Effect of Corporate Social Responsibility on Consumers
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1.1 Research Background and Motivations
Throughout the history of cosmetics (Appendice B), substances of all sort were utilised to produce products to enhance beauty and social lives, however with time certain substances were found to be hazardous, dangerous and poisoness.
The cosmetic industry of the twenty-first century has evolved to adopt a more structured model of regulations in regards to which substances may and may not be utilised in the manufacturing of products. However, it is an industry that has become accountable to consumers and society in terms of how the products are produced (Eg. No testing on animals, chemical free, etc) and the effects of these products on consumers, society and our environment.
Thus, CSR is becoming a vital issue in determining a company's performance and how it manages its economic, social and environmental impacts, as well as its contribution to society.
CSR can be best explained as business practices or strategies that has the aim of satisfying the financial interests of organisations while positively impacting society (Foran et al., 2005). Though, CSR may involve certain investments for an organisation, it can also provide a source of opportunity and may; in certain circumstances; lead to building and sustaining competitive advantage.
Many research on CSR has focused on the organisational business side and few have focused on the influence of CSR on consumers. However, consumers are essential to the success of CSR and understanding their attitudes towards CSR can enable companies to determine if their CSR business strategies are efficient, and the extent to which consumers are affected by these. Companies have also realised that consumers are making consumption decisions based on their personal ethical values, and according to Tallontire et al. (2001) ethics in consumption choices has become a growing phenomenon that underpins ethical trade activities.
Many studies by scholars and practitioners when identifying and assessing the components of CSR, often refer to Archie B. Carroll's CSR pyramid (Ibrahim & Parsa, 2005; Schwartz & Carroll, 2003). However, there is very limited research in regards to the concept of CSR relating to that of consumer behaviour, and more precisely taking into account factors such as consumers attitudes and ethical beliefs.
Therefore, the purpose of this study is to provide a better understanding of the concept and role of CSR, and explore how it is applied by the main local players within the CCI in France. The study focuses on examining the extent to which CSR affects consumers' attitudes, and how their ethical beliefs may influence their attitudes towards CSR.
1.2 Context of the Problem
Defining the problem is one of the most important steps in the research process and enables to indentify the specific marketing decision area that will be clarified by answering some research questions (Koerner 2006; Zikmund 1989).
Growing pressure from governments, NGO's and consumer movements for companies to account for their impact of business operations on society and the environment; has lead more companies to invest in CSR initiatives and in managing more efficiently their SRI.
However the issue arises in understanding whether consumers are actually aware of CSR practices adopted by companies, to which extent do they consider these when making a purchase decision, how are their attitudes affected, and in which manner do their ethical beliefs play a role in their decision making and their perception of CSR.
1.3 Research Aims and Objectives
The aim of this dissertation is to investigate the role of CSR and its' affect on consumers' attitudes and ethical beliefs, within the CCI in France. The study also aims to determine if an association exists between CSR, consumers' attitudes and ethical beliefs, and whether this may have an influence on consumers' purchase behaviour.
Research Objectives provide guidelines in determining which steps must be undertaken in the research and if objectives are achieved the research information is considered sufficient to solve the problem (Hair et al. 2006). The main objectives of this research are the following :
(1) To provide facts about the demographic characteristics of consumers who purchase colour cosmetics, as well as insights into their purchase behaviour,
(2) To provide a better understanding of the role of CSR and examine the different frameworks, approaches to CSR,
(3) To explore to which extent CSR affects consumers' attitudes and whether consumers ethical beliefs plays a role,
(4) To examine if relationships exists between consumers' attitudes, ethical beliefs and Caroll''s four dimensions of CSR,
(5) To determine what are the factors and information sources considered important when judging a company, and;
(6) To determine what are the social issues consumers are most concerned about.
The previous research objectives constitute the basis for establishing the hypotheses of the study in order to measure the effect of CSR on ethical beliefs and consumers' attitudes within the Colour Cosmetics industry in France:
H1. There exists a positive relationship between Ethical beliefs and Awareness of CSR
H2. There exists a positive relationship between Ethical beliefs and Feelings towards companies adopting CSR
H3. There exists a positive relationship between Ethical beliefs and Considering CSR in purchase decision
H4. There exists a positive relationship between Ethical beliefs and Ethical purchase behaviour
H5. There exists a positive relationship between the Affective component of attitudes and Awareness of CSR
H6. There exists a positive relationship between the Affective component of attitudes and Considering CSR in purchase decision
H7. There exists a positive relationship between the Affective component of attitudes and Ethical purchase behaviour
H8. There exists a positive relationship between the Cognitive component of attitudes and Considering CSR in purchase decision
H9. There exists a positive relationship between the Cognitive component of attitudes and Ethical purchase behaviour
The development of these hypothesis will be reviewed in Chapter 3, Section 3.6 of this dissertation.
1.5 Scope and Limitations
This dissertation will cover the concept of CSR and will investigate the relationship between CSR and consumers attitudes and ethical beliefs. The study will also providing a brief overview of the main companies present in the local French market, and the extent to which they adopt CSR policies.
The sample unit is limited to that of French consumers, having the following characteristics : female consumers , above the age of 18 years old and residing in France.
Consideration must be taken that the author has attempted to present references the most frequently cited in the literature reviewed.
The author attempts to make the link between the concept of CSR and consumers attitudes and ethical beliefs, hence for the purpose of this study, the models applied have been limited to that of the CSR Pyramid Model proposed by Carroll (1979) , and the Tricomponent Attitude Model. However, there is very limited research that exists linking these two models, and thus the literature reviewed may be limited in certain areas.
1.6 Organisation of the thesis
The dissertation was divided into six chapters:
- Chapter One, provides the significance of the study, context of the problem, aims and objectives, states the hypotheses, scope and limitations of the study, and the present organisation of the thesis.
- Chapter Two, presents facts and informations issued from the secondary and exploratory research in regards to the CCI, and CSR practices of the main players within the local French market.
- Chapter Three, consists of a review of relevant literature and theoretical models in regards to the concept of CSR, implementing and measuring performance of CSR. It will also provide relevant literature reviewed in regards to linking CSR to consumer attitudes, and thus will also address the theory of attitudes, through the Tricomponent Attitude Model.
