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Corporate Social Responsibility from an Emerging Market Perspective: Evidences from the Indian Pharmaceutical Industry

D I S SERTAT ION of the University of St. Gallen,

Graduate School of Business Administration, Economics, Law and Social Sciences (HSG)

to obtain the title of Doctor Oeconomiae

submitted by

Shiban Khan

from

Bangladesh

Approved on the application of

Prof. Dr. Li Choy Chong

and

Prof. Dr. Thomas Dyllick-Brenzinger

Dissertation no. 3468

Difo-Druck GmbH, Bamberg 2008

Corporate Social Responsibility from an Emerging Market Perspective

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The University of St. Gallen, Graduate School of Business Administration, Economics, Law and Social Sciences (HSG) hereby consents to the printing of the present dissertation, witohut hereby expressing any opinion on the views herein expressed. St. Gallen, May 14, 2008 The President: Prof. Ernst Mohr, PhD


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Acknowledgements

They say it is about the journey, and not the destination. I believe it is the fellow travelers

who make a voyage remarkable. Although I was eager enough to reach this particular

destination on my own, I could not have arrived here without the support of the amazing

individuals who guided and aided me in my arduous, yet deeply fulfilling journey of

completing a Doctoral dissertation all along the way.

I consider myself very lucky to have worked under the superlative guidance and

supervisions of Prof. Dr. Li-Choy Chong and Prof. Dr. Thomas Dyllick. Without their

support, encouragement and understanding, this project would never have materialized. I

am thankful to them for granting me the opportunity to work and learn by their sides.

I cordially thank Prof. Narendra M. Agrawal of the Indian Institute of Management,

Bangalore for hosting my research stay. I am indebted to him for lending his support in

every academic and non-academic way possible to make my sojourn in Bangalore a

delightful experience. I would also like to thank Prof. J. Ramachandran for giving me

invaluable insights on the Indian pharmaceutical industry and providing me with access

to companies I am grateful for the occasion when I had the opportunity to work with

him. Thanks also to Prof. P.D. Jose and Dr. Mukesh Sud for sharing their expertise.

My sincere thanks to the personnel of the pharmaceutical companies who took time off

their busy schedules to accommodate me and my requests of repeated meetings. Especial

thanks go to Ms. Rani Desai of Biocon Ltd., Mr. Ranjit Shahani of Novartis (India) Ltd.,

Mr. Joe Thomas of Strides Arcolabs Ltd., and Col. L. Gill of Wockhardt Ltd. Dr. Ajit

Dangi of OPPI had been instrumental in arranging company access and industry insight.

I am obliged to Prof. Dr. Ulrich Steger for allowing me to get involved in the IMD

Corporate Sustainability Management Forum. Thanks to Dr. Oliver Salzmann for

reviewing my thesis and the cherished friendship in Lausanne. I am grateful for Prof. Dr.

Kai Hockerts feedback on my proposals in the early days. I also thank Dr. Jost

Hamschmidt and other expert scholars at the oikos Summer Academy 2005 for their

invaluable advice.


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I humbly thank my family, for giving me the reasons to strive for a better me. My parents,

Sayeeda and Jahangir Khan taught me lifes most valuable lessons and shaped my ethos; I

draw my strengths from their unrestricted love, unconditional support and relentless

encouragement. I can never thank them enough for being my parents. I am grateful to

Samara for being such a terrific sister and a wonderful friend. I am indebted to all my

grandparents, uncles, aunts and in-laws for their love and blessings. I wish my

grandparents who have already left us were here today to share in my achievements.

Last but not least, my heartfelt gratitude to my dear husband Wolfgang whose love,

understanding and resounding encouragement paved the path in my dissertation journey.

Thank you so very much for being there.

St. Gallen, 2008 Shiban Khan


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This dissertation is dedicated to the loving memory of my Nana

Dr. A. M. M. Khan

For explaining to me the merits of Doctoral studies and inducting me into the world of pharmaceuticals,

among others.


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Table of Contents

EXECUTIVE SUMMARY.......................................................................................................................................... V

LIST OF ILLUSTRATIONS .....................................................................................................................................VI

LIST OF ABBREVIATIONS...................................................................................................................................VII

1. INTRODUCTION..................................................................................................................................................... 1

1.1 THE RESEARCH FIELD............................................................................................................................................ 1 1.2 OBJECTIVES AND COUNTRY SETTING .................................................................................................................... 3 1.3 STRUCTURE OF THE DISSERTATION ....................................................................................................................... 4

2. THEORETICAL FOUNDATIONS ........................................................................................................................ 7

2.1 INTRODUCTION TO THE CONCEPT .......................................................................................................................... 7 2.2 DEVELOPMENT OF THE THEORETICAL CONCEPT ................................................................................................... 9 2.3 CSR AND SUSTAINABILITY: DEFINITIONS AND INTERPRETATIONS ..................................................................... 13 2.4 IMPORTANCE OF CSR .......................................................................................................................................... 18 2.5 MEASURING AND MODELING CSR ...................................................................................................................... 20

2.5.1 The Business Case for Sustainability .......................................................................................................... 22 2.5.2 The Triple Bottom Line of Sustainability .................................................................................................... 25 2.5.3 The Natural Step.......................................................................................................................................... 26 2.5.4 Ecological Footprint Analysis..................................................................................................................... 27 2.5.5 The Sustainable Livelihood Framework ..................................................................................................... 28 2.5.6 Sustainability Hierarchy.............................................................................................................................. 29

3. CONTEXTUAL FOCUS ON CSR ........................................................................................................................ 31

3.1 VALUE OF A CONTEXTUAL FOCUS ON CSR......................................................................................................... 31 3.1.1 Environmental Kuznets Curve..................................................................................................................... 31 3.1.2 Effects of Globalization ............................................................................................................................... 34

3.2 THE CSR TRADITIONS OF INDIA .......................................................................................................................... 35 3.2.1 Foundation of the Indian Business Ethics................................................................................................... 35 3.2.2 Historical Development of CSR in India..................................................................................................... 40

3.3 CSR IN PRESENT-DAY INDIA ............................................................................................................................... 44

4. SUMMARY OF RESEARCH GAP AND RESEARCH QUESTIONS............................................................. 50

4.1 IDENTIFICATION OF RESEARCH GAP .................................................................................................................... 50 4.2 RESEARCH QUESTIONS ........................................................................................................................................ 51

5. THE PHARMACEUTICAL INDUSTRY OF INDIA......................................................................................... 54

5.1 RATIONALE FOR SELECTION ................................................................................................................................ 54 5.2 INTRODUCTION TO THE INDUSTRY ....................................................................................................................... 54

5.2.1 Industry Definition....................................................................................................................................... 54 5.2.2 Characteristics ............................................................................................................................................ 55 5.2.3 Product Portfolio......................................................................................................................................... 57

5.3 MACROECONOMIC CONTEXT ANALYSIS: PESTL MODEL ................................................................................... 57 5.3.1 Political Aspects .......................................................................................................................................... 57 5.3.2 Economic Aspects........................................................................................................................................ 60 5.3.3 Social Aspects.............................................................................................................................................. 62 5.3.4 Technological Aspects ................................................................................................................................. 62 5.3.5 Legal Aspects............................................................................................................................................... 63

5.4 INDUSTRY ANALYSIS: PORTERS FIVE FORCES MODEL ...................................................................................... 64 5.4.1 Bargaining Power of Buyers ....................................................................................................................... 64 5.4.2 Bargaining Power of Suppliers ................................................................................................................... 65 5.4.3 Threat of New Entrants ............................................................................................................................... 65 5.4.4 Threat of Substitute...................................................................................................................................... 66 5.4.5 Rivalry in the Industry ................................................................................................................................. 66

