Corporate Social Responsibility. CSR Communication as an Instrument to Consumer-Relationship Marketing

Contents

ABSTRACT

LIST OF FIGURES AND TABLES

LIST OF ABBREVIATIONS

1 INTRODUCTION
1.1 INTRODUCTION TO THE TOPIC
1.2 RESEARCH OBJECTIVES

2 THEORETICAL FRAMEWORK
2.1 BACKGROUND OF CORPORATE SOCIAL RESPONSIBILITY
2.1.1 Defining Corporate Social Responsibility
2.1.2 Historical Background to CSR
2.1.3 CSR in Europe
2.1.4 The Role of CSR Today
2.2 CSR AND CORPORATE PERFORMANCE
2.2.1 Linking CSR and Corporate Performance
2.2.1.1 Transactional Benefits
2.2.1.2 Relation-driven Benefits
2.2.1.3 Moderating Variables and Limitations to Consumer-related Potentials
2.2.2 CSR Communication as the Mediating Link
2.3 CSR COMMUNICATION
2.3.1 Critical Success Factors as Prerequisites to CSR Communication
2.3.2 Peculiarities of CSR Communication
2.3.3 Measures of CSR Communication
2.3.4 How to Communicate Using CSR
2.4 LINKING CSR AND CONSUMER-RELATIONSHIP-MARKETING
2.4.1 Consumer-Relationship Marketing and C-C Identification
2.4.2 Consumer-Company Identification
2.4.3 CSR and C-C Identification
2.4.4 Implications for CSR Communication
2.4.5 CSR, C-C Identification and Gender Differences

3 METHODOLOGY
3.1 RESEARCH APPROACH
3.2 SECONDARY RESEARCH
3.3 PRIMARY RESEARCH
3.3.1 Research Strategy
3.3.2 Research Sample
3.3.3 Design of Questionnaire
3.4 DATA ANALYSIS
3.4.1 Validity and Reliability of Primary Research
3.5 ETHICAL ISSUES

4 SURVEY
4.1 RESULTS
4.2 DISCUSSION OF FINDINGS
4.2.1 Personal Support and Perceived CSR Recognition
4.2.2 Consumer Awareness
4.2.3 Perception of CSR Communication
4.2.4 Implications for Effective CSR Communication

5 CONCLUSIONS AND RECOMMENDATIONS
5.1 CONCLUSIONS
5.2 LIMITATIONS AND RECOMMENDATIONS

REFERENCES

BIBLIOGRAPHY

APPENDIX
APPENDIX A: CSR COMMUNICATION EXAMPLES
Appendix A (1): Advertising
Appendix A (2): Negative Examples – “GreenWashing Award 2007” Nominees
Appendix A (3): Website Information
Appendix A (4): Cause-Related Marketing
Appendix A (5): Product Information
APPENDIX B: QUESTIONNAIRE
APPENDIX C: FIGURES OF SURVEY RESULTS

Abstract

Corporate Social Responsibility (CSR) is defined as “achieving commercial success in ways that honour ethical values and respect people, communities, and the natural environment” and is the topic of interest for this research paper. The aim of study was to investigate CSR communication and how it is perceived with a view to identifying how CSR can be communicated more effectively to consumers. The focus in this context was on relational CSR potentials and the effect of consumer-company identification as a main driving force behind relational CSR effects.

In order to achieve this aim a comprehensive literature review was conducted to conceptualise the ideas on CSR, the CSR communication challenge as well the link between CSR information and consumer-company identification. Further, primary research was undertaken in terms of a consumer survey among German students in order to gain an understanding of consumer perceptions as well as to identify critical aspects of CSR communication.

Results indicate that in spite of a general tendency of scepticism towards companies, consumers do accept and expect companies to communicate on their CSR activities. It also became apparent that interest in and support of the subject clearly exceed the awareness level, which suggests an unmet receptiveness regarding CSR information. In this context, women showed significantly more support and interest in the topic corroborating the established hypothesis of respective gender differences which was established within the theoretical discussion. As a conclusion of this study female consumers have to be considered as particularly receptive towards CSR information and as a particular valuable target for CSR communication. The high level of support in general and especially among women can be considered as a given basis to consumer-company identification. It implies the potential for perceived congruence between consumers’ self concept and company CSR values and also highlights the relation-building dimension of CSR and its opportunities for consumer-relationship marketing.

This research suggests that CSR should be communicated more proactively as the majority of respondents stated that they ‘would like to know more about it’ and affirmed the acceptability of advertising on CSR as a proactive means of communication. Consumer scepticism can be viewed as relatively vague and does not justify the neglect of numerous potential benefits resulting from low consumer awareness. A low awareness level was identified in the literature as a main inhibitor to generating benefits from CSR activities and emphasises the importance of CSR communication as an awareness-building instrument.

This research was subject to some limitations. Generalisations about the entire population cannot be made on the basis of the selected sample of German students. Additionally, the research method provided rather general indications in terms of results, which require further in-depth research in the future. The originality of this paper constitutes by its approach to address the topical subject matter CSR communication and its link to consumer-relationship marketing. Especially, the identification of gender as an influencing variable to the perception of CSR represents a key finding of this project, which has not been addressed in this clarity in preliminary CSR research. Attained findings add to the developing body of knowledge on CSR communication and consumer relations, which is still in its infancy in terms of academic research. So far littler research has been carried out on this specific research question and consumer research on CSR remains scarce, particularly on the German market.

List of Figures and Tables

Figure 1: Consumer-related CSR-Potentials

Figure 2: The Mediating Role of CSR Communication

Figure 3: Critical Success Factors in Successful CSR Implementation

Figure 4: Conflicting Forces of CSR Communication

Figure 5: Critical Aspects According to Implementation Levels

Figure 6: CSR and Identity Attractiveness

Figure 7: Cause-Effect Relationships of CSR Communication and C-C Identification

Figure 8: What Should Companies Be Responsible for?

