The Good, the Bad, and the Successful –How Corporate Social ResponsibilityLeads to Competitive Advantage andOrganizational Transformation

ANDRE MARTINUZZI & BARBARA KRUMAY

Institute for Managing Sustainability, Vienna University of Economics and Business, Austria

ABSTRACT This paper presents a referential stage model for corporate social responsibility (CSR)implementation by linking CSR to four business operations: project management, qualitymanagement, strategic management and organizational learning. Companies try to cope withsocietal demands by integrating them into these business operations: (1) integrating societaldemands into project management by initiating a project in an area that is perceived as ‘good’;(2) avoid ‘bad things’ by applying quality management for CSR implementation; (3) strategicCSR perceives societal demands as opportunities to create shared value and (4) transformationalCSR helps to overcome constraints like low materiality and developing the capabilities of acompany. While the first two stages aim at ‘doing good’ or ‘avoiding bad’, strategic andtransformational CSR are key for ‘being successful’. Based on extended literature review andwell-documented studies, our referential framework offers insights into underlying patterns,potentials and limitations of linking CSR to business operations. Companies can assess the stagethey have reached, strive for higher materiality, boost their competitiveness, and evolve in termsof CSR maturity. Hence, the referential framework adds a new and application-orientedperspective to the discussion of the business case for CSR and demonstrates how stages lead tocompetitive advantage and organizational transformation.

KEY WORDS: Social responsibility of business, stage model, CSR business case, responsiblecompetitiveness, organizational learning, strategic management, quality management, projectmanagement

Journal of Change Management, 2013

Vol. 13, No. 4, 424–443, http://dx.doi.org/10.1080/14697017.2013.851953

Correspondence Address: Andre Martinuzzi, Research Institute for Managing Sustainability, Vienna University

of Economics and Business, Austria. Email: andre.martinuzzi@wu.ac.at

# 2013 Taylor & Francis

1. Introduction

In our conceptual paper, we describe three common approaches – project-orientedcorporate social responsibility (CSR), quality-oriented CSR, and strategic CSR –based on a comprehensive literature review and selected cases. Opportunities forand threats to an individual company as well as to society are assessed. Further-more, we identify a fourth approach based on organizational learning, which is,in our impression, the logical next step for companies willing to act in a respon-sible way.

The Good: CSR is often seen as ‘doing good’. Businesses make donations tocivil society and environmental organizations, sponsor projects in developingcountries, build solar power units, spend money on counselling for employees,etc. These projects are commonly perceived as ‘good’, and are thus easy to com-municate to the general public. However, such projects remain peripheral and arein danger of being cancelled in times of crisis.

The Bad: Many companies face severe problems when they are revealed to usechild labour in their supply chain, to be accountable for environmental disasters, orto ignore human rights. In such cases, consumers’ loyalty is quickly jeopardized,and even the license to operate can be endangered. CSR can therefore be seen aspreventing ‘doing bad’. To help companies in implementing this approach, severalstandards, management systems, and checklists were developed. However, it isdifficult to say to what extent a single company can be held accountable in a glo-balized economy. In addition, checklists and standards are often difficult to com-municate to customers.

. . . and The Successful: CSR can also be seen as a strategic success factor andan opportunity to create shared value. The challenge is to take social and environ-mental issues into account and to ‘rethink your business’ around four strategicquestions: what, where, how, and for whom are we producing? This createsnew business models, boosts incentive innovation, and builds up a robustreputation.

On the basis of this literature study, we identified a fourth innovative approachto link CSR with change management and organizational learning: ‘transforma-tional CSR’. The paper structure is as follows: first we describe the relationshipbetween CSR and competitive advantage, as well as our research aim and meth-odological approach. Second, we explore how linking of CSR with business oper-ation leads to a logical and sound categorization of stages of CSR, which can beachieved often in companies, as demonstrated by different cases. And finally, wepresent conclusions and an outlook on the next steps.

2. CSR and Competitive Advantage

In recent years, the concept of CSR has become established increasingly all overthe world: more than 260,000 companies worldwide have implemented a certi-fied environmental management system following ISO14001 (ISO, 2004b);about 4,500 organizations make use of the European Eco-Management andAuditing Scheme (European Commission, 2005); about 8,000 businesses andnon-business stakeholders from 135 countries participate in the UN-driven

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Global Compact initiative; 42 of the most developed countries, which accountfor 85% of the total foreign direct investment flow, have established NationalContact Points for promotion and diffusion of the Organisation for EconomicCo-operation and Development (OECD) ‘Guidelines for Multinational Enter-prises’ (OECD, 2011); the Social Accountability standard SA8000 has beenimplemented in 62 countries covering about 3,000 facilities and about 1.5million workers (SAI, 2008); and about 1,500 companies have published CSRreports based on the guidelines of the Global Reporting Initiative (GRI, 2011).

