Social and environmental issues such as global warming are the underlying reason behind the growth on Corporate Social Responsibility (CSR) in the corporate agenda. For instance, a study carried out by Accenture showed that 93% of 766 participating CEOs ranked sustainability as “very important” or “important” for the success of their organization (Campbell, 2007). One of the basic beliefs underlying this change in thinking is if CSR is done right, it can improve a corporation’s financial performance, while enhancing the well-being of society and planet (Carvalho et al., 2010), also known as Triple Bottom Line approach.
Corporations have been known to derive erroneous benefits when perceived as being socially responsible by stakeholders (Idowu & Towler, 2004). Arguably, the most important stakeholder group being, Consumers (Marin et. al., 2008; Mohr & Webb, 2005). As shown by a McKinsey poll (2009), CEOs of companies who have signed the UN global compact have done so as they firmly believe that consumers will have a significant say in how the company will manage its CSR activities in the future.
Recently a burgeoning body of research has been produced to understand consumer reaction to CSR, however most of this research focuses on North American and European consumers (Bhattacharya & Sen, 2004) and very few on how this relationship functions in developing countries (Arli & Lasmono, 2010). With CSR being a global phenomenon, it is necessary to focus on emerging economies, primarily the BRIC (Brazil, Russia, India and China) nations. Insights into these groups of consumers are particularly important in developing a broader understanding of consumer reactions to CSR due to the following reasons:
- Due to growing economic, political and social clout, these economies are being put on the world stage; hence the behavior of consumers within these nations is of much interest to multinational corporations with operations and a large customer base in these countries.
- CSR activities differ among BRIC nations due to varying motives, processes and stakeholder issues. Hence, CSR is in a different part of its life cycle in each of these nations, and it is important to be able to pinpoint where exactly each country is.
- A common trend among emerging economies as identified by the World Bank (2006) is the wider distribution of disposable income and therefore, consumption power relative to developed economies. Hence, these consumers are being targeted by Multi-national Corporations, as they are the next big group of consumers.
1.1 Aims & Objectives
This report investigates the paradox associated with consumer behavior towards CSR in BRIC nations by conducting a thorough literature review and applying the information to case studies to fulfill the following objectives:
- To find out the perception and knowledge consumers hold towards CSR practices in these nations
- To identify whether any already implemented CSR practices have made a difference in the consumer decision-making process
- To inform Multi- National corporations operating in these nations about the parity that exists in consumers conceptualization of CSR and the subsequent response
- Recommendations for further research and improvement of CSR practices to enhance consumer reactions
2 Literature Review
2.1 Notion of Corporate Social Responsibility
Over decades, the definition of CSR has been widely debated and gone through many evolutions. During the 1970’s, Friedman’s theory was widely discussed where he argued that a corporation’s sole responsibility is to make profit for shareholders. However, Freeman & McVea (1984) introduced stakeholder theory, which made it clear that businesses were responsible for encompassing the needs of all stakeholders within a society (i.e. Consumers, Communities, Employees). The need to satisfy these stakeholder demands stems from the fact that stakeholders are imperative to the survival and economic well-being of the firm (Mitchell et. al., 1997). Following this an ethical culture was fostered in corporations that bought along the inclusion of CSR in the corporate agenda. According to Porter & Kramer (2006), corporations that include CSR in their corporate agenda have a competitive advantage.
The most widely cited and durable CSR model was one put forward by Carroll (1999), which includes a four-part conceptualization of the idea (Appendix A: Image 1). However, like any other model, Carroll’s (1999) model fails to take into consideration several aspects of CSR:
‘a concept whereby companies integrate social and environmental concerns in their business operations and in their interaction in their stakeholders in a voluntary basis’ as they are aware responsible behavior leads to sustainable business success.
- CSR definition by European Commission (2002)
- Carroll’s pyramid is created in an American context, which has been criticized by several authors such as Matten et al. (2003) and Visser (2006). Due to changing hierarchy on whether the country is developed or developing, Visser (2006) proved that it is not applicable to understanding CSR in a global context.
- In developing countries, top executives have been shown to not know the difference between philanthropic and ethical responsibilities. There are also several arguments surrounding the inclusion of “philanthropic” as discussed by Strong & Meyer (1992) who deem it appropriate for that category to be removed.
- Another major criticism surrounding Carroll’s pyramid is the omission of the environmental aspect, as climate is high on the agenda in today’s world; it only seems appropriate to include it as a dimension.
Following this, Visser (2008) reviewed the CSR pyramid in the context of developing countries and reconstructed it (Appendix A: Image 2) to make the second obligation philanthropic responsibilities due to the prevalence of poverty, unemployment and shortage of foreign direct investments. Gao (2009) verified this propriety in developing countries and attributed it to cultural norms and religious expectation. Khavul & Bruton (2013) interpreted the legal aspect to be placed after philanthropic as developing countries are often characterized by a weak judicial infrastructure and limited government capacity.
2.2 CSR & Culture
Previous research such as by Rugman, Oh & Kim (2011) argued that a firm’s competitive performance within the general economy is influenced by a variety of home factors such as culture. As said by Katz et. al., (2001), “…. culture based tendencies shape a nation’s expectation of corporate social conduct”. When cultural values are mentioned, Hofstede’s cultural dimensions are an inevitable reference for understanding consumers, summarized in table 1 (Appendix B). Argued by Katz et. al., (2001), countries that are low in power distance, uncertainty avoidance and masculinity but high in individualism have a high degree of consumer activism. Research done by Hofstede Centre calculates country specific values for the BRIC nations for each cultural dimension, shown below (Image 1).