A Customer Perception Of Csr Management Essay

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In recent years the phenomena of corporate social responsibility have been one of business concern and there is growing interest in exploring the links between corporate social responsibility and customer behavior. This chapter is covering the literature review of corporate social responsibility which includes the concept and how customers perceive it and how it could be measured. The chapter also demonstrates the service quality dimensions and types and what were the relationship that found in previous studies between it and corporate social responsibility. Finally an overall frame for customer loyalty and what were the relationship that found in previous studies between it and the corporate social responsibility is illustrated.

2.1 Corporate Social Responsibility (CSR) Concept

Corporate social responsibility (CSR) has become one of the important pressing issues for organizations worldwide (Chen and Bouvain, 2005). The challenge is raising the balance between two goals: corporate social responsibility and achieving profit. Being beneficial is critical for organizations and without it, later or sooner; the organization will be eliminated from competition. On the other hand, corporate social responsibility results on costs which seem very heavy in short term. But corporate social responsibility can results in customer loyalty and customer satisfaction and consequently bring the profit to organization (Abbasi et al., 2012).

Corporate social responsibility is a concept that has took the attention all over the world and gained a new resonance in the global economy (Jamali and Mirshak, 2006). Corporate social responsibility is a broad concept that covers a range of environmental, social, and ethical responsibilities, and there have been many definitions in the literature over the years. But while corporate social responsibility is getting too much increasing attention in recent years, very little is known about its' practice in developing countries (Jamali and Mirshak, 2006).

Although there are many concepts for corporate social responsibility such as corporate citizenship, ethical corporate and good corporate governance, however, they are all about corporate responsibility toward stakeholders (El-Megharbel and Foad, 2008).

Corporate social responsibility can be a source of good and a source of innovation, competitive advantage and value creation for the organization. The concept of corporate social responsibility has been approached from several perspectives by many scholars, and researchers have adopted varying perspectives. Initially, the concept was exclusively associated with economic aspects, understood as the organization's obligation to maximize shareholder value. Another research flow appears relating the concept with marketing activities with a social dimension, in areas such as environment protection, community development, resource conservation and philanthropic giving. According to Wood (1991) "the basic idea of corporate social responsibility is that business and society are interwoven rather than distinct entities" and for Mallenbaker (2005) "corporate social responsibility is about how organizations manage the business process to produce an overall positive impact on society" (Liu and Zhou, 2009).

The corporate social responsibility is a concept that offers organizations the opportunity to treat the environmental and social problems as a part of their business operations. It helps organizations to respond in a positive manner to the present needs without compromising the ability of future generations to meet their own needs. It turns the environmental protection that was considered as costs and vulnerabilities source for the organizations, into a new competitiveness growth opportunity. It's important to understand that corporate social responsibility offers opportunities, not adding to organizations new rules or obligations (Sima, 2007).

Corporate social responsibility also referred to as pro-social corporate endeavors or corporate social performance, has traditionally been conceptualized rather broadly as "the managerial obligation to take action to protect and improve both the welfare of society as a whole and the interest of organizations" (Turban and Greening, 1997). Alternative perspectives on the role and place of organizations in the broader social environment have engendered multiple concepts for corporate social responsibility ranging from a purely economic one to more recently a comprehensive "proactive social responsiveness view" that articulates organization's long-term role in a dynamic social system (Sen and Bhattacharya, 2001).

Corporate social responsibility depends on the stakeholder theory which states that the main purpose of any business is maximizing value for stakeholders (El-Megharbel and Foad, 2008). Corporate social responsibility should be understood as a broad concept, particular note is the Carroll's (1979, 1999) framework, which is the most widely accepted and used framework to explain the construct. According to this framework, organizations have economic, legal, ethical and philanthropic obligations towards their environment, and these four dimensions make up corporate social responsibility (Liu and Zhou, 2009).

While corporate social responsibility provides support to worthy causes; organizations practice it as much to increase visibility as to create social impact, and invest heavily not only in good actions but also in communicating them. For example, in 1999, Phillip Morris made $75 million in charitable contributions, and then launched a $100 million campaign to publicize these charitable to increase its visibility in the society (Vlachos et al., 2009).

The impact of business activities on people's quality of life leads to increase concerns about corporate social responsibility. Nowadays, corporate social responsibility is considered by individuals as an absolute necessary and has resulted in businesses which have been expected to define their roles in society in applying social, ethical, and legal responsibilities to their businesses (Onlaor and Rotchanakitumnuai, 2010).

