THE IMPACT OF CORPORATE SOCIAL RESPONSIBILITY (CSR) ON BUSINESS PERFORMANCE BY LE MINH HOANG E0700038 Graduation Project Submitted to the Department of Business Studies, HELP University College, in Partial Fulfillment of the Requirements for the Degree of Bachelor of Business (Accounting) Hons OCTOBER 2011 DECLARATION OF ORIGINALITY AND WORD COUNT I hereby declare that the graduation project is based on my original work except for quotations and citations which have been duly acknowledged I also declare that it has not been previously or concurrently submitted for any other course/degree at Help University College or other institutions The word count is 12,718 words LE MINH HOANG 17th October 2011 ACKNOWLEDGEMENT This project would not have been made possible without the assistance, support and encouragement of many people I wish to take this opportunity to thank all the people who have helped me during the time of completing the dissertation Firstly, I would like to express my deep gratitude to my supervisor Dr Le Van Lien, International School, Vietnam National University Hanoi He has kindly helped me and supported me all the way through For that, I am very grateful I also would like to express my thank to Ms Sumathi and Ms Shenba, Help University College, who initiated the project and give so much instruction and support Additionally, I would like to thank the interview participants who took their precious time to help me to conduct the interview I also would like to extend my special thanks to my family, my friends, and other people who have help me to carry out the survey I want to thank them for all their support, interest and valuable hints LE MINH HOANG THE IMPACT OF CORPORATE SOCIAL RESPONSIBILITY (CSR) ON BUSINESS PERFORMANCE By LE MINH HOANG October 2011 Supervisor: Dr Le Van Lien ABSTRACT CSR has become a burning issue in the world As Vietnam is one of the world’s fastestgrowing economies, CSR has become even more important for the country to develop sustainably This paper aims to discover how the CSR impact on the business performance of companies in Vietnam It also give a view CSR and CSR reporting, whether CSR information have any effect on the Vietnam customer behavior, and the attitude of Vietnamese employees toward CSR reporting The results of the study provide evidence that there is strong support for CSR from managers and a growing awareness among consumers and employees However, there is expectation gap between how people perceive and how people act because there are lack of adequate CSR disclosure from firm, and not-so-enthusiastic support actions from consumers due to the barriers in living expenses, and low effective CSR communication tools that companies use However, with highly positive attitude toward the important of CSR and the willingness to learn and gain more knowledge about this issue found from the survey have drawing potential bright future for CSR in Vietnam TABLE OF CONTENTS DECLARATION OF ORIGINALITY AND WORD COUNT ACKNOWLEDGEMENT ABSTRACT CHAPTER 1: INTRODUCTION 1.1 Research background 1.2 CSR in Vietnam 10 1.2.1 Government actions and policies 10 1.2.2 CSR practices, opportunities, and challenges 11 1.3 Problem statement 12 1.4 Research objectives 14 1.5 Research methods 14 CHAPTER II: LITERATURE REVIEW 15 2.1 CSR definition 15 2.2 Research related studies and concepts 15 2.2.1 Model "pyramid" of Carroll 15 2.2.2 Triple Bottom Line 16 2.2.3 CSR and Sustainability investing 18 2.2.4 CSR and Business ethics 19 2.2.5 CSR Report 19 2.3 Hypothesis 20 2.3.1 CSR and the role of manager 20 2.3.2 CSR and the role of employees 21 2.3.3 CSR and the role of customers 22 CHAPTER 3: RESEARCH METHODOLOGY 23 3.1 Research objectives 23 3.2 Research methodology 23 3.3 Data sources 23 3.3.1 Primary data 23 3.3.2 Secondary data 24 3.4 Research method 24 3.5 Research tool 24 3.5.1 Questionnaire 24 3.5.2 Personal interview 25 3.6 Sampling 25 3.6.1 Sampling population 25 3.6.2 Sample frame 25 3.6.3 Sample size 25 3.7 Limitations 26 CHAPTER 4: FINDING AND ANALYSIS 27 4.1 Management 29 4.1.1 Finding from the questionnaire survey 29 4.1.2 Actual CSR disclosure by firms 34 4.1.3 Overall assessment of management’s responses 34 4.2 Employees 36 4.2.1 Finding from employee questionnaire survey 36 4.2.2 Overall evaluation of employee’s responses 40 4.3 Consumers 41 4.3.1 Finding from consumer questionnaire survey 41 4.3.2: Overall evaluation of consumer’s responses 45 4.4 Overall discussion 46 CHAPTER V: CONCLUSION AND RECOMMENDATION 48 5.1 Conclusion 48 5.2 Recommendation 48 5.3 Limitation