Figure 9: Importance of CSR When Considering a Company as a Future Employer

Figure 10: CSR Appraisal Among the General Public

Figure 11: Awareness of Responsible Companies

Figure 12: Recall of Purchase Decision Influenced By CSR Considerations

Figure 13: Awareness Level Regarding Companies’ CSR Behaviour

Figure 14: Source of CSR Information

Figure 15: Awareness of CSR Website Information

Figure 16: Trustworthiness of Company Information

Figure 17: How Should CSR Be Communicated?

Figure 18: Influence of CSR Information on the Attitude Towards a Company

Table 1: Evaluation of CSR Communication Measures Regarding Consumer-related Outcomes

List of Abbreviations

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1 Introduction

1.1 Introduction to the Topic

The role of Corporate Social Responsibility (CSR) has been increasing continuously in the business context within the last years. This is shown by the fact that 90% of the Fortune 500 companies have explicit CSR initiatives today and an increasing number of companies that report and communicate on Corporate Social Responsibility (Kotler and Lee, 2005; Lichtenstein et al., 2004). While CSR is often denounced as a way of corporate window-dressing on the one hand, many companies on the other hand appear to be hesitant about the communication of their CSR involvement. Some companies pursue a proactive way of communication including CSR messages in their advertising (e.g. Eon, BP, Unilever (UNEP, 2007a)); many others rely on rather inwardly reporting or website information targeting mainly NGO’s and other specific stakeholder groups (Hirschland, 2005).

Differences regarding approaches to and the handling of CSR communication appear to arise from a perceived sensitivity of the CSR issue as well as corporate uncertainty and insufficient knowledge about its risks as well as its potential. Thus, the question arises what makes CSR communication such a sensitive issue, in spite of increasing interest in corporate behaviour which can be observed among the general public (Dawkins, 2004; Ernst&Young, 2007). Increasing consumer interest has become prominently known in the recent past as the ‘Lifestyle of Health and Sustainability’ (LOHAS) that is lived and exemplified by Hollywood stars as Julia Roberts or Leonardo di Caprio and has promoted the success of products such as the “Prius”, Toyota’s first hybrid technology car. In the context of the LOHAS-phenomenon, it appears that next to the reasonable dimension, responsible behaviour has also become a matter of “style” and “self-expression” for consumers. Therefore the underlying psychological variables that drive consumers’ interest in CSR-related products represent an interesting field for investigation with a view to the question how consumers can be best addressed by CSR communications.

CSR communication is a ‘red hot’ subject and its topicality is emphasised by ongoing academic publications and findings during the process of this project. It is discussed from different perspectives and driven by different interests. The United Nations Environment Programme (UNEP) organises and promotes forums and exhibitions on sustainable advertising aiming to increase consumer education and sustainable consumption habits (UNEP, 2007b). The entrepreneurial side on the other hand looks for effective ways to communicate on CSR in order to generate maximum benefits from their CSR activities (Hirschland, 2005). Even though, both objective targets may be complementary at the end of the day, this research will focus on the company perspective and how CSR can be communicated most effectively with respect to consumer perceptions. In the light of the increasing attributed importance of intangible assets and the quality of relationships between a company and its stakeholders, the discussion will be focussed on the relational potential with regard to consumer-relationship marketing (Perrini and Castaldo, 2008, p.1). While research has linked the impact of CSR on corporate performance in several ways, little research can be found specifically on the mediating function as well as the effect of CSR communication. This research aims to address the named gap by focussing on the role of CSR communications with its challenges and potential as to consumers.

1.2 Research Objectives

This research paper strives to add to this body of knowledge on CSR communication by addressing the following research question:

“How can CSR be communicated more effectively with a view to strengthen relationships with consumers?”

One aim of this thesis is to provide a sound theoretical framework on the impact of CSR on corporate performance in order to grasp the mediating role as well as the specific requirements of CSR communication. The development of the main potentials and the challenges of CSR communication represents equally a main challenge to this project as any existing academic sources provide merely fragmented information and need to be conceptualised and added together to build on a logical argument on the defined research question. This shall be done in the light of how CSR can be effectively used in order to strengthen the relational bonds between the consumer and the company. In this context, the focus will be on the psychological construct of consumer-company identification, which is considered as a particular valuable dimension in terms CSR specific potentials as well as in the context of consumer relationship marketing.

The theoretical discussion in this thesis aims at identifying critical aspects of the communication of CSR which is analysed more closely by means of primary research. As such secondary research provides the basis for primary research which is conducted by means of a consumer survey. Secondary as well as primary research is directed at achieving the following research objectives:

1 To investigate how corporations communicate their CSR initiatives and who they address with these measures
2 To assess critical aspects and the consumer-specific potential of CSR communication with regard to relationship marketing
3 To explore consumers’ perception of CSR communication and how they relate to identified CSR effects
4 To identify how CSR can be communicated more effectively

2 Theoretical Framework

2.1 Background of Corporate Social Responsibility

Corporate Social Responsibility is a wide-reaching topic with many influencing factors and peculiarities. The following section gives background information on the complex of problems of CSR and is directed at providing the contextual framework of the research focus of consumer-related CSR communication. In order to build the appropriate background, definitional, historical and cultural aspects as well as recent trends and development are to be considered.

2.1.1 Defining Corporate Social Responsibility

The theoretical approach to Corporate Social Responsibility is based on the question of what organisations are responsible for and what they are motivated by. While according to Milton Friedman (1970) the only responsibility for corporations is to maximise profits (shareholder value), it is widely acknowledged today that corporations do have further responsibilities within society (Friedman, 1970; Porter and Kramer, 2003). This perspective is proposed in the literature in Freeman’s stakeholder approach as well as the broader societal approach to CSR. However, the scope of responsibility ascribed varies in terms of a stakeholder focus versus a more comprehensive societal view towards corporate responsibility (Nielsen and Thomsen, 2007).

