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For the past two decades, corporate social responsibility (CSR) has been the subject of academic scrutiny due to an increase pressure placed on corporations to be more accountable for the well being of society. There are many researches done on CSR and its impact on multinational corporations (MNCs) (Gande, Fortanier & Van Tulder 2009; Kytle & Ruggie 2005; Subrahmanyan 2004) but research on an industry wide level, especially within the Information Technology sector are underrepresented (Cetindamar & Husoy 2007). Furthermore, CSR impact on MNCs competitive advantage within a Singapore context seem to be limited and those researches done are mainly confined within the boundaries of CSR awareness (Ramasamy & Ting 2004) and corporate social reporting (Newson & Deegan 2002; Tsang 1998; Andrew et al. 1989; Foo & Tan 1988). The standard definition of a MNC is a firm that "controls and manages production establishments - plants - in at least two countries" (Caves 1996, p. 1), therefore MNCs have a wide extension of corporate ownership and corporate decision-making power across national borders thus making them more responsive to international obligatory rules and regulations (Jones 1996). For example, the European Union and the North America have codified many policies to govern the activities of MNCs thus creating a certain level of "social obligations" for MNCs to comply (Harris 1999; Vyakarnam 1992). With more stringent policies in place and greater pressure by civil society, CSR is increasingly being accepted as a source of competitive advantage (Branco & Rodrigues 2007). CSR has evolved from being detrimental to a company's profitability to being beneficial to a company in the long run (Porter & Kramer 2002). The proposed research project is an attempt to examine how Hewlett-Packard (HP) could better adopt CSR to strengthen its competitive advantage in areas such as human resources, strategic branding, operations efficiency and profitability.
This chapter examines past CSR studies that are relevant to the proposed research and highlights some gaps in existing literature. It begins with a review of CSR development for the past 60 years and a discussion of a range of competitive advantages derived from effective deployment of CSR initiatives. Some examples of CSR initiatives include fair employment practices, philanthropic activities such as education bursaries as well as integrating heath, safety and environment standards into operations (Semcorp 2008). The relationship among these concepts will also be explored through the constructions of research hypotheses.
Development of CSR
In 1999, at the world Economic Forum in Davos, Mr Kofi Annan, then United Nations Secretary General had told business leaders, "we have to choose between global market driven only by calculations of short-term profit, and one which has a human face." (Mares 2004, p. 99). A decade later, the world faces a multitude of challenges such as economic, food security, financial, climate change and terrorism. On top of these challenges, there is also the challenge of achieving sustainable development, "development that meets the needs of the present without compromising the ability of future generations to meet their own needs" (United Nations General Assembly 1987, p. para 1). Therefore, businesses do not have a choice between short term profit and operating with a human face. Organisations have to act in the interests of stakeholders so as to achieve long-term sustainability (van Marrewijk 2003).
CSR is accepted by many businesses, civil society organisations, labour organisations and governments as the way of giving businesses a "human face" (ICC World Business Organization 2002). Moreover, true CSR helps to mitigate the negative effects of globalization and to maximize its benefits for the betterment of both society and businesses (Uddin, Hassan & Tarique 2008). CSR goes beyond enhancing shareholder value to enhancing value for stakeholders. The humane component imbedded within CSR allows businesses to make commercial decisions that take into account people, society and environmental factors (Elkington 1998). The term "sustainability" is commonly used instead of CSR, with dedicated reports on CSR activities and outcomes published as "sustainability reports" and "citizenship reports" (Weber 2008).
"CSR is a philosophy of conduct and a concept of doing business applied by the business community, companies and individual businessmen for sustainable development and preservation of resources for future generations, based on the following principles: providing quality products and services to consumers; creating decent jobs, investing in development of production and human resources; strict compliance with laws, whether tax, labour, environmental or otherwise; integrity and reciprocity in relationships with all stakeholders; doing business efficiently to create economic value added and improve national competitiveness for the benefit of shareholders and the society; integrating public expectations and generally accepted ethics into business practice; and contributing to the evolution of civil society through partnerships and social development projects" (Russian Managers Association 2006, p. 4).
Neoclassical View of Firm's Behaviour
With greater scrutiny on sustainability in the 21st century, the neoclassical view of doing business can no longer be an effective way in simultaneously balance or improve financial and corporate social performance (Griffin & Mahon 1997). In the neo classical model, modern managers are view as professional managers that do not have ownerships in the business they run. These managers are obligated only to stockholders, the recipients of profit (Friedman 1970). There is an inexistent of external influences or responsibilities nor internal relationship or ethical considerations in this model. However, the firm's behaviours can be regulated by governmental entities through the imposition of "explicit regulatory incentives to counter the problematic market incentives" (Tomer 1999, p. 5) and managers merely "obey the law only if the risk of penalties makes it financially prudent to do so" (Paine 2003, p. 32). Therefore, under neoclassical model, market and regulatory incentives will determined the firm's behavior (Tomer 1999). Figure 1 depicts the neoclassical model of firm's behaviour.