of study 49 Suggestion for the future research 50 References 51 Appendix 55 LIST OF FIGURES, DIAGRAM, AND IMAGES Figure 2.1 The Carroll’s “Pyramid of CSR” 16 Figure 2.1 Triple Bottom Line 18 Figure 4.1: Respondents 27 Figure 4.2: Employee categories 28 Figure 4.3: Consumer categories 28 Figure 4.4 Distribution of responses from management survey 29 Figure 4.5 Distribution of responses from management survey (percentage) 33 Figure 4.6 Distribution of responses from employees' survey 36 Figure 4.7: Distribution of response from employee’s survey 39 Figure 4.8: Distribution of responses from consumer survey 41 Figure 4.9: Distribution of responses from consumer survey (percentage) 45 LIST OF ABBREVIATIONS CSR Corporate Social Responsibility CSP Corporate Social Performance IAS International Accounting Standard WTO world trade organization APEC Asian pacific economic organization ASIAN Association of southeast Asian nations NGO Non-governmental Organization PR Public Relation TBL Triple Bottom Line VSA Vietnamese Accounting Standard CHAPTER 1: INTRODUCTION 1.1 Research background The concept of Corporate Social Responsibility (CSR) has issued in the early of the 1970s, CSR has become very popular for the companies especially companies which are running business in the developed countries With the major relationship between business and society reflected by CSR, nowadays, CSR is not only the current affairs of companies which are running business in the developed countries, it also is the current affairs of companies which are running business in the developing countries With the three major issues of CSR are labor, environment, and finance Companies are paying more attention on the CSR in the way performing well CSR activities to improve competitive advantages and reputation in the market The companies take care about their internal stakeholders such as employees’ healthcare, working environment will raise their loyalty, it will lead to increase productivity and may lead to increase profit for companies Nowadays, companies are influenced by many parties which are related to CSR Especially, international companies which are not running business in only one country, so they have to follow law in control of CSR of each country they business More than that, they have to follow the rules of World Trade Organization (WTO) or other organization such as Integrated Reporting Committees (IRC), and World Council for Sustainable Development (WBCSD) which are applied for over the world By following the rules of the organization above, and doing well CSR activities, companies can build their strong reputation and reliable in the view of public, so they can make shareholders confident to invest, customers also prefer to buy their products and services, and governments also have sympathy with them and may offer more benefits to attract them to invest in that country References:  Ackerman, R.W., & Bauer, R.A (1976) Corporate Social Responsiveness: The Modern Dilemma Virginia: Reston  Amstrong G And Kotler, P., 2007 Marketing: An introduction 5th Edition Pearson Prentice hall  Argandona, A and Hoivik, H.W., 2010 Corporate social responsibility: One size does not fit all Collecting evidence from Europe Journal of Business Ethics 89, pp 22134  Ballou, B., Heitger, D.L and Landes, C.E., 2006 The future of corporate sustainability reporting Journal of Accountancy, 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The whats, whys, and hows of corporate social responsibility in a multinational corporation Management Decision 47(8),pp 1261-80  Shapiro, C., 1982 Consumer information, product quality and seller reputation The Bell Journal of Economics 13, pp 20-35  O’Rourke, D., 1995 Policy integration during development in Vietnam Berkeley Planning Journal 10, pp 15-35  Stittle, J., 2002 UK corporate ethical reporting- A failure to inform: Some evidence from company annual reports Business and Society Review 107, pp 349-70  Mark-Herbert, C and Schantz, C., 2007 Communicating corporate social responsibility- Brand management Electronic Journal of Business Ethics and Organization Studies 12(2), pp 4-11 54 Appendix: I) QUESTIONNAIRE SAMPLES MANAGEMENT SURVEY Personal information Company: _ Year in holding current position: Age: Gender: Please choose the most appropriate answer: 1) I heard about CSR 1) Strongly agree □ 2) Agree □ 3) Neutral □ 4) Disagree □ 5) Strongly disagree □ 2) I am understand the meaning “corporate social responsibility” 1) Strongly agree □ 2) Agree □ 3) Neutral □ 4) Disagree □ 5) Strongly disagree □ 3) Company may have benefits from CSR disclosure 1) Strongly agree □ 2) Agree □ 3) Neutral □ 4) Disagree □ 5) Strongly disagree □ 4) It is the responsibility of the managers to carry out CSR reporting? 