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Corporate Social Responsibility from an Emerging Market Perspective: Evidences from the Indian Pharmaceutical Industry
D I S SERTAT ION of the University of St. Gallen,
Graduate School of Business Administration, Economics, Law and Social Sciences (HSG)
to obtain the title of Doctor Oeconomiae
submitted by
Shiban Khan
from
Bangladesh
Approved on the application of
Prof. Dr. Li Choy Chong
and
Prof. Dr. Thomas Dyllick-Brenzinger
Dissertation no. 3468
Difo-Druck GmbH, Bamberg 2008
Corporate Social Responsibility from an Emerging Market Perspective
-ii-
The University of St. Gallen, Graduate School of Business Administration, Economics, Law and Social Sciences (HSG) hereby consents to the printing of the present dissertation, witohut hereby expressing any opinion on the views herein expressed. St. Gallen, May 14, 2008 The President: Prof. Ernst Mohr, PhD
Corporate Social Responsibility from an Emerging Market Perspective
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Acknowledgements
They say it is about the journey, and not the destination. I believe it is the fellow travelers
who make a voyage remarkable. Although I was eager enough to reach this particular
destination on my own, I could not have arrived here without the support of the amazing
individuals who guided and aided me in my arduous, yet deeply fulfilling journey of
completing a Doctoral dissertation all along the way.
I consider myself very lucky to have worked under the superlative guidance and
supervisions of Prof. Dr. Li-Choy Chong and Prof. Dr. Thomas Dyllick. Without their
support, encouragement and understanding, this project would never have materialized. I
am thankful to them for granting me the opportunity to work and learn by their sides.
I cordially thank Prof. Narendra M. Agrawal of the Indian Institute of Management,
Bangalore for hosting my research stay. I am indebted to him for lending his support in
every academic and non-academic way possible to make my sojourn in Bangalore a
delightful experience. I would also like to thank Prof. J. Ramachandran for giving me
invaluable insights on the Indian pharmaceutical industry and providing me with access
to companies I am grateful for the occasion when I had the opportunity to work with
him. Thanks also to Prof. P.D. Jose and Dr. Mukesh Sud for sharing their expertise.
My sincere thanks to the personnel of the pharmaceutical companies who took time off
their busy schedules to accommodate me and my requests of repeated meetings. Especial
thanks go to Ms. Rani Desai of Biocon Ltd., Mr. Ranjit Shahani of Novartis (India) Ltd.,
Mr. Joe Thomas of Strides Arcolabs Ltd., and Col. L. Gill of Wockhardt Ltd. Dr. Ajit
Dangi of OPPI had been instrumental in arranging company access and industry insight.
I am obliged to Prof. Dr. Ulrich Steger for allowing me to get involved in the IMD
Corporate Sustainability Management Forum. Thanks to Dr. Oliver Salzmann for
reviewing my thesis and the cherished friendship in Lausanne. I am grateful for Prof. Dr.
Kai Hockerts feedback on my proposals in the early days. I also thank Dr. Jost
Hamschmidt and other expert scholars at the oikos Summer Academy 2005 for their
invaluable advice.
Corporate Social Responsibility from an Emerging Market Perspective
-iv-
I humbly thank my family, for giving me the reasons to strive for a better me. My parents,
Sayeeda and Jahangir Khan taught me lifes most valuable lessons and shaped my ethos; I
draw my strengths from their unrestricted love, unconditional support and relentless
encouragement. I can never thank them enough for being my parents. I am grateful to
Samara for being such a terrific sister and a wonderful friend. I am indebted to all my
grandparents, uncles, aunts and in-laws for their love and blessings. I wish my
grandparents who have already left us were here today to share in my achievements.
Last but not least, my heartfelt gratitude to my dear husband Wolfgang whose love,
understanding and resounding encouragement paved the path in my dissertation journey.
Thank you so very much for being there.
St. Gallen, 2008 Shiban Khan
Corporate Social Responsibility from an Emerging Market Perspective
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This dissertation is dedicated to the loving memory of my Nana
Dr. A. M. M. Khan
For explaining to me the merits of Doctoral studies and inducting me into the world of pharmaceuticals,
among others.
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Table of Contents
EXECUTIVE SUMMARY.......................................................................................................................................... V
LIST OF ILLUSTRATIONS .....................................................................................................................................VI
LIST OF ABBREVIATIONS...................................................................................................................................VII
1. INTRODUCTION..................................................................................................................................................... 1
1.1 THE RESEARCH FIELD............................................................................................................................................ 1 1.2 OBJECTIVES AND COUNTRY SETTING .................................................................................................................... 3 1.3 STRUCTURE OF THE DISSERTATION ....................................................................................................................... 4
2. THEORETICAL FOUNDATIONS ........................................................................................................................ 7
2.1 INTRODUCTION TO THE CONCEPT .......................................................................................................................... 7 2.2 DEVELOPMENT OF THE THEORETICAL CONCEPT ................................................................................................... 9 2.3 CSR AND SUSTAINABILITY: DEFINITIONS AND INTERPRETATIONS ..................................................................... 13 2.4 IMPORTANCE OF CSR .......................................................................................................................................... 18 2.5 MEASURING AND MODELING CSR ...................................................................................................................... 20
2.5.1 The Business Case for Sustainability .......................................................................................................... 22 2.5.2 The Triple Bottom Line of Sustainability .................................................................................................... 25 2.5.3 The Natural Step.......................................................................................................................................... 26 2.5.4 Ecological Footprint Analysis..................................................................................................................... 27 2.5.5 The Sustainable Livelihood Framework ..................................................................................................... 28 2.5.6 Sustainability Hierarchy.............................................................................................................................. 29
3. CONTEXTUAL FOCUS ON CSR ........................................................................................................................ 31
3.1 VALUE OF A CONTEXTUAL FOCUS ON CSR......................................................................................................... 31 3.1.1 Environmental Kuznets Curve..................................................................................................................... 31 3.1.2 Effects of Globalization ............................................................................................................................... 34
3.2 THE CSR TRADITIONS OF INDIA .......................................................................................................................... 35 3.2.1 Foundation of the Indian Business Ethics................................................................................................... 35 3.2.2 Historical Development of CSR in India..................................................................................................... 40
3.3 CSR IN PRESENT-DAY INDIA ............................................................................................................................... 44
4. SUMMARY OF RESEARCH GAP AND RESEARCH QUESTIONS............................................................. 50
4.1 IDENTIFICATION OF RESEARCH GAP .................................................................................................................... 50 4.2 RESEARCH QUESTIONS ........................................................................................................................................ 51
5. THE PHARMACEUTICAL INDUSTRY OF INDIA......................................................................................... 54
5.1 RATIONALE FOR SELECTION ................................................................................................................................ 54 5.2 INTRODUCTION TO THE INDUSTRY ....................................................................................................................... 54
5.2.1 Industry Definition....................................................................................................................................... 54 5.2.2 Characteristics ............................................................................................................................................ 55 5.2.3 Product Portfolio......................................................................................................................................... 57
5.3 MACROECONOMIC CONTEXT ANALYSIS: PESTL MODEL ................................................................................... 57 5.3.1 Political Aspects .......................................................................................................................................... 57 5.3.2 Economic Aspects........................................................................................................................................ 60 5.3.3 Social Aspects.............................................................................................................................................. 62 5.3.4 Technological Aspects ................................................................................................................................. 62 5.3.5 Legal Aspects............................................................................................................................................... 63
5.4 INDUSTRY ANALYSIS: PORTERS FIVE FORCES MODEL ...................................................................................... 64 5.4.1 Bargaining Power of Buyers ....................................................................................................................... 64 5.4.2 Bargaining Power of Suppliers ................................................................................................................... 65 5.4.3 Threat of New Entrants ............................................................................................................................... 65 5.4.4 Threat of Substitute...................................................................................................................................... 66 5.4.5 Rivalry in the Industry ................................................................................................................................. 66
5.5 COMPANY CLASSIFICATIONS AND COMMON BUSINESS MODELS ........................................................................ 67 5.5.1 Foreign Multinational Companies .............................................................................................................. 68
Corporate Social Responsibility from an Emerging Market Perspective
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5.5.2 Large Local Companies .............................................................................................................................. 68 5.5.3 Medium-sized Local Companies ................................................................................................................. 69 5.5.4 Small Local Companies............................................................................................................................... 69 5.5.5 Common Business Models........................................................................................................................... 70