5.5 COMPANY CLASSIFICATIONS AND COMMON BUSINESS MODELS ........................................................................ 67 5.5.1 Foreign Multinational Companies .............................................................................................................. 68


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5.5.2 Large Local Companies .............................................................................................................................. 68 5.5.3 Medium-sized Local Companies ................................................................................................................. 69 5.5.4 Small Local Companies............................................................................................................................... 69 5.5.5 Common Business Models........................................................................................................................... 70

5.6 STRATEGIC ANALYSIS: SWOT MODEL ............................................................................................................... 72 5.6.1 Strengths ...................................................................................................................................................... 72 5.6.2 Weaknesses .................................................................................................................................................. 72 5.6.3 Opportunities............................................................................................................................................... 73 5.6.4 Threats ......................................................................................................................................................... 73

5.7 FUTURE OUTLOOK ............................................................................................................................................... 73 5.7.1 Vision 2010 ............................................................................................................................................... 73 5.7.2 Ways Forward ............................................................................................................................................. 74 5.7.3 Advent of Biotechnology.............................................................................................................................. 75

6. METHODOLOGY.................................................................................................................................................. 76

6.1 PRINCIPAL APPROACHES TO RESEARCH METHODOLOGY.................................................................................... 76 6.2 THE CHOSEN METHODOLOGY ............................................................................................................................. 76 6.3 DESCRIPTION OF THE METHODOLOGY AND METHODS ........................................................................................ 77

6.3.1 Sample Population....................................................................................................................................... 77 6.3.2 Data Collection Methods............................................................................................................................. 80 6.3.3 The Concept of Analysis .............................................................................................................................. 82

6.4 ENSURING VALIDITY: FOLLOW-UP INTERVIEWS ................................................................................................. 83 6.5 EVALUATION OF THE SELECTED METHODOLOGY................................................................................................ 85

7. EMPIRICAL CASES.............................................................................................................................................. 90

CASE A: STRIDES ARCOLAB LIMITED........................................................................................................................ 90 A.1 Company Background.................................................................................................................................... 90 A.2 Company History ........................................................................................................................................... 90 A.3 Strides Twofold Business Strategy................................................................................................................ 96 A.4 CSR at Strides .............................................................................................................................................. 101 A.5 Managerial Attitudes toward CSR at Strides............................................................................................... 110 A.6 Evaluation of CSR at Strides........................................................................................................................ 112

CASE B: BIOCON LIMITED ....................................................................................................................................... 114 B.1 Company Background.................................................................................................................................. 114 B.2 Company History ......................................................................................................................................... 114 B.3 Biocons Business Strategy: Vertical Integration........................................................................................ 122 B.4 CSR at Biocon .............................................................................................................................................. 122 B.5 Managerial Attitudes toward CSR at Biocon .............................................................................................. 133 B.6 Evaluation of CSR at Biocon ....................................................................................................................... 135

CASE C: WOCKHARDT LIMITED .............................................................................................................................. 137 C.1 Company Background ................................................................................................................................. 137 C.2 Company History ......................................................................................................................................... 137 C.3 Wockhardts Business Strategy: Acquisition and R&D .............................................................................. 145 C.4 CSR at Wockhardt........................................................................................................................................ 146 C.5 Managerial Attitudes toward CSR at Wockhardt ........................................................................................ 157 C.6 Evaluation of CSR at Wockhardt................................................................................................................. 158

CASE D: NOVARTIS (INDIA) LIMITED ...................................................................................................................... 161 D.1 Company Background ................................................................................................................................. 161 D.2 Company History......................................................................................................................................... 161 D.3 Novartis Indias Business Strategy: Contract Manufacturing.................................................................... 168 D.4 CSR at Novartis ........................................................................................................................................... 169 D.5 Managerial Attitudes toward CSR at Novartis............................................................................................ 178 D.6 Evaluation of CSR at Novartis India ........................................................................................................... 181

8. RESULTS: DISCUSSION AND EVALUATION.............................................................................................. 184

8.1 OVERVIEW OF THE CASE STUDIES FINDINGS ..................................................................................................... 184 8.1.1 Drivers of the CSR Agenda ....................................................................................................................... 184 8.1.2 Area and Content of CSR activities........................................................................................................... 185 8.1.3 Perceptions on the Triple Bottom Line...................................................................................................... 186 8.1.4 Stature of CSR ........................................................................................................................................... 186


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8.2 KEY FINDINGS FROM THE CONFIRMATORY INTERVIEWS................................................................................... 187 8.2.1 Drivers of the CSR Agenda ....................................................................................................................... 188 8.2.2 Area and Content of CSR activities........................................................................................................... 189 8.2.3 Perceptions on the Triple Bottom Line...................................................................................................... 190 8.2.4 Stature of CSR ........................................................................................................................................... 191

8.3 EMERGING ISSUES OF SIGNIFICANCE ................................................................................................................. 191 8.3.1 Closeness of CSR to Core Business........................................................................................................... 192 8.3.2 CSR and International Competitiveness ................................................................................................... 192 8.3.3 Role of Stakeholders .................................................................................................................................. 193

8.4 INTERPRETATION OF OVERALL FINDINGS.......................................................................................................... 195 8.5 TRUE GANDHIAN TRUSTEESHIP? ....................................................................................................................... 198 8.6 A CONCEPTUAL FRAMEWORK FOR CSR IN THE INDIAN PHARMACEUTICAL INDUSTRY .................................... 199

9. FINAL THOUGHTS............................................................................................................................................. 203

9.1 IMPLICATIONS FOR THEORY............................................................................................................................... 203 9.2 IMPLICATIONS FOR PRACTICE ............................................................................................................................ 207 9.3 LIMITATIONS OF THE STUDY AND AVENUES FOR FUTURE RESEARCH............................................................... 210 9.4 CONCLUSION...................................................................................................................................................... 212

BIBLIOGRAPHY ..................................................................................................................................................... 214

APPENDICES ........................................................................................................................................................... 239

APPENDIX 1: LIST OF INTERVIEW PARTNERS........................................................................................................... 239 APPENDIX 2: INTERVIEW SCHEDULE FOR THE CASE STUDIES ................................................................................. 244 APPENDIX 3: QUESTIONNAIRE FOR CONFIRMATORY INTERVIEWS .......................................................................... 245


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EXECUTIVE SUMMARY

Despite the proliferation of corporate social responsibility (CSR) related research in

academic management literature, the numerous nuances of this multidisciplinary concept

pose challenges in arriving at a clear conceptualization. Moreover, the greater part of

academic CSR research focuses on evidences from developed western countries, largely

overlooking the cues from developing economies. Therefore, the addition of CSR

viewpoints from an emerging economy can contribute invaluable insights to the growing

body of scholarly work in this realm. This dissertation addresses this research gap by

exploring CSR from an Indian perspective.

This study has been aimed at determining what CSR denotes in the Indian setting from

the pharmaceutical industrys perspective. Four comparative case studies form the basis

of the methodology, complemented with 40 supplementary interviews with top

management personnel in other companies within the industry.

The results from the study clearly suggest that the Indian perspective of CSR differ quite

significantly from the West. Three essential elements of the western conceptualization of

CSR stakeholder pressure, environmental concerns and integration into core business

are not prominently present in India. Instead, the Indian CSR perceptions and practices

seem to stem from the Gandhian ideology of social trusteeship, which perceives big

businesses (and their leaders) as social development agents. Therefore, it is apparent that

CSR in India is essentially corporate philanthropy. The companies primarily focus their

CSR activities on their employees, followed by the employees families and subsequently

followed by the community they live in. Activities range from healthcare, education,

human resources training to infrastructure development.

