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Corporate Social Responsibility and Financial Performance: A Study of ISO 26000 Implemented Companies

Corporate Social Responsibility and Financial Performance: A Study of ISO 26000 Implemented Companies

A Research Project Submitted to the Department of Management Sciences In partial fulfillment of the Requirements for the degree of Master of Business Administration

Table of Contents

  • Abstract 3
  • 1.0 Introduction. 3
  • 1.1 Importance of CSR.. 4
  • 1.3 CSR benefit to the Community. 5
  • 1.4 Research Questions. 5
  • 1.5 Stakeholder Theory. 5
  • 1.6 CSR in Pakistan. 6
  • 1.7 Objective and Uniqueness of Study. 6
  • 2.0 Literature Review.. 7
  • 2.1 Definition of CSR.. 8
  • 2.2 Concept of CSR.. 8
  • 2.3 CSR and financial performance. 11
  • 2.4 CSR Dimensions. 16
  • 2.4.1 CSR Model 16
  • 2.4.2 Philanthropic responsibility. 17
  • 2.4.3 Ethical responsibilities, 17
  • 2.4.4 Legal responsibilities. 17
  • 2.4.5 Economic Responsibilities. 17
  • 2.4.6 CSR items Table. 18
  • 2.5 Corporate social responsibility and Financial Performance Model Analysis. 20
  • 2.6 CSR and Financial Performance Model 21
  • 2.7 ISO 26000. 21
  • 2.7.1 Hypothesis. 22
  • 2.8 CSR in Pakistan. 22
  • 2.8.2 Pakistan State Oil CSR Activities: 23
  • 2.8.3 Nestle Pakistan CSR activities. 23
  • 3.0 METHODOLOGY.. 24
  • 3.1 Sample and procedure. 24
  • 3.2 Survey Results. 25
  • 3.2.1 Profile of the Respondents. 25
  • 3.3 Data Analysis. 26
  • 3.3.1 Data Reduction, validity and reliability of the constructs. 27
  • 3.3.2 Figure Correlation Table. 29
  • 3.3.3 Path Analysis. 30
  • 4.0 Conclusion. 31
  • 5.0 Limitation. 32
  • 6.0 Future Implication. 32
  • 7.0 Questionnaire. 33
  • 7.1 Social Responsibility Practices. 33
  • 8.0 References. 36

Abstract

Corporate Social Responsibility (CSR) as a common business practices has only recently established a foothold in developing countries. This paper examines the relationship between CSR and Corporate Financial Performance (CFP) for Pakistani firms. Pakistan was chosen due to it’s one of worlds developing countries and has undergone radical economic and social change. The objective of this research to determine whether CSR based on environment, community, and employs and customer and philanthropic items have positive, negative or neutral relationship with CFP. CSR dimension of customer, community, environment and employees and philanthropic is used as independent variable while financial performance is used as dependent variable. Regression analysis used to test the relationship by using SPSS. Prior studies had produce mixed result but most research found there is positive relationship between CSR and CFP. The result of this study concludes that there is positive relationship between CFP and CSR.

1.0 Introduction

The correlation among csr and financial performance signifies the utmost questioned part of csr (Ibrahim, Howard, & Angelidis, 2008). There are different research ideas to support the minor positive connection (Siltaoja, 2006), and the association has is not completely established besides it the instruments who increased financial performance with related to csr is not fit assumed (Yaziji & Doh, 2009).

And in this research more comprehensive model used to check that which is not used in earlier to measure the link among csr and financial performance. The conclusions are not only analyzing the straight connection among csr and financial performance it also clarify the association through middle variables recognized in the works of (Waddock, Bodwell, & Graves, 2002) for example the consequences of csr. The association among csr and every variables of this study is also answer the more accurate grained method to calculating this connection (Hillman & Keim, 2001).

Corporate social responsibility (CSR) is playing a key role in organizational strategy, as well as an important topic of discussion among the academicians and practitioners. Major reason of high acceptability is that it helps the organizations to develop positive relationship with all of its stakeholders. Globalization, technological advancements, high quality of products, and not only customer satisfaction but delight has created a competitive environment and sustainability is among the major factor for organizational survival. To address these issues, organizations are now focusing to develop and strengthen their long term relationships with all of its stakeholders and allocated resources for the development of the welfare of the society and community as a whole (Balmer, Fukukawa, & Gray, 2007; Hansen, Dunford, Boss, Boss, & Angermeier, 2011; Sen, Du, and Bhattacharya (2009)). Organizations are proving themselves to be socially responsible and participating in community development activities that appeal the value systems of their internal and external customer (Vlachos, Tsamakos, Vrechopoulos, & Avramidis, 2009). It has been well proven in numerous studies that CSR practicing organization are successful in developing positive ethical identity, and strong relationship with the key stakeholders such as employees, customers, investors etc. (Balmer et al., 2007; Castaldo, Perrini, Misani, & Tencati, 2009). Due to the growing importance of developing relationships among organization and society, CSR has emerged and has taken a central position among organizational strategies to sustain and grow in today’s corporate world. Besides this it also helps to increase employees and customer financial and non-financial performance.

1.1 Importance of CSR

Currently CSR is gradually existence documented by buyers and government again by its significance on environmental and moral and welfare issues (Sweeney 2009). The subject of CSR is one of the very key features of maintainable development mentioned to in community and research debates.  CSR is regularly executed by giant Elegance manufacture firms however it is prudent to pressure that average size and small size firms can also offer proposal space for its expansion (Yaziji & Doh, 2009).

CSR is amid the growing field of research, and during the last one decade numerous theoretical and empirical studies has been evolved around the globe. It has also been witnessed from literature that CSR can be consider a strategic way of gaining sustainable competitive advantage and increased financial performance of organization with internal and external benefits (Mandhachitara & Poolthong, 2011) through involvement of stakeholder involvement, and establishing strong connections with the community and society as well . CSR practices also contribute in the national development projects with the government by providing financial support. However, employee contribution in CSR activities plays a significant role in the success of CSR programs and considered to be the major driver for its success. The aim of the study is to find the connection among csr and financial performance.

