A review of studies in external corporate social responsibility
A REVIEW OF STUDIES IN EXTERNAL CORPORATE SOCIAL
RESPONSIBILITY
Bui Thu Van, MA.
Tran Trong Duc, MA.
National Economics University
Abstract
The world has been experiencing the greatest changes in the production industry over
the past 100 years. Professor Klaus Schwab, author of The Fourth Industrial
Revolution, states that we are in the midst of the 4.0 revolution. The First Industrial
Revolution took place in the late 1700s and used water and steam to mechanize
production. The Second Industrial Revolution took place at the end of the 19th
century and used electric energy to create mass production. The third industrial
revolution took place in the second half of the 20th century and used electronics and
information technology to automate production.
As an indispensable process, the Industrial Revolution 4.0 is driven by advances
including the intelligent manufacturing, robot, the artificial intelligence and Internet of
Things (IoT). This is followed by five trends of future production: the 360 °
Production Technology, the 3D Printing Technology, the Automated Manufacturing,
the Intelligent Building - Cloud Computing and the throne of the robot; however, they
are still controlled by human.
All these trends are leading to the sustainable production and the sustainable
development. Therefore, how will enterprises address the issues of sustainable
development? In general, companies often address these issues by following the
corporate social responsibility (CSR). In this paper, I would like to clarify the theories
of corporate social responsibility, especially I will focus on external CSR and use a
case of Toyota Vietnam to analyze. We find that CSR researchers generally follow the
external stakeholders approach such as customer, supplier, community and
environment when doing research about the impact of external CSR on some fields
such as the employee motivation or firm performance. Based on our analysis, we
provide several recommendations for future studies in Corporate Social Responsibility
and Sustainability.
Key words: corporate social responsibility (CSR), external corporate social
responsibility, sustainable development, sustainability.
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1. Corporate Social Responsibility concepts
Perception of CSR
Employees are concerned about how to evaluate, react and perceive organization’s
CSR practice (Rupp et al. 2013). The employees’ perception of CSR has impacted on
their behaviors and attitudes (Aguinis and Glavas 2012). However, Aguinis and
Glavas (2013) suggest that the perception of employees about CSR might be not
appropriate as they think.
However, the implications for employees’ perception still exist (Dijksterhuis and Van
Knippenberg 1998). Rupp et al. (2013) explain that the employees’ perception is
likely to have more direct and stronger impacts than actual firms’ behaviors. There is
a wide variety of literature using employees’ perception as a measurements, for
example El Akremi et al. (2015) use employees’ perception to measure CSR practice.
Relevance of a stakeholder framework
CSR has a variety of contrasting definitions, which reflect a range of practices
(Welford 2004; Welford 2005; O'Riordan and Fairbrass 2008). Although scholars and
practitioners have been trying to build a common definition for CSR, CSR has not one
agreed upon definition (Carroll 2004a; Rahman 2011; Hack et al. 2014). The concept
of CSR has evolved since 1950s with the first dimension of CSR being about the
obligation to the society (Heald 1957). Currently, there are an increasing number of
disagreements about what the concept actually means (Matten and Moon 2008;
O'Riordan and Fairbrass 2008; Skudiene and Auruskeviciene 2012).
Elkington (1999 cited by Savitz and Weber 2006; Crane et al. 2007; Crane and Matten
2010) considered the triple bottom line (TBL) of sustainability with three
perspectives: Social (people), Economic (profit) and Environmental (planet) also
known as “3Ps”. Thus, a socially responsible company is an organization with
economic prosperity, social equity and environment protection. Werther and Chandler
(2011) suggested that an organization should not only gain profits but also have an
obligation to benefit society. Moreover, CSR is accepted as a strategy for the
sustainable development (Crane and Matten 2010; Werther and Chandler 2011).
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Figure 1: The triple bottom of sustainability
Source: Adapted from (Crane and Matten 2010)
Carroll introduced a framework named “The pyramid of Global Corporate Social
Responsibility” with the basic blocks of economic, then legal, ethical and
philanthropic responsibility, respectively (Carroll 1979; Carroll 1999; Carroll 2004a).