- Chapter Four, presents the research philosophy, research methodology and methods adopted for collecting, analysing and discussing the relevant data obtained for the purpose of this study. The design and implementation of the questionnaire survey, and the reliability, validity, limitations and ethics of the research will also be adressed.
- Chapter Five presents research findings in regards to primary data collection, and presents the results regarding the validity of the stated hypotheses.
- Chapter Six, provides the final conclusions of the study conducted, limitations and future recommendations. References, bibliograpgy, appendices, s, graphs and tables follow Chapter Six.
chapter 2 : colour cosmetics industry review
This chapter will define cosmetics in the context of this dissertation and will also present an overview of the CCI in France (section 2.2, and Appendice C), as well as its main players (Section, 2.3 and Appendice D).
CSR practices adopted by the main local players and whether these companies provide a CSR policy will also be addressed.
2.1 Defining Cosmetics
According to the current EU legislation cited in Morganti & Paglialunga (2008), a cosmetic product is ‘any substance or preparation intended to be placed in contact with the various external parts of the human body with a view exclusively or mainly to cleaning them, perfuming them, changing their appearance and/or correcting body odours and/or protecting them or keeping them in good condition'.
The word ‘cosmetic' in greek derives from the word ‘kosmetikos' and the meaning allocated is ‘to make for beauty, especially of the complexion, or beautifying'. The meaning over time has evolved into that of ‘ masking, concealing, cover up or that of camouflaging' . Cosmetics consists of products such as personal care creams, makeup, perfumes, deodorant, shampoos, etc.
The term ‘make-up' is more often used when speaking of colour cosmetics and according to Oumeish (2001) means ‘to use cosmetics and apply them to color and beautify the face, and to other parts of the body.'
This dissertation will be focusing on the Category of Colour Cosmetics, which involves: (1) facial make-up, (2) eye make-up, (3) lip products, and (4) nail products.
2.2 Colour Cosmetics Industry in France
The French Colour Cosmetic dominates the European market and 15,7% of the European market value. It holds the second largest market value in Europe behind that of the United Kingdom. (Euromonitor International, 2009). The local French market is largely dominted by major players such as L'Oreal SA that holds 38,80% of total market shares, followed by Chanel S.A with 13,40% and LVMH Moet Hennessy Louis Vitton S.A with 9,40% of market shares (Datamonitor, 2008). Other players present in the local market include Estee Lauder, Beiersdorf-Nivea Beauté, Clarins S.A, Coty, Yves Rocher, and Shiseido. (Appendice C)
The colour cosmetic market consists of 4 subsectors, that of (1) facial make-up, (2) eye make-up, (3) lip products and (4) nail products.
The facial make-up category dominates the sector with 36,40% of market value, followed by eye make-up with 34,40%, lip make-up with 19,70% and nail make-up with 9,40%. The fastest growing category in 2008 were facial make-up which had a growth of 4% and eye make-up, by 3% (Euromonitor International, 2008 & 2009).
According to Datamonitor report (2008), distribution of products are mainly through Supermarkets/Hypermarkets, with 45,7% and specialised retailers with 39,5% of the market's distribution, and other channels of distribution represent 14.8%.
Many French women are now more inclined to mix premium and mass brands (Euromonitor International, 2009). However with increase awareness of consumers attitudes towards toxic chemicals having negative aspects on health, the premium segment is becoming more popular amongst females who are in search of more safe to use products, and environemntally friendly.
The legal environment also oversees the French industry by adopting strict regulations towards ingredients which are allowed to be utilised in the cosmetic product, or those that may be considered dangerous in regards to health aspects. Examples such as adoption of Directives 93/35/CEE (1993), Directives CEE (2004), European International Nomenclature of Cosmetic Ingredients. Since 2009, the European Union has also put legilsatives in place banning animal testing within the E.U and also sale of any product that has been prior tested on animals (Kumar, 2005).
2.3 Colour Cosmetic Companies and CSR Practices
The following will provide a brief overview of the 3 major colour cosmetic players in France (L'Oreal, Chanel and LVMH), and discuss whether these companies have adopted CSR activities within their business strategy, and will state if a formal (written, printable report of their CSR policy) or informal CSR policy (only available on their corporate website) has been adopted. Other players present in the local market such as Estee Lauder, Beiersdorf-Nivea Beauté, Clarins S.A, Coty, Yves Rocher, and Shiseido, are also presenetd, in Appendice D of this dissertation.
L'Oreal S.A - In France, L'Oreal S.A accounts for 38,80% of total market shares (Datamonitor 2008). It is the world's second largest manufacturer of cosmetics and toiletries. L'Oreal operates through three business divisions: cosmetics, the Body Shop, and dermatology. Its' main colour cosmetic brands are : L'Oreal Paris, Gemey Maybelline Garnier, Lancome and The Body shop.
L'Oreal acquired The Body Shop in March 2006, which enabled to position itself in the ethical cosmetics market, to reinforce this positionment. L'Oreal also acquired a leading french company Sanoflore, which is specialised in organic cosmetics. This strategy enables L'Oreal to develop into the organic and natural cosmetics market (Euromonitor International, 2009).
L'Oreal invests largely in CSR practices, and provides a formal CSR policy which enables to support its' disclosure and transparency to the public in regards to its' business operations. L'Oreal addresses an extensive lists of social and ethical issues such as contributing to the society and community, addressing issues of sustainability, preserving the environment, labour and human rights, actions against animal testing, donating to charities and natural disasters, developing education, supporting medical research, adopting ethical standards throughout the entire company and subsidaires, it's employees and having strict ethical requirements for its' suppliers.
Chanel S.A - was established in 1924 by Coco Chanel, and is owned by the Swiss company Pamerco. It is a privately held company and is not obligated to release any financial results. It is specialised in a wide range of products such as fashion, watches, eye wear, fragrances and beauty products.
In France, Chanel S.A accounts for 13,40% of total market shares in the cosmetics market. It operates in Europe, Asia and USA (Datamonitor 2008), with the highest shares of market value in that of Western Europe (Euromonitor International 2009). Its colour cosmetic products are distributed unders the brands Bourjois and that of Chanel.
In order to improve financial results due to the economic downturn, community projects such as ‘Mobile Art Tour' have been stopped in order to focus investments on other strategies.
