CORPORATE SOCIAL RESPONSIBILITY How to communicate responsible behavior to the stakeholders.doc

CORPORATE SOCIAL RESPONSIBILITY- How to communicate responsible behavior to the stakeholders -Vesna BABI-HODOVI, Ph.D., Associate ProfessorSchool of Economics and Business Sarajevo Bosnia and Herzegovina Trg Oslobodjenja Alija Izetbegovi 1 Sarajevovesna.babic-hodovicefsa.unsa.ba+387 61 139 010; +387 33 275 994Eldin MEHI, Mr. Sc., Senior Teaching AssistantSchool of Economics and Business Sarajevo Bosnia and Herzegovina Trg Oslobodjenja Alija Izetbegovi 1 Sarajevoeldin.mehicefsa.unsa.ba+387 61 278 980; +387 33 275 994Emina RESI, Mr. Sc., Senior Teaching AssistantSchool of Economics and Business Sarajevo Bosnia and Herzegovina Trg Oslobodjenja Alija Izetbegovi 1 Sarajevoemina.resicefsa.unsa.ba+387 33 275 953; +387 33 275 994Amra KRAMOSchool of Economics and Business Sarajevo Bosnia and Herzegovina Trg Oslobodjenja Alija Izetbegovi 1 Sarajevoamra.kramoefsa.unsa.ba+387 61 214 518; +387 33 275 994ABSTRACTThe overall aim of the research presented here was to find main causes of irresponsible behavior in business, as well as main issues companies have to take into consideration when they try to communicate responsible behavior or cause-marketing activities to their target market or other stakeholders.In the first part of paper we had discussed theoretical framework of CSR and different CSR dimensions, using them to formulate hypothesis for our research. We had completed research between managers of most successful Bosnian companies and customers on the other side. During the research we had been testing hypothesis about significant differences between managers and customers attitudes regarding responsibility, and their perception of communication tools and activities companies used in order to send message concerning responsibility. We had been using statistical tests in order to check our hypothesis and to measure dependence between goals companies want to achieve through communication and the causes they support. At the end we gave conclusion and recommendation based on results we had got, wanting to help companies to find out successful way to build really responsible business and to get maximum benefit for the companies and society through commitment to CSR. Key words: corporate social responsibility and information, stakeholders, ethical issues, marketing, Bosnia and HerzegovinaCORPORATE SOCIAL RESPONSIBILITY- How to communicate responsible behavior to the stakeholders 1. INTRODUCTIONCorporate social responsibility is a very hard to engage, but sometimes even harder to communicate to the companies stakeholders. Many companies are aware they need to operate in a socially responsible way and if they implement CSR properly it will lead to profitability. “We recognize that corporate responsibility lies at the heart of the decisions you make in ordinary business activities. The trust that people have in you as a company is critical” (Harrington 2005). But CSR is more than using clear technology or pay some donations - its more about sustainability. At the same time, as companies engage in initiatives that support corporate social responsibility, they should communicate about these initiatives in their marketing and public relations effort. CSR is generally associated with positive events, and as such companies are inclined to communicate about their good deeds to influence public opinion and enhance their corporate reputation (Morsing, 2005). The nature of CSR is hard to define because different stakeholders have such different opinion about it. As the result the chances are that whatever a companys CSR activities, some observers will think company doesnt do enough, (or doesnt do right things) and others will feel the company do too much.For some people, CSR merely means that managers, employees and other companys stakeholder put something back into society to alleviate the perceived societal or environmental damage that modern business does to the world. That something usually has a financial component and as such it is little more than a synonym for good management (Harding 2005). Many companies, when they ask themselves what CSR they undertake, find that they already do much of what is expected of a “responsible firm” (Harding 2005). But the confusion surrounding what CSR actually is and the doubt about the right level of commitment prevents companies from robustly addressing some if the big social, legal, ethical and environmental challenges.2. CORPORATE SOCIAL RESPONSIBILITY DEFINITION Concept of corporate social responsibility is closely interrelated with the corporate governance, more precisely concept of strategic marketing management. Only synergy between the corporate governance, marketing concept and responsible business can create base for successful business and company differentiation (Sparkes, 2003). Unfortunately, anyone looking with the large and evolving literature about CSR, with a critical eye will notice that the concepts and terms, as: corporate social responsibility, corporate responsibility, social responsibility, corporate citizenship, global citizenship, corporate accountability, social involvement, corporate responsibility. are explained and used by various authors in very different ways and supported (or critiqued) with diverse and often contradictory evidence and arguments. That explains that very often, the term of corporate responsibility is used as the synonym for corporate social responsibility. According to Philip Kotler and Nancy Lee, Corporate social responsibility is a commitment to improve community well-being through discretionary business practices and contribution of corporate resources (Kotler, Nancy, 2005).Corporate responsibility is really about ensuring that the company can grow on a sustainable basis, while ensuring fairness to all stakeholders. This definition emphasizes the companys external relationships. But EIU survey shows that executives are much more focused on the internal aspects of CR, in particular: ethical behavior, corporate governance and transparency. The most important stakeholders for executives, after customers, were employees and shareholders. The social responsibility of business encompasses the economic, legal, ethical and discretionary expectations that society has of organizations at a given point in time (Carroll, 1979). The economic component is businesss fundamental responsibility to make a profit and grow. The legal component is their duty to obey the law and to plan by “the rules of the game”. The ethical component is their responsibility to respect the rights of others and to meet the obligations placed on them by society that ensure these rights. Finally, the discretionary component involves philanthropic activities that support the broader community (Snider et al. 2003). A research paradigm that parallels this perspective is stakeholder theory, whereby business is deemed responsible on such dimensions to specific stakeholders groupings (Maignan and Ralston, 2002).Taking into consideration the most important dimension of responsible business is connected with the primary and secondary stakeholders, as well as with those who influence the company (Donaldson, Preston, 1995), CSR encompasses various kinds of responsibilities (Post et al, 1996). The most important and the most frequent are the ones toward: (I) Employees and