This framework helps managers consider the different stakeholder expectations “make
profit consistent with expectations for international businesses; obeys the law of host
countries as well as international law; be ethical in its practices, taking host-country
and global standards into consideration; be a good corporate citizen, especially as
defined by the host country’s expectations”(Carroll 2004b,p.117). However the later
revised to a three-domain approach has been presented without the philanthropic
component (Schwartz and Carroll 2003; Glavas and Kelley 2014). The Carroll
framework could be seen as resolving for the argument of Friedman (1970 cited by
Hack et al. 2014) when Friedman argued that CSR of company is to generate profit.
Figure 2: The pyramid of Corporate Social Responsibility
Source: Adapted from Carroll (2004b)
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In contrast to Carroll’s four-part model and the triple bottom line of sustainability, the
stakeholder theory of the firm approaches CSR by “looking at various groups to which
the corporation has a responsibility” (Crane and Matten 2010, p. 61). Sacconi (2006)
focused on the wide range of stakeholders when defining CSR. According to Sacconi
(2006, p262):
“Corporate Social Responsibility is a model of extended corporate governance
whereby those who run a firm (entrepreneurs, directors and managers) have
responsibilities that range from fulfillment of their fiduciary duties towards the
owners to fulfillment of analogous fiduciary duties towards all the firm’s
stakeholders.”
Stakeholder theory suggests that managers have to develop their activities in relation
to stakeholders (Freeman and McVea 2001). According to the stakeholder theory
(Donaldson and Preston 1995), a cognition-based theoretical model is established in
terms of perceptions of stakeholders (Bundy et al. 2013), which reflect “who and what
really count” (Mitchell et al. 1997). Additionally, Lucea (2010) also confirms that
managerial cognition on organizational behavior reflects the stakeholder groups. The
impact of CSR on firm’s performance is mediated by the stakeholders’ responses to
CSR practice (Barnett 2007). It is acknowledged that the stakeholder approach is a
useful method to help employees evaluate the external and internal activities of
organizations. Through combining arguments from the works of Sacconi (2006,
2007), Rahman (2011), Carroll (2004a), Aguilera et al. (2007a), and others, a
stakeholder-based perspective is considered as a comprehensive approach for
development CSR concept
2. External CSR
This paper has considered CSR as a multidimensional concept toward different
external stakeholders. Scholars and practitioners defined two different dimensions of
CSR but different names: internal dimension and external dimension
(EuropeanCommission 2001); actions within and outside the firm (Aguilera et al.
2007a); internal and external social roles (Ligeti and Oravecz 2009), intrinsic and
extrinsic CSR (Story and Neves 2015)and implicit and explicit CSR (Matten and
Moon 2008). The external stakeholders include customer, supplier, community,
environment and the government (regulators) (Mason and Simmons 2014; Griffin et
al. 2015). However, in this paper, the author has focused on external CSR concept,
which means moral activities oriented to external stakeholders such as customer,
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supplier, community and environment.
The government plays a significant role in establishing regulations and rules by which
some criticisms are raised about business ethics or CSR (Crane and Matten 2010). “In
democratic societies, the government would include all legislative and executive
bodies that act on the basis of parliamentary consent” (Crane and Matten 2010, p.19).
The emergence of the debate on CSR is about whether or not CSR practice
implemented by companies is due to the nature of the obligation or regulations of the
government (Smith 2003; Crane et al. 2007; Crowther and Lancaster 2009). The CSR
practice tends to be legitimate and be impacted by political issues (Rotter et al. 2014).
For outcomes to be legitimate, CSR practice must be socially accepted (Dryzek 2010).
However, the government is one of the important stakeholders, so firms have
responsibilities to be concerned about government’s expectations (Sacconi 2006,
2007). Crane and Matten (2010, p. 496) suggest that the government presents as “the
representative of citizens’ interests and an actor with interests of its own” with
regulations and rules. In the Carroll’s CSR pyramid, legal responsibility (obey the
law) is the second component after the foundation of the pyramid (Economic
responsibility). Organization sometimes take action due to the pressure from the
government or society and sometimes they do because they are concerned (Crowther
and Lancaster 2009; Crowther and Reis 2011). Deegan and Shelly (2014) suggest that
CSR should be further implemented through the enactment of additional regulations.