CSR is important for companies because it give different benefit to the company. Corporations that show their assurance to different reasons are supposed as fewer self-centered rather than firms whose CSR activities are absent. A firm’s community image is due to its public duties packages and how conscious customers are of them. Staffs like employed for a firms that has a respectable community image and is continuously in the news of media for optimistic reasons. Pleased worker nearly always equivalent positive production. Almost 60% of workers who are satisfied of their firm’s public accountability are involved with their jobs.

1.3 CSR benefit to the Community

Csr also give different benefit to the society because when companies start work for the well-being of people the life style of people changes. Community moves towards betterment. The major benefit of CSR to the community is CSR enhanced the superiority of life and altered lifestyles of the people. Another benefit of CSR is Capacity building makes authorization and prosperity.

1.4 Research Questions

The following research questions will be addressed.

  1. How ROA and ROE increased by CSR activities practiced by the organizations
  2. To what extent CSR initiatives help to increase financial performance of the company.

1.5 Stakeholder Theory

Stakeholder theory is organization management and business ethics that emphasizes that organizations must addresses the moral and values during their business operations. This theory was originally developed by Freeman (1984) and stakeholder approach identifies and models the groups which are stakeholders of corporation, and both describes and recommends methods by which management can give due regards to the interests of those groups. According to traditional view companies only focuses on their owners and shareholders and make their efforts to facilitate them by adding values. However, stakeholder theory emphasizes that besides owner and shareholders, all other people like; employee, customer, government bodies, political groups, trade associations, unions, investors, suppliers, etc. must be involved and should give value.

1.6 CSR in Pakistan

Pakistan is the country that has had to absorb rapidly in adjusting to the CSR phenomenon. As the country’s fabric and eatable goods export businesses have continuous to face stresses by global consumers for CSR authorizations.

In this condition it is obligatory for Pakistan to vigorously reflect indication based policy progress as a first footstep towards making a good and expressive CSR culture in Pakistan. There is having many cases of corporate philanthropy which are frequently accessible as CSR. For example PSO and Unilever and nestle.

1.7 Objective and Uniqueness of Study

The objective of the study is to find out the relationship among CSR, and financial performance. The independent variables of the study are employee, community, environment, philanthropic and customer and the dependent variable is financial performance. The following objectives for the study have been developed.

  1. To determine the meaning of CSR. As the concept of CSR has been widely discussed in literature but still there is no comprehensive definition on CSR has yet been established and thus leading towards limited understanding about the CSR concept(Sharma, 2013). Thus this study provides us an opportunity to explore the meaning of CSR in Pakistani context.
  2. To analyze the relationship between CSR and financial performance. To outperform organization need to attract more knowledgeable and highly skilled people. Due to the technological advancement, people and organization has access to attract the best employer and employee. However, CSR activities create a philanthropic behavior among employee, and employee volunteer participation in social activities. CSR activities also help the companies to improve its financial performance.

2.0 Literature Review

In recent years, dramatic changes has been appeared on global horizon, it may the worst natural disasters both in developed and developing countries, economic recessions, poverty, oil spills and environmental issues like ozone depletion. Pakistan is also among the victims of number of issues, it includes the worst earthquake in Azad Kashmir, worst river floods in 2003, 2005, 2010, and 2011 and in 2013, thousand people have lost their lives and their valuable property, and live stocks.  War on terrorism has also put adverse effects on our economy, community and society as well. Environmental pollution has also creating imbalance between economic development and environmental protection. These issues has raised the importance to protect the societal values among business organization (Giacalone, Paul, & Jurkiewicz, 2005). Both national and multinational companies has realized the importance of society, and start making efforts to meet the societal expectations (Turker, 2009).

Main objective of every business is to maximize profit and business expansions are made on the same motives. Besides the profits companies are also responsible for their impact on people living on this planet. Here the word people mean all the stakeholders, employee, investors, suppliers, government, business partners, communities and societies (Afshan Ahmed & Iftikhar Ahmed, 2011). All these people are linked together in a social network, and need to be socially responsible to survive, sustain and grow. Organizations grow and sustain due to their goodwill and image of the organization among stakeholders and this can be achieved through CSR.

Thus CSR has been considered as the most attractive and topic of discussion among the academicians and the business organizations during the recent years (Balmer et al., 2007; Sen et al., 2009; Turker, 2009). CSR is a management concept and business organization has adapted this concept by integrating the environmental and societal elements to create interaction with the stakeholders, community and society. CSR provides opportunities for the business organization to maintain a balance between social imperatives, economic and environmental and at the same time addressing the expectations of their stakeholders(Sweeney, 2009). Sweeney (2009) further emphasized that there is a need to provide clarity between CSR as a strategic management concept, philanthropic, charity, and sponsorship. Today, about 80% of Fortune 500 companies are practicing CSR activities and about $15.2 Billion has been spend by US and UK companies on CSR activities.

2.1 Definition of CSR

The following are different definitions of CSR which are defined by different authors.

According to (Hetherington, 1973)

There is no cause to believe that stakeholder is ready to bear a sum of corporate nonprofit activity which reduces the profit of the company.

(Aupperle, Carroll, & Hatfield, 1985) defines corporate social responsibility and he said that corporate social responsibility contains the method of a business so that it could cost-effective and informally and morally and law abiding helpful.

2.2 Concept of CSR

Dahlsrud (2008) Explain about the corporate social responsibility and he also clarify the different confusion related to definitions of CSR and how to corporate social responsibility is defined. In this article Dahlsrud elaborate five extents of corporate social responsibility which are established with the help of a contented investigation of present CSR classifications. Regularity totals are used to examine how frequently these scopes are appealed. To define the CSR he used different methodological tactics and these tactics are top one is Carroll’s (1999) in which the works review on corporate social duties descriptions in theoretical literature and courting the principal proper explanation to Bowen (1953). Moir (2001) adopts this procedural method nonetheless increases the investigation to contain explanations used by corporate. This all study is really important to deliver the summary of the past progress of these perceptions like a CSR. The second method was to take interviews. He takes interviews of twenty nine mangers to define the corporate social responsibility. The five dimensions which are used first one is the volunteer dimension the second is the stakeholder dimension and third is economic dimension the fourth is the environmental dimension and last one is social dimension. He concluded that

There are different accessible descriptions of firm social duties and they are constantly talking about the five extents. While they put on diverse expressions the descriptions are mostly corresponding and creating the absence of one generally recognized meaning. The dispute for business is not so abundant to explain CSR as it is to realize how CSR is informally made in a definite situation and how to take this into accounting while professional plans are established.

