Enhancing Corporate Social Responsibility in Small and
Medium-Sized Enterprises
A study on intermediary organisations in Latin America
Keywords:
SMEs, intermediary organisations, CSR capacity building, Latin America
Title page
Title: Enhancing Corporate Social Responsibility in Small and Medium-Sized Enterprises
Sub title: A study on intermediary organisations in Latin America
Student: Heike Delfmann, s1334077
W A Scholtenstraat 12-17 9712 KW Groningen +31-6-12431559
h.s.delfmann@gmail.com
Principal: UNEP/ Wuppertal Institute Collaboration Centre on Sustainable Consumption and Production
Completed at: November 2008
Institution: University of Groningen
Faculty: Economics and Business
Master: Business Administration
Small Business and Entrepreneurship
Supervisor: Dr. Christoph Streb
Co-assessor: Dr. Clemens Lutz
“If among a range of alternative actions open
to us in the present, some of these are likely to have more undesirable
consequences than others,
then we ought to engage in those actions that will have the best
consequences on the whole.”
Preface
With this thesis my study of Business Administration at the University of Groningen comes to an end. The writing process of this thesis took a relative long time span, but finally the end product lies in front of you. It has been a great learning process.
There are many people to whom I would like to say thanks. I have been given the opportunity to write this thesis for the Centre on Sustainable Consumption and Production (CSCP), located in Wuppertal, where I did an internship for three months. I would not have had this chance if it were not for Marc Herberigs, who introduced me to Liesbeth Bakker, who in her turn introduced me to the CSCP. So thanks to the both of them for their interest and effort!
I would like to thank Michael Kuhndt of the CSCP for given me the opportunity to work on such an interesting project and for his valuable feedback. From that point on, I could truly begin writing this thesis.
Furthermore, many thanks to Thomas Petruschke of the CSCP for helping me very patiently, giving me feedback and for his role of communicator between the CSCP, GTZ and my self. I want to thank all colleagues of the CSCP, for making my stay in Germany one to remember. Additionally, I would like to thank GTZ for their cooperation and Andreas Villar in particular. Special thanks go out to everyone who helped by filling out a questionnaire and those who were kind enough to let me interview them.
I want to thank my supervisor Christoph Streb for his guidance in the last months of this project. Especially because he accepted the way my thesis was going and supported me to go along with the thesis, while giving me constructive feedback. In addition, I would like to thank Hein Vrolijk for his guidance during the first few months of my thesis.
Besides that, I want to thank my friends and family who helped me to stay focused on my writing and were available for questions. Finally, I want to thank my mother for supporting me throughout my study, and last but not least, my grandfather for his support and interest in my study.
Heike Delfmann
Executive Summary
Introduction. This paper focuses on small and medium-sized enterprises (SMEs) in developing countries, Latin America in particular. SMEs are extremely valuable for the economic prosperity of a country. They make up such a large part of the entire business population that the impact they have on the environment, on society and on development should no longer be ignored.
Under the authority of the Centre on Sustainable Consumption and Production, who were commissioned for this project by the German Development Agency, this thesis looks into the motives and barriers of SMEs and tries to find out how they can get engaged in activities related to corporate social responsibility (CSR). The focus is on intermediary organisations, how they can motivate and stimulate socially responsible behaviour among SMEs. This results in the following research question:
How can intermediary organisations best be supported to bolster their capacity building for increasing CSR amongst small and medium-sized enterprises in Latin America?
Methods. To answer the research question stressed above, three methods were used. First of all, secondary data was analysed and literature has been examined. Secondly, using this secondary data and the resource-based view combined with the institutional theory, a questionnaire was developed and sent out to different intermediary organisations in Latin America. These results were used as input for several interviews, which were conducted as a third source of data to get an answer to the research question.
Results.The status quo analysis indicated that CSR in Latin America still has a strong connection with philanthropy and charity. Other than that, CSR is seen as a voluntary commitment by businesses to go beyond legal requirements, to integrate social and environmental aspects with special attention for the internal aspects of the organisation. CSR is however not by a long way common practice among SMEs. A second aspect of the status quo analysis was concerned with the activities of intermediary organisations. When it comes to their current support for corporate social responsibility among SMEs, intermediary organisations seem to be at the bottom of the pool along side with the governmental organisations.
The most important drives for small and medium-sized enterprises are first of all the potential profits and market advantages. Followed by other factors: ethical and religious values, the image of an organisation and pressure felt by the organisation from customers. The most important barriers according to the results of the questionnaire are a lack of knowledge, stimuli, awareness and finance.
So far, it was assumed that this particular motivator to become actively involved in CSR was mainly to be applied by large organisations or multinational companies.
Conclusion. The conclusion of this research is mainly formulated in form of recommendations for a CSR programme, to be developed for the German Development Agency. The following recommendations are the most important ones:
- There is a high need to address corruption; this is the first place to start.
- There should be a focus on the internal aspects of organisations as well as on community contribution. There is also a need for improvement in respecting human rights.
- It turned out that the business case for CSR is not well known among SMEs. However, SMEs tend to respond well to best-case examples, thus these examples provide a solid base for communication of the business case.
- Environmental issues are a relatively easy way to get the attention of small business owners since there is often a clear business case for this particular aspect of CSR.
- Help is needed with procedures connected to certificates, grants and tax advantages.
- Providing easy accessible information and tools for SMEs is needed, with special attention to the language being used; simplify the messages.
