Domestic Institutions and Market Pressures as Drivers of Corporate Social Responsibility: Company Initiatives in Denmark and the UK

Authors


Abstract

In recent research, corporate social responsibility (CSR) initiatives by companies with a home base in different countries have been explained in terms of their relation to national institutions or business systems. This set of explanations sees CSR as fitting in with domestic institutional structures by either ‘substituting’ or ‘mirroring’ national models of capitalism. An alternative set of explanations views company CSR programmes as determined by market pressures. We examine the role of domestic institutions and market pressure as drivers of CSR through an evaluation of the content of company CSR initiatives revealed in their external reporting. We conduct case studies of two large British companies (Glaxo Smith Kline and Barclays) as well as two large Danish companies (Novo Nordisk and Danske Bank). We find that market pressures rather than domestic institutions determine the content of company CSR programmes.

Corporate social responsibility (CSR)1 initiatives are often seen as a response to globalisation pressures. More and more Western firms produce in and/or source from developing countries without adequate social and environmental government regulation. According to this perspective, the sphere of corporate influence has widened, yet host country institutions are often weak and unable to cope with the large powerful firms operating there. Due to pressure from stakeholders, Western companies have themselves adopted a range of social and environmental programmes in order to protect human and labour rights in supplier factories and to ensure health and safety standards, etc. The rise of private forms of regulation, however, has not entirely taken the place of government intervention. On the contrary, in recent years there has been a notable increase in government policies supporting CSR initiatives across Europe and elsewhere. Examples include green public procurement requirements and non-financial reporting schemes, all of which attempt to align company practices with government interests. In this article we explore this paradox and ask where the major influences on company CSR are coming from: to what extent are company CSR programmes shaped by domestic institutional constraints and to what extent by market pressures that have emerged from globalisation?

The link between company CSR programmes and domestic institutions is explained in the literature in terms of the presence of national institutional complementarities (Campbell, 2011) which serve as a key determinant of CSR initiatives. Institutional complementarities mean that a country's institutions fit together such that the function of one depends on and enhances the functions of the others. The debate concerning the impact of institutional complementarities between CSR initiatives in firms and domestic institutions revolves around two contradictory hypotheses (Koos, 2012). These explanations see CSR as fitting in with domestic institutional structures and either ‘substituting’ for (Jackson and Apostolakou, 2010; Kinderman, 2009) or ‘mirroring’ (Campbell, 2007; Gjølberg, 2009) national models of capitalism. This literature draws largely on the varieties of capitalism framework (Hall and Soskice, 2001), seeing distinctions in CSR between companies from different types of domestic institutional structure. An alternative set of explanations sees CSR as driven by market demands, with companies that are internationally oriented more likely to have a greater need for CSR in order to cope with low regulation and high risks in host countries (Börzel and Risse, 2010; Kostova and Zaheer, 1999). A high degree of sectoral vulnerability to stakeholder demands is also correlated with strong company interest in CSR (Bennie et al., 2007; Knudsen, 2011) and large firms are also more likely to adopt CSR initiatives compared to smaller ones (Bennie et al., 2007).

This article uses a unique approach to evaluate existing explanations concerning the link between domestic institutions, market pressures and CSR. We start by looking at how the causal link in these explanations is established. We find that many studies rely on CSR rankings, and draw correlations between national institutions and the level of CSR in companies with a home base in the nation being studied. Our research challenges these explanations, first, by looking at alternative explanations for high levels of CSR in certain countries. Second, we argue that if national institutions determine CSR, then CSR initiatives should have particular characteristics. In this article, we make an attempt to define those characteristics and then evaluate the content of publicly available CSR reports in order to assess them. Likewise, we expect that when CSR is driven by market needs, there will be particular emphases in CSR programmes. The nature and emphases of CSR policies are clearly articulated in the public CSR reports of most companies, providing an opportunity to evaluate the questions we pose in the article.

Theoretical Discussion

We first present an overview of how institutional scholars view the impact of domestic institutions on corporate motivations for adopting CSR initiatives and next we turn to arguments about how market forces shape CSR initiatives within firms.

Institutional Structure of Company Home Country

The literature on the political economy of advanced industrialised countries has been dominated by institutionalist theories highlighting different types of institutional arrangement that define distinctive models of capitalism (Thelen, 2012). The most widely used framework has been proposed by Peter Hall and David Soskice in their influential book Varieties of Capitalism (2001). In this framework they propose two distinct types of capitalist production regime, which they refer to as ‘coordinated market economies’ (CMEs) found in continental Europe and ‘liberal market economies’ (LMEs) found in Anglo-Saxon countries. CME countries feature more patient capital, which supports long-term employment relations. These in turn are associated with stronger social protections (especially against the risk of unemployment), which also support investments in dedicated assets, including most prominently ‘specific’ rather than ‘general’ worker skills (Thelen, 2012; see also Deeg and Jackson, 2012). In LMEs, market coordination is based on investment in transferable assets. According to Kathleen Thelen, LMEs are characterised by a lack of patient capital, which leads to short-term employment relations. These are associated with weak social protection, for example against the risk of unemployment, and minimal investment in general worker skills. The UK is considered an example of a liberal market economy (LME) ideal type2 and Denmark as a coordinated market economy (CME) ideal type.3

Liberal market economies such as the UK do not possess stable coordinating capacities between employers and labour (Thelen, 2012). These economies are characterised by increased deregulation, which involves an active dismantling of coordinating capacities. Institutions and mechanisms for collective labour regulation are explicitly set aside in favour of arrangements that emphasise the market (Matten and Moon, 2008).