Criticism about CSR is increasing due to the growing recognition of the failure of
governments to address many social problems such as pollution or product safety
(Crane et al. 2007, p.38). The poorly enforced regulation and escalation of corruption,
which has seen in some parts of the former Soviet Union such as Eastern Europe and
Central Asia, lead to the difficulties in attracting foreign investors to enter these
markets (Crane and Matten 2010, p.496). Scherer and Palazzo (2011) suggest the
Political CSR concept as “an extended model of governance with businesses
contributing to global regulation and providing public goods”. This concept is
opposed to the Political CSR definition suggested by (Garriga and Melé 2004), which
is concerned about “the power of corporations in society and a responsible use of this
power in the political arena”. Although Mäkinen and Kourula (2012) suggest the
pluralism in Political CSR, the aim of the idea about Political CSR (Scherer and
Palazzo 2011) is to balance questions of power and responsibility.
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After considering the debate on the role of governments, it is acknowledged that the
government has an influence on the customer, supplier, community and environment –
oriented CSR practice. For example, governments issue rules which are protection
environment rules such as the companies have to cut the amount of carbon-dioxide
emissions or regulations for protecting customers (Crane and Matten 2010). For
example , in Vietnam, the law on environmental protection no. 55/2014/QH13 stated
that manufacturing companies have to invest in the process of collecting and treating
the industry sewage and waste (VietLaw 2014). This also partly encourages SMEs in
Vietnam to implement CSR activities. However, CSR is seen as sustainability strategy
of companies in Vietnam. The external CSR of a company is influenced partly by
laws or regulations/governments. Therefore, this research does not address about the
government-oriented external CSR in the framework and considers four external
stakeholders: customer, supplier, community and natural environment.
Customer-oriented External CSR: A socially responsible company is expected to
offer products and services in an efficient, ethical and environmentally manner for
customers. A long- lasting relationship between companies and customers is built
when companies understand and meet the customers’ demand (EuropeanCommission
2001). Ethical issues related to customers such as product or marketing are mentioned
by Crane and Matten (2010) or do not only require correct and safe products but also
opportunities to deliver suggestions and complaints for the company (Longo et al.
2005). Moreover, customers prefer buying products made from socially responsible
material (Longo et al. 2005; Kweh et al. 2014). Thus, external CSR activities have a
significant effect on customer – related outcomes and customers’ attitudes to
companies, which tend to affect the profit of companies. Longo et al. (2005, p.32)
mentioned four values to customer “product quality, safety of customer during use of
product, customer protection and transparency of consumer information on product”.
Supplier-oriented External CSR: Acting in a socially responsible way primarily
implies treating suppliers and other partners in an ethical manner. The company
should encourage suppliers to improve their products and services through sharing the
quality goals, setting high standards for suppliers and agreeing on the quality control
procedures (Longo et al. 2005). Selection of suppliers is not always exclusively
through competitive bidding. In the long run building relationships may result in fair
prices, terms and expectations along with quality and reliable delivery. In adopting
CSR practices, all companies have to respect the relevant rules of EU and national
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competition laws (EuropeanCommission 2001).
Community- oriented External CSR: Companies practice external CSR toward
local communities if, for example they educate and help children and disabled
individuals, implement donating practices or recruit socially excluded people
(EuropeanCommission 2001; Ligeti and Oravecz 2009); stimulate employees to
participate in community development activities or volunteer activities (Papasolomou-
Doukakis et al. 2005); provide financial assistance to social activities through
sponsoring local sports or cultural events (EuropeanCommission 2001; Graafland and
van de Ven 2006). External CSR practices not only bring benefits for the whole
community but also for the company (Aguilera et al. 2007a).
Natural environment-oriented External CSR: The environment perspective is one
of components in the triple bottom line (Elkington 1999 cited by Crane and Matten
2010) of the sustainability model. The work of El Akremi et al. (2015) suggested
environment – oriented CSR practice is to take actions to mitigate pollution, save
manufacturing energy and resources or to invest in renewable energy and clean
technologies.