However, no information in concerns to CSR practices nor that of any formal CSR policy was publicly available on their corporate website. However, it cannot be assumed that they do not invest in CSR, but may have chosen not to make publicly available their CSR policies.
LVMH Moet Hennessy Louis Vitton S.A - Is an international group of companies with principal activities focused on the production and sale of luxury goods. Its main divisions are : wines and spirits, fashion and leather goods, fragrances and cosmetics, jewelry and selective retailing sectors. LVMH operates about 1,859 stores worldwide (Datamonitor 2008).
In France, LVMH group accounts for 9,40% of total market shares in the colour cosmetics market (Datamonitor 2008). Its' main brands in the colour cosmetic segment include : Christian Dior, Guerlain, , Hard Candy, Benefit Cosmetics, Urban Decay, Fresh, Make Up for Ever and Dior Addict. (Datamonitor, 2009, LVMH Group 2009).
LVMH adopts an informal CSR policy which is publicly available on their corporate website. The company is largely invested in the french community and believes in promoting french culture, art and heritage. It allocates important investments towards community projects, and is involved in many initiatives to promote french cultural heritage.
chapter 3: literature review and theoretical framework
3.1 The Concept of CSR
The section 3.1 will provide the literature review in regards to the background of CSR, its purpose, how CSR is defined, implementing CSR and monitor CSP, as well as the criticism of the concept. It will also focus on presenting the different dimensions of CSR through Carroll's CSR Pyramid Model (1979).
3.1.1 Background of CSR
During the eighteenth century companies took little responsibility for their impact of business operations. According to writings of the Scottish philosopher of the eighteenth century, Adam Smith (1776) many corporations limited their operations according to the rules of pure competition. This gradually evolved and companies started taking full responsibility for their business impact on society, the community and the economy.
Many academics believe that the roots of CSR originated from nineteenth century U.S industrialist, Andrew Carnegie, in his writings from the ‘Gospel of wealth', where he was the first to express publicly his beliefs that that the most fortunate members of society should ensure that money was used to aspire the less fortunate members (Carnegie Corporation New York).
The early twentieth century, saw businesses adopt more responsibility in regards to society and the community which was mainly represented by CP. According to Carroll (1999), and Hopkins (1999) cited in Leal (2007), the discussion about SR of businesses began to become more prominent from the 1930's, with authors like Chester Barnard, J.M Clark, Theodore Kreps and Merick Dodd.
Prior to the 1960's, business ethics was rather left to theologians to discuss issues of fair wages, unfair labor practices, and the morality of capitalism (Lantos, 2001).
From the 1960's, companies were more focusing on generating profits that outweighted largely over moral principles. It was during this era that consumers began to manifest their mecontentment against unethical business behaviour. During the 1960's Milton Friedman, Nobel Prize winner in economics in 1976, raised an issue by stating that the ‘only obligation a business had was to generate profits for its sharehlders'.
It was only during the 1970's, that the concept evolved when CP was supplemented by corporate initiatives and activities, and businesses taking a more responsible attitude towards societal needs. It was considered that companies should not pursue profit without taking into consideration business ethics, acting in a social responsible manner and being a good corporate citizen.
In the 1980's, R. Edward Freeman (in contrast to the views by Milton Friedman), argued on the issue that CSR is a question of managing stakeholders, and that values and ethics are necessarily a part of doing business.
The last decades, growing interest has been more towards environmental issues (Eg. Global warming, climate change, pollution index, etc), and how companies are addressing such issues through adoption of sustainable development.
3.1.2 CSR in France
In France, the concept of CSR surfaced during the late nineteenth century. Early twentieth century, professional organisations as well as commercial undertakings have been adopting texts containing social standards that employers must observe (Segal et al., 2003).
During the 1980s, the concept was mainly issued from the idea to combine economic and social policy, and on the basis of promoting the concept of the ‘corporate citizen'. There was great involvement on the part of undertakings in civic life, such as lobbying to exert an influence on the decisions made by the public authorities or providing sponsorship to support social, cultural and sporting activities (Segal et al. , 2003).
According to Segal et al. (2003), the CSR movement from the United States did not reach France until the early 1990s, however, companies in France referred more to the term ‘corporate citizenship' (in french ‘citoyenneté d'entreprise'), which was more familiar to them, than CSR. Due to cultural differences, some aspects of the CSR concept as it was constructed by Anglo-American background, did not adapt well into the French cultural landscape, such as the idea that all stakeholders should be taken into account, or the fact of a responsibility that merely complements that of companies. This is explained by the fact that the State and the Law are regarded as the only guarantors of a principle of SR that applies to all, whereas initiatives emanating from civil society are perceived as campaigns and suspected of concealing vested interests (Segal et al. ,2003).
CSR, in France is exercised within an increasingly precise legal framework, particularly because the law encourages undertakings to adopt standards of SR.
It is a frequent custom for the people in France, to turn to the public authorities demanding that they ‘face up to their responsibilities and lay down the laws' recognising a new social problem and addressing it, rather than provide laws that define minimal thresholds for companies (Segal et al., 2003).
3.1.3 The Purpose of CSR
With the increasingly pressure received from Governments, NGOs, consumer movements, activists, shareholders, the public and the media has lead companies to account for their social and environmental impacts of their activities. As a result the twenty-first century is seeing CSR emerging as an important area in business strategies.
Advocates of CSR have used four main arguments to justify the reason for CSR : (1) moral obligation of companies in adopting an ethical and responsible behaviour; (2) sustainability in terms of the TBL, (3) license to operate in terms of companies identifying social issues important to stakeholders and taking approrpiate related decisions, and (4) reputation by investing in cause-related marketing campaigns (Porter & Kramer, 2006).
Porter & Kramer (2002), also suggest that CSR practices can provide economic benefits if the social improvement has been related to the company's business. Companies often willingly engage in socially responsible behaviour because it enhances shareholder value by keeping a business on the right side of the law (Martin, 2002). Companies can serve shareholder interests while also serving those of a larger community.
Most CSR practices implemented by firms are largely based on Philanthropy activities, and used as a purpose to promote the the corporate image. It can also contribute to improving the community by developing education, health, provide safe products, preserve the environment, improve employment, and on the long-term can aid in building strong ties with governments, official organisations, partnerships, and build trust within the community.