Corporate Social Responsibility (CSR) as a term varies equally in its definition across the economic literature as authors' understandings of CSR differ regarding the evaluation of corporate purpose and motivation (Mohr et al., 2001; Crane and Matten, 2004). Vogel (2005) as a contemporary academic in business ethics provides a broad definition by describing CSR as ‘policies and programs of private firms that go beyond legal requirements as a response to public pressures and societal expectations’ (cited in Baron, 2006, p. 659). While some sources state altruistic motivation as the decisive criterion which differentiates corporate responsibility from other self-serving activities, the alignment of social responsibility commitments and business goals is widely accepted and also expected by the various stakeholder groups today (Kotler and Lee, 2005). Multiple authors also argue that it is this alignment of corporate responsibility and business activity in particular which makes CSR a strategic approach and defines it in contrast to pure philanthropy (Porter and Kramer, 2003). Here, the author follows this understanding of CSR and adopts the definition of the Business for Social Responsibility organisation as “achieving commercial success in ways that honour ethical values and respect people, communities, and the natural environment” (cited in Bhattacharya and Sen, 2004, p.13). Kellie McElhaney (2007), a professor of the University of California, takes a firm view to this definition, however emphasises even more so the need for integrating CSR strategy into the entire business context:

“CSR is not about how you spend the money - it is about how you make the money!”

Within recent literature as well as by many practitioners the term “Corporate Social Responsibility (CSR)” is increasingly being replaced by “Corporate Responsibility (CR)” aiming not to limit the scope of corporate responsibility to social issues. While the broadness and complexity of the concept is equally respected, the widely established term “Corporate Social Responsibility” and its abbreviation “CSR” will be used in the following discussion.

2.1.2 Historical Background to CSR

The term Corporate Social Responsibility appeared for the first time in the 1950s. However, it remained somewhat limited to its definition until the 1980s, when scholars began gathering empirical evidence of the effects of CSR activities. This was also when the term Corporate Social Performance (CSP) was introduced, which stressed the performance perspective of CSR, i.e. the measurement, quantification and evaluation of CSR efforts as well as its strategic dimension (Beckmann et al., 2006; Carroll, 1991).

Corporate philanthropy had evolved earlier particularly in the United States starting with a Supreme Court decision in the 1950 that legalised corporate contributions and involvement in social issues. This decision changed the perceived responsibility level of business within American society and led to first corporate social involvement. These early roots of corporate giving were however mainly driven by pure philanthropy and devoted based on personal interest and not related to the business context; it was not considered strategically. Only after key events such as the Exxon Valdez oil spill in 1989 and the attempted sinking of Shell’s Brent Spar later in the nineties, which demonstrated non-compliance of corporate responsibility to the general public, the strategy of business-unrelated corporate giving was questioned and corporations increasingly began to consider a more business-integrated and a more strategic approach to CSR (Kotler and Lee, 2005, p. 7; Doane, 2005).

Another driving force was a societal shift which has been referred to as the new “moral market place factor”, indicating an increase of moral consideration in consumers’ as well as investors’ and employees’ decision-making (Kotler and Lee, 2005, p. 8). In this context the accusation of Nike’s use of “sweatshop labour” was one of the first major cases that demonstrated the power of stakeholder reactions in terms of consumer boycotts and forced the company to react accordingly (Duane, 2005). Due to scandals like Nike as well as Enron, World Com and Parmalat in more recent history, companies have become increasingly aware that a poor CSR performance represents a major risk for corporate success and that in turn a positive CSR record can serve as a source for competitive advantage. This thinking has increased the attributed strategic significance of CSR within corporations as well as the attempt to employ performance-based measures to the CSR record (Kotler and Lee, 2005, p. 9). In addition to the above mentioned drivers, further key factors have also contributed to the rapid gain in importance within recent years and the establishment of CSR into mainstream business thinking today (McElhaney, 2007, p.3; Silberhorn and Warren, 2007):

- The impact of information technology giving stakeholders worldwide access to transparent information and news and the opportunity to exchange them.
- The increasing professionalisation of the NGO sector in unveiling and publishing critical corporate behaviour and malfeasance.
- Employees demanding a responsible employer and the corporate need to attract and retain highly-qualified professionals worldwide.
- Increasing topicality of climate change and its impact have contributed to increased stakeholder sensitivity towards sustainability issues.

2.1.3 CSR in Europe

Set in different traditions of social systems and developments, the role of corporations in society is viewed differently in the Anglo-Saxon and the continental-European world. While European understanding traditionally allocated social responsibility mainly to the state and organisations fulfilled their societal obligations by acting according to strict legal requirements, particularly the American self-help and minimum government system allowed organisations more freedom and more responsibility respectively. Consequently, CSR mainly evolved as a concept in the Anglo-Saxon environment, where companies acted in a responsible manner self-motivated by altruistic and ethical reasons as well as by considering outstanding behaviour as an option for differentiation (Beckmann et al., 2006).

In Europe, CSR as a practised concept developed many years later. This can be explained by the strict legal requirements and obligations, which made it more difficult for corporations to fulfil the definitional CSR condition to “go beyond legal requirements”, but also influenced the understanding of the role of business within society (Vogel, 2005 cited in Baron, 2006, p. 659; Crane and Matten, 2004). In Europe corporate responsibility has been traditionally seen as obligatory and not as a fact of differentiation. With regard to the focus of this project, it is important to understand this difference between the Anglo-Saxon and the continental European tradition of Corporate Responsibility to understand why self-presentation in terms of CSR communication may be seen different and potentially more critical among Europeans consumers.

Up to now, the vast majority of academic research on CSR has been undertaken in the United States (Beckmann, 2006). This means that most findings of sources considered here implicate the Anglo-Saxon understanding of CSR and its reactions to it. While this project does not aim to investigate the differences between the Anglo-Saxon world and Europe, the fact that European reactions to CSR will be investigated contributes to the originality of this project as well as the importance of its results.

2.1.4 The Role of CSR Today

CSR has always been and still is a subject to controversial views and discussions. The Economist as a prominent voice against CSR still declares CSR as “one of the biggest corporate fads of the 1990s” and dismisses it as “a cosmetic treatment” (cited in Guthey et al., 2006, p. 40 and 43). Against, an overall recognition of the significance of CSR today and for the future has minimised the number of CSR critics and shifted the general CSR discussion among academics as well as practitioners from “whether” to “how”. CSR is increasingly considered as a central function in business strategy and considerable energies and resources for CSR initiatives are devoted to it. This phenomenon ca be seen by examples as General Motor’s donation in CSR of $ 51.2 million (2.7% of pre-tax profits) and Merck’s donation of $921 million (11.3% of pre-tax profits) in the year 2005 (Berner, 2005, p. 72; Polonsky and Jevons, 2006; Bhattacharya and Sen, 2004).

