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Source: United Nations Conference on Trade and Development 2007, 117.
Introduction 11

Chapters 4, 5 and 6 comprise the core of this book. These three
chapters investigate the three main CSR challenges in the oil and gas
sector “ the environment, development and governance: Chapter 4
discusses the environmental side of CSR activities; Chapter 5 dis-
cusses company-funded development efforts; and Chapter 6 discusses
governance initiatives. Each chapter starts by outlining the CSR
challenge for the industry and then examines the CSR initiatives;
finally, what follows is a critical assessment of the current CSR
Chapter 7 draws conclusions from the book™s findings and provides
some recommendations.

The logic of CSR strategies

Hundreds of academic papers have been published on CSR, but there
is no consensus on how to explain the rise and direction of CSR, and
there is no agreement on how CSR should be studied. The emergence
of CSR has been explained as a consequence of the actions or
inaction of governments and changing global governance (Jenkins
2005; Moon 2004); the spread of global communications and greater
scrutiny of corporate activities by non-governmental organisations
(Fabig and Boele 1999; Spar 1998); and globalisation and a changing
economic environment (Korhonen 2002). However, the company
responses to these global trends have been differently interpreted.
Lockett et al. (2006) have argued that ˜the CSR field is becoming
more established and distinctive, however, this does not indicate any
emergence of a Kuhnian normal scientific paradigm™ and that ˜CSR
knowledge could best be described as in a continuing state of emer-
gence™. There is no accepted theoretical perspective or research meth-
odology for making sense of CSR activities. Indeed, most scholars
study CSR without any reference to a given theoretical perspective,
and it has been found that CSR research is not driven by continuing
scientific engagement but by ˜agendas in the business environment™
(Lockett et al. 2006).

The logic of CSR strategies 13

What is particularly lacking is a general explanation as to why
and how firms engage in CSR. Why do some companies display
greater willingness to engage in CSR than others? Why do the
same companies have different CSR policies in different countries?
Why do some companies engage in CSR even if there is little
external pressure to do so? In this chapter, we shall consider these
issues, first by discussing different theories to explain corporate
strategies and then by investigating why specific companies pursue
CSR strategies.
Within the fields of management and organisation studies, the
company responses to social and environmental issues have been
variously explained. These theoretical perspectives include agency
theory, stakeholder theory, stewardship theory, institutional theory,
game theory, theory of the firm and the resource-based view in
strategic management. The various theoretical perspectives are
briefly summarised in Table 2.1.
While company responses to social and environmental issues
have been variously explained, one can note the emergence of two
dominant perspectives in the current literature. The first perspective “
stakeholder theory “ emphasises the reactions of individual firms in the
context of external stakeholder relationships. This perspective can
explain the different strategic responses of firms to social pressures
even in the same industry or country, based on the nature of external
relationships. The second perspective “ institutional theory “ empha-
sises the adaptation of firms to institutions in a given (for example,
national or industry) context. This institutional perspective can, for
instance, explain why firms from different countries or industries
respond to social and environmental pressures differently and why
different country subsidiaries of the same multinational firm have
different CSR strategies, as a result of the prevailing national norms
and beliefs.
These two perspectives can help to explain company responses to
external social and environmental pressures. However, both perspectives
14 Beyond Corporate Social Responsibility

table 2.1: Perspectives on CSR strategies

Theoretical perspective Main authors on
(alphabetical order) Main argument CSR strategy
Agency theory CSR driven by self-serving Friedman 1962;
behaviour of managers at the Wright and Ferris
expense of shareholders 1997
Game theory CSR as a trade-off between Prasad 2005
present cost and future benefits
Institutional theory CSR driven by conformity to Doh and Guay 2006;
different institutional Jennings and
contexts Zandbergen 1995
Resource-based view in CSR can act as a specialised Hart 1995; Russo and
strategic skill or capability to gain a Fouts 1997
management competitive advantage
Stakeholder theory CSR driven by relationships Clarkson 1995;
with specific external actors Freeman 1984
Stewardship theory CSR driven by moral Donaldson and
imperative of managers to ˜do Davis 1991
the right thing™
Theory of the firm CSR driven by a supply of/ Baron 2001;
demand for social activities McWilliams and
in the marketplace Siegel 2001
Source: largely adapted from McWilliams et al. 2006.

are reactive and fail to explain active strategic choices within com-
panies. The focus of the current literature on external stimuli fails to
explain, among other things, why particular firms may use CSR as
a weapon against competing firms or why specific firms may invest
billions of dollars into renewable energy. Therefore, we consider a third
perspective in this chapter “ Austrian economics “ which provides
insights on the active pursuit of CSR strategies within companies
from an entrepreneurial perspective.
This chapter investigates eight multinational oil companies to
explore the applicability of the above three theoretical perspectives
The logic of CSR strategies 15

in explaining the social and environmental strategies of firms. We
start by briefly explaining the three perspectives, and then we inves-
tigate the CSR strategies of the eight oil companies.