Therefore, the classical view can also be seen as a form of shareholder model, where shareholders are the sole legal claimant on the purpose of the firm (Emiliani 2001). According to Friedman (1970), managers will emasculate free market mechanism if they spend their organisation's resources for the betterment of society and someone must pay for this redistribution of assets. Friedman argues that all organisation's constituencies will lose out because of the following reasons:
Profits and dividends for shareholders will be reduced to pay for socially responsible actions.
Employees will need to have their wages and benefits reduced to pay for social actions.
Consumers lose out because prices of products will need to be raised in order to pay for social actions.
If the higher product prices are rejected by consumers, there will be a decline in sales and business livelihood will be affected.
Figure 1: Neoclassical model of the firm's behaviour (Tomer 1999, p. 5)
The classical view also contends that there are pressures in a competitive market for investment funds to go where they will achieve higher returns. If socially responsible firms cannot pass on its higher cost to consumers, they will need to absorb the higher social cost, and it will generate a lower rate of return. Over time, investment funds will gravitate away from socially responsible firms to those that are not burdened by higher
Social cost, because the later will provide a higher rate of returns (Friedman & Miles 2002; Friedman 1978; Friedman 1962; Friedman 1970; Friedman & Friedman 1980). Stated below is HP's mission statement:
Socio-economic View of Firm's Behaviour
The omission of social responsibilities and ethical considerations in the neoclassical theory has given rise to the development of socioeconomic perspective that could help both society and businesses achieved long term sustainability. Unlike the classical economic perspective where managers focus on short term returns, the socioeconomic view contends that managers should be concerned with maximizing financial returns over the long run (Porter & Kramer 2006; Porter & Kramer 2002). According to one author, "maximizing profits is a company's second priority, not its first. The first is ensuring its survival" (Gellerman 1986, p. 89). To accomplish that, corporations must accept some social obligations and the costs that go with them (Galen 1990).
When businesses address the economic, social and environmental impact of their business, it provides an opportunity for businesses to engage with stakeholders and earn their trust and support. Companies that establish a reputation for their commitment to strong corporate governance, the well-being of people, the environment, and a sustainable future, distinguish themselves in the market as a company of choice for consumers, employees, investors and communities. The theory of 'stakeholders in business' can be traced back to Dr R. Edward Freeman's Strategic Management: A Stakeholder Approach in (1984). "The stakeholders in a corporation are the individuals and constituencies that contribute, either voluntarily or involuntarily, to its wealth-creating capacity and activities, and that are, therefore, its potential beneficiaries and/or risk-bearers" (Post, Preston & Sachs 2002, p. 19).
Stakeholders can be divided into primary and secondary stakeholders. Primary stakeholders include shareholders, employees, customers, business partners, communities, future generations and the natural environment (Carroll & Buchholtz 2008). Secondary stakeholders include local, state and federal governments; regulatory bodies, civic instructions and groups, special interest groups, media, competitors, trade and industry groups (Carroll & Buchholtz 2008). Although primary stakeholders have a direct stake in the firm's operations and success and therefore are influential. An organisation's responsibilities are not limited towards its primary stakeholders. Secondary stakeholders can be "extremely influential as well, especially in affecting reputation and public standing, but their stake in the organisation is more representational of public or special interest than direct" (Sims 2003, p. 74). In addition, secondary stakeholders also act as active gatekeepers in ensuring organisations fulfill their responsibilities towards their primary stakeholders (Sims 2003; Phillips 2003). Therefore, strong relationships will need to be established with all of its key stakeholders before a resilient competitive advantage can be build.
CSR trends in the 21st Century
Lastly, in the 21st century, the trend of CSR tends to skew towards eco-economy or natural capitalism (Brown 2006; Hawken, Lovins & Lovins 2000). Natural capitalism is a "framework designed to show businesses how the new century's profits would be drawn from engaging in society and environmentally responsible behaviors. Natural Capitalism outlines how commerce can transform itself by enhancing value through capitalizing on green opportunities" (Swallow 2009, p. 42). The sustainability framework of eco-economy can be traced back to the 1999 publication of the Natural Capitalism by Paul Hawken, Amory and Hunter Lovins (Reinhardt 2000). The authors demonstrated that by redesigning systems of productions and consumption can help organisation achieve high resource productivity capable enough to generate a new economic system. Higher resource productivity efficiency can be achieved through the usage of new technology, shifting to biologically inspired production models, moving to a solution based business model, and reinvesting in natural capital (Swallow 2009; Orsato 2009).