In spite of this trend of intensified CSR practices, a straightforward strategy for successful implementation has not yet been established and there does not seem to be one right way. This can be ascribed to issue complexity as well as the multiple options and facets of CSR implementation. Activities on CSR can cover a wide scope of issues, which may be related to community, corporate governance, diversity, employee relations, environment, human rights, product and controversial business issues, taking up the classification criteria of the KLD social investing group (Polonsky and Jevons, 2006). While some companies target the CSR complexity by a broad range of initiatives (e.g. Nestle a narrow definition of a cause is stated on the other hand as essential in order to benefit from CSR initiatives in terms of differentiation as a competitive advantage (Polonsky and Jevons, 2006; Cone et al., 2003).

Even though potential CSR bottom line effects, such as risk reduction, competitive advantage and enhancement of reputation, awareness and employee motivation, are acknowledged throughout the CSR literature, the problem of how to quantify the influence of CSR on a corporation’s performance remains the main critical issue to CSR (Luo and Bhattacharya, 2006; Mohr et al., 2001; Porter and Kramer, 2003). A study on company stock prices from 1995 to 2003 revealed that companies which are rated highly in social responsibility significantly outperform companies who are rated low in social responsibility (Derwall et al., 2005 cited in Smith, 2007). Financial bottom line benefits are equally documented in a Goldman Sachs report released at the UN Global Compact Summit in July 2007. This report found that companies considered leaders in environmental, social and governance policies have surpassed their competitors in stock performance by an average of 25 percent since August 2005 (Cone, 2007). While these studies provide an indication for the global return on CSR, a causal link to CSR performance still remains undetermined. AS a consequence of this insufficient knowledge, research on CSR related issues is increasingly undertaken in recent years to detect more specifically the drivers for positive outcomes of corporate responsible performance. In the course of discussion about the specification of CSR potentials, there is a growing sense that positive CSR effects can be generated particularly with regard to consumers as a key stakeholder group (Du et al., 2007). However, market research and consumer research on the topic still remains scarce and empirical evaluations are limited (Maignan and Ferrell, 2001; Beckmann, 2006).

This research aims to add to this developing body of market research by considering the role of CSR communication with respect to consumers, who represent a particularly relevant stakeholder group with regard to generating beneficial CSR effects. All in all, continuoually research publications as well as the topicality of CSR in newspapers and magazines (e.g. periodical FTD Special on Corporate Responsibility; Harvard Business Review on Corporate Responsibility (2003); Harvard Business Manager: Verantwortung (2007)) emphasise the importance attributed to the topic as well as need to investigate its drivers and potentials.

2.2 CSR and Corporate Performance

The complexity of CSR and the broad range of CSR issues, regional differences in evaluation and its business specific adaptation constitute the intricacy of treating CSR as a concept and make it difficult to establish universally valid criteria for its successful implementation (Polonsky and Jevons, 2006; Weinstein (2005) cited in Business for Social Responsibility, 2005; Maignan and Ferrell, 2001). This issue of complexity as well as the primarily intangible nature of its outcomes contributes to the main problem of CSR that is how to determine its impact on corporate performance and how to justify the investments for its implementation respectively.

These specific CSR challenges will be considered to build the framework for the problem complex of consumer-related CSR communication. In this regard, potential CSR-driven benefits will be compiled in order to understand the mediating role of communications and how it can contribute to achieving these CSR bottom-line effects with respect to consumers.

2.2.1 Linking CSR and Corporate Performance

How to quantify bottom-line effects remains a major challenge to CSR and has been the topic for much discussion, debate and disagreement, though the direct causal link between CSR and corporate performance could not yet be established (Hirschland, 2006). Some studies indicate a superior performance regarding the financial bottom-line of companies with a good CSR record, as the Goldman Sachs report cited previously or a recent German study by WHU professors, though results are ambiguous whether a good CSR record actually leads to better financial performance or vice versa (Cone, 2007; Kaufmann et al., 2008). Thus relational drivers do not remain straightforward; instead “linkage of CSR to increases in earnings has proved to be indirect and correlational” (McElhaney, 2007, p. 4).

Indirect links to corporate performance have been established in academic research on multiple dimensions as with respect to employee motivation and retention, risk reduction and attractiveness for investors as well as consumer-related benefits (Kaufmann et al., 2008). Considerations of the CSR impact on a company’s performance will be limited here to consumer-related linkages.

2.2.1.1 Transactional Benefits

While it is widely acknowledged in academic literature that CSR can have a positive impact on the overall image and reputation of a company, the influence on the most tangible consumer-related potential, that is the impact of CSR on buying behaviour as a transactional outcome, remains equivocal (Mohr et al., 2001; Beckmann, 2006). Despite the fact that consumers do claim to take an interest in CSR issues and companies’ responsible behaviour, purchasing decisions appear to be influenced by other criteria such as perception of fairness towards customers and corporate leadership (Page and Fearn, 2005). In the United Kingdom, ethical consumerism data show that in spite of most consumers being concerned about environmental or social issues, with 83 percent of consumers intending to act ethically on a regular basis, only 18 percent of people do act ethically occasionally and even fewer than 5 percent of consumers show consistent ethical and green purchasing behaviours (Doane, 2005, p.6). In contrast, a 2007 Cone study documents that 87% of Americans are likely to switch from one product to another if the other product is associated with a good cause (Cone, 2007). Similarly, a 2001 Hill & Knowlton/ Harris Interactive poll reveals that 79% of Americans take corporate citizenship into account and 36% consider corporate citizenship an important factor when buying a particular company’s product (Bhattacharya and Sen, 2004).

Notwithstanding potential cultural differences, results regarding the CSR relevance for consumer purchase decisions are contradictory however, which can be first of all explained by methodology differences as to hypothetical versus empirical tests. Whereas multiple studies do reveal consistent results of positive CSR effects regarding consumers hypothetical purchase intension, the few existent empirical data on actual behaviour reveal a significant gap between the intention and the actual purchase decision (Doane, 2005; Beckmann, 2006; Business for Social Responsibility, 2008). Reasons for this so-called “purchase gap” still remain widely undetermined by research (McElhaney, 2007). However, many sources point into the direction that the low awareness level of corporate responsible behaviour among consumers represents a major inhibitor within this context (Dawkins, 2004; Mohr et al., 2001).