List of tables and figures
Table 1. Divergences in CSR for large and small organisations……… 14
Table 2. Definition SMEs ………..…….……….. 22
Table 3. CSR vs. SCP………..….……….… 25
Table 4. Data on Latin America per country………..……….………… 27
Table 5. Clarification of questionnaire………..…….…………. 32
Table 6. Comparison Institutional Theory and RBV………..….…..………. 37
Table 7. Overview drivers for CSR………..…….….………... 40
Table 8. Frequencies of ‘CSR…’………..………..………. 45
Figure 1. Structure of thesis………..……..……19
Figure 2. CSR Pyramid……… 24
Figure 3. Global view of different stages of development……….……… 26
Figure 4. Sequence mixed methods……….……… 29
Figure 5. Summary drivers and barriers……….. 44
Figure 6. Current areas SMEs are practicing CSR……… 46
Figure 7. Prioritising focus areas SMEs should practice CSR………. 46
Figure 8. CSR Topics……….. 47
Figure 9. Drivers for Corporate Social Responsibility………..………….. 51
Figure 10. Barriers to Corporate Social Responsibility………..………….. 52
Figure 11. Overview of Drivers ………..…………. 53
Figure 12. Overview of Barriers………..………. 53
Text Box 1. Seven reasons to abandon CSR………..………… 23
Text Box 2. Some definitions of CSR………..………….. 24
List of abbreviations
CSCP UNEP/ Wuppertal Institute Collaboration Centre on Sustainable Consumption and Production
CSR Corporate Social Responsibility
EU European Union
GDP Gross Domestic Product
GTZ Deutsche Gesellschaft für Technische Zusammenarbeit / German Development Agency
HDI Human Development Index
HPI Human Poverty Index
IFC International Finance Corporation ILO International Labour Organisation
LDC Less Developed Countries
LEDC Least Economically Developed Countries
MNC Multinational Company
NGO Non-Governmental Organisation
NIC Newly Industrialized Countries
NIS New Independent States
NPO Non Profit Organisation
OECD Organisation for Economic Co-operation and Development
RBV Resource-based view
SCP Sustainable Consumption and Production
SEBRAE Servicio Brasileño de Apoyo a las Micro y Pequeñas Empresas / the Brazilian Service of Support for Micro and Small Enterprises
SNV Netherlands Development Organisation SME Small and Medium-sized Enterprise
TBL Triple Bottom Line
UN United Nations
UNDP United Nations Development Programme UNEP United Nations Environment Programme
Table of Content
Preface………...V Executive Summary………VI List of tables and figures………..VIII List of abbreviations………IX
1. Introduction ... 12
1.1 Research Topic... 12
1.2 Relevance of research ... 12
1.2.1 The significance of small businesses ... 13
1.2.2 CSR in small businesses ... 14
1.2.3 Intermediary organisations ... 15
1.3 Problem statement... 16
1.3.1 Objective ... 17
1.3.2 Research questions ... 17
1.4 Prior conditions of research ... 18
1.5 Structure of thesis ... 18 1.6 Recapitulation ... 19 2 Research context ... 20 2.1 Background information ... 20 2.1.1 CSCP ... 20 2.1.2 GTZ ... 20 2.1.3 CSR Support Programme ... 21
2.2 Small and Medium-sized Enterprises ... 21
2.3 Corporate Social Responsibility ... 23
2.3.1 Triple Bottom Line ... 24
2.3.2 Sustainable Consumption and Production ... 25
2.4 Developing countries and emerging economics ... 25
2.5 Latin America ... 27 3. Methodology ... 28 3.1 Data collection ... 28 3.2 The questionnaire ... 29 3.3 The interviews ... 30 3.4 Data Analysis ... 31
4. Theory and Literature ... 34
4.1 Theoretical Framework ... 34
4.1.1 The Resource Based View ... 34
4.1.2 Institutional Theory ... 35
4.1.3 Recapitulation of theories ... 37
4.2 Status Quo Analysis ... 38
4.2.1 CSR in Latin America ... 38
4.2.2 Intermediaries’ current activities ... 39
4.2.3 Recapitulation of status quo ... 39
4.3 Drivers and Barriers ... 40
4.3.1 Drivers for Corporate Social Responsibility ... 40
4.3.2 Barriers to Corporate Social Responsibility ... 42
4.3.3 Recapitulation of Drivers and Barriers ... 44
5 Empirical Analysis ... 45
5.1.1 CSR in Latin America ... 45
5.1.2 Intermediaries’ current activities ... 49
5.1.3 Recapitulation of status quo results ... 49
5.2 Drivers and Barriers ... 49
5.2.1 Drivers for Corporate Social Responsibility ... 50
5.2.2 Barriers to Corporate Social Responsibility ... 51
5.2.3 Barriers to Corporate Social Responsibility ... 51
5.2.4 Recapitulation and preview ... 52
6 Discussion ... 54 6.1 Discussion of theory ... 54 6.2 Discussion of results ... 54 6.3 Synthesis ... 56 7 Conclusion ... 58 7.1 Practical recommendations ... 58 7.2 Research limitations ... 60 Definitions ... 61 Literature ... 62 Articles ... 62 Websites ... 66 Declaration of Authenticity ... 68 Appendices ... 69 1. CSR Support - Questionnaire ... 69 2. Results of questionnaire ... 74 3. Interview outline ... 80 4. Interview transcripts ... 82
September 23rd: Arno Ambrosius ... 82
September 23rd: Odécio Roland ... 84
September 24th: Marloes van Beveren ... 87
September 24th: Daniel Oporto ... 91
October 3rd: Ruth Vásconez ... 94
October 6th: José Luis Segovia ... 95
5. Example Calculation HPI-1 ... 99
6. UN Millennium Development Goals ... 100
7. Do’s and Don’ts by David Grayson ... 102
1.
Introduction
This initial chapter will introduce the subject of this study. The first paragraph will start with a general introduction, followed by an explanation of the justification for this study. Next, the problem statement will be defined which will contain the following: objective, research questions, definitions and the research limitations. Finally, an overview and structure of this thesis is given.
1.1 Research Topic
corporate social responsibility (CSR) is a rapidly growing field in both the academic and the practitioner domains (Campbell, 2007; MacGregor et al., 2007; Perrini, 2006). Considering the amount of research that has been written on this subject, as well as the growth in specialist consultants, the emergence of CSR critics and the fact that the term ‘Corporate Social Responsibility’ generates almost 5,5 million hits on Google, it has become clear that interest in CSR is growing and it is moving towards mainstream (Raynard & Forstater, 2002).
The decision to focus this research on small and medium-sized enterprises (SMEs) is directly related to the fact that most of the literature of social science concentrates on large and/or multinational organisations (Jenkins, 2004), whereas SMEs are a significant part of a country’s economy as they make up over 90 percent of businesses world wide (Luetkenhorst, 2004). Furthermore, SMEs are seen as an important factor to overcome poverty and inequality in developing countries (Raynard & Forstater, 2002), and CSR is claimed to be the hope for positive change in Latin America (Schmidheiny, 2006). Even from a philosophical and ethical view a so-called moral duty for organisations to act in a responsible way can be argued. Utilitarianism provides a theoretical framework to logically address the obligations that organisations have towards future generations (Keijzers & Jeurissen, 2002). A morale obligation exists to maximize the happiness or pleasure as accumulated among all people; and this obligation is not limited to the current generation. Utilitarianism states that we need to take the future generation into account, not only for their rights, but also for their happiness. This starting position broadens the basis of our obligations towards the future (Keijzers & Jeurissen, 2002).
