CORPORATE SOCIAL RESPONSIBILITY: STRATEGIC INTEGRATION AND
COMPETITIVENESS FOR VIETNAM COMPANIES
BY
NGUYEN THANH HUYEN
E0600081
Graduation Project Submitted to the Department of Business Studies,
Help University College, in Partial Fulfillment of Requirements for
The Degree of Bachelor of Business (Accounting) Hons
OCT 2010
1
DECLARATION
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 10,007 words.
______________________
NGUYEN THANH HUYEN
28 Oct, 2010
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CORPORATE SOCIAL RESPONSIBILITY: STRATEGIC INTEGRATION AND
COMPETITIVENESS FOR VIETNAM COMPANIES
By
NGUYEN THANH HUYEN
Oct 2010
Supervisor: Dr. Pham Duc Hieu
ABSTRACT
In the process of integration of international economy, besides the advantages for social
and economic development, Vietnam enterprises are faced with great challenges in the
fiercely compete for continued stability and development. This paper aims to examine
how executives and managers from different Vietnam industries represent their conduct
on Corporate Social Responsibility (CSR) and its reporting, as well as whether the
attitude of Vietnam customers toward CSR is positively. The results of the study
indicate that while a large proportion of managers express a highly positive attitude
toward CSR and its reporting, consumers perception is at low state and questionable; it
point out a week of companies’ communication on consumers’ perception. Nevertheless,
the willingness to learn and gain more knowledge about CSR found from the survey
have drawing a bright future for CSR in Vietnam. “Well implement social responsibility
in business” is effective strategy to enhance the competitiveness of products on
international markets, and also the conditions for Vietnam companies.
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TABLE OF CONTENTS
Page
Declaration of originality and word count
ii
Abstract
iii
Table of Content
iv
List of Figures
v
List of Abbreviations
vi
CHAPTER 1
1
INTRODUCTION
1.1 CSR in the world
1
1.2 CSR in Vietnam
2
1.2.1 Government actions
4
1.2.2 Vietnamese Accounting Standards
5
1.2.3 CSR practice and challenges
6
1.3 Reason for Future Research
CHAPTER 2
7
LITERATURE REVIEW
2.1 Definition and conceptualization of CSR
9
9
2.1.1 Elkington's 1999 triple bottom line conceptualization
10
2.1.2 Carroll’s 1979 conceptualization
12
2.2 Stakeholder theory
14
2.3 CSR reporting
16
2.4 Hypothesis
18
4
2.4.1 Management’s perception of CSR and its reporting
18
2.4.2 Consumer’s perception of CSR information and disclosure
19
CHAPTER 3
RESEARCH METHODOLOGY
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3.1 Research objective
21
3.2 Research methodology
21
3.3 Data source
21
3.3.1 Primary data
22
3.3.2 Secondary data
22
3.4 Research method
23
3.5 Research tool
23
3.5.1 Questionnaire
23
3.5.2 Personal interview
24
3.5.3 Annual reports
24
3.6 Data collection
25
3.7 Sampling
25
3.7.1 Sample population
25
3.7.2 Sample frame
26
3.7.3 Sample size
26
CHAPTER 4
ANALYSIS AND DISCUSSION
4.1 Management
27
27
4.1.1 Results of questionnaire survey
27
4.1.2 Actual CSR reporting
32
4.1.3 Results of managers interview
33
5
4.1.4 Overall management’s responses analysis
4.2 Consumers
34
35
4.2.1 Results of questionnaire survey
35
4.2.2 Consumer’s responses analysis
38
4.3 Overall discussion
40
4.4 Limitations of the Study
41
CHAPTER 5
CONCLUSION
43
REFERENCES &
46
APPENDICES
57
6
LIST OF FIGURES
Figure
Title
Page
Chapter 1
N/A
N/A
Chapter 2
Figure 2.1
Triple bottom line of CSR (adapted from Crane & Matten,
11
2004)
Figure 2.2
A hierarchy of CSR (adapted from Carroll, 1991)
12
Chapter 3
N/A
N/A
Chapter 4
Figure 4.1
The number of managers response
27
Figure 4.2
Distribution of managers’ responses towards statements
28
Figure 4.3
Percentage of manager’s response towards CSR by five scale
29
Figure 4.4
Descriptive statistics from management survey (1)
30
Figure 4.5
The number of consumer response
31
Figure 4.6
Consumer category
35
Figure 4.7
Descriptive statistics from management survey (2)
35
Figure 4.8
Distribution of consumers’ responses towards statements
36
Figure 4.9
Percentage of consumer’s response towards CSR by five scale
37
Figure 4.10
Descriptive statistic from consumer survey (1)
38
Figure 4.11
Descriptive statistic from consumer survey (2)
39
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LIST OF ABBREVIATIONS
Abbreviation
Full name
CSR
Corporate Social Responsibility
CSP
Corporate Social Performance
IAS
International Accounting Standard
VSA
Vietnamese Accounting Standard
VCCI
Vietnam’s Chamber of Commerce and Industry
SMEs
Small and Medium-sized companies
NGO
Non-governmental Organization
WTO
World Trade Organization
PR
Public Relation
TBL
Triple Bottom Line