What becomes also apparent in several studies is that consumers’ articulated preference for CSR-related products is only given in the ceteris paribus event that quality and price are equal (Cone, 2007; Page and Fearn, 2005; Bhattacharya and Sen, 2004). Only when the extra in price is clearly invested in a certain CSR-initiative as with cause-related marketing campaigns, consumers appear to accept to pay more (Bhattacharya and Sen, 2004). This shows that CSR information can usually only serve as additional information on a desirable product, but does not function as a sufficient purchase argument itself. Exclusively, when CSR can be implemented as an integral and value-adding product feature itself, as in the case of organic food or hybrid cars for example, it can actually become a means of differentiating the product and a meaningful direct purchase argument. Bhattacharya and Sen (2004) affirm that purchase decisions are influenced positively when interdependencies between the product quality and the CSR involvement is evident to consumers. This way of integrating CSR in terms of creating a “sustainable” product needs to be considered as the most integrative way of CSR implementation. However, it needs to be regarded as limited to certain product categories where CSR-related product benefits such as healthiness, freshness, quality, durability or lower costs in operation can be clearly demonstrated to consumers (Business for Social Responsibility, 2008).

Contrary to potential positive transactional benefits, Bhattacharya and Sen (2004) found that CSR information may also have a negative impact on purchase decisions when CSR initiatives are perceived to be made at the expense of investments in the product or the service. These assumptions are more likely to be made when the company produces a mediocre product rather than a high-quality product, which serves as a first indication that a proactive approach to communicating on CSR will be more beneficial for higher quality products (Folkes and Kamins, 1999).

Overall, the direct effects on sales appear to be stronger towards irresponsible behaviour in terms of consumer boycotts than towards responsible behaviour (Bhattacharya and Sen, 2004). Bearing in mind the risk of consumer boycotts as a reaction to business scandals (e.g. Nike and Parmalat), the preventive dimension of a successful CSR strategy needs to be highlighted here as a main benefit to consumer purchase behaviour. Direct effects of CSR with regard to positive purchase decisions on the other hand are limited. Following this finding, Bhattacharya and Sen (2004) emphasise the short-sightedness of looking simply at direct transactional effects and point to valuable internal consumer-specific outcomes with a view to long-term relational benefits regarding consumers. These may eventually also be linked to external outcomes.

2.2.1.2 Relation-driven Benefits

When considering consumer-specific benefits of CSR, relational outcomes can be of high value for a company in terms of building meaningful and long-term relationships with consumers, but may also serve as a mediating link to further external outcomes. Recent research has linked CSR to corporate performance by identifying customer satisfaction as a mediator between the two, arguing that CSR promotes customer satisfaction and leads to higher market value eventually (Luo and Bhattacharya, 2006). CSR has been found to add to the multidimensional picture that forms the perceived company appeal of consumers and creates a positive overall context that favourably impacts consumers’ evaluations of and attitudes towards a company and the degree of satisfaction respectively. Additionally, the role of consumer-company identification is highlighted within this relation as a main mediating dimension between CSR and customer satisfaction. It is suggested that CSR can contribute to an increased C-C identification. This creates emotional involvement and again promotes company support and satisfaction: CSR [illustration not visible in this excerpt] C-C Identification [illustration not visible in this excerpt] Customer Satisfaction [illustration not visible in this excerpt] Market value. Restrictively, it has to be noted that this relation is only beneficial when a company shows high innovative capability and high product quality as otherwise customer satisfaction and market value may actually decrease.

An additional study on CSR consumer perception adds to this body of knowledge indicating more specifically the effect of CSR on consumer-company identification. As it is the CSR information that provides consumers with insight into the company’s “value system”, “soul” or “character”, it is suggested that this information enables consumers to learn more about corporations and to build meaningful relationships (Sen and Bhattacharya, 2001, p. 228). The product or service must therefore bear a certain importance to the consumer in order to be a valid target for such social identity fulfilment. When strong consumer relationships are formed however, they again offer the potential of benefitting a company in several respects. It is argued that consumers become strong supporters of the company they identify with and demonstrate this support in various ways (Ahearne et al., 2005). As one such dimension, CSR initiatives have the potential to transform consumers into long-term advocates of the brand or the company and C-C identification is suggested to be once again a key underlying psychological variable (Du et al., 2007). Bhattacharya and Sen (2004) cite consumers’ willingness to talk positively about the socially responsible company as one of the key behavioural CSR outcomes, which can be categorised as an expression of such advocacy: CSR [illustration not visible in this excerpt] C-C Identification [illustration not visible in this excerpt] Advocacy [illustration not visible in this excerpt] Positive Word of Mouth. The value of positive word-of-mouth again arises from the high credibility and persuasiveness ascribed to it and represents a red-hot topic within recent marketing literature and an important marketing objective as far as to external awareness and perception of a company (Bhattacharya and Sen, 2004).

Subsequently to consumers’ willingness to talk positively about a company, consumer resilience to negative brand information has to be highlighted as another meaningful CSR benefit on the relational level. It is referred to as ‘consumers’ willingness to overlook or even forgive a company, when there is an occasional, possibly inadvertent, lapse on its part’ (Bhattacharya and Sen, 2004, p.19). More precisely it means that when a company has a poor CSR record consumers are more likely to blame the company for the crisis, whereas when the record is positive consumers blame other parties and the brand image remains stable (Dawar and Klein, 2004). This potential of consumers downplaying or overlooking negative information emphasises the risk management dimension of CSR and highlights the benefit of proactively creating a CSR-based image among consumers. This will find further consideration within closer examination on CSR communications.

Following on the link of C-C identification to transactional benefits, another typical reaction that arises from C-C identification is increased consumer loyalty. As consumer’s perceived relationship with a company will make it more difficult to switch to competitors they feel less committed to, CSR as a promoter of consumer relationships can increase loyalty as a meaningful potential with long-term perspective (Du, et al., 2007; Bhattacharya and Sen, 2004).

