Corporate social responsibility information and involvement strategies in controversial industries

2.1 Stakeholder engagement and CSR communication: A legitimacy perspective

Stakeholders have increasingly heightened ethical and social expectations towards business (Alniacik, Alniacik, & Genc, 2011; Moreno & Capriotti, 2009), thus asking corporations to justify and report not only their economic actions but also their environmental and social behavior. Corporate responsibility communication has acquired growing importance, as it is considered as a legitimating activity for the organization in the eyes of society (Deegan, 2002; Luo, Zheng, & Maksimov, 2015). It is generally acknowledged that CSR communication raises the stakeholder awareness of a company's CSR actions and enhances its CSR credibility (Du, Bhattacharya, & Sen, 2010; Maignan & Ferrell, 2004) and generates positive stakeholder engagement, that is, “the process of seeking stakeholder views on their relationship with an organisation in a way that may realistically be expected to elicit them” (ISEA, 1999). In fact, according to the normative assumption of the stakeholder theory, each stakeholder group with legitimate interests has a right to participate in determining the future direction of the company in which it has a stake (Donaldson & Preston, 1995; Evan & Freeman, 1988).

The stakeholder engagement process can range from one-way information flows to the “passive” public, or when involvement is considered only in response to external conditions, to approaches where companies realize the benefits of a broader and constant dialogue (Friedman & Miles, 2006). The latter approach aims to improve mutual understanding, to find a more effective solution to conflicts arising from diverging interests and reduce the risks which may be generated by the criticism received from key stakeholders (Gable & Shireman, 2005; Rinaldi, Unerman, & Tilt, 2014).

In this study, the focus is thus on two stakeholder engagement strategies: self-centered information and involvement. In accordance with Colleoni (2013), we assume that companies always have the opportunity to benefit from feedback and to converge stakeholder requests, also through an information strategy. Thus, both information and response strategies can be considered as a single strategy which, as feedback is only used to find out what the public accepts and tolerates, is predominantly a one-sided approach. In contrast, the involvement strategy involves a dialogue and the active participation of stakeholders in CSR initiatives.

2.2 Controversial industries

In the current context of ecological and social problems such as global warming or human rights abuses, the problem of the legitimation of businesses in the eyes of the stakeholders concerns all organizations; however, it is particularly important for all those industries considered as controversial. Controversial industries are typically identified as such in terms of their social and public health costs, for example, tobacco, gambling, alcohol, abortion providers, and health- or sex-related products (Jo & Na, 2012; Lindorff et al., 2012; Palazzo & Richter, 2005). These sectors are controversial because their products are viewed as sinful by society based on social norms. They are described as being “morally corrupt,” “unethical,” and “offensive” (Byrne, 2010; de Colle & York, 2008) as they operate in a legitimate arena of moral disagreement (Yoon et al., 2006).

More recently, controversial industries have also comprised companies involved with emerging environmental, social, or/and ethical issues (Byrd et al., 2017; Cai et al., 2012; Kilian & Hennigs, 2014). Thus, energy and mining industries are the main sectors that are required to respond to the public regarding environmental pollution, emissions of greenhouse gases, and toxic waste (Du & Vieira, 2012; Perez & Sanchez, 2009; Rodrigo, Duran, & Arenas, 2016). In the same way, chemical and pharmaceutical industries have been questioned regarding health and social issues and especially in relation to the significant ecological footprint of their activities (Günther & Hüske, 2015). Some authors also include organizations in transport (e.g., automobile and airlines) and resource industries (Kilian & Hennigs, 2014). On the same lines, agriculture and food industries have also been under the spotlight due the quality and safety of products and the potential conflicts regarding CSR involvement in the food supply chain (Hartmann, 2011; Maloni & Brown, 2006). Lastly, following the financial crisis, banks and financial services have gained a higher visibility and a more extensive media coverage (Castelo Branco & Rodrigues, 2006; Hinson, Boateng, & Madichie, 2010).

Table 1 summarizes this “wider” conceptualization of controversial industries, distinguishing them on the basis of their primary impact on CSR issues. However, it should be noted that the CSR concerns are closely related, for example, the environmental activities of controversial companies (mining, etc.) frequently impact on social and ethical dimensions.

Conversely, sectors such as consumer goods, manufacturing, telecommunication, media, and entertainment are generally considered as non-controversial industries because they are based on products with a low impact on the environment and society (Kilian & Hennigs, 2014).

2.3 Hypotheses development

Legitimacy studies suggest that companies in controversial industries are more exposed to public scrutiny, as they are socially more visible (Lindgreen, Maon, Reast, & Yani-De-Soriano, 2012) and more liable to risk in terms of stakeholder conflict and gaining a bad reputation (Aerts & Cormier, 2009). Therefore, they are expected to disclose environmental and social information in more detail and more scrupulously (Hasseldine, Salama, & Toms, 2005; Kilian & Hennigs, 2014). The ability of an organization to obtain the support from stakeholders depends in fact on its capacity to communicate and interact with society and to implement effective stakeholder engagement. This concept comprises both the disclosure of environmental and social information and the interactive dialogue with stakeholders (Lane & Devin, 2017).