1.2 Relevance of research
Visser (2007, p. 474) explains in his research that the validation for focusing on CSR in developing countries as distinct from CSR in the developed world is fourfold:
1. Developing countries represent the most rapidly expanding economies, and hence the most lucrative growth markets for business;
2. Developing countries are where the social and environmental crises are usually most acutely felt in the world;
3. Developing countries are where globalization, economic growth, investment, and business activity are likely to have the most dramatic social and environmental impacts (both positive and negative); and
4. Developing countries present a distinctive set of CSR agenda challenges, which are collectively quite different to those, faced in the developed world.
1.2.1 The significance of small businesses
The significance of small and medium-sized enterprises1 is widely recognised. SMEs make up the most important sector of a countries economy, and especially in developing countries, they are critical to the development process.
SMEs make up over 90 percent of businesses worldwide and account for between 50 and 60 percent of employment. In Latin America this percentage is up to 95, they account for between 40 and 60 percent of jobs – depending on the country – and contribute up to 50 percent of the Gross Domestic Product (GDP). However, their value in the development process goes further than their strength in number. A rich body of research is available on the development contribution of small enterprises2 (amongst others: Fox, 2005; Luetkenhorst, 2004; Vives, 2006). Small and medium-sized enterprises tend to be more labour intensive than large companies, which means they have a significant impact on employment and income distribution. Further more, SMEs are a sources of innovation and entrepreneurship by which means they create healthy competition (Geibler & Kuhndt, 2002; Vives, 2006). OECD figures show that SMEs create by far the greatest number of jobs in the rich world. The International Labour Organisation (ILO) considers that this is probably also true in the developing world, but figures are difficult to obtain (UNEP, 2003).
As the economic significance of SMEs continues to grow, so do their environmental and social impacts. However, their environmental impact is not known either at national or regional levels. It is often and widely quoted that SMEs as a sector could contribute up to 70 percent of all industrial pollution (Hillary, 2004). It can no longer be accepted that small businesses violate human rights or pollute the environment. However, the focus of the CSR agenda has almost entirely been on large enterprises and has taken place mainly in the United States and Western Europe (Fox & Prescott, 2004). And, as often stated; small companies are not little big companies. Although both small and large companies deal with
1 A definition of SMEs can be found in chapter 3
many of the same questions, smaller businesses also deal with unique size related issues, and they behave differently in their analysis of, and interaction with, their environment (Shuman & Seeger, 1986), which means they cannot be treated in the same way, as illustrated in table 1.
Corporate CSR Small Business CSR
Who Who
Responsible to wide range of stakeholders Responsible to fewer and/or different stakeholders Perceived responsibility to society at large Perceived responsibility to the local community Importance of shareholders SMEs often don’t have shareholders
Why Why
Protection of brand image and reputation Protection of customer business
Pressure from consumers Pressure from business customers down the supply chain
Shareholder pressure, the SRI movement Pressure from moneylenders? Unaffected by SRI movement
The business case Proven business case lacking
How How
Based on ‘corporate values’ Based on principles of ‘owner-manager’ Formal strategic planning for CSR Informally planned CSR strategies
Emphasis on standard and indices Emphasis on intuition and ad hoc processes Key involvement for CSR professionals No dedicated personnel for CSR programmes
Mitigation of risk Avoidance of risk
What What
Prominent campaigns e.g. Cause Related marketing
Small scale activities such as sponsorship of local football team
Publicity linked to CSR activities Activities often unrecognized as CSR related Table 1. Divergences in CSR for large and Small Organisations (adopted from Jenkins, 2004)
1.2.2 CSR in small businesses
typical for developing countries, the prevalence of SMEs is particularly pronounced (Luetkenhorst, 2004)
By focusing on corporate social responsibility and on SMEs in developing countries, the opportunity to further broaden the positive effect that CSR can have on a wider group of people is enhanced. Besides this effect, CSR has proven to create new business opportunities and increase profits (Geibler & Kuhndt, 2002). By the sustainable development of small businesses, a positive effect on relieving poverty and on the improvement of living conditions of Latin American society is created, and thereby a more favourable business environment (UNIDO, 2007).
This raises the question why small businesses are not already practising en masse socially responsible behaviour? This could have several causes. Basically it can be brought back to one of two things: either there are not enough stimuli or small and medium-sized enterprises face barriers in becoming socially responsible. These stimuli and barriers need to be identified and solutions need to be found to overcome these obstacles.
The majority of SMEs in developing countries can still be characterized by lack of awareness of their own environmental and social impacts (Geibler & Kuhndt, 2002). Even though many firms seem to carry out some sort of socially and environmentally responsible activities, more than two third of these firms does not consider those activities to be a priority (Vives, 2006). The same research revealed that less than one in every eight firms thought that they were doing enough, which suggests that there is a lot of room for improvement in this field. According to Raynard and Forstater (2002), there is a need to bring in other players into the already existing partnerships and to create an enabling environment for CSR to thrive, for both the benefit of SMEs as for development in general. At the moment, the current policy approaches seems to be ineffective and support organisations are unable to reach SMEs (Geibler & Kuhndt, 2002). It is argued by Geibler and Kuhndt (2002) that SMEs are in need for more pragmatic and appropriate assistance (e.g. hands-on tools).
1.2.3 Intermediary organisations
Several researches have confirmed that the best way to reach SMEs is through local players, especially in developing countries (Buhr & Hermansson, 2004 in: Fox, 2005; Fox, 2005; Fox & Prescott, 2004; Luetkenhorst, 2004). Jenkins also argues that the focus of small businesses is usually not on societies or nations, but more on the local communities in which they operate (2004). Considering this, local intermediary organisations seem to be an obvious choice to focus on. This is affirmed by the European Union, who states that these small business advisors are a logical channel for raising awareness amongst SMEs, however, that small businesses often have hardly any contact with these intermediaries (2007). This second part also deserves to receive more attention.
Other terms than intermediary organisations often used are ‘Development Cooperation Agencies’, ‘Business Development Agencies’ or ‘Business Support Organisation’, which sound more specific than the phrase intermediary organisation. However, all phrases refer to more or less the same organisations; covering all persons and organisations that provide support in some sort to, in this case, small and medium-sized enterprises.
Intermediary organisations are for example: chambers of commerce, trade unions; business clubs and SME associations at local, regional and national level; sector and trade associations; business advisors (both public and private funded); relevant training and education institutions; and potentially also banks, accountants and lawyers (EU, 2007).
