Corporate Social Responsibility: business strategies, processes and management control systems

Abstract

Nowadays, the Corporate Social Responsibility (CSR) has become an every-day acronym for corporations. The development of this concept has begun in the 1990s, when scepticism rose around society about the ethical values embedded in the firms’ procedures. The concept of CSR is based on the legitimacy theory, for which an organization should consider how to commit with its stakeholders’ requirements and how to respond to their expectations. In the last ten years, the international organizations have developed a large amount of indicators that help companies to assess their social and environmental impacts and communicate those impacts through reporting. The most accepted tool is the United Nations’ Sustainable Development Goals that are a set of seventeen objectives which pool all the main global sustainability issues and help companies to identify where they provoke the main impacts and where they have possibility of improvement. The purpose of this research is to demonstrate that whereas the sustainability reporting has been subjected to a great development, management control systems applied to sustainability are still marginal within organizations. Therefore, MCS lag behind reporting in the context of sustainability. By ascertaining this lack both in the literature and in the reality, this research has the objective to provide a comprehensive framework of the best solutions to apply MCS to sustainability, supported by a sample of companies which pursue the best practices in this context. The research will be divided in five main chapters; in the first one, it will be reported the concept of CSR and its application within organizations, identifying the main trends of regulation; in the second one, it will be analysed the main CSR strategies that a company may integrate with the corporate strategy, highlighting which are the main limitations in the process of integration; the third chapter will investigate how to align the existing corporate processes to the established sustainability goals, identifying the main processes subjected to changes, such as the procurement process and the selection and hiring procedures; the fourth chapter will be dedicated to the analysis of management control systems. Indeed, once the company has recognised the sustainability objectives, developed an action plan and integrate new activities within the corporate processes, it should incentivise employees to pursue the new activities efficiently, find the best way to monitor the results and use these results in the decision-making process. The classification of MCS will generally follow the distinction of formal and informal controls. The literature has pointed out different problems in the implementation of effective MCS related to sustainability, finding that management control systems and the so-called “sustainable control systems” may force employees to make a trade-off between financial and non-financial performance. Moreover, even when the two dimensions of control systems are aligned, it is difficult to find a good integration of formal and informal dimensions within sustainable control systems. Finally, the fifth chapter will provide an overall illustration of the current trends related to “sustainable control systems” and will analyse a sample of companies that represent the best practitioners in the application and union of formal and informal control systems.