Explaining and assessing CSR are hampered by the fact that a broad variety ofterms evolved in research, which all deal with rather similar corporate activities.But even when the same term is used, there is still the potential for seeing theconcept from different angles, applying competing conceptual frameworks, anddiscussing them in different research communities (e.g. corporate sustainability,business ethics, stakeholder management, corporate citizenship, corporate govern-ance, and shared value). Researchers applied different methodological approachesto explain and define CSR: from summarizing existing definitions (Carroll, 1999;Carter & Jennings, 2004; Joyner & Payne, 2002; Moir, 2001), over analysingresearch papers (Dahlsrud, 2008; Montiel, 2008; Taneja, Taneja, & Gupta,2011), and to conducting interviews (Johnston & Beatson, 2005; O’Dwyer,2002). Some researchers developed a CSR definition based on theoretical reason-ing (Gobbels, 2002; Matten & Crane, 2005a; Van Marrewijk, 2003). Nevertheless,some key ideas are applied most commonly:

. CSR is the obligation of business to act according to the overarching goals ofthe society. Hence, it is connected with sustainable development as CSR’sguiding vision.

. CSR depends on the political, institutional, and cultural context and environ-ment, as it is dependent on the relationship between business and society.

. CSR is beyond compliance: A precondition to responsible corporate behaviouris to be compliant to laws or regulations.

. CSR is voluntary (since it is beyond compliance), but it is still perceived as amoral, ethical, or philanthropic obligation of business, although some labourunions and Non Governmental Organizations (NGOs) are constantly question-ing the voluntariness of CSR.

. Making profit out of CSR: It is questioned if making profits out of CSR can stillbe perceived as CSR. Is it immoral to make money out of being moral? Seenfrom a different angle, the following question arises: Can CSR measures thatdo not have any – even indirect – influence on profit be regarded as CSR –for example, is philanthropy a form of CSR? This is an on-going debate.

These key ideas can be applied at the policy level as well. For a long period, CSRwas experienced as an active corporate engagement beyond legal compliance andthe voluntary contribution of business to the overall guiding societal model of sus-tainable development (European Commission, 2001, 2002, 2008). Since the recentCSR Communication of the European Union published in October 2011 (Euro-pean Commission, 2011), which states that CSR is the responsibility of everycompany for its impacts on the environment and society, the idea of CSR has

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been changing. CSR has become a concern for all businesses, independent of theirsizes, sectors, or locations.

One big issue in the CSR debate, already discussed for a long time, is the ques-tion of whether or not CSR leads to improved competitiveness (Carroll &Shabana, 2010). A number of studies concerning the ‘business case of CSR’tried to validate the relationship between CSR and competitive advantage. As aresult, a majority of these studies support the idea that a positive relationshipbetween CSR and competitive advantage exists (Becchetti, Ciciretti, Hasan, &Kobeissi, 2012; Clarkson, Li, Richardson, & Vasvari, 2008; Ghoul, Guedhami,Kwok, & Mishra, 2011; Sharfman & Fernando, 2008; Vilanova, Lozano, &Arenas, 2009), but some studies presented contrary results (Cordeiro & Sarkis,1997; Hassel, Nilsson, & Nyquist, 2005). In addition, some found the relationshipto be neutral (Nelling & Webb, 2009; Wagner, 2005). These equivocal results leadto a number of meta-studies based on the existing literature (Griffin & Mahon,1997; Guenther, Hoppe, & Endrikat, 2011; Margolis & Walsh, 2003; Orlitzky,Schmidt, & Rynes, 2003). Some of them (Orlitzky et al., 2003) supported theidea that under certain circumstances (e.g. increasing reputation), CSR is mutuallyreinforcing: improved CSR (respectively, corporate social performance) mayactually lead to more competitiveness (respectively, corporate financial perform-ance) and improved competitiveness enables the implementations of CSRmeasures. However, the intermediate factors and their role to make this reinforce-ment happen are just sketched on a very vague basis, hence this relationship willfurther be investigated.

3. Research Aim and Methodological Approach

Our research aim is to shed light onto the rather vaguely described linkage of CSRand competitiveness. Compared with other approaches (Carroll, 1999; Carter &Jennings, 2004; Dahlsrud, 2008; Gobbels, 2002; Johnston & Beatson, 2005;Joyner & Payne, 2002; Matten & Crane, 2005b; Moir, 2001; Montiel, 2008;O’Dwyer, 2002; Taneja et al., 2011; Van Marrewijk, 2003), our typology presentsa referential framework to analyse different stages of CSR implementation, focus-ing on the materiality of CSR and helping to assess the potential of CSR to createcompetitive advantage and new business opportunities. It links CSR to four of themost frequently implemented business operations:

. Project-oriented CSR: Projects are seen as a temporary organization and asocial system different from permanent organization. They are designed forthe performance of a relatively unique, short- to medium-term strategicbusiness process of medium or large scope. Since CSR activities are often inte-grated into projects and handled by project management, we identified this asthe first and easiest way of integrating CSR into a standard business operation.