MOF
Ministry of Finance
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CHAPTER 1
INTRODUCTION
1.1 CSR in the world
Corporate Social Responsibility (CSR), also known as Social responsibility of
business, is no stranger to the developed world, and it has become increasingly
gaining important with enterprises, shareholders and investors, employees,
customers and entire society. Over the world, giants companies are devoting their
time and resources to incorporate CSR activities in their overall strategies to become
an ideal business model, and to be accountable to society. In the United States there
is “One PERCENT Club” that is a collection of businesses committed to use at least
1% of their profits into social work; the Group's U.S. manufacturing light bulbs,
Haitech Group investment $ 4.3 billion on controlling environmental pollution. Also
in France, a series of cultural funds of enterprises such as France Télécom (France
Telecom), RATP (Subway Company) were among the sponsors of contemporary
French art. In addition, “Google”- Web search engine- with headquarters called
Googleplex behaves their employees like gold pearl. General Electric uses $2 billion
annually for researching technologies to protect the environment. World Bank,
World Bank and Merck pharmaceutical company has launched an initiative to
develop a fund of U.S. $ 50 million to donate the Mectizan medicine to help 28
countries in Africa. Shell Co. set up a Shell Foundation to help educate the
community’s children and adults (Saga Vietnam, 2008). The billionaires such as Bill
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Gates also built a charity fund to the development of community. Prahl Paul, Deputy
Head of Public Relations of Best Buy, has stated that „We are successful in the
marketplace because we take social responsibility into business operation” (Saga
Vietnam, 2008).
In short, more and more companies in the world are getting involved in CSR
activities strategy to ensure the quality of life for employees, environmental
protection and development of products that create benefits for consumers and the
society. Schiebel and Pöchtrager (2003) reported that “it makes good business sense
to fully integrate the interests and needs of customers, employees, suppliers,
communities, and our planet - as well as to those of shareholders - into corporate
strategies”.
1.2
CSR in Vietnam
CSR is a topic which is quite attractive in over three years for enterprises in
Vietnam. And the concept of CSR is best known in the two major export industries,
namely textiles and footwear. The reason is that the importer, especially in the U.S.
and Europe, always requires businesses to have a“completed CSR evaluation panel”
before exporting goods. Recently, the concept of CSR in Vietnam became more
popular as a serious infringement cases on the environment occurs (Vedan Co., Ltd
discharging waste into the Thi Vai River for 10 years) and many products were
found to have substance hazardous to human health (milk with melamine, a 3MPCD
sauce). Such immoral companies are failing to rebuild trust from the community.
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According to Mr. Florian Beranek, chief advisor of the project Industrial
Development Organization United Nations (UNIDO Chief Technical Advisor CSR), some Vietnam businesses in small and medium-scale (SMEs) considered
social responsibility of business is a burden and the responsibility that must be
implemented more than an opportunity. He stated that “More and more foreign
enterprises apply the implementation of CSR into business strategy. Meanwhile,
some enterprises in Vietnam, especially small and medium enterprises, have not yet
found the opportunities and benefits that CSR can bring” (Saigon Economic Times
Online, 2010).
Besides, in the last two years, financial and economic crisis in the world has a little
impact on operations and policies of many Vietnam businesses, as well as the
public’s attention to CSR. Therefore, some companies cut off the cost in social
activities or reduce the size of community projects. For businesses trying to keep
CSR activities, they also have faced many difficulties in carrying on a business. This
situation prompted the Chamber of Commerce and Industry of Vietnam (VCCI)
launched the CSR Award to encourage enterprises to social responsibility.
Consequently, the awareness of the problems of workers and the environment are
increasing rapidly due to the efforts of the Government, industry associations as well
as strict requirements from the foreign partner. In addition, CSR appearances on
several studies, seminars, articles, websites which help the perception on CSR is
gradually improving.
