Leadership for Sustainability: Connecting Corporate Responsibility Reporting and Strategy

Leadership for Sustainability: Connecting Corporate Responsibility Reporting and Strategy

Nikolina Markota Vukić (RRIF d.o.o., Croatia), Mislav Ante Omazić (Faculty of Economics and Business, University of Zagreb, Croatia), Mirjana Pejic-Bach (Faculty of Economics and Business, University of Zagreb, Croatia), Ana Aleksić (Faculty of Economics and Business, University of Zagreb, Croatia) and Jovana Zoroja (Faculty of Economics and Business, University of Zagreb, Croatia)
DOI: 10.4018/978-1-7998-1108-4.ch003

Abstract

This chapter describes how and why normative justification for corporate responsibility has been replaced with business case thinking. Modern organizations do link their non-financial reports to strategy because corporate responsibility is seen as a source of competitive advantage, growth, motivation, and innovation. Non-financial reporting potentiates companies to understand, learn, and redefine their social and environmental impacts and its cost; how to minimize both impact and cost; and how to capitalize on challenges that management face on a daily basis. The connection between CR strategy and non-financial reporting is described along with how it is relevant for the successful business of modern organizations. By improving CR strategies and developing unique non-financial reporting, organizations can be more effective and efficient in the local community, which will positively reflect on their business model and in achieving higher sustainability levels.
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Introduction

In a globalized and interconnected world, the distant becomes close, and time and space are no longer constraints for business interaction. In a modern world, organizations are encouraged by stakeholders to balance between the need for profitability and need to contribute to the local community, social equity, and environmental protection (Leon, 2013). The beginnings of the concept of corporate (social) responsibility (hereafter CR) in the academic literature are found in the articles from the 1930s where for the first time, in addition to the profit function, social service function of business is also mentioned (Okoye, 2009). During the 1960s, the growing refinement of consumer demands helped to spread this concept, followed in the 1970s by the environmental movement and the growing concern for the impact of the economy on society in the 1990s. Since the 1990s CR has been seen as an integral part of business activities and strategy (Dahlsrud, 2008) with a balance between social, environmental, and economic impact becoming a crucial element of all organizational activities. As a consequence the raison d’être of contemporary CR is very much a product of general developments and trend in modern society.

Although the majority of academics still use term corporate social responsibility, in this chapter, we will use term corporate responsibility to emphasize the balance between the economic, social, and environmental impact of an enterprise. CR is multidimensional and can benefit business organizations and their stakeholders in a multitude of ways; many driving increased profitability and resource efficiency. Still leading to corporate responsibility requires leaders to pay attention to how the concept is framed and introduced into the organization (Quinn & Dalton, 2009).

On its road to sustainable business models, organizations need to implement CR in their strategic processes (Bonn & Fisher, 2011). In order to achieve this integration, the strategy itself should be aligned with organizational values, and stakeholders needs and wants have to be integrated into organizational past, present, and future. As such, CR strategy is focused on the successful integration of organization into the overall network of society. This requires full integration of societal needs, the natural environment, and corresponding business imperatives (Quinn & Dalton, 2009) into the organization environment, its process, structure, and culture. Thus sustainability efforts need to become an integral part of business strategy if they are to provide long-term value to both the organization and society (Galpin & Whittington, 2012). In that sense, leaders are encouraged to change the organization’s views of success from an economic-based to a sustainability-based measurement (Quinn & Dalton, 2009, p. 22). Companies are motivated to include social and environmental activities in their business to be considered legitimate following national, local, and industrial norms and regulations. Also, as stated by Husted and Allen (2011), companies will take part in responsible and sustainable activities to imitate their competitors and thus preserve their social legitimacy, build a reputation, avoid negative perception, and ensure the long-term survival of the organization.

Key Terms in this Chapter

Corporate Responsibility: Also known as corporate social responsibility, represents the business concept that integrates socially and environmentally beneficial programs and practices into a distinctive business model. It is a form of corporate social and environmentalist self-regulation integrated into its everyday activities, or how companies manage the business processes to produce an overall positive impact on society.

Corporate Responsibility Strategy: Presents a framework for managing a company's current and future impacts on the economy, society, and environment.

Integrated Reports: Are linking non-financial reports to financial reports to provide transparent and reliable information on business activities and how corporation creates value on short, mid and long-term. It follows trend that companies should expand their reporting system beyond the stewardship of financial capital, and include all the resources they use as inputs to their business processes.

Non-Financial Reporting: It reflects a company’s claim to portray, in printed or/and on the website, an account of its environmental, social and governmental performance and impact on economic performance, and to inform their stakeholders on company’s role in society.

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