While the importance of C-C identification as the underlying variable to relational CSR benefits has become apparent, it is suggested that C-C identification can equally represent an important mediator to transactional outcomes in the relation CSR [illustration not visible in this excerpt] C-C Identification [illustration not visible in this excerpt] Purchase Behaviour. Whereas Du et al. (2007) cannot observe an immediate link between identification and transactional reactions, Ahearne et al. (2005) state that on the basis of C-C identification purchasing a certain company’s products becomes an act of self-expression. This is backed by literature of product symbolism as well as by Palazzo and Basu (2007) stating that, in the light of identity shaping as a continuous process, consumption is a key element of post-modern self-constructing activities (Nan and Heo, 2007). It is therefore suggested that CSR can be indirectly and in the long-term linked to purchase behaviour via the dimension of C-C identification. Intermediate dimensions such as consumer loyalty may then reinforce this relation.

Figure 1: Consumer-related CSR Potentials

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With regard to direct transactional benefits of CSR, it has been indicated in the previous section that in some cases, CSR, as an integrated product feature, can function as a means of product differentiation and a direct purchasing argument. However, it is argued that in some cases the emotional attachment to a company by means of C-C identification can also directly impact the evaluation of a certain product and thus be linked to perceived product differentiation. It is argued, that the potential of this form of product differentiation is particularly given within the services industries, where products are difficult to compare and consumers look for other variables to assess the perceived quality of the product. Referring to Ahearne et al. (2005) many purchase decisions derive not only from judgments of economic factors, but from the consideration of various corporate dimensions. This corporate evaluation is likely to be positively influenced when the consumer feels emotionally involved with the company, which may then translate into positive evaluation of the company’s product. Based on this finding, it is suggested that CSR-based C-C identification may support perceived product differentiation, even in the event that there is no direct CSR product integration. Vice versa, a product clearly differentiated by CSR-values is likely to amplify the potential for C-C identification by increasing perceived the impact as well the external statement for the consumer. These aspects as potential influencing variables to C-C identification will be subject to more detailed discussion in chapter 2.4.

Long-term relational rewards represent the outstanding feature of CSR with respect to consumers. The finding that CSR-based consumer relationships are stronger than those based on other values such as corporate ability (CA) is of great significance in this regard. CSR as a driver to the various beneficial relations is hence suggested to be a key contributor to the magnitude of customer equity by promoting relationship equity as a main component of it (Du et al., 2007). Overall, the importance of C-C identification as a vital driver to the various relational dimensions becomes apparent when considering potential consumer-related CSR effects. C-C identification with its antecedents and limitations needs to be consequently considered as a main area of interest when trying to generate bottom-line effects of CSR involvement. The relation CSR ' Communication ' C-C Identification therefore needs to be equally contemplated as a main objective when seeking to effectively communicate CSR to consumers.

2.2.1.3 Moderating Variables and Limitations to Consumer-related Potentials

Discussion of the various consumer-related CSR potentials has also revealed several limitations and moderating variables that are to be met in order to achieve the respective effects. All these criteria need to find consideration when implementing CSR and an appropriate communication strategy with a view to generating cited relational consumer effects.

a) Corporate ability, innovativeness and product quality: It has become apparent that consumer-related benefits can be achieved by companies primarily with good corporate ability, high innovativeness and high quality products (Folkes and Kamins, 1999). Even though Berens et al. (2007) have found that a good CSR performance can sometimes compensate for poor corporate ability (CA), generally a good CA needs to be considered as a necessary prerequisite for achieving positive CSR effects. On the contrary, companies with mediocre or inferior products risk evoking negative effects in terms of purchasing behaviour or customer satisfaction when emphasising their CSR involvement. CA and product quality need to be consequently factored in with a view to the decision whether to emphasise CSR by means of CSR communication.

b) Relevance of product: As highlighted by Sen and Bhattacharya (2001) a certain relevance of the product to the consumer is a precondition for C-C identification. In spite of differing consumer interests, it does confine the product categories for which a proactive approach to CSR communication will be particularly beneficial, i.e. cited CSR potentials are less likely to be achieved by products and articles of daily use to which less attention is paid.

c) Reputation: While poor corporate reputation has to be viewed as an inhibitor to positive reaction in the context of critically perceived motivation, it has to be also mentioned that companies with extremely positive reputations, may be less able to generate additional positive outcomes from their CSR activities (Bhattacharya and Sen, 2004). This is due to so-called ceiling effects, implicating that cited CSR potentials may be already achieved based on other positively associated image components. Next to the existing corporate image, the image of the industry may constitute another important variable that influences the perception of the company and its CSR respectively.

d) Size, operational radius and ownership: Research on reactions to CSR reveals that consumers have more positive attitudes towards a company when the respective company is ‘small rather than big, local rather than national, and a small, personal, privately owned operation rather than a big [...] multinational’ (Bhattacharya and Sen, 2004, p.17). Accordingly, big companies in particular will have to try harder to reap positive effects from their CSR involvement.

e) Brand structure: With regard to C-C identification it is to be noted that generally consumers’ object of identification is the company rather than the product brand. Thus, companies with a diverse product portfolio have the potential to profit by C-C identification across its various brands. Simultaneously, this dependency also imposes limits as when the link between company and its product brands is not sufficiently recognised by consumers (Ahearne et al., 2005).

f) Competitive context: The competitive context has to be considered with regard to potential CSR benefits as, according to Du et al. (2007), the relevance of CSR activities as a variable of corporate image varies relative to competitors in the mind of the consumer. It therefore determines the degree of differentiation that can be achieved as well as the perceived proactivity of the involvement. The authors suggest that the degree of CSR integration into the overall business strategy as well as an innovative and proactive approach will positively influence the perception of a company in the competitive environment and will aid to generate a competitive advantage.

2.2.2 CSR Communication as the Mediating Link

“The majority of consumers seem not to be aware that by and large many companies engage in at least some kind of CSR activities” (Beckmann, 2006, p.172).