Carroll, (1991) according to Carroll corporate social responsibility contains the method of a business so that it could cost-effective and informally and morally and law abiding helpful. By Social responsible it comes in mind that following the law and profitability these two are primary situations when debating on the company’s beliefs and on the degree to which it helps the humanity in which it occurs through donation of cash. Carroll (1979) allowing specific material for quarrel that corporate social responsibility contains moving outside the rule contended that a description of social responsibility and it is to completely discourse the whole choice of duties business has to culture it must represent the legal and economically and also ethical and supple classes of business performance. Carroll constructs a pyramid to explain the corporate social responsibility and the items which are included in the Carroll’s pyramid are corporate philanthropic responsibilities and firm Ethical responsibilities and companies Legal duties and organization Economic Responsibilities. Corporate philanthropic responsibilities mean to become a respectable tradable citizen. This is the most important responsibility. Its emphasis is mostly on comfortable belongings such as enhancing the excellence of life of personnel and local societies and also eventually peoples in overall. Particular features of the philanthropic responsibilities of the industries could be provocative and wants distinct trainings meant to it. The important idea of morally duties which is explains and define by Carroll is that the moral duty involves of what is normally expected by civilization above the financial and lawful outlooks. Moral responsibilities of corporations cover its extensive variety of values. And legal responsibilities mean follow the law and fulfill the legal values. The lawful accountability of the organization stresses that trades bear by the regulation and should play the games by living under the laws. Organizations should select to turn or either it should overlook their lawful tasks the fee could be very greater for the business. And Economic duties explain be profitable. It interests the duty of corporate of making things and amenities desired by peoples and retailing them creating a profit. Novak (1996) has underwritten to this by explaining seven duties of firms. Businesses have owners who claim a sensible profit on their funds and they have workers who desire good and justly paid works and there are also clients who want better standards goods at a normal price.

Smith, (2011) defines the corporate social responsibility and theory of corporate social responsibility he said that Even though the idea of organization communal duty has been backed for years and is mostly working by businesses worldwide contract on how corporate social duties would be elaborate and executed leftovers a combative discussion between different academies and society and corporates. This breach is creating problems for companies since they are gradually being obligatory to adjust with social rules whereas making business earnings. In order to re correct this difficulty the next explanation is given which is CSR is a professional method that allows the supply and production of capital for the progress of its stakeholders with the help of mixing and execution of moral structures and maintainable administration performs. He also explain the new definition of CSR and according to new definition of CSR is defined as a corporate structure that allows the delivery and manufacture of wealth for the advancement of its sponsors with  the help of the addition and application of moral arrangements and maintainable management does. This explanation provides the numerous features that are reliable with other meanings still it will be increased upon in next there are different significant differences and discrepancies from present definitions. These alterations offer new assumed management and a profounder understands of csr for firms to get their goals.

Matten and Moon, (2008) explains the query of why procedures of trade duty for humanity both vary between states and alters inside them. They do it by related search of csr past and presently in the in Europe and in USA. There are two usual explanations. The first opinion is that as sundry USA organizations have both been ascribed and prepared to entitlement public duties this is not so coarse in any other place. Relative examination in csr among the USA and Europe has recognized extraordinary variances amid enterprises on each horizontal of the Atlantic. Such relates first to the linguistic firms usage in relating their connection with society. They  relative conceptuality of csr absorbs on Tempel and Walgenbach’s (2007) examination of several recognized models to describe both the old proportional variances amid USA and European csr and the current suggestion of the progress of USA dash csr in Europe.

They refer the implied clear outline for CSR since they believe that it pays to the discussion on three stages expressive and prescriptive and contributory. Corporate social responsibility permits for a good sympathetic of what CSR involves of its exact official foundations and the state situations in which businesses runs and whose observations of suitable social duties they strive for to live up to. This is thoroughly linked to the influence at the contributory level. Establishments selecting to undertake their societal responsibilities have to take into account how diverse national circumstances affect their csr agenda.

Waheed, (2005) explain the growth of company’s social responsibility in Pakistan. And according to her in the Asia maximum of the states are developing the so called another upsurge of csr which is competence focused and market attentive. They have touched theoretical clearness and are observing at the impairments to CSR application. While in Pakistan just have just initiate our drive and are stressed with the first upsurge that is of legal compliance and philanthropy which is humanity and government motivated. And she concluded that CSR found itself definitely as an importance area in Pakistan’s strategy atmosphere and highlighted again the standing of investor commitment and ownership for any csr strategy creativity to succeed.

2.3 CSR and financial performance

Sweeney, (2009) explain the relationship between corporate social responsibility and financial performance. According to her there is an important enhancement in curiosity in csr in current years it is observed as a significant subject for examination (Burton and Goldsby, 2009). This is not only the subject established academic courtesy but it is flattering an important issue for several companies.

The affiliation amid financial performance and csr signifies the greatest asked area of CSR (Ibrahim et al., 2008). Whereas many of investigation opinions in support of a slight positive association this linking has not been completely recognized and the instruments with the help of which monetary measurement is increased by corporate social responsibility is not fine assumed. In her research she usages an additional information process of examination  which is not used in the past used to evaluate the affiliation between csr and financial performance hence goes certain way to responding the call for an extra well thoroughly work in style to computing the link (Hillman & Keim, 2001). While comparing with the preceding studies a modest positive correlation is noted amid financial performance and csr when investigated directly. Still, it is complete an investigation of the unintended interactions that understanding is established. Corporate social responsibility was originate to have a solid positive link with employee magnetism and social status and holding and inspiration and buyer attraction and trustworthiness but a feebler correlation with other corporate welfares proposed to consequence from csr such as admittance to wealth and business status. In her paper she accomplishes with a debate of the suggestions of these answers and also references for future research in the area.