In recent years, many Small and Medium-sized companies in VN put CSR into their
business strategies, in which, they launched some CSR activities to support the take11
up of CSR as a means to enhance their competitiveness. For example, Vinamilk,
Dutch Lady, two famous milk producers, built social programs such as “6 million
cups of milk for children Vietnam “and funds scholarships “fireflies light” that are
resonated and supported from the consumer. Besides, Kirin Acecook - Latte
Beverage Company, a joint venture between Vietnam and Japan implement CSR in a
different way of focusing on maximum product quality. They are the pioneer in
applying technology Vietnam pouring Aseptic sterile, process design and bottle
blowing was conducted at the factory to ensure hygienic source of plastic bottles.
These proved that implementing CRS is a major concern of businesses. According to
Nguyen Hong Ha, deputy director of the Chamber of Commerce and Industry of
Vietnam (VCCI) in HCM City, CSR must be placed on the business strategies of
each business. It was, is and will be an indispensable part of decision success of the
business.
With the context of Vietnam joining the World Trade Organization (WTO) as well
as the fact that Vietnam's enterprises are small and medium businesses, to achieve a
balance of economic, social and environmental, business must also consider all other
relevant issues to improve the competitive advantage as well as better opportunities
to export goods to the international market.
1.2.1
Government actions
Government plays a very important role for the development of CSR in shaping and
promoting enterprises conduct societal responsibility. After Vietnam carrying out its
economic reforms in the mid 1980s called Doi Moi (renovation) and implement
12
open-door policies, Vietnam has had many chances to joint into the world economy
in which Government has strengthened its legal implementation mechanism,
promoted Foreign Direct Investment (FDI) and has raised awareness of the business
and stakeholders on CSR. This is regarded as an important content in the agenda of
sustainable development.
Vietnam Government has expressed Agenda 21 of Vietnam as a special attention on
CSR in Orientation Strategy for Sustainable Development in Vietnam on the basis of
harmonious incorporation between economic development, social development and
environmental protection.
Besides the Labor Code legislation, Government has created new regulations,
represented by the new Environment Protection Law that strengthened enforcement
measures to fight against immoral companies. Along with these, the Government is
relatively calling on businesses to perform their tasks for the environmental
protection and concern for the interests of workers. As to help SMEs make effort on
CSR, Vietnam government, along with the VCCI and several international Nongovernmental Organizations (NGOs) offered them consulting services, conferences
and training programs in order to enhance the need to implement CSR and to
improve their competitiveness through CSR, in particular in SMEs operating in
footwear and textile & garment industries.
1.2.2
Vietnamese Accounting Standards (VAS)
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Vietnam has issued 26 Vietnam Accounting Standards (VASs) in five phases since
1996 with the assistance of the World Bank and European Community. Generally,
the VASs are set up by the Ministry of Finance that based on the International
Accounting Standards (IAS) to support adjusting economic, finance and accounting
issues. In Vietnam, many VASs are still unclear and flawed. They also have some
conflicts among standards and do not consist between standards and guidelines for
such standards. Besides that, many Vietnam enterprises lack of transparency in
accounting activities, especially in State companies and Banking system. Moreover,
CSR information of enterprises is not required by Vietnamese Accounting Standards
Board (VASB) to disclose to public.
1.2.3
CSR practice and challenges
While CSR is gaining more attention throughout the world Vietnam is left behind to
realize that it is a matter of business survival. A quite many business in small and
medium-scale in Vietnam do not really see the importance of CSR. People’s
awareness and the management about CSR is actually still slightly poor and weak
state than other countries on the world, legal documents are not realistic, and the
enforcement is sporadic. These have lead to business spleen law easier, denied
business ethics responsibility or pollute the water environment in the long times
without treatment.
In addition, Vietnam goods are obviously hard to compete on price or quantity with
many countries on the world such as China, Thailand, etc. Some recent researches
14
indicate that CSR’s meaning is not really understood by some SMEs. These entire
roles have answered the question of “which ways that can help the domestic
enterprises have advantages in the market?” CSR may be the answer if businesses
really understand the meaning and turn into a CSR culture, style of thinking and
working methods. CSR can be a key tool to increase benefits for their brands and
their overall reputation, or as a means to improve the business-relationship or the
way to promote business operation effectively. So, there is a need of integrating CSR
in day to day business affairs as PhD Doan Duy Khuong – Vice Director of Vietnam
Chamber of Commerce and Industry state “Vietnam companies must embrace CSR
as a necessary requirement to approach the global market” (Saga Vietnam, 2008).