Carroll's (1979, 1991) Pyramid of Corporate Responsibility (CSR four dimensions economic, legal, ethical, and philanthropic) identifies a spectrum of obligations that organizations have toward society. The Carroll's pyramid serves as a framework which places primary emphasis on economic results but argues for legal, ethical and philanthropic behavior.

In a recent conceptualization, Carroll 1998 terms the four dimensions of corporate social responsibility as "the four faces of corporate citizenship". Economic responsibilities pertain to the necessity for corporations to be profitable and grow. Legal responsibilities require organizations to operate within the boundaries of laws and national policies. Ethical responsibilities demand that organizations operate morally, fairly, justly and obligation to follow the norms placed on them by society. Philanthropic responsibilities oblige organizations to contribute financial and other resources for the welfare and betterment of society and the community (Salmones and Bosque, 2011).

According to Carroll (1979, 1991), organizations have economic, legal, ethical and philanthropic responsibilities towards all their stakeholders, and these four dimensions give shape to the structure of social responsibility. This framework of Carroll (1979, 1991) has become a reference to explain responsible behavior; however, in some studies, doubts are introduced in the inclusion of economic matters (Maignan and Ferrell, 2001). Actually, Aupperle et al. (1985) observe that economic dimension is inversely correlated with the remaining associations; this result of Aupperle et al. (1985) leads them to consider the categories "concern for society" and "concern for economic outcome". In the same way, Salmones et al. (2005) verified that customers do not include the economic dimension in the global construct of corporate social responsibility, and Bigné et al. (2006) noticed that economic issues are weakly correlated to corporate social responsibility practices (Salmones and Bosque, 2011).

The Pyramid of corporate social responsibility is a total general framework. It possesses key research constructs to develop an instrument for undertaking empirical studies in the field of corporate social responsibility because there is still a need for researches in this field (Tan and Komaran, 2006; Chiu and Hsu, 2010).

Corporate social responsibility was intended on some occasions to be a one-dimensional variable, centered on the organization's orientation towards society and environment. However, considering that responsible behavior includes all moral obligations that maximize the organization's positive impact on the social environment and minimize its negative one, it is more correct to widen the concept and regard it as multidimensional (Salmones and Bosque, 2011).

Corporate social responsibility is a debatable issue as there are two points of view. The first one states that the organizations have to have a specific framework for the corporate social responsibility programs as to ensure that human resources are not misused and to protect environment, and human rights. In this case organizations will follow the framework of corporate social responsibility that have been decided according to organization plans and which will lead to high profits. On the other side, the second point of view indicates that the government has to put corporate social responsibility in a specific framework by laws for corporate social responsibility to organizations to follow which will make organizations not to do more than what is required by corporate social responsibility laws. This reflects that government has to make corporate social responsibility laws a requirement for any organization to work and that will lead to more bureaucratic system and increasing corporate social responsibility cost. Corporate social responsibility programs differ from one organization to another which makes it hard to put general rules (El-Megharbel and Foad, 2008).

2.2 CSR and Marketing

In recent years, there is growing interest in exploring the links between corporate social responsibility and marketing. Corporate social responsibility activities have been used to address customers' social concerns, create a favorable corporate image, and develop a positive relationship with customers and other stakeholders. Corporate social responsibility activities have been adopted based on growing evidence that customers are willing to give incentives to socially responsible organizations. For example, customers are willing to pay higher prices for products made by an ethical organization, to switch brands to support organizations that make donations to nonprofit organizations, and to buy products from organization simply because it supports charitable causes (Liu and Zhou, 2009).

The increase in poverty, low living standards of some categories, and unemployment, led to the increasing concern about corporate social responsibility programs (El-Megharbel and Foad, 2008). There are two major sources of demand for corporate social responsibility: (1) customer demand and (2) demand from other stakeholders, such as investors, employees, and the community. Investment in corporate social responsibility activities may entail embodying the product with socially responsible attributes, such as pesticide-free or non-animal-tested ingredients. It may also involve the use of signals, such as the union label in clothing, that convey to the customer that the organization is concerned about certain social issues. This results in the belief that, by using these products, customers are indirectly supporting a cause and rewarding organizations that devote resources to corporate social responsibility. Customer- oriented corporate social responsibility may also involve intangible attributes, such as a reputation for quality or reliability (McWilliams and Siegel, 2001).

Corporate social responsibility is being noun as a popular means for differentiation, because it allows managers to simultaneously satisfy personal interests and to achieve product differentiation. Differentiating through the use of corporate social responsibility resources, such as recycled products or organic pest control, may also include investment in research and development (R&D). Investment in research and development may result in both CSR-related process and product innovations, which are each valued by some customers (McWilliams and Siegel, 2001).