Thelen distinguishes between two types of CME exemplified by Germany and Scandinavia. Germany is characterised by sector- or industry-based coordination which, following the decline in manufacturing production, has contributed to a dual labour market (dualisation) where traditional arrangements for labour market insiders are maintained, while an unorganised and unregulated periphery that is characterised by inferior status and protections for labour-market outsiders is allowed to grow (Thelen, 2012, p. 147). Scandinavian CMEs are characterised by embedded flexibilisation, which involves a ‘combination of market-promoting labour market policies, but combined with social programs designed to ease the adaptation of society, especially its weaker segments, to changes in the market (flexicurity)’ (Thelen, 2012, p. 147). In Scandinavia coordination is national, which means that other interests outside manufacturing are well entrenched in the union movement and in partisan competition. Institutionalised pressures push against dualisation (e.g. through continued broad collective bargaining coverage) and/or provide incentives for policy makers to re-embed flexibilisation in compensatory social policies (e.g. through activation accompanied by training and continued strong social protections) (Thelen, 2012, p. 154; see also Campbell and Pedersen, 2007; Campbell et al., 2006).

Scholars – mainly political scientists – in the varieties of capitalism tradition focus on six institutional domains: finance; corporate governance and responsibility; industrial relations; education/skill formation; industrial policy; and the welfare state (Deeg and Jackson, 2007; 2012; Hall and Soskice, 2001; Kristensen and Morgan, 2012; Martin and Thelen, 2007; Streeck, 1992; Whitley, 1999). However, in addition to these domains a growing literature has sought to apply the varieties of capitalism framework to explain cross-national variations in company interest in adopting CSR programmes, seeing distinctions in CSR between companies from different types of institutional structure (Aguilera et al., 2007; Albareda et al., 2008; Cantó-Milà and Lozano, 2009; Midttun et al., 2006). Although these authors acknowledge scope for actors also to shape CSR, they emphasise the institutional explanation as the predominant influence.

The Substitution Argument. 

According to the ‘CSR as substitution’ view, firms in countries with less developed institutionalised solidarity have a greater need for CSR, and firms are therefore more likely to devise CSR initiatives as a proxy for the missing regulation. The literature highlights a regulatory vacuum created by inadequate or reduced government capacity. For example, Dirk Matten and Jeremy Moon (2008) make a distinction between ‘explicit’ and ‘implicit’ CSR. Implicit CSR consists of values, norms and rules which result in requirements for corporations and are motivated by the societal consensus on the legitimate expectations regarding the role and contribution of all major groups in society. Explicit CSR describes corporate activities to assume responsibility in society and consists of voluntary corporate policies, programmes and strategies.

According to Matten and Moon (2008), explicit CSR is particularly prevalent in the US compared to Europe. However, Matten and Moon (2008) propose that explicit CSR is gaining momentum in Europe for three reasons: (1) changes in the ‘organisational field’ of companies have popularised CSR as a management idea; (2) domestic institutional contexts are changing. According to Matten and Moon (2008, p. 415), one example of change is a reduced ‘capacity of the welfare state and corporatist policy making to address such issues as the onset of mass unemployment and fiscal stress from the late 1970s to the early 1990s'; and (3) globalisation confronts European multinational corporations with new contexts, which institutionalise CSR differently from their respective domestic contexts. Liberal market economies such as the UK have a greater need for government substitution than coordinated market economies but both types of economy (LMEs and CMEs) face reduced government capacity (Matten and Moon, 2008; see also Gond et al., 2011).

Gregory Jackson and Androniki Apostolakou (2010) argue that firms from the more liberal market economies of Anglo-American countries such as the US and the UK score higher on most dimensions of CSR than firms in the more coordinated economies in continental Europe. The authors find support for the view that voluntary CSR practices in liberal economies function as a substitute for institutionalised forms of stakeholder participation. Paraphrasing Matten and Moon (2008), Jackson and Apostolakou (2010) find that, in coordinated market economies, CSR programmes often take on more implicit forms. It is, however, likely that the difference in CSR performance between LMEs and CMEs is due to the manner in which CSR is measured in many CSR rankings such as the Dow Jones Sustainability Index or the FTSE4Good Index. Rankings reflect more explicit CSR initiatives.

Likewise, Daniel Kinderman (2009) proposes that CSR has been integral to the politics of social deregulation in European markets. Both employers and state officials have an interest in compensating for the hardships of liberalisation and the weakening of institutionalised social solidarity. One way in which they seek to legitimate the market to their stakeholders and the electorate is through CSR. Using national CSR associations and their membership levels as a proxy for the institutionalisation of CSR, Kinderman (2009) argues that LMEs get CSR earlier, and get more of it, than CMEs. CSR inoculates firms against burdensome regulation and justifies a light regulatory touch. Furthermore, CSR co-evolves with the decline of institutionalised social solidarity, embedded liberalism and organised capitalism. Thus, the rise of responsible business coincides with deep structural changes within the political economies of European and Organisation for Economic Cooperation and Development (OECD) countries during recent decades. Stefanie Hiss (2009) also points to the erosion of trade unions and collective bargaining and deregulation of rules and regulations as key drivers for company adoption of CSR initiatives. LMEs are more likely to emphasise the publicity of CSR programmes because they are more dependent on satisfying investor and financier demands compared to German companies. For instance, Stephen Chen and Petra Bouvain (2009) argue that in the US, UK and Australia capital is more dispersed than in Germany. As a result, US, UK and Australian companies have to appeal to a wider public audience than is the case in Germany (Chen and Bouvain, 2009; see also Maignan and Ralston, 2002). In sum, the literature on CSR as substitution suggests that CSR programmes by firms can function as a substitute for deficient institutionalised forms of social solidarity. Firms in liberal market economies are therefore expected to show a greater interest in CSR compared to firms in coordinated market economies.

The Mirror Argument. 

John Campbell (2007) proposes a different interpretation of the relationship between domestic institutions and CSR initiatives. Campbell suggests for example that corporations are more likely to act in socially responsible ways the more they encounter strong state regulation, collective industrial self-regulation, NGOs and other independent organisations that monitor them, and a normative institutional environment that encourages socially responsible behaviour. As evidence Campbell points out that Finland, Sweden and Denmark are among the most competitive economies in the world yet are also applauded for the strong ethical behaviour of their corporations. All these countries are open economies and have the sort of institutions that facilitate socially responsible corporate behaviour including much state regulation, self-regulation and corporatist bargaining. In short, according to this view, rather than CSR substituting for missing domestic institutions, companies' CSR initiatives mirror their domestic institutional environment.