In the current economic integration, CSR is gradually becoming a concept that many
people are more interested and have strategic importance for business. It may be
considered as a competitive advantage for a company. It not only refers to CSR as
"the right thing to do" but also "wise to do". Embracing CSR, business could get
many benefits; such benefits as enhanced reputation, improved relationships at work,
motivated work forces, ability to attract desired employees, and convenience in
calling for investment, especially foreign investment (Schmidt Albinger & Freeman,
2002).
1.3 Reasons for further investigation
Although CSR is really hot subject in the world, SCR in Vietnam is still weak with
very few studies are taken place. However, CSR has become even more important
15
for Vietnam companies to develop sustainably since Vietnam has joined into World
Trade Organization (WTO). This paper aims to explore how companies in Vietnam
view CSR and its disclosure as a strategic integration and competitiveness, and
whether Vietnam consumer behavior is affected by CSR information.
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CHAPTER 2
LITERATURE REVIEW
2.1 Definition and conceptualization of CSR
There are many different definitions of CSR. Each organization or company,
government recognizes CSR under its own perspective and opinions, depending on
conditions and characteristics and their level of development. Keith Davis (1973)
gives a rather broad view of “CSR is the interest of the organizations and react to
issues beyond satisfying the legal requirements, economic and technology”.
Meanwhile, Carroll (1999) argues that CSR has a larger scope of “all matters
economic, legal, moral, and other areas of social expectations on businesses in each
period of time”. According to Matten and Moon (2004), “CSR is a concept cluster
includes many other concepts such as business ethics, business philanthropy,
corporate citizen, sustainability and environmental responsibility. It is a concept and
always challenging in the context of each economic, political and social
characteristic”.
The definition defined by The World Bank and the World Business Council on
Sustainable Development (WBCSD) is one of the most cited definitions, in that, “the
commitment of business to contribute to sustainable economic development –
working with employees, their families, the local community and society at large to
improve their quality of life, in ways that are both good for business and good for
development” (SIDA, 2005).
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Various theories about CSR have been introduced, but only two CSR
conceptualizations from different authors will be highlighted in this paper. Both of
them are the most cited and most used conceptualizations that facilitate a basic
understanding of CSR concept: Elkington’s triple bottom line CSR conceptualization
and Carroll four-part definition of CSR.
2.1.1
Elkington’s 1999 tripe bottom line
The triple bottom line (TBL or 3BL) theory of CSR is known as a common way for
companies to conceptualize CSR (Crane & Matten, 2004; Cornelissen, 2008). In
1999, Elkington, author and founder of the consultancy firm sustainability,
introduced this concept that refers to three aspects of organization when carrying on
business, namely companies’ economic, environmental, and social performance. In
the study of Crane and Matten (2004), they has summarized Elkington’s key idea to
be that businesses do not have only one goal on economic value, but have further
goals on environmental and social value. In other words, company must to fulfill all
three things at once to achieve the sustainability. Under this theory, organizational
activities are composed in three categories: people, planet, and profit; such
categories present for the social issues, environment issues and healthy financial
performance respectively. The figure 2.1 below visually illustrates these bottom
lines are being interdependent and interrelated:
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Figure 2.1 Triple bottom line of CSR (adapted from Crane & Matten, 2004)
People affected by a company are often called stakeholder groups, such as
shareholders, non-governmental organizations, consumers, and governmental
regulators and agencies are trying to call for information related to the social and
environmental dimensions. However, quite large companies that usually figure out
how much they to be social responsible and how they are attempting to help the
world by advertise their “green” practices on media actually mask community to
reduce social and environment debt (Darrell Brown, Jesse Dillard, R. Scott Marshall,
2006). Not all businesses are really achieving the TBL. Elkington and others argued
that consumer are becoming more aware of damaging practices, and then their
choices to use or invest in companies are being changed.
As said above, business practitioners use TBL to define CSR. From The Global
Reporting Initiative (2010) the TBL sets directions and principles to evaluate and
19
report business economic, social performance and environmental conduction. That
the reason why it is described as a “frame of social sustainability in the language of
business”.
2.1.2
Carroll's 1979 conceptualization
Carroll’s Pyramid is widely accepted and used in CSR literature and can be seen as a
mainstream conceptualization of CSR. In 1979, Carroll divided CSR into four
separate areas: economic, legal, ethical, and discretionary responsibility. Each area is
presented as consecutive layer of pyramid that illustrated in Figure 2.1 and briefly
summarized below:
Figure 2.2 A hierarchy of CSR (adapted from Carroll, 1991)
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