. Quality-oriented CSR: Quality management has a long tradition in research andpractice and is often connected to standards such as ISO or total quality man-agement (TQM). Within these standards, CSR is gaining importance. Hence,we identified quality management as the second important business operationin which CSR can be integrated.

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. Strategic CSR: Strategic management influences organizations since the long-term approach and the positioning of the organization in competition areinherent in strategy. Since CSR is approached strategically, the success of thewhole organization may increase. Therefore, we see strategic management asour third business operation.

. Transformational CSR: Organizational learning and change does not only havethe potential to change the organization and transform it from a static, reactivecompany to a dynamic, self-learning organization. It also allows the paralleltransformation of an organization, its stakeholders, and the whole society.Therefore, we will sketch transformational CSR as the fourth and most power-ful approach to implement CSR.

Our conceptual paper is based on a literature review and the analysis of selectedcase studies, which are well documented in scholarly literature and the media. Wefocus on proactive business operations and hence excluded defensive or finance-related operations (e.g. risk management, which is also often connected to CSR).The four business operations in our stage model were identified based on thisanalysis. In the following sections, we explain how these business operations inte-grate or embed CSR, why they are predominant in the CSR literature, and whythey can be found in companies very often.

4. Linking CSR with Business Operations

Already in the late 1970s, Carroll (1979) presented stages or phases of socialresponsiveness, ranging from no response to pro-active response. Moreover, heframed different stages in his ground-breaking CSR pyramid, from economic(be profitable), to legal (obey the law), to ethical (be ethical), and up to philanthro-pic (be a good corporate citizen) responsibilities of a company (Carroll, 1991) andhence presented a first stage model of CSR. Another early stage model isFrederick’s CSR1/CSR2/CSR3/CSR4 concept (Frederick, 1978, 1986, 1998).He describes the development from the rather philosophical CSR1, which is theobligation of a company to ‘work for social betterment’, to a managerialconcept, which is more action-oriented – CSR2, and includes the ability of acompany to react on social pressure (Frederick, 1978). Later he concluded fromhis research that the concepts need an ethical basis and hence presented SocialCorporate Rectitude (CSR3), which enables a constant surveillance of theimpact of companies’ actions on society. This was further developed into CSR4to overcome the ‘CSR1–2–3 trap’ having the company in the centre of CSR (Fre-derick, 1998).

Other authors presented different phases or stages, e.g. Dunphy (2002), who ela-borated six stages of sustainability. Crowther (2008) identified seven stages anddescribed them in terms of dominant features. Halme and Laurila (2009) presenteda model with higher complexity, showing three stages, from reactive or defensive,driven by the demand of external influences, to a strategic and transformativeorientation, as well as three CSR types with three dimensions. Baumgartner andEbner (2010) presented four stages of corporate sustainability strategies or sus-tainability profiles: beginning, elementary, satisfying, and sophisticated/

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outstanding. Another way of seeing CSR is provided by Schneider (2012), whodefines several system boundaries of CSR development stages, and determinesfour stages from social engagement without systematic and planned behaviour(CSR 0.0) to a proactive political designer (CSR 3.0). In order to systematizethis variety of CSR stage models, two systematic reviews have recently beencarried out: Spitzeck and Hansen (2011) elaborated different ways of measuringor describing CSR based on historical, performance-based, structural, cognitive,and moral-cognitive measures. Maon, Lindgreen, and Swaen (2010) developeda consolidative model based on nine other stage models and presented sevenstages describing the development from ‘CSR-unsupportive to CSR-supportivecultures through its development of integrated CSR programmes and policies’.

Different researchers critically discussed stage models for CSR or sustainabil-ity. They criticize, for example, that the complexity of the current situation of acompany can never be represented by such stages (Kolk & Mauser, 2001),especially since national, international, and global regimes are very different.Others note that guidelines for overcoming hurdles to reach a higher stage arerarely integrated into the models or lack integration with existing business pro-cesses (Asif, Searcy, Zutshi, & Fisscher, 2013). Nonetheless, stage modelssupport researchers and practitioners to identify the situation that a company isin, to make companies comparable to each other by identifying and measuringthe characteristics of the stages, to offer insights into best practice cases in thestage, and to offer the possibility of developing measures to either act as best aspossible in the situation or identify necessary steps to reach a higher stage (Asifet al., 2013; Baumgartner & Ebner, 2010; Maon et al., 2010; Panwar, Rinne,Hansen, & Juslin, 2006).