This argument has been further developed by Maria Gjølberg (2009), who undertakes a sophisticated investigation of the relative importance of global forces and national political institutions for companies' willingness to engage in CSR. Gjølberg's study, based on qualitative comparative analysis, reveals causal heterogeneity and indicates two separate pathways leading to CSR success. On the one hand, according to an institutionalist argument, a combination of corporatism, an active state and a strong political culture corresponds well to strong CSR performance. Denmark's high level of CSR is explained by this pathway, for example. On the other hand, according to a globalist argument, a combination of a high proportion of multinational corporations and foreign direct investment can also be associated with a strong CSR performance. The UK is included in this category. In short, Gjølberg (2009) argues that CSR in a country such as Denmark mirrors domestic institutional strengths such as corporatism. Gjølberg (2009) also argues that it is not the political-economic institutional context alone that shapes CSR practices but also a country's proportion of globally oriented companies. For example, the international character of UK firms corresponds with a more international CSR emphasis.

Atle Midttun et al. (2006) also find a symmetric relationship between old forms of social embeddedness such as the degree of welfare state development and new forms of social embeddedness (corporate CSR programmes). For example, countries with strict environmental regulation such as Denmark are more likely to have many firms that adhere to ISO 14001, the most widely adopted voluntary environmental programme in the world (Midttun et al., 2006; see also Prakash and Potoski, 2007). The mirror hypothesis also expects to find a higher degree of CSR programmes in firms from coordinated market economies reflecting strong domestic welfare institutions.

What we see as a weakness or missing link in the literature on national economic systems and company CSR initiatives is that it fails to address how the substance of such company CSR policies may reflect distinct national governance systems. Neither the literature on substitution (Jackson and Apostolakou, 2010; Kinderman, 2009) nor the literature on mirroring (Campbell, 2007; Gjølberg, 2009) spells out which institutional voids CSR initiatives are meant to substitute for, nor do they address the processes through which broader domestic institutional settings may enable specific corporate CSR initiatives.

Expectations. 

We can postulate some expectations from this literature, which suggests that national patterns of CSR adoption reflect different domestic political-economic contexts:

  • Substitution: UK companies, representing LMEs, would be expected to adopt CSR initiatives that substitute somehow for inadequate welfare state services (Matten and Moon, 2008).
  • Mirror: Danish companies, representing trends in CMEs, would be expected to adopt CSR programmes that support existing welfare state initiatives (Campbell, 2007; Gjølberg, 2009).

Specific CSR initiatives can be measured by these criteria. In Table 2 (in the Methodology section) we propose some concrete expectations for CSR initiatives according to the substitution and mirror theses.

CSR as an Agenda Driven by Market Pressures

In contrast to the literature on the role of domestic institutions as drivers of CSR, others see company CSR initiatives as driven by market pressures. As more companies operate in or source from countries without adequate regulation, securing legitimacy under conditions of complexity becomes more challenging. One example, noted by Tatiana Kostova and Srilata Zaheer (1999) is the censure of multinational enterprises (MNEs) in the global media such as that faced by Nike for its labour practices in Indonesia. According to this literature, firms with a high degree of international presence or business focus will undertake different CSR initiatives compared to firms with a mainly domestic presence (Bennie et al., 2007; Knudsen, 2011). These initiatives are more likely to reflect a business reality where firms have to focus on securing their international competitiveness rather than on managing domestic initiatives. Firms that source from or produce in less developed countries are under pressure to secure a social licence to operate if they want to stay in business. Outward flows of foreign direct investment (FDI) as a percentage of the home country's GDP can be used to measure the importance of the global economy to the firm in a country's economy. This variable is positively and significantly associated with company interest in CSR (measured as participation in the Global Compact – see Bennie et al., 2007; Knudsen, 2011).

Industry sector is also found to influence CSR adoption, with global extractive industries (Bennie et al., 2007; Jackson and Apostolakou, 2010), pharmaceutical companies (Brammer and Millington, 2003) and manufactured consumer brands (Spar and LaMure, 2003) among those with the earliest and most extensive CSR initiatives. The pressure can come from a variety of external stakeholders such as NGOs, trade unions, customers and governments (Koos, 2012).

The size of firms also matters (Lepoutre and Heene, 2006), with large firms more likely than small and medium-sized firms proactively to seek out internationally oriented CSR solutions (Knudsen, 2011; 2013). In a study of smaller European firms across seventeen European countries including the UK which focuses on local/domestic civic engagement, Sebastian Koos finds that they ‘already showed high levels of civic engagement before the discursive rise of CSR’ (Koos, 2012, p. 137). Actions undertaken by large firms are more visible than those of small firms, and big-name multinationals are generally more likely to face more scrutiny from NGOs, trade unions, consumer groups, the media or institutional investors (Adams and Hardwick, 1998). Large firms also have more resources to handle demands (Jørgensen and Knudsen, 2006; Navarro, 1988). Furthermore, large firms in risky sectors (e.g. the environmentally sensitive chemical industry) have been found to be willing to go beyond legal compliance for ‘reasons related to risk management and the perceived need to protect their social license’ (Gunningham et al., 2005, p. 313).

In short, studies show that (large) firms in vulnerable sectors that operate internationally are more likely to adopt CSR programmes (Bennie et al., 2007; Knudsen, 2011) than smaller firms that are domestically oriented and from sectors that face a low level of vulnerability in the form of demands from external stakeholder groups.

Expectations. 

The literature described in this section expects that internationally oriented firms will adopt CSR programmes that reflect their need to meet stakeholder demands abroad. In contrast, domestically oriented firms will face less need for using CSR to gain and maintain market share and therefore domestically oriented firms will have less comprehensive CSR programmes. These assumptions can be measured by evaluating variation in CSR between firms with a more domestic or international orientation, and by looking at the degree to which CSR initiatives are oriented towards international markets.