This finding adds to the debate of CSR conceptualization by highlighting the influence of

the local culture and context. The results support the argument that the cultural heritage

of corporate philanthropy and the current economic needs of social advancement shape

the CSR practices in India. The findings of this study thus call for sensitivity to CSRs

contextual idiosyncrasies in other regions as well, and opines against undifferentiated

applications of western CSR concepts that ignore the local cultural context.


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LIST OF ILLUSTRATIONS

Tables

Table 1: Components of Sustainable Development .................................................................................... 15 Table 2: Carbon Dioxide Emission Rates by Country ............................................................................... 33 Table 3: Indias GDP Growth (2002-2006) ................................................................................................ 61 Table 4: India's Inflation Rate (2002-2006) ................................................................................................ 61 Table 5: PESTL Analysis of the Indian Pharmaceutical Industry .............................................................. 63 Table 6: Strides Timeline ............................................................................................................................ 95 Table 7: Biocon Timeline ......................................................................................................................... 120 Table 8: Wockhardt Timeline ................................................................................................................... 143 Table 9: Novartis Timeline ....................................................................................................................... 166 Table 10: NCLCA Disability Care Package ............................................................................................. 172 Table 11: Novartis Environmental Guidelines.......................................................................................... 178 Table 12: Overview of the CSR contents and agenda in the case companies........................................... 186 Table 13: Stakeholders for CSR................................................................................................................ 194

Figures Figure 1: Structure and Content of the Dissertation...................................................................................... 6 Figure 2: Pillars of Sustainability................................................................................................................ 16 Figure 3: The Smart Zone of Sustainability ................................................................................................ 23 Figure 4: The Triple Bottom Line of Sustainability.................................................................................... 25 Figure 5: The Sustainability Hierarchy ....................................................................................................... 29 Figure 6: The Environmental Kuznets Curve ............................................................................................. 32 Figure 7: India Pharmaceuticals Market Value (in million USD) 2002-2006 ............................................ 56 Figure 8: Porter's Five Forces Analysis of the Indian Pharmaceutical Industry ......................................... 64 Figure 9: The Pharmaceutical Value Chain ................................................................................................ 70 Figure 10: Strides Shareholding Structure .................................................................................................. 93 Figure 11: Biocon Shareholding Structure................................................................................................ 117 Figure 12: The Corporate Structure of Biocon Group .............................................................................. 120 Figure 13: The Biocon Business Model.................................................................................................... 122 Figure 14: Wockhardt Shareholding Structure ......................................................................................... 140 Figure 15: The Corporate Structure of Wockhardt Group ........................................................................ 144 Figure 16: Wockhardt Generic Competency Model (WHEEL)................................................................ 148 Figure 17: The Corporate Structure of Novartis Group ............................................................................ 167 Figure 18: Novartis India Shareholding Structure .................................................................................... 168 Figure 19: Drivers of CSR ........................................................................................................................ 188 Figure 20: Barriers to CSR........................................................................................................................ 189 Figure 21: Perceptions of Stakeholder Pressure Concerning CSR ........................................................... 195 Figure 22: Conceptual Framework for CSR in the Indian Pharmaceutical Industry ................................ 201 Figure 23: Categorization of Research Efforts.......................................................................................... 203 N.B. Unless otherwise indicated within the text-body, the author is the source of all tables and figures.


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LIST OF ABBREVIATIONS

AA AccountAbility

ACE Aim for Competitive Excellence

AG Aktiengesellschaft (Public Limited Company)

AIDS Acquired Immune Deficiency Syndrome

ANDA Abbreviated New Drug Application

ANVISA Agncia National de Vigilncia Sanitria (Brazil)

API Active Pharmaceutical Ingredient

ARV Anti Retro Viral

ARY Arogya Raksha Yojana

ATM AIDS, Tuberculosis, Malaria (Program of Strides)

BATF Bangalore Agenda Task Force

BBPL Biocon Biopharmaceuticals Private Limited

BCS Business Case for Sustainability

BITS Birla Institute of Technology and Science

CAP College of American Pathologists

CAGR Compound Annual Growth Rate

CC Corporate Citizenship

CEC Commission of the European Communities

CEO Chief Executive Officer

cf. Confer

CHF Swiss Francs

CLCP Comprehensive Leprosy Care Program

CMD Chairperson & Managing Director

CO2 Carbon Dioxide

COO Chief Operating Officer

CRAM Contract Manufacturing and Research

CRC Custom Research Company

CSM Centre for Social Markets

CSP Corporate Social Performance

CSR Corporate Social Responsibility

CTD Common Technical Document (for the Registration of Pharmaceuticals for Human Use)

DFID Department for International Development (UK)

DJSI Dow Jones Sustainability Index

DMF Drug Master File

DNA Deoxyribonucleic Acid

DPCO Drug Price Control Order

EKC Environmental Kuznets Curve

EMR Exclusive Marketing Rights

EMS Environmental Management System

et al. et alia

etc. et cetera

EU European Union

e.g. exempli gratia

FCCB Foreign Currency Convertible Bonds

FDA Food and Drug Administration

FI Financial Institutions

FII Foreign Institutional Investors

FTSE Financial Times Stock Exchange

FMCG Fast Moving Consumer Goods

GBP British Pound


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GDR Global Depository Receipt

GHG Green House Gases

GIPAP Glivec International Patient Assistance Program

GMP Good Manufacturing Practices

GmbH Gesellschaft mit beschrnkter Haftung (Private Limited Company)

GRI Global Reporting Initiative

HGAP Health Global Access Project

HIV Human Immunodeficiency Virus

HMI Harvard Medical International

HQ Headquarters

HR Human Resources

HSE Health, Safety and Environment

ICRA Investment Information and Credit Rating Agency (of India)

IIM Indian Institute of Management

INR Indian Rupee

IPO Initial Public Offering

ISO International Organization for Standardization

i.e. id est

JEET Joint Efforts to Eradicate Tuberculosis

Ltd. Limited (Company)

MBA Master of Business Administration

MBBS Bachelor of Medicine, Bachelor of Surgery

MCC Medicines Control Council (South Africa)

MDT Multi Drug Therapy

MHRA Medicine and Healthcare product Regulatory Agency (UK)

MNC Multinational Corporation

MoEF Ministry of Environment and Forest

MS Master of Science

NABL National Accreditation Board for Testing and Calibration Laboratories

N.B. Nota Bene

NCE New Chemical Entity

NCLCA Novartis Comprehensive Leprosy Care Association

NDDS New Drug Delivery System

NFSD Novartis Foundation for Sustainable Development

NGO Non-governmental Organization

NILP Novartis India Leadership Program

NRI Non Resident Indian

OCB Overseas Corporate Bodies

OECD Organization for Economic Co-operation and Development

OPPI Organization of Pharmaceutical Producers of India

OTC Over-the-Counter

PEPFAR President's Emergency Plan for AIDS Relief

PhD Doctor of Philosophy

PiC Partners in Change

Pvt. Private (Limited Company)

RARE Rhetoric and Realities in CSR

RBV Resource-based View

R&D Research and Development

RWTV Rheinisch-Westflischer Technischer berwachungsverein

SA Socit Anonyme (Public Limited Company)

SL Sustainable Livelihood


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SME Small and Medium-sized Enterprises

SOP Standard Operating Procedure

SpA Societ per Azioni (Public Limited Company)

SRI Socially Responsible Investment

STEP Strides Training & Education Plan

TB Tuberculosis

TBL Triple Bottom Line (of sustainability)

TGA Therapeutic Goods Administration

TMT Top Management Team

TRIPS Trade Related Aspects of Intellectual Property Rights

UK United Kingdom (of Great Britain and Northern Ireland)

UN United Nations

UNDP United Nations Development Program

UTI Unit Trust of India

U.S. United States (of America)

USD United States Dollar

USFDA United States Food and Drug Administration

WCED World Commission on Environment and Development

WHARF Wockhardt-HMI HIV/AIDS Education and Research Foundation

WHEEL Wockhardt Holistic Excellence Enhancement Lever

WHHI Wockhardt Hospital and Heart Institute

WHO World Health Organization

WTO World Trade Organization


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1. INTRODUCTION

1.1 The Research Field

Earth provides enough to satisfy every man's need, but not every man's greed.