Why CSR/Sustainability is Important to Business
There are four main reasons why CSR/sustainability is important to business. The four main reasons include regulations; community relations; cost and revenue imperatives; societal and moral obligations.
Differences in government regulations and industry conducts varies across countries are numerous and complex. The magnitude of government involvement in economic and environmental regulations could influence the way MNCs conduct their business. Failure to comply with regulations can be costly. Regulatory noncompliance costs can take the form of penalties and fines; potential closure of operations, legal costs, lost productivity due to additional inspections and tarnish corporate reputations. For example, Shell was fine US$300,000 for a January 2006 oil spillage at Martinez refinery (Taugher 2008). It is important to note that Shell was also fine US$19.75 million on 1st December 1989 for spilling more than 400,000 gallons of crude oil at the Martinez refinery in April 1988 (AP 1989).
With greater access to modern technology, the public and nongovernmental organisations (NGOs) have become more conscious of sustainability and the impacts MNCs' business activities have on the environment and the society. Additionally, corporate citizenship "demands that firms should not forget the responsibility to the society such as public health, public safety, and the environment" (Husain et al. 2001, p. 926). Ability to foster good community relations with these key stakeholders can foster loyalty and trust, giving them a legitimate license to conduct business on an ongoing basis. Failure to meet these stakeholders concerns can be damaging to the business in the long run and create a negative impact to corporate reputations, loyalty to the product and the bottom line (Hess, Rogovsky & Dunfee 2002; Griffin & Mahon 1997).
Cost and Revenues Imperatives
Thirdly, sustainability can generate positive returns for the corporation through cost reduction and higher revenues (Auld, Bernstein & Cashore 2009), making a win-win situation for both society and business. Revenues increases because of bigger market share and higher sales, derived indirectly through an "improved brand image or directly e.g., by CSR-driven product or market development" (Weber 2008, p. 249). Additionally, process improvements can also help companies reduce operation costs (Epstein & Roy 2001). Furthermore, if companies practices good corporate citizenships, exposure to regulatory fines will also be reduce, thus reducing cost and further enhanced the bottom-line (Schaltegger & Wagner 2006).
Societal and Moral Obligations
Lastly, there are growing public expectations that firms have contractual obligations to be socially responsible towards society because business as a whole is a subset of society (Donaldson & Werhane 1983). It is the society that permitted firms to perform their productive functions and attained their power status through the usage of both human and natural resources. As a result, there is an implicit social contract between firm and society. This social contract has given the firms legitimate rights to exploit resources in the production process and in return firms need to help maintain and improve the overall welfare of the society (Moir 2001; Carroll 1999). Similarly, Wilson (2000, p. 13) has noted that "to earn and retain social legitimacy, the corporation must define its basic mission in terms of the social purpose it is designed to served rather than as the maximization of profit".
These societal and moral obligations have led to a rise for corporate leaders to include sustainability in the firm's corporate strategy. For example, Anita and Gordon Roddick's company, The Body Shop, recognizes the relationships between society and business and has established a business model based on the concept of sustainability (Roddick 1991). The body shop "sells products and remedies that are made with natural ingredients and that are proven to be good for people and the environment" without "exploiting women or behaving immorally as the conventional beauty business has" (Tomer 1999, p. 112).
Linking Competitive Advantage with CSR
Figure 2 provides an illustration on how firm's internal guiding mechanisms, external context, business context, human and financial resources can help drives CSR initiatives, which can lead to various competitive advantages and eventual tangible benefits (Tan & Chong 2009). The competitive advantage can be split into external intangible benefits and internal intangible benefits. Overtime these competitve advantages will become tangible as they become measurable and directly impact the firm's income statement, such as reduction in operating and human resources cost, which leades to revenue growth and an increase in share prices (Filbeck & Gorman 2004; Fussler, Cramer & Van der Vegt 2004; Bowie 1991; Griffin & Mahon 1997; Teece 1998; Turban & Greening 1997; Preffer 1994; Fombrun & Shanley 1990; Tan & Chong 2009). However, the benefits and competitive adavantages dereived from CSR will not be attainable if firms' leaders failed to embed CSR in the organisation through its vision and mission statement. Corporate leaders must also advocate the the importance of compliancing with industry norms, regulatory requirements and fair employment practices that promote social responsibility (Chhabara 2009; Choy 2007; Epstein 2008).
Internal Guiding Mechanism
As mentioned earlier, the guiding mechanism within the firm's will have a direct impact on its CSR initiatives. These guiding mechanisms incude the company's vision, mission, core values and CSR vision (Tan & Chong 2009).