According to Fox there is a need to develop more comprehensive support services with respect to corporate social responsibility for SMEs (2005). Such organisations provide an important way of communicating with small and medium-sized enterprises. Intermediary organisations have the necessary legitimacy and networks to play a positive role in supporting SME (EU, 2007). Supporting local intermediary organisations could improve the practice of corporate social responsibility among SMEs in development countries. However, to date only a very limited research has been done regarding the role intermediary organisations can play to promote CSR amongst small businesses (EU, 2007). For intermediaries to be able to raise awareness on the subject of responsible entrepreneurship, it is necessary to consider the conditions under which they operate (Geibler & Kuhndt, 2002). Local intermediary organisations can provide advice and support on corporate responsibility to SMEs, as they are aware of what is relevant in the local context (Fox & Prescott, 2004).
In a research executed by Luetkenhorst (2004, p. 8) the following conclusion was drawn: “there is a case for an intermediary to intervene and complement market mechanisms in creating sustainable business linkages. Any such linkage support programme initiated by an impartial broker will need to adopt a sector-wide approach, strengthen existing service institutions, work with local partners and arrange for world-class expertise to be delivered to SME suppliers”. This study focused on sustainable business linkages in developing countries, however it is likely to that the same argument can be applied for creating more corporate responsible behaviour.
By identifying elements for a CSR programme for intermediary organisations, these organisations can be helped to enhance their CSR capacity building.
1.3 Problem statement
1.3.1 Objective
As mentioned in the beginning of this introduction, this thesis aims to serve two goals; a practical goal and a scientific one. First, the practical objective of this research is to improve the CSR capacity building activities of intermediary organisations aimed at small and medium-sized enterprises in Latin America. By doing so, contributing to the overall development of these countries and relieving some environmental strain.
Thus, from the perspective of the principle of this project, the desired outcome of this thesis is an overview of elements, recommendations for a CSR Support Programme specified to be used by intermediary organisations in Latin America, aimed at small and medium-sized enterprises.
The scientific objective is to gain new insights into the concept of CSR amongst SMEs in the context of developing countries by comparing theory and reality.
1.3.2 Research questions
The research question is derived from the objective and is thereby the core of the research. The main research question can be formulated as followed:
“How can intermediary organisations best be supported to bolster their capacity building for increasing CSR amongst small and medium-sized enterprises in Latin America?”
In order to be able to answer this question, several sub questions have been formulated. The relevance of each of the sub questions for the purpose of this study is explained below.
1. What is the meaning of corporate social responsibility for SMEs in Latin America?
In order to draw conclusions from this research it is important to have a clear understanding of the concept of corporate social responsibility. CSR is a highly discussed subject, however there is no agreement upon the definition. Definitions of CSR differ per country and sometimes even per company. In order to be able to compare results it is necessary to have a communal definition and to understand the differences between countries. The discussion on the meaning of CSR will be bound in the context of SMEs in development countries, Latin America in particular.
2. What is the status quo of corporate social responsibility of small and medium-sized enterprises in Latin America?
3. What are intermediary organisations currently undertaking to enhance corporate social responsibility amongst small and medium-sized enterprises in Latin America?
The status quo of not only the small and medium-sized enterprises need to been assessed, the current situation of the intermediaries is equally relevant in order to answer the main research question.
4. What are the drivers for SMEs in Latin America to implement CSR?
For an intermediary organisation to be able to enhance corporate social responsibility amongst SMEs, it is essential to understand the business case of CSR. What are the incentives for an organisation to get engaged in CSR? This is especially important seeing the observation of the EU (2007), that SMEs do not often have contact with intermediaries on their own. By making the business case clear, this can be communicated to the SMEs in that area.
5. Which barriers are faced by SMEs in Latin America to implement CSR?
Small and medium-sized enterprises experience barriers in practising corporate social responsibility. These barriers need to be identified in order to be able to make suggestions to overcome them.
1.4 Prior conditions of research
This research has several research boundaries, which are valid for the final research product and process. For the delimitation of this study the following boundaries have been formulated:
- The study focuses on intermediary organisations and on small and medium-sized enterprises in Latin America.
- The willingness of the staff of intermediary organisations to participate in this research. - The duration of this study is approximately five months.
- The execution of this study is bound to the demands formulated by the University of Groningen, described in the manual for master's thesis and graduation MSc BA.
- This research will be conducted in cooperation with the UNEP/Wuppertal Institute Collaboration Centre on Sustainable Consumption and Production (CSCP), as well as with the German Development Agency (GTZ).
1.5 Structure of thesis
In chapter five the status quo and the drivers and barriers are discussed again, only then based on the outcomes of the empirical research. The next chapter will be a synthesis of both theory and results. Practical recommendations, suggestions for further research and limitations will be discussed in the final chapter.
Figure 1. Structure of thesis
1.6 Recapitulation
All in all, this paper will contribute not only to reduce the knowledge gap existing on CSR amongst SMEs in developing countries as mentioned above, but in particular it will highlight the lack of research on intermediary organisations. Research on intermediary organisations has rarely been done. As stated by the European Union (2007, p.17), very few initiatives “have explicitly sought to build the capacity of mainstream SME intermediary organisations to promote CSR amongst small businesses”.
2
Research context
The research context will describe the framework in which this thesis can be placed. First of all background information of the project will be given. Then, the concept of small and medium-sized enterprises will be discussed, followed by a description of developing countries and emerging economics, especially Latin America.
2.1 Background information
During a three-month internship at the UNEP/Wuppertal Institute Collaborating Centre on Sustainable Consumption and Production (CSCP), the CSCP was commissioned by the German Development Agency (GTZ) to develop a CSR Support Programme. In this section first a brief description of the CSCP and GTZ will be given. Once it is clear who both organisations involved are, a more elaborate description of the entire project will be given in order to show the purpose and position of this thesis.
2.1.1 CSCP
The CSCP is a small organisation, established in 2005 as a not-for-profit think-tank and “do-tank” from the collaboration between two institutions: the United Nations Environment Programme (UNEP) and the Wuppertal Institute. The vision of the Centre is to contribute to the Plan of Implementation agreed at the World Summit on Sustainable Development in 2002 to promote sustainable patterns of consumption and production (CSCP, 2008).
They provide scientific support, which includes the development, testing, implementation and monitoring of concrete projects, especially in developing countries, which enables these countries to leapfrog to sustainable consumption and production patterns. In this respect the CSCP supports the integration of environmental, social and cultural concerns into decision-making at the level of national governments, regional and local authorities, the private sector, and consumer groups.