Although CSR stage models are numerous and many authors see a connectionbetween the stages and business operations (Halme & Laurila, 2009), hardly anyof them are directly linked to business operations, but instead are based on theor-etical concepts and considerations. Therefore, they are not integrated into corebusiness processes (Asif et al., 2013). In addition, most of them present defensiveversus proactive attitudes of businesses towards CSR and sustainable developmentas a key element and, therefore, do not offer more complex insights into the prac-tical problems of CSR implementation. Our paper is meant to help understanddifferent stages of integrating CSR into existing business operations, theirstrengths and weaknesses, opportunities and threats. In our approach, ‘higherstages’ build upon and integrate the characteristics of ‘lower’ stages some over-laps between stages are logical. Next, we present the different stages andexplain the specific characteristics of the stages.1

4.1 Project-Oriented CSR (‘Doing Good’)

Projects and project management are adopted and implemented by many organiz-ations. Definitions of projects range from a project being an idea or draft (Engwall,1998), a complex task (IPMA, 2006; PMI, 2008), a complex system to be opti-mized (Cleland & King, 1983), a social entity (Thamhain, 2004), a legal unit(Barnes, 1983), a business objective (Pinto & Slevin, 1987), or a temporary organ-ization (Turner & Muller, 2003). Gareis defines a project as a temporary

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organization and a social system different from permanent organization, designedfor the performance of a relatively unique, short- to medium-term strategicbusiness process of medium or large scope (Gareis, 2005). Hence, project manage-ment is a process different from the content of the project, and is used for ‘plan-ning, organizing, and managing resources to bring about the successfulcompletion of a specific project’ (Vyas, 2008).

Many companies approach CSR by initiating a social or environmental project,and thus aim at ‘doing good’. The projects’ content varies from targeting custo-mers (e.g. cause-related marketing), external stakeholders (e.g. sponsorships,awards, donations), or internal stakeholders (e.g. voluntary social or health ser-vices, corporate volunteering). The following examples give just a brief insightinto the great variety of project-oriented CSR:

. Simacek Facility Management Group GmbH2 in Austria initiated a project incooperation with a non-profit organization to support their employees in learn-ing German. Since most of their employees are migrants and very often have nocommand of the language of the country they live in, this is a way to foster inte-gration and social stability of employees. The courses are voluntary and corre-lated with working hours.

. Coca Cola in Austria together with the NPO Competence Center of the ViennaUniversity of Economics and Business and the newspaper Der Standardinitiated a project called ‘Ideen gegen Armut’ (ideas fighting poverty).3 Thisproject invites people to introduce their ideas on how to fight poverty, and sup-ports needy people to help themselves by bringing up new business ideas. Thecompany awards about 100,000 euros per year to implement the best idea.

. RHI,4 a producer of refractory materials, installed a new waste heat conceptwhere the air used for cooling of the tunnel kiln fosters as an energy sourcefor machines and water treatment, which results in reducing the consumptionof fossil energy of 2,317 tons of carbon dioxide.

All of these projects are undoubtedly ‘good’, which makes them easily communic-able to the public. However, they are not necessarily in the focus of the companies’activities and are often the first to be cancelled in times of economic crisis. Asproject-oriented CSR often means to give back a certain share of the profit tosociety, several questions arise concerning this allocation decision: (1) is it theobligation of companies to spend profit for society, or should businesses purelyconcentrate in business, (2) what is the right amount (e.g. is it sufficient to allocatea few thousand euros for ‘being good’ or is there a minimum to be ‘really good’?),(3) who should benefit from ‘doing good’ (e.g. fighting poverty or protecting rarespecies?), (4) how will other stakeholders not benefiting from the project perceivethe initiative? For example, when the Deutsche Bank fired 10% of their employees(Deutsche Bank, 2003), one might have asked why the company still spent moneyin fighting AIDS in Asia (Deutsche Bank, 2006).

We consider project-oriented CSR as the first stage due to the nature of projects.Projects have a limited duration, they start and end with a fixed goal and budget(Gareis, Huemann, & Martinuzzi, 2011). This means that at a certain point theyare finished and do not influence the company as a whole. In addition,

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communicating sponsorship and donations is easy. An organizational change,especially in culture and processes of the company, does not necessarily takeplace in this stage. Consequently, project-oriented CSR is just a first steptowards sustainable management, and hence further steps are required to trans-form responsibility into success for companies. Due to the nature of projects,which have limited timeframe and resources often linked to middle management,societal and economic impacts are low, but also risks are not very high. Further-more, the materiality is low because after the project ends, it does not need furthermanagerial actions. To summarize this stage, we could define it as the stage wherecompanies strive for ‘doing good’ and integrate this aim into projects and projectmanagement.

4.2 Quality-Oriented CSR (‘Avoid Doing Bad!’)

Quality management has been a well-known concept for decades. At the verybeginning, quality thinking aimed at the quality of products and services, butfurther developed to quality of production and service processes, quality of thewhole production system to overall quality of the organization (van der Wiele,Kok, Mckenna, & Brown, 2001).

