. Solutions extracted from the EFA should retain all of the important information from the original data while removing unnecessary or redundant information such as sampling, and measurement errors (Matsunaga, 2010). Kaiser’s criterion is followed within the EFA (Pallant, 2001). Furthermore, based on varimax rotation, factor loadings above 0,4 are used for the factor groupings. At last, each factor is tested for reliability.

Continuing, a descriptive statistic analysis of the remaining items will be conducted; in order, to highlight the level of SD-MCS adoption. Furthermore, the combined score of the remaining items of both informal and formal SD-MCS. SD-MCS will be subject to cluster analysis using non-hierarchical K- means; where K is three. This is performed in order to segregate the companies as

Performers, Indecisives and Passives of SD-MCS adoption (objective 1). The cluster labels are based

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A follow up ANOVA test is performed to identify if each SD-MCS practices contribute to the clustering. Furthermore, the cluster analysis can be seen as complementary to factor analysis as it groups cases based on the variables of interest and thus is useful to manage and organize data (Antonenko, Toy, & Niederhauser, 2012). Finally, in order to verify the results of the cluster analysis, a discriminant analysis is performed as suggested by Kumar et al., (2016).

3.3.2 Perceptions of stakeholder pressures

This concept included 14 items based on Kumar et al. (2016) (Appendix 4), which are measured on a five-point Likert scale (1 = “no influence” to 5 = “very high influence”). The perceived stakeholder pressures by managers are measured on both the Formal and the Informal SD-MCS. An EFA, reliability test and a descriptive analysis are conducted as described above. Finally, an ANOVA test is conducted to identify and analyze if individual stakeholders are associated with SD-MCS adoption (objective 2).

3.3.3 Hypothesis

In order to test the hypotheses a multiple regression analysis will be performed. This is a statistical technique used to analyze the relationship between several independent (predictors) variables and a single dependent (criterion) variable (Park et al., 2014). The respective perceived stakeholder’s pressure serves as independent variables and the dependent is the average of Formal SD-MCS and Informal SD-MCS; meaning, there are two-regression analysis (objective 3). As a precaution, a correlations analysis between the variables is performed first in order to confirm the non-existence of Multicollinearity. Multicollinearity arises when two or more highly correlated variables are assessed simultaneously in a regression model, which may lead to unstable p-values for assessing the statistical significance of predictors, resulting into untenable interpretation (Vatcheva, Lee, McCormick, & Rahbar, 2016). Furthermore, as an extra step, the variance inflation factor (VIF) test is run to more precisely test the level of multicollinearity among the variables (Park et al., 2016).

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4. Analysis and Results

The pilot interview provided insights on the current stage of SD and CSR in Aruba. The main take away from the interview was that Aruba is in the development stage of raising awareness on SD, CSR, and related matters due to the rising interest of the stakeholders around the island. Furthermore, the department would like to have a better overview of “who does what”-DR in regard to CSR and SD. In this section both the analysis and results of the research are described. To start of, the descriptive of the respondents are presented followed by with the analysis and results of SD-MCS as well as the managerial perception of stakeholder’s pressure. The chapter is finalized with the results on H1 and H2.

4.1 Respondents

The sample population was reduced to 4735 companies (section 3.2). The “Download history distribution” tool of Qualtrics was used, which indicatedthat respondents were eliminated due to 587 duplicated emails, emails that bounced back (817) and where respondents immediately “opted out” (38). This has made the population size 3293. Out of the 3293 potential respondents, 153 were recorded as “Partially Completed Survey” (unusable) whilst (n=111) did complete the survey and the rest 3029 did not open or acknowledge the email. Thus out of 264 respondents that opened the survey, gave a completion rate of N= 42.04%.

The amount of “Partially Completed Survey” raised the question of “Why” they did not complete the questionnaire. Therefore, another email was sent specifically to this group, where respondents could answer openly and express the reason for the incompleteness of the questionnaire. In total six responses were received, Table 1.