The Centre works on the exchange of experiences with partners in both developing and developed countries, with support for capacity building and training approaches as an integral part of its programmes.
The concept of sustainable consumption and production will be briefly discussed in the third paragraph of this chapter.
2.1.2 GTZ
The GTZ employs more or less 10,000 staff worldwide spread over more than 120 countries of Africa, Asia, Latin America, the Eastern European countries in transition and the New Independent States (NIS). Around 9,000 of these staff are German national personnel (GTZ, 2008).
2.1.3 CSR Support Programme
The CSR Support Programme is financed by GTZ and will be executed by the CSCP. The CSR Support Programme will help intermediary organisations in Latin America, including GTZ offices, to design programmes and partnerships that
- promote corporate social responsibility in small- and medium sized enterprises; - thereby, address development goals through effective partnering with business; - and support the private sector competitiveness and innovation capacity.
The project encompasses two main steps:
The ‘CSR Support Study’ – which takes shape in this paper – will be a fact-finding exercise on opportunities for CSR support, based on a survey among local country offices of GTZ in countries across Latin America, expert interviews and desk research. The study serves to get an insight into the feasibility and concrete options for offering further CSR services and designing CSR programmes.
The ‘CSR Support Navigator’ will contain training material for use by GTZ offices and intermediaries wanting to support CSR among SMEs. Its scope and content will be based on the findings of the CSR Support Study. The navigator will be a toolbox for organisations that wish to design and implement CSR programmes like local intermediaries, governments, business associations, NGOs or other relevant development actors. It is not intended for direct use by individual SMEs or companies wanting to implement CSR activities, but could be used by larger companies or industry sectors wanting to set up programmes with companies in their surrounding or supply chain.
2.2 Small and Medium-sized Enterprises
The previous chapter already discussed the importance of small businesses. Even though the phrase “SME” is frequently used, it is not often clearly defined and there is no consensus on the definition. However, it is essential to understand what the term reflects on. The group of small and medium-sized enterprises encompasses a very broad range of firms. What is meant by a micro, small, medium or large company is by no means clear or uniform, even within individual countries (Fox, 2005; UNEP, 2003).
A quantitative definition uses objective measurements like annual turnover and number of employees to characterize an organisation. A definition of this sort has the benefit of being very clear and easy to verify. The European Union categorizes SMEs as is shown in the table below.
Category Employees Turnover or Total assets
Medium-sized < 250 ≤ € 50 million ≤ € 43 million
Small < 50 ≤ € 10 million ≤ € 10 million
Micro < 10 ≤ € 2 million ≤ € 2 million
Table 2: definition SMEs (European Committee, 2003)
In Canada, the United States and Mexico, definitions of small businesses vary by sector and are based on the number of employees (a maximum of 500 employees) or annual turnover. Brazil defines a micro enterprise as one with up to 19 employees, a small enterprise as one with between 20 and 99 and a medium-sized enterprise up to 500 in the industry sector (UNEP, 2003). In commerce and services other quantities are valid; micro: 1-9, small: 10-49 and medium: 50-99. Besides that, the term SME is often restricted to non-primary enterprises, which means that it does not include farming, fishery or extractive industries.
An enterprise of 245 employees does not change its character if it employees another 10 or 20 persons. That is why in a definition of small and medium enterprises qualitative features should be emphasised as well. A statistical definition does not tell us more than merely what the total volume of SMEs is, according to Nooteboom (1988). A definition of this sort does not say anything about the characteristics of an organisation. Nooteboom mentions three core dimensions to summarize small and medium-sized enterprises: a limited scale, personality and independence of ownership and management (1988). Personality refers to the fact that the entrepreneur himself determines the aim of the business, the independence of a small firm refers to sufficiency in decision-making and limited accountability. SustainAbility (2002) also emphasises independency and management by its owner. The perfect definition depends on the goal of the research; this could also be a combination of qualitative and quantitative.
Considering the fact that this research is concerned with developing countries and emerging economies, the following definition of SMEs will be used in the duration of this study:
It could be argued that the number of employees used to define a SME in this research is relative high for developing countries. However, to be able to compare this study with other studies this amount is the most legitimate (Vives, 2006), especially when considering the fact that official definitions of SMEs per country in the region vary between a maximum of 99 employees and a maximum of 500 employees.
2.3 Corporate Social Responsibility The first discussions on so-called modern CSR can be traced back to the 1920s (Asongu, 2007). However, the earliest contributions to the research body relating to the CSR dilemma originates from the 1950s, with the first definition of corporate social responsibility formulated by Bowen in 1953 (see Text Box 2), though the focus was on large organisations. From this point on, the concept of CSR kept evolving, despite inevitable
scepticism and much
disagreement (Perrini, 2006). An example of opponents of CSR is given in Text Box 1. Another important critic of the CSR concept is Milton Friedman (1970), as he
wrote: ‘there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as its stays within the rules of the game’.
Starting from 1980, the significance of stakeholders was recognized. The stakeholder concept was developed by Freeman (1984). Stakeholders are described as ‘those groups who can affect or are affected by the achievement of an organisation’s purpose’ (Freeman, 1984, p. 46). Nowadays, the term Triple Bottom Line (TBL) is often used. Elkington was the first to introduce this perspective in the 1990s (Norman & MacDonald, 2004). Paragraph 2.3.1 will describe the TBL in more detail.
As shown in Text Box 2, there are many definitions of corporate social responsibility. An overall consensus prevails on the fact that CSR goes beyond legal requirements (Perrini, 2006). Phrases like transparency, sustainability, traceability, trust and a time dimension – spread out over several Text Box 1. Freeman and Liedtka (1993) illustrate seven reasons to abandon CSR
1. The origins of the concept are suspect, as they derive primarily from the field of economics, and fail to include, among others, history, religion, and culture.
2. The different models of CSR all accept the terms of the debate as set forth by Milton Friedman’s argument that sees corporations only as profit maximizers.
3. Corporate social responsibility accepts the prevailing business rhetoric of “capitalism: love it or leave it.”
4. CSR is inherently conservative–it starts with the standard received wisdom and then attempts to “fix” its unintended consequences.
5. CSR promotes incompetence by leading managers to involve themselves in areas beyond their expertise-that is, repairing society’s ills.
6. CSR accepts a view of business and society as separable from each other, each with a distinct ethic, linked by a set of responsibilities.
generations – are characterizing when describing CSR (amongst others: van Ginneken, 2003; Hoevenagel, 2004; Minez, 2007).