5.6 STRATEGIC ANALYSIS: SWOT MODEL ............................................................................................................... 72 5.6.1 Strengths ...................................................................................................................................................... 72 5.6.2 Weaknesses .................................................................................................................................................. 72 5.6.3 Opportunities............................................................................................................................................... 73 5.6.4 Threats ......................................................................................................................................................... 73
5.7 FUTURE OUTLOOK ............................................................................................................................................... 73 5.7.1 Vision 2010 ............................................................................................................................................... 73 5.7.2 Ways Forward ............................................................................................................................................. 74 5.7.3 Advent of Biotechnology.............................................................................................................................. 75
6. METHODOLOGY.................................................................................................................................................. 76
6.1 PRINCIPAL APPROACHES TO RESEARCH METHODOLOGY.................................................................................... 76 6.2 THE CHOSEN METHODOLOGY ............................................................................................................................. 76 6.3 DESCRIPTION OF THE METHODOLOGY AND METHODS ........................................................................................ 77
6.3.1 Sample Population....................................................................................................................................... 77 6.3.2 Data Collection Methods............................................................................................................................. 80 6.3.3 The Concept of Analysis .............................................................................................................................. 82
6.4 ENSURING VALIDITY: FOLLOW-UP INTERVIEWS ................................................................................................. 83 6.5 EVALUATION OF THE SELECTED METHODOLOGY................................................................................................ 85
7. EMPIRICAL CASES.............................................................................................................................................. 90
CASE A: STRIDES ARCOLAB LIMITED........................................................................................................................ 90 A.1 Company Background.................................................................................................................................... 90 A.2 Company History ........................................................................................................................................... 90 A.3 Strides Twofold Business Strategy................................................................................................................ 96 A.4 CSR at Strides .............................................................................................................................................. 101 A.5 Managerial Attitudes toward CSR at Strides............................................................................................... 110 A.6 Evaluation of CSR at Strides........................................................................................................................ 112
CASE B: BIOCON LIMITED ....................................................................................................................................... 114 B.1 Company Background.................................................................................................................................. 114 B.2 Company History ......................................................................................................................................... 114 B.3 Biocons Business Strategy: Vertical Integration........................................................................................ 122 B.4 CSR at Biocon .............................................................................................................................................. 122 B.5 Managerial Attitudes toward CSR at Biocon .............................................................................................. 133 B.6 Evaluation of CSR at Biocon ....................................................................................................................... 135
CASE C: WOCKHARDT LIMITED .............................................................................................................................. 137 C.1 Company Background ................................................................................................................................. 137 C.2 Company History ......................................................................................................................................... 137 C.3 Wockhardts Business Strategy: Acquisition and R&D .............................................................................. 145 C.4 CSR at Wockhardt........................................................................................................................................ 146 C.5 Managerial Attitudes toward CSR at Wockhardt ........................................................................................ 157 C.6 Evaluation of CSR at Wockhardt................................................................................................................. 158
CASE D: NOVARTIS (INDIA) LIMITED ...................................................................................................................... 161 D.1 Company Background ................................................................................................................................. 161 D.2 Company History......................................................................................................................................... 161 D.3 Novartis Indias Business Strategy: Contract Manufacturing.................................................................... 168 D.4 CSR at Novartis ........................................................................................................................................... 169 D.5 Managerial Attitudes toward CSR at Novartis............................................................................................ 178 D.6 Evaluation of CSR at Novartis India ........................................................................................................... 181
8. RESULTS: DISCUSSION AND EVALUATION.............................................................................................. 184
8.1 OVERVIEW OF THE CASE STUDIES FINDINGS ..................................................................................................... 184 8.1.1 Drivers of the CSR Agenda ....................................................................................................................... 184 8.1.2 Area and Content of CSR activities........................................................................................................... 185 8.1.3 Perceptions on the Triple Bottom Line...................................................................................................... 186 8.1.4 Stature of CSR ........................................................................................................................................... 186
Corporate Social Responsibility from an Emerging Market Perspective
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8.2 KEY FINDINGS FROM THE CONFIRMATORY INTERVIEWS................................................................................... 187 8.2.1 Drivers of the CSR Agenda ....................................................................................................................... 188 8.2.2 Area and Content of CSR activities........................................................................................................... 189 8.2.3 Perceptions on the Triple Bottom Line...................................................................................................... 190 8.2.4 Stature of CSR ........................................................................................................................................... 191
8.3 EMERGING ISSUES OF SIGNIFICANCE ................................................................................................................. 191 8.3.1 Closeness of CSR to Core Business........................................................................................................... 192 8.3.2 CSR and International Competitiveness ................................................................................................... 192 8.3.3 Role of Stakeholders .................................................................................................................................. 193
8.4 INTERPRETATION OF OVERALL FINDINGS.......................................................................................................... 195 8.5 TRUE GANDHIAN TRUSTEESHIP? ....................................................................................................................... 198 8.6 A CONCEPTUAL FRAMEWORK FOR CSR IN THE INDIAN PHARMACEUTICAL INDUSTRY .................................... 199
9. FINAL THOUGHTS............................................................................................................................................. 203
9.1 IMPLICATIONS FOR THEORY............................................................................................................................... 203 9.2 IMPLICATIONS FOR PRACTICE ............................................................................................................................ 207 9.3 LIMITATIONS OF THE STUDY AND AVENUES FOR FUTURE RESEARCH............................................................... 210 9.4 CONCLUSION...................................................................................................................................................... 212
BIBLIOGRAPHY ..................................................................................................................................................... 214
APPENDICES ........................................................................................................................................................... 239
APPENDIX 1: LIST OF INTERVIEW PARTNERS........................................................................................................... 239 APPENDIX 2: INTERVIEW SCHEDULE FOR THE CASE STUDIES ................................................................................. 244 APPENDIX 3: QUESTIONNAIRE FOR CONFIRMATORY INTERVIEWS .......................................................................... 245
Corporate Social Responsibility from an Emerging Market Perspective
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EXECUTIVE SUMMARY
Despite the proliferation of corporate social responsibility (CSR) related research in
academic management literature, the numerous nuances of this multidisciplinary concept
pose challenges in arriving at a clear conceptualization. Moreover, the greater part of
academic CSR research focuses on evidences from developed western countries, largely
overlooking the cues from developing economies. Therefore, the addition of CSR
viewpoints from an emerging economy can contribute invaluable insights to the growing
body of scholarly work in this realm. This dissertation addresses this research gap by
exploring CSR from an Indian perspective.
This study has been aimed at determining what CSR denotes in the Indian setting from
the pharmaceutical industrys perspective. Four comparative case studies form the basis
of the methodology, complemented with 40 supplementary interviews with top
management personnel in other companies within the industry.
The results from the study clearly suggest that the Indian perspective of CSR differ quite
significantly from the West. Three essential elements of the western conceptualization of
CSR stakeholder pressure, environmental concerns and integration into core business
are not prominently present in India. Instead, the Indian CSR perceptions and practices
seem to stem from the Gandhian ideology of social trusteeship, which perceives big
businesses (and their leaders) as social development agents. Therefore, it is apparent that
CSR in India is essentially corporate philanthropy. The companies primarily focus their
CSR activities on their employees, followed by the employees families and subsequently
followed by the community they live in. Activities range from healthcare, education,
human resources training to infrastructure development.