Quality management is defined as an integrated approach to achieving and sustain-

ing high quality output, focusing on the maintenance and continuous improvement

of processes and defect prevention at all levels and in all functions of the organiz-

ation, in order to meet or exceed customer expectations. (Flynn, Schroeder, & Saka-

kibara, 1994)

To apply quality management, standardized management systems, quality guide-lines and standards, audits, or assessments are used. One approach to assessquality is TQM, which has been developed to foster ‘an all-embracing philosophyof conceptual Business Excellence’ (Robson & Mitchell, 2007). It is an integratedapproach that aims to continuously improve the quality of products or services ofa company (Hackman & Wageman, 1995; Porter & Parker, 1993; Powell, 1995;Sureshchandar, Rajendran, & Anantharaman, 2001). Many quality managementtools already include CSR measurement (Robson & Mitchell, 2007), such asthe ISO9000/9001 (ISO, 2005) for quality, ISO14000/14001 (ISO, 2004a) forEco-Management, or ISO26000/260001 (ISO, 2010)5 or Eco-Management andAudit Scheme (European Commission, 2005) – either explicitly or implicitly.

Companies applied environmental management systems (e.g. following theISO14001 series) as a next step after implementing quality managementsystems (e.g. following the ISO9001 series). The lately developed ISO26000can be perceived as a third step in this sequence, although the focus shiftedfrom management systems standards to guidance standards (Castka & Balzarova,2007). The majority of these companies applied a quality-oriented approach toprotect their image, brand, and license to operate, as famous cases showed howquickly reputation is lost and regained by applying quality measures:

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. In the textile industry, companies such as Nike or Deichmann suffered fromimage-damaging reports about poor working conditions in their supply chainsand developed codes of conduct to rebuild trust in their responsibility (DeTi-enne & Lewis, 2005; Loew, 2005).

. Unfair practices and poor working conditions led to a loss in credibility in theretail sector, as the case of Lidl, a cut-price supermarket chain, showed. Asreported by the newspaper Stern,6 the company spied on its staff and collectedintimate information concerning their staff’s relationships, habits, and howoften the employees used their mobile phones during their breaks (Walsh &Bartikowski, in press).

. In the oil industry, the Shell versus Greenpeace case on the dismantling of theBrent Spar oil platform demonstrated how quickly reputation was lost(Zyglidopoulos, 2002). The recent BP Deepwater Horizon case proved thatminor errors (i.e. a failing blowout preventer with costs of about 400,000dollars) can cause major damages (i.e. more than 20 billion dollars) (Lewis, 2011).

These cases depict how quickly reputation may get lost and even the license tooperate might be in danger. Therefore, many companies implemented qualitymanagement systems and standards to reduce these threats in their own operations,preferred suppliers who implemented these standards, or developed codes ofconduct. However, it is not an easy task to avoid ‘bad things’, particularly dueto the fact that the idea of ‘avoiding bad things’ is diverse, highly relative, andhas an emotional component. When there is evidence that a company uses childlabour to produce their goods, that dramatic ecological devastation is an effectof production, or that they ignore human rights, it seems to be an easy decision.But how far does the responsibility of a single company go (i.e. how many tiersof suppliers)? And how can companies find a balance between their own ethicalstandards and the cultural conditions in other countries (e.g. the right ofworkers to organize labour unions is rather limited in several countries)?

We consider quality-oriented CSR as a second stage, which is even morecomplex and fosters some changes in the structures and processes of an organiz-ation. In implementing quality management systems or following quality manage-ment guidelines, a company has to look at business processes and restructurethem. The materiality of this approach is, therefore, higher. Furthermore, thedifferent quality management schemes require validation and re-auditing, whichhelps to develop a more professional approach to CSR than just initiating asingle project. Advantages of implementing quality-oriented CSR are given bythe standardized and well-defined nature of quality management instruments.By applying such instruments, organizations are able to identify and describetheir status as well as report their achievements in implementing CSR. Drawbacksof this stage are manifold, for example, the problem to communicate the value ofmanagement systems to the public. Moreover, quality management systems withtheir checklists are often seen as annoying obligations, and the resulting stimulusfor innovation is rather low. Quality-oriented CSR ensures a systematic approach,but needs extension by other steps towards corporate sustainability, as managingresponsibilities is more complex than managing quality (Waddock & Bodwell,2004).

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4.3 Strategic CSR (‘Rethink Your Business!’)