Enterprises that practice sustainable responsible behaviour go beyond legal obligations; they do this voluntarily as they are of the opinion that it will bring them a long-term advantage (EG, 2002). According to Raynard and Forstater (2002) CSR operates at three key levels:
The first stage includes compliance with legal responsibilities like tax, health and safety, workers rights, consumer rights, environmental regulations and industry standards.
The second level is concerned with the minimization or elimination of negative effects of business on society and is about managing risk. This could include the management of human rights, voluntary standards or codes of conduct.
The last level formulated by Raynard and Forstater
involves increasing the positive effects of business and creating value through innovation, investment and partnership aligned towards social and environmental good.
2.3.1 Triple Bottom Line
The single bottom line refers to the financial performance of a company. Applying the TBL means to expand this with environmental and social performance. Thus, the Triple Bottom Line is made up of “Social, Economic and Environmental”, which is normally translated to “People, Profit and Planet. The Triple Bottom Line according to Elkington (1999):
“Sustainable development involves the simultaneous pursuit of economic prosperity, environmental quality, and social equity. Companies aiming for sustainability need to perform not against a single, financial bottom line but against the triple bottom line”.
Text Box 2. Some definitions of CSR
‘It refers to 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’ (Bowen, 1953, p. 6 as cited in Carroll, 1999).
‘CSR is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large’’ (WBCSD, 1999).
The voluntary commitment by business to manage its activities in a responsible way (International Chamber of Commerce, 2002).
‘Being socially responsible means not only fulfilling legal expectations, but also going beyond compliance and investing more into human capital, the environment and relations with stakeholders’ (EU Green Paper, 2001).
The acknowledgement that these three dimensions strengthen each other can be seen as being the core of sustainable business (Spittaels et al., 2005).
2.3.2 Sustainable Consumption and Production
Besides corporate social responsibility there are many related terms, amongst others social responsibility in business, corporate responsibility, corporate citizenship, sustainability and corporate governance (MacGregor et al., 2007). Then there is also the concept of Sustainable Consumption and Production (SCP). It could be argued that CSR is a more narrow view than SCP is. The table below illustrates this perspective.
Table 3. CSR vs. SCP
2.4 Developing countries and emerging economics
The world can be divided into several major groupings based on level of development. Emerging economies3 represent the world’s largest potential markets. They represent the source of a great deal of the world’s natural and human resources on one hand, but embody major sustainability challenges on the other hand (Sustainability, 2002).
The United Nations (UN) do not have an official definition on what a developing country is. In common practice, Japan, Canada and the United States, Australia and New Zealand, and Europe are considered
3 The term ‘emerging market’ was originally coined by the International Finance Corporation (IFC) to describe a
relative narrow list of middle-to-higher income economies among the developing countries, with stock markets in which foreigners could buy securities. The term’s meaning has since been expanded to include more or less all developing countries (SustainAbility et al., 2002).
CSR SCP
Focus (who) Focuses primarily on business operations (production)
Has a value chain/life-cycle perspective
Scope (what) Mainly micro perspective, some meso view.
Focus is on businesses (primarily large multinational corporations) (Fox, 2005; Kuhndt et al., 2003)
Micro, meso and macro perspective – systemic perspective
Beyond large multinational corporations, i.e. also including responsibility of SMEs, private and institutional consumers, policy makers Goal Workers safety, fair treatment of
workers, reducing impacts to environment
Improve quality of life and de-coupling economic growth from environmental degradation
Measures Reporting, environmental management, labour standards
Life cycle approach, cleaner production, product design, environmental management
Main drivers Public pressure, strategy (profit, image) and values
developed regions or areas (UN, 1998). The World Trade Organisation does not apply a definition either; they use a system of self-selection to decide whether a country is to be considered “developed” or “developing” (WTO, 2008).
Usually countries that have a relatively low standard of living, an undeveloped industrial base, and a moderate to low Human Development Index (HDI)4 are considered developing countries and emerging economies. Normally, all countries which are neither considered developed, nor a failed state, are classified as developing countries. However, some developing countries are far more developed than others.
A third category in the level of development of a country is Newly Industrialized Countries (NICs). NICs are countries with more advanced economies than developing countries, however not yet a developed country. NICs include amongst others Spain, South Korea, Argentina, Mexico, Colombia, Thailand, Brazil and Turkey (Guillén, 2001, p. 126). Other terms often used are: less developed counties (LDCs) and least economically developed countries (LEDCs); for the poorest countries.
Figure 3. Global view of different stages of development5
Besides the Human Development Index mentioned earlier, the gross domestic product is one of the most common measures of development. The GDP can be defined as the total market value of all final goods and services produced within the country in a given period of time.
A third way6 of measuring development is the Human Poverty Index (HPI), which is an indication of the standard of living in a country, developed by the United Nations (Puri et al., 2007).
Both indexes focus on three main components – longevity, knowledge and standard of living. The most important distinction between the HDI and the HPI is that the HDI measures progress in a country or for a population, while the latter focuses on the most deprived people in a country (Puri et al., 2007).
4 The UN has developed the HDI, an indicator which uses statistical indexes such as income per capita (per
person) (GDP), life expectancy and the rate of literacy, to gauge the level of human development for countries where data is available. The HDI attempts to provide more alternatives to measure human development (UNDP, 2007).
5 Classifications by the IMF and the UN, figure derived from Wikipedia.com 6 These three ways of measuring development are not exhaustive.
Advanced economies
Emerging and developing economies (not least developed)
2.5 Latin America
This study concentrates on Latin America. Latin America refers to those countries in both Americas where a Latin-derived language is primarily spoken. In Latin America, 95% of firms are SMEs, and account for between 40% and 60% of jobs, depending on the country, and contribute 30–50% of GDP (Vives, 2006).
Even though almost all countries in Latin America are considered to be developing countries, in Latin America different levels of development exists. In the table below the different data (HDI, GDP and HPI) is given for Latin American countries.
Country GDP per capita7 (IMF, 2007) HDI in 2005 (Published in 2007) HPI-18 % (UNDP, 2007) Argentina 5,458 0.869 4.1 Bolivia 1,124 0.695 13.6 Brazil 5,716 0.800 9.7 Chile 8,864 0.867 3.7 Colombia 2,887 0.791 7.9 Costa Rica 4,858 0.846 4.4 Dominican Republic 3,652 0.779 10.5 Ecuador 2,987 0.772 8.7 El Salvador 2,619 0.735 15.1 Guatemala 2,508 0.689 22.5 Honduras 1,212 0.700 16.5 Mexico 8,066 0.829 6.8 Nicaragua 908 0.710 17.9 Panama 5,210 0.812 8.0 Paraguay 1,483 0.755 8.8 Peru 3,374 0.773 11.6 Uruguay 6,006 0.852 3.5 Venezuela 6,736 0.792 8.8
Table 4. Data on Latin America per country
7 Per capita is a Latin phrase meaning ‘for each head’. It is usually used in the field of statistics to indicate the
average per person for any given concern.
