CHAPTER-7 THE CONTRIBUTION OF

CORPORATE SOCIAL RESPONSIBILITY

TO ORGANISATIONAL COMMITMENT

Organizational commitment forms the basis of an extensive

literature which has focused both on the antecedents of
commitment and its consequences for work behavior. Meta-
analytic studies of the literature suggest that organizational
commitment is driven by work experience rather than the
recruitment or selection of employees, and highlight the
importance of perceived organizational support in this process.
we focus on the relationship between organizational
commitment and Corporate Social Responsibility (CSR) within
a model which draws on social identity theory and
distinguishes between the importance of CSR for male and
female employees. During the past decade firms have come
under increasing pressure to pursue socially responsive
behavior from a variety of stakeholder groups including
shareholders, employees, investors, consumers, and
managers. The demand for corporate social responsiveness
has been accentuated in the UK through the activities of
pressure groups such as the Percent Club and Business in the
Community and the increasingly widespread attention given to
the subject in the national media’. As the threats and

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opportunities associated with corporate social and
environmental responsibilities become better understood,
companies have sought to generate strategic capital from the
acceptance of these responsibilities. In light of this, significant
strands of research have investigated whether there are
financial payoffs to increased social responsiveness, the
influence of perceptions concerning corporate social
responsiveness on customers, and the attractiveness of social
performance to investors. Within this body of research
considerable attention has been paid to the importance of
employees in corporate social responsiveness. These studies
provide evidence of payoffs to improved social responsibility,
including the observation that more socially responsible
corporations are more attractive to potential employees and
that they may therefore benefit from larger applicant pools,
and a more committed workforce because “employees will be
proud to identify with work organizations that have favorable
reputation”. Indeed, a recent survey found that 58% of UK
employees believed that the social and environmental
responsibilities of the organization they worked for are very
important, with other evidence highlighting that corporate
social and environmental values may play a particularly
significant role in the recruitment of new graduates. In this
paper we investigate the relationship between organizational
commitment and employee perceptions of CSR within a model
which draws on social identity theory and distinguishes

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between aspects of CSR which are primarily concerned with
the external image and reputation of the organization (what we
call “external CSR”) and aspects of CSR which are related to
the internal operation of the organization (what we term
“internal” CSR). Specifically, we examine the impact of three
aspects of socially responsible behavior on organizational
commitment: employee perceptions of external CSR and in
particular corporate social responsibility in the community,
procedural justice in the organization and the provision of
employee training. According to social identity theory
corporate social performance may be expected to contribute
positively to the attraction, retention and motivation of
employees because they are likely to identify strongly with
positive organizational values. Earlier work has emphasized
the strong relationships which exist between organizational
commitment, labor retention and a range of work attitudes
including: productivity and absenteeism. Resource based
theory suggests that sustained competitive advantage is based
on the attraction, accumulation, and retention of resources
which are difficult to substitute and hard to imitate.
Organizational knowledge is both intangible and embedded in
the organizations human resources; it encompasses the
technical knowledge, know-how, and managerial skills which
underpin the managerial process and the diffusion of
knowledge within the organization. The retention of workers
may therefore be seen as central to the maintenance of firm

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specific advantages. In so doing it adds to our understanding
of the determinants of organizational commitment and to our
knowledge of the impact of external corporate social
responsibility on internal stakeholders. Although earlier work
has explored the relationship between CSR and external
stakeholder management few studies have investigated the
impact of external CSR strategies on internal stakeholders and
in particular work attitudes. Second, we evaluate the
contribution of external CSR to organizational commitment in
the context of a model which also includes two aspects of
internal CSR (training and procedural justice) which reflect
both corporate investments in the labour force and the ethical
stance of the organization. Our approach to the relationship
between CSR and organizational commitment is therefore both
disaggregated and multidimensional and can be contrasted
with earlier work which focuses either on aspects of CSR or
generic constructs which fail to distinguish between policy
choices. This disaggregated approach enables us to investigate
the relative returns, in terms of organizational commitment, to
different forms of socially responsible behavior, from which we
might reasonably infer payoffs in terms of retention and
recruitment and thereby establish a mechanism by which CSR
can deliver strategic benefits. The analysis is carried out in five
sections. The relationship between CSR and organizational
commitment is discussed in the next section within a model
which draws on social identity theory, and a set of hypotheses

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is introduced. The sample, data and variable specification are
then discussed in section. The results of the analysis are
presented in section and the implications are then discussed
in the conclusion.