Figure 2: Linkage Between CSR, Competitive Advantage and Benefits
Source: Model modified from Tan and Chong 2009; Epstein 2008
Vision and mission statements not only express a firm's identity and describe its work but also inform both managers and employees of the firm's direction. Although vision and mission statement are not strategies, but they convey organizational identity and purpose to critical stakeholders both inside and outside the firm (Palazzi & Starcher 1997). The firm can use its mission statement to identify certain core concepts, such as raison d'être; values and beliefs; standard of behaviour; or corporate level aims (Bart & Baetz 1998; Campbell & Yeung 1991; Ireland & Hitt 1992). All employees are supposed to internalize core ideals and call upon them to guide their decisions and actions, this form of behaviour must be advocated by leaders of the corporation (Ireland & Hitt 1992). HP's mission statement was first written by co founders Bill Hewlett and Dave Packard in 1957, ever since, it has become an integral part of HP's standard of business conduct Stated below is HP's mission statement:
The formulation and implementation of CSR initiatives will be affected by the global and local external context. Corporations will need to follow a minimum standard of sustainability stipulated by governmental regulatory agencies. Some examples of regulatory regulations include non discrimination laws, regulations pertaining to working conditions, hazardous and waste disposal regulations, labour laws, and pollution standards (Kytle & Ruggie 2005; Burke & Logsdon 1996). Regulatory requirements vary across different regions, with a higher form of conformity requirements felt within the European Union (Mercado, Welford & Prescott 2001). Firms can meet these regulatory requirements through the development of a comprehensive sustainability plan.
Additionally, child employment and minimum wage standards are issues that have tainted the reputation of many internationally well-known companies. For example, Nike's 1990s child labor scandals that involved child labor in Pakistan, low wages in Indonesia as well as poor working conditions in Vietnam and China has tarnished Nike's worldwide reputation (Locke 2003; Locke, Qin & Brause 2007). Because of these particular incidents, Nike had become the target of anti-sweatshop and anti globalization movements. To counteract social discontent, Nike has implemented a social audit process to implement an international code of conduct for its suppliers to follow, requiring them to abide to basic labour and health/environmental standards (Locke 2003).
The marketplace for the firm's products and services will also influence the firm's sustainability strategy. Studies conducted in China and Mexico has indicated that corporations that sell its products and services in countries with strong culture of sustainability performance outperformed their rivals in terms of environmental performance (Christmann & Taylor 2001; Wisner & Epstein 2005). Therefore, with deviations among marketplace and governmental regulations, firms need to decide whether it wants to maintain a customized or standardized sustainability strategy across regions.
The characteristics of products and customers as well as the industry sector of the business can also influence the firm's sustainability strategies. Although HP operates within the Information Technology sector, it is a highly diversified company that also operates within the manufacturing, consumer products, electronics and service sectors. HP is the biggest personal computers manufacturer in the world, an industry that has huge impact on the environment in terms of "consumption of natural resources, emissions, and health risk of their products or services compared to companies operating in other industries" (Epstein 2008, p. 49). Therefore, companies that operate within the manufacturing and electronics sector will focus more on environmental and health issues in its CSR programmes because electronic products contain several hundreds or thousands of heavy metals and hazardous chemicals (Schipper & de Hann 2005). Workers' health is at stake because they are exposed to these dangerous chemicals at the production phase. Furthermore, a study conducted in 1994 has indicated that workers in the electronic manufacturing industry are exposed to higher toxic components than workers working in the chemical industry (LaDou 1994).
On the environmental front, environmental rating agency Greenpeace has extremely divergent opinions about HP despite being ranked highest on the Silicon Valley Toxics Campaign index on environmental sustainability (Schipper & de Hann 2005). This is because Greenpeace "claimed that test carried out in late 2003 showed that the amount of brominated flame retardants (BFRs) contained in HP computers is much higher than in other computers tested. TBBPA, a kind of BFR, made up twenty percent of all plastic weight in the HP Pavilion A250 desktop model, a material that is used worldwide in HP computer" (Schipper & de Hann 2005, p. 88). However, a recent ranking conducted by Greenpeace International (2010) has indicated that HP has made slight improvement in its ranking, climbing 3 places from the fourteen position to the eleven position due to its clear support for global emissions reduction and improved reporting compliance with the latest Energy Star standard for energy efficiency of products. However the recent report has also indicated that HP should also placed high emphasis on reducing the amount of hazardous components in its product (Greenpeace International 2010). Table 1 shows the overall score of HP based on Greenpeace International rating standards. Table 2 shows the detailed scoring of HP based on Greenpeace International rating standard.
As HP also deals in services as well as consumer durable products, thus HP will be exposed to high brand exposure as well as a competitive market for talent (Epstein 2008). Consumer durable products refers to mass market goods intended to last for 3 or more years (businessdictionary.com). Therefore HP's sustainability strategy should also incorporate components that could enhance effective brand differentiations as well as talent recruitment and management. The various CSR initiatives will be discussed in the section on CSR initiatives.