M.K. Gandhi

Almost 60 years after Gandhis death, the need versus greed debate has reached new

heights, especially at the corporate level. As societal expectations of businesses have

changed, narrow goal systems, short-term orientation, and the (at times dubious) means

chosen by managers to suit their own ends have become subject to much deliberation.

Consequently, socially and morally responsible business practices have gained

prominence at practitioner and academic levels, and the discussion has moved beyond

whether companies should focus on their non-financial responsibility to the how it can

be done (best) end of the spectrum (Smith 2003). The recent proliferation of Corporate

Social Responsibility (CSR) related work1 in mainstream academic management

literature (e.g., Mackey et al. 2007, McWilliams et al. 2006, Husted and Allen 2006,

Sharma and Henriques 2005) leaves no doubt about the importance and timeliness of the

topic. Studies and real life examples of the successful implementation of CSR practices

have provided evidence of their compatibility with business goals (cf. Steger 2004a).

CSR has been linked to key success factors such as corporate strategy (Porter and Kramer

2006), corporate governance (Elkington 2006), branding (Crosby and Johnson 2006),

stakeholder management (Sharma and Henriques 2005), and total quality management

(Waddock and Bodwell 2004), heralding in new insights.

However, the current literature on CSR focuses heavily on instances from developed

western markets (cf. Eberhard-Harribey 2006, Knights and OLeary 2006, Vuontisjrvi

2006, Habisch et al. 2005, etc.), and the replicability of these findings on the emerging

markets, e.g., of Asian countries, is lacking. Although there have been recent attempts at

mapping the CSR terrain of emerging markets (e.g. Jamali and Mirshak 2007, Husted and

1 As Chapter 2 will show, scholars use a multitude of terms to describe this phenomenon. They use CSR and corporate sustainability (CS) synonymously in most cases, although there are subtle differentiations. While these differences are addressed in the appropriate section, for the general purpose of this study, the terms CSR and CS have been considered interchangeable.


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Allen 2006, Waldman et al. 2006, Chen 2006), they are quite insufficient when weighed

against the coverage of western countries, and thus research gaps are obvious. Moreover,

the literature (cf. Jamali and Mirshak 2007, Welford 2004, Mohan 2001) often assumes

that firms in the emerging Asian markets lag behind in their CSR agenda in comparison

to their western counterparts, overlooking the possibility of context-specific

idiosyncrasies. Therefore, in order to understand the CSR agenda in the Asian contexts

and to generate a solid base of empirical evidences, it is imperative to expand CSR

research in these settings, with sensitivity toward possible local particularities.

The potentials of a contextual focus in studying CSR are vast, and they can be expected to

produce noteworthy outcomes. Prior to embarking upon CSR research at the corporate

level in emerging Asian markets, it is crucial to note that companies operating contexts

in Asia are likely to differ from those of their western counterparts. The rationalization

behind this argument is twofold. The first is due to the differences in the economic

environments. The emerging markets in Asia face a multitude of critical issues with

regard to globalization, poor infrastructure and basic services (Davies 2002) and often

also show evidence of deficient regulatory frameworks (Osland et al. 2002). Secondly, as

Ramasamy and Ting (2004) indicate, in general, there are significant differences between

the East and the Wests cultural environments and moral judgments, besides the role that

corporate entities play in the relevant societies. Such diversities of perceptions play a

decisive role in the clarification of a companys social roles and in determining how it

should be fulfilled in the context. Therefore, it is likely that western models of CSR may

not be truly fitting in Asian settings. An undifferentiated application of existing CSR

models that are based on western norms prematurely assumes comprehensive

transferability, and thus neglects the potentials inherent in idiosyncratic local solutions.

Wheeler and Ng (2004) also criticize standardization of CSR policies and practices across

companies as a potential constraint to progress in this regard. Therefore, researchers (and

practitioners) must not rule out the possibility of CSRs culture or context-bound

idiosyncrasies prior to undertaking a careful examination.


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1.2 Objectives and Country Setting

The purpose of this research project is to arrive at a clear conceptualization of CSR in the

context of an emerging Asian market. India as an up-and-coming emerging Asian giant

was chosen as the research setting to endow the study with a more specific perspective.

Choosing India as the research setting is significant for a number of reasons. On the one

hand, the Indian economy boasts a very high growth rate, with some estimates for the

gross domestic product (GDP) growth rate standing as high as 9.4 percent in the 2007

financial year.2 In fact, experts had even predicted that in 2007 India would have taken

over Chinas gross domestic product rate for the first time (cf. Vembu 2006). While

realization of this projection is unlikely, India is undoubtedly on the way to becoming one

of the most significant players in the global economy in the very near future. If it sustains

eight percent growth rate on average, India will overtake the economies of Italy, France

and the UK by 2015, and surpass the U.S. economy by 2050.3 On the other hand, India is

the land of ancient civilizations, with strong cultural traditions and identities. The

interactions between these age old traditions and the rapid integration into the world

economy make India an ideal ground for this study not only for an appraisal of Indias

current CSR context as a global player, but also to explore how CSR is conceptualized in

a patently different cultural context from the West.

Corporate India has always boasted a strong tradition of corporate philanthropy, where

business leaders have been viewed as leaders of social development (Mohan 2001).

Regardless of this strong tradition of philanthropy, CSR research in India in the recent

past has primarily focused on identifying the ideal how to carry out CSR, often leading

to contradictory findings on the related practices (e.g. Ruud 2002, Kumar et al. 2001).

The undifferentiated application of western ideologies of corporate responsibility in the

Indian context may have contributed to this inconsistency in the previous literature.

Mohan (2001) has already hinted that in the CSR context, expectations with regard to

corporate India differ from expectations in the traditional western sense. Indian

stakeholders understanding of the CSR agenda is influenced by cultural, political, and

2 Source: Central Statistical Organization, Ministry of Statistics and Program Implementation, India. 3 Source: In 10 years, Indias GDP will surpass [sic] UKs, Rediff News, retrieved 22 March 2007 from http://www.rediff.com/money/2007/jan/23india.htm.


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development aspects, and it is crucial to identify these to determine the right approach to

implementing CSR at the corporate level.

Therefore, before determining appropriate approaches to CSR management in India, it is

imperative to explore the concept of CSR as applicable to Indian companies what is

CSR? within their specific contexts. This research project aims to address this research

gap.