The model which she used is structural equation model a multi variable method which permits for the checking a customary of connections among different independent and different dependent variables. She uses LISREL on behalf of the mostly used computer package for structural equation model was working in this research to check the correlation among corporate social responsibility and financial performance straightly and also to check the association among these two variables with midway ways of retaining buyer desirability and faithfulness worker magnetism motivation and increased and easily entree to capital.

The different corporate social responsibility items which she used in her paper are employees and customer and community and environment. She develop different hypothesis to check the connection among financial performance and csr.

Lin, Yang, and Liou (2009) Elaborate the connection amid business performance and corporate social duties. They take the time period among 2002 and 2004 and for this they select one thousands Taiwan companies. Out of this one thousands two hundred were manufacturing industries and five hundred were services firms and remaining hundred were best financial institution in Taiwan. And the Organizations involve their research and development   costs as one of their corporate approaches for maintainable progress and they also classify their benevolent expenses as charities to welfare of society and to enhance corporate social responsibility. Founded on hypothetical declarations and experimental proof in the literature thy recognized a positive association between csr and financial performance. While the model is accurately recognized they had seen that while corporate social responsibility does not have abundant positive influence on short term financial performance and it does suggestion an extraordinary long term economic advantage.

From last decades the burden on companies to involve in CSR has enlarged. Mostly administrators have answered to this pressure but some of them fought. Those who fight mostly appeal the interchange among socially answerable and profitability. More when social creativities are not allied with business goals CSR could convert into an obligation and reduce formerly held opinions between clients about company. Though, the consequences of many practical studies of the affiliation amid CSR and profitability have been questionable and reporting optimistic and negative and neutral outcomes.

Cochran and Wood (1984) explain the relationship among financial performance of an industry and corporate social responsibility. According to them the correlation amid financial performance and corporate social responsibility is retraced by a new approach and better procedure and business definite control groups. Normal age of industry resources is found to be highly connected with social responsibility position. After adjusting for this feature there is still little connection among CSR and financial performance. According to them this study of corporate social responsibility and financial performance used a greater sample and firm definite control groups and numerical tools latest to this area of research. The important results is that within manufacturing groups the monetary variable most powerfully connected with CSR is benefit and the error of this variable outcomes in a false relationship of csr and financial performance. The cause of the link amongst asset age and CSR is of interest. Exactly, organizations with elder resources have lesser CSR ratings.

Saeidi, Sofian, Saeidi, Saeidi, and Saaeidi (2015) Explain that how financial performance and corporation social responsibility are related with each other and what is the contribution of CSR to increase the financial ability of an organization. According to them there is straight association among firm performance and corporate social responsibility which is inspected by different authors but this straight examination appears to be false and vague. This is because different reasons circuitously impact this relation. So this study considers maintainable reputation and competitive advantage and buyer satisfaction as three likely intermediaries in the correlation in the middle of firm performance and CSR. The outcomes from two hundred and five Iranian industrial and buyer product companies disclose that the relation amid CSR and firm performance is a completely arbitrated association. The positive influence of CSR on firm performance is because of the positive impact CSR has on status and competitive advantage and purchaser satisfaction. The last results display that only repute and competitive benefit facilitate the affiliation among CSR and firm performance. Taken together this result recommends a role for CSR in circuitously endorsing company performance with the help of increasing standing and competitive benefit while enhancing the level of buyer satisfaction.

McGuire, Sundgren, and Schneeweis (1988) Elaborate the correlation among financial performance and CSR. According to them different opinions has been made about the association amongst company social accountability and their monetary performance. One opinion is this organization look a tradeoff among social duty and financial performance. Those having this opinion recommend that corporations suffer costs from socially responsible activities that place them at the financial drawback associated to other. Another opposing lookout is that the clear costs of organization social responsibility are low and that companies may really advantage from publicly responsible activities in terms of worker team spirit and productivity. Another outlook is that the prices of publically responsible activities are important but are balance by a decrease in other company costs. They collected data related to CSR were got from Fortune magazine’s annual review of corporate statuses.   They concluded that hypothetical opinions can be prepared for an association amid social responsibility and company risk. Absence of communal responsibility may expose an organization to major extra risk from complaints and penalties and might bound its strategic options.

Aupperle et al. (1985) Elaborate the connection among profitability and corporate social responsibility.  According to them research has also been obstructed by the trouble of effectively computing CSR. In this study they are using an intricate required choice tool managed to corporate chief executive officer did not find any association among profitability and social responsibility. They conduct survey to check the association among the profitability and CSR. According to them there is strong inverse connection among ethical component and economic component.

Tsoutsoura (2004) According to them the area of CSR has developed very rapidly in the past years. However there leftovers a prolonged discussion about the validity and worth of firm responses to firm social duties concerns. There are several outlooks of the part of the organization in culture and difference as to either wealth expansion should be the primary goal of the industry. By using wide-ranging data from duration of five year this study discovers and examines the symbol of the connection amid financial performance and CSR. The statistics set involve maximum of the top five hundred companies from time period of years 1996-2000. The correlation is verified with empirical process. The outcomes show that the correlation is positive and statistically important helping the point of view that publically answerable company performance can be linked with a series of bottom line profits.

Chetty, Naidoo, and Seetharam (2015) Explain the connection among financial capability of company and firm social responsibility. According to them if Company Social Duties are away from organization legal tasks and potential­ly want an expense for less period returns, why do companies encourage CSR? The connection is checked for the duration from 2004 to 2013 in South Africa. They measure the small term influence of CSR statements on financial returns of companies involved in or left out from the Johannes­burg Securities exchange generally answerable asset index and conclude either there is a alteration in the long run amid these two sets for the whole duration. They use model that displays that stockholders were pleased in time period of 2004 and 2012 while company entered the index and were deal with severely in 2013, when industry departed the index. When using regression examination the different firms shows mixed outcomes among CSR and company financial performance for company for the long term. According to this result they concluded that corporate social duties main important changes in financial performance.