Modern companies are using business or corporate strategy to position and dis-tinguish themselves from competitors. Although the strategy already emergedas an important discipline in the 1970s (Carter, Clegg, & Kornberger, 2010), itis diversely discussed in the literature and a single definition is still missing.Porter (1996), for example, sees strategy as the way in which companies canperform activities distinctive from those of their rivals, and how they may positionthemselves uniquely, either based on customers’ needs, customers’ accessibility,or the companies’ products or services. Mintzberg states that strategy does nothave one definition, but five: it is a plan, a pattern, a position, a perspective,and a ploy (Mintzberg, Ahlstrand, & Lampel, 2005). Strategic management isoften connected to other concepts, such as the relationship between power andstrategy (Carter et al., 2010). Basically – agreed upon by researchers and prac-titioners – strategy is long-term, sets directions, and defines a company’s position(Bowman & Helfat, 2001; Mintzberg et al., 2005; Porter, 1996). In addition, stra-tegic management is not a one-way road, but includes formulation, implemen-tation, and control in cascading steps (Mintzberg et al., 2005), and influencesprojects as well as quality management processes in a company. A business strat-egy describes how a company competes and positions itself (Bowman & Helfat,2001), whereas corporate strategy ‘defines the businesses in which a companywill compete, preferably in a way that focuses resources to convert distinctivecompetence into competitive advantage’ (Andrews, 1987).

The aim of strategic CSR is to include environment and society in strategicdecisions and to open up an innovation potential. Thus, CSR is integrated intoall four central business decisions: what, where, how, and for whom thecompany is producing. This holistic penetration of CSR enables new businessmodels and leads the company’s innovation capacity to the very target of socialproblems and their solutions. Strategic CSR as a term is used in different ways,e.g. as a socially responsible profit-maximizing strategy (Baron, 2001; Bhattachar-yya, 2010; Porter & Kramer, 2006). Hence, the relationship between the success ofthe company and the societal impacts of strategic CSR is perceived as mutuallyreinforcing (Porter & Kramer, 2006). Strategic CSR includes mission andvision statements (Lantos, 2001), requires decisions (Porter & Kramer, 2006),and targets stakeholders, especially consumers, employees, and marketers(Lantos, 2001). Husted and Salazar (2006) compared different approaches (strat-egy, altruism, and coerced egoism) and state that a strategic CSR approach issuperior to the others based on calculating costs, benefits, and social output.Examples of strategic CSR are versatile and impressive:

. Muhammed Yunus (Nobel Peace Prize Laureate) started a micro-credit initiat-ive with the Grameen Bank in Bangladesh in the 1970s (Yunus, Moingeon, &Lehmann-Ortega, 2010; Yunus & Weber, 2007). This initiative reached avolume of 60 billion US-dollars. The loans are issued to small-scale traderswith an amount of credits of 1,000 US-dollars each (Yunus & Weber, 2007).These micro-credits enable the deployment of independent businesses in devel-oping countries and foster the reduction of poverty.

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. Betapharm, a pharmaceutical manufacturer producing generic drugs, enrichedits corporate activities by founding a network of facilities for seriously andchronically ill children and their families offering a broad variety of prevention,care, and post-rehabilitation support. Instead of investing in the development ofnew drugs or investigating the prescription behaviour of medical practitioners,Betapharm supported ill children and gained broad knowledge about their livingarrangements (Heuskel, 2008).

. Some software-producing companies such as Specialisterne7 and Aspiri-tech8 (Johnson, 2011) deploy people with Asperger syndrome, a form ofautism, to test the software. They are able to find errors five times fasterthan IT-experts. They are not seen as handicapped people who should beintegrated just on the edge of society. On the contrary, the company estab-lished highly specialized, high-quality, and highly paid jobs which matchthe strengths and needs of people with autism (Cammuso, 2011; Mottron,2011).

As these examples show, ‘rethink your business’ is the motto of strategic CSR.Strategic CSR unlocks shared value by investing in social aspects of contextand strengthening a company’s competitiveness (Porter & Kramer, 2011) andby helping to achieve a generic firm strategy, new products, and marketsbased on social and economic inclusion (Bhattacharyya, 2010). It can beassessed as a source of tremendous social progress (Porter & Kramer, 2006).The high potential impact of strategic decisions is simultaneously the biggestconstraint of strategic CSR: the successful history of a company, existing struc-tures and processes, and narrow patterns of thought form the most importantbarriers to innovation and change. These problems are caused by the enormousinfluence that the changes can have on the company and the stakeholdersinvolved (Yuan, Bao, & Verbeke, 2011). As a consequence, measuring theeffectiveness and impacts of strategic CSR is difficult, as at the momentsocietal and environmental concerns are fully integrated into the core decisionsof a company. CSR as such can no longer be easily identified, but can be seenas a new, integrated form of CSR, creating shared value for the company andthe society.