7.1 Conceptual background and hypotheses

development
Three forms of organizational commitment: affective
commitment which denotes ‘an emotional attachment to,
identification with, and involvement in the organization’,
continuance commitment which denotes ‘the perceived costs
associated with leaving the organization’ and normative
commitment ‘which reflects a perceived obligation to remain in
the organization’. Recent meta-analytic studies show that each
of these forms of commitment is associated with labour
turnover and intentions to leave the organization but suggest
that a stronger relationship exists between affective
commitment and a range of desirable employee outcomes
which include: attendance, job performance, stress, health,
work-nonwork conflict. Since the implications of affective
commitment encompass both job behavior and a set of
underlying outcomes which are relevant to the individual well
being of employees we focus on affective commitment and
explore the relationship between affective commitment and
corporate social responsibility within a model that draws on
social identity theory. Social identity theory proposes that

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individuals view themselves as members of social categories.
Within social identity theory, an individual’s view of
themselves, their “self- concept”, is influenced by their
membership of social organizations, including the organization
for which an individual works. Individuals attempt to establish
or enhance their positive self-concept through the comparison
of the characteristics of themselves and the groups they
belong to with other individuals and groups. Favorable
comparisons lead to an enhanced self-concept, unfavorable
ones to reduced self esteem. Perceptions of an organization’s
identity, the beliefs held by a member of an organization
concerning the “distinctive, central, and enduring attributes of
the organization”, may influence the strength of identification
of an individual with an organization. Social identity theory
therefore hypothesizes that individuals are happiest when they
associate themselves with organizations that have positive
reputations, because it is association with those organizations
that will enhance their self-concept. More recently, it has been
suggested that employee perceptions of a firm’s ethics, values,
and social responsiveness play a significant role in shaping
employees perceptions of the attractiveness of particular
organizations. Recent evidence suggests that employees and
the public in general appear to attach significant and growing
importance to the values of corporations and inter alia socially
responsible behavior by these organizations. In addition,
individuals “choose activities congruent with salient aspects of

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their identities, and they support the institutions embodying
those identities”. Within social identity theory, employees may
be expected to identify with socially responsible behavior by
companies resulting in an increase in organizational
commitment. we distinguish between three aspects of CSR:
external CSR, procedural justice and training and explore the
implications of each aspect for organizational commitment.
Since social identity theory suggests that an individuals self
identity and values are associated with gender the relationship
between organizational commitment and each aspect of CSR is
investigated within a model which distinguishes between
gender and includes a set of control variables which are drawn
from the literature.

7.2 External corporate social responsibility

External CSR encompasses philanthropy and community
contributions but also reflects the way in which the firm
interacts with the physical environment and its ethical stance
towards consumers and other external stakeholders. Since
CSR is concerned with those actions which exceed the legal
minimum corporate contributions in this field are largely
discretionary. Employees may be expected to base their
opinions of external CSR on internal and external information
sources including the media and their personal experience
within the company. Recent corporate experience in the oil

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and pharmaceuticals industries has emphasized the negative
consequences for corporate reputation that may flow from
inappropriate behavior towards the environment. At the same
time recent studies have shown positive relationships between
corporate reputation and philanthropy and corporate
involvement in social causes and reputation. Since social
identity theory suggests that employees will be proud to
identify with organizations that have a positive external
reputation a positive relationship is expected between
organizational commitment and external corporate social
responsibility.

7.3 ROLE OF CORPORATE SOCIAL

RESPONSIBILITY IN DEVELOPING ECONOMIES

According to the report of Economic Advisory Council to Prime

Minster, the economy is witnessing an average growth of 8.1%
since past three fiscal years. Growth during this period was
driven largely due to the acceleration in industry and services
sector. Economic gurus worldwide have predicted that India
can surpass china as far as economy is concerned by year
2050. However, looking from the other aspect the most critical
question ahead is whether our Social growth be able to sustain
the challenges and impacts like inflation, uneven wealth
distribution etc. posed by this aggressive economic growth?
India’s development strategy, like that of most other

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developing countries, has evolved over successive Plan
periods, reflecting the growing strength of our economy,
structural transformations taking place in the domestic
economy and also developments in the world economy. In the
early stages of development planning, government was viewed
as the principal actor in development exercising strict control
over private investment, ensuring a dominant role for the
public sector in all important industries. Trade policy tended
to be inward oriented focusing on industrial development
through import substitution which was encouraged through a
tight control over imports and maintenance of high tariffs. The
limitations of this strategy became evident by the end of the
1970s and early 1980s when it became clear that these
policies reduced efficiency and competitiveness and growth
was much lower than targeted. While government was over-
active in industry, it was under-active in many areas,
especially relating to social development and this was reflected
in a very slow pace of improvement in critical social indicators.
Large sections of planners and policy makers in the country
have argued that there exists no serious problem of
infrastructural deficiency that can not be tackled through
management solutions. All that is needed is to restructure the
system of governance, legal and administrative framework in a
manner that the standard reform measures can be
implemented equally in all sectors. Reduction of public sector
intervention, ensuring appropriate prices for infrastructure