According to Burke and Logsdon (1996, p. 496), ‘CSR (policy, program or process) is strategic when it yields substantial business-related benefits to the firm, in particular by supporting core business activities and thus contributing to the firm's effectiveness in accomplishing its mission.'
3.1.4 Defining CSR
There is no formal universal definition of the concept of CSR. Many believe it concerns what corporations give back to society in return from the benefits they have gained, others tend to believe it is based on how ethically corporations behave, towards society and the environment, and in regards to its stakeholders. Often, CSR is also referred to as the ‘triple bottom line' in which it refers to the corporation's financial, social, and environmental performance in conducting its business.
There have been numerous attempts by organisations, institutions, corporate executives and academics to clarify the constructs and concept of CSR (Dahlsrud, 2008, Lantos 2001, Tywoniak & Bartlett, 2008, Van Marrewijk 2003, 2005), resulting in many definitions towards a more humane, more ethical and transparent way of doing business (Van Marrewijk 2003, 2005).
Prior research by Dahlsrud (2008), reveal that there is not ‘one' standard definition of CSR but that a variety of definitions exist. In his research he anyalysed 37 definitions of CSR, and results showed that, even though most definitions are different from one another textually, they are nevertheless constantly referring to the the same five dimensions: (1) environmental, (2) social, (3) economic, (4) stakeholder and (5) voluntariness.
Davis (1975) describes that SR implies that companies should not only make a decision based on their own interest but are also obliged to take actions that protect and enhance society's interests. According to Sethi (1975) the concept of CSR has different meanings according to time and the cultural context and is more based on the corporate actions that enable to determine whether corporations are meeting societal expectations.
According to Carroll & Schwartz (2003), definitions of CSR fall into two general schools of thought, those that argue that business is obligated only to maximise profits while respecting the legal requirements and minimal ethical constraints (Friedman 1970, Levitt, 1958), and those that believe corporations are accountable on how they conduct their business toward society.
CSR is concerned with businesses being morally accountable to its stakeholders, and thus that values are necessarily and explicitly a part of doing business (Freeman, et al. ,2004), and that it is a voluntary commitment by companies to exceed the explicit and implicit obligations imposed on them by society's expectations of conventional corporate behavior (Falck & Heblich (2007)
Others such as Davies (1960), Andrews (1973), McWilliams and Siegel (2001), Kotler and Lee (2005) refer to CSR as being an obligation to improve community well-being through transparent business practices, contribution of corporate resources, corporate decision making and actions extending beyond the firm's direct economic or technical interest, and that which is required by law. In this context, CSR can therefore be seen as the voluntary assumption of responsabilities beyond that of just economic or legal (McGuire, 1963).
Authoritive institutions have also attempted to define CSR. The World Business Council for Sustainable Development (2000, p.3) defined CSR as : ‘... the continuing commitment by business to contribute to economic development while improving the quality of life of the workforce and their families as well as of the community and society at large'. The European Trade Union (2004, p.1), on the other hand, defines CSR as ‘companies integrating social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis'.
And on its' part, the Organisation for Economic Co-operation and Develpment (OECD) on their website, describe CSR as : ‘The most important contribution of business is the conduct of business itself, and its core responsibility is to yield competitive returns to shareholders by identifying and developing promising investment opportunities - and must comply with legal requirements and, respond to societal expectations not written down in law books.'
184.108.40.206 Carroll's CSR Pyramid Model
For the purpose of this dissertation, the author has chosen to focus on Carroll's Pyramid Model ( 3.1) in order to identify the main dimensions of CSR. Carroll's Pyramid Model was selected on the basis that it seems to be the framework the most frequently referred to in the literature reviewed, in terms of managing social issues.
In Carroll (1979, 1991 & 2000), Carroll & Schwartz (2003) CSR, is defined as:
‘The social responsibility of business encompasses the economic, legal, ethical, and discretionary (philanthropic) expectations that society has of organisations at a given point in time.'
The following sections will provide an overview of each individual dimensions of Carroll's CSR Pyramid Model.
220.127.116.11.1 Economic Responsibilities
The environment of global trade is becoming a more competitive arena and faces economic challenges (Kehoe (1998), cited in Carroll, 2000, p.35), and thus, the economic responsibility of business remains very important (Carroll, 2000).
Companies' business operations contribute largely to the economic unit in society. It has the responsibility to produce goods and services that society wants and to sell them at a profit, and all other business roles are predicated on this major assumption (Carroll, 1979).
Economic responsibilities is characterised by companies willingness to perform in a manner consistent with maximising earnings per share, must be committed to being as profitable as possible, must maintain a high level of operating efficiency and competitive positioning and that the success of the company be defined as being consistently profitable (Carroll, 1991).
18.104.22.168.2 Legal Responsibilities
Society expects business to achieve its economic operations within the framework of legal requirements. It goes on the assumption that economic responsibilities and legal responsibilities coexist and must be met simultaneously, as they represent fundamental precepts of the free enterprise system (Carroll, 1979, 1991).
According to Carroll (1991), legal responsibilities can be viewed as "codified ethics" in the sense that they integrate the basic notions of fair operations as established by lawmakers, and are characterised by companies performing in a manner that is expected of them by government and law, and thus, that the success of the company is defined as one that fulfills its legal obligations, and to provide goods and services that meet legal requirements (Carroll, 1991).
Accordoing to Carroll (1991), the Economic and the legal responsibilities are the most important components in the Pyramid Model. However, this may cause confusion when applying the framework as both components are located at the very bottom of the Pyramid. (Carroll & Schwartz, 2003)
22.214.171.124.3 Ethical Responsibilities
In addition to fulfilling their economic and legal responsibilities, businesses are expected to fulfill ethical responsibilities as well (Carroll 1979). ‘Ethics', are the driving forces behind every creation of laws or regulation, there are not necessarily codified into laws but are expected by society (Carroll, 1970), and concerns standards, norms, or expectations that reflect a concern for what consumers, employees, shareholders, and the community regard as fair, just, or in keeping with the respect or protection of stakeholders' moral rights (Carroll, 1991).
Carroll (1991), describes that the main components of ethical responsibilities of companies are to perform in a manner consistent with expectations of societal norms mores and ethical norms; to recognise and respect new or evolving ethical/moral norms adopted by society; to prevent ethical norms from being compromised in order to achieve corporate goals; that good citizenship be defined on the basis of moral and ethical behaviour and should recognise that corporate integrity and ethical behaviour go beyond laws and regulations.