There is still a lack of research on the impacts of social responsibility from the marketing perspective (Vlachos et al., 2009).

2.3 CSR and ISO 26000

The need for organizations in both sectors public and private to behave in a socially responsible way is becoming a generalized requirement of society (Jimena, 2010). The expected business from organizations not only providing products and services that satisfy the customer, without causing harm or damage for the environment, but also operating as a social organization through socially responsible manner (Frost, 2010).

Organizations all over the world are being subjected to greater scrutiny by their stakeholders, as both the perception and reality of an organization's social responsibility performance can influence its interaction with competitors, customers, suppliers, regulators, investors, and others within the financial community and the community in which it operates. It may also influence the ability of organization to attract and maintain competent and dedicated workers (Crognale, 2011).

The International Standardization Organization (ISO) has taken a major step forward in the wider adaptation of social responsibility by opening the way for the publication of ISO 26000 after a nine years process that has included five years of worldwide consultations and negotiations to create the ISO 26000 guidance (Jimena, 2010; Frost, 2010).

The ISO 26000 guidance standard has been developed by the International Organization for Standardization in consultation with stakeholders and experts from 99 ISO member countries and 42 public and private sector organizations (Jimena, 2010).

ISO standards have achieved common use and considerable respect from industry. ISO has mainly produced standards on more technical and ordinary matters, such as quality control (ISO 9000). Social responsibility was then a departure for ISO when first suggested in 2002 (Henriques, 2010). The guidance standards of ISO 26000 are voluntary to implement. It does not include requirements, and thus not a certification standard (Jimena, 2010).

ISO 26000 provides general guidance on the essential principles of social responsibility, how to recognize social responsibility, and how to engage stakeholders for added benefit. It includes a description of the foundation subjects and issues concerning to social responsibility, and describes methods to integrate socially responsible behavior into the organization (Crognale, 2011).

ISO 26000 has seven foundation subjects. It includes principles for the respect of the rule of law, for international norms of behavior and for human rights. ISO 26000 discusses issues of complicity, discrimination, the position of vulnerable groups and civil and political rights as well as economic, social and cultural rights. These foundation subjects cover the most likely economic, environmental, and social impacts that organizations should address (Crognale, 2011; Henriques, 2010).

Crognale, (2009); Frost, (2010); and Park and Kim, (2011) mentioned that the framework of ISO 26000 concern of becoming familiar with the issues concerning social responsibility that can impact the seven core subjects that following:

1 - Organizational governance - this is the mechanism by which an organization makes and implements decisions.

2 - Human rights - recognizes two categories of human rights civil and political rights; and economic, social, and cultural rights, such as the right to work, food, education, and social security.

3 - Labor practice - these take into account the labor practices of an organization, including all policies and practices relating to work by, or on behalf of, the organization, such as employment relationships, work conditions and social protection, worker health and safety, and human development.

4 - The environment - ISO 26000 considers the relationship between the activities of organizations and the environment that can be seen in several factors: the energy and natural resources used the amount of waste generated, and the effects of these on natural habitats. Acting responsibly toward environmental issues is not just for the present, but for future generations.

5 - Fair operating practices - fair operating practices relate to the ethical conduct of organizations in their business dealings with other organizations, including partners, suppliers, contractors, competitors, regulatory agencies, and associations to which they belong.

6 - Customer issues - organizations using fair, transparent, and useful marketing, informational, and contractual processes. The standard makes it clear that organizations providing goods or services to customers have a certain responsibility to those customers, which includes the use of marketing that is open, honest, and helpful, as well as minimizing risks from the use of products or services through various means, including recalls.

7 - Community involvement and development - organizations of all sizes play an important role in their communities, just by the nature of their doing business. Other actions that an organization may take to advance the common good of the community include: promoting sustainable social investment projects, promoting cultural activities, and honoring local culture and cultural traditions. Those actions that support cultural activities that strengthen the identity of historically disadvantaged groups are of extreme importance, promoting good health by ensuring ready access to medicines and vaccines, encouraging healthy lifestyles, discouraging unhealthy eating practices, and supporting access to essential health care services, potable water, and sanitation.

The challenge is how to put the principles into practice when even the understanding of what social responsibility means may vary. Previous initiatives have tended to focus on corporate social responsibility, while ISO 26000 provide social responsibility guidance not only for business organizations, but also for public sector organizations of all types (Frost, 2010; Henriques, 2010).

2.4 Customer Perception of CSR

Little is known about the effects of corporate social responsibility actions on customers. Recent research suggests that there is a positive relationship between organization's CSR actions and customers' attitudes toward that organization and its products. But it is not known when, how, and for whom specific CSR initiatives work (Sen and Bhattacharya, 2001).