“Among psychological outcomes, the greatest stumbling block was the lack of awareness about a company’s CSR activity” (Bhattacharya and Sen (2003) cited in Dong et al., 2003, p.14).

“Lack of awareness is likely, [then], to be a major inhibitor of consumer responsiveness to CSR” (Mohr et al., 2001, p. 48).

“Communication, however, often remains the missing link in the practice of corporate responsibility. The information requirements of a range of opinion leaders and mass stakeholder audiences are not currently being satisfied by many companies, so they are not getting full credit for their responsible corporate behaviour” (Dawkins, 2004, p. 108).

“So commitments to sustainable development and corporate social responsibility projects and other measures are not contributing to the growth of brand value, because nobody knows enough about them” (Longhurst, 2003, p. 45).

“Consumers’ lack of awareness about CSR initiatives is a major limiting factor in their ability to respond to these initiatives. Companies therefore need to work on increasing awareness levels” (Bhattacharya and Sen, 2004, p. 23).

“A key implication, therefore, is that to reap the positive benefits of CSR, companies need to work harder at raising awareness levels” (Sen et al., 2006, p.164).

“Finally, it’s important to remember that communication is implementation. There is little point in having CSR policies if people don’t know about them” (Townsend, 2005, p. 9).

The quotations above provide a picture of the critical role of awareness within the relation CSR and the realisation of CSR potentials with respect to consumers. This critical role has become equally apparent in considerations before as in terms of how CSR can have an impact on consumers’ buying behaviour. While consumers do claim to take an interest in CSR issues and companies’ responsible behaviour, these positive attitudes and hypothetical buying intention hardly appear to be transferred into actual purchase decisions (Page and Fearn, 2005;). However, there is so far no reliable research which specifically investigates whether consumers actually know about the CSR efforts of the companies from whom they purchase (McElhaney, 2007; Dawkins, 2004; Mohr et al., 2001).

All in all, there is very little research on concrete consumer awareness or knowledge on companies CSR performance, though there are many indications that the level of consumer knowledge is fairly low (Dawkins, 2004; Sen et al., 2006; Du et al., 2007). This suggests that the lack of awareness is likely to be a major inhibitor of consumer responsiveness towards CSR efforts and a key deficiency to most CSR strategies. In this context, Du et al. (2007) have identified consumers’ awareness of a CSR activity and their attribution regarding the company’s motivation for engaging in these activities as main determinants of CSR beliefs. Further, the meaning of awareness is underscored by a study undertaken by Sen et al. (2006) suggesting that awareness about CSR initiatives leads significantly to a more positive view of a company in terms of associations, attitudes, identification as well as behavioural intensions.

CSR awareness is a prerequisite to all consumer responses and is thus conditional to benefitting a company for its CSR involvement. It is to be therefore highlighted that a low awareness level represents a crucial limitation to the significance of all consumer-related CSR potentials, which have been previously elaborated. Underlying academic research on these established CSR relations has been primarily concerned with the consequences of CSR and has either assumed or manipulated consumers’ CSR awareness in experimental contexts (Du et a l., 2007; Sen et al., 2006). Results must be therefore considered to show limited relevance in the real market place.

Whereas consumer awareness on CSR can be stressed as a main critical factor, the challenge of how CSR awareness should be achieved and which CSR content should be conveyed as to promoting potential benefits appears to be so far widely neglected by academic research. Responding to this finding, this project aims to take a closer look at CSR communication as an awareness-building instrument and its specific measures. More precisely, the role of CSR communication and its main challenges and objectives are to be examined and the link between communication and consumer-related CSR outcomes is to be investigated.

Figure 2: The Mediating Role of CSR Communication

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2.3 CSR Communication

CSR communication can be defined as using promotional techniques that are directed at informing about a company’s CSR and supporting CSR-based brand identity and relational as well as behavioural loyalties or switching behaviour (Kitchen, 1999, p. 7). It incorporates communication of any kind that broaches the issue of socially, ethically or environmentally responsible behaviour which may be related to the entire corporation as well as its supply chain (Hansen et al. 2006, p.19).

The relevance of CSR communication as a mediating function has been addressed before when linking CSR to consumer-related benefits in terms of building awareness as well as conveying corporate image (Dawkins, 2004; Sen at al., 2006). German companies further predict an increase of relevance of this form of communication in the market place within the following years (Hansen et al., 2006). In spite of the ascribed importance, little research has yet been undertaken specifically on CSR communication and its perception itself (Beckmann, 2006). CSR as a comprehensive concept affects all stakeholder groups which may have contradictory interests and different perceptions and evaluations of the outcome. These differences need to be considered when communicating on CSR in order to meet the diverse information requirements (Polonsky and Jevons, 2006; Dawkins, 2004; Hirschland, 2005). In the following, the focus will be placed solely on CSR communication towards consumers and its peculiarities and challenges with regard to achieving positive reactions from it. However, communication is to be seen as the implementation of CSR and can consequently not be considered isolated from the overall strategy. Therefore, critical success factors for CSR implementation with regard to external perception will be discussed beforehand as conditional variables to effective CSR communication.

2.3.1 Critical Success Factors as Prerequisites to CSR Communication

Multiple components such as how, by which company and in which industry CSR is pursued influence the requirements for a successful CSR strategy (Beardsley et al., 2007; Hirschland, 2005). In Particular company-related characteristics such as size of the company, operational radius and ownership, product quality, the overall marketing strategy and the position of CSR within the given strategy impact the external perception of a CSR involvement and its communication accordingly. Further, the area of activity and the overall reputation of an industry may cause particular sensitivities and requirements which need to be respected (Bhattacharya and Sen, 2004). In this context, the energy sector, the pharmaceutical industry and the tobacco industry can be cited as typical examples for such problematic business fields, in which CSR involvement will be eyed especially censoriously by stakeholders.

Notwithstanding the different particularities, the main recurring critical success factors for CSR can be identified in the literature and are underscored by numerous authors (Polonsky and Jevons, 2006; Luo and Bhattacharya, 2006; Bhattacharya and Sen, 2004; Simmons and Becker-Olsen, 2006; Maignan et al., 2005; Becker-Olsen et al., 2005). These critical success factors are: the right fit of the initiative, perceived motivation of the company and strategic implementation of CSR.