Table 1: HP Overall Score by Greenpeace International
Table 2: HP Detailed Scoring by Greenpeace International
Table 2: Continue from page 18
Human and Financial Resources
Human and financial resources constraint will also influence the types of sustainability programmes adopted by an organisation. Adequate financial resources are needed for the implementation of various sustainability programmes as well as to pay and provide training for sustainability staffs. Additionally, "organisations need educated and trained individuals throughout the organisation who can be sensitized to sustainability issues along with staff who can be specifically dedicated to sustainability programmes" (Epstein 2008, p. 49). Therefore, it can be seen that the allocation of financial and human resources will have a direct impact on the ability to implement sustainability programmes.
In 2009, HP had put in considerable financial and human resources in the formation of a global Centre of Social Innovation because it believes that "As one of the largest global communities, HP can make fundamental differences to how people live their lives. Innovative technology, a host of transferable skills in management and collaboration, and our amazing HP volunteers represent a potent force for change. At HP, innovation in education, entrepreneurship education and employee volunteerism were our primary focus areas in 2009" (HP Centre of Social Innovation 2009, p. Para 1). In 2009 alone, HP has contributed a total of US$52.2 million to social causes (HP Centre of Social Innovation 2009).
Corporate leaders need to consider inputs such as external context, internal guiding mechanism as well as the human and financial resources before effective sustainability strategies can be implemented. A research has indicated that the best way to deploy effective sustainability is through a top-down commitment approach (Wisner et al. 2006). The board and CEO can set the commitment at the top through the articulation of a mission statement or the development of a corporate sustainability strategy so as to encourage employees to behave in ways that are aligned with company strategy. If leaders fail to motivate their subordinates or establish proper CSR initiatives, then sustainability will have higher propensity for failure. "Effective and consistent leadership provides an alignment between environmentally and socially responsive activities and corporate goals and provides internal credibility to promote progress toward improved social and environmental management within business units and organizational functions" (Epstein 2008, p. 58).
In HP corporate social responsibility programmes are oversee by the Executive Vice President of Office of Corporate Strategy and Technology who reports directly to the CEO. He is supported by a Corporate Marketing business unit as well as an Office of Social Innovations. Corporate Marketing was described as the key co-coordinating department, with every other departments/division in charge of the CSR practices within its scope of responsibility. The CSR programmes are aligned with HP's Standard of Business Conduct (SBC), a policy that all employees need to be familiar with and all employees are require to complete a compulsory SBC course on a yearly basis. The main activities under the Office of Corporate Innovations include CSR programmes that focus on Innovation in Education (IE), Entrepreneurship Education (EE), Employee Volunteerism and Giving (EVG).
CSR Initiatives - Corporate Governance
Corporate governance can be defined as the mechanisms used within an organisation to determine its strategic direction and ensure this direction is consistent with the desires of stakeholders (Aguilera et al. 2006). As mentioned earlier in this chapter, stakeholders are individuals or groups that have an interest, claim or stake in an organisation as a result of either their ability to affect, or their potential to be affected by, the organisation (Freeman & Evan 1990). Corporate governance is related to CSR formulation and implementation in several ways. The most visible roles are in establishing controls and incentives. Boards should ensure that the firm's vision and mission are reflected in its CSR initiatives, monitor the way the programmes are executed, and insure the top executives' reap appropriate career and financial consequences in cases of failure or success.
The risk that managers will deviate from organization's stated purpose and its guiding mechanisms increases when managers are not the owners of the firm (Fama & Jensen 1983; Walsh & Seward 1990). An agency relationship exists when one party, the agent, acts on behalf of another party the principal. In corporations like HP, shareholders are viewed as principals, and key executives like CEO, Mark Hurd are viewed as agents (Milgrom & Roberts 1992). Generally, a few assumptions can be made about principals and agents that highlight the potential problems in an agency relationship.
Most theoretical treatments of the agency relationship in a modern corporation assume that both shareholders and executives are self interested decision makers. This does not mean that they have no interest in the well-being of the other party; it simply means that they will generally make decisions that are in their own best interest. When the interest of shareholders and executives are virtually identical, then the agency problem is small. In this situation, executives will do what shareholders want them to do because it serves their own interests as well as those of the firm's shareholders (Sanders 2001).
However, in most situations, the interests of principals and agents do not naturally overlap completely; some things that would be in shareholders' best interest may be detrimental to those of executives and vice versa. Therefore, the key for shareholders is either to find a way to align the interest of executives with their own or to closely monitor and control what executives do so that shareholders' interests are protected. The interest of shareholders and affected stakeholders can be protected through the formulated codes of governance (Beltratti 2005).