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and civic amenities through elimination or reduction of
subsidies, development of capital market for resource
mobilization, facilitating private and joint sector projects,
simplification of legislative system to bring about appropriate
land use changes and location of economic activities etc. are
being advocated as the remedial package. According to
planning commission report on 2020, India is likely to attain a
stationary population of 1.7-1.8 billion. It may be a dream to
reach the current prosperity of the United States or may be it
can not be achieved with all its attendant extravagance. But
can it reach at least the average level of world’s prosperity with
per capita incomes of about US $ 5-6000 per year? That much
is indeed necessary as it is the minimum need to avoid being
looked down in the comity of nations. More than that runs the
risk of evoking jealousy and inviting unwanted migration too.
The Planning Commission has targeted 8 per cent growth rate
but agriculture (the mainstay of rural areas) cannot grow
much faster than 2 per cent. So, either rural area recede 6 per
cent a year relative to cities, or there is 6 per cent rural-urban
migration or rural areas are empowered to grow at 8 per cent
with non-agricultural development making rural-urban
migration unnecessary. Most reports emphasized economic
growth and also highlighted the importance and means of
social growth but still we could not been able to achieve that
sustainable social growth when we can say India’s overall
development is satisfying. economic vs. social progress and

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will try to suggest how Corporate Social Responsibility can
contribute. We would also try to highlight the existing
examples of owning social responsibilities by corporate and
how they have benefited through it. Indicators of Social vs.
Economic Growth At National Level Government has claimed
that the level of living of country has mounted up after the
implementation of reforms but parameters which can actually
judge the social growth is different. These parameters are
actually never considered intensively before who clearly
showed that social growth is not occurring at the same rate as
compared to economic growth. The basic parameters which he
studied in his research were NSDP (Net sales Domestic
product) of states, Human Development index and People
below poverty line. These parameters were compared on a
relative basis taking one state as a base during performs and
also during post-reforms. The graph which came out of the
study gives a clear cut picture of whether we are moving
towards convergence or divergence of social vs. economic
growth. It can be easily seen that divergence during Pre-
reforms period was less prominent compared to the divergence
during post-reforms period.

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This graph analyzes the rate of growth in human development
index at comparative scale between the states. Here also the
inferences can be drawn that pace of improvement during the
post reforms has considerably gone down. At Global Level If a
comparative analysis is done on the basis of Human
development index, as a key parameter for social growth and
GDP per capita, as a key parameter for economic growth then
we can get many interesting facts. This analysis gives a clear
scenario of how developed nation differs with India as far as
Economic vs. Social growth is concerned.

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As can be seen from figure-3 India has been implementing
aggressive economic growth that in terms of growth over the
previous years India has surpassed U.S.A. India has shown a
growth of over 50% in the last decade in GDP per capita. ON
the other side U.S.A which is growing at a nominal rate has
shown a growth if over 23%in the last decade. This is a good
sign, as far as economy is concerned, for India. Now let’s look
at the comparative social indicator index of these economies.

Now from figure-4 it is clearly visible that even though U.S.

has higher HDI than India but the growth rate of HDI is
almost consistent for both the economies. But in terms of GDP

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growth India is aggressive dominating U.S. growth. This shows
the divergence of social vs. economic growth of India compared
to developed economy like U.S. For this reason still we are
dealing with many social problems like environment pollution,
unemployment, Poverty and other social indicators. Also from
this example it can be proved that developed economies always
try to maintain balance between their social and economic
growth.