Figure 3: Critical Success Factors in Successful CSR Implementation

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The “Right Fit”

Following a careful analysis of business activity with its critical areas and a view to potential connecting points for specific actitivies, the initial step for a successful CSR strategy is the decision about the focus area of involvement and how it should be implemented in terms of concrete initiatives. The “right fit” of the selected initiative is cited as being crucial in achieving positive returns. This can be explained insofar as in contrast to a high fit initiative, a low fit of an initiative increases the attribution process of the recipient, who tries to make sense of the conveyed information. This intensified attribution process promotes scepticism and eventually leads to a negative perception of the CSR involvement (Becker-Olsen et al., 2005; Szykman, 2004).

However, authors’ understandings of the “right fit” of CSR involvement do vary. While most authors refer to a suitable initiative as one that can be logically related to the business activity, Bloom and Hoeffler (2003) state that a “high fit indicates either that CSM [Corporate Social Marketing] initiatives benefit consumers directly or that the initiatives are about the issues consumers care about” (cited in Dong et al., 2003, p. 4; Gourville and Rangan in Dong et al., 2003). Nan and Heo (2007) take a more general position by adopting a multidimensional view and define fit as the overall perceived relatedness between the company and the initiative on multiple cognitive dimensions. While the contextual “closeness” of business and initiative is often cited as worthwhile to generating positive CSR effects, a close fit does not equal a right fit for every company. If a company has a negative reputation, close relatedness of business and initiative can be also particularly harmful as it may spur consumer scepticism, e.g. Philip Morris’s campaign “talk to your kids about not smoking” and the alliance of the Coca Cola foundation with the American Academy of Pediatric Dentistry provoked harsh criticism and cynical attributions (Bhattacharya and Sen, 2004, p. 14). On the other hand, Chevrolet successfully set the focus of its US involvement in the business-unrelated area of school violence prevention and youth projects with a view to attracting young drivers as well as strengthening relationships with their local dealers (Cone et al., 2003). This implicates how the “right fit” differs for every company and how sensitively every CSR initiative needs to be selected in order to generate positive reactions. This selection process appears particularly critical in the light of managers being usually not trained in taking decisions in this area with high economic relevance and according to an interdisciplinary mix of economic, sociologic, political and historical criteria (Cone et al., 2003; Von Oetinger and Reeves, 2007).

Perceived Motivation

In line with the previous mentioned importance of fit, perceived company motivation equally influences recipients’ information processing. Suspicion or perceived questionable motivation activates a more intense attribution process which results in scepticism and rather negative perception (Becker-Olsen et al., 2006; Szykman, 2004). Philip Morris serves as a negative example in this context, as the company was found to have spent $75 million on doing good in 1999 and $100 million on publicising it. As a logical consequence the ascribed sincerity of the company’s commitment was torn in the public perception (Cone et al. 2003).

Perceived motivation of a CSR strategy is closely related to the existing reputation of a company and its business surrounding. Companies with a negative reputation will thus have more difficulties in achieving positive reactions based on their CSR activity as they will be questioned more critically regarding their motivation (Szykman, 2004). Further, it has been found that global companies in general face a higher degree of distrust among stakeholders than smaller and regional businesses (Von Oetinger and Reeves, 2007). In order to counteract this distrust, authors point to the need for companies to act proactively and to set standards in terms of their CSR involvement (Von Oetinger and Reeves, 2007). Many studies show that a proactive approach to CSR positively influences perceived motivation as well as the credibility of a company and consequently leads to more favourable reactions among consumers (Bhattacharya and Sen (2003) cited in Dong et al., 2003; Becker-Olsen et al., 2005 ). It may equally function in a preventive way as shown already in the context of resilience to negative information (see 2.2.1.2.)

Consumers also appear to accept company intrinsic bottom line objectives by considering the CSR involvement as a “two-way street” that benefits the society at large as well as the company (Bhattacharya and Sen, 2004, p. 15). However, this consumer tolerance towards non-altruistic company motivation is not likely to be given in the case of a reactive CSR strategy, which highlights once more the relevance of a proactive approach to CSR instead of a reaction to external pressures or accusations. The perceived sincerity of the CSR involvement is decisive towards generating positive reactions from the CSR strategy. In order to achieve this, the CSR strategy needs to be truly part of the corporate culture in order to be communicated via every business pore as convincing and credible and to convey sincere company motivation.

Strategic Implementation

The degree of implementation implicates the scope in which a CSR approach is embodied in all corporate activities. Responding to the critical importance of perceived motivation, strategic implementation is essential as CSR needs to be reflected in every aspect of the company in order to be convincing and to gain full benefit in terms of external perception. CSR is often criticised as a simple marketing tool to “window dress” corporate image, which is closely connected to stakeholder scepticism regarding the company motivation (Lunheim, 2005). Strategic implementation demonstrates the conditional seriousness behind the strategy and is therefore decisive in achieving positive reactions in the long run (Reisch, 2006). Additionally Du et al. (2007) argue “to the extent that the CSR activities are more integrated with the overall business strategy, consumers are more likely to observe a link between the CSR initiative and the corporate ability”. This will positively influence potential CSR benefits as transactional and relational consumer-related potentials cited in the previous.

Further, only a strategic approach allows the integration of CSR measures within the entire scope of business activity, suitable controlling instruments and the supervision and documentation about the degree of its implementation. Having CSR thinking integrated as a maxim in every decision level of the value chain pays off in two more respects: 1. It helps to detect a maximum of activity areas within the business, where corporate responsibility guidelines shall be applied and to deploy those as competitive advantages accordingly (Porter and Kramer, 2007), 2. It assists in avoiding potential business scandals from internal and also from collateral business activity e.g. child labour practices among suppliers. Apart from the importance of successful implementation, strategic alignment is fundamental to a meaningful CSR strategy due to the long-term nature of its bottom line effects (Drumwrite, 1996). As CSR benefits are mainly of an intangible nature and cannot be quantified by short-term economic measures, CSR needs to be supported from the top management level as a long-term investment that requires staying power and cannot be measured against short-term profit goals.

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