The main code of conduct in HP is the Standard of Business Conduct (SBC) that guides the behaviour of the whole organisation in areas such as Ethics and Compliance (e.g. human rights, supplier relationship, environmental sustainability, privacy protection, workforce diversity and trade compliances) (HP Ethics and Compliance Office 2009). The SBC is aimed at for main issues: shareholder equality - upholding shareholder rights; accountability by the board and management; disclosure and transparency through accurate and timely financial and non-financial reporting; and independence (audits and oversight; directors). Under the stakeholder engagement category, HP seeks to be transparent and accountable to its stakeholders, including its customers, investors, employees, contractors, suppliers and the community at large. The main initiatives under the environmental sustainability will be the Design for Environment programme, Social and Environmental Responsibility Supplier Code of Conduct, Electronic Industry Code of Conduct, General Specification for the Environment, buyback programme, Policy on Export of Electronic Waste to Developing Countries, environment, health and safety (EHS) management system. The main activities under the labour policies/human rights category include the adoption of fair employment practices like non-discrimination, cultivating talent and building a pro-family work-health and work-life harmony. Those under community category include employee volunteerism and educational programmes such as IE and EE.
Other than internal code of conducts, HP is required to file periodic reports in compliance with the Sarbanes-Oxley Act of 2002. Noncompliance comes with significant penalties. The essential components of Sarbanes-Oxley deal with accounting oversight, auditor independence, disclosure, analysts' conflicts of interests, and accountability for fraud, and attorney's responsibilities (Security and Exchange Commission 2010).
CSR Initiatives - Environmental Sustainability
To promote environmental sustainability, business should "support a precautionary approach to environmental challenges, undertake initiatives to promote greater environmental responsibility as well as encourage the development and diffusion of environmental-friendly technology" (Agawal 2008, p. 73; Cetindamar & Husoy 2007; Fussler, Cramer & Van der Vegt 2004).
HP has continually worked to save energy in its operations by monitoring the manufacturing process, logistics requirements and usage of its products. Although the IT industry only constitute 2 percent of the world's greenhouse gas (CHG) emissions, there are abundant opportunity to play a part in reducing the other 98 percent (EIA 2009). The development of HP halo and HP SkyRoom has helped reduce energy consumption through the reduction in business travel. For example, the HP halo solutions is a virtual meeting platform embedded with end-to-end managed services that helps create a real time lifelike meeting experience that can help reduced energy consumption through the elimination of business travel (HP Global Citizenship: Tech Gallery 2010).
Secondly, HP has also collaborated with conservation World Wildlife Fund (WWF) on climate change research as well as facilitating thought leadership that encourages the importance of a low carbon economy (HP Global Citizenship: Environmental sustainability 2010).
Thirdly, HP also promotes sustainable design so as to minimise the amount of hazardous components discharged into environment. For example HP Compaq 8000f Elite Business PC is the world's first desktop PC in the industry that does not contain any BFRs and polyvinyl chloride (PVC) (HP Global Citizenship: Environmental sustainability 2010). However as mentioned earlier, the research conducted by Greenpeace International has indicated that HP should place a stronger emphasis on eliminating both BFR and PVC in all of its products, this innovation will provide opportunity for HP to address Greenpeace concern. The recycle project conducted by HP, encourages the re-usage of recycled plastic has been overwhelming and a new goal was set to use a cumulative one hundred million pounds of recycled plastic in HP's printing products such as the Deskjets and the ink cartridges by 2011 (HP Global Citizenship: Environmental sustainability 2010).
CSR Initiatives - Stakeholder Engagement (Consumers)
With advancement in technology and immediate access to information via the internet, consumers' has become more informed on global citizenship issues such as labour practices, human rights violations, privacy, environment and philanthropy (Werther Jr & Chandler 2005). A survey conducted by Carbon Trust (2009) has indicated that the majority of consumers in the UK has a strong preference to buy from environmentally responsible corporations. Yet research has also indicated that there is a lack of consensus among consumer preference with regards to socially responsible brands (Brønn & Vrioni 2001; Pomering & Dolnicar 2009).
Therefore HP feels that there is a need to educate consumers on ways they can be more sustainable as well as highlight to them the progress and contribution make by HP in areas such as community welfare and environmental sustainability. Research has indicated that consumers will only switch to a socially responsible brand only when they are aware of the initiatives made by the corporations (Pomering & Dolnicar 2009). For example, the introduction of HP Eco Highlights label in 2008 will facilitate consumers' awareness and understanding of the environmental attributes of more than 215 HP products (HP Eco Solutions 2010).