This research projects intended contributions are threefold. Firstly, from a conceptual

standpoint, this study will play a part in CSRs theory building process by adding the

perspectives from an emerging market, more specifically, the applicability and required

adaptations of current CSR models to the Indian context. It will contribute to building a

framework for CSR in India, identifying the contents and nature of the CSR agenda and

exploring their relative importance in the context. This framework can then serve as a

basis for more refined and focused analysis of context specific studies. Secondly, it

presents new and unique data on CSR practices in India. Thirdly, and in addition to

theoretical contributions, the study strongly contributes to applied management research

and actual practices. With a status quo analysis and a CSR framework in hand, the CSR

discussion among Indian companies could benefit substantially, and in the process,

contribute to the discourses maturation.

This study thus addresses the crucial questions of the what and why of CSR practices

in India that are essential for progressing with the how to aspects. This also makes

replications in other, similar, contextual settings (i.e. in other emerging market settings)

possible.

1.3 Structure of the Dissertation

This dissertation is divided as follows. Chapter two describes the origins of the CSR

concept. CSRs correlation with other closely linked terms and constructs is explored, as

well as different models of CSR. The focus then shifts to understanding the importance of

a contextual approach to CSR in chapter three, highlighting the different factors that play

decisive roles in shaping this perspective. The subsequent section is dedicated to

understanding CSR in India. It provides a background on the elements that have played a


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crucial role in shaping CSR in this setting. It is followed by an outline of the status quo of

CSR research in India. Drawing attention to the research gaps, the dissertation continues

by raising the key research questions in chapter four. Chapter five introduces the

pharmaceutical industry of India, the industry of choice in this research study. Chapter six

discusses the methodology for the study at hand that pays special attention to the

contextual factors for this study.

Describing the four case studies, the dissertation moves on to the empirical section in

Chapter seven. Chapter eight presents and analyzes the results of the study. This chapter

also presents the derived conceptual framework of CSR in the Indian pharmaceutical

industry. Chapter nine discusses the implications for theory and practice, reflects on the

studys limitations, and makes suggestions for future research. Figure 1 presents a

graphical overview of the structure and content of the dissertation.


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Figure 1: Structure and Content of the Dissertation

Chapter 8: Results: Discussion and Evaluation

Interpretations Conceptual Framework

Discussion

Chapter 1: Introduction

The Research Field Rationale for the Study

Chapter 2: Theoretical Foundations

Definitions and Concepts CSR Models

Chapter 3: Contextual Focus on CSR

Importance of a Contextual Focus CSR in India

Chapter 4: Research Gap and Research Questions

Chapter 5: The Pharmaceutical Industry of India

Chapter 6: Methodology

Chapter 9: Final Thoughts

Implications for theory & practice Limitations and suggestions for future research

Chapter 7: Empirical Evidence from Case Studies

Case A Case B Case C Case D


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2. THEORETICAL FOUNDATIONS

2.1 Introduction to the Concept

Dow Votaws 1972 comments on what CSR means still hold true today for the most part.

He contended:

The term (CSR) is a brilliant one; it means something, but not always the

same thing, to everybody. To some it conveys the idea of legal responsibility

or liability; to others, it means socially responsible behavior in an ethical

sense; to still others, the meaning transmitted is that of responsible for, in

a causal mode; many simply equate it with a charitable contribution; some

take it to mean socially conscious; many of those who embrace it most

fervently see it as a mere synonym for legitimacy, in the context of

belonging or being proper or valid; a few see it as a sort of fiduciary duty

imposing higher standards of behavior on businessmen than on citizens at

large. (Votaw 1972, p. 25)

As the following discussion will show, even after three decades have past since Votaws

observations, CSR is still notoriously difficult to define as a concept despite an ever-

growing body of scholarly and popular work. Matten and Moon (2004) identify three

reasons that lie at the root of this conundrum. Firstly, it is a complex concept with

inherent value judgments that have relatively compliant application rules. Secondly, a

plethora of concepts is used synonymously with CSR, and scholars disagree over the

extent of their similarity and interchangeability. The third reason complicating the

process are the regional and context-specific approaches to CSR. The following section

presents a review of the CSR and corporate sustainability discussion with its related

aspects in the light of these considerations. McWilliams et al. (2006) rightly observe that

CSR continues to be a fertile ground for theory development and empirical analysis

(McWilliams et al. 2006, p. 2).

In general, therefore, CSR relates to those responsibilities of corporate operations that go

beyond the financial aspects of its performance. Classic management and economic

theories have tended to adopt a functionalist viewpoint toward business and capitalism.


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As a result, they normally viewed (and for the most part continue to view) environmental

effects and costs as externalities that are inevitable in the process of (economic and

industrial) progress (Banerjee et al. 2003, Banerjee 2002). Although Adam Smith the

father of modern capitalism placed due emphasis on serving public interests and did

endow capitalist behaviors with a moral obligation (Newbert 2003, Bassiry and Jones

1993), the subsequent practice of capitalism and the free market moved away from his

original philosophy. The functionalist homo economicus rationale (cf. Persky 1995)

largely dominated the management literature and practice for the better part of the 20th

century. However, proactive environmental management (Hoffman 2001) became more

prominent in the latter years of the 20th century. The focus had shifted from strictly short-

term profit orientation, and corporations were interpreting their business models in a more

responsible manner and even enjoying competitive advantages (cf. Hoffman 2001).

The CSR concept thus makes a crucial contribution to (as well as extending) classic

management theories, as it resides in the idea that economic (financial) sustainability by

itself cannot ensure a firms overall sustainability (Gladwin et al. 1995). As a result,

sustainability/CSR has become one of the most-touted mantras in the management field

(Dyllick and Hockerts 2002), and has been promoted as an alternative to companies

traditional growth and profit-maximization models (Wilson 2003).

CSR is a relatively new terminology to describe the relationship between business and

society (Garriga and Mel 2004), and is closely associated with a host of related concepts

in the field. Although these concepts often overlap, preferences for a certain terminology

or related operationalization seem to be subjective, depending on the scholars points of

reference and perceptions of the concept. For example, Brown (2004) opts for corporate

responsibility instead of corporate social responsibility, believing the latter term to be

limited by its exclusion of moral and ethical aspects. European researchers, on the other

hand, advocate the use of societal responsibility in lieu of social responsibility, as in the

continental European context social can be interpreted as referring only to issues of social

welfare (cf. Dyllick and Hockerts 2002, Andriof and McIntosh 2001). Scherer and

Palazzo (2007) consider CSR to be an umbrella term for the debate on businesses role in

society.


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2.2 Development of the Theoretical Concept

Hardin (1968) popularized the concept of the tragedy of the commons, which highlights

the conflict that inevitably result from resource allotments between individuals and the

community. He argues that multiple sources limitless demands on a finite resource

would lead to over-exploitation and mistreatment of the resource, ultimately depleting it

completely. This idea led to the first insights into modern sustainability in the Limits to

Growth discourse of the 1970s (Meadows et al. 1972), although earlier scholars have

advocated about balancing nature conservation with economic activities (cf. Lumley and

Armstrong 2004). Nevertheless, until the 1992 Earth Summit in Rio, neither politicians,

nor NGOs, nor business leaders had given the concept of sustainability/CSR center stage

as a principal human challenge for the 21st century (cf. Hockerts 2003).

Then again, the ideas of business entities social sensibility and good citizenship are

hardly novel, and can be traced back a long way. As the following discussion on earlier

literature demonstrates, the mainstream concepts of corporate social responsibility and

sustainable development essentially convey the same message as sustainability, and

academics frequently use them synonymously with (corporate) sustainability.