7.4 CSR: Helping Society or Oneself

Corporate Social responsibility is best defined by the World
Business Council as “The continuing commitment by business
to behave ethically and contribute to economic development
while improving the quality of life of the workforce and their
families as well as of the local community and society at
large”. Being socially responsible means not only fulfilling legal
expectations, but also going beyond compliance and investing
more into human capital, the environment and relations with
stakeholders. Thus CSR exhorts firms to diverge from their
sole aim of maximizing profits and to lay more importance on
improving the economic and social standards of the
community in their countries of operation. CSR can be thus be
simply defined as the additional commitment by businesses to
improve the social and economic status of various
stakeholders involved while complying with all legal and
economic requirements. the three major elements of CSR are

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product use which focuses on contribution of industrial
products which help in well being and quality of life of the
society, business practice which focuses on good corporate
governance and gives high impetus for the environmental well
being and equity which tries for distribution of profits
equitably across different societies especially the host
community. For many years, Milton Friedman has served as
the villain in much of the Business and society literature. His
adage that the social responsibility of business is to maximize
profits within the bounds of the law goes against the
inspiration of most business and society work that examines
the impact of business power on society. His arguments have
proven unconvincing to many scholars in the field, given that
they seek to limit the negative impacts of business on society,
while optimizing its social performance. CSR produces a range
of benefits which companies get by producing some specific
amount of social output. Husted and Salazar have graphically
proved how CSR would be beneficial to society as well as
oneself

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In this case an example of a firm is taken which faces both a
social cost curve and a social benefit curve. The corporate
social cost curve (Ccs) represents the total amount spent by
the firm at each level of social output. The social cost curve
indicates the cost to the firm of providing additional units of
social output to society. The vertical axis represents the firm’s
social investment the value of resources expended by the firm
to produce social outputs. It should be noted that this ‘social
benefit’ curve is not the social benefit of welfare economics,
but is the private benefit to the firm for its production of social
goods. These benefits might include increased sales, the ability
to extract a price premium, or reduced production costs, all of
which are due to the firm’s CSR projects. However, as the
firm’s social output increases, this output is less likely to
produce the same kind of impact on its image, sales, etc. At
some point, additional improvement in social output will
provide no additional benefits for the firm. In fact, if the firm
continues spending on the resolution of some social problem

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after that maximum potential output has been reached, it is
likely to be viewed negatively and benefits for the firm will
decrease. Given the high cost of reaching the maximum
potential social output (Xsp), the optimal quantity of social
output from the perspective of society is not necessarily that
which eliminates all pollution, poverty, social instability,
illiteracy, etc, but that which permits a society to maintain at
least a minimal desirable state.

7.5 CSR Understanding in India

CSR is not a new concept in India. It has been well established
in India by the organizations having strong values for families.
Historically also it CSR has been a strong influence on
business, government and society. Kumar suggests that four
models of CSR can be identified in India.

• Voluntary commitment to public welfare based on ethical

awareness of broad social needs: The Gandhian Model.
• State driven policies including state ownership and extensive
corporate regulation and administration: the Nehru Model.
• Corporate responsibility primarily focused on owner
objectives: Milton Friedman Model
• Stakeholder responsiveness which recognizes direct and
indirect stakeholder interests: the Freeman model.
Though Nehru model and Gandhian model still tends to exist
but due to continuous impact of western culture the Friedman

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model can be more influential compared to all previous
models. Now the CSR activities by corporate are not limited to
families it has become Globally local. In a survey done by JIM
Bangalore more than 70% participants believe that social
responsibility is not only a government role but its also a
corporate one and a very small proportion 17% agrees that its
social obligations are responsibility of government, not
corporations. This is a strong indication that social
responsibility is an integrated process which has to be
implemented by government and corporate as well. Nearly 80%
suggests that codes of conduct are necessary to encourage
accountability and transparency. Both these responses
suggest a significant variation from the Friedmanite view of
business being in business for business.

7.6 Areas of CSR concern and Corporate

Performance

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Also from the survey the resulting response (table 1) clearly
tells the perception of respondents towards the corporate for
fulfilling social needs. It’s not surprising that still the major
problems which are faced by urban population are pollution,
roads and power as compared to least concern area which is
communication and education. This survey text evidently
proves that CSR is highest in India in the factors which is
education and communication which is always identified as
the most important development concern by the government.
In an survey conducted by CSM (2001), the perceptions of
companies towards various parameters of CSR has been
brought forward. The various dimensions of CSR valued by
companies are national wealth, employment, environment and
social programmes including health and literacy. The Green
Paper identifies two main dimensions of companies
implementing CSR, an internal dimension relating to practices
internal to the company and an external dimension involving
stakeholders. Dawar and Chattopadhay point out the instance
of whirlpool. “Whirlpool discovered that it was unable to sell its
high priced, fully automatic machines in the emerging
markets. It was only after it introduced twin-tub machines
that were cheaper and utilized the consumers’ labor rather
than electronics to complete the entire washing cycle that
sales took off interestingly, due to the fact that these machines
had long disappeared in the developed markets, Whirlpool had
to acquire the ‘obsolete’ technology from Korea.” According to

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Robbins, “Companies operating in countries where human
rights are regularly violated may experience a climate of civil
instability and corruption that makes for uneasy relations with
government officials, employees, local communities and
shareholders.” In the context of emerging markets, operations
of companies should not impinge on the land rights of the
local community. In particular, the company needs to make
sure that people are not forcibly removed from their homes
and their livelihoods are not endangered.

