Influencing Factors of Corporate Social Responsibility(CSR) Accountability on Firm Performance Thesis Writing, Singapore

Influencing Factors of Corporate Social Responsibility(CSR) Accountability on Firm Performance”

Chapter 1:   Introduction

1.1 Introduction

The business landscape has shifted dramatically in recent years, not only as a result of competition dynamics but also as a result of the globalisation wave that has swept through markets (Sial et al., 2018). Businesses are expanding beyond their home country’s borders into new markets in developed countries, which are frequently referred to as emerging markets (Khan, Yang &Waheed, 2019). Globalization has established an unmistakable reality for businesses: in order to compete effectively in an increasingly competitive and complex world, they require well-defined business practices that prioritise the public interest in markets (Kong, Antwi‐Adjei &Bawuah,2020). Businesses must establish a foothold in these markets by addressing people’s social and cultural needs in order to tap into these emerging talents in developing countries.

1.2  Research Aims and Objective

Research Objectives

The primary objective of the study was to determine the effect of corporate social responsibility on the success of medium-sized businesses. Additional fundamental objectives include the following:

• The purpose of this study is to determine the effect of corporate social responsibility (CSR) on employee attraction and retention in medium-sized businesses.
• The effect of marketplace corporate social responsibility (CSR) on revenue turnover in medium-sized businesses will be examined.
• Evaluate the impact of environmental corporate social responsibility (CSR) on environmental security in medium-sized businesses.
• Determine the extent to which participating in group corporate social responsibility (CSR) can help medium-sized businesses improve their reputation.

1.3 Problem Statement

Numerous MSEs face similar challenges to large and multinational corporations in adopting CSR due to characteristics such as owner-managership, close ties to business partners and the local community, and a lack of funding and support, among others. Despite its significant impact on community growth, environmental sustainability, employee efficiency, and consumer satisfaction, corporate social responsibility (CSR) in MSEs has received scant attention. Due to their less formal existence, transparent ownership structure, and more philanthropic and community-oriented nature, the relationship between CSR and MSEs in Malaysia, as in other developing countries, is extremely complicated.

Despite frequent public declarations of MSEs’ assumed role as development agents, the majority of medium-sized businesses lack adequate knowledge of contemporary competitive techniques such as CSR to address fundamental issues such as the creation of a positive work environment that fosters diversity, equitable wealth distribution within a community, environmental protection, and market innovation. Despite the prominence of MSEs in Malaysia, little research has been conducted on the relationship between CSR and results.

According to Handayani,Wahyudi andSuharnomo (2017),organisations are required to behave in socially beneficial ways more than ever before. This includes the physical environment, product quality, employee working conditions, and the elimination of unfair recruitment practises and employee disengagement. This study examined the performance of CSR and MSEs in Malaysia. Medium-sized enterprises (MSEs) are businesses that contribute to the economic growth of developing countries while also reducing poverty (Wan, Chen&Ke, 2020). Pham and Tran (2020) defined MSEs as businesses with total costs of less than 200 million ringgit, excluding property.

MSEs (Medium-Sized Enterprises) are critical to the economic development of every country and state. They are an effective tool for achieving national economic objectives such as job creation and poverty reduction at a low investment cost. MSEs also contribute to economic activity by supplying a variety of raw materials to large firms, complementing the role of small businesses (Rahman, Rodríguez-Serrano & Lambkin, 2019).

1.4       Research questions

• What impact does corporate social responsibility (CSR) have on the recruitment and retention of employees in medium-sized businesses?
• Does corporate social responsibility (CSR) in the marketplace affect the revenue of medium-sized businesses?
• How has environmental corporate social responsibility (CSR) influenced environmental protection in medium-sized businesses?
• How does participation in corporate social responsibility (CSR) affect the reputation of medium-sized businesses?

1.5       Significance of the study

This research will benefit MSE managers, industry professionals, policymakers, and academics. The study’s findings will be critical for the nation as a whole in terms of how CSR activities can boost the efficiency of MSEs, which are critical for achieving national economic goals such as job creation and poverty reduction.

MSEs who participate in the study will receive a summary of the findings following its conclusion, which is hoped to provide them with valuable insight into CSR practises. A comparison of their behaviours to their overall outlook may also help them rethink their approach to CSR activities in order to improve their results.

The study’s objective is to shed more light on the relevance of commonly used theories such as stakeholder theory and institutional theory to MSEs’ CSR practises in Malaysia, and to assist them in aligning their relationships with various stakeholders such as employees, clients, suppliers, the immediate environment, and the government, with the goal of increasing overall efficiency.

Policymakers and practitioners can use the findings of this study to strengthen and reorient their plans in order to increase MSE CSR participation rates. On a macroeconomic level, this has the potential to improve both social conditions and the national economy.

The study’s findings are expected to add to the body of knowledge on business management by providing new insights into CSR in MSEs. Future researchers from a variety of disciplines will be able to use the study’s overall understanding of MSEs’ approach to CSR to examine issues pertinent to MSEs and their social attitudes.

1.6       Scope of the study

This study examines Malaysian medium-sized enterprises (MSE) that practise CSR. Small and micro businesses will be excluded from the report due to their low level of CSR participation.