other stakeholders within the company (labor relations, additional health care, education at the workplace, transparency in corporate governance, etc.); (II) The economic system: honor contracts, transparency, preserving competition etc.; (III) Environment: preservation; (IV) The social system: respect for state recommendation (e.g. inner city redevelopment, education); (V) Social welfare (Help to disabled, support people in need etc.) and (VI) Cultural needs and institutions, (e.g. banks as art collectors).Still you might say CSR was always intended to be more about how the companies conduct themselves in relation to “stakeholders” (such as employees, consumers, the broader society, in which firms operate and as it often argued, future generation) than about straightforward gifts to charity. Seen that way, donations, large or small, are not the main thing (Crook 2005).Since the goal of responsible behavior and message “we are responsible”, companies send to public, is to convince different kinds of companies stakeholders that company is better than its competitors, it is important to close gaps between customers and managers attitudes. That means companies have to investigate its customers to be able to find out what customers really think about the CSR and how they perceive companies that try to accomplish some of different forms of responsible behavior, sending the message that they are responsible and use some of the cause-related marketing or cause-related promotion. Based on the results companies should build adequate communication strategy in order to motivate customers and create preferences toward companies and their activities.Hypothesis 1: There is no unique determination CSR dimensions and meaning among managers and customer in B&H. Those differences one can find in the way how they defined responsible behavior and actions they mostly related to the responsible behavior, but in the meaning responsible companies have to them. 2.1. Responsibility between customers and companiesThe problem for companies is that there is a little agreement among customers about what is good corporate behavior. Even more, somehow, companies are caught in a moral trap. Customers want their companies to be responsible, but do not want to pay premiums. As the result some authors conclude: the belief that customers will pay a premium for CSR is a myth (Doane 2005, Smith 2005). Parallel with those customers are suspicious of companies that wear their hearts on their sleeves, thinking that they are only committing to CSR because it looks good (Smith, 2005).Therefore, relationship and interests of specific stakeholders and CSR practice of the company are particularly related to the customers, often identified as the one of the most important interest groups. We have just explained their attitudes, but even bigger problem is that all cited researches are connected to the customers attitudes, not behavior. It means research measure just customers “promises”, not the results of their decisions. But, when their positive intentions face with costs of responsible behavior, which almost always come to the customers, they often left “the problem of responsibility to the others”.Those attitudes are closely related to the main cases where companies commit to CSR: normative and business ones. Previous one is really connected to the companies wish to be good, but the second one is related to the self-interest of the companies, wanting to create better image and position at the market. No matter if they admit or no, most companies undertake CSR initiatives from a mixture of these two motivations (Smith 2005). H2: Customers prefer responsible companies in B&H, but the influence of companies responsibility to the buying decision is not significant. 2.2. Corporate social responsibility communication PR invention?Very significant questions theorists and NGO have often asked is connected to the real intention of CSR activities in the companies. Sometimes they even asked if CSR is an invention of PR. Some of the authors stress different paradoxes connected to CSR, arguing companies use “cause-related marketing” as a means of improving their branding and positioning, not as a companys long-term footprint on society (Frankental 2001). This means that CSR can only have real substance if it embraces all the stakeholders of a company, if it is reinforced by changes in company law relating to governance, if it is rewarded by financial markets, if its definition relates to the goals of social and ecological sustainability, if its implementation is benchmarked and audited, if it is open to public scrutiny, and if it is embedded across the organization horizontally and vertically. As the result it is important to measure reaction of customers to the companys communication strategies, but at the same time companies actions and nature of the problems they support in public. Namely, based on reaction of customers and perception companies could expect positive reaction or skepticism as the consequence of corporate responsible behavior. Very often authors can find different gap between companies intention and goals laying beyond the CSR practice and customers reaction to those actions. Based on that theoretical framework we have tested the next hypothesis:H3: Customers perceive responsible behavior of companies more as the actions implemented in order to create good image in public, than really responsible ones and, as the consequence, sometimes they have high level of skepticism regarding companies invitation to participate in.2.3. Dimensions of corporate responsibilityCorporate social responsibility is defined often primarily from social or environmental influences of systematical organizational activities. That is not the main point. To be implemented, CSR should be understood as the process influencing to build connection between individuals' moral values and interests (Maclagan 1999).Today to be responsible companies have to be firstly profitable. Unsustainable business is not social responsible one. Economic sustainability and market success are the most efficient way to practice social responsibility. Market success create benefits to shareholders, employees, suppliers, governments, even future generation getting companies to invest in R&D and creating innovation. Corporate success itself is important commitment to social welfare. Prosperity for all is the main idea of market economy social policies without economic ruin their own foundation. But critics of globalization perceive market as immoral monster that must be controlled (The 2005). Sometimes Henry Ford had said: If business does not produce anything but money it is bad business.“ It is possible to add: business which does not produce any money is social irresponsible way of business (Pischetsrieder 2005). Logical conclusion is - profit and social responsibility are positively related. It is wrong to claim social responsibility is only visible through direct charity. Since Adam Smith and his Wealth of nations there is the statement: only poor person would choose to depend on charity of his citizens. In order to keep multidimensionality of the category it is necessary look at companies' activities through the framework of stakeholders. That means corporate responsibility is capability to answer to the requests of different groups and it has four different dimensions