Table 1: Partially Completed response

Respondents Reason for incompleteness of the questionnaire

R_1 "Sole proprietorship/trader I don't have any employees" R_2 "Don' t remember, did not know the answer"

R_3 "I filled it in completely, I do not know what may have happened" R_4 "As far as I am concerned I have completed the survey" R_5 " Did not feel comfortable sharing"

R_6 "Did not match with the operation of the business"

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non-respondents, meaning that late responders are similar to non-respondents (Welch & Barlau, 2013). Therefor, a comparison was made between the early 45 respondents and late 21 respondents in order to evaluate non-response bias. Under the early respondents are those who filled in the questionnaire after the original email was sent and under late respondents are those who filled in after the last reminder was sent. The results of the independent-samples t-test revealed no significant differences between early and late respondents (all p > 0.05) variable responses except for one variable. The perceived pressure of competitors by managers on Formal SD-MCS response significantly differs between early and late respondents; early (M= 2.73, SD=1.031) and late (M=2.19, SD=0.928) conditions; t (64)=2.054, p=0.044.

Table 2 contains a summary of the descriptions of the respondents based on industry sector, size and when the company was founded. Companies from the service sector, together with companies across multiple and other6_{sectors made up the majority of the sample by (75.6%).} Furthermore, the majorities of the companies were small business with 1-10 employees (61.3%) and existed for more than 10 years (57.7%).

Table 2: Descriptions of the respondents

Industry Frequency Percent Size (number of

employees) Frequency Percent

Agriculture, forestry and fishing 2 1.8 1-10 68 61.3 Construction 6 5.4 11-49 24 21.6 Wholesale trade 1 .9 50-99 9 8.1 Transportation, communication, electric, gas, and sanitary services

1 .9 More than 100 10 9.0

Retail trade 11 9.9 Total 111 100.0

Finance, insurance,

and real estate 4 3.6

Services 30 27.0 Company founded Frequency Percent

Public administration 2 1.8 0-5 years ago 35 31.5

Other 36 32.4 6-10 years ago 12 10.8

Multiple 18 16.2 More than 10 years

ago 64 57.7

Total 111 100.0 Total 111 100.0

4.2 Concept measurements

In this section the analysis and results of SD-MCS and perceived stakeholders pressure are discussed.

6_{Respondents that considered themselves as “Others” on the questionnaire indicated that they belong amongst others to the Marketing,}

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4.2.1 Sustainable development management control system

The EFA given in Table 3 suggested removing statement related to the discussion of SD in meetings (IMC_5) and related to work teams being built to handle SD issues (IMC_7).

Table 3: Exploratory factor analysis and Reliability test on SD-MCS (N=111)

Sustainable Development- Management Control System (SD-MCS)

Raw Rescaled Component Component Formal SD-MCS Informal SD-MCS Formal SD-MCS Informal SD-MCS Formal SD-MCS

FMC_9: Our organization has procedures of external sustainable development

communication 1.084 .882

FMC_8:Our organization has detailed description of sustainable development

functions 1.155 .877

FMC_7: Our organization has well-documented sustainable development rules

and procedures 1.078 .850

FMC_2: Our organization integrates sustainable development performance

indicators in compensation/rewarding system 1.000 .798 FMC_3: Our organization integrates sustainable development performance

indicators in promotion/career advancements .949 .793 FMC_6: Our organization provides environmental and/or social information of

employees (such as, diversity information) .946 .770 FMC_5: Our organization compares the actual results of sustainable

development to the sustainable development objectives .784 .714 FMC_1: Our organization integrates sustainable development objectives in the

planning system .589 .631

FMC_4: Our organization integrates sustainable development criteria in the

investment decisions .473 .487

Informal SD-MCS

IMC_3: All employees are encouraged to make suggestions in the field of

sustainable development in our organization .985 .903 IMC_2:All employees are encouraged to make suggestions to improve the

sustainable development of our organization’s primary products/services .960 .898 IMC_1: All employees are encouraged to make suggestions to improve the

sustainable development of our organization’s primary process 1.018 .886 IMC_6: Managers have enough freedom to manage sustainable development

issues in our organization .778 .732

IMC_4: The management team is involved in the sustainable development

management process of our organization .701 .713 Extraction Method: Principal Component Analysis.

Rotation Method: Varimax with Kaiser Normalization.a

a. Rotation converged in 3 iterations.