3. Background about CSR in Vietnam
Recently, CSR has attracted great attention of the government, small and medium-
sized enterprises (SMEs) and Multinational Companies (MNCs) in Vietnam
(CSRVietnam 2015). This can be seen from various events or workshops about CSR
organized to improve the awareness of organizations about CSR, especially about
external CSR related to environment, community, consumer and supplier
(CSRVietnam 2015).
External CSR in Vietnam was introduced by MNCs under the form of a Code of
conduct or social standard requirements (Pham 2011a). It has received great attention
from the society and organizations in Vietnam, especially following ecological
disasters by factories since 2008 (Pham 2011b). A serious example of environment
protection was the pollution of Thi Vai River caused by Vedan Vietnam in 2008
(Nguyen and Pham 2012). The CSR issues are emerging in many developing
countries, not only Vietnam, with concerns about low standards for working
conditions, low salary, high corruption, poor provision of healthcare or environment
protection (Crane et al. 2007).
The CSR situation in Vietnam tends to be promising with the concern from the
Vietnamese Government and businesses. The ”Doi Moi” and open-door policies were
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implemented in 1986 (Twose 2002). Although many social problems still remain, it
has helped Vietnam gain economic development (Pham 2011a). To address these
social problems, the Vietnamese Government issues laws about environment
protection (VietLaw 2014) or sustainable development (Viet Nam Sustainable
Development Strategy for 2011-2020) (VietnameseGovernment 2012). The violations
of the laws would cause companies to incur financial penalties or to be imprisonment
in a severe case (VietLaw 2014; Bilowol and Doan 2015).
From 2005, Vietnam has had the CSR Award, which was launched by the Office for
Business Sustainable Development (SD4B) under VCCI, the Vietnam Business
Council for the Sustainable Development (VBCSD), and the UNIDO-VCCI CSR
Project (VBCSD 2012). This award drives companies to put efforts into improving
working condition, protecting environment and improving Vietnamese communities
with the aim of sustainability development in Vietnam (O' Rourke 2004; VBCSD
2012). However, there is still a wide range of challenges in implementing CSR in
Vietnam. Firstly, there is lack of compulsory regulations (Pham 2011a). The measures
to evaluate CSR are based on general codes of product and standards such as SA 800,
WRAP, IOS 14000, et al (Twose 2002; Pham 2011a; Pham 2011b). However, these
standards do not conform to the international convention (Pham 2011a). Secondly,
many companies in Vietnam have a limited knowledge about CSR, which leads to the
limitation of the development of CSR (Pham 2011b). Thirdly companies, especially
SMEs, lack resources and experts to apply CSR strategies.
There are currently many MNCs implementing external CSR practice in Vietnam such
as Toyota. Starbucks or KFC (Bilowol and Doan 2015). However, the real driver
behind the CSR-sustainable strategy of MNCs in Vietnam is questionable.
4. External CSR in Toyota Vietnam
Toyota Motor Vietnam Co., Ltd is established in September 1995 with the total
investment capital contributed from Toyota Motor Corporation (70%), Vietnam
Engine and Agricultural Machinery Corporation – VEAM (20%) and KUO Singapore
Pte. Ltd (10%) (ToyotaVietnam 2015a). In 2015, Toyota Vietnam is 1 of 50
enterprises received “The Corporate Social Responsibility Award 2015” because the
CSR activities contributes to Vietnamese society (ToyotaVietnam 2015f).
Proactive and reactive approaches are two ways to implement CSR strategy (Groza et
al. 2011; Chang 2015). A proactive approach is defined as the way an organisation
proactively takes action to increase sustainable development without the pressure
from stakeholders (Groza et al. 2011; Torugsa et al. 2013). In contrast, a reactive
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approach is defined as the organizations’ attitude adapt to stakeholders’ requests and
meets the country’s regulations and laws (Groza et al. 2011; Chang 2015).
Toyota Vietnam has a clear proactive approach for their sustainable development
strategy. Toyota implements technical training programs at the automotive vocational
schools in Vietnam, invests in technology to save energy resources (ToyotaVietnam
2015g) and develops supplier networks for increasing the rate of localization
(ToyotaVietnam 2014). This proves that Toyota selects its approach based on the
demand of sustainable development for the automobile industry in Vietnam and not
because of stakeholder pressure. Although the proactive approach is not driven by
stakeholder pressure, the sustainability strategy is affected by the demands of
stakeholders (Groza et al. 2011; Chang 2015).