This finding adds to the debate of CSR conceptualization by highlighting the influence of
the local culture and context. The results support the argument that the cultural heritage
of corporate philanthropy and the current economic needs of social advancement shape
the CSR practices in India. The findings of this study thus call for sensitivity to CSRs
contextual idiosyncrasies in other regions as well, and opines against undifferentiated
applications of western CSR concepts that ignore the local cultural context.
Corporate Social Responsibility from an Emerging Market Perspective
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LIST OF ILLUSTRATIONS
Tables
Table 1: Components of Sustainable Development .................................................................................... 15 Table 2: Carbon Dioxide Emission Rates by Country ............................................................................... 33 Table 3: Indias GDP Growth (2002-2006) ................................................................................................ 61 Table 4: India's Inflation Rate (2002-2006) ................................................................................................ 61 Table 5: PESTL Analysis of the Indian Pharmaceutical Industry .............................................................. 63 Table 6: Strides Timeline ............................................................................................................................ 95 Table 7: Biocon Timeline ......................................................................................................................... 120 Table 8: Wockhardt Timeline ................................................................................................................... 143 Table 9: Novartis Timeline ....................................................................................................................... 166 Table 10: NCLCA Disability Care Package ............................................................................................. 172 Table 11: Novartis Environmental Guidelines.......................................................................................... 178 Table 12: Overview of the CSR contents and agenda in the case companies........................................... 186 Table 13: Stakeholders for CSR................................................................................................................ 194
Figures Figure 1: Structure and Content of the Dissertation...................................................................................... 6 Figure 2: Pillars of Sustainability................................................................................................................ 16 Figure 3: The Smart Zone of Sustainability ................................................................................................ 23 Figure 4: The Triple Bottom Line of Sustainability.................................................................................... 25 Figure 5: The Sustainability Hierarchy ....................................................................................................... 29 Figure 6: The Environmental Kuznets Curve ............................................................................................. 32 Figure 7: India Pharmaceuticals Market Value (in million USD) 2002-2006 ............................................ 56 Figure 8: Porter's Five Forces Analysis of the Indian Pharmaceutical Industry ......................................... 64 Figure 9: The Pharmaceutical Value Chain ................................................................................................ 70 Figure 10: Strides Shareholding Structure .................................................................................................. 93 Figure 11: Biocon Shareholding Structure................................................................................................ 117 Figure 12: The Corporate Structure of Biocon Group .............................................................................. 120 Figure 13: The Biocon Business Model.................................................................................................... 122 Figure 14: Wockhardt Shareholding Structure ......................................................................................... 140 Figure 15: The Corporate Structure of Wockhardt Group ........................................................................ 144 Figure 16: Wockhardt Generic Competency Model (WHEEL)................................................................ 148 Figure 17: The Corporate Structure of Novartis Group ............................................................................ 167 Figure 18: Novartis India Shareholding Structure .................................................................................... 168 Figure 19: Drivers of CSR ........................................................................................................................ 188 Figure 20: Barriers to CSR........................................................................................................................ 189 Figure 21: Perceptions of Stakeholder Pressure Concerning CSR ........................................................... 195 Figure 22: Conceptual Framework for CSR in the Indian Pharmaceutical Industry ................................ 201 Figure 23: Categorization of Research Efforts.......................................................................................... 203 N.B. Unless otherwise indicated within the text-body, the author is the source of all tables and figures.
Corporate Social Responsibility from an Emerging Market Perspective
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LIST OF ABBREVIATIONS
AA AccountAbility
ACE Aim for Competitive Excellence
AG Aktiengesellschaft (Public Limited Company)
AIDS Acquired Immune Deficiency Syndrome
ANDA Abbreviated New Drug Application
ANVISA Agncia National de Vigilncia Sanitria (Brazil)
API Active Pharmaceutical Ingredient
ARV Anti Retro Viral
ARY Arogya Raksha Yojana
ATM AIDS, Tuberculosis, Malaria (Program of Strides)
BATF Bangalore Agenda Task Force
BBPL Biocon Biopharmaceuticals Private Limited
BCS Business Case for Sustainability
BITS Birla Institute of Technology and Science
CAP College of American Pathologists
CAGR Compound Annual Growth Rate
CC Corporate Citizenship
CEC Commission of the European Communities
CEO Chief Executive Officer
cf. Confer
CHF Swiss Francs
CLCP Comprehensive Leprosy Care Program
CMD Chairperson & Managing Director
CO2 Carbon Dioxide
COO Chief Operating Officer
CRAM Contract Manufacturing and Research
CRC Custom Research Company
CSM Centre for Social Markets
CSP Corporate Social Performance
CSR Corporate Social Responsibility
CTD Common Technical Document (for the Registration of Pharmaceuticals for Human Use)
DFID Department for International Development (UK)
DJSI Dow Jones Sustainability Index
DMF Drug Master File
DNA Deoxyribonucleic Acid
DPCO Drug Price Control Order
EKC Environmental Kuznets Curve
EMR Exclusive Marketing Rights
EMS Environmental Management System
et al. et alia
etc. et cetera
EU European Union
e.g. exempli gratia
FCCB Foreign Currency Convertible Bonds
FDA Food and Drug Administration
FI Financial Institutions
FII Foreign Institutional Investors
FTSE Financial Times Stock Exchange
FMCG Fast Moving Consumer Goods
GBP British Pound
Corporate Social Responsibility from an Emerging Market Perspective
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GDR Global Depository Receipt
GHG Green House Gases
GIPAP Glivec International Patient Assistance Program
GMP Good Manufacturing Practices
GmbH Gesellschaft mit beschrnkter Haftung (Private Limited Company)
GRI Global Reporting Initiative
HGAP Health Global Access Project
HIV Human Immunodeficiency Virus
HMI Harvard Medical International
HQ Headquarters
HR Human Resources
HSE Health, Safety and Environment
ICRA Investment Information and Credit Rating Agency (of India)
IIM Indian Institute of Management
INR Indian Rupee
IPO Initial Public Offering
ISO International Organization for Standardization
i.e. id est
JEET Joint Efforts to Eradicate Tuberculosis
Ltd. Limited (Company)
MBA Master of Business Administration
MBBS Bachelor of Medicine, Bachelor of Surgery
MCC Medicines Control Council (South Africa)
MDT Multi Drug Therapy
MHRA Medicine and Healthcare product Regulatory Agency (UK)
MNC Multinational Corporation
MoEF Ministry of Environment and Forest
MS Master of Science
NABL National Accreditation Board for Testing and Calibration Laboratories
N.B. Nota Bene
NCE New Chemical Entity
NCLCA Novartis Comprehensive Leprosy Care Association
NDDS New Drug Delivery System
NFSD Novartis Foundation for Sustainable Development
NGO Non-governmental Organization
NILP Novartis India Leadership Program
NRI Non Resident Indian
OCB Overseas Corporate Bodies
OECD Organization for Economic Co-operation and Development
OPPI Organization of Pharmaceutical Producers of India
OTC Over-the-Counter
PEPFAR President's Emergency Plan for AIDS Relief
PhD Doctor of Philosophy
PiC Partners in Change
Pvt. Private (Limited Company)
RARE Rhetoric and Realities in CSR
RBV Resource-based View
R&D Research and Development
RWTV Rheinisch-Westflischer Technischer berwachungsverein
SA Socit Anonyme (Public Limited Company)
SL Sustainable Livelihood
Corporate Social Responsibility from an Emerging Market Perspective
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SME Small and Medium-sized Enterprises
SOP Standard Operating Procedure
SpA Societ per Azioni (Public Limited Company)
SRI Socially Responsible Investment
STEP Strides Training & Education Plan
TB Tuberculosis
TBL Triple Bottom Line (of sustainability)
TGA Therapeutic Goods Administration
TMT Top Management Team
TRIPS Trade Related Aspects of Intellectual Property Rights
UK United Kingdom (of Great Britain and Northern Ireland)
UN United Nations
UNDP United Nations Development Program
UTI Unit Trust of India
U.S. United States (of America)
USD United States Dollar
USFDA United States Food and Drug Administration
WCED World Commission on Environment and Development
WHARF Wockhardt-HMI HIV/AIDS Education and Research Foundation
WHEEL Wockhardt Holistic Excellence Enhancement Lever
WHHI Wockhardt Hospital and Heart Institute
WHO World Health Organization
WTO World Trade Organization
Corporate Social Responsibility from an Emerging Market Perspective
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1. INTRODUCTION
1.1 The Research Field
Earth provides enough to satisfy every man's need, but not every man's greed.