Iqbal, Ahmad, Basheer, and Nadeem (2012)Check the effect of firm social responsibility on the financial performance of the company in the Pakistan. They used specific examination of one hundred and fifty six listed corporations on Karachi stock exchange from different sector such as chemical sector and textile sector and the tobacco sector and cement sector are selected. The explanations are selected for the whole duration of 2010 and 2011 from the available assets of SBP. In total the consequences of the study showed that company social performance has no impact on financial performance. It is clear from the outcomes that corporate social responsibility has negative outcome on the market worth of the share. Besides, the shareholders have different level of material as the info is captured by the organization about the firm affairs.

They develop different hypothesis to show the effect of the firm social duties on financial performance. The dependent variable were market value of return on asset and market value of return on equity and the independent variables were firm social performance and return on asset and debt to equity and return on equity. In total the consequences of this learning conclude that corporate social responsibility has no impact on financial performance. It is clear from the results that csr has negative influence on the market value of the share but no correlation to debt to equity behavior of the firm meaningfully.

Alexander, & Buchholz, (1978) elaborate the correlation among company social responsibility and stock market performance. Mainly they assessed stock capability for only a small duration of time 6 month in the Moskowitz reading and twelve month in the Vance reading. Secondly they not learning assessed stock market presentation on the risk familiar basis. This study will precise for these absences by permitting a more conclusive declaration to be made about the link amid organization social accountability and stock market enactment. They use regression model to find out the relationship.

The conclusion of this study shows that the degree of industry social responsibility as calculated by the positions of manufacturers and students endures no important association to stock market performance. Besides there is shows to be no major link among stock risk levels and degree of social responsibility.

Isa (2012) explain the firm social responsibility and its effect on stakeholder. According to him

Business Social Accountability has developed as a main planned strategy for companies. A significant of courtesy has been seen in to the CSR and still working on the progress of CSR definition has continued limited. Definitions have been disadvantaged by a lack of clearness in hypothetical outlines and empirical approaches for the CSR description. Given that the experimental education of firm social duties description growth is in a new public in this research defines struggles to grow and classify CSR definition. A description is advanced based on a serious analysis of both the idea and repetition of CSR. What has been stated is a usual of standards that are likely to satisfactory and that pay owing respect to the need for possibility in respect to CSR.

2.4 CSR Dimensions

The dimension of CSR is given below. These dimensions are Carroll’s dimension for CSR.

2.4.1 CSR Model

Corporate Social Responsibility and Financial Performance: A Study of ISO 26000 Implemented Companies

2.4.2 Philanthropic responsibility

The meaning of Philanthropic responsibility is to become a respectable tradable citizen. This is the most important responsibility. Its emphasis is mostly on comfortable belongings such as enhancing the excellence of life of personnel and local societies and also eventually peoples in overall. Particular features of the philanthropic responsibilities of the industries could be provocative and wants distinct trainings meant to it. For explanation of it we take example of those who agree on what source to devote the cash and how abundant and on which foundation these conclusions should be made. Adopted from (Carroll, 1991), (Mowat et al., 2011)

2.4.3 Ethical Responsibilities

Moral responsibility means do the right and fair things and avoids from the things which are ethically bad. The important idea of morally duties which is explains and define by Carroll is that the moral duty involves of what is normally expected by civilization above the financial and lawful outlooks. Moral responsibilities of corporations cover its extensive variety of values. Moral obligations are not essentially forced by the law but actually this value is anticipated from moral firm by the government and from peoples and this situation was realized in the case of Shell in which the verdict of the government was inverted for placing of oil platform afterward a movement and difference by the humanity and peoples. Adopted from Carroll, (1991).

2.4.4 Legal responsibilities

As the statement explains that it means follow the law and fulfill the legal values. The lawful accountability of the organization stresses that trades bear by the regulation and should play the games by living under the laws. Organizations should select to turn or either it should overlook their lawful tasks the fee could be very greater for the business. And one of the examples of this is United States software huge Microsoft has confronted an extended consecutively antimonopoly situation in Europe for mistreating its anti-competitive situation to drawback its opponents which caused in hard clearings against the firms.

2.4.5 Economic Responsibilities

It means be profitable. It interests the duty of corporate of making things and amenities desired by peoples and retailing them creating a profit. Novak (1996) has underwritten to this by explaining seven duties of firms. Businesses have owners who claim a sensible profit on their funds and they have workers who desire good and justly paid works and there are also clients who want better standards goods at a normal price. Thus the primary duty of the firm is to be a correctly operative financial unit and be in professional. And this is also the foundation of the pyramid where all the extra layers rest on.

2.4.6 CSR items Table

CSR itemsAuthors
Philanthropic

Our organization actively participate in solving social problems

Our organization knows the importance of corporate social responsibility

Our company allocate resource for the charity activities on regular basis

Our company encourages employee to participate in social activities

(Turker, 2009)
Customer

1.      At which level does your company provide acquit and correct data and category about goods and facilities with after sales provision?

2.       At what level your organization resolution client application in a timely manner?

3.      What the criteria of quality guarantee followed in the production.

4.       At which level your organization is loyal to give value to their customer.

Sweeney,(2009); Spiller,( 2000)

Ashridge, (2005)

Community

1. To what range does your company contribute for aid?

2. At which level are worker include in assistance helper work on interest of the company?

3. To what degree is your corporation keenly convoluted in a plan with the native public?

Sweeney,(2009); Spiller,( 2000)

Ashridge, (2005)

Employees

1. To which degree does your firm guarantee satisfactory steps are taken contrary to all procedures of discernment?

2. To what level does your company refer staffs on core problems?

3. At which level is your institute loyal to the fitness and security of employees?

4. To what range does your company safeguard a work balance between employees?

5. Does company provide work freedom to the employees or not.

Sweeney,(2009); Spiller,( 2000)

Ashridge, (2005)

Environment

1.      To what degree does your firm deliberate ecological effect when making new goods for   example pollution and recycling and usage of energy? At which levels your company usage environmentally friendly.