We consider strategic CSR as the third stage towards linking CSR and competi-tiveness, as it helps to develop an overall strategy, improves stakeholder relations,and creates shared value. The on-going changes involved in implementing stra-tegic CSR are profound, since this means that CSR is integrated into businessor corporate strategy. The changes are not short- or mid-term, but long-term,and influence the company as a whole. Processes must be adopted, employeeshave to be informed about the strategy, and a certain commitment to CSR isrequired. Therefore, the materiality is high. There are certain risks when integrat-ing CSR into strategy, such as losing the position achieved in the market or upset-ting business partners. The abilities that are necessary in order to overcome theseconstraints are in the focus of the next CSR approach, which very rarely can befound in companies.

434 A. Martinuzzi & B. Krumay

4.4 Transformational CSR (‘Stay Flexible!’)

‘CSR involves learning over time and the ability to understand the specificcontext and confluence of stakeholder expectations’ (Maon, Lindgreen, &Swaen, 2009), hence organizational learning and transformation as well as sta-keholder integration are strongly linked with CSR issues. Organizational learn-ing addresses strategy, structure, and culture of a company and the system asa whole (D’Amato & Roome, 2009). Companies face changing requirementsin a constantly changing world, and hence have to react in a flexible way(Roome & Louche, 2011). By adapting to the situation and integrating (social,economic, and environmental) requirements into the learning process, they arein a continuous, result-open (and hence iterative) process, which is the basisfor sustainable competitiveness and strengthening the resilience of companies.This organizational learning and transformation already includes communicationmechanisms, hence stakeholder dialogues, stakeholder engagement, and stake-holder management – additional leading topics in the CSR discussion (vonWeltzien Hoivik, 2011) – are vital. Involving stakeholders enables an organiz-ation to contribute to the wealth and sustainable development of the organizationitself and the (social and natural) environment in which it is embedded(Donaldson & Preston, 1995; Freeman, 1984; Frooman, 1999; Mainardes,Alves, & Raposo, 2011; Mitchell, Agle, & Wood, 1997). Since stakeholderinvolvement is an important issue, research has addressed it accordingly. Stake-holder management seeks to support the relationship and communicationbetween the organization and internal or external stakeholders (Carroll & Buch-holtz, 2011). Johansen and Nielsen (2011) developed a literature-based frame-work to explore and support understanding of stakeholder dialogue bytargeting issues of responsibility and legitimacy. Nijhof, De Bruijn, andHonders (2008) emphasized the role of NGOs for the success of businesses inCSR and identified three strategies in this area, which are unbalanced or evencontroversial in terms of goals and concerns of companies and NGOs. Walsand Schwarzin (2012) state in a conceptual paper that dialogic interaction isnecessary to enable transition towards organizational sustainability as well asto achieve sustainability competence. This dialogue may be institutionalizedand includes alliances between non-profit and for-profit actors, which in turnenable learning in organizations (Arya & Salk, 2006).

Since organizational learning and transformation include participatory mechan-isms which enable not only employees, but also external stakeholders to influencean organization’s development, both concepts are closely related and can be inte-grated into ‘transformational CSR’ (for details see Martinuzzi & Zwirner, 2010).Examples of transformational CSR are rare and often highlight just one aspect ofthe complex interplay of change, learning, and transformation:

. A longitudinal study in two hospitals in London showed that changes inworking, relationships, and leadership are necessary to develop the abilitiesof learning. However, the changes have to be embedded into the organizationalculture to be sustainable (Mitleton-Kelly, 2011).

The Good, the Bad, and the Successful 435

. The Arla Foods-consumer dialogue was implemented by offering a portal tostrengthen relationships with Danish consumers. The portal presented fre-quently asked questions coupled with feedback, based on the idea that stake-holders engage with organizations. Via feedback and dialogue, stakeholdersare involved and mutual commitment can be achieved (Johansen & Nielsen,2011).

. Sabaf, a world-leading manufacturer of components for domestic gas cookingappliances, embedded social, environmental, and governance issues. Todevelop a new approach to CSR, the company runs through a transformationprocess that includes learning and change processes in the company (Roome& Louche, 2011).

We consider transformational CSR as the fourth stage, which is able to overcomesome constraints of the preceding stages such as narrow-mindedness, inflexibility,or sticking to standardized ways. An organization which is able to learn and trans-form based on experiences and collected knowledge that integrates CSR in thistransformation is flexible, and may adapt quickly to new challenges and gainscompetitive advantage (Vilanova et al., 2009). Moreover, this organization con-tributes to societal change and acts as a key driver for sustainable business prac-tices, which also can be seen as a competitive advantage. As this could lead to atransformation of economic and political framework conditions (e.g. throughestablishing new environmental or social standards or through contributing to achange of values in society such as ‘sufficiency’ instead of ‘greed’), the assess-ment of the competitive advantage of transformational CSR is not easy. On theone hand, changing the ‘rules of the game’ might lead to an outstanding position;on the other hand, the predictability of these changes is very low. Transforma-tional CSR, therefore, does not focus on gaining a specific competitive advantageby implementing CSR, but on fostering the abilities, which form the basis of theseadvantages: the ability of an organization to develop its capabilities for reacting ina flexible way on social, ecological, and economical requirements and to continuewith progress.