M.K. Gandhi
Almost 60 years after Gandhis death, the need versus greed debate has reached new
heights, especially at the corporate level. As societal expectations of businesses have
changed, narrow goal systems, short-term orientation, and the (at times dubious) means
chosen by managers to suit their own ends have become subject to much deliberation.
Consequently, socially and morally responsible business practices have gained
prominence at practitioner and academic levels, and the discussion has moved beyond
whether companies should focus on their non-financial responsibility to the how it can
be done (best) end of the spectrum (Smith 2003). The recent proliferation of Corporate
Social Responsibility (CSR) related work1 in mainstream academic management
literature (e.g., Mackey et al. 2007, McWilliams et al. 2006, Husted and Allen 2006,
Sharma and Henriques 2005) leaves no doubt about the importance and timeliness of the
topic. Studies and real life examples of the successful implementation of CSR practices
have provided evidence of their compatibility with business goals (cf. Steger 2004a).
CSR has been linked to key success factors such as corporate strategy (Porter and Kramer
2006), corporate governance (Elkington 2006), branding (Crosby and Johnson 2006),
stakeholder management (Sharma and Henriques 2005), and total quality management
(Waddock and Bodwell 2004), heralding in new insights.
However, the current literature on CSR focuses heavily on instances from developed
western markets (cf. Eberhard-Harribey 2006, Knights and OLeary 2006, Vuontisjrvi
2006, Habisch et al. 2005, etc.), and the replicability of these findings on the emerging
markets, e.g., of Asian countries, is lacking. Although there have been recent attempts at
mapping the CSR terrain of emerging markets (e.g. Jamali and Mirshak 2007, Husted and
1 As Chapter 2 will show, scholars use a multitude of terms to describe this phenomenon. They use CSR and corporate sustainability (CS) synonymously in most cases, although there are subtle differentiations. While these differences are addressed in the appropriate section, for the general purpose of this study, the terms CSR and CS have been considered interchangeable.
Corporate Social Responsibility from an Emerging Market Perspective
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Allen 2006, Waldman et al. 2006, Chen 2006), they are quite insufficient when weighed
against the coverage of western countries, and thus research gaps are obvious. Moreover,
the literature (cf. Jamali and Mirshak 2007, Welford 2004, Mohan 2001) often assumes
that firms in the emerging Asian markets lag behind in their CSR agenda in comparison
to their western counterparts, overlooking the possibility of context-specific
idiosyncrasies. Therefore, in order to understand the CSR agenda in the Asian contexts
and to generate a solid base of empirical evidences, it is imperative to expand CSR
research in these settings, with sensitivity toward possible local particularities.
The potentials of a contextual focus in studying CSR are vast, and they can be expected to
produce noteworthy outcomes. Prior to embarking upon CSR research at the corporate
level in emerging Asian markets, it is crucial to note that companies operating contexts
in Asia are likely to differ from those of their western counterparts. The rationalization
behind this argument is twofold. The first is due to the differences in the economic
environments. The emerging markets in Asia face a multitude of critical issues with
regard to globalization, poor infrastructure and basic services (Davies 2002) and often
also show evidence of deficient regulatory frameworks (Osland et al. 2002). Secondly, as
Ramasamy and Ting (2004) indicate, in general, there are significant differences between
the East and the Wests cultural environments and moral judgments, besides the role that
corporate entities play in the relevant societies. Such diversities of perceptions play a
decisive role in the clarification of a companys social roles and in determining how it
should be fulfilled in the context. Therefore, it is likely that western models of CSR may
not be truly fitting in Asian settings. An undifferentiated application of existing CSR
models that are based on western norms prematurely assumes comprehensive
transferability, and thus neglects the potentials inherent in idiosyncratic local solutions.
Wheeler and Ng (2004) also criticize standardization of CSR policies and practices across
companies as a potential constraint to progress in this regard. Therefore, researchers (and
practitioners) must not rule out the possibility of CSRs culture or context-bound
idiosyncrasies prior to undertaking a careful examination.
Corporate Social Responsibility from an Emerging Market Perspective
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1.2 Objectives and Country Setting
The purpose of this research project is to arrive at a clear conceptualization of CSR in the
context of an emerging Asian market. India as an up-and-coming emerging Asian giant
was chosen as the research setting to endow the study with a more specific perspective.
Choosing India as the research setting is significant for a number of reasons. On the one
hand, the Indian economy boasts a very high growth rate, with some estimates for the
gross domestic product (GDP) growth rate standing as high as 9.4 percent in the 2007
financial year.2 In fact, experts had even predicted that in 2007 India would have taken
over Chinas gross domestic product rate for the first time (cf. Vembu 2006). While
realization of this projection is unlikely, India is undoubtedly on the way to becoming one
of the most significant players in the global economy in the very near future. If it sustains
eight percent growth rate on average, India will overtake the economies of Italy, France
and the UK by 2015, and surpass the U.S. economy by 2050.3 On the other hand, India is
the land of ancient civilizations, with strong cultural traditions and identities. The
interactions between these age old traditions and the rapid integration into the world
economy make India an ideal ground for this study not only for an appraisal of Indias
current CSR context as a global player, but also to explore how CSR is conceptualized in
a patently different cultural context from the West.
Corporate India has always boasted a strong tradition of corporate philanthropy, where
business leaders have been viewed as leaders of social development (Mohan 2001).
Regardless of this strong tradition of philanthropy, CSR research in India in the recent
past has primarily focused on identifying the ideal how to carry out CSR, often leading
to contradictory findings on the related practices (e.g. Ruud 2002, Kumar et al. 2001).
The undifferentiated application of western ideologies of corporate responsibility in the
Indian context may have contributed to this inconsistency in the previous literature.
Mohan (2001) has already hinted that in the CSR context, expectations with regard to
corporate India differ from expectations in the traditional western sense. Indian
stakeholders understanding of the CSR agenda is influenced by cultural, political, and
2 Source: Central Statistical Organization, Ministry of Statistics and Program Implementation, India. 3 Source: In 10 years, Indias GDP will surpass [sic] UKs, Rediff News, retrieved 22 March 2007 from http://www.rediff.com/money/2007/jan/23india.htm.
Corporate Social Responsibility from an Emerging Market Perspective
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development aspects, and it is crucial to identify these to determine the right approach to
implementing CSR at the corporate level.
Therefore, before determining appropriate approaches to CSR management in India, it is
imperative to explore the concept of CSR as applicable to Indian companies what is
CSR? within their specific contexts. This research project aims to address this research
gap.