2.      To which levels your company affected the giving below.

3.      Waste Decrease and Reprocessing and Energy preservation and Decrease in water usage and reduce of air pollution and Decrease in packaging.

4.     To what extent is your firm involved in Energy Conservation

Sweeney,(2009);
Financial performance

1.     Has your company been profitable for the last five years

2.      How did the net profit of the company in current year tell to expectations?

3.      How does the sale of the company in the current year tell about the previous year?

4.        Please specify the effect of the CSR actions of the company on financial performance.

Sweeney,(2009); Spiller,( 2000)

Ashridge, (2005)

2.5 Corporate Social Responsibility and Financial Performance Model Analysis

The affiliation amid financial performance and csr signifies the greatest asked area of CSR (Angelidis et al, 2008). Whereas many of investigation opinions in support of a slight positive association this linking has not been completely recognized and the instruments with the help of which monetary measurement is increased by corporate social responsibility is not fine assumed. In her research she usages an additional information process of examination  which is not used in the past used to evaluate the affiliation between csr and financial performance hence goes certain way to responding the call for an extra well thoroughly work in style to computing the link (Hillman and Keim, 2001). While comparing with the preceding studies a modest positive correlation is noted amid financial performance and csr when investigated directly. Still, it is complete an investigation of the unintended interactions that understanding is established.

In this research has the connection among financial performance and CSR is to find out. The employed structural calculation method is used to find out the direct link amid financial performance and csr. To check the connection the different variables which used in this study are employees, customer, philanthropic, environment, and communities; these are independent variables while financial performance is a dependent variable.

2.6 CSR and Financial Performance Model

Corporate Social Responsibility and Financial Performance: A Study of ISO 26000 Implemented Companies

2.7 ISO 26000

ISO 26000 is the worldwide standard established to help firms excellently address and measure those public duties that are related and substantial to their vision and mission procedures and processes such as employees and customers and communities and additional investors and ecological effect.

Trade and companies do not work in a vacuity. Their connection to the people and environment in which they function is a serious issue in their capability to remain to work successfully. It is also progressively being cast-off as a degree of their complete presentation. International standard organization 26000 offers leadership on how industries and firms can drive in a publicly responsible way. This results that acting in a moral and clear way that pays to the health and well-being of society.

ISO 26000 offers direction instead of necessities thus it could not be specialized to dissimilar certain other well-known ISO principles. As an alternative it helps explain what public accountability are assistance’s businesses and governments translate values into actual actions and deliver best performs linking to communal responsibility worldwide. It is meant at all sorts of companies irrespective of their action and size or location.

The standard was propelled in 2010 subsequent five years of discussions among numerous different investors crossways the world. Legislatures from administration and firms and buyer groups and working companies round the world were complex in its progress which means it signifies a worldwide consensus.

2.7.1 Hypothesis

On the basis of above conceptual model the following hypotheses are developed.

H1: There is a strong association between philanthropic responsibilities and CSR

H2: There is a strong association between employees and CSR

H3: There is a strong association between communities and CSR

H4: There is a strong association between customer and CSR

H5: There is a strong association between environment and CSR

H6: There is a positive association between CSR practices and organizations financial performance.

2.8 CSR in Pakistan

The common opinion about the business sector in Pakistan is that the Pakistani firms are bloodsuckers who did not actually care about all but given priority their own self-seeking interests. From reckless promotion to firms misusing their controlling place to a whole disrespect of buyer connection administration the company dismay stories in Pakistan are abundantly. That thought the organization sector in Pakistan has originated a long way from its starting days of discussed self-advertising disguised as CSR.

2.8.1 Unilever CSR initiatives

One firm that has been model in its CSR initiatives is Unilever and this is not as of any own favoritism in contradiction of any other businesses but because their CSR programmer aristocratic the unilever maintainable existing strategy has enclosed a wide area that has significantly wedged the humanity and the deprived people.
Rendering to the supportable alive strategy the firm has drew a number of objectives to be attained by the year 2020.

2.8.2 Pakistan State Oil CSR Activities:

PSO is loyal to play an energetic part in supportive and work with their shareholder for maintainable public and social progress of Pakistan. With their squad and state standing as Pakistan foremost oil advertising firm their aim is to support drive formation of shared financial and communal value through Pakistan.PSO has been helping Behbud Association a state NGO functioning in the arena of generative public progress and schooling and health and professional training and to elevate the deprived units of civilization.  PSO has kindly reinforced foundation for Special children Quetta the only institute of its kind in Baluchistan to promotion of its tackle to ease communicating of teaching to the special children. PSO has continuously been at the forward-facing of endorsing several sports at all stages. In such an effort they supported the PSO-CNS Global Squash Championship in 2007 which is a world best squash occasion.

2.8.3 Nestle Pakistan CSR activities

Nestle Pakistan is one of the leading company which is working on CSR activities. Nestle Pakistan started school programing at small villages so that the people of the underdeveloped areas can get free education. Beside it Company also initiative of providing purified water plant at small villages and small towns. Nestle Pakistan is ISO certified company. The company starts many CSR activities.

3.0 METHODOLOGY

This section includes discussion on sample, data collection procedures, and the variables used in this study. Main objective of this study is to analyze and explore the impact of CSR items such as employee, environment, community, customer, and philanthropic on financial performance. This section also makes discussion on statistical techniques used to analyze the causal relationship among the studied variables. The sample collected for this study is selected from three firms which are PSO and Unilever and Nestle Pakistan practicing CSR.

3.1 Sample and procedure

The target population of this study was the employees of CSR practicing organizations at a managerial or supervisory level. Three companies are selected for these purposes and the names of the companies are PSO, Unilever, and Nestle Pakistan. These organizations are participating in social activities independently as well as in different projects with the government. These organizations has also implemented social accountability standard (ISO-26000). Thus employee at managerial or supervisory level is considered as a unit of analysis for this study. This study used survey based methodology and a questionnaire was developed after a comprehensive review of literature. CSR items are taken as independent variables and financial performance as dependent variable. Data was collected using questionnaire and distributed to the respondent, however, a formal permission was taken through HR department of each organization before conducting the survey. A stratified random sampling technique was used to reduce the common bias in the data.