126.96.36.199.4 Philanthropic Responsibilities
Philanthropy concerns corporate actions that are in response to society's expectation of companies acting as good corporate citizens and includes engaging in acts or programs to promote human welfare or goodwill (Carroll, 1991). Philanthropy responsibility differs from that of ethical responsibility in the sense that it is not expected with the same degree of moral force (Carroll, 2000).
The components of philanthropic responsibilities, as described by Carroll (1991), requires ‘companies to perform in a manner consistent with the philanthropic and charitable expectations of society; to assist the fine and performing arts; to encourage managers and employees participate in voluntary and charitable activities within their local communities; to provide assistance to private and public educational institutions, to assist voluntarily those projects that enhance a community's quality of life.'
Philanthropic investments can improve a company's competiveness by contributing to expanding the local market and helping to reduce corruption in the local business environment. Using philanthropy to enhance competitive context aligns social and economic goals and can contribute to improving company's long-term business prospects. Philanthropic campagins can be used to increase company visibility and improve employee morale as to create social impact (Porter & Kramer, 2002).
According to Kanter (1999), Corporate Philantropy provides opportunity to build political capital, to influence regulations, to reshape public institutions on which the company depends, to augment a public image as a leader, or to build closer relationships with government officials.
3.1.5 Implementing CSR and Measuring CSP
188.8.131.52 Implementing CSR
The literature often refers to the ‘Triple Botton Line' approach in implementing CSR (Elkington, 1997), cited in Maccarrone (2009) which requires businesses to take into account three main dimensions when managing CSR activities :
(1) ‘The social dimension, which includes the relationships with all the stakeholders
(2) The environmental dimension, which deals with all the impacts of a firm activity on the environment, in terms of pollution/consumption of natural resources;
(3) The economic dimension , in order to meet the shareholders' expectations.
Other guidelines, such as that proposed by Sethi's three stage schema, described in Goodwill (2007), also provides another framework useful for companies to determine what areas of CSR needs to be developed. The framework suggests three areas which companies should concentrate : (1) Social Obligation, (2) Social Responsibility, and (3) Responsiveness. This goes on the principle that companies' should adopt an ethical and social responsible behaviour, by respecting legal constraints, and going beyond that required by law and economic considerations, and should deal with social issues.
Others, such as Davis (1975), proposed a ‘ A Social Responsibility Model', offering five major guidelines for the conduct of business, and that these guidelines apply to a greater or lesser degree according to individual circumstances : (1) ‘Social Responsibility and Power, (2) An Open System,
(3) Calculation of Social Costs, (4) The User Pays and (5) Social Responsibilities as Citizens'. The first four guidelines are concerned with social costs directly caused by company's operations, whereas, the fifth guideline concerns business operations that are indirectly impacting society.
Challen (1974), proposed a conceptual framework where corporations should first define their responsibilities in global terms. The framework suggested had three main areas : (1) Ethics in planning for CSR, (2) Awareness of issues within their industry, and (3) Relations with stakeholders. He also proposes that this should be done within the corporation's specialised field of knowledge, skill geographical concern and financial capacityand that the Board should define the direction.
Today, one of the main reference in implementation guidelines of CSR which is formally recognised by governements and adopted by many mutlinational companies, is that offered by OECD. The OECD guidelines were initiated in 1976, and provide guidance on how to ensure that business operations are in harmony with government policies and the societies in which they operate, to help improve the foreign investment climate and to enhance the contribution to sustainable development by multinational enterprises (OECD, 2008).
The Guidelines have been developed and adhered to by all 30 OECD governments, in close consultation with representatives of business and employee organisations and with NGO support. There are also 11 non-OECD countries (Hohnen, 2008). In General, the OECD guidelines provide principles and standards of good practice consistent with applicable laws. However, observance of the Guidelines by enterprises is voluntary and not legally enforceable (OECD, 2008).
The main guidelines proposed by OECD, are stated in their report OECD Guidelines for MNE. The are nine main areas that the guideline cover : (1) General Policies (2) Disclosure, (3) Employment and Industrial Relations (4) Environment (5) Combatting Bribery (6) Consumer Interests (7) Science and Technology (8) Competition and (9) Taxation .
Other guidelines and principles that are non-binding have also been proposed by other organisations or institutions for example such as the ILO, Amnesty International, the Global Sullivan Principles, The Bellagio Principles, the United Nation's Global Impact Principles, the Caux Round Table Principles, the Ceres Principles, the Clarkson Principles, The European Corporate Sustainability Framework, the AA1000 standards, or the Social Accountability SA8000.
184.108.40.206 Measuring CSP
There are diverse tools and measuring instruments that can enable companies to measure the progress of their CSP, the ones which tend to have recognition are that of the Wood Model, the Global Reporting Initiative (GRI), the FTSE4GOOD Index, and the Sethi CSR Monitor :
The Wood Model, was proposed by Donna Wood in her paper ‘CSR Revisited' (Wood, 1991). The CSP Model she proposed is based on three levels :
(1) Principles of CSR, which pertains to a firm's obligations towards society and specifies what is expected of them.
(2) Process of Corporate Social Responsiveness, which refers to the capacity of a firm to respond to social pressures and adapt to its business environment.
(3) Outcomes of Corporate Behaviour, which mainly refers to measuring CSR, and making sure that all stakeholders are taken into consideration in assessing performance.
The Wood Model provides a method for companies to assess their level of engagement in CSR practices and pratical guidelines ensuring CSR measures are properly put in place.
The Global Reporting Initiative was formallly put in place by CERES (Baker, 2009). The GRI has developed a set of guidelines to be used by companies for their annual reporting, known as G3 Reporting guidelines. These guidelinesprovide a reporting framework for disclosure of environmental, social and economic performance of companies. (Global Reporting Initiative, 2009). It enables the industry to have a common framework of reporting, companies to facilitate their transparency and accountability, and provides a better understanding of disclosed information for all stakeholders.
Another recognised instrument for monitoring and measuring CSP was launched by an independant company, FTSE, which specialises in providing market information, creating and managing indices, and gathering data. In 2001, FTSE launched the FTSE4GOOD index.