Existing Examples
There are many Companies which have been implementing
CSR for the benefit of society and also for the benefit of their
organization. In this context we will see the social activities
which were performed by Ashok Leyland in terms of many
factors like environment, Safety and health, life cycle
assessment and society.

Environment
As a practice, rainwater-harvesting projects have been
implemented extensively to improve the ground water table in
Bhandara and the saved water is used during summer to
prevent depletion of ground water. Over the years, two
artificial ponds with 40,000 KL and 10,000 KL capacities and
a check dam of 30,000 KL capacity have been created at the
Bhandara (Maharashtra) unit. As water is available round the

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year in these water bodies, a rich variety of flora and fauna
flourish around these ponds. During the heavy downpours in
end-2005, the ponds filled up and overflowed. After the rains,
the living organisms in the ponds, including the fish, were
found to be dying in large numbers. Extensive analysis of the
reasons was carried out in coordination with a few
Governmental agencies. The root cause was found to be an
increase in the ‘Biological Oxygen’ demand due to sudden
changes in atmospheric conditions accompanying the
downpours a serious threat to the living organisms in the
water. As a solution, a chemical called Nualgi was used to
increase the Oxygen content in the water and the problem was
solved.

Safety and health

As the old adage goes what is not identified is not controlled
and to ensure that as many unsafe conditions are identified,
an extensive ‘hazard mapping’ exercise has been taken up and
is nearing completion. The results of the mapping are being
used to improve safety at all locations. As far as improving
contractor safety is concerned, many new initiatives like
auditing the usage of Personal Protective Equipments among
the contract workmen, having a Safety Officer for large
contractors and extensive training for all contract workmen
have been put in place. To improve access to safety
information and training, an IT portal on safety is under

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construction. This portal, to be accessible to all employees, will
have modules for reporting of incidents and accidents, training
modules and general information on safety issues. While
isolated efforts to improve safety are effective in the short
term, accident prevention demands a comprehensive system.
Towards this, the implementation of an Occupational Health
and Safety Management System on lines of the OHSAS 18001,
is being accelerated and given impetus. Training programmes
to all executives and associates have begun in right earnest
and are nearing completion.

Society
Ashok Leyland has commissioned the Driver Training Institute
(DTI), Burari, in partnership with the Government of National
Capital Territory of Delhi. “To ready a commercial vehicle
driver for life on the road - and off the road” is the mission of
this first ever such public private partnership in North India.
Operating on a revenue-neutral basis, the Institute runs under
an apex governing body called FAITH (Foundation to Assist
Inculcating Traffic Habits), constituted by the Government of
Delhi. The DTI is built on 12 acres of land that houses
classrooms, an auditorium, a library and a trainee’s hostel. It
has a 2.2 km driving track with various road configurations
complete with electronic signals, signboards, road markings
and streetlights for night driving. Trained instructors impart
theoretical and practical training to the drivers. In line with

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the driving environment and current needs of drivers, practical
training and tips on fuel efficiency and handling of hazardous
goods are also provided. Yoga and AIDS awareness are also
part of the exhaustive curriculum. To start with, the institute
provides a two-day refresher course for heavy vehicle drivers,
evaluation of heavy vehicle drivers, PSV badge training
programme and a programme on defensive driving and fuel
saving. It hopes to add more courses in the future.

7.7 Diverse knowledge about the CSR definition

From the result of the conducted study it was obvious that the
concept of CSR can be complicated and difficult to define. This
pattern is also shown in literature where a great deal of
different definitions flourishes. An explanation of this is that
CSR is most likely still a rather unknown concept for most
people. CSR is also a rather new concept and especially for
service organization that has not had the same pressure from
the society as manufacturing organizations where social
responsibility has been an issue for quite some time. For the
case company the CSR work started seriously when the new
CEO was employed. The respondents seem to believe that
companies have responsibility but a direct definition of what
responsibility involve, is difficult to give. The pattern of not
including the responsibility towards employees as a CSR
activity can possibly be explained by the fact that companies
and their personnel regard those activities as obvious. The