This research projects intended contributions are threefold. Firstly, from a conceptual
standpoint, this study will play a part in CSRs theory building process by adding the
perspectives from an emerging market, more specifically, the applicability and required
adaptations of current CSR models to the Indian context. It will contribute to building a
framework for CSR in India, identifying the contents and nature of the CSR agenda and
exploring their relative importance in the context. This framework can then serve as a
basis for more refined and focused analysis of context specific studies. Secondly, it
presents new and unique data on CSR practices in India. Thirdly, and in addition to
theoretical contributions, the study strongly contributes to applied management research
and actual practices. With a status quo analysis and a CSR framework in hand, the CSR
discussion among Indian companies could benefit substantially, and in the process,
contribute to the discourses maturation.
This study thus addresses the crucial questions of the what and why of CSR practices
in India that are essential for progressing with the how to aspects. This also makes
replications in other, similar, contextual settings (i.e. in other emerging market settings)
possible.
1.3 Structure of the Dissertation
This dissertation is divided as follows. Chapter two describes the origins of the CSR
concept. CSRs correlation with other closely linked terms and constructs is explored, as
well as different models of CSR. The focus then shifts to understanding the importance of
a contextual approach to CSR in chapter three, highlighting the different factors that play
decisive roles in shaping this perspective. The subsequent section is dedicated to
understanding CSR in India. It provides a background on the elements that have played a
Corporate Social Responsibility from an Emerging Market Perspective
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crucial role in shaping CSR in this setting. It is followed by an outline of the status quo of
CSR research in India. Drawing attention to the research gaps, the dissertation continues
by raising the key research questions in chapter four. Chapter five introduces the
pharmaceutical industry of India, the industry of choice in this research study. Chapter six
discusses the methodology for the study at hand that pays special attention to the
contextual factors for this study.
Describing the four case studies, the dissertation moves on to the empirical section in
Chapter seven. Chapter eight presents and analyzes the results of the study. This chapter
also presents the derived conceptual framework of CSR in the Indian pharmaceutical
industry. Chapter nine discusses the implications for theory and practice, reflects on the
studys limitations, and makes suggestions for future research. Figure 1 presents a
graphical overview of the structure and content of the dissertation.
Corporate Social Responsibility from an Emerging Market Perspective
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Figure 1: Structure and Content of the Dissertation
Chapter 8: Results: Discussion and Evaluation
Interpretations Conceptual Framework
Discussion
Chapter 1: Introduction
The Research Field Rationale for the Study
Chapter 2: Theoretical Foundations
Definitions and Concepts CSR Models
Chapter 3: Contextual Focus on CSR
Importance of a Contextual Focus CSR in India
Chapter 4: Research Gap and Research Questions
Chapter 5: The Pharmaceutical Industry of India
Chapter 6: Methodology
Chapter 9: Final Thoughts
Implications for theory & practice Limitations and suggestions for future research
Chapter 7: Empirical Evidence from Case Studies
Case A Case B Case C Case D
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2. THEORETICAL FOUNDATIONS
2.1 Introduction to the Concept
Dow Votaws 1972 comments on what CSR means still hold true today for the most part.
He contended:
The term (CSR) is a brilliant one; it means something, but not always the
same thing, to everybody. To some it conveys the idea of legal responsibility
or liability; to others, it means socially responsible behavior in an ethical
sense; to still others, the meaning transmitted is that of responsible for, in
a causal mode; many simply equate it with a charitable contribution; some
take it to mean socially conscious; many of those who embrace it most
fervently see it as a mere synonym for legitimacy, in the context of
belonging or being proper or valid; a few see it as a sort of fiduciary duty
imposing higher standards of behavior on businessmen than on citizens at
large. (Votaw 1972, p. 25)
As the following discussion will show, even after three decades have past since Votaws
observations, CSR is still notoriously difficult to define as a concept despite an ever-
growing body of scholarly and popular work. Matten and Moon (2004) identify three
reasons that lie at the root of this conundrum. Firstly, it is a complex concept with
inherent value judgments that have relatively compliant application rules. Secondly, a
plethora of concepts is used synonymously with CSR, and scholars disagree over the
extent of their similarity and interchangeability. The third reason complicating the
process are the regional and context-specific approaches to CSR. The following section
presents a review of the CSR and corporate sustainability discussion with its related
aspects in the light of these considerations. McWilliams et al. (2006) rightly observe that
CSR continues to be a fertile ground for theory development and empirical analysis
(McWilliams et al. 2006, p. 2).
In general, therefore, CSR relates to those responsibilities of corporate operations that go
beyond the financial aspects of its performance. Classic management and economic
theories have tended to adopt a functionalist viewpoint toward business and capitalism.
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As a result, they normally viewed (and for the most part continue to view) environmental
effects and costs as externalities that are inevitable in the process of (economic and
industrial) progress (Banerjee et al. 2003, Banerjee 2002). Although Adam Smith the
father of modern capitalism placed due emphasis on serving public interests and did
endow capitalist behaviors with a moral obligation (Newbert 2003, Bassiry and Jones
1993), the subsequent practice of capitalism and the free market moved away from his
original philosophy. The functionalist homo economicus rationale (cf. Persky 1995)
largely dominated the management literature and practice for the better part of the 20th
century. However, proactive environmental management (Hoffman 2001) became more
prominent in the latter years of the 20th century. The focus had shifted from strictly short-
term profit orientation, and corporations were interpreting their business models in a more
responsible manner and even enjoying competitive advantages (cf. Hoffman 2001).
The CSR concept thus makes a crucial contribution to (as well as extending) classic
management theories, as it resides in the idea that economic (financial) sustainability by
itself cannot ensure a firms overall sustainability (Gladwin et al. 1995). As a result,
sustainability/CSR has become one of the most-touted mantras in the management field
(Dyllick and Hockerts 2002), and has been promoted as an alternative to companies
traditional growth and profit-maximization models (Wilson 2003).
CSR is a relatively new terminology to describe the relationship between business and
society (Garriga and Mel 2004), and is closely associated with a host of related concepts
in the field. Although these concepts often overlap, preferences for a certain terminology
or related operationalization seem to be subjective, depending on the scholars points of
reference and perceptions of the concept. For example, Brown (2004) opts for corporate
responsibility instead of corporate social responsibility, believing the latter term to be
limited by its exclusion of moral and ethical aspects. European researchers, on the other
hand, advocate the use of societal responsibility in lieu of social responsibility, as in the
continental European context social can be interpreted as referring only to issues of social
welfare (cf. Dyllick and Hockerts 2002, Andriof and McIntosh 2001). Scherer and
Palazzo (2007) consider CSR to be an umbrella term for the debate on businesses role in
society.
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2.2 Development of the Theoretical Concept
Hardin (1968) popularized the concept of the tragedy of the commons, which highlights
the conflict that inevitably result from resource allotments between individuals and the
community. He argues that multiple sources limitless demands on a finite resource
would lead to over-exploitation and mistreatment of the resource, ultimately depleting it
completely. This idea led to the first insights into modern sustainability in the Limits to
Growth discourse of the 1970s (Meadows et al. 1972), although earlier scholars have
advocated about balancing nature conservation with economic activities (cf. Lumley and
Armstrong 2004). Nevertheless, until the 1992 Earth Summit in Rio, neither politicians,
nor NGOs, nor business leaders had given the concept of sustainability/CSR center stage
as a principal human challenge for the 21st century (cf. Hockerts 2003).
Then again, the ideas of business entities social sensibility and good citizenship are
hardly novel, and can be traced back a long way. As the following discussion on earlier
literature demonstrates, the mainstream concepts of corporate social responsibility and
sustainable development essentially convey the same message as sustainability, and
academics frequently use them synonymously with (corporate) sustainability.