The study’s target audience will be the owners and managers of the MSEs under investigation, and the questionnaires will collect responses from those who will be sampled. The study followed MSE success through CSR practises for five years (2015 to 2019). The two industrial sectors that will be examined are manufacturing and services. These two industries account for the majority of medium-sized businesses in the study region. The CSR dimensions of workplace CSR, marketplace CSR, environmental CSR, and community CSR will be compared to the results. Financial and non-financial variables will be used to quantify output

1.7 Conceptual Framework

 The conceptual framework adopted in this research has been based on Matten and Moon’s (2005) research.

Marketplace CSR –

Sales Turnover

Workplace CSR –

Employee Attraction and Retention

Environmental CSR –

Environmental Protection

Firm Performance

Community CSR-

Organisational Image

CSR is a term that has become increasingly popular in the business world. It is a legal requirement for a business to act ethically and contribute to economic growth while also improving the quality of life for its employees and their families, as well as the surrounding community (Zhang, Oo& Lim, 2019). According to Walker, Zhang and Ni(2019), corporate social responsibility (CSR) is described as a commitment to promote community well-being through voluntary business practises while also contributing to corporate capital. Issa(2017)’s description, on the other hand, appears to be more appropriate and applicable to this analysis. It examines CSR as a philosophy that businesses embrace in order to integrate social and environmental concerns into their operations and interactions with various corporate stakeholders.
CSR (Corporate Social Responsibility) is a philosophy that has garnered considerable attention and is extremely pertinent in today’s world (Choongo,2017). CSR has developed into a potent tool for reviving society and ensuring sustainable growth (Park, et al., 2017). Due to the fact that societal needs have outgrown governments’ capacity to meet them, particularly in terms of raising people’s living standards, the emphasis has shifted to business’s position in society, and businesses are now competing to differentiate themselves through CSR engagement (Ansong, 2017). According to CSR advocates, businesses should incorporate economic, social, and environmental concerns into their business plans, management tools, and activities, moving beyond enforcement and increasing investment in human, social, and environmental resources (Hasanudin et al., 2019)).
Chapter 2:   Literature ReviewFigure 1: Conceptual Framework of CSR and Firm Performance

While organisational success is not the sole criterion for evaluating the quality and effectiveness of a firm’s CSR, it is a significant variable in management studies. As with any other management principle, quality can be viewed from a variety of perspectives. Performance was defined in the 1950s as an organization’s capacity to accomplish its objectives (Hou, Lu & Hung, 2019). Jobs, individuals, and organisational structure all played a role in determining success in the past. Due to the complexity of today’s organisational priorities, performance objectives are constrained by the company’s limited resources. Financial and non-financial metrics both serve as objective indicators of a company’s CSR success in this context. CSR is a term that refers to a business’s ongoing obligation to act ethically in order to contribute to economic growth and improve the quality of life for its employees and their families, as well as the environment and society at large (El-Bassiouny& El-Bassiouny,2019). Additionally, it addresses issues such as ethical manufacturing, socially responsible employee relations, economic growth, and long-term sustainability. It is, in fact, a method of performing tasks correctly.

Employees, clients, societies, and other stakeholders hold organisations that practise CSR in high regard (Adegboyegun et al., 2020). While CSR incurs costs, it also has the potential to strengthen a company’s brand and credibility over time (Sial, et al., 2018). CSR, as a broad term, has been largely associated with large and multinational corporations.

Despite Malaysia’s high unemployment rate, workplace CSR can be one of the strategies used by MSEs to recruit and retain employees (Saha et al., 2020). Any organization’s activities and business practises have an effect on more than just its shareholders; they also have an effect on its clients, vendors, employees, and members of the community in which it operates, as well as the environment (Ikram et al., 2019). As a result, MSEs face competing pressures from a variety of stakeholders, including employee pressure to recognise those rights at work, market pressure to avoid price increases while maintaining a high standard of quality and health, and community and environmental pressure to ensure that the business process does not jeopardise the lives and welfare of local residents.

CSR’s application to the workplace is critical because it involves employees, who are viewed as an organization’s most valuable asset (González-Rodríguez et al., 2019). Attracting the best employees and providing them with decent working conditions has a significant impact on a business’s efficiency and success. A company’s ability to retain employees can be determined by its strategies for increasing employee motivation and engagement (Atan et al., 2014).

Customers regard socially conscious businesses as trustworthy and associate them with a high level of confidence, which can result in increased sales and loyalty. According to Sial et al. (2018), a company’s CSR helps to increase customer loyalty by increasing customer satisfaction and trust in the organisation. Consumers are more likely to purchase goods from a socially responsible business, job seekers are more likely to apply, and investors are more willing to risk their capital. Due to a lack of resources and an inability to incorporate CSR into their policies and strategies, many MSEs, in comparison to large corporations and multinational corporations, have not fully reaped the economic and non-economic benefits of corporate philanthropy.