CSR Initiatives - Stakeholder Engagement (Corporate Customers)
There is a growing trend for corporate customers to include criteria of global citizenship in their purchasing policies (Macleod & Lewis 2004). IT suppliers like HP, will need to demonstrate its efficiency in helping these corporate customers reduce their carbon footprints (Cramer 2008). HP must also ensure these corporate customers that ethical labour policy is emplaced within its supply chain. Based on the recent ranking by CR (2010), HP was ranked 3rd in environmental sustainability and twelve in human rights, with a consolidated 1st position in the CR ranking. Such recognition will provide HP an edge in winning business.
Large corporate customers have a tendency to award business to suppliers that can help them improve their very own global citizenship status. From a HP perspective, it can help corporate customers achieve better global citizenship standings by helping them reduce the energy consumption in their data centres, encourage the recycle of old IT equipments and provide data security services to protect the privacy of partners, customers and employees. To meet the growing demands of these corporate customers, HP had launched a web-based portal, HP Global Innovation Network, where partners, industry experts and leaders as well as HP can share ideas, products, solutions, capabilities and inventions that are both beneficial to business and the society (HP Enterprise Services 2010). These corporate social responsibility initiatives will allow HP to be more responsive to the needs of its customers.
CSR Initiatives - Stakeholder Engagement (Governmental Agencies)
Governmental laws and regulations related to social obligations have direct impact on business operations efficiency in numerous markets. There is an increasing trend indicating that pubic sector buying behaviour can be affected by factors such as environmental responsiveness, privacy and data security (Drumwright 1994; Bradley 1977). For example, the European Commission strongly support green public procurement and encourages each member states to set concrete steps for meeting them (Mercado, Welford & Prescott 2001).
In Singapore, "the Singapore Constitution does not contain any provisions on the environment. Neither does Singapore have a framework law on environmental protection and management. There is no mandatory environmental impact assessment (EIA) system laid out in legislation. The present scheme of environmental management in Singapore is scattered throughout numerous Acts and Regulations. EIAs are required on an ad hoc basis at the discretion of the ENV" (Tan 1998, p. 2.2) and corporate environmental responsibility is based on a voluntary basis (Perry & Singh 2001). In the United States, procurement purchasing behaviour in the public sector is influence by the Federal Acquisition Regulation (FAR). FAR specify that they have stronger preferences towards suppliers that promote the usage of renewal products, energy and water efficiency (US Environmental Protection Agency 2010). To meet these requirements standards set by EPA, HP has achieved a Gold-rated standard for the Electronic Product Environmental Assignment set by EPA, a purchasing policy pertains to personal computer products.
CSR Initiatives - Stakeholder Engagement (Investor)
There is a growing trend indicating that investors are scrutinizing non-financial aspects such as CSR in their assessments of companies (Epstein 2008). An interviews with investor relations professionals in 2004, has indicated that main stream investors and socially responsible investors are more willing to invest in companies that achieve positive financial, social and environmental impact (Hockerts & Moir 2004). These socially responsible investors used either the negative screening or positive screening methods in their investment decision process. In negative screening, these socially responsible investors will eliminate companies that have poor corporate citizenship standards or products that are socially harmful (Woll 2010). They will also use the positive screening method to invest in companies that performed well in CSR.
The Dow Jones Sustainability Group Indexes (DJSGI) was created in 1999 to help social investors identify and rank companies according to five elements. Table 3 provides a summary of the sustainability assessment used in DJSGI:
Table 3: Sustainability Assessment of Down Jones Sustainability Group Indexes
Source: (Knoepfel 2001)
HP is reducing its carbon footprint, developing innovations to support a low-carbon global economy as well as establishing a socially responsible supply chain, so as to attract a wider group of investors that could aid HP access to a wider pool of capital. HP continues to perform well in many Social Responsibility Index ranking. HP performances in these indexes are outlined below:
CSR Initiatives - Stakeholder Engagement (Suppliers)
HP took the lead in influencing its suppliers to adopt safe and environmentally-friendly designs, plans and programmes to reduce the negative components in its products and services. HP achieved its objective by co-leading the development of the Electronic Industry Code of Conduct (EICC). The EICC has been applied across the industry (HP Global Citizenship: Supply Chain 2010). By advocating these concerns throughout the supply chain, HP can minimise costs as well as social and environmental impact. Thus, giving HP an opportunity to stimulate market with its socially and environmentally sensitive products and services (Hammond et al. 2007). Since 2000, HP has engaged 600 over suppliers and conducted 500 supplier audits, this action help raise the suppliers' performance as well as eliminate socially non-ethical suppliers from its supply chain (HP Global Citizenship: Supply Chain 2010).