Social concerns began to infiltrate management education after the Second World War,
with social responsibility first emerging as an academic topic in the 1950s. Bowen (1953)
was a pioneer in delineating the social responsibilities of businessmen, stating that
corporate social responsibility 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). This was a
landmark initiative to define the concept, and earned Bowen the designation Father of
corporate social responsibility (cf. Carroll 1999, p. 270). Among the notable contributors
to the literature in the 1960s are Davis (1960), Frederick (1960) and McGuire (1963).
Davis argued in favor of social responsibility from a managerial viewpoint, and stated
that it referred to those decisions and actions of managers that were taken for reasons at
least partially beyond the firms direct economic and technical interest (Davis 1960, p.
70). Frederick viewed the concept from a stakeholder perspective, and held that
businessmen should oversee the operation of an economic system that fulfills the
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expectations of the public (Frederick 1960, p.60). McGuire (1963) drew a more succinct
definition by asserting that businesses must accept a social responsibility that extends
beyond economic and legal obligations. In this period, the publication of Rachel Carsons
landmark book Silent Spring in 1962 launched the worldwide environmental movement
in the wake of environmental disasters brought on by corporate negligence and ignorance
in the U.S. (Carson 1962). Inspired by the mass social movements of the 1960s in Europe
and America, public acceptance of companies social responsibilities also began to gain
ground.
Profuse theorization on and conceptualization of companies social responsibilities
emerged from scholars in the fields of sociology, management and business ethics in the
1970s (cf. Carroll 1979, Ackermann and Bauer 1976, Davis 1973, Johnson 1971). Similar
to Frederick (1960), Johnson (1971) also held a stakeholder view and considered
managers corporate social responsibility as utility maximization, rather than profit.
Carrolls (1979) CSR model proved to be immensely popular, and has been cited widely.
He conceptualized four hierarchical but mutually inclusive responsibilities for a
corporation: economic (to be profitable), legal (regulation-compliant), ethical (acting in a
righteous and fair manner) and philanthropic (contributing to a broader civic society for
educational, cultural or recreational purposes). Building on Carrolls work, Wartick and
Cochran (1985) ventured to formulate a general model for corporate social performance
(CSP).
Eventually, the 1980s and 1990s saw the concept of corporate social responsibility evolve
theoretically and receive much empirical attention (cf. Wood 1991), and complemented
the growing trend of theoretical focus on the environmental dimension. 1999 saw the
publication of Natural Capitalism, espousing for the first time that companies can
combine positive financial results with pollution reduction, if they rethink certain
operating procedures and use of materials (cf. Hawken et al. 1999). This book
popularized the idea of natural capital and challenged the conventional notions of
accounting that cataloged environmental impacts of a firm as externalities. The natural
capitalism theory focused heavily on resource efficiency, and advocated ways to exploit
the market systems for environmental advantages.
Corporate Social Responsibility from an Emerging Market Perspective
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Banerjee (2002) builds up on the natural capitalism philosophy and promotes the idea of
corporate environmentalism as a corporate strategy, where environmental concerns are
taken into account in a firms core decision-making processes. He stresses the recognition
of the natural environments importance and legitimacy as a primary element of corporate
strategy formulation, based on the belief that environmental problems arise from
corporate activities (Banerjee 2002, p. 181). This integration of environmental concerns
into core business strategy may help to build a successful business case for sustainability,
whereby a firm ultimately actually benefits from adapting environment-friendly or green
policies (cf. Hawken et al. 1999, Porter and van der Linde 1995).
On a more inclusive level, Freeman (1984) formulated the stakeholder theory, which
proposed that the firm must meet the expectations of external groups or individuals who
may have an effect on the firms performance. The rationale behind the stakeholder
theory is that it would be beneficial for firms to link up with stakeholders (as opposed to
only shareholders) to legitimize and maintain their license-to-operate (Howard-Grenville
et al. 2006). Donaldson and Preston (1995) expanded Freemans theory and maintained
that the normative base of the theory to engage in stakeholder activities should be
regarded as fundamental.
A more moral take on the stakeholder theory is found in the corporate stewardship theory
(cf. Worrell and Appleby 2000, Davis et al. 1997, Donaldson and Davis 1991), which
adds a new dimension to the CSR and business ethics debate. This theory suggests that
firms should exclusively focus on carrying out their social duties and responsibilities,
without regard to the financial consequences of such acts.
Jones (1995) introduced an instrumental theory for stakeholder management, enhancing
the stakeholder theory and surmising that the high returns on regular and trusting
interaction with stakeholders make firms strive for better ethical performances and give
them significant competitive advantages.
In a similar line of thought, the concept of corporate citizenship emerged (cf. Marsden
and Andriof 1998). As a broader concept, corporate citizenship (CC) deals with
businesses interplay in society beyond their economic roles, and Birch (2001) regards
this as the next step to CSR. According to Carroll (1999), it is an extension of the
Corporate Social Responsibility from an Emerging Market Perspective
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operationalization of businesses role in society in the management literature. Matten and
Crane (2005) clearly separate it from CSR, and argue that CC is strategic in nature,
whereby assuming that stabilities in the social, environmental and political scenarios are
profitable for business (Windsor 2001, Wood and Logsdon 2001). Crouch (2006) agrees
with Matten and Crane (2005) that CC is not synonymous with CSR, and that CC views
the organization in a wider perspective (than CSR). However, regardless of scholarly
debate upon the depth and breadth of these (closely-related) concepts, quite a few global
companies (e.g. Novartis) treat CC and CSR as synonymous.
A critical viewpoint along regulatory lines is raised by the corporate accountability theory
(cf. Swift 2001, Zadek et al. 1997), which states that firms are answerable to society for
the consequences of their actions. Stakeholder interactions and corporate environmental
reporting are popular tools for realizing corporate accountability. Waldman et al. (2004)
meanwhile applied the transformational leadership theory to highlight the role that the top
management team can play in relation to CSR activities within a firm. Their study shows
that a CEOs intellectually stimulating leadership can lead to a firm being engaged in a
higher degree of strategic CSR than its peers.
Strategic application of CSR can also be discussed within the perspectives of the
resource-based view of the firm (RBV) (cf. Barney 1991, Wernerfelt 1984). This view
presupposes that firms need to exploit their resources (e.g., assets, capabilities,
competencies, firm attributes etc.) in such ways that these resources become sources of
sustainable competitive advantage. In his 1995 article on the natural-resource-based view
of the firm, Hart applied the RBV framework to a firms environmental responsibilities
(Hart 1995), stating that there is a positive correlation between environmental
responsibility and financial performance. While Russo and Fouts (1997) confirmed Harts
assertions, their contemporaries Preston and OBannon (1997) found a few negative
correlations. However, as Roman et al. (1999) show in their comparative compilation of
studies investigating the social and financial performance link, negative correlation
between these two have been increasingly rare or inconclusive in later years, while the
literature on positive correlations has become increasingly robust.
Corporate Social Responsibility from an Emerging Market Perspective
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Husted and De Jesus Salazar (2006) conducted a cost/benefit analysis of social
responsibility under three scenarios concerning a firms willingness to engage in CSR
altruism, coerced egoism, and the strategic use of CSR. In altruistic CSR, companies take
on the role of stewards who are proactively socially responsible, disregarding the effects
on the financial bottom line. In coerced egoism, companies only undertake CSR activities
when they are compelled to do so by external factors such as regulations. The strategic
use of CSR is related to the business case for sustainability, where the companys
financial bottom line benefits from its CSR activities. Perhaps not surprisingly, the
authors prefer the strategic use of CSR to the other two more extreme manners of CSR,
both of which can threaten the existence of the firm (albeit in very different ways!).