Methodology

In order to probe these alternative explanations, we examine company CSR policies. Both the UK (a country closer to the LME ideal type) and Denmark (a country closer to the CME ideal type) have companies that are CSR leaders in that they are ISO 14001 certified, members of the UN Global Compact, listed on the Dow Jones Sustainability Index, etc. (Knopf et al., 2011). The substitution and mirroring literatures have mostly evaluated companies in terms of the performance of their CSR programmes, concluding: either that since the UK companies figure prominently in the Dow Jones Sustainability Index, these companies must use CSR programmes to substitute for an inefficient UK welfare state (Jackson and Apostolakou, 2010); or if Danish companies have a high prevalence of ISO 14001 certified companies and often engage in social inclusion programmes then it must be because these initiatives complement existing welfare state programmes (Campbell, 2007). In short, this literature focuses on national variation in the levels of CSR performance by firms to make implicit claims about the purpose or content of these company CSR programmes.

We use CSR reports from four companies that are all recognised as CSR leaders (three of them are in the Dow Jones Sustainability Index and one is in the FTSE4Good Index). We focus on the pharmaceutical and banking sectors. Concerning our selection of cases we have picked the largest pharmaceutical company in Denmark (Novo Nordisk) which, measured in terms of share value, is the largest firm in Scandinavia. We have also selected Denmark's largest bank (Danske Bank). From the UK we examine Glaxo Smith Kline (GSK) and Barclays Bank. The two sectors represent those that are more and less internationalised. Pharmaceutical firms are very international. Seven per cent of GSK's turnover originates in the UK, while for Novo Nordisk turnover from Denmark is only 1 per cent. Banks and in particular retail banking have traditionally been more domestically oriented.4 Forty-four per cent of Barclays' turnover originates in the UK, while 36 per cent of Danske Bank's turnover is from Denmark. We propose that the degree of internationalisation is an important dimension in terms of evaluating whether the competitive landscape drives company CSR policies and also to probe whether domestically oriented company CSR programmes are linked to domestic forms of capitalism. We select very large firms as these have more resources to engage in CSR and also face greater pressure to do so from a variety of stakeholders. The pharmaceutical sector has been characterised as a high-impact sector whereas banking is a low-to-medium-impact sector5 (Jackson and Apostolakou, 2010). Our case selection is summarised in Table 1.

Table 1. Case Selection Criteria
SectorCompanyCountryType of capitalist systemCSR recognitions (examples)% Turnover in home country
PharmaceuticalGlaxo Smith KlineUKLMESAM (Bronze)7%
Novo NordiskDenmarkCMESAM (Gold)1%
BankingBarclaysUKLMESAM (Silver)44%
Danske BankDenmarkCMEFTSE4Good36%
Table 2. Company CSR Initiatives that Follow from the Substitution and Mirror Theses
ActivitySubstitution – improving the broader business environmentMirror – enhancing existing policies and norms
Social – domesticExample: companies offer training and skill upgrading for employees in home countryExample: vocational training initiatives are created by social partners and funded by government in home country (public subsidies finance skill development)
Social – internationalExample: establish health care programmes or educational schemes in underdeveloped countriesExample: work with home country governments to enhance/finance social development in less developed countries
Environment – domesticExample: improve environmental practices beyond what is required by national law in home countryExample: promote and support existing government programmes to improve environmental performance in home country
Environment – internationalExample: improve environmental practices beyond what is required by national law outside home countryExample: promote and support existing government programmes to improve environmental performance outside home country

For each company we review available reports6 on CSR programmes from a year in the early 2000s (subject to availability) and from 2011. In some cases these are annual reports, while in other cases they are dedicated CSR or ‘Sustainability’ reports. While the reports are highly varied in length and in the type of information included, they all contain a description of the CSR initiatives of these companies and thus offer evidence of CSR priorities.

Concerning the content of CSR we focus on social and environmental initiatives undertaken by firms as part of their CSR programmes following the definition of CSR as a ‘firm's consideration of, and response to, issues beyond the narrow economic technical, and legal requirements of the firm to accomplish social [and environmental] benefits along with the traditional economic gains which the firm seeks’ (Koos, 2012, citing Aguilera et al., 2007, pp. 836–7). In order to limit our investigation we do not consider corporate governance issues such as limits on executive compensation, financial disclosure requirements, etc.; nor do we consider anti-corruption schemes.

Social initiatives can include human resources programmes ‘directed toward raising the economic, social and political opportunities for employees, contract workers and potential employees in the workplace’ (Griffin and Prakash, 2010, p. 2). Other social initiatives could include human rights and labour rights programmes. Finally, social initiatives could also include local community programmes, donations to the arts or a local sports club. These latter initiatives are focused on what Jennifer Griffin and Aseem Prakash call ‘development’ and ‘may be directed at the local community or at the underprivileged sections of society that may not be directly affected by the corporation. The division of social initiatives into (1) employees, (2) human rights, (3) labour rights and (4) community and society initiatives also follows Kenneth Amaeshi (2007).

Environment initiatives ‘seek to generate positive environmental externalities or reduce the production of negative environmental externalities associated with producing the organisation's goods and services’ (Griffin and Prakash, 2010, p. 2). Examples could include initiatives to reduce CO2 emissions, waste and water use, etc. (see also Amaeshi, 2007).

Next, we divide initiatives into domestic and international initiatives. Domestic initiatives are adopted in the home country only. We are interested to know if these domestic initiatives mirror existing political economic institutions or substitute for inadequate domestic institutional frameworks. We also wish to determine whether domestic initiatives dominate CSR programmes or if internationally oriented programmes are considered more important. Certainly internationally oriented programmes may also be adopted in the home country (e.g. group-wide health, safety and environment standards that are applied through a multinational corporation). International initiatives can also concern suppliers, for example requirements regarding human rights and labour rights.