Social concerns began to infiltrate management education after the Second World War,

with social responsibility first emerging as an academic topic in the 1950s. Bowen (1953)

was a pioneer in delineating the social responsibilities of businessmen, stating that

corporate social responsibility refers to the obligations of businessmen to pursue those

policies, to make those decisions or to follow those lines of action which are desirable in

terms of the objectives and values of our society (Bowen 1953, p. 6). This was a

landmark initiative to define the concept, and earned Bowen the designation Father of

corporate social responsibility (cf. Carroll 1999, p. 270). Among the notable contributors

to the literature in the 1960s are Davis (1960), Frederick (1960) and McGuire (1963).

Davis argued in favor of social responsibility from a managerial viewpoint, and stated

that it referred to those decisions and actions of managers that were taken for reasons at

least partially beyond the firms direct economic and technical interest (Davis 1960, p.

70). Frederick viewed the concept from a stakeholder perspective, and held that

businessmen should oversee the operation of an economic system that fulfills the


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expectations of the public (Frederick 1960, p.60). McGuire (1963) drew a more succinct

definition by asserting that businesses must accept a social responsibility that extends

beyond economic and legal obligations. In this period, the publication of Rachel Carsons

landmark book Silent Spring in 1962 launched the worldwide environmental movement

in the wake of environmental disasters brought on by corporate negligence and ignorance

in the U.S. (Carson 1962). Inspired by the mass social movements of the 1960s in Europe

and America, public acceptance of companies social responsibilities also began to gain

ground.

Profuse theorization on and conceptualization of companies social responsibilities

emerged from scholars in the fields of sociology, management and business ethics in the

1970s (cf. Carroll 1979, Ackermann and Bauer 1976, Davis 1973, Johnson 1971). Similar

to Frederick (1960), Johnson (1971) also held a stakeholder view and considered

managers corporate social responsibility as utility maximization, rather than profit.

Carrolls (1979) CSR model proved to be immensely popular, and has been cited widely.

He conceptualized four hierarchical but mutually inclusive responsibilities for a

corporation: economic (to be profitable), legal (regulation-compliant), ethical (acting in a

righteous and fair manner) and philanthropic (contributing to a broader civic society for

educational, cultural or recreational purposes). Building on Carrolls work, Wartick and

Cochran (1985) ventured to formulate a general model for corporate social performance

(CSP).

Eventually, the 1980s and 1990s saw the concept of corporate social responsibility evolve

theoretically and receive much empirical attention (cf. Wood 1991), and complemented

the growing trend of theoretical focus on the environmental dimension. 1999 saw the

publication of Natural Capitalism, espousing for the first time that companies can

combine positive financial results with pollution reduction, if they rethink certain

operating procedures and use of materials (cf. Hawken et al. 1999). This book

popularized the idea of natural capital and challenged the conventional notions of

accounting that cataloged environmental impacts of a firm as externalities. The natural

capitalism theory focused heavily on resource efficiency, and advocated ways to exploit

the market systems for environmental advantages.


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Banerjee (2002) builds up on the natural capitalism philosophy and promotes the idea of

corporate environmentalism as a corporate strategy, where environmental concerns are

taken into account in a firms core decision-making processes. He stresses the recognition

of the natural environments importance and legitimacy as a primary element of corporate

strategy formulation, based on the belief that environmental problems arise from

corporate activities (Banerjee 2002, p. 181). This integration of environmental concerns

into core business strategy may help to build a successful business case for sustainability,

whereby a firm ultimately actually benefits from adapting environment-friendly or green

policies (cf. Hawken et al. 1999, Porter and van der Linde 1995).

On a more inclusive level, Freeman (1984) formulated the stakeholder theory, which

proposed that the firm must meet the expectations of external groups or individuals who

may have an effect on the firms performance. The rationale behind the stakeholder

theory is that it would be beneficial for firms to link up with stakeholders (as opposed to

only shareholders) to legitimize and maintain their license-to-operate (Howard-Grenville

et al. 2006). Donaldson and Preston (1995) expanded Freemans theory and maintained

that the normative base of the theory to engage in stakeholder activities should be

regarded as fundamental.

A more moral take on the stakeholder theory is found in the corporate stewardship theory

(cf. Worrell and Appleby 2000, Davis et al. 1997, Donaldson and Davis 1991), which

adds a new dimension to the CSR and business ethics debate. This theory suggests that

firms should exclusively focus on carrying out their social duties and responsibilities,

without regard to the financial consequences of such acts.

Jones (1995) introduced an instrumental theory for stakeholder management, enhancing

the stakeholder theory and surmising that the high returns on regular and trusting

interaction with stakeholders make firms strive for better ethical performances and give

them significant competitive advantages.

In a similar line of thought, the concept of corporate citizenship emerged (cf. Marsden

and Andriof 1998). As a broader concept, corporate citizenship (CC) deals with

businesses interplay in society beyond their economic roles, and Birch (2001) regards

this as the next step to CSR. According to Carroll (1999), it is an extension of the


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operationalization of businesses role in society in the management literature. Matten and

Crane (2005) clearly separate it from CSR, and argue that CC is strategic in nature,

whereby assuming that stabilities in the social, environmental and political scenarios are

profitable for business (Windsor 2001, Wood and Logsdon 2001). Crouch (2006) agrees

with Matten and Crane (2005) that CC is not synonymous with CSR, and that CC views

the organization in a wider perspective (than CSR). However, regardless of scholarly

debate upon the depth and breadth of these (closely-related) concepts, quite a few global

companies (e.g. Novartis) treat CC and CSR as synonymous.

A critical viewpoint along regulatory lines is raised by the corporate accountability theory

(cf. Swift 2001, Zadek et al. 1997), which states that firms are answerable to society for

the consequences of their actions. Stakeholder interactions and corporate environmental

reporting are popular tools for realizing corporate accountability. Waldman et al. (2004)

meanwhile applied the transformational leadership theory to highlight the role that the top

management team can play in relation to CSR activities within a firm. Their study shows

that a CEOs intellectually stimulating leadership can lead to a firm being engaged in a

higher degree of strategic CSR than its peers.

Strategic application of CSR can also be discussed within the perspectives of the

resource-based view of the firm (RBV) (cf. Barney 1991, Wernerfelt 1984). This view

presupposes that firms need to exploit their resources (e.g., assets, capabilities,

competencies, firm attributes etc.) in such ways that these resources become sources of

sustainable competitive advantage. In his 1995 article on the natural-resource-based view

of the firm, Hart applied the RBV framework to a firms environmental responsibilities

(Hart 1995), stating that there is a positive correlation between environmental

responsibility and financial performance. While Russo and Fouts (1997) confirmed Harts

assertions, their contemporaries Preston and OBannon (1997) found a few negative

correlations. However, as Roman et al. (1999) show in their comparative compilation of

studies investigating the social and financial performance link, negative correlation

between these two have been increasingly rare or inconclusive in later years, while the

literature on positive correlations has become increasingly robust.


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Husted and De Jesus Salazar (2006) conducted a cost/benefit analysis of social

responsibility under three scenarios concerning a firms willingness to engage in CSR

altruism, coerced egoism, and the strategic use of CSR. In altruistic CSR, companies take

on the role of stewards who are proactively socially responsible, disregarding the effects

on the financial bottom line. In coerced egoism, companies only undertake CSR activities

when they are compelled to do so by external factors such as regulations. The strategic

use of CSR is related to the business case for sustainability, where the companys

financial bottom line benefits from its CSR activities. Perhaps not surprisingly, the

authors prefer the strategic use of CSR to the other two more extreme manners of CSR,

both of which can threaten the existence of the firm (albeit in very different ways!).