Furthermore, HP made it clear that suppliers' ethical behaviours in labour relations, environmental health and safety track records were key deciding factors in the decision process to re-engage the suppliers for future projects. Additionally, HP has also collaborated with non-governmental organisations (NGOs) and industry partners to provide the suppliers the necessary training needed to conform with the EICC standards (HP Global Citizenship: Supply Chain 2010).
CSR Initiatives - Labour Practices
HP is committed to creating a positive workplace where employees are fairly rewarded. In a sign of commitment to this cause HP has offer remuneration packages which are performance driven. HP also practices non-discriminatory policy when it comes to age, gender, ethnicity, and nationality. For instance, there is an increase in the number of women employee in HP from the period of 2008 to 2009. Table 4 reflects HP's worldwide workforce demographics from 2005 to 2009. Additionally, women top executives (vice president level and above) was 17% in 2009, of which 17.3% are minorities, a 4.4% increase from 2008 (HP Global Citizenship: Employee Diversity 2010).
Source: (HP Global Citizenship: Employee Diversity 2010).
HP is also committed to the work-life harmony and health of its employees. HP work-life flexibility programme is very popular among employees. The kind of work-life flexibility is elaborated in Table 5.
Table 5: HP Work-life Flexibility Programmes
CSR Initiatives - Community Programmes
HP has a strong tradition of giving back to the community. Its community efforts have evolved to extend beyond philanthropy to include three specific social innovation programmes. These programmes include Innovation in Education (IE), Entrepreneurship Education (EE) and Employee Voluntarism and Giving (EVG). These programmes were established carefully to complement HP's business model.
The IE programme was implemented to bring technology into classrooms. Technology is apply in a creative way to enhance the teaching and learning process that helps equips future leaders, workers and innovators with the necessary skill sets and knowledge needed to succeed in a highly globalised economy. HP had contributed more than US$30 million to this programme in 2009, benefiting more than 1,100 educational institutions over 40 countries. The EE programme was established to provide young people with the necessary business and technology skills training necessary to jump start their career or set up their own business. A total of US$6.7 million was contributed to the EE programmes. The programmes under EVG were established to provide HP's employees the opportunities to contribute back to the society where they live and work in areas such as disaster relief and Pandemic flu (H1N1) response.
Outputs and Outcomes
Competitive advantage can be defined as a firm's ability to create value in a way that is rivals cannot (Barney 1991; Peteraf 1993). Performance itself, however, is not a competitive advantage. A firm may achieve relatively high short-term performance levels without gaining any substantial advantage over its rivals because it might be attributed to a good year or because of a cost cutting measure. A firm can enjoy a significant competitive advantage in some business lines but still experience a worse performance than its rivals because of other underperforming business. For example Toyota is able to outperform its competitors for a long period of time provides an indication that Toyota has some form of competitive advantage over their rivals (Iyer, Seshadri & Vasher 2009; Liker 2004; Liker & Meier 2006; Wiggins & Ruefli 2002). According to figure 2, competitive advantages can be attributed to external intangible benefits and internal intangible benefits.
External Intangible (Inputs) and Tangible Benefits (Outcomes)
For example, environmental sustainability initiatives such the reduction of hazardous components in HP manufacturing process and introduction of innovative products that helps in the reduction of carbon emission have helped HP win countless awards and recognitions as well as generate much good publicity. This in turn has enhanced HP's reputation which acts as a form of brand reinforcement (Werther Jr & Chandler 2005; Strahilevitz 1998). Furthermore, this positive reputation has helped HP gain credibility amongst the international investor community and goodwill with the government. These external intangible benefits eventually lead to tangible benefits such as increased revenue growth, and increase share price as demand for its shares increases amongst the international investor community (Werther Jr & Chandler 2005; Hockerts & Moir 2004; Woll 2010; Filbeck & Gorman 2004; Gande, Fortanier & Van Tulder 2009).
Internal Intangible (Inputs) and Tangible Benefits (Outcomes)
HP's Work-life and Flexibility Programmes have led to a more conducive work environment. This in turn led to tangible benefit such as reduced operating costs as employees' absenteeism are minimized (Leonard & McAdam 2003). Furthermore, HP's exemplary labour and community practices such as fair employment practices and employee volunteerism have led to internal intangible benefits such as attraction of higher quality job applicants and increased employee commitment and morale, and hence reduced turnover rates (Shelton 1999; Leonard & McAdam 2003; Morgan & Hunt 1994). These in turn have led to the tangible benefit of reduced human resources costs that comes with recruitment cost, training and development cost.
The present chapter looked at the linkage between CSR and firm's competitive advantage. It also provide an illustration on how a firm's internal guiding mechanisms, external context, business context, human and financial resources can help drives CSR initiatives, which can lead to various competitive advantages and eventual tangible benefits. The research discussed in the present chapter was used to develop the model that is the major focus of the present study