8 HPI-1 Human poverty index (for developing countries) calculated on the basis of data on: Probability at birth of
3.
Methodology
In continuation of the insights provided in the previous two chapters, this section will present the methodology used for answering the research question of this thesis. After discussing the data collection, the questionnaire will be discussed. The third paragraph will provide information about the interviews conducted and the last paragraph considers the data analysis.
3.1 Data collection
De Leeuw (2000) distinguishes several types of research. This study consists out of a scientific research (literature research), which can be described as assertions, theoretical knowledge products and models (de Leeuw, 2000), and an empirical research. This paper can best be described as a combination of exploratory research and descriptive research. Exploratory as the research goal of this study is to find out how intermediary organisation can best be supported to improve their CSR capacity building, where hardly any research has been done. The conclusions that will be drawn from this study will be general, not only applicable by one specific organisation. Secondly, it can also be considered to be descriptive because this study also aims to describe data and characteristics of a certain population, namely SMEs in Latin America.
The desk research encompassed a study of literature and other scientific, theoretical documents including books, reports and articles. The primary data source was the electronic library of the University of Groningen, in particular focussing on articles concerning management and organisation. Most articles were found using a so-called snowballing effect; using the list of references of one good article to find more appropriate articles. Based on this, the status quo was determined and accordingly the drivers and barriers.
The whole listing of used resources is to be found in the section ‘Literature’. This theoretical part of the thesis aimed to provide a framework for the practical problem statement. Chapter four will describe the theoretical framework; this includes two relevant theories: the resource-based view and the institutional theory.
Creswell (2003) describes three approaches to research: a quantitative approach, a qualitative approach and a mixed methods approach. This study is considered to be the last of these three possibilities. This mixed methods approach uses strategies that involve collecting data either simultaneously or sequentially to best understand research problems (Creswell, 2003). In this case, as described, the data was collected sequentially. On top of that, the data collection used with the mixed methods approach involved gathering both numeric information as well as text information in order for the final database to consist out of both qualitative and quantitative information (Creswell, 2003).
According to Yin (2003) any finding or conclusion drawn is likely to be much more convincing and accurate when it is based on several different sources of information. The purpose of using both theoretical as well as empirical data is to enable the comparison between survey outcomes and desk research theory. Consequently, new perceptions are expected to be found regarding the research topic.
3.2 The questionnaire
The second phase of the research is based on field information collected by means of a questionnaire. The information is derived from intermediary organisations in Latin America. As mentioned above, these intermediary organisations are local GTZ offices. GTZ has offices in 16 countries in the region. Seeing the fact that there are not enough GTZ offices to collect a large enough sample, the questionnaire was also sent to other intermediary organisations in Latin America. These organisations were all members of Forum Empresa; a regional alliance of business organisations committed to promoting corporate social responsibility in the Americas. They represent 18 organisations in 16 countries. Based on the outcomes of the questionnaire and literature, the interview questions were formulated.
The development of the questionnaire had been an elaborate process. It started with a short outline provided by the CSCP, based on which a first draft of the questionnaire was made. During several feedback rounds and extensive literature research the final questionnaire was drawn. The feedback loops were mainly with the CSCP, however GTZ also gave their opinion. Finally, the questionnaire was translated into Spanish. This process took place in the period of April till June 2008. The final questionnaire was sent out on the 17th of July 2008 to the GTZ offices. The second round of sending the questionnaire to other intermediary organisations took place in September 2008. However unfortunately, this second round did not generate any additional filled out questionnaires.
Figure 4. Sequence mixed methods
Questionnaire
Almost all questions had a 5-point Likert-scale. This means the questions were on an interval level; this created more opportunities in the data-analysis. The decision was made to use the current layout instead of a more traditional one where the respondent can circle or tick the right number (1-2-3-4-5). This decision was based on two grounds; first of all the chosen layout gave the respondents the opportunity to easily fill out the questionnaire on the computer, which enhanced the user friendliness and it was hoped to increase the response rate. Secondly, this layout was less space consuming which provided the option to ask more questions on a maximum of four pages. The maximum of four pages – including a front-page with an introduction – was also based on the likeliness to respond.
All questions had an extra answering option with ‘other’, in order for the respondent to give an answer that is not already provided in the pre-formulated answers. Most questions consist of two questions linked together. First a status quo question is asked, followed by an ‘ideal situation question’. The conclusion, which can be drawn from this, will uncover discrepancies, which will be connected to the resource based-view and the institutional theory.
At the end of this chapter a table is presented with all questions asked, their relevance for the end goal and their theoretical background. The full questionnaire as it was sent is presented in the first appendix.
3.3 The interviews
After analysing the data received from the questionnaire, interviews were conducted. The interviews were held with officials in Latin America by phone or in person. The respondents were first approached by e-mail. This request was sent to all embassies of the kingdom of the Netherlands in Latin America and to all embassies in the Netherlands of Latin American countries. It was also sent to other organisation that work with SMEs and CSR. They were approached with the request to participate in an interview, which will last approximately 30-45 minutes, to be held at a time and date suitable for the respondent. Preceding the interview, a basic outline of the interview was sent to the interviewee, in order for him or her to be fully prepared.
There were, in total, six respondents who participated in an individual interview. Five interviews were conducted by phone or Skype, one was conducted in person at the embassy of Ecuador in The Hague, the Netherlands. The respondents came from different countries: Mexico, Ecuador, Bolivia, Peru and Brazil. Two out of six interviewees were female and five out of six respondents were specialised in CSR in their country. Of the six interviews, four were conducted in English, two in Dutch.
questions are less susceptible for steering by the interviewer. It is, on the other side, more difficult to analyse.
The interview started with two questions in order to set the context of the interview, namely to describe SMEs in their country and the concept of CSR. After that, most respondents kept talking about the situation in their country and the outline of the interview was only used to check that all topics were addressed and to introduce new subjects when needed. The semi-structured interview contained, for instance, the following question: ‘what is the meaning of corporate social responsibility for SMEs in your country?’ All questions asked related to the country of that particular respondent. This means the interviewees were not asked to answer questions about Latin America as a whole.