We start our investigation by looking at the corporate initiatives that are labelled CSR (or sustainability or some related term)7 and divide them into social initiatives and environmental initiatives focused on domestic concerns or international concerns. In order to assess whether the domestic CSR activities of a company are effectively ‘substituting’ or ‘mirroring’ government policies, we need a framework to understand what such activities would look like. In particular, we expect substituting initiatives to fill in for missing government regulation while mirroring activities rely on or build on existing government regulations and programmes.

Substitution

Substituting activities around social CSR could include the development of human resource policies that offer working conditions, guarantees and benefits beyond that required by the law. A firm that is substituting for weak domestic institutions might also offer to compensate training and skill upgrading for employees. Likewise, with environmental policies, we expect firms that are substituting through CSR to adopt environmental practices beyond that required by national law and to be clear in their reporting about what they are doing. Overall, we think that substituting activities will often take the form of policies, so we expect to find standards and codes of practice as the norm.

Mirroring

The mirror argument suggests that we can expect firms with a home base in countries where institutions are strong to act differently from those based where institutions are weak. We might expect that a company that is mirroring domestic institutions will aim to enhance existing policies and norms rather than recreate or rebuild them. Therefore, our expectation is that if CSR policies are a mirror of government policies, companies based in CME countries with strong domestic institutions will build on or rely on key aspects of those government policies. These companies will be strongly focused on employee development and on benefits for stakeholders. It is likely that companies from LME countries where institutions are weak will focus less on employee policies, investor and customer rights and the environment. Table 2 provides an overview of company CSR initiatives that follow from the substitution and mirror theses.

In short, we have two main objectives in analysing the company reports. The first is to determine the extent to which CSR is oriented domestically or internationally in each report. We also want to evaluate whether domestically oriented CSR appears to substitute for or mirror domestic government policies for CSR. Towards these goals, the reports have been read and summarised by three readers. In order to ensure consistency, readers carefully prepared individual reports for each company and afterwards ‘compared notes’ in order to organise findings into a single protocol (see Tables 3 and 4).

Table 3. Findings from the Case Studies – Pharmaceutical Companies
ActivitiesSubstitution – improving the broader business environmentMirror – enhancing existing policies and normsSubstitution – improving the broader business environmentMirror – enhancing existing policies and norms
Sources: Novo Nordisk, Reporting on the Triple Bottom Line 2001 – Dealing with Dilemmas (in 2001 Novo Nordisk for the first time prepared a separate Triple Bottom Line report), http://www.novonordisk.com/investors/download-centre/reports/sustainability/Novo-SUS-2001-UK.pdf; Novo Nordisk, Novo Nordisk Annual Report 2011 – Financial, Social and Environmental Performance (since 2004 Novo Nordisk stopped preparing a separate social responsibility report and since then the Novo Nordisk annual report has accounted for financial, social and environmental performance), http://annualreport2011.novonordisk.com/; GSK, The Impact of Medicines – Corporate and Social Responsibility Report 2002, http://www.gsk.com/content/dam/gsk/globals/documents/pdf/GSK_CSR-2002.pdf; GSK, Do More, Feel Better, Live Longer – Corporate Responsibility Report 2011, http://www.gsk.com/content/dam/gsk/globals/documents/pdf/GSK-CR-2011-Report.pdf
Novo Nordisk2001200120112011
Social –domesticn.a.

Social inclusion programme in a factory to prepare recent immigrants to Denmark for entering the labour market

Collaboration with the local unemployment agency

Co-funding from the Danish government

n.a.

Signs the Danish government's charter for more women in management

Major donation to research in diabetes at Copenhagen University

Social –domestic and international

World Diabetes Foundation (establish and support)

Engage in health care provision in underdeveloped and poor countries

Provide assistance in the development and implementation of national diabetes strategies

Donation to World Diabetes Foundation

Training of health care professionals in underdeveloped countries/regions

Supply chain audits (worldwide)

Human rights programme

n.a.
Environment – domesticn.a.Programme to improve health and safety in factory in Denmark that exceeds strict Danish health, safety and environment standardsn.a.n.a.
Environment – domestic and internationalISO 14001 in Denmark and across all plants globallyProgramme to limit energy consumption in Denmark in order to comply with and move beyond Danish government targets

Programmes to reduce waste and CO2 emissions across organisation worldwide

Continued emphasis on ISO 14001

n.a.
Glaxo Smith Kline2002200220112011
Social –domesticHygiene education for school children in the UK (PHASE programme)

Funding to boost science education in UK schools

Working with UK health care sector to improve asthma treatment

Work with a UK supermarket chain to take back used inhalersReimbursing 100% of uncapped tuition fees for all undergraduates recruited in the UK from 2015
Social – domestic and international

Access to health is major challenge globally and GSK has adopted a wide range of programmes to enhance access throughout the world (‘the global challenge’)

Focus on human rights

Employee diversity throughout the organisation

 

Most of the 103 pages in the corporate responsibility report from 2011 focus on global challenges:

Access to health programme

Research and developments in diseases plaguing poor countries (malaria, TB, dengue fever, HIV Aids)

Partnerships

Worked with the UK government on global health issues
Environment – domesticn.a.n.a.n.a.n.a.
Environment – domestic and international

Minimise use of ozone-depleting gases in products

Minimise air emissions, waste water discharges and hazardous waste

n.a.

Minimise use of ozone-depleting gases in products

Minimise air emissions, waste water discharges and hazardous waste

n.a.
Table 4. Findings from Case Studies – Banks
ActivitiesSubstitution – improving the broader business environmentMirror – enhancing existing policies and normsSubstitution – improving the broader business environmentMirror – enhancing existing policies and norms
Sources: Danske Bank, Danske Bank Corporate Social Responsibility 2006, http://www.danskebank.com/en-uk/CSR/Documents/Reports/CSREngelsk.pdf; Danske Bank, Danske Bank Corporate Social Responsibility Report 2011, http://www.danskebank.com/en-uk/CSR/Documents/CR_report_2011.pdf; Barclays Bank, Corporate Social Responsibility Report 2002 – Making Business Sense (the 2002 CSR report is the first report that is available online), http://www.investor.barclays.co.uk/results/2002results/annual_report/website/impact/responsibility.html; Barclays Bank, Citizenship Report 2011, http://reports.barclays.com/cr11/overview.html.
Danske Bank2006200620112011
Social – domestic

Access for disabled people

Study grants

Donation to sports clubs and ballet

Pilot project to integrate immigrants into the Danish labour market (funded by the Danish government)

Employee competence development

Employee can conduct volunteer work (e.g. contribute advice to people with serious debt problems)

Signed Danish government's charter for more women in management

Collaborate with universities in developing internships, mentoring and training programmes

Social – domestic and international

Group employees in Ireland and

Northern Ireland have been volunteering in local schools for a number of years

n.a.