With the aim to become “A good citizen in the local community” and “The most
famous company”, Toyota Vietnam approaches external CSR oriented to four external
stakeholders: Community (Traffic safety, Education and Culture & Society), Natural
Environment, Customer and Supplier (ToyotaVietnam 2015d).
First, customer-oriented external CSR is implemented with the philosophy “Customer
First”. Toyota Vietnam provides innovative, safe and high quality products to
customers (ToyotaVietnam 2015c). Second, supplier-oriented external CSR is
implemented with supporting activities to suppliers with the belief of the development
and moving forward together (ToyotaVietnam 2015e). Third, community-oriented
external CSR is implemented in three field: Traffic Safety, Education and Culture &
Society in order to improve the traffic safety, to build up a technical talented young
generation in Vietnam and to strengthen the Vietnamese culture (ToyotaVietnam
2015d). Fourth, environment-oriented external CSR is taken action with the mission
of protecting natural environment for the future (ToyotaVietnam 2015b). Appendix D
shows in detail external CSR activities of Toyota Vietnam.
The external CSR activities of Toyota Vietnam are classified by the TBL model
(Elkington 1999 cited by Crane and Matten 2010) with three elements: economic,
environmental and social (see Table 1). Table 1 shows Toyota activities supporting
CSR.
Economic
x Develop supplier
Environment
Social
x Offer scholarships
x Use Eco bag
campaign
networks
x Employ local
people
x Organize the
technical education
programs
x Re-use of materials
and waste recycling
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x Invest in innovation
products or services
x Invest in the water-
x Organize sate
driving training
programs
waste treatment
(ToyotaVietnam 2015e)
(ToyotaVietnam 2015b)
(ToyotaVietnam 2015d)
Table 1: The Triple Bottom Line of Toyota Vietnam
This section presents the answer for the key research question “What is the external
CSR in Toyota Motor Vietnam?” In brief, Toyota Vietnam approaches external CSR
oriented to four external stakeholders: Community (Traffic safety, Education and
Culture & Society), Natural Environment, Customer and Supplier (ToyotaVietnam
2015d).
5. Conclusion and limitations
Reviewing studies in CSR and sustainability from 1995 to 2016, we observe that
studies in CSR and sustainability are on the increase. This paper has considered CSR
as a multidimensional concept toward different external stakeholders. Scholars and
practitioners defined two different dimensions of CSR but different names: internal
dimension and external dimension (EuropeanCommission 2001); actions within and
outside the firm (Aguilera et al. 2007a); internal and external social roles (Ligeti and
Oravecz 2009), intrinsic and extrinsic CSR (Story and Neves 2015) and implicit and
explicit CSR (Matten and Moon 2008). Based on the above analysis, we propose
several recommendations for future studies in CSR. First, we suggest that CSR
researchers pay special attention to external CSR, so we could broaden examination to
other stakeholders groups and to investigate relations between the factors. In addition,
researchers should be careful about the government (regulators), which is an external
stakeholder in doing research. In addition, researchers could suggest maturity models
for integrating sustainability to the corporation strategy.
We acknowledge that our study is limited in terms of the scope. Not all types of CSR
studies have been taken into account. However, considering the fact that external CSR
studies are the most widely adopted in doing research about the impact of CSR on
some fields such as the employee motivation or firm performance, the summary and
208
recommendations are valuable to shed light on this topic. To further enhance our
knowledge about CSR and sustainability, this study can be extended in two ways.
First, our study provides a comprehensive but not exhaustive review of CSR and
sustainability. It is possible to review internal CSR research and check the correlation
between CSR and others factors such as firm performance and employee motivation.
Second, in this paper authors only use Toyota as a case to analyze CSR activities, so it
would be informative to investigate more cases. From that we could analysis data to
understand CSR theories, their characteristics, contributions and current issues they
encompass in the 4.0 revolution.
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