Exploring the Interface of CSR and the Sustainable Development Goals

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Transnational corporations (TNCs) today are facing rising expectations that they will engage with societal stakeholders and get involved with sustainable development, even in light of an increasingly uncertain international business environment. This
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  Exploring the Interface of CSR and the Sustainable Development Goals 33 Exploring the Interface of CSR and the Sustainable Development Goals Norma Schönherr, Florian Findler and André Martinuzzi*  Transnational corporations (TNCs) today are facing rising expectations that they will engage with societal stakeholders and get involved with sustainable development, even in light of an increasingly uncertain international business environment. This article explores how the Sustainable Development Goals (SDGs) as a global agenda may serve as a reference framework that can support TNCs in improving their corporate social responsibility (CSR) engagement in a way that contributes to sustainable development. The authors specifically consider the role of systematically measuring and managing corporate impacts on sustainable development as a prerequisite for demonstrating a net contribution to the SDGs. In order to capture these impacts, existing corporate measurement and evaluation systems need to be adapted and new management instruments have to be developed. We conclude by proposing a research agenda for this purpose.Key words: transnational corporations, sustainable development, corporate social responsibility, Sustainable Development Goals, impact measurement 1. Introduction It has long been assumed in the discourse on corporate social responsibility (CSR) that in order to be considered responsible, a transnational corporation (TNC) must “do well and do good” (Falck and Heblich, 2007). Indeed, this idea is at the core of the most widely accepted CSR concepts, such as the triple bottom line or integrated reporting. What these concepts have in common is their focus on integrating traditional business concerns, such as the generation of shareholder profits, with sustainable development concerns, such as a TNC’s impacts on societal and environmental issues. It also resonates with the academic discourse on CSR, which has expended significant effort on establishing a business case for CSR by linking financial performance with CSR engagement. * The authors are at the Institute for Managing Sustainability, Vienna University of Economics and Business,  Austria. The corresponding author is Norma Schönherr. Contact: norma.schoenherr@wu.ac.at. Funding for research underlying