The FTSE4GOOD is based on a series of benchmark and tradable indices for responsible investors and covers over 23 markets and over 2,000 potential constituents. The index was initially designed to identify companies that meet recognised responsible investment criteria (FTSE4GOOD, 2008). For companies to be indexed, they must demonstrate that they are taking continuous necessary actions in terms of : (1) environmental management, (2) climate change mitigation and adaptation, (3) countering bribery, (4) upholding human and labour rights, and (5) supply chain labour standards. Companies who do not meet the standards are withdrawn from the FTSE4GOOD index series list. This system enables to ensure that companies are committed to their SR, and are taking continuous actions and investments to uphold the standards requested in terms of social and environmental impacts.
ICCA has also developed a framework to enable to evaluate CSR sustainability reports, this framework is the Sethi CSR Monitor. It was initially developed by Prakash Sethi (1975), and is a product licensed of the ICCA. It offers in depth analysis of companies CSR reports and content and adopts measuring tools in order to evaluate the level of reporting and in comparison to other companies and to the overall industry reporting trends. It enables to identify the areas of reporting but also analysis of the content helps to determine to what extent companies consider each area important. It enables to provide a global view of a particular industry's reporting trends by comparing companies' reports across diverse industries, and the regions in which they operate. The main advantage of such a framework is that companies with a stong committment towards CSR can be indentified, and regularly monitored.
All these four instruments preceedingly described tend to refer to the same major points in evaluating CSP : that of companies' level of CSR reporting, level of transparency and disclosure, level of committment in areas of CSR initiatives, and their management and engagement in regards to stakeholders.
3.1.6 Criticism of the Principles of CSR
The concept of CSR continues to be constant debate, with differing views of those who argue that the role of CSR is irrelavant to business but is rather a responsibility in managing stakeholders (Freeman and Liedtka, 1991), and those who consider that the only obligation business has is to maximise profits (Friedman, 1962; Friedman, 1970), in contrast to those who believe that CSR used in the appropriate context can play a major role in business (Kotler & Lee, 2005).
Adam Smith contributed in providing a framework for modern business and its relationship to society through his writings ‘The Wealth of Nations' (Lantos (2001), and was one of the first to criticise the concept of CSR. Smith (1776) believed in the concept of free-market captilism and rejected the concept of CSR believing that companies who are involved in social actions cannot achieve success within the marketplace. He argued that that capitalism, by focusing on gain and efficiency, contributes to greater wealth than any other economic system.
Others such as Levitt (1958), state that CSR only emerged from a defensive manoeuvre by corporations against attacks by politicians and interest groups of society, and argued that ‘Government's job is not business, and business's job is not government'.
Friedman (1970) supported the view by Levitt and added that CSR, is a ‘fundamentally subversive doctrine' and that ‘there is only one social responsibility of business is to increase its profits'. Friedman's argument is based on the distinction between the ‘person as an individual' and the ‘the person as a corporate executive'. He argues that ‘corporate executives' represent the company, and in that respect their only responsibility is to generate profits for the company and should not take into consideration investing in social issues that could amount to decreasing profits or business performance (Friedman (1970), Porter & Kramer , 2002: 30).
Others, such as Freeman and Liedtka (1991), also support Friedman's view and argue that the idea of CSR should be abandonned, and be replaced by ‘Stakeholder theory'. They argue that ‘Stakeholders have a moral claim on the company's action and operations that derives from the company's potential to either provide benefits or to harm them.
Business ethics is seen by many to be a very fundamental factor within the main constructs of CSR, however, Robert (2001), cited in Aasland (2004) claims that ‘business ethics, together with corporate management, environmental management and CSR, is no ethics at all but rather a strategy of being seen to be ethical, which is the obverse of being responsible and argues that the real ethical challenge for corporations is to spend greater efforts on learning and anticipating the consequences of their actions for others.'
3.2 CSR and Consumers
The following section 3.2 will provide literature reviewed in regards to consumers' ethical beliefs, attitudes towards CSR, and the concept of Attitude. The TriComponent Attitude Model will also be discussed.
3.2.1 Consumers' Ethical Beliefs
Though there has been much research in the past in regards to CSR and ethics in business practices, Carrigan & Attalla (2001), Vitell et al., (2001) state that there still remains limited research that has been undertaken in regards to the ethical behaviour from the consumer side.
In order to understand consumers' ethical beliefs, it is important to understand the meaning of ‘Ethics'. According to Cooper & Schindler (2006), ‘ethics are norms or standards of behaviour that guide moral choices about our behaviour and our relationships with others'. Ethics in consumers' attitudes refer to their personal beliefs about what they believe to be right or wrong, good or bad, acceptable or not (Kurland, 1995).
The principle of ethics in consumerism can be viewed as consumers' consumption decisions based on ethical values, such as environmentally friendly products and production methods, labour standards (wage rates and working conditions), and human rights (Tallontire et al., 2001). Devinney et al. (2006) also refers to ethical consumerism as ‘Consumer Social Responsibility' and describes it as ‘the conscious and deliberate choice of consumers in making certain consumption choices based on personal and moral beliefs'.
Bendell (1998) cited in Tallontire et al. (2001) suggests that ethical consumerism has a ‘‘citizen'' as well as consumerist element, and can be respresented by three major elements that of (1) positive ethical behaviour that can be translated through consumers buying products with ethical characteristics, (2) negative ethical purchase behaviour, that can be seen as consumers chosing to not buy certains products with unethical characteristics, and (3) consumer action, in regards to consumers taking direct action such as advising others not to buy the product, speaking negatively about the product, engaging in consumer movements, lobbying.
According to Vitell, et al. (2001), Koerner (2006) consumers ethical decision making-process is based on consumers perception of an ethical problem in a situation which is followed by the perception of various possible alternatives based on consumers' deontological and/or teleological evaluations in order to resolve the problem.
Forsyth (1980) also supports this and argues that ‘individual variations in approaches to moral judgment and behavior may be conceptualized in terms of two basic dimensions: idealism and relativism'. Idealism behaviour assumes that individuals should avoid harming others, while relativism assumes harm may sometimes be necessary to produce good.
3.2.2 Attitudes towards CSR
According to Klein & Dawar (2004), CSR has become an important factor in consumer behaviour, and this beyond economic considerations such as product attributes. Consumers have become more conscious of social issues and are increasingly turning towards companies to account for the impact of their business operations.