1) Strongly agree □ 2) Agree □ 3) Neutral □ 55 4) Disagree □ 5) Strongly disagree □ 5) CSR is important for your company 1) Strongly agree □ 2) Agree □ 3) Neutral □ 4) Disagree □ 5) Strongly disagree □ 4) Disagree □ 5) Strongly disagree □ 6) CSR is cost burden for your company 1) Strongly agree □ 2) Agree □ 3) Neutral □ 7) Reducing cost to maximize profit for your company by cutting CSR activities is necessary 1) Strongly agree □ 2) Agree □ 3) Neutral □ 4) Disagree □ 5) Strongly disagree □ 8) You think offer more value related to CSR will encourage employees working more effective and efficient 1) Strongly agree □ 2) Agree □ 3) Neutral □ 4) Disagree □ 5) Strongly disagree □ 9) You suppose to reserve part of company’s income for CSR 1) Strongly agree □ 2) Agree □ 3) Neutral □ 4) Disagree □ 5) Strongly disagree □ Additional personal comments (option): _ _ _ _ _ _ 56 EMPLOYEE SURVEY Personal information Company _ Years in holding position Age _ Status _ Number of children Please choose the most appropriate answer 1) I heard about CSR 1) Strongly agree □ 2) Agree □ 3) Neutral □ 4) Disagree □ 5) Strongly disagree □ 2) I am understand the meaning “corporate social responsibility” 1) Strongly agree □ 2) Agree □ 3) Neutral □ 4) Disagree □ 5) Strongly disagree □ 4) Disagree □ 5) Strongly disagree □ 3) CSR is cost burden for your company 1) Strongly agree □ 2) Agree □ 3) Neutral □ 4) You prefer to work for company which has good CSR policies 1) Strongly agree □ 2) Agree □ 3) Neutral □ 57 4) Disagree □ 5) Strongly disagree □ 5) You are follow the manager’s mission even it harmful CSR 1) Strongly agree □ 2) Agree □ 3) Neutral □ 4) Disagree □ 5) Strongly disagree □ 6) You let public know about CSR problem of your company even the managers don’t allow 1) Strongly agree □ 2) Agree □ 3) Neutral □ 4) Disagree □ 5) Strongly disagree □ 7) You are work harder if the CSR of your company is well perform by offer more benefit for you 1) Strongly agree □ 2) Agree □ 3) Neutral □ 4) Disagree □ 5) Strongly disagree □ Additional personal comments (option): _ _ _ _ _ _ 58 CONSUMER SURVEY Personal information Age: 20-30 Marital status: 30-40 Married Single Number of children: None 40-50 50-60 Above 60 Above Education: Current employment _ Please choose the most appropriate answer 1) I heard about CSR 1) Strongly agree □ 2) Agree □ 3) Neutral □ 4) Disagree □ 5) Strongly disagree □ 2) I am understand the meaning “corporate social responsibility” 1) Strongly agree □ 2) Agree □ 3) Neutral □ 4) Disagree □ 5) Strongly disagree □ 3) You are prefer to buy products and services of company which own well CSR performance 1) Strongly agree □ 2) Agree □ 3) Neutral □ 4) Disagree □ 5) Strongly disagree □ 4) With the same quality, you choose the products and services with higher prices of a company which has well CSR performance 1) Strongly agree □ 2) Agree □ 3) Neutral □ 4) Disagree □ 5) Strongly disagree □ 5) You are still buy products and services of companies that made pollution but not your local 1) Strongly agree □ 2) Agree □ 3) Neutral □ 59 4) Disagree □ 5) Strongly disagree □ 6) You are persuade other to not buy products and services of companies which have weak CSR 1) Strongly agree □ 2) Agree □ 3) Neutral □ 4) Disagree □ 5) Strongly disagree □ 7) You are support wholeheartedly the companies which have well performed CSR to expand business activities in your local 1) Strongly agree □ 2) Agree □ 3) Neutral □ 4) Disagree □ 5) Strongly disagree □ Additional personal comments (option): _ _ _ _ _ _ II) STATISTICAL TEST To test the hypothesis developed in the study, the Chi-squared test is used to investigate any association between two different sets of observations This test can test the actual number of people that answered a particular value and compare it to the expected or “random” value, where each value has an equal chance of appearing Each statement in each survey is designed in positive manner which means “strongly agree” (5) give the strongest support for the hypothesis The results of all questions in each survey are aggregated to test the hypothesis to generate overall decision MANAGEMENT SURVEY : Managers’ attitude toward CSR and CSR reporting is positive Test statistic: 60 Degree of freedom: = (the rule of five is applied) Level of significant: α = 0.05 Decision rule: Reject if Value of the test statistic: Total services 18 16 