Environmental CSR is a company’s obligation to address the environmental consequences of its activities, goods, and facilities, to minimise waste and pollution, to optimise the quality and competitiveness of its resources, and to mitigate practises that could jeopardise future enjoyment of the country’s resources. Bhattacharyya and Rahman(2019) define CSR as “performance in a variety of social and environmental areas,” which typically includes philanthropy, diversity, socially responsible investment, human rights, business ethics, climate change, workplace issues, sustainability, and corporate governance.Historically, environmental security was a public-sector function. Historically, the government was the sole entity responsible for environmental protection and placed a premium on developing and maintaining a sustainable environment. Private businesses are now active partners in environmental conservation and growth, resulting in a shift in their position. Environmental legislation and strict government regulations have prompted some businesses to engage in self-regulation and voluntary CSR initiatives related to the environment. On the other hand, many MSEs are contemplating how and why they should incorporate environmental concerns into their strategies.

Organizational reputation is a valuable asset (Assaf, et al., 2017) because it provides customers with a reason to choose the company over the competition (Yang, Bento&Akbar,2019). To enhance their corporate image, businesses are placing a greater emphasis on showcasing their group’s CSR efforts (Rehman, Khan& Rahman,2020). On the other hand, many MSEs do not view themselves as integral members of the communities in which they work, and as a result, they contribute less to community causes such as sponsoring local sporting events, making charitable contributions, conducting health awareness campaigns, and implementing educational programmes. This development may have an effect on the company’s profile, either directly or indirectly.

Chapter 3: Methodology

3.1  Research Methodology

This study uses quantitative survey method because it allowed for the collection of data in a consistent format and at a lower cost. Respondents whom are Chief Executive Officers of selected MSEs in Malaysia – will be asked to rate each item on a five-point Likert scale ranging from 1 (Strongly Agree) to 5 (Strongly Disagree) (Strongly Disagree). Additionally, the majority of the elements used to evaluate each variable come from previous research. Due to the fact that validity had been established in Wilkinson and Birmingham(2003), they were a credible source for data collection and measurement. Bacinello, Tontini and Alberton (2020) adapted CSR and its associated objects (Workplace – CSR, Marketplace – CSR, Environment – CSR, and Community – CSR) (2002). Alshbili and Elamer (2020) also contributed to the development of the firm output construct. Where necessary, specific questions are derived from a literature review to ensure that any variable captured in the instrument accurately represents all of the objects.

The Kaplan measurement tool was used to measure firm performance in this study. When evaluating managers’ and the enterprise’s success, the trend has been to incorporate quantitative and qualitative metrics, as well as short- and long-term objectives. A balanced scorecard is one method for assessing both financial and non-financial performance. The organisations held meetings to assess their ethical climate using ethical appraisal metrics. The businesses held strategy review meetings to discuss the metrics and strategies outlined in the unit is Balanced Scorecard as well as to assess the progress and challenges associated with strategy implementation. The Metrics were developed in accordance with the organization’s values and desired outcomes. The use of the balanced scorecard will assist employees and managers in creating a more ethical work environment.

The instruments were divided into two sections: section A contained demographic information about the respondents and the MSEs in which they worked, and section B contained information about the CSR factors that influenced the MSE results.

Table 1: Sources of previously validated items that are used in the measuring instrument

3.2       Operationalisation

The study has two major constructs: Corporate Social Responsibility and Performance.Also thevariables ofthestudyinclude:

Independent variables: In this analysis, the independent variables were CSR influences. According to previous research (Price & Sun,2017), some CSR factors that apply to MSEs in the Malaysian business environment include workplace-related CSR, market-related CSR, and environmental-related CSR.

Workplace CSR: This aspect of corporate social responsibility focuses on how an organisation treats its employees. There are sections on recruitment, workforce diversity, wages and working conditions, health and safety, and human rights.

Marketplace CSR: The term Marketplace CSR refers to a business’s interactions with vendors, consumers, and other economic actors along the supply chain. It covers issues such as responsible advertising and marketing, consumer protection, ethical business practises, and requiring manufacturers to adhere to social and environmental standards.

Environment-related CSR:Environment-related CSR refers to the steps anorganisation can take to mitigate its negative impact on the environment through the implementation of appropriate measures such as pollution mitigation, water conservation, and hazardous waste reduction.

Community-related CSR: This aspect of CSR is concerned with the relationships between an organisation, its citizens, and the communities that may be impacted by the organization’s operations. It is all about developing relationships and collaborating with local communities, as well as the organization’s involvement in their social well-being.

Dependent Variables within the construct of firm performance

There are numerous methods for determining an organization’s efficiency. Certain businesses evaluate their performance solely on financial metrics such as profitability, return on assets, and return on investment, and this methodology has been criticised for a number of shortcomings (Agyemang &Ansong, 2017)), including an inability to distinguish between firms that may provide misleading information about quality improvement and innovation.

As a result, evaluating an organization’s success requires considering a variety of other objectives in addition to financial ones. According to Singh andMisra(2021), non-financial objectives should be considered when evaluating organisational success, as many stakeholder groups other than a company’s shareholders are significant in today’s business climate. This report used employee attraction and retention, sales volume, environmental stewardship, and organisational image to determine a firm’s efficiency.