Some scholars (e.g. Sacconi 2004) consider corporate governance a discrete branch in
management studies to be a part of CSR. However, the majority of corporate
governance studies do not explicitly relate to CSR, although one could argue that there
are implicit assumptions in this regard (cf. Steger 2004b). Elkington (2006) opines that
corporate governance needs to integrate greater social concerns whose scope goes beyond
the immediate jurisdiction of the boardroom.
In summation, a number of theories in management science (and economics) have
contributed toward developing a modern CSR concept. There have also been concepts
within the CSR realm that stress various nuances of the notion. Nevertheless, the
theoretical maturation of CSR has not yet been concluded. The following section
discusses scholarly attempts at defining CSR.
2.3 CSR and Sustainability: Definitions and Interpretations
The term sustainable was first used in relation to forestry and natural resource
management (cf. Hediger 1999). Although earlier work on CSR primarily dealt with
issues in the social arena (cf. Frederick 1960, Bowen 1953), later years have seen the
inclusion of environmental aspects in its realm (cf. van Marrewijk 2003, CEC 2001),
contributing to the ongoing debate on whether corporate sustainability (CS) and CSR are
mutually exclusive. In fact, van Marrewijk (2003) holds CS and CSR to be synonymous,
and advocates context-specific contents for a CS/R definition that is in keeping with the
individual organizations awareness and goals.
Corporate Social Responsibility from an Emerging Market Perspective
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As currently understood, the concept of sustainability and CSR lies in the legendary
definition of sustainable development offered by the Brundtland Commission of the
World Council on Economy and Development (WCED) as development that meets the
needs of the present without compromising the ability of future generations to meet their
own needs (WCED 1987a, p. 8). In the corporate context, sustainability is the
application of sustainable development at the firm level, in addition to the global, national
and local levels (Hockerts 2003). Atkinson (2000) likewise holds sustainability to be one
of the key concepts to have emerged from sustainable development. Dyllick and Hockerts
(2002) draw upon the Brundtland Commissions definition of sustainable development to
define corporate sustainability, stating that it is meeting the needs of a firms direct and
indirect stakeholders [] without compromising its ability to meet the needs of future
stakeholders as well (Dyllick and Hockerts 2002, p. 131). Schaltegger et al. (2002) hold
the central challenges of corporate sustainable development to be the integration of the
economic, ecological and social aspects of a firms activities (Schaltegger et al. 2002, p.
6), whereas, Starik and Rands (1995) equate sustainable development with ecological
sustainability, and state that the test of an organizations ecological sustainability is the
degree to which its activities can be continued indefinitely without negatively altering the
limiting factors that permit the existence and flourishing of other groups of entities,
including other organizations (Starik and Rands 1995, p. 909). The limiting factors in
this context refer e.g. to the access and utilization of resources, among other aspects
(Starik and Rands 1995).
It therefore follows that as theoretical concepts, many of CSR and corporate
sustainabilitys roots lie in the concept of sustainable development. However, scholars
have defined and interpreted sustainable developments core concept in a multitude of
ways, and there have been many contradictions in the elucidation of the concept from
early on (e.g. Redclift, 1987). The landmark Brundtland definition has been streamlined,
specified and made more relevant and contextual for a number of ensuing definitions.
Starik and Rands (1995), for example, have commented on the Brundtland definition as
being tentative and outdated, because they believe that we have already crossed the
critical threshold of global carrying capacity into decline (Starik and Rands 1995). The
rich perceptive and definitional diversity of this core concept has contributed to the
Corporate Social Responsibility from an Emerging Market Perspective
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subsequent concepts of CSR and corporate sustainability. A glance at the environmental
economics (one of the fields that CSR has roots in) literature shows the concepts of inter-
generational cost transfer, limits to and the depletive nature of resources, and
compensating for natural resource exhaustion emerge as major components that
characteristically define sustainability and sustainable development. Table 1 presents a
selection of components that have emerged in sustainable development definitions over
the years in this context, which forms a base for the ensuing concepts of corporate
sustainability and CSR.
Characteristics Proponents
Consumption made possible at a persistent rate over generations; intergenerational cost transfer
Viederman (1994), Hawken (1993), Pearce (1993), WCED (1987a)
Resilience between ecological and socio-economic and system goals
Corson (1994), Costanza et al. (1992), Daly (1992), Barbier (1987)
Limitation of natural resources Dyllick and Hockerts (2002), Holdgate (1993), Clark (1991)
Need satisfaction without affecting long-term resource consumption
Starik and Rands (1995), Bartelmus (1994)
Compensate resource exhaustion with future utility
Pezzey (1992), Pearce et al. (1990)
Consisting of multilevel & multi-system characteristics that require integration
Schaltegger et al. (2002), Holme and Watts (2000), Starik and Rands (1995)
Fulfillment of stakeholder demands Dyllick & Hockerts (2002), Holme & Watts (2000)
Contextual in terms of temporal and societal setting
Moon (2007)
Table 1: Components of Sustainable Development (Source: based on and extending Gladwin et al. 1995, p.877)
In defining CSR, Holme and Watts (2000) highlight a firms ethical obligation to
positively influence the livelihood of its stakeholders at different levels employees,
local community and society in that order. The authors of the Green Paper on CSR
presented by the Commission of the European Communities go a step further by
including environmental issues in the sphere, defining CSR as a concept whereby
companies decide voluntarily to contribute to a better society and cleaner environment
(CEC 2001). Dyllick and Hockerts (2002), in tune with Elkington (1997), maintain that
social responsibility is only one dimension of the three pillars of sustainability
economic and ecological being the other two.
Corporate Social Responsibility from an Emerging Market Perspective
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Wilson (2003) proposes a somewhat different conceptualization, distinguishing between
CSR and corporate sustainability. He states that corporate level sustainability is based on
four distinct conceptual principles, namely sustainable development, CSR, the
stakeholder theory, and corporate accountability theory. In this context, Wilson (2003)
considers sustainable development to be a derivative of three concepts, e.g. the principles
of economics, ecology and social justice. For him, sustainable development delineates the
boundaries of the sustainability subject matter, and describes the preconditions for a
common societal goal. As the second pillar, CSR provides the ethical arguments as to
why corporations should work toward attaining sustainability goals, and is based on
ethics and moral philosophy. Derived from the strategic management perspective, the
stakeholder theory offers business arguments for sustainability and thus constitutes the
third pillar. Lastly, from a legal compliance perspective, the corporate accountability
theory presents ethical arguments for sustainability performance reporting, and ensues
from business law. These four pillars of sustainability and their underlying disciplines are
depicted in Figure 2, and draw attention to the apparent contradictions within this
multidimensional and multidisciplinary construct.
Figure 2: Pillars of Sustainability (Source: based on Wilson 2003, p. 2)
Sustainability
Sustainable Development Stakeholder
Theory
Corporate Social
Responsibility
Corporate Accountability Theory
Econom
ics
Ecology
Social Justice
Moral Philosophy
Strategic Management
Business Law
Underlying Disciplines
Sustainability Sustainability
Sustainable DevelopmentSustainable Development Stakeholder
Theory Stakeholder Theory
Corporate Social
Responsibility
Corporate Social
Responsibility
Corporate Accountability Theory
Corporate Accountability Theory
Econom
ics
Ecology
Social Justice
Moral PhilosophyMoral
PhilosophyStrategic
ManagementStrategic
ManagementBusiness LawBusiness Law
Underlying Disciplines Underlying Disciplines
Corporate Social Responsibility from an Emerging Market Perspective
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In conclusion, it can be surmised that the different, albeit related, viewpoints on CSR and
sustainability have given rise to a rich body of literature, but significant disagreement still
prevails. Daly (1992) actually saw merit in this lack of a definitive CSR construct, and
held that it had proved to provide consensus in support of the moral and economic
unfairness of treating the earth as a business in liquidation. Some scholars have
attempted to map the terrain by providing meta-reviews on the CSR discourse (cf.