In today's society, consumers are becoming more aware of consumption related issues, such as animal welfare, human rights/conditions, fair trade, and sustainability (Tallontire et al., 2001), and their purchase behaviour may be influenced by their attitudes and beliefs towards CSR, their personal support for CSR issues, and whether the company takes action to such issues in the CSR initiatives (Sen & Bhattacharya, 2001).
Past studies have investigated how consumers perceive and respond to various CSR initiatives, and findings of past research often relate to attributions developed by consumers about motives of the corporation to invest in CSR and whether these attributions exert a positive or negative influence on attitudes toward the corporation (Lee et al., 2009). However, there has been limited research in regards to whether consumers are aware of CSR initiatives (Maignan, 2001; Mohr et al., 2001 cited in Dolnicar. & Pomering, 2009).
Companies may gain benefit from their CSR activities by influencing consumers in regards to developing positive attitudes towards product and brand evaluations, brand choice, and brand recommendations (Klein & Dawar, 2004).
A socially responsible corporate image association involves the creation of consumer perceptions of how a company is contributing to society (Keller, 1998; cited in Fan, 2005) and may be formed on attributes such as to whether a company is good or bad, is well known, reliable, trustworthy, reputable and believable. DaSilva & Alwi (2006) refers to corporate association as being consumers' cognition and affect evaluations towards a particular corporate brand/company.
Schuler & Cording (2004) cited in Sen & Bhattarcharya (2001), state that information is a key element in consumers' ethical decision making and argue that it may also contribute to creating a stronger relationship between the company and its' consumers. Consumers may learn about a company's values and business ethics through appropriate communication of CSR information, which may also enable to yield postive attitudes towards the company (Lee et al., 2009), influence their support in the companies and effect their purchase behaviour (Webster, 1975).
The elements of CSR are complexe and are not necessarily easily assessed by consumers before making a purchase decision. In order for consumers to assess CSR performance of a company they rely on credible information by the company or trustworthy third parties (Schrader et al., 2006).
However, many companies do not neccessarily communicate information efficiently to consumers, and may limit their channels of communication of CSR activities to only providing a formal/non formal CSR policy avalaible publicly on their corporate website or through other recognised institutions. Dolnicar. & Pomering (2009) argue that consumers are influenced by a company's CSR if they are aware of them, thus companies should ensure that they chose strategically the appropriate channels of communication if they are to benefit from their CSR activities.
Consumer's attitudes tend to be favourable towards a company's actions when the outcome of these actions are positive. Consumers that have negative attitudes towards socially irresponsible companies will tend to avoid purchasing their products ( Levitt, 1965 cited in Fan, 2005). However, Carrigan & Attalla (2001) argue that even though consumers may wish to support ethical companies, and punish unethical ones, in most cases attributes of a product such as price, quality and value outweigh ethical criterias in the consumer purchase decision.
Consumers may form positive attitudes also where a company's values are closely related to their own personal values, (Katz, 1960), and may consider ethics in their purchase decision on the basis that ethical issues have become an important part of their self-identity (Shaw & Shui, 2003).
In order for companies to benefit from their CSR initiatives, it has become essential to understand how CSR affects consumers' attitudes and in which manner their ethical beliefs plays a role.
220.127.116.11 Defining Attitudes
Consumers may be influenced by external and/or internal factors before making their purchase decision. Such factors can be seen through the Model of Consumer Decision Making ( 3.2). The psychological field within this model represents the internal influences that may affect consumers' decision-making process, ‘Attitudes' is one of these influential factors.
Attitude Research has been largely used to examine what drives consumers' behaviours and is frequently undertaken to study a wide range of strategic marketing questions (Schiffman & Kanuk, 2004). The attitude construct occupies a central role in theories and research regarding the understanding of consumer behaviour (Ajzen, 2008).
Attitude can be seen as the predisposition of an individual to evaluate some symbol or object or aspect of his world in a favourable or unfavourable manner (Katz, 1960) and has a motivational quality that can influence a consumer toward a particular behaviour or repel the consumer away from a particular behaviour (Peter et al., 1999 ; Schiffman & Kanuk, 2004).
Although most formal definitions may vary, the agreed definition by many theorist is that ‘attitude is the tendency to respond to an object with some degree of favorableness or unfavorableness (Eagly & Chaiken, 1993; Fishbein & Ajzen, 1975; Osgood, Suci, & Tannenbaum, 1957; Petty & Cacioppo, 1986; cited in Ajzen, 2008). It is the evaluative reaction to the attitude object that is considered to be at the core of a person's attitude (Ajzen, 2008).
Attitude formation enables consumers to make a decision by providing ways to evaluate alternatives based on each products' attributes and benefits, and respresents one of the most important variables in consumer behaviour.
There are three main models that enable to provide an understanding of the structure and composition of an attitude : the tricomponent attitude model, multi-attribute attitude models, and attitude-toward-the-ad models.
However, for the purpose of this dissertation, the following section will be limited to presenting only the Tricomponent Attitude Model.
18.104.22.168 The TriComponent Attitude Model
The tricomponent view has largely dominated most marketing thinking about attitude structure, formation and change. (Day 1973 cited in Derbaix & Vanden Abeele, 1985) The Tricomponent Attitude Model consists of three major components : a cognitive component, an affective component and a conative (behavioural) component ( 3.3).
Wolman (1973) defines cognition as a general term for any process which allows an individual to know and be aware and may include factors such as perceiving, reasoning, conceiving, or judging of an object (cited in Derbaix & Vanden Abeele, 1985). The cognitive component of attitude can be seen as a person's beliefs, perceptions, and knowledge about an object and its attributes (Schiffman & Kanuk (2004). According to Bettman (1979) cited in Derbaix & Vanden Abeele (1985) the cognitive component studies phenomena such as the search and acquisition of information, its analysis and encoding, its storage, structure and transformation in memory, its retrieval or reprocessing from memory and its use for control of behavior.
The more information a consumer has about a product/service the more likely an attitude will be formed upon it. Consumers that tend to have a high need for cognition are more likely to form positive attitudes in response to products/services that provide more relative information. On the other hand, consumers who are relatively low in need for cognition are more likely to form positive attitudes to products/services on the basis of brand personality.