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responsibility towards the society as large and towards the
environment was mentioned more frequently as a socially
responsible activity. Moreover; the caring about the employee’s
welfare was most likely implemented before organizations
began to execute many of their social and environment
projects. It can also be assumed that actions regarding the
environment and society are more obvious considered as CSR
due to the fact that especially the environment is a very
relevant and discussed topic today and comes to peoples mind
instinctively. The knowledge and the definition of CSR were
very diverse in the case company. The management had
greater knowledge than the employees and customers. A first
possible explanation for this may be that the CEO of our case
company had previous knowledge of CSR from working at
SAAB Training Group. SAAB is a manufacturing organization
and it was apparent that they had more pressure from the
general public and the government regarding CSR. Another
explanation is that the management often is more involved in
the handling of CSR activities because of a higher position in
companies. It can also be the case that managers encounter
the concept of CSR more frequently than employees and
customers. This is because they also engage in meetings where
strategically decisions are executed. One reason why
employees and customers are not that familiar with the actual
term CSR could be that it is an English term and moreover
that they never reflected on the meaning of the definition.

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7.8 The practice and purpose of CSR
Even though people have difficulties to define CSR the study
indicates that a service organization can do a great deal of
CSR work. Literature provides information that it might be
easier for a manufacturing company to take decisions about
CSR, implement it and also to define it. A producing
organization may also easier control and monitor their
pollution, transportation and other actions that affect the
environment. This indicates that it is easier for a
manufacturing organization to actually communicate their
CSR on their website or in other matters, since they actually
have measurable facts and results. In a service company the
decision process of what actions to engage in regarding CSR
might be more complex because no clear impact on the
environment may be measureable and moreover, other control
and monitor aspects may be absent. The case study
performed, implies that a service company have the possibility
to engage in several different CSR activities, however, those
might not be as obvious as in a manufacturing company and
therefore more complicated to communicate externally. The
case study moreover, indicates that the responsibility towards
the environment and the employees is taken most seriously.
Despite the fact that the employees were not discussed
extensively when defining CSR, the company perform those
activities to a great extent. The extensive work towards the
employees in order to facilitate employee satisfaction can be

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explained by the fact that personnel are regarded as a very
important stakeholder in a service company. This may be
considered as a win-win situation where both the employees
and the company gains. Facilitating the working environment
for the employees may most likely result in that they feel
better and perform better and therefore contribute more to the
organization. One very obvious and straight forward example
from the case company is that the employees are encouraged
to exercise by given free membership at various gymnasiums
this is argued to result in healthier individuals and therefore
less sick days for the organization. According to Lanto’s this
may be considered as strategic CSR. A service company
usually does not have the same impact on the environment as
a producing company. It can be assumed that ethical CSR is
not very existant in service organization due to their lack of
morally mandatory actions. Therefore fulfilling the
responsibility that a service company has towards the
environment can be considered as a bit different from what a
producing company executes. The case company exercised
several rather complex environment activities. This was
actually to some extent rather surprising because these
activities did not provided the organization with obvious
benefits. One possible reason for service organizations to
perform actions that is argued to enhance the environment is
that the environmental conscious thinking is right in time at
present. Moreover, the general public and the society as a

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whole considered the environment to be a vital issue and
environmental friendly organizations may experience positive
publicity. Concentrating on the environment may therefore be
regarded as a strategic move for a company, where there is
again a win-win situation. A company receives goodwill from
these actions since it leads to a positive image. It can also be
argued that a service organization may gain more positive
attention if they are considered to be environmentally friendly
due to the fact that their incentives to take these actions are
not imposed on them from external pressure groups, which is
often the case for producing organizations. Companies’
customers will also affect what activities service organizations
execute. The case company works closely with the wood
industry and agriculture where the demand for environmental
friendly solutions is great. This has influenced how the
company conducts their business and moreover what services
they offer. This indicates that the activities that an
organization performs, whether they are regarded as CSR or
not, depend to great deal on the requirements from customers.
It could be the case that this is even more obvious in a service
organization context due to the fact that the service performed
depends on the interaction between the organization and the
customers and moreover that the actual service may differ
depending on the receiver. It can be assumed that a company
with no demands from their customers to engage in
environmental improvements may not put a great deal of effort