Questionnaire for this study consists of two sections; first section was about the general information about the respondent and the second section is to inquire respondent perceptions about the CSR items and its impact on the dependent variables. This study was based on employees experience and their expertise that successful implementation of CSR significantly contributes to increase financial performance of the company. Questionnaire was developed in English as the respondents were having sufficient knowledge to understand the questionnaire. However, in case of in confusion faced by the respondents were explained. Questionnaire for this study was comprised of 5 constructs as independent variables addressing CSR with 20 items, with one dependent variables consisting 4items. Responses were measured on a seven point Likert scale [5] agree to [1] strongly disagree. A total of 200 questionnaires were distributed and only 148 were returned, however a remainder has been sent to the respondent after 15 days. After a number of personal visits and telephone calls were also made and thus yielding a very good response rate of 59.2%.

3.2 Survey Results

3.2.1 Profile of the Respondents

Demographic of this study was show in the table 1. There were 115 male respondents representing 77.7% of the total population, whereas, only 33 respondents were female representing 22.3% of the total population. Out of 148 respondents 1 was undergraduate and representing 0.7% of the total population, 23 respondents were diploma holders and representing a 15.5 % of the total population, 65 respondents were graduates and representing 43.9% of the total population, 48 respondents were having post graduate representing 32.4% of the population. With reference to the age group of the employee majority of the employee were in the age bracket of 26-35 years and thus representing half of the population. Sector wise distribution, length of service, employee total no of year experience, and the organizations practicing CSR practices is given in detail in the table 1.

Table 1: Demographic of the Study

ProfileRespondentsCategoryFrequencyPercentage
Gender148Male

Female

115

33

77.7

22.3

Qualification148Undergraduate

Diploma Holders

Graduate

Post Graduates

1

23

76

48

0.7

15.5

51.3

32.4

Age14821-25

26-35

36-45

46-55

Over 55

30

75

30

11

2

20.3

50.7

20.3

7.4

1.4

Length of service in current organization1480-5

6-10

11-15

16-20

21-25

Over 25

75

53

5

8

5

2

50.7

35.8

3.4

5.4

3.4

1.4

Industry148PSO

SHELL

Nestle

Unilever

Atlas Honda

29

44

22

28

25

19.6

29.7

14.9

18.9

16.9

Total Experience1480-5

6-10

11-15

16-20

21-25

Over 25

56

43

27

11

6

5

37.8

29.1

18.2

7.4

4.1

3.4

 3.3 Data Analysis

As we adopted the instrument therefor we first perform explanatory factor analysis. According to the results the KMO values are .820 and which are is significant and Bartlett’s Test of Sphericity .000 which is significant and shows that the given data is reliable for factor analysis.

KMO and Bartlett’s Test
Kaiser-Meyer-Olkin Measure of Sampling Adequacy..820
Bartlett’s Test of SphericityApprox. Chi-Square1491.277
Df171
Sig..000

Result generated shows that all the items are loaded on their respective construct. However some items have been deleted during this data reduction.

The Matrix Pattern Table
Factor
123456
Phil1.947
Phil2.756
Phil3.537
Cus1.532
Cus2.491
Cus3.502
Emp1.856
Emp2.795
Emp3.766
Emp4.668
Emp5.628
Comu1.774
Comu2.835
Comu3.791
Env1.736
Env2.831
Env3.830
Extraction Method: Maximum Likelihood.

Rotation Method: Promax with Kaiser Normalization.

a. Rotation converged in 6 iterations.

 3.3.1 Data Reduction, validity and reliability of the constructs

Five CSR practices (constructs) were consisting 3 to 4 items and three dependent variable representing employee commitment, turnover intention and organizational trust were used and data reduction process will be made in order to convert these constructs in to composite variables. Detail of the constructs, with items has been given in the table below. Hair Jr, Black, Babin, Anderson, and Tatham (2006) Suggested that all the latent variables must have at least three items and thus keeping in view this rule, this study include minimum 3 items in each latent variable.

Reliability of the data was checked using Cronbach alpha and it is gave us 85.5% which is more than the suggest value of 0.70 by

In the first step of data analysis, confirmatory factor analysis (CFA) was employed to check the validity of the each construct by assessing how well individual item measure and during this process only three items were deleted due to poor loadings with a cut-off values less than 0.4; one item from ethical responsibility practices has been deleted. CFA of the given model is given in the figure below.

CFA Model

Corporate Social Responsibility and Financial Performance: A Study of ISO 26000 Implemented CompaniesResults of CFA of this model shows a very good fit and values for goodness of fit index was: CFI (0.938), GFI (0.889) and RMSEA (0.046) which is quite high.

IndexValues for the proposed
Normed Chi-square (CMIN/df)1.704
Goodness of fit index (GFI).889
Comparative fit index (CFI).938
Root mean square error approximation (RMSEA).059

Major reason of this result is the total number of record. However, more data is required to improve the values of model fit indexed.

Correlation among the construct has also been verified which shows that all the construct significantly correlate with each other.

 3.3.2 Figure Correlation Table

Correlations
EMPCOMUENVCUSFPERFPHIL
EMPPearson Correlation1.337**.403**.407**.213**.229**
Sig. (2-tailed).000.000.000.002.001
N200200200200200200
COMUPearson Correlation.337**1.347**.358**.207**.275**
Sig. (2-tailed).000.000.000.003.000
N200200200200200200
ENVPearson Correlation.403**.347**1.345**.155*.150*
Sig. (2-tailed).000.000.000.028.034
N200200200200200200
CUSPearson Correlation.407**.358**.345**1.216**.226**
Sig. (2-tailed).000.000.000.002.001
N200200200200200200
FPERFPearson Correlation.213**.207**.155*.216**1.367
Sig. (2-tailed).002.003.028.002.609
N200200200200200200
PHILPearson Correlation.229**.275**.150*.226**.3671
Sig. (2-tailed).001.000.034.001.609
N200200200200200200
**. Correlation is significant at the 0.01 level (2-tailed).
*. Correlation is significant at the 0.05 level (2-tailed).