Thus, given the strong impact of controversial industries' activities on ethical and environmental issues and the higher expectations by stakeholders, we expect that

Considering the fact that a company can implement various strategies in CSR communication, achieving different levels of engagement, it is important for controversial companies to understand how information and involvement strategies are used to facilitate the match between stakeholders' social perceptions of corporate responsibilities and the corporate CSR agenda.

Many studies have in fact highlighted several steps in the stakeholder engagement process, ranging from the one-way dissemination of information to the highest level of participation (Friedman & Miles, 2006). Thus, the aim of our subsequent hypotheses is to verify whether controversial and non-controversial industries differ in the adoption of CSR strategies. These are included in the stakeholder engagement “continuum” but indicate different approaches related to the stakeholder role (passive or active) in CSR communication on corporate websites.

The one-way communication strategy aims to gain stakeholder interest in CSR, which is a key stage on the way to obtaining participation by stakeholders (Lane & Devin, 2017). Legitimacy theory studies have found that industry affiliation is related to social responsibility communication (Vollero, Palazzo, Siano, & Sardanelli, 2018), with industries with a potentially more negative environmental impact or having a less favorable public image disclosing more social responsibility information than its counterparts (Patten & Crampton, 2004). In this perspective, we assume that

However, other studies suggest that the more an organization exposes its ethical, social, and environmental intentions, the more easily it will attract the critical attention of the stakeholders (Ashforth & Gibbs, 1990), who will believe that the organization is trying to hide something (Brown & Dacin, 1997). Thus, while informing is necessary in the stakeholder management process, it is not sufficient to counteract a controversial reputation (Morsing & Schultz, 2006). Engaging affected stakeholders cannot be the mere outcome of applying certain accountability standards but rather requires a stakeholder dialogue prior to making a CSR decision (Rasche & Esser, 2006).

Thus, considering stakeholder theory as a guide for managerial behavior (Donaldson & Preston, 1995), it is essential for organizations to effectively enhance the “intensity level” of stakeholder engagement (Krick, Forstater, Monaghan, & Sillanpää, 2006). This means going beyond the information efforts, towards the increasing involvement of stakeholders in CSR decisions and initiatives; adopting an open approach grounded in peer discussion, dialogue, and involvement activities (Devin & Lane, 2014; Lim & Greenwood, 2017). Cai et al. (2012) found that stakeholder involvement in CSR company activities, mainly through interactive and participation tools, is positively associated with company value in controversial industries. It is thus plausible to assume that

A comparison between controversial and non-controversial industries in terms of these possible differences in CSR communication strategies to stakeholder engagement could help to clarify the different patterns organizations in “sensitive” industries follow to develop their legitimacy.

3.1 Findings

One-way analysis of variance (ANOVA) was used to detect statistical differences across groups and to test the research hypotheses. An ANOVA-based design is often adopted in studies related to CSR communication (Eberle, Berens, & Li, 2013; Knox, Maklan, & French, 2005).

Thus, to explore whether controversial industries are likely to pay more attention to stakeholder engagement than non-controversial industries, we first compared the mean values and standard deviations of the two groups. Table 3 shows that there are differences in the mean values between the two industry groups regarding stakeholder engagement in CSR issues. The mean value obtained by controversial industries (0.707) is higher than non-controversial ones (0.670).

Table 4 presents the ANOVA results across the controversial and non-controversial groups. It shows that the differences between the two industries are statistically significant (p < 0.001), pointing out that the overall stakeholder engagement is higher in those companies belonging to controversial sectors. Thus, the first hypothesis of our study is supported: controversial industries are likely to pay more attention to stakeholder engagement than non-controversial industries.

In the next step, the study investigated the two additional indexes of stakeholder engagement (CSR information strategy and CSR involvement strategy) through a mean comparison and ANOVA testing. On both information and involvement strategies, controversial industries have on average a higher value (respectively 0.722 and 0.697) than non-controversial industries (respectively 0.644 and 0.688; see Table 3). However, one-way ANOVA (see Table 4) shows that the differences between the two groups are statistically significant only for CSR information strategy (p < 0.001).

Thus, there is significant empirical evidence for the second hypothesis (an information strategy is more likely to be adopted by companies in controversial industry). On the other hand, there is no sufficient evidence to support the third hypothesis, that is, controversial industries are more prone to adopting an involvement strategy.

In order to have a more detailed picture of the differences in CSR communication between the two types of industry, we also examined the relevance of the specific main themes that define the two strategies. The main themes are related to both self-centered communication and dialogic tools.

Table 5 compares the mean values of themes in non-controversial and controversial industries. The results highlight that the differences are statistically significant for “INF_1 Corporate Profile” (p < 0.001) and “INF_4 Details and information of CSR projects” (p < 0.001) in information strategy and for “INV_3 Presentational Features” (p < 0.005) in involvement strategy, to which controversial industries are more committed (Table 6). For the other themes, the differences between the two groups are not significant.

4.1 Theoretical implications

This study provides several theoretical implications, contributing to the CSR literature in different ways.