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on environmental activities. Another socially responsible
activity that a service organization may perform is
philanthropic CSR. This is something that the case company
performs to a great extent. Donating money to charity, youth
organization and sport association may generate much
goodwill for an organization due to brand image etc. However,
in the case company this action may be regarded as altruistic
CSR because their intentions are not to gain anything back
from it. Yet, altruistic CSR may be beneficial for an
organization due to the fact that the internal stakeholders may
get the feeling that the work for an organization that give
something back to society and this may motivate them more in
their work. From the case study and from previous research it
becomes evident that service companies in general do not
communicate their CSR activities through their annual report.
A possible reason for this is that they do not experience the
demand from shareholders or other stakeholders. The
activities are instead communicated in other ways. Patterns
indicate that service companies communicate their activities to
great extern internal. This could be explained by the fact that
the employees are regarded as significant in a service
organization context and it is important that they feel that
they are part of the activities and decisions that the
organization performs. This internal communication therefore
satisfied their need for information and facilitates the work
towards a common goal. Moreover, since there is a close

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relationship between the customers and employees the
employees will have the possibility to communicate to the
customers about the different activities within the company.
The media is also seen as an important stakeholder when
communicating to the society. This most definitely applies to
all companies since newspapers; TV and radio reach many
individuals and plays a great role in what image people have of
a company.
The authors could here draw a parallel to Friedman that
argues that managers engage in CSR do it to promote their
own social, political or career agendas. It can be assumed that
it is not that common that companies engage in activities that
is pure altruistic. Businesses primary exists to generate jobs,
profit and opportunities. Hence, it might be that the reason
why organizations engage in CSR is because they regard the
relationship as reciprocal and that CSR to some extent always
is an egoistic behavior. An activity executed with the
anticipation to gain something back from it, can also be
estimated as socially responsible. CSR and profit should not
be considered as poles apart; instead it might be the case that
the more positive benefits that organizations discover by
perform CSR, the more of those actions will be executed.

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7.9 Stakeholders influence on CSR
7.9.1 Shareholders & Civil society
Shareholders are one stakeholder that is acknowledged as
influential for organizations. Friedman’s theory that
businesses should only aim at making profit for the
shareholders cannot be applied on the case company since the
shareholder’s endeavor is not to generate as much profit as
possible. It becomes evident in the empirical findings that
what the shareholders requires is for the organization to be
socially responsible and follow the directives that provide
benefits for the entire region. Hence, the argument by
Friedman that the managers should act as employees to the
owners and obey to their requirement can be assumed to be
true. The shareholder’s directives are for the organization to be
socially responsible, an approach that the service organization
has adopted. It also becomes evident that all the greater
decisions first need to be approved by the shareholders, an
indication that the shareholders put much demands on
organizations, regardless if it involves profit generating or not.
This assumption is most likely true for most organizations
since shareholders are the actual owners of organizations and
therefore posses much power. However, the fact that the case
company has one major shareholder that posses 82% of the
shares and therefore is rather constrained to their
requirements, is not applicable to other service organizations.
Hence, the importance of one single shareholder is most likely

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not as evident in other companies. Moreover, other
organizations with several different shareholders may not be
as responsive to their demands since it might not be as severe
for them to terminate the collaboration with one of their
shareholders. According to Freeman organizations usually
acknowledge their primary stakeholders and then adapt to
their directives, some indications of this do exist at Elmia. It
can be assumed that other service organizations that are
lacking the demand from the general public and are not
regarded as having a major impact on the environment do not
experience the obligation to engage in CSR to a great extent.
However, it can also be assumed that the shareholders are the
not the only imperative stakeholder for service organization
since the case company actually goes beyond the shareholders
requirements with their CSR activities in this case.

7.9.2 Customers
The customers were the first stakeholder group that the
management, mentioned as imperative. According to Singh,
Sanchez and del Bosque, there is a tendency today for
companies to treat their customers as key stakeholders since
the importance of brand image has increased. Customers may
also have been the first stakeholder group mentioned given
that their importance for an organization is very apparent,
since without the customers, no business. They are the ones
demanding a product or a service and the company supplies

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it. Klein furthermore argues that in service organizations
where the goods are immaterial, the interactions with the
customers are even more essential since they almost become
part of the service delivered as well. In the empirical findings it
is argued that the requirements from customers regarding
CSR is augmenting and when customers asks about these
issues, the organization wants to be able to provide
information that they are socially responsible. This approach
is considered to be very proactive and it also indicates that the
actual demand for service organizations to be socially
responsible may not always originate from the customers.
Singh present information that the main concern for
customers regarding CSR usually involves the demand for safe
products. Taking this statement into account, it can be
assumed that a service organization which not provides
tangible goods may not receive pressure from customers to be
involved in CSR to the same extent as manufacturing
companies that provides their customer with a physical
product. Despite the fact that the customers regard it as
important for the service organization to be socially
responsible, they also argue that they do not put any concrete
demands; instead their main concern is that the organization
provides good qualitative services. However, this may be
interpreted as an aspect of CSR as well. As mentioned above,
Singh states that CSR required from the consumers’ are often
that they entail safe and reliable goods, and the service can