Stakeholders vs. institutions

Following Freeman™s (1984) influential book, stakeholder theory has
become the key theoretical perspective utilised within CSR debates.
A stakeholder is typically defined as ˜any group or individual who
can affect or is affected by the achievement of the organisation™s
objectives™ (Freeman 1984, 46). To put it differently, stakeholders are
those groups that can either help or damage the firm, including
employees, customers, suppliers, shareholders, banks, governments
and non-governmental organisations. Freeman simply summarised
the stakeholder approach as ˜the principle of who or what really
Stakeholder theory predicts CSR activities as a direct result of
external pressures from different actors. Typically, the relative
importance of different stakeholders for the firm is considered
with reference to resource or power dependence (Clarkson 1995;
Freeman and Reed 1983; Jawahar and McLaughlin 2001).1 A stake-
holder is considered particularly important if: either (1) the organ-
isation is dependent on the stakeholder for its continued survival
(Freeman and Reed 1983; Jawahar and McLaughlin 2001); or (2) the
stakeholder can affect the business in some way (Clarkson 1995;
Freeman 1984).
Given the dominance of the stakeholder view in CSR theory and
research, it is surprising that relatively few studies have empirically
tested the impact of different stakeholder attributes on social and

A number of authors have also used other criteria to assess the relative importance

of stakeholders, including ˜legitimacy™ of a stakeholder (Hill and Jones 1992;
Langtry 1994) and ˜urgency™ of stakeholder claims (Mitchell et al. 1997).
16 Beyond Corporate Social Responsibility

environmental strategies of firms (Bremmers et al. 2007; Olander
2007; Tsai et al. 2005). Therefore, it is not clear under what circum-
stances stakeholder theory can actually be used to explain and predict
CSR strategies. At the same time, case studies show the importance of
institutional contexts in determining CSR strategy (Doh and Guay
2006; Levy and Kolk 2002). Indeed, even the study on stakeholder
impact by Tsai et al. (2005) found that the key external influence on
strategy was institutional factors derived from dominant social norms,
while the more traditional stakeholder attribute of resource depend-
ence was found to be less important. The study concluded that
˜a direction for future research on stakeholder influence strategies
would be to combine resource dependence and institutional factors™
(Tsai et al. 2005), which points to the importance of ˜institutional
Following the influential work of writers such as Douglass North,
John Meyer and Paul DiMaggio, institutional theory suggests that
firms need to conform to the social norms in a given business
environment because they cannot survive without a certain level
of external social approval (legitimacy) (DiMaggio and Powell 1983;
Meyer and Rowan 1977; North and Thomas 1973). In contrast to
stakeholder theory, firms often conform not because external
actors are powerful but because certain practices ˜are taken for
granted as “the way we do these things”™ (Scott 2001, 57). Put
simply, companies imitate what others do in order to remain
socially acceptable.
Institutional theory predicts that firms™ strategies and practices will
become similar within a defined business environment, as similar
firms face similar social expectations “ a process known as ˜institu-
tional isomorphism™. DiMaggio and Powell (1983) identified three
mechanisms through which isomorphism can occur: (1) the actions
of agencies such as government regulators on which the firm is
dependent (coercive isomorphism); (2) professionalisation within
occupational groups with similar training, ethos and disciplinary
The logic of CSR strategies 17

mechanisms (normative isomorphism); and (3) executives™ imitation
of strategies of firms which are considered more successful or more
legitimate (mimetic isomorphism).
Following institutional theory, one would expect CSR strategies to
converge between firms with similar characteristics. Indeed, one
Dutch study found that CSR policies are strikingly similar between
Shell and BP in the oil and gas sector, Fiat and Volkswagen in the
automotive sector and GlaxoSmithKline and Bristol-Myers Squibb in
the pharma sector. There are also striking similarities between CSR
policies in the garment industry and the food industry. As the authors
concluded, ˜MNCs appear only willing to state active commitment if
others in their sector do as well™ (Kolk and van Tulder 2006, 798). In
simple terms, CSR policies become similar in a given industry because
companies imitate the policies of their competitors.
Isomorphic pressures on CSR strategy have also been found as a
consequence of the firms™ national country of origin (Doh and Guay
2006). For instance, companies in South Africa take for granted the
obligation to increase the share of black ownership (Hamann et al.
2005), while Japanese companies take for granted the importance of
occupational health and safety and traditionally have very strong
policies in this area compared with companies from other countries
(Wokutch 1990).
While there are many differences between the stakeholder and
institutional perspectives, they share important similarities. Above
all, both perspectives are reactive and emphasise the role of external
actors in transmitting ideas and beliefs about managerial practices to
the firm. There may also be an overlap in that the same external actor
may be classified both as part of the stakeholders and of the institu-
tions; for instance, the government can be a stakeholder (e.g., as a
business partner) and part of the institutional environment (e.g.,
creating social norms as a law maker). Table 2.2 summarises the key
assumptions of both perspectives and contrasts them with the
Austrian perspective discussed below.
18 Beyond Corporate Social Responsibility

table 2.2: Summary of theoretical perspectives on CSR strategy

Institutional theory Stakeholder theory Austrian view
Main focus Adherence to rules Relationships with Role of the
and norms external actors entrepreneur
Determinants of Conformity to Relative Entrepreneurial
CSR strategy different dependence of a foresight
institutional firm on
contexts stakeholders
Scope for Non-choice Limited choice Substantial
independent behaviour behaviour choice
managerial behaviour


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