Some scholars (e.g. Sacconi 2004) consider corporate governance a discrete branch in

management studies to be a part of CSR. However, the majority of corporate

governance studies do not explicitly relate to CSR, although one could argue that there

are implicit assumptions in this regard (cf. Steger 2004b). Elkington (2006) opines that

corporate governance needs to integrate greater social concerns whose scope goes beyond

the immediate jurisdiction of the boardroom.

In summation, a number of theories in management science (and economics) have

contributed toward developing a modern CSR concept. There have also been concepts

within the CSR realm that stress various nuances of the notion. Nevertheless, the

theoretical maturation of CSR has not yet been concluded. The following section

discusses scholarly attempts at defining CSR.

2.3 CSR and Sustainability: Definitions and Interpretations

The term sustainable was first used in relation to forestry and natural resource

management (cf. Hediger 1999). Although earlier work on CSR primarily dealt with

issues in the social arena (cf. Frederick 1960, Bowen 1953), later years have seen the

inclusion of environmental aspects in its realm (cf. van Marrewijk 2003, CEC 2001),

contributing to the ongoing debate on whether corporate sustainability (CS) and CSR are

mutually exclusive. In fact, van Marrewijk (2003) holds CS and CSR to be synonymous,

and advocates context-specific contents for a CS/R definition that is in keeping with the

individual organizations awareness and goals.


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As currently understood, the concept of sustainability and CSR lies in the legendary

definition of sustainable development offered by the Brundtland Commission of the

World Council on Economy and Development (WCED) as development that meets the

needs of the present without compromising the ability of future generations to meet their

own needs (WCED 1987a, p. 8). In the corporate context, sustainability is the

application of sustainable development at the firm level, in addition to the global, national

and local levels (Hockerts 2003). Atkinson (2000) likewise holds sustainability to be one

of the key concepts to have emerged from sustainable development. Dyllick and Hockerts

(2002) draw upon the Brundtland Commissions definition of sustainable development to

define corporate sustainability, stating that it is meeting the needs of a firms direct and

indirect stakeholders [] without compromising its ability to meet the needs of future

stakeholders as well (Dyllick and Hockerts 2002, p. 131). Schaltegger et al. (2002) hold

the central challenges of corporate sustainable development to be the integration of the

economic, ecological and social aspects of a firms activities (Schaltegger et al. 2002, p.

6), whereas, Starik and Rands (1995) equate sustainable development with ecological

sustainability, and state that the test of an organizations ecological sustainability is the

degree to which its activities can be continued indefinitely without negatively altering the

limiting factors that permit the existence and flourishing of other groups of entities,

including other organizations (Starik and Rands 1995, p. 909). The limiting factors in

this context refer e.g. to the access and utilization of resources, among other aspects

(Starik and Rands 1995).

It therefore follows that as theoretical concepts, many of CSR and corporate

sustainabilitys roots lie in the concept of sustainable development. However, scholars

have defined and interpreted sustainable developments core concept in a multitude of

ways, and there have been many contradictions in the elucidation of the concept from

early on (e.g. Redclift, 1987). The landmark Brundtland definition has been streamlined,

specified and made more relevant and contextual for a number of ensuing definitions.

Starik and Rands (1995), for example, have commented on the Brundtland definition as

being tentative and outdated, because they believe that we have already crossed the

critical threshold of global carrying capacity into decline (Starik and Rands 1995). The

rich perceptive and definitional diversity of this core concept has contributed to the


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subsequent concepts of CSR and corporate sustainability. A glance at the environmental

economics (one of the fields that CSR has roots in) literature shows the concepts of inter-

generational cost transfer, limits to and the depletive nature of resources, and

compensating for natural resource exhaustion emerge as major components that

characteristically define sustainability and sustainable development. Table 1 presents a

selection of components that have emerged in sustainable development definitions over

the years in this context, which forms a base for the ensuing concepts of corporate

sustainability and CSR.

Characteristics Proponents

Consumption made possible at a persistent rate over generations; intergenerational cost transfer

Viederman (1994), Hawken (1993), Pearce (1993), WCED (1987a)

Resilience between ecological and socio-economic and system goals

Corson (1994), Costanza et al. (1992), Daly (1992), Barbier (1987)

Limitation of natural resources Dyllick and Hockerts (2002), Holdgate (1993), Clark (1991)

Need satisfaction without affecting long-term resource consumption

Starik and Rands (1995), Bartelmus (1994)

Compensate resource exhaustion with future utility

Pezzey (1992), Pearce et al. (1990)

Consisting of multilevel & multi-system characteristics that require integration

Schaltegger et al. (2002), Holme and Watts (2000), Starik and Rands (1995)

Fulfillment of stakeholder demands Dyllick & Hockerts (2002), Holme & Watts (2000)

Contextual in terms of temporal and societal setting

Moon (2007)

Table 1: Components of Sustainable Development (Source: based on and extending Gladwin et al. 1995, p.877)

In defining CSR, Holme and Watts (2000) highlight a firms ethical obligation to

positively influence the livelihood of its stakeholders at different levels employees,

local community and society in that order. The authors of the Green Paper on CSR

presented by the Commission of the European Communities go a step further by

including environmental issues in the sphere, defining CSR as a concept whereby

companies decide voluntarily to contribute to a better society and cleaner environment

(CEC 2001). Dyllick and Hockerts (2002), in tune with Elkington (1997), maintain that

social responsibility is only one dimension of the three pillars of sustainability

economic and ecological being the other two.


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Wilson (2003) proposes a somewhat different conceptualization, distinguishing between

CSR and corporate sustainability. He states that corporate level sustainability is based on

four distinct conceptual principles, namely sustainable development, CSR, the

stakeholder theory, and corporate accountability theory. In this context, Wilson (2003)

considers sustainable development to be a derivative of three concepts, e.g. the principles

of economics, ecology and social justice. For him, sustainable development delineates the

boundaries of the sustainability subject matter, and describes the preconditions for a

common societal goal. As the second pillar, CSR provides the ethical arguments as to

why corporations should work toward attaining sustainability goals, and is based on

ethics and moral philosophy. Derived from the strategic management perspective, the

stakeholder theory offers business arguments for sustainability and thus constitutes the

third pillar. Lastly, from a legal compliance perspective, the corporate accountability

theory presents ethical arguments for sustainability performance reporting, and ensues

from business law. These four pillars of sustainability and their underlying disciplines are

depicted in Figure 2, and draw attention to the apparent contradictions within this

multidimensional and multidisciplinary construct.

Figure 2: Pillars of Sustainability (Source: based on Wilson 2003, p. 2)

Sustainability

Sustainable Development Stakeholder

Theory

Corporate Social

Responsibility

Corporate Accountability Theory

Econom

ics

Ecology

Social Justice

Moral Philosophy

Strategic Management

Business Law

Underlying Disciplines

Sustainability Sustainability

Sustainable DevelopmentSustainable Development Stakeholder

Theory Stakeholder Theory

Corporate Social

Responsibility

Corporate Social

Responsibility



Econom

ics

Ecology

Social Justice

Moral PhilosophyMoral

PhilosophyStrategic

ManagementStrategic

ManagementBusiness LawBusiness Law

Underlying Disciplines Underlying Disciplines


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In conclusion, it can be surmised that the different, albeit related, viewpoints on CSR and

sustainability have given rise to a rich body of literature, but significant disagreement still

prevails. Daly (1992) actually saw merit in this lack of a definitive CSR construct, and

held that it had proved to provide consensus in support of the moral and economic

unfairness of treating the earth as a business in liquidation. Some scholars have

attempted to map the terrain by providing meta-reviews on the CSR discourse (cf.