SD- MCS Number of items Cronbach’s alpha Cronbach's Alpha Based on

Standardized Items

Formal SD-MCS 9 α=0.926 α=0.925

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A two-factor structured that comprised the Informal MCS (five items, α=0. 910) and Formal SD-MCS (nine items, α= 0.926) was produced. The measure of sampling adequacy Kaiser-Meyer-Olkin was value at 0.896, which indicates sufficient inter-correlations, as the recommended value is 0.6 (Kaiser, 1974). Furthermore, the Barlett’s test of Sphericity was also found significant (χ2 = 1,203.741, p =0.000) supporting the factorability of the correlation matrix. At last, both factors have a Cronbach’s coefficients above 0.7, suggesting high reliability of the factors.

Continuing, a descriptive statistics analysis was done in order to identify which practices the respondents, Table 4, adopt the most or the least. In general the Informal SD-MCS shows higher values compared to Formal SD-MCS, which means that Aruban companies lean more towards to adoption of Informal SD-MCS as compared to the Formal SD-MCS. It also indicates that within the Informal SD-MCS, the practice of having the management team being involved within SD process (IMC_4) is the most common amongst the respondents (M=4.32, σ =0.983).

Table 4: Descriptive statistics on SD-MCS

N Min. Max. Mean Std. Deviation

Formal SD-MCS

FMC_1: Our organization integrates sustainable

development objectives in the planning system 111 1 5 3.96 .933 FMC_4: Our organization integrates sustainable

development criteria in the investment decisions 111 1 5 3.90 .972 FMC_5: Our organization compares the actual results of

sustainable development to the sustainable development objectives

111 1 5 3.71 1.099

FMC_3: Our organization integrates sustainable development performance indicators in promotion/career advancements

111 1 5 3.36 1.197

FMC_2: Our organization integrates sustainable development performance indicators in compensation/rewarding system

111 1 5 3.29 1.253

FMC_6: Our organization provides environmental and/or social information of employees (such as, diversity information)

111 1 5 3.27 1.228

FMC_7: Our organization has well-documented sustainable

development rules and procedures 111 1 5 3.14 1.268 FMC_8: Our organization has detailed description of

sustainable development functions 111 1 5 3.05 1.317 FMC_9: Our organization has procedures of external

sustainable development communication 111 1 5 3.02 1.228

Informal SD-MCS

IMC_4: The management team is involved in the sustainable

development management process of our organization 111 1 5 4.32 .983 IMC_2: All employees are encouraged to make suggestions

to improve the sustainable development of our

organization’s primary products/services 111 1 5 4.14 1.069 IMC_1: All employees are encouraged to make suggestions

to improve the sustainable development of our

organization’s primary process 111 1 5 4.09 1.149 IMC_6: Managers have enough freedom to manage

sustainable development issues in our organization 111 1 5 4.08 1.063 IMC_3: All employees are encouraged to make suggestions

in the field of sustainable development in our organization 111 1 5 4.03 1.091

Valid N (listwise) 111

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On the contrary, encouraging employees to make SD suggestion is less common (IMC_3, M=4.03, σ =1.091). Meanwhile, within the Formal SD-MCS the practice of integrating SD objectives in planning system was the most common (FMC_1, M=3.96, σ= 0.933)whilst the practice of external sustainable development communication is less common (FMC_9, M=3.02, σ =1.228) amongst the respondents. Moreover, the respondents had difference in opinion in statements related to the description and documentation of SD (FMC_8, σ = 1.317 & FMC_7; σ = 1.268). In general, it is noticeable that the respondents adopts Informal SD-MCS to some extend meanwhile; the adoption of Formal SD-MCS is neutral.

The next step was to indicate the level of adoption of SD-MCS based on the respondents. With K=3 and after five iterations, the cluster analysis yielded three clusters, Table 5.

Table 5: SD-MCS Clusters

SD-MCS Practices Cluster

Performers (N=56) Indecisives (N=25) Passives (N=30)

IMC_1: All employees are encouraged to make suggestions to improve the

sustainable development of our organization’s primary process ₅ ₃ ₄ IMC_2: All employees are encouraged to make suggestions to improve the

sustainable development of our organization’s primary products/services ₅ ₃ ₄ IMC_3: All employees are encouraged to make suggestions in the field of

sustainable development in our organization 5 3 4

IMC_4: The management team is involved in the sustainable development management process of our organization

5 4 4

IMC_6: Managers have enough freedom to manage sustainable development

issues in our organization 5 3 4

FMC_1: Our organization integrates sustainable development objectives in

the planning system 4 4 3

FMC_2: Our organization integrates sustainable development performance indicators in compensation/rewarding system