Joined UN Global Compact

Launched socially responsible investment policy

Signed the UN Principles for Responsible Investment

Ethical guidelines in the Group's credit portfolio

n.a.
Environment – domestic

Non-smoking policy

Phased out PVC plastics

Purchased organic products in cafeteria

n.a.n.a.Eco-label in-house printing
Environment – domestic and internationaln.a.n.a.United Nations Environmental Programme Financial Initiative Nordic Working Group

Group-wide environmentally friendly management system

Environmentally friendly car leasing

Barclays Bank2002200220112011
Social – domestic

Advising and financial literacy programme for young people

Seminars for new entrepreneurs

Community investment to help people with disabilities, support the arts

n.a.

Substantial charity/philanthropy work:

contributes resources to UK community finance sector targeting those that are not regular bank customers

Provides 1,000 apprenticeships

 
Social – domestic and international

Community investment in the UK, US and Africa

Choice of (global) suppliers that focus on social and environmental initiatives

n.a.

Collaboration with CARE International UK and Plan UK – reach up to 400,000 financially excluded people in remote or deprived areas of Africa, Asia and South America

Diversity programmes across global organisation

Focus on human rights

Focus on responsible investing

n.a.
Environment – domesticReduce water use, paper consumption and water use in the UKn.a.Renewable energy, CO2 reductionn.a.
Environment – domestic and international

ISO 14001 certification across whole organisation

Choice of suppliers based on environmental standards

n.a.

Funding and advice for renewable energy companies, through equity, debt, private financing, project finance and research

Reduction of water usage and CO2 emissions

Partnership with WWF in Africa

n.a.

Summing up, the purpose of our case-based investigation is to build and refine expectations about the link between domestic institutions and corporate CSR programmes. We do not propose to engage in hypothesis testing (Yin, 2003) but have a more ‘modest’ goal of building new insights into the link between the content of national models of capitalism, competitive pressures and company CSR initiatives.

Results

We find a significant distinction between the two sectors that we evaluated with respect to the degree of the international vs. domestic orientation of firms. The reports of the pharmaceutical companies have a far greater emphasis on international programmes and contributions than the banking sector. Moreover, we find that the international CSR agendas of the two pharmaceutical firms we studied are rather similar. Both companies prioritise in their reports ‘access to medicine’ and support for health care systems. International market requirements, particularly in less developed countries, dominate the CSR programmes of both companies. None of the companies give particular attention to their home health care systems or the particular health needs of ‘home’ consumers.

We can see in the types of CSR programme that pharmaceutical firms develop that these firms are geared toward ‘substituting’ for weak, ineffective or non-existent regulations or policies. However, those initiatives that could be described as substitution are aimed at countries outside the home country of the pharmaceutical companies. In the developing world, pharmaceutical companies deal with the systemic challenges of delivering medications, vaccines and education, all of which are essential to the establishment of a market. Market motivations are clearly driving these objectives. The pharmaceutical companies had broader environmental goals including specific policies for reducing CO2 and the use of water in the supply chain. This makes sense since the pharmaceutical sector has a far greater environmental footprint through the production of medicines than the banking sector has. Furthermore, environmental issues intersect with global health concerns (e.g. access to clean water). Our focus on the environment therefore fits with the emphasis of the pharmaceutical companies on addressing global health issues.

The banking sector is more focused on domestic-level programmes such as community funding, support for the arts, programmes to raise financial awareness among school children, and human resource management initiatives including programmes to increase the share of women managers, reduce stress and provide flexible work schemes for older workers. Danske Bank focused mainly on domestic programmes in 2006 when it issued its first CSR report such as securing access to disabled customers, anti-stress programmes for employees and a pilot project to integrate immigrants into the Danish labour market. Environmental programmes include systems for documenting and reducing energy resources. Both Danske Bank and Barclays use indicators and follow-up regarding reduction of the usage of electricity, heat and water. Other programmes focus on recycling of office products and supplies. Philanthropy programmes have remained important but programmes have changed from only including traditional philanthropy such as supporting the ballet and sports events for children to include also initiatives that are more strategic in nature. For example, Danske Bank has adopted a financial literacy programme for young people. While these initiatives are mainly domestic in nature, CSR initiatives have become more international in recent years, including membership of the UN Global Compact since 2007 and the UN Principles for Responsible Investment since 2010. Barclays has a long tradition of operating internationally while the relatively smaller Danske Bank has only recently begun to operate abroad. In contrast to Barclay's global reach, Danske Bank focuses primarily on Scandinavia, Ireland and the Baltic states. More so than others, Danske Bank's environmental initiatives are domestically oriented, with a focus on action plans to reduce and document energy resources and implement systems for waste management and recycling of office products and supplies.

We find a significant change in CSR agendas over time. As mentioned above, one of the most significant is the movement of the banking sector towards a more global agenda. While the banking companies we have reviewed overall give more attention to domestic CSR than to international CSR, there is a significant change over time. Barclays’ 2002 report focuses almost exclusively on domestic-level programmes, but the 2011 report dedicates far more time to international issues, including a report on lending to African governments and micro lending in Africa. Further, unlike in the 2002 Barclays report, the 2011 report includes information about work with leading international organisations including the OECD, International Labour Organization (ILO) and the UN. Danske Bank also focused mainly on domestic programmes when it issued its first CSR report. Since then Danske Bank has joined the UN Global Compact, signed the UN Principles for Responsible Investment and participates in the United Nations Environment Programme Finance Initiative, which strives to identify, promote and realise the adoption of best environmental and sustainability practice at all levels of financial institution operations.