First, it offers a wider range of business activities in relation to controversial industries compared to the current literature (Byrd et al., 2017; Cai et al., 2012; Kilian & Hennigs, 2014). The study attempts to distinguish the business activities of controversial industries on the basis of their primary impact on CSR issues. In fact, the paper provides a new conceptualization of controversial companies by linking their activities with social and environmental spheres.

Second, the paper supports findings based on the legitimacy theory (Deegan, 2002; Luo et al., 2015), focusing on the role of stakeholder engagement in CSR that so far has been poorly investigated, above all in relation to controversial sectors. In fact, although the literature has shown that CSR communication is a means of achieving social consensus (Cai et al., 2012; Windolph et al., 2014), there are limited empirical contributions to the link between stakeholder engagement and company legitimacy. Moreover, there is a dearth of research on examining how the need for engage stakeholder is experienced by controversial, compared to non-controversial industries. The paper thus provides the first empirical evidence on the significant relation between belonging to controversial industries and CSR disclosure efforts on corporate websites.

The study contributes to enriching the literature on theoretical models aimed at analyzing CSR communication in digital environments. Previous studies have mostly focused on CSR content topics. For example, Fukukawa and Moon (2004) analyze elements related to environmental responsibility, employment relation, and customer services on websites, etc. Parker, Zutshi, and Fraunholz (2010) consider communications on websites relating to CSR policies, internal processes, and CSR awards, whereas Gomez and Chalmeta (2011) assess the presentation, CSR content, and the interactive functions on websites. Illia, Romenti, Rodríguez Cánovas, Murtarelli, and Carroll (2017) identified the types of online spaces different types of stakeholders expect corporations to employ to communicate CSR-related matters and some of the different types of cocreational processes companies use for such dialogue. Our coding thus contributes to the studies on stakeholder engagement in CSR (Lane & Devin, 2017; Manetti, 2011), identifying the items that an organization should implement in the digital context to develop an information or/and involvement communication strategy.

4.2 Managerial implications

Our results lead to interesting insights from a managerial point of view. The information strategy of controversial industries accounts not only for CSR and governance orientation but also for the goals and results achieved through reporting and disseminating details and information on CSR projects. Albeit one way, this communication practice is considered as a meta-level of engagement (Devin & Lane, 2014) which demonstrates the corporate social responsiveness of an organization (Frederick, 1994). The information strategy is thus a recurrent means for controversial industries to secure stakeholders' interest in engaging with the company and leveraging on their fears, self-interest, and moral/ethical concerns (Lane & Devin, 2017).

However, to pursue the true engagement of stakeholders, a transition is needed towards the involvement strategy as a choice of differentiation. Dialogue and effective stakeholder participation pose a greater risk to businesses, but they are a bold and innovative choice for controversial industries, which could be the basis for building greater legitimacy. This new approach would be to change the way that controversial industries engage with the public, so that the dialogue with stakeholders would improve the distinctiveness of the companies that are ready for a positive comparison. Such two-way communication can guide controversial companies to achieving CSR benefits in terms of business (e.g., increasing competitive advantage and customer satisfaction), community (e.g., improving the social and economic health of local community), and employees (e.g., attracting and retaining talented people; Lim & Greenwood, 2017). An effective corporate commitment in involving stakeholders could have relevant implications also in terms of CSR reporting, as stakeholder participation is important for defining sustainable strategic goals, getting advice on actual strategies, which can be modified accordingly (Manetti, 2011), and having a dialogue on topics that stakeholders find important (Moratis & Brandt, 2017).

Our thematic coding suggests the main elements which companies should focus on in their two-way involvement strategy. Clearly, such effort would be meaningless if the company did not meet the prerequisites for “substantive” stakeholder engagement, such as good faith, negotiation, and transparency (Dawkins, 2013). The rising social scrutiny regarding CSR actions, especially in online environments, may shed light on the inconsistency between “talk” and “action,” resulting in companies being accused of greenwashing (Delmas & Burbano, 2011; Lyon & Montgomery, 2015) and tarnishing their efforts in reporting CSR initiatives.

4.3 Limitations and future research

This research presents some limitations that could be addressed in further studies. First, because DJSWI organizations are leading companies in sustainability in corresponding industries, they may not be a realistic sample of the two groups of companies (controversial and non-controversial). The use of a different list of companies and a longitudinal analysis of their CSR communication strategies would be necessary in future research to substantiate the findings to the standard controversial/non-controversial dichotomy.

Moreover, the grouping into themes may be influenced by the subjective assessments of the researchers (Beattie, McInnes, & Fearnley, 2004), and our type of content analysis did not enable us to measure the extent of information disclosure and the emphasis that companies attach to each information item. Therefore, this limitation can inform future studies in investigating the qualitative level of disclosure in the information strategy. Our coding could be enhanced if it were able to determine the differentiated levels of engagement of an organization. It would therefore be possible not only to distinguish controversial from non-controversial organizations but also to differentiate between those controversial companies that have made or are making a cultural transformation to recover their reputation and those who have not yet perceived the importance of dealing with the public on CSR issues.