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actually be considered as the organizations immaterial goods.
The time when the customers become aware of what they
actually bought from the company is when the immaterial
product is delivered in a service organization context according
to Heskett. This implies that the customers require safe and
high standard services but they probably not consider it as a
claim. If a service organization maintain high standard and
deliver high quality services, this may be regarded as taken for
granted by the customers and could actually be the reason
why they do not put any claims on the company. Nonetheless,
if organizations did not assure it, they would fail in meeting
the customers demand and hence decrease sales and profit. In
the empirical findings, it becomes evident that the incentives
to perform the bio-energy fairs, near-produced food fairs and
“green fairs” is argued to not actually derive from the
customers, instead it is said to originate from the media and
the society in large. Yet, the demands from customers are
often reflected by the media and society. Today, the
environmental issues generate a lot of publicity and this most
likely result in a greater consciousness by the customers as
well. Hence, it can be assumed that part of the CSR activities
performed by organizations originates from customers, even if
it is not as obvious as the requirements and claims stated by
the media and the general public. In service organizations it is
argued that the provided service is to a large extent based on

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the receiver and a service may differ depending on the
customer.

7.9.3 Employees
It becomes apparent that the employees are well aware about
the CSR activities that the service organization performs. The
management furthermore argues that the employees are
essential stakeholders and several activities that the
organization performs in order to improve the working
environment is mentioned both by the employees as well as
the management team. Moreover, the employee turnover is
significantly low. These facts can be considered as a strong
indicator that the employees are regarded as vital for a service
organization. Edvardsson furthermore state that the
interaction between the customer and the organization is
imperative for service companies, a statement that might be
rewritten as the interaction between the customers and
employees. Hence the employees are the ones in service
organization that provide the customers with the immaterial
goods and therefore is it significant to have motivated and
involved employees. This can be connected to the study
performed by Rodrigo and Arenas that establish the
importance of committed employees, especially in relation to
CSR implementations. Mitchell, Agle and Wood consider
employees as vital due to their possession of authority, power
and need within organizations. It becomes apparent that the

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employees consider the organization as significant for the
business life in the region as well as for the environmental
work. According to Rodrigo and Arenas it is very beneficial for
companies if their employees perceive the company as
important. Moreover, the employees also give the impression
that they are proud of the CSR activities that the organization
execute. This implies that they are motivated employees and
designates, according to Rodrigo and Arenas’ theories, that
they have a genuine interest and commitment in the
organizations CSR work as well. The few researchers within
the field of CSR and employees argue that there is a positive
relationship between personnel and CSR activities. Klein
furthermore states that employees that are satisfied with their
organizations social and environmental commitments are more
likely to be productive and positive. It can be assumed that
organization that engage in CSR may increase the internal
stakeholders’ satisfaction and pride and this should be
considered a major motivator for organization to engage in
CSR. This is true especially for service organizations were the
employees are regarded as a vital asset. None of the employees
argue that they make any concrete demands on the company.
This does not imply that the employees do not influence the
organization’s CSR activities, instead it could be the case that
since the company already provides a lot of benefits for their
employees, perform activities in order to enhance the
environment and society, no need for the employees to make

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further demands exists. They all seem rather satisfied with
their present working environment and the organization in
which they work. In organizations where employees are not
satisfied, it can be assumed that they do put demands on their
organization since they want them to change to the better.

7.9.4 Management
It is as mentioned, argued in research that the general public
usually not put as much requirements on service
organizations regarding CSR as they do on manufacturing
organizations. it becomes apparent that the CEO is the driving
force behind many of the CSR activities that the organization
performs since they were first implemented when he was
appointed at the organization. His background is from a
producing organization in which the directives regarding the
environment, working environments and other social aspects.
His former organization had the government as a major
customer and if the company did not follow their set criteria,
no business would be performed. The approach to be a socially
responsible service organization is rather proactive since the
demand from customers is not as evident. This implies that
the values and morale from the CEO has been fostered in a
manufacturing organization and has now been applied in the
context of a service organization. The extent that a service
company engage in CSR activities is very much influenced by
the relationship that the managers has to CSR since they are

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in the end the ones deciding what the company will do and not
do. If a company has a manager whose knowledge about CSR
and its positive effects is limited that organization will
probably not engage in CSR activities to a large extent. The
manager of a service organization may have an even greater
influence on CSR due to the fact that service companies do not
have the same specific demands from other stakeholders as
manufacturing organization.

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