Do the domestically oriented company initiatives that we have identified reflect distinct domestic models of capitalism? Barclays' 2002 report pays particular attention to community activities, emphasising the bank's support for initiatives aimed at revitalising communities. These activities can be interpreted as substituting for weak domestic welfare policies and programmes in the UK. However, between 2002 and 2009 there is a notable shift in Barclays’ report towards more international programmes. Danske Bank did not have any programmes in 2000 that were labelled as CSR but in 2006 one of its most notable programmes was a social inclusion initiative to prepare immigrants for the Danish labour market. This programme was financed by the Danish government and social workers from the local unemployment agencies assisted in its organisation. In 2002 the Novo Nordisk plant in Kalundborg in Denmark also engaged in a similar programme funded by Danish public sources. These CSR initiatives, directly prompted by government funding, signal that Danish firms engaged in some ‘mirroring’ activities in the early 2000s. We interpret programmes aimed at including people with other problems than unemployment in the workforce as mirroring because programmes rely on government funding, and companies collaborate with public sector social workers, language teachers, the psychiatric health care system, etc. While one could also argue that asking the private sector to ‘step in’ to help deliver policies could be seen as ‘substitution’, we find that the Danish programmes differ from substitution programmes because of their reliance on the public sector. We found also that our Scandinavian firms gave more attention to environmental programmes than their counterparts. Again, we might argue that this shows a mirror effect, with the CME countries having stronger environmental policies than LME countries.

Discussion and Conclusion

We have positioned this study within a new and growing literature that evaluates the embeddedness of CSR programmes in companies in national institutional frameworks. This literature has sought to identify links between national models of capitalism and the CSR agendas of firms within those countries. Our concern with this literature is the way that motivations of company policies have been interpreted rather than demonstrated, and we examine the specific content of company CSR policies and ask whether domestic models of capitalism shape company CSR initiatives or whether CSR programmes are more likely to be determined by market pressures.

Summing up, our most significant finding was that companies within sectors adopt very similar types of CSR programme regardless of their country of origin. Pharmaceutical companies invest a great deal of their CSR attention in ‘access to medicines’, global health priorities and developing global health care systems. These are clearly strategic objectives. The CSR initiatives lay the basis for new market development and they help pharmaceutical firms to address reputational issues that have surrounded their pricing strategies, particularly in developing countries where pharmaceutical companies are frequently blamed for charging too much (Angell, 2004; Leisinger, 2005). In general, the pharmaceutical companies are far more international in their market activity, and their CSR goals go hand in hand with this. Banking firms are more domestically focused, and so is their CSR. However, we see an internationalisation of CSR occurring even in these firms, explicitly related to the extension of international market activity. This analysis of the content of CSR suggests strongly that CSR in the firms we have studied is largely driven by sectoral conditions as well as the degree of internationalisation of the firm. We conclude from this that competitive concerns are a strong driver of CSR. For the domestically oriented banking firms we see relatively stronger examples of mirroring (Denmark) and substitution (the UK). For the internationally oriented pharmaceutical firms we see a trend towards substitution activities – although these activities are adopted to fill a governance gap in host countries and not in home countries.

How national models interact with sectors has long been an issue of contention in the varieties of capitalism literature. At its core the varieties of capitalism approach claims that sector-specific competitive advantages of companies and countries depend on country-specific institutional structures. This proposition has inspired cross-country comparisons of innovation patterns and success at the firm level (Casper and Whitley, 2004; Love and Roper, 2004; Schneider and Paunescu, 2012). CMEs are claimed to export more heavily in medium–high-tech industries and LMEs in high-tech industries (and finance). Following this literature, UK pharmaceutical companies would be leading the international competition (biotechnology and pharmaceuticals are examples of high-tech industries). However, we cannot detect national differences in how GSK and Novo Nordisk use CSR as a way to help gain and secure international market shares.

Our findings challenge current conceptualisations of the link between institutional context and CSR. Our case study approach has the benefit of providing a fine-grained view of what CSR policies and initiatives look like, thus giving us an opportunity to question existing theories. A larger set of cases and possibly a narrower (more focused) definition of social and environment initiatives could lead to a more fine-grained examination or even testing of the substitution and mirror theses.

While we conclude that sectoral characteristics of multinational enterprises are more important than the model of capitalism of company home countries in shaping company CSR programmes, we are not claiming that domestic political economic institutions do not matter for shaping company CSR programmes. Multinational corporations operating in the same sector can have very different CSR programmes if they are from an advanced industrialised country such as the UK or from an emerging market such as China. Shell has adopted much more extensive CSR initiatives compared to Petro China, for example (Scheel, 2012; Whelan, 2012). The reason is that firms from countries with vibrant civil society groups are more likely to agree to cooperate on human rights, for example, than those from countries with less active organisations (Bennie et al., 2007; Prakash and Potoski, 2007). As Tanja Börzel and Thomas Risse argue (2010, p. 120), ‘reputational concerns about socially accepted behaviour induce firms to take norms seriously. Norm compliance can then turn into a strategic advantage in competitive markets’. Novo Nordisk, for example, has adopted elaborate programmes to detect how key stakeholders such as patient organisations and doctors' associations perceive the role of pharmaceutical companies in society (Brown and Knudsen, 2012).

Future research on the connection between company CSR and national models of capitalism should focus on the way that home country institutions shape attitudes towards internationally oriented CSR. Instead of looking for relationships between domestic home institutions and company scores in CSR ranking initiatives such as the Dow Jones Sustainability Initiative (Jackson and Apostolakou, 2010), the focus should be on the content of company CSR programmes. To what extent do multinational firms bring embedded habits and practices to their global operations? We suspect that one might find differences between firms from different home countries, but that these would be at a finer level that the LME/CME distinction.