 Reliability of the construct has also been the check and the value of the Cronbach’s back alpha employees is .863 and philanthropic is also .863 and community is .829 and customer is .653 and environment is .826 while the financial performance alpha is .738. While the reliability of the instrument was .859 which is significant.

3.3.3 Path Analysis

In order to analyze the impact of csr on financial performance path analysis using AMOS 23 was run and model fit index are shown in the table below.

Figure Path Analysis

Corporate Social Responsibility and Financial Performance: A Study of ISO 26000 Implemented CompaniesModel Fit Summary for Path analysis

IndexValues for the proposed
Normed Chi-square (CMIN/df)1.617
Goodness of fit index (GFI).889
Comparative fit index (CFI).938
Root mean square error approximation (RMSEA)0.059

 

Results of Path Analysis

                                         Standardized Regression Weights

Results of Path Analysis

Relationship among ConstructsEstimateS.E.C.R.PHypothesis
Philanthropic<—CSR.370.1433.699***Accepted
Customer<—CSR.887.1604.874***Accepted
Employee<—CSR0.694.1585.608***Accepted
Community<—CSR.649.0000.000***Accepted
Environment<—CSR.631.1465.301***Accepted
Financial performance<—COMT.443.1753.809***Accepted

Model fit summary of the above results provides us insights that the values of model fit index are approximately significant. However, due to limited data, RMSEA is normal and its values should not be more than 0.85. It may be reduced by adding more data. The standardized values of the path analysis provide us insights that CSR values play a significant and positive role in enhancing CSR activities. P-values of all cases are significant and thus accepting the hypothesis that CSR practices significantly contribute in effectiveness of CSR in the organizations. Furthermore, effective implementation of CSR has significant impact on increasing financial performance of the company.

4.0 Conclusion

On the basis of the results it is concluded that there is significant connection among financial performance. The independent variables such as customer, environment, employees, community and philanthropic has positive impact on the financial performance of the company. The csr activities enhance the financial performance of the companies and the increase the motivation level of the employees and buyers. Csr activities have positive impact on the environment and community. So on the basis of judgment and results it is confirmed that csr and financial performance have positive impact and financial performance of the firm increased.

5.0 Limitation

There are certain limitations of the study, this study is conducted in one city, and the number of respondents was limited.

6.0 Future Implication

This study is conducted at one city of city in future the area of the study should increase and variables selected in this study should study more deeply. In future longitudinal study should be adopted so that the connection of CSR and financial performance should find more accurately.

7.0 Questionnaire

7.1 Social Responsibility Practices

The objective of this study is to investigate the relationship of socially responsible approach of organizations on employee behavior and joint effect on growth leading to organizational sustainability. Your valuable opinion will help us to understand this relationship. It will also help us to further examine the social contributions of organizations of different sectors. This study will contribute, to promote the social spirit in the organization in general to achieve the organizational goals.

This questionnaire is divided into three main parts.

  • The first section asks for information about you.
  • The second section asks about your perceptions the level of CSR practices practiced by your organization

It is totally an academic research and there are no right or wrong answers. Please answer each question and if you would like to add any comments do so in the margin or the comment section. Please be as accurate and honest as possible, remembering that all responses are held in the strictest confidence. We appreciate and thank you for your participation.

 First Section – Personal Information

This section of the survey asks general questions to discover information about you and your organization.

Please tick () the response that best applies to yourself for each of the following statements.

1.      Gender:  

Male…………………….                            Female…………………….

2.       In which age group do you belong?

21-25……………………                                26-35……………………                            36-45……………………….

46-55……………………                                over 55……………………

  1. Highest education level achieved

High school……………                              Degree………………….

Other (Specify)….…….

Diploma………………..                              Postgraduate degree …

  1. Please mention the service sector you are working: ……………………………………………………………….
  2. Number of years in your current organization?

0-5………………………                                 6-10…………………….                              11-15……………………….

16-20……………………                                21-25……………………

over 25……………………….

  1. Overall Number of years in the industry?

0-5………………………                                 6-10……………………..                            11-15……………….…..….

16-20……………………                                21-25……………………

over 25……………………….

  1. Number of year your organization practicing CSR

0-5………………………                                 6-10……………………..                            11-15……………….…..….

16-20……………………                                21-25……………………

over 25……………………….

 

Section II

Please encircle the option according to your perceptions

At which level does your company provide acquit and correct data and category about goods and facilities with after sales provision    54321
At what level your organization resolution client application in a timely manner  54321
What are the criteria of quality guarantee followed in the production?   54321
At which level your organization is loyal to give value to their customer   54321
At which levels your company usage environmentally friendly  54321
To which levels your company affected the giving below. Waste decrease and reprocessing and energy preservation and decrease in water usage and reduce of air pollution and decrease in packaging   54321
It is core to offer help to educational institutions and private and public.  54321
To what level does your company refer staffs on core problems?   54321
At which level is your institute loyal to the fitness and security of employees?  54321
To what range does your company safeguard a work balance between employees?  54321
To what range does your company contribute for aid?  54321
At which level are worker include in assistance helper work on interest of the company?  54321
Our organization actively participate in solving social problems  54321
Our organization knows the importance of corporate social responsibility  54321
Our company allocate resource for the charity activities on regular basis  54321
Our company encourages employee to participate in social activities  54321
To which degree does your firm guarantee satisfactory steps are taken contrary to all procedures of discernment?  54321
To what degree is your corporation keenly convoluted in a plan with the native public?  54321
To what degree your firm is involved in saving energy?  54321
To what extent is your firm involved in Reduction of air pollution  54321
Has your company been profitable for the last five years  54321
How did the net profit of the company in current year tell to expectations?  54321
How does the sale of the company in the current year tell about the previous year?  54321
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