Several marketing studies have found that social responsibility programs have a significant influence on numerous customer-related outcomes (Liu et al., 2010). Customers increasingly expect business to go beyond delivering economic outcomes and also contribute to society's welfare and sustainability by being socially-responsible, and will support them if they do so (Pomering and Dolnicar, 2009).

Salmones et al. (2005) found that customer perceptions of CSR behavior can be important and have direct consequences for their valuation of the service and perceived service quality (PSQ). It has been shown, experimentally, that customer knowledge of organization's CSR initiatives may lead to a higher evaluation of the organization and a more positive evaluation of the organization's product (Vlachos et al., 2009).

Corporate social responsibility activities can help organizations in creating strategic benefits. For instance, CSR involvements by organizations could lead positive long-term financial impact. CSR engagements could help organizations increase sales and market share, strengthen brand positioning, improve corporate image, attract, motivate and retain employees, reduce operating costs and enhance appeal to investors and financial analysts (Tan and Komaran, 2006).

In deciding how to evaluate service providers, customers may consider both economic-oriented offerings and corporate social responsibility as important, but may consider bad performance in economic offerings more threatening than poor performance in CSR. Often, people continue to buy from unethical organizations because these organizations perform well on economic-oriented offerings, rendering corporate social responsibility information less dominant in customer decision-making (Vlachos et al., 2009).

Customer awareness of organization CSR actions in one domain such as recycling will influence their perceptions of corporate social responsibility performance in other domains which they have little or no information about them (Smith et al., 2010).

2.5 Measuring CSR Effect

Although the expanding literature on corporate social responsibility issue has provided a clearer understanding, but there is still a problem on finding a worldwide accepted definition of corporate social responsibility and there is a problem to measure it based on its links with the stakeholder concept (Turker, 2009). This lack in the studies that measure the effect of corporate social responsibility are attributable to several reasons such as following:

It's difficult to measure the effect of corporate social responsibility programs on some variables such as stock prices, market share, or return on investment and some other variables.

The success and profitability (that any organization work to achieve them) of some organizations depend on their reputation which in turn depends on some factors such as protecting the environment, taking care of human resources, trust, quality, and transparency and these factors are part of corporate social responsibility.

Wolfe and Aupperle (1991) indicated that there isn't any specific best way to measure corporate social responsibility activities. Waddock and Graves (1997) also pointed out how it's difficult to measure corporate social performance and assessed the alternative methods, including forced-choice survey instruments, reputation indices and scales, content analysis of document, behavioral and perceptional measures, and case study. Maignan and Ferrell (2000) categorized the methods of measuring CSR into three main approaches: expert evaluations, single-issue and multiple-issue indicators, and surveys of managers (Turker, 2009). Although there are some difficulties in measuring CSR, there are still some measures organizations use to evaluate the degree of success of corporate social responsibility programs such as:

Rating indices according to CSR - these measures include DOW Jones indicator, and the financial times stock exchange which measures to what extent organizations follow environmental standards, human rights and stakeholders rights. Advanced sustainable performance indices is one of the measures that is used to rank organizations according to their corporate social responsibility activities.

Rules of practicing - this represents the standards that organizations follow to review their performance, and this includes internal or external evaluation and whether formal or informal. The organization could use any of the following standards for internal evaluation:

United Nations Global Compact (UNGC) - a United Nations action to encourage businesses worldwide to adopt sustainable and socially responsible policies, and to report on business implementation.

Ethical Trading Initiative (ETI) - an alliance of organizations, trade unions and voluntary organizations working in partnership to improve the working lives of people across the globe who make or grow customer goods.

Sullivan principles - the names of two corporate codes of conduct, developed by the African-American preacher Rev. Leon Sullivan, promoting corporate social responsibility. Developed in 1977 to apply economic pressure on South Africa in protest of its system of apartheid, then the principles eventually gained wide adoption among United States-based organizations. The new and expanded corporate code of conduct, were designed to increase the active participation of organizations in the advancement of human rights and social issues.

For external evaluation the organization could use the principles of the world health organization or the United Nations Children's Fund (UNICEF).

Principles and rules of management systems and certification - Some of these certificates are eco-management and audit scheme (EMAS), forest stewardship council's (FSC), and social accountability 8000 (SA8000). These rules help organizations in evaluating their corporate social responsibility programs especially that concerning environment, and that increase stakeholders trust including customers, suppliers, among many other.

There are other indicators that are not directly related to corporate social responsibility however organizations use them in these programs and reports. But till now there is no specific measure that could be used in all cases for all organizations, (El-Megharbel and Foad, 2008).