The basic outline, which was used to conduct the interviews, can be found in the third appendix.
3.4 Data Analysis
Besides a description of the methods used to collect the necessary data, the method of analysing the data also needs additional explanation. The response to the questionnaire was too low to use statistical programmes like SPSS, therefore data displays were created for examining the data (Yin, 2003). The frequencies of different events were put into tables and graphs to facilitate the analysis of the questionnaire.
The semi-structured interviews consisted of open-ended questions, which means that the answer possibilities are not measurable. Therefore, only the recurring and most striking results of the data collection methods are written down in the upcoming chapter with the empirical findings. A specific sequence was applied during the analysis of the interviews.
Creswell (2003) describes three generic steps that need to be taken when analysing and interpreting data, which was applied during this study. First the data was organised and prepare for analysis by transcribing the recorded interviews, optically scanning the material and arranging the data into different types. Then all data was read again, to obtain a general sense of the information. Thoughts that were generated during this second read were written down and similar topics were clustered.
Question Relevance Theory and references 1. In your opinion, which of the following
statements do you consider to adequately describe Corporate Social Responsibility (CSR)?
This question enables us to see how CSR is defined by the intermediary organisations. With this information the rest of the answers can be placed in context. For instance, when a respondent answers with ‘CSR is only concerned with employees’, their answers to the other questions will be based on this assumption.
Besides this, the question introduces the respondent filling out the questionnaire with the subject. Without this question the respondent would immediately dive into the deep waters, now instead, they will ease into the questions.
Jenkins, 2004
Moratis and van der Veen, 2006 MacGregor et al., 2007
2. In your experience, in which areas are Small and Medium-sized Enterprises (SMEs) in your country already practising CSR?
The second and third question both contribute to establish the so-called ‘20-80 percentage dilemma’; 80 percent of all management activities covers only 20 percent of the available opportunities for value creation through environmental and social responsibility. Where are they already practising CSR and where is room for improvement?
Besides the already stated relevance of question two and three, they will also give an insight in the most important stakeholders of SMEs which is needed to determine the organisational field (DiMaggio & Powell, 1983)
3. In which of the following areas should SMEs practice CSR?
There is no consensus in the literature on what the priorities of SMEs should be regarding CSR. This question will provide the expert insights of intermediaries, which will give the opportunity to identify the most important focus areas, specific to that country and/or to Latin America as a whole.
These two questions will help to identify the appropriate targets for a CSR programme.
The given answers to these questions are based on several sources (both articles as expert opinions) to make them as comprehensive as possible (CSCP, 2007).
4. To what extend are SMEs in your country already addressing the following CSR topics? 5. Which CSR topics should be addressed by
SMEs?
Question 4 and 5 contribute in a similar way as 2 and 3. They help to identify the most appropriate topics. Four is concerned with the current situation of SMEs and question five asks for the preferred situation according to the intermediary organisation.
Whereas 2 and 3 are more concerned with where in the supply chain CSR is practiced, 4 and 5 are focused on what they do. Both are
There are many CSR topics, in order to be most comprehensive, these topics are based on the ten principles of the UN Global Compact, which can be found at: http://www.unglobalcompact.org
essential for the overall goal of this thesis. 6. Which of the following services are already
available for SMEs in your country in respect to CSR?
7. Which of the following services should be strengthened in order to promote CSR amongst SMEs?
Make an inventory of existing services that are available for SMEs to develop CSR capacity, to identify where there is room for improvement.
Besides theoretical insights, the opinion of experts on location is very valuable for the prioritising of services.
Moratis & van der Veen, 2006 MacGregor et al., 2007
8. Which of the following organisations already support CSR in SMEs in your country? 9. Which partners should support CSR in your
country?
The purpose of question 8 is to make an inventory of the available potential partner organisations in Latin America.
The second question on partners will help to identify the most promising potential partners for GTZ for building a partnership or network.
Which field is the organisation part of? (DiMaggio & Powell, 1983; Round Table, 2004)
These questions will help determine the status of political influence. In addition to question two and three, they also help determine most important stakeholders.
10. In your opinion, what are the main drivers for a SME to become engaged in CSR?
To make the business case clear in order for the intermediaries to reach out to the SMEs (amongst other to convince them to participate in the training).
DiMaggio & Powell, 1983; Dummet, 2006; Luetkenhorst, 2004; UNEP, 2003; Vives, 2006 11. In your opinion, what are the main obstacles
preventing a SME from becoming engaged in CSR?
CSR requires special resources that intermediaries can provide to complement business resources.
Resources based-view (Barney, 1983)
Campbell, 2005; MacGregor, 2007; Raynard and Forstater, 2002; UNEP, 2003; Vives, 2006
12. Could you indicate, in percentages, in which sectors SMEs in your country are mainly active?
This question will help to place the given answers in a context. Vives, 2006
13. Is there any other information that you would like to add to this questionnaire?
This last question is the only open-ended question in the survey. It provides the respondent the opportunity to write down additional information that he of she believes is of relevance.
4.
Theory and Literature
This chapter will first discuss the theories used, followed by a status quo analysis. Based on this, the most important drivers and barriers for SMEs in Latin America are given. The theories and the resulting drivers and barriers were used to formulate the questions asked in the questionnaire and in the interviews.
4.1 Theoretical Framework
The theoretic framework will consist out of the resource-based view (RBV) and the institutional theory. There are several ways to look at an organisation and try to explain its behaviour. On a very basic level, one way is to look at the organisation inside out; another way is to look from the outside in. The resource-based view will give an internal perspective on CSR capacity building. The institutional theory on the contrary will provide a more external view.
4.1.1 The Resource Based View
The reason for choosing specifically the resource-based view is twofold. The RBV of the firm offers a tool for refining the analysis of how corporate social policy influences the bottom line (Russo & Fouts, 1997). First of all, the RBV has a strong focus on performance as the key outcome variable. Secondly, work adopting the resource-based view explicitly recognises the importance of intangible concepts, such as know-how, corporate culture and reputation (Russo & Fouts, 1997). According to Russo and Fouts (1997), the RBV provides a good foundation for the hypothesis that improved environmental performance can enhance economic performance.
CSR requires special resources that intermediaries can provide to complement business resources. On this topic a lot of research already has been done, however not in this context.
The resource-based view builds on the assumption that strategic resources are heterogeneously distributed across firms and is originally being used to explain a firm’s sustained competitive advantage (Barney, 1991). A firm is said to have a sustained competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors and when these other firms are unable to duplicate the benefits of this strategy (Barney, 1991).