McWilliams et al. 2006, Kakabadse et al. 2005, Matten and Crane 2005, Garriga and
Mel 2004, Carroll 1999). Nonetheless, as McWilliams et al. (2006) point out, the
absence of a universally-agreed-upon definition of CSR and sustainability is the most
contentious issue in the context of CSR research. Deciding on such a definition would be
the first step before differentiating between the subfields of CSR, e.g. the differentiations
between strategic, altruistic and coerced CSR types as put forward by Husted and De
Jesus Salazar (2006).
It is also imperative to note here that in the Indian context, the term CSR is most
prevalent, while corporate sustainability is hardly used.4
CSR and Business Ethics
While partly overlapping and seemingly complementing each other, business ethics and
CSR nonetheless differ from each other to some extent. Crane and Matten (2004) refer to
CSR as an increasingly common term in the rhetoric surrounding business ethics
(Crane and Matten 2004, p. 21) and suggest evaluating business ethics practices
according to their potentials to contribute to CSR. Both concepts share descriptive,
prescriptive, and normative elements with regard to the role of corporations. Carroll and
Buchholtz (1999) hold business ethics to be concerned with the good and bad or right
and wrong behavior that takes places within a business context (Carroll and Buchholtz
1999, p. 99). In turn, CSR also addresses the question of what is good (and for that
matter, bad) within a strategic business context. The concepts thus partly complement
each other, and it is therefore no surprise that there are efforts to conceptually link the
two, e.g. in the form of sustainability ethics (cf. Cairns 2003).5
4 Prof. PD Jose of the Indian Institute of Management, Bangalore, personal communication 14 July 2005. 5 For a more detailed review of business ethics, see Phillips (1991).
Corporate Social Responsibility from an Emerging Market Perspective
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Moreover, both business ethics and CSR are circumscribed with relation to contingencies
(such as emerging markets, and multinational corporations)6 and reveal ongoing
theorizing processes (cf. Sharma 2002). Similar to CSR, and despite its earlier
emergence, business ethics still requires more models, tools, measurement concepts and
further integration into core management (research). As Carroll and Bucholtz (1999) state
[] until senior management fully embraces the concepts of moral management, the
transformation in organizational culture that is so essential for moral management to
blossom, thrive, and flourish will not take place (Carroll and Bucholtz 1999, p. 117).
The same is likely to hold true for CSR as well.
Business ethics is a more established research stream, whereas CSR is a modern
management (research) concept exhibiting more dynamics, momentum, and conceptual
innovations in a shorter time frame and, in many ways, is an extension of the business
ethics discourse (OHara 1998). CSR attempts to bridge the gap between managements
financial profit orientation and their social roles through approaches such as the business
case for sustainability. Thus, CSR partly shares and partly moves beyond business ethics
normative focus, and leans more strongly toward the functional view dominant in
business research.
It is, therefore, evident that CSR as a concept not only draws upon other related
constructs dealing with businesses role in society and its responsibilities toward its
stakeholders, but also contributes to the discussion in a more advanced stage. Although
the various concepts discussed so far often exhibit differing origins, their meanings and
implications increasingly converge to illuminate the same phenomenon in different
shades.
2.4 Importance of CSR
As mentioned earlier, the proliferation of CSR research in core management academia,
the increased integration of the CSR agenda in corporate practices, and attention from the
6 See Welford (2004) and Christmann (2004) for sustainability and Robertson & Crittenden (2003) and Holtbrgge and Berg (2004) for business ethics.
Corporate Social Responsibility from an Emerging Market Perspective
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mainstream corporate media7 are concrete proof of the importance and timeliness of the
issue. At a corporate level, various factors have emerged as important contributors to this
phenomenon and in favor of building a business case for sustainability and/or achieving
the triple bottom line.
Traditionally, a firms responsibilities can be described as twofold: to the primary
shareholders, and to the secondary stakeholders (Freeman 1984). Sustainable business
practices, especially the business case for sustainability view, allow the firm to fulfill its
responsibilities toward both in better ways. This plays a significant role in providing a
firm with market benefits and building competitive advantage in a multitude of ways.
Firstly, the sustainable use and management of social and environmental capital ensures a
consistent economic yield over a longer period. As Steger (2004a) points out, when
companies operate in the smart zone (cf. Figure 3: The Smart Zone of Sustainability),
they not only boost their environmental and social performances, but also perform
optimally in the financial sense, leading to the attainment of the triple bottom line. This
ultimately leads to long-term shareholder value creation. Moreover, the emergence of the
socially responsible investment (SRI) niche means that companies with better CSR
profiles could enjoy an exemplary reputation, and may attract more investors (van den
Brink and van der Woerd 2004).
In addition, CSR adds to brand value creation (Werther and Chandler 2005). Brand value
and reputation are undoubtedly two of the most valuable company assets (cf. van Rekom
2005). Consumers are becoming increasingly aware and informed about companies CSR
values, and it is professed to become the next major element in product branding. As a
commentator in The Economist8 very aptly puts it, it would be clever to say there is
nothing different about our product or price, but we do behave well. Sustainable
production and distribution processes, therefore, might well be the differentiation point
between competitors, and help to build trust and loyalty among customers (cf. Schrage
2004). Corporate goodwill created via CSR activities are invaluable (Murray and Vogel
7 For example, The Economists June 2007 issue, Times July 2006 issue, Financial Times February 2006 issue and BusinessWeeks December 2005 issue, among others, carried special CSR features. 8 The Economist, 8 September 2001, as quoted in CSR Europes The European Business Campaign: Why Corporate Social Responsibility, retrieved 19 December 2005 from www.csrcampaign.org/why/default. aspx.
Corporate Social Responsibility from an Emerging Market Perspective
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1997), with increased customer loyalty (Maignan et al. 1999) and positive reception to
new products (Brown and Dacin 1997).
Adapting sustainable business practices translates into a host of advantages within the
firm itself. It can attract better quality workforce (Greening and Turban 2000) and
increase employee commitments, leading to low turnover rates and reduced misconduct
(Maignan et al. 1999). Efficient uses of resources reduce wastage, and thus the overall
operating cost decreases. Optimum management of social and environmental capital
facilitates long-term return on investments and, consequently, boosts the firms long-term
financial performance (Carroll and Buchholtz 2000).
Therefore, sustainable business practices are rewarded with an increase in firm
productivity, and enhanced relations with the community and government. It ultimately
leads to long-term positive relations for the firm with its stakeholders resulting in a
robust license to operate. In fact, in many parts of the world, corporate philanthropy,
social responsibility and sustaining the core values of the indigenous population have
greatly enhanced companies licenses to operate in unfavorable host communities (cf.
Anderson and Bieniaszewska 2005, Genest 2005, Zinkin 2004). The companies
sustainable practices lessen the burden on environmental resources, and allow the
community, and by extension, the wider world to enjoy a better quality livelihood.
Consequently, it also helps to protect natural capital and ensures their long-term use.
2.5 Measuring and Modeling CSR
Besides spreading awareness of CSRs importance, its implementation and, consequently,
its measurement have also triggered much debate. As apparent from the literature, the one
common CSR theme is ensuring future and present well-being. The central tenet of CSR
indicators thus emphasizes the management of an asset portfolio over time (Atkinson
2000), taking natural wealth (and ecological liabilities) into consideration.
Preceding the discussion on how CSR is to be measured is the discourse on whether CSR
should and can be measured at all. Quantification of natural capital and the subsequent
measurement of CSR have been repeatedly criticized (and also vehemently opposed) by
environmental scholars (cf. Abramovitz 2001, Sagoff 2001, Pearce 1998). In
Corporate Social Responsibility from an Emerging Market Perspective
-21-
conceptualizing a price for natural capit
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