15 58 25 21 12 Consumer goods 70 10 20 14 Industries 52 Total 53 57 36 23 11 180 1= strongly agree, 2=agree, 3=neutral, 4=disagree, 5= strongly disagree = services Consumer goods Industries Total 17.08 18.37 11.60 7.41 3.54 Total 58.00 20.61 22.17 14.00 8.94 4.28 70.00 15.31 53 16.47 57 10.40 36 6.64 23 3.18 11 52.00 180 The expected value should be at least five to ensure that the chi-squared distribution provides an adequate approximation of the sampling distribution In this contingency table, there are some cells have expected values of less than five, there is need to combine column to satisfy the rule of five Thus, “disagree” column and “strongly disagree” column is combined So, the and will be as follow: 61 4&5 Total services Consumer goods Industries Total services Consumer goods Industries Total 18 16 15 58 25 21 17 70 10 53 20 57 14 36 34 52 180 17.08 18.37 11.60 4&5 10.96 total 58.00 20.61 22.17 14.00 13.22 70.00 15.31 53 16.47 57 10.40 36 9.82 34 52.00 180 Value of 18 25 10 16 21 20 15 14 17 Conclusion: Since 17.08 20.61 15.31 18.37 22.17 16.47 11.60 14.00 10.40 10.96 13.22 9.82 0.92 4.39 -5.31 -2.37 -1.17 3.53 3.40 -7.00 3.60 -1.96 3.78 -1.82 0.8504938 19.262346 28.207901 5.6011111 1.3611111 12.484444 11.56 49 12.96 3.8241975 14.271605 3.3204938 , not reject the 62 0.049801 0.934561 1.842316 0.304961 0.061404 0.758165 0.996552 3.5 1.246154 0.349065 1.079365 0.338059 11.4604 Employee survey: : Employees’ attitude toward CSR reporting is moderate Test statistic: Degree of freedom: = (the rule of five is applied) Level of significant: α = 0.05 Decision rule: Reject if Value of the test statistic: gender male female total 130 88 218 160 90 250 201 158 359 82 65 147 45 21 66 total 618 422 1040 gender male female total 129.54 88.46 218 148.56 101.44 250 213.33 145.67 359 87.35 59.65 147 39.22 26.78 66 total 618 422 1040 63 Value of 130 88 160 90 201 158 82 65 45 21 129.54 88.46 148.56 101.44 213.33 145.67 87.35 59.65 39.22 26.78 0.46 -0.46 11.44 -11.44 -12.33 12.33 -5.35 5.35 5.78 -5.78 Conclusion: Since 0.209482249 0.209482249 130.9264053 130.9264053 152.0004475 152.0004475 28.64308062 28.64308062 33.4172929 33.4172929 , not reject the 0.001617095 0.002368163 0.881316903 1.290648925 0.712517084 1.04344919 0.327904408 0.480201242 0.852063955 1.2478093 6.839896266 Consumer survey: : Customers’ attitude toward CSR reporting is moderate Test statistic: Degree of freedom: = (the rule of five is applied) Level of significant: α = 0.05 Decision rule: Reject if Value of the test statistic: age under 30 30-40 40-50 50-60 above 60 total 25 18 45 28 15 131 40 40 67 44 34 225 131 129 188 96 63 607 64 33 37 65 28 25 188 18 16 15 16 74 total 247 240 380 212 146 1225 age under 30 30-40 40-50 50-60 above 60 total 25 18 45 28 15 40 40 67 44 34 131 129 188 96 63 33 37 65 28 25 18 16 15 16 Conclusion: Since 26.41 25.67 40.64 22.67 15.61 131 26.41 25.67 40.64 22.67 15.61 45.37 44.08 69.80 38.94 26.82 122.39 118.92 188.29 105.05 72.34 37.91 36.83 58.32 32.54 22.41 14.92 14.50 22.96 12.81 8.82 45.37 44.08 69.80 38.94 26.82 225 122.39 118.92 188.29 105.05 72.34 607 -1.41 -7.67 4.36 5.33 -0.61 -5.37 -4.08 -2.80 5.06 7.18 8.61 10.08 -0.29 -9.05 -9.34 -4.91 0.17 6.68 -4.54 2.59 3.08 1.50 -7.96 3.19 0.18 37.91 36.83 58.32 32.54 22.41 188 1.999049729 58.75691795 19.03808413 28.39802349 0.375844065 28.80841316 16.65972511 7.817159517 25.61599334 51.60516451 74.11452961 101.5570346 0.086364015 81.86925848 87.31948955 24.07804815 0.028004998 44.64421491 20.57085281 6.726083465 9.481372095 2.256126614 63.28364848 10.19824673 0.032547105 , not reject the 65 14.92 14.50 22.96 12.81 8.82 74 total 247 240 380 212 146 1225 0.075681797 2.289351924 0.468494437 1.25261338 0.024072413 0.635003259 0.377928949 0.112000239 0.657853078 1.924393502 0.605555288 0.853976986 0.000458666 0.779349738 1.20699572 0.635188409 0.000760331 0.765525802 0.632258498 0.300184066 0.635445936 0.155616841 2.756844573 0.796331734 0.003690319 17.94557588 ... different The awareness of the different generation also different Suggestion for the future research With the limitation of the research, there are some suggestions for the future research on the. .. confuse about the concept of CSR 30 In the second question which focus more by asked “I am understand the meaning Corporate Social Responsibility? ?? From the answers we find out that 65% respondents... erudite consumers Next question is continued more deeply from question by asking “I am understand the meaning corporate social responsibility? ?? The percentage of respondents choose the answer “strongly