4 3 2

FMC_3: Our organization integrates sustainable development performance

indicators in promotion/career advancements ₄ ₃ ₂

FMC_4: Our organization integrates sustainable development criteria in the

investment decisions 4 4 3

FMC_5: Our organization compares the actual results of sustainable

development to the sustainable development objectives ₄ ₄ ₃ FMC_6: Our organization provides environmental and/or social information

of employees (such as, diversity information)

4 3 2

FMC_7: Our organization has well-documented sustainable development

rules and procedures 4 3 2

FMC_8: Our organization has detailed description of sustainable

development functions 4 3 2

FMC_9: Our organization has procedures of external sustainable

development communication 4 3 2

Mean 4,357 3,286 2,929

Valid N (listwise) 111

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The clusters were labeled as “Performers,”, “Indecisives” and “Passives” based upon the highest to the lowest average of the clusters as indicated by Kumar et al. (2016).

An ANOVA test (Appendix C) was used to check the relative importance of each SD-MCS practices to the cluster solution (Kumar et al., 2016). For each SD-MCS practice, the ANOVA F values were found significant (p < 0.01). This means that every SD-MCS practice successfully contributes towards segregating SD-MCS adoption of the Aruban companies. The integration of SD performance indicators with compensation contributed the most (FMC_2; F=74.657) while the integration of SD in investments decision contributed the least (FMC_4; F=13.033).

Furthermore, a discriminant analysis (Appendix D) was conducted in order to evaluate the discriminatory power of the cluster analysis. To assess the model fit, Wilks’ lambda statistic for first discriminating function was considered (Kumar et al., 2016) and was found to be significant (p=0.000) with 12.1% of the variance not explained by the difference among clustered groups. Furthermore, that 97.3% of the responses were correctly classified. According to Kumar et al., (2016) the results ensure both the stability and the quality of the cluster analysis. These cluster are used in the following section to identify if there are stakeholders associated the adopted level (cluster types) of SD-MCS.

Figure 2 shows that half of the Aruban companies are considered as performers in adopting SD-MCS, 23% are unsure whether to adopt or not and 27% of the companies are not interested in adopting SD-MCS. Furthermore, majority of the companies coming from the “Service” (30.35%) and “Others” (30.35%) industry were part of the Performers. Likewise, companies within the “Other” (40%) was the largest within the Indecisives, meanwhile, “Services” (33.3%) companies formed the largest part of the Passives as well (Appendix E).

4.2.2 Perception of stakeholders pressure

The EFA suggested removing the group of Regulators to produce a 13 factor structured that comprised out the rest of the stakeholders. The measure of sampling adequacy Kaiser-Meyer-Olkin

50% 23% 27% Performers=56 companies Indecisives=25 companies Passives=30 companies

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was value at 0.782, which indicates sufficient inter-correlations. Furthermore, the Barlett’s test of Sphericity was also found significant (χ2 = 2144.334, p =0.000) supporting the factorability of the correlation matrix. At last, all factors have a Cronbach’s coefficients above 0.7, suggesting high reliability (Appendix F).

Top management, Employees and Shareholders are the three top stakeholders on average to have between moderate to high influence on SD-MCS according to the Aruban companies, Table 6. On the other hand, the bottom three stakeholders were Financial Institution, NGO and Trade unions are considered to have no to low influence on SD-MCS.

Table 6: Descriptive statistics on stakeholders

Descriptive Statistics

M=Mean N Minimum Maximum Mean Std. Deviation Top management_M 111 1.00 5.00 3.860 1.120 Employees_M 111 1.00 5.00 3.324 1.174 Shareholders_M 111 1.00 5.00 3.247 1.324 Customers_M 111 1.00 5.00 3.207 1.168 Governments_M 111 1.00 5.00 2.986 1.281 Communities_M 111 1.00 5.00 2.842 1.163 Competitors_M 111 1.00 5.00 2.689 0.997 Mass media_M 111 1.00 5.00 2.675 1.060 Scientific communities_M 111 1.00 5.00 2.590 1.283 Suppliers & Distributors_M 111 1.00 5.00 2.572 1.050 Financial institutions_M 111 1.00 5.00 2.504 1.112 NGOs_M 111 1.00 5.00 2.436 1.198 Trade unions_M 111 1.00 4.00 1.792 0.945 Valid N (listwise) 111

Notes: 1= No influence, 2=Low influence, 3=Moderate influence, 4=High influence, 5=Very high influence

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compared to the rest of the significant stakeholders. On the contrary, companies who are unsure whether to adopt SD-MCS perceived the pressure more from the community (M=2.960).