The knowledge and resulting perceptions commonly take the form of beliefs, where the consumer believes that the attitude object possesses various attributes and that specific behaviour will lead to specific outcomes (Schiffman & Kanuk, 2004).
The affective component focuses on consumers' emotions or feelings that something may evoke, and more dircetly involves the consumer's feelings and emotions in respect to a given object. These are evaluative in nature, the affective component captures an individual's overall assessment of the attitude object (Schiffman & Kanuk, 2004), in terms of some kind of rating of favourableness.
Affective component is a complex reaction, consisting of a physiological change from the homeostatic state, subjectively experienced as feeling and manifested in bodily changes which are preparatory to overt action. (Wolman, 1973 cited in Derbaix & Vanden Abeele, 1985).
According to Schiffman & Kanuk (2004), affect-laden experiences may also arise as emotionally charges states such as for example happiness, sadness, anger, guilt, surprise. Such emotional states may enhance or amplify positive or negative experiences and that recall of such experiences may impact what comes to mind and how the individual acts.
Conative or Behavioural Component
In marketing and consumer behaviour, the conative or behavioural component is frequently treated as an expression of a consumer's intention to buy. Derbaix & Vanden Abeele (1985) refer to conation as a person's intended or actual behavioural response to an object, and the aspect of personality characterised by conscious, willing strong and purposive action.
The conative or behavioural component refers to consumers' tendency or disposition to act in certain ways toward the attitude object, however what consumers' intend and their actions may be quite different. Buyer intention scales are useful in assessing the likelihood of a consumer purchasing a product or behaving in a certain way (Schiffman & Kanuk, 2004).
3.3 The Theoretical Framework
This study aims to determine the extent to which CSR affects consumers' attitudes, and how their ethical beliefs plays a role in influencing attitudes towards CSR. The CSR Pyramid developed by Carroll (1979, 1991 & 2000) is the model the most cited amongst scholars and academic literature in concerns to determining the main components of CSR. The model presents CSR as having four major components, that of ‘Economic Responsibilities, Legal Responsibilities, Ethical Responsibilities and Philanthropic Responsibilities. Though, the literature reviewed offers many differing frameworks/definitions for CSR, for the purpose of this dissertation the model proposed by Carroll (1979, 1991 & 2000) provides a more appropriate framework when examining consumer attitudes toawards each component.
The use of the Tricomponent Attitude Model will provide the the theoretical framework for determining consumers' attitudes towards CSR practices (Schiffman & Kanuk, 2004, p. 258). The Tricomponent Attitude Model consists of three main components that of cognition, affect, and conation. It has often been argued in literature that the cognition and affect components may appear simultaneously together when an attitude is formed, and the conation component is the intended behaviour that the attitude will induce.
The three elements of ethical consumerism proposed by Bellen (1998) cited in Tallontire et al. (2001 : 7), will also be examined in regards to determining the category of ethical consumerism. Consumers' ethical beliefs in terms of idealism and relativism levels will be examined by applying two questions from the EPQ proposed in the study by Forsyth (1980). The deontologic and teleologic philosophy of respondents will also be examined in order to investigate how consumers take into consideration their personal values when making a purchase decision.
3.4 Hypotheses Development
The dissertation will attempt to bring out facts in order to determine the validity of the following hypotheses in regards to consumers ethical beliefs and attitudes towards the principles of CSR.
3.4.1 Ethical Beliefs and CSR
‘Ethical' attitudes of consumers reflect individuals' personal beliefs about what they believe is right and wrong, what is acceptable and what is not (Kurland, 1995).
According to Vitell, et al. (2001), Koerner (2006) consumers' deontological and/or teleological evaluations of alternatives play a role in order to resolve an issue. The deontologic evaluation involves consumers' comparison of the various perceived alternatives with a set of established deontologic norms that represent the consumers' personal values and beliefs. Whereas, the teleological evaluation refers to consumers' assessing how much good versus bad will result from the decision. The function of both evaluations are considered to form the consumers' ethical judgment towards the given problem/issue.
Moral judgement and behaviour of consumers may also be conceptualised in two dimensions, that of idealism that refer to individuals that believe we should avoid harming others, and that of relativism, which assumes that harm may sometimes be necessary for good to be achieved (Forsyth, 1980). Individuals with high levels of idealism tend to more strongly endorse items that reflect a fundamental concern for the welfare of others, whereas those who have a strong level of relativism tend to espouse a personal moral philosophy based on rejection of moral universals (Forsyth, 1980). Individuals who are both highly relativistic and highly idealistic feel that people should strive to produce the best consequences possible, but that moral rules cannot be applied across all situations.
Katz (1960), states that an individual's attitude is based on value-expressive functions, that provides positive expression to values that are the most related to the self-identity or self image. According to Shaw & Shui, (2003) ethical consumers may tend to make ethical consumption choices because ethical issues have become an important part of their self-identity.
Therefore, the hypotheses for consumers' Ethical beliefs and CSR are :
H1. There exists a positive relationship between Ethical beliefs and Awareness of CSR
H2. There exists a positive relationship between Ethical beliefs and Feelings towards companies adopting CSR
H3. There exists a positive relationship between Ethical beliefs and Considering CSR in purchase decision
H4. There exists a positive relationship between Ethical beliefs and Ethical purchase behaviour
3.4.2 Affective Component and CSR
According to Dolnicar. & Pomering (2009) the research that has been done over the last decade in regards to CSR, have shown results that indicate consumers are influenced by CSR initiatives of businesses if they are aware of them. Information about CSR initiatives helps consumers to learn about the company's value system and improve the corporate image (Lee et al., 2009) .
Klein & Dawar (2004), state that ‘consumers spontaneously construct attributions of blame for faulty or harmful products form the basis of consumers' brand judgments and behavior and explain that ‘in constructing these attributions consumers rely on information, including corporate associations, that goes beyond the product attributes that are normally the basis of evaluation or purchase decisions, which places high importance on CSR issues leading consumers to utilise such information in forming their attributions.'
Whether consumers are aware of CSR initiatives has not been previously studied and researchers such as Maignan (2001); Mohr, Webb, & Harris 2001) cited in Dolnicar. & Pomering (2009), have called for empirical studies to determine the extent to which consumers are actually aware of the CSR records of corporations.
Corporate reputation can be defined in terms of a number of attributes that form a
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