5. Conclusion

In this paper, we sketched a stage model based on three most often implementedbusiness operations linked to CSR, i.e. project management, quality management,and strategic management, as well as an additional approach – organizationallearning and change. While the first three are well described in scholarlypapers, the fourth is rather innovative as it puts the linkages of CSR and competi-tiveness in a dynamic and even systemic perspective. When entering a new stage,the characteristics of the previous stages of course are still existing and integratedinto the higher stages (e.g. CSR projects of ‘doing good’, quality managementmeasures of ‘avoid doing bad’), hence the characteristics are not mutually exclu-sive, but the company’s approach to CSR reaches another level. The followingfigure shows our stage model encompassing the four approaches describedabove (Figure 1).

436 A. Martinuzzi & B. Krumay

Fig

ure

1.

CS

Rst

age

model

.

The Good, the Bad, and the Successful 437

A first evaluation of the applicability of our stage model was done in tworesearch projects as a guiding framework for interviews with CSR sectoralexperts and in the course of a Delphi-like survey, and received interesting results:

. In the construction sector, three actors play a prominent role in shaping theenvironmental and societal impacts of construction on the one hand, and decid-ing on its costs structure on the other: the property developer, the general con-tractor, and the future user. Only if at least one of these key actors requiresthem, CSR measures are implemented. If none of them perceives CSR measuresas essential, societal responsibility is seen in contradiction to the high pressurefor low costs, which are the most decisive factor for competitiveness in thissector (Martinuzzi, Gisch-Boie, & Wiman, 2010). This leads to the situationthat the same company might apply CSR on a very high level at one construc-tion site (when it is required by one of the three key actors), while in anotherconstruction project CSR issues are ignored to reduce costs. We consider thissector to be in the stage of project-oriented CSR.

. In the chemical industry, quality-oriented CSR is the most common approach:ISO14001 and Responsible Care are the best-established CSR tools. Experts seeseveral positive links of CSR and competitiveness and believe that CSR willgain importance in the future. However, the relevance of CSR as a source ofcompetitive advantage is rather limited, as other issues like innovation,product quality, and human resources are of much higher importance for com-petitiveness. Therefore, the life-cycle approach, safeguarding the license tooperate, and socially responsible human resource management are perceivedas pathways for strategic CSR in the chemical sector.

As the examples show, the stage model presented here can be used as a frameworkto assess the recent situation of a company and of a whole sector, respectively.Therefore, it might be applied in the course of upcoming empirical projects aswell as in the course of consulting projects.

As stated in the paper, the stage model offers a way to assess how companiesdevelop in the course of time. The characteristics of the stages based on the under-lying business operations may be used to answer some questions: concerning com-petitiveness, we argue that the competitiveness of the company increases byentering higher CSR stages. The changes in the organizations walking alongthis path are very different, reaching from being slightly unchanged (project-oriented CSR) to a stage where recurring changes and learning are the basis forsuccess (transformational CSR). Since responsibility of companies is growingor transforming into shared value, the positive impact on society will increaseby entering higher stages.

Since this model is in a conceptual stage, we consider the following researchissues as most promising to pursue: (1) the further development of the fourstages to a fully fledged maturity model for CSR, including the development ofindicators to assess the stages more clearly, (2) the application in surveys toassess the maturity of certain sectors, (3) a series of case studies to deepen theunderstanding of the contingencies and constraints of the four stages, and (4)

438 A. Martinuzzi & B. Krumay

some accompanying research projects on cases where individual companiesmanaged to shift from one stage to another.

Acknowledgements

The authors thank Wilhelm Zwirner for his support in developing the transforma-tional CSR approach; Robert Kudlak and Michal Sedlacko for valuable input; andBernhard Nussgruber and Megan Ahearn for proofreading.

Funding

The authors thank the Austrian National Bank for funding project number 13175,which made this paper possible.

Notes

1. The development of indicators based on the characteristics is part of ongoing research.

2. http://www.simacek.com/en

3. http://www.ideen-gegen-armut.at

4. http://www.rhi.at/internet_en

5. Other ISO systems (ISO10001 for customer satisfaction and complaints systems, ISO31000 for risk man-

agement, AA1000 for sustainability assurance, ISO26000 for corporate responsibility and SA8000 for

social accountability) related to CSR and sustainability are not that popular (Asif et al., 2013).

6. http://www.stern.de/wirtschaft/news/unternehmen/studie-spitzelskandal-ramponiert-lidl-image-654199.

html

7. http://specialisterne.com

8. http://www.aspiritech.com

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