A more fine-grained analysis of how distinct home and host country contexts shape CSR programmes in multinational enterprises would therefore be of practical value to companies. It is, for example, very likely that CSR strategies adopted by multinational enterprises are conditioned by key institutions and norms in each national market, and norms and institutions will result in different types of corporate involvement in disease management across countries. National frameworks may shape the degree of strategic adaptation required by pharmaceutical firms in each market as a result of unique features of health delivery systems, laws on drug approvals and legal frameworks that structure business–government and business–society relations.

Recently the Danish and British governments have adopted regulations that shape internationalised CSR rules through companies. It is therefore possible that government regulations in countries such as Denmark and the UK may shape the global CSR activities of multinational corporations listed there. The British and Danish governments are increasingly promoting social change in less developed countries by regulating home country companies and their social activities. The Ethical Trading Initiative (ETI) illustrates how the UK government served as the lead actor of this partnership. The ETI code sets standards for CSR in international supply chains. The UK government launched the ETI in 1998 following discussions among companies and today contributes resources and its imprimatur. In 2012 a majority in the Danish parliament agreed to establish a non-judicial mediation and complaint institution to resolve disputes concerning the infringement of international standards and principles for global responsible business behaviour according to the OECD Guidelines for Multinational Enterprises. On the basis of a complaint or acting on its own initiative, the mediation and complaint institution deals with violations relating to Danish companies, organisations and public authorities, regardless of where the violations appear to be committed.

These new forms of government CSR regulations pertain also to multinational corporations and it is therefore possible that such corporations may have to adjust their behaviour if they are listed in countries such as Denmark and the UK. The regulations demonstrate new forms of interaction between government and companies, aimed not at enhancing domestic welfare policies but rather at improving the global competitive position of companies. These policies are often developed as a partnership between government and business, creating forms of collaboration and impact on firms that are vastly different from either private or public regulation.

Notes

We received very helpful comments from Michel Goyer and Deborah Mabbett and from the three anonymous reviewers. Earlier versions of this article were presented at the Society for the Advancement of Socio-economic Studies in Madrid in 2011, the Council for European Studies Conference in Boston in 2012 and the 2012 workshop on ‘Changing Boundaries of Public and Private Regulation’ at the Copenhagen Business School sponsored by the Carlsberg Foundation. We thank the participants for their input. Asbjørn Klein and Katinka Stenbjørn provided excellent research assistance.

  1. 1

    The EU Commission defines CSR as ‘the responsibility of enterprises for their impacts on society’ (European Commission, 2011, p. 6).

  2. 2

    For a critical view of the UK as an LME, see Crouch et al., 2009.

  3. 3

    The varieties of capitalism literature focuses on two diametrically opposed ideal types of capitalism. This has generated a vibrant discussion of the correct labelling of individual countries. For example, Campbell et al. (2006) argue that Denmark is a hybrid model blending important elements of each type (e.g. flexicurity) while Casey (2007) claims that increased business regulation and vastly expanded social welfare spending during the Blair years mean that the UK is less of a liberal economy than the one Tony Blair inherited. While we acknowledge these arguments, we follow Hall and Gingerich's (2004) claim that Denmark is an ideal-typical coordinated market economy and the UK a liberal market economy.

  4. 4

    Regarding size, certainly Barclays' international presence would lead us to expect that Barclays has at least some focus on internationally oriented CSR. But Barclays is also a large retail bank in the UK and therefore at least in this business segment can be seen as a domestically oriented company.

  5. 5

    Jackson and Apostolakou (2010) group sectors into three broad industry groups based on the stakeholder impact of each sector: low impact, medium impact and high impact. For this categorisation, they use the sector allocation of the FTSE4Good indices, which classifies sectors according to the ecological footprint of their activities. The rationale for this measure is that the greater impact of company activities is a useful proxy for the resulting pressure from stakeholder groups to adopt CSR policies and, finally, the development of institutionalised forms of CSR.

  6. 6

    The data in the report are used as a guide to understanding how the company portrays its CSR initiatives, their degree of internationalisation and change in emphasis over time. We do not evaluate initiatives in terms of their degree of relevance or their impact.

  7. 7

    Novo Nordisk uses the term Triple Bottom Line reporting (TBL reporting) or sustainability. The other three companies have a CSR report.

Biographies

  • Dana Brown is Professor of Strategic Management at EMLYON Business School in France and International Visiting Scholar at Said Business School, Oxford University. She holds a PhD in political science from MIT, and an MPhil in Russian studies from Oxford University. Dana's research and teaching focus on corporate global entry strategies and the use of social (CSR) initiatives as a component of market entry. She is also Academic Director of the International DBA programme, a joint degree between EMLYON and Lingnan University in Guangzhou, China. Dana works as an adviser to the Alfa Fellowship Programme, which provides an opportunity for young professionals to work for one year in Russia. She is an avid supporter of international education and responsible business practice. Dana Brown, EMLYON Business School, 23 avenue Guy de Collongue, Ecully 69134, France; email: brown@em-lyon.com

  • Jette Steen Knudsen is Professor of Business in Society at the Department of Political Science at Copenhagen University. She obtained a PhD in political science from MIT and holds Visiting Fellow appointments at the International Centre for Corporate Social Responsibility at Nottingham University Business School and at CBSCSR at Copenhagen Business School. She has published extensively on CSR, focusing on the changing boundaries of public and private regulation of CSR as well as on the internal organisation of CSR in multinational corporations. Jette has published in journals such as Business and Politics, European Journal of Industrial Relations, Journal of Business Ethics, Journal of Public Policy and Regulation and Governance. She previously served as project leader for the CEO at AP Moller Maersk (a shipping, oil and retail conglomerate) evaluating CSR threats and opportunities. She has also been a director of the think tank, Copenhagen Centre for CSR. Jette is a consultant to companies and governments on CSR issues. Jette Steen Knudsen, Department of Political Science, Copenhagen University, Øster Farimagsgade 5, 1014 Copenhagen, Denmark; email: jsk@ifs.ku.dk

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