McWilliams et al. 2006, Kakabadse et al. 2005, Matten and Crane 2005, Garriga and

Mel 2004, Carroll 1999). Nonetheless, as McWilliams et al. (2006) point out, the

absence of a universally-agreed-upon definition of CSR and sustainability is the most

contentious issue in the context of CSR research. Deciding on such a definition would be

the first step before differentiating between the subfields of CSR, e.g. the differentiations

between strategic, altruistic and coerced CSR types as put forward by Husted and De

Jesus Salazar (2006).

It is also imperative to note here that in the Indian context, the term CSR is most

prevalent, while corporate sustainability is hardly used.4

CSR and Business Ethics

While partly overlapping and seemingly complementing each other, business ethics and

CSR nonetheless differ from each other to some extent. Crane and Matten (2004) refer to

CSR as an increasingly common term in the rhetoric surrounding business ethics

(Crane and Matten 2004, p. 21) and suggest evaluating business ethics practices

according to their potentials to contribute to CSR. Both concepts share descriptive,

prescriptive, and normative elements with regard to the role of corporations. Carroll and

Buchholtz (1999) hold business ethics to be concerned with the good and bad or right

and wrong behavior that takes places within a business context (Carroll and Buchholtz

1999, p. 99). In turn, CSR also addresses the question of what is good (and for that

matter, bad) within a strategic business context. The concepts thus partly complement

each other, and it is therefore no surprise that there are efforts to conceptually link the

two, e.g. in the form of sustainability ethics (cf. Cairns 2003).5

4 Prof. PD Jose of the Indian Institute of Management, Bangalore, personal communication 14 July 2005. 5 For a more detailed review of business ethics, see Phillips (1991).


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Moreover, both business ethics and CSR are circumscribed with relation to contingencies

(such as emerging markets, and multinational corporations)6 and reveal ongoing

theorizing processes (cf. Sharma 2002). Similar to CSR, and despite its earlier

emergence, business ethics still requires more models, tools, measurement concepts and

further integration into core management (research). As Carroll and Bucholtz (1999) state

[] until senior management fully embraces the concepts of moral management, the

transformation in organizational culture that is so essential for moral management to

blossom, thrive, and flourish will not take place (Carroll and Bucholtz 1999, p. 117).

The same is likely to hold true for CSR as well.

Business ethics is a more established research stream, whereas CSR is a modern

management (research) concept exhibiting more dynamics, momentum, and conceptual

innovations in a shorter time frame and, in many ways, is an extension of the business

ethics discourse (OHara 1998). CSR attempts to bridge the gap between managements

financial profit orientation and their social roles through approaches such as the business

case for sustainability. Thus, CSR partly shares and partly moves beyond business ethics

normative focus, and leans more strongly toward the functional view dominant in

business research.

It is, therefore, evident that CSR as a concept not only draws upon other related

constructs dealing with businesses role in society and its responsibilities toward its

stakeholders, but also contributes to the discussion in a more advanced stage. Although

the various concepts discussed so far often exhibit differing origins, their meanings and

implications increasingly converge to illuminate the same phenomenon in different

shades.

2.4 Importance of CSR

As mentioned earlier, the proliferation of CSR research in core management academia,

the increased integration of the CSR agenda in corporate practices, and attention from the

6 See Welford (2004) and Christmann (2004) for sustainability and Robertson & Crittenden (2003) and Holtbrgge and Berg (2004) for business ethics.


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mainstream corporate media7 are concrete proof of the importance and timeliness of the

issue. At a corporate level, various factors have emerged as important contributors to this

phenomenon and in favor of building a business case for sustainability and/or achieving

the triple bottom line.

Traditionally, a firms responsibilities can be described as twofold: to the primary

shareholders, and to the secondary stakeholders (Freeman 1984). Sustainable business

practices, especially the business case for sustainability view, allow the firm to fulfill its

responsibilities toward both in better ways. This plays a significant role in providing a

firm with market benefits and building competitive advantage in a multitude of ways.

Firstly, the sustainable use and management of social and environmental capital ensures a

consistent economic yield over a longer period. As Steger (2004a) points out, when

companies operate in the smart zone (cf. Figure 3: The Smart Zone of Sustainability),

they not only boost their environmental and social performances, but also perform

optimally in the financial sense, leading to the attainment of the triple bottom line. This

ultimately leads to long-term shareholder value creation. Moreover, the emergence of the

socially responsible investment (SRI) niche means that companies with better CSR

profiles could enjoy an exemplary reputation, and may attract more investors (van den

Brink and van der Woerd 2004).

In addition, CSR adds to brand value creation (Werther and Chandler 2005). Brand value

and reputation are undoubtedly two of the most valuable company assets (cf. van Rekom

2005). Consumers are becoming increasingly aware and informed about companies CSR

values, and it is professed to become the next major element in product branding. As a

commentator in The Economist8 very aptly puts it, it would be clever to say there is

nothing different about our product or price, but we do behave well. Sustainable

production and distribution processes, therefore, might well be the differentiation point

between competitors, and help to build trust and loyalty among customers (cf. Schrage

2004). Corporate goodwill created via CSR activities are invaluable (Murray and Vogel

7 For example, The Economists June 2007 issue, Times July 2006 issue, Financial Times February 2006 issue and BusinessWeeks December 2005 issue, among others, carried special CSR features. 8 The Economist, 8 September 2001, as quoted in CSR Europes The European Business Campaign: Why Corporate Social Responsibility, retrieved 19 December 2005 from www.csrcampaign.org/why/default. aspx.


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1997), with increased customer loyalty (Maignan et al. 1999) and positive reception to

new products (Brown and Dacin 1997).

Adapting sustainable business practices translates into a host of advantages within the

firm itself. It can attract better quality workforce (Greening and Turban 2000) and

increase employee commitments, leading to low turnover rates and reduced misconduct

(Maignan et al. 1999). Efficient uses of resources reduce wastage, and thus the overall

operating cost decreases. Optimum management of social and environmental capital

facilitates long-term return on investments and, consequently, boosts the firms long-term

financial performance (Carroll and Buchholtz 2000).

Therefore, sustainable business practices are rewarded with an increase in firm

productivity, and enhanced relations with the community and government. It ultimately

leads to long-term positive relations for the firm with its stakeholders resulting in a

robust license to operate. In fact, in many parts of the world, corporate philanthropy,

social responsibility and sustaining the core values of the indigenous population have

greatly enhanced companies licenses to operate in unfavorable host communities (cf.

Anderson and Bieniaszewska 2005, Genest 2005, Zinkin 2004). The companies

sustainable practices lessen the burden on environmental resources, and allow the

community, and by extension, the wider world to enjoy a better quality livelihood.

Consequently, it also helps to protect natural capital and ensures their long-term use.

2.5 Measuring and Modeling CSR

Besides spreading awareness of CSRs importance, its implementation and, consequently,

its measurement have also triggered much debate. As apparent from the literature, the one

common CSR theme is ensuring future and present well-being. The central tenet of CSR

indicators thus emphasizes the management of an asset portfolio over time (Atkinson

2000), taking natural wealth (and ecological liabilities) into consideration.

Preceding the discussion on how CSR is to be measured is the discourse on whether CSR

should and can be measured at all. Quantification of natural capital and the subsequent

measurement of CSR have been repeatedly criticized (and also vehemently opposed) by

environmental scholars (cf. Abramovitz 2001, Sagoff 2001, Pearce 1998). In


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conceptualizing a price for natural capit

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