Table 7: Descriptive analysis and ANOVA analysis between stakeholders and SD-MCS clusters (N=111)

Performers – 56 companies Indecisives – 25 companies Passives – 30 companies Stakeholders_MA _M _σ _M _σ _M _σ _{ANOVA F} _p Customers_M 3.661 1.000 2.940 1.054 2.583 1.225 10.769 .000** Employees_M 3.857 0.923 2.880 1.102 2.700 1.222 14.723 .000** Suppliers & Distributors_M 2.893 0.999 2.480 0.941 2.050 1.037 7.124 .001** Competitors_M 2.911 0.895 2.760 0.948 2.217 1.088 5.171 .007* Scientific communities_M 2.857 1.253 2.720 1.347 1.983 1.110 5.040 .008* Communities_M 3.071 1.002 2.960 1.249 2.317 1.242 4.549 .013* Trade unions_M 2.018 1.004 1.680 0.900 1.467 0.765 3.729 .027* NGOs_M 2.670 1.141 2.500 1.199 1.950 1.199 3.743 .027* Mass media_M 2.857 1.030 2.700 0.968 2.317 1.133 2.618 .078 Financial institutions_M 2.714 1.070 2.300 1.010 2.283 1.230 2.048 .134 Top management_M 3.991 0.961 3.620 1.157 3.817 1.349 .979 .379 Shareholders_M 3.357 1.327 3.120 1.236 3.150 1.415 .385 .682 Governments_M 3.045 1.161 2.960 1.282 2.900 1.517 .129 .879

Notes: M= Mean, σ = Standard deviation, *p<0.05, **p<0.01,Green=Highest significant mean, Orange=Lowest significant mean

A: The cluster analysis was based on both Formal and Informal SD-MCS practices together and therefore the average of (stakeholder_1 + stakeholder_2) was used for this analysis.

4.3 Hypotheses

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Table 8: Multiple regression results Formal and Informal SD-MCS (N=111)

Formal SD-MCS Informal SD-MCS

Betac _t _Sig. _VIF _Betac _t _Sig. _VIF

(Constant) 6.315 .000 (Constant) 8.439 .000 Employees_2B _.356 _2.775 _.007* _2.455 _{Employees_1}A _.582 _5.125 _.000** _1.976 Communities_2 -.302 -2.025 .046* 3.326 Customers_1 .246 2.297 .024* 1.756 NGOs_2 .256 2.002 .048* 2.443 Shareholders_1 -.214 -1.971 .052 1.806 Scientific communities_2 .197 1.776 .079 1.837 Financial institutions_1 .197 1.806 .074 1.824 Customers_2 .186 1.687 .095 1.809 Suppliers &

Distributors_1 -.139 -1.292 .199 1.779 Suppliers &

Distributors_2 .202 1.651 .102 2.245 Top

management_1 -.141 -1.192 .236 2.131 Trade unions_2 -.076 -.713 .477 1.678 Communities_1 -.118 -.946 .347 2.368 Top

management_2 -.070 -.560 .577 2.368 Mass media_1 -.096 -.945 .347 1.580 Financial

institutions_2 -.063 -.543 .589 2.025 Trade unions_1 .091 .862 .391 1.695 Governments_2 -.043 -.411 .682 1.633 NGOs_1 .091 .860 .392 1.707 Mass media_2 .042 .401 .690 1.672 Governments_1 .060 .589 .557 1.570 Competitors_2 .025 .219 .827 1.977 Competitors_1 -.017 -.162 .871 1.761 Shareholders_2 .012 .116 .908 1.701 Scientific communities_1 -.014 -.134 .893 1.721 R2 _.364 _R2 _.367 Adjusted R2 _.277 _{Adjusted R}2 _.282 F 4.187 F 4.321 Durbin-Watson 2.112 Durbin-Watson 1.768

Notes: *p<0.05, **p<0.01; A=_1:Perceived stakeholder’s pressure on Informal SD-MCS; B=_2:Perceived stakeholder’s pressure on Formal SD-MCS, C=standardized coefficients Red= Negative Beta

The stakeholders within the Formal SD-MCS significantly accounted for 36.4% variability in the adoption of Formal SD-MCS practices. The proposed model was found to be statistically significant (F=4.187, p=0.000). At last, the Durbin–Watson index was 2.112, which lies within the “no autocorrelation problem in the data” range of 1.50 to 2.50 (Kumar et al., 2016). The first

hypothesis predicted that there is a relationship between the perceived stakeholders pressure by

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The stakeholders within the Informal SD-MCS significantly accounted for 36.7% variability in the adoption of Informal SD-MCS practices. The proposed Informal SD-MCS model was found to be statistically significant (F=4,321, p=0.000). At last, there is no autocorrelation problem within the data. The second hypothesis predicted that there is a relationship between the perceived stakeholders pressure by managers and the adoption of Informal SD-MCS. This is true for customers and employees. The manager’s perceived pressure of customers is significantly related to the adoption of Informal SD-MCS at a significance level of p<0.05. Similarly, the perceived pressure of employees is highly significant on the adoption of Informal SD-MCS practices at a significance level of p<0.01. Out of these two stakeholder groups, the perceived pressure of employees has the leading affect on the adoption of Informal SD-MCS (B=0.582). Based on the above, one can conclude that H2 is supported for customer and employees.

Finally, as the analysis are based on the perceived stakeholder’s pressure on Informal and Formal SD-MCS one cannot interpret and relate the results with the analysis done in Table 7, as the latter is based on both type of perceived stakeholder’s pressure combined. Consequently, an extra analysis was performed.

4.4 Extra analysis: Multiple regression on SD-MCS

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5. Discussion

The research question of this paper is: What is the relationship between the perceived

stakeholder’s pressure and sustainable development management control system? The main findings

showed that the relationship of the perceived pressure of stakeholders by managers differs depending on the adoption level of SD-MCS and the two different formalities of SD-MCS. The perceived pressure of customers, employees, suppliers & distributors, competitors, scientific communities, trade unions and NGOs are associated with the level of SD-MCS adoption. However, when taking Formal SD-MCS into account, it shows there are only a positive relationship between the perceived pressure of the NGOs and employees; and a negative relationship with the communities. Finally, the Informal SD-MCS only has a positive relationship with customers and employees.

The present study identifies and defines the relationship between the managerial perception of stakeholder’s influence and SD-MCS. For this purpose, the study formulated three objectives.

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through objectives, indicators and system as well as the communication of it. This might indicate, why the Passives have the lower level of SD-MCS adoption as they probably do not have the proper means to adopt SD practices. Finally, companies within the Performers cluster adopt both formalities of SD-MCS at a higher level. Thus, it might indicate that companies within this cluster do have proper leadership and employee and top-level commitment, as well as suitable governance structure, communication and reporting. Even though Performers see the importance in adapting SD-MCS, one should always strive for improvement and growth.

The second objective identified key stakeholders associated with the adopted level of SD-MCS. Whether Aruban companies are categorized as Performers, Indecisives or Passives of SD-MCS adoption, the managers would still perceived pressure from customers, employees, suppliers & distributors, competitor, scientific communities, communities, trade unions and NGOs. All three clusters perceived higher pressure from its employees, customers and communities; which partially supports and contradicts the research of Henriques & Sadorsky (1999). According to Henriques & Sadorsky (1999) environmental proactivity (Performers) is associated with higher pressure from customers, suppliers, and employees, which is supported within this study. However, they also claim that reactivity (Passives) is associated with higher pressure from governments and trade associations; which is contradicting within this study. In particular, within the Passives cluster, the higher pressure is perceived from the employees; which aligns with the findings by Kumar et al. (2016) as they state that Passives “perceive high pressure from those employees, who are more aware of sustainability

issues” (Kumar et al., 2016, p. 12). Additionally, it might be that employees are more aware of their

rights and exert pressure for the safeguard of their well-being (Hameed et al., 2016). As for the Indecisives, the pressure is most perceived from the community. It may be that the community is pushing the companies to finally adopt SD-MCS. Local communities are voicing their opinions more in order to push businesses to focus on CSR efforts (Carroll, 1999). Furthermore, for all three clusters, the lowest amount of pressure was perceived by the trade unions. This is quite interesting, as the employees were perceived as having high pressure amongst the clusters. According to the literature, trade unions reinforce internal activities by e.g. supporting improved work-life balance and flexible working arrangements (Boodoo, 2016). Thus, it might mean, that even though employees exert high pressure for their rights, they are not backed up by the trade unions.

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SD-MCS has to do with communication and reporting. Organizations publish SD reports to external stakeholders in order to legitimize them in the face of external pressure (Tregidga & Milne, 2006). Thus, the community is more aware of the organization’s sustainable practices and therefore might exert less pressure on the companies. Yet, it is difficult to conclusively state if this is a valid explanation for the negative perceived pressure from communities within this study. The reason being is that the findings showed that the adoption of having external SD communication procedure was neutral amongst the Aruban companies, Table 4. Furthermore, just as within this study, the study of Pondevile et al. (2013) found that the NGOs and employees were positively related to the Formal aspect of a MCS. The findings also indicate that the perceived pressure from customer and employees are positively related to the Informal SD-MCS which means as the adoption of Informal SD-MCS increases, the manager’s perception of customer and employee’s pressure also increases. Not all stakeholders are associated with the adoption of Formal and Informal SD-MSC in this study. However, those stakeholders that were found significant are not uncommon, as these stakeholders were also found significant in similar studies (Kumar et al., 2016; Park et al., 2016; Pondeville et al., 2013).

The formal and informal should be mutually reinforcing. Either dimension on itself is unlikely to be sufficient and could hinder the MCS (Durden, 2008) in relation to the achievement of SD goals. Yet, the extra analysis on SD-MCS does not show a big difference, as again, only the perception of customers and employees increases as the adoption of SD-MCS increases. Quite surprisingly, only two out of the eight stakeholders are associated with the different level of SD-MCS adoption are significant related to SD-MCS. Finally, the highest pressure is perceived from the employees (highest Beta) on Informal and Formal SD-MCS and on SD-MCS (combination), which shows that employees are indeed a key stakeholder group (Hameed et al., 2016).

This study was a cross-sectional study in Aruba with companies across ten different industries and companies that found themselves within multiple of these industries. This might be the reason why other/(more) stakeholders were not associated to the two formalities of SD-MCS; as stakeholders vary across industries, companies, or geographic situation (Mitchell et al., 1997; Bailur, 2006; Gil-Lafuente & Paula, 2013).

The Government of Aruba is trying to raise more awareness in regard to CSR, considering the rising interest of stakeholders in this area. Thus, one can say that Aruba is still in the development stage with regard to CSR and SD matters, which possibly may have affected the results regarding the relationship between stakeholders and SD-MCS. It was further elaborated that raising awareness was one of the responsibilities of the bureau: “… Creating awareness is first step, and that is what we are

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but if they want we can do it”- DR. Yet, surprisingly, there was no significant relationship between the

Government and Informal SD-MCS or with the Formal SD-MCS, based on the Aruban companies who have responded. This might indicate, that the Governments initiative to raise awareness is not reaching the companies as it is intended to. Furthermore, the Regulators were left out because of the EFA. Interestingly, the DR also points out that they are not considering legislation in the short term: “

There is a legitimate reason why we are not looking at laws right now because if you look into development of CSR worldwide, there is a lot changing actually and also the way people are looking at it and acting according to it. This is why we decide we want to bring awareness but it does not mean that you always have to put things directly into laws” –DR.

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6. Conclusion

The findings conclude that the relationship of a manager’s perceived pressure of stakeholders differs depending on the adoption level of SD-MCS and the two different formalities of SD-MCS.

Aruba is considered to be in a “development” stage, which might have affected the results. Yet, this study permits further exploration. The results will help academics that are interested in the topic of SD and interested in comparing “progressed” stage of SD with “development” stage. Furthermore, it will help managers and higher-level executive to understand the importance of the identification and inclusion of stakeholders when developing a SD-MCS. Moreover, the Government of Aruba has the vision to become a sustainable society. This study shines light to the Government of Aruba on the progress of one aspect, which is the adoption of SD-MCS of Aruban companies who have responded. Furthermore, by bridging together the topic of SD and MCS with the combined effect of multiple stakeholders enriches and contributes to the literature. It also enriches it by giving an insight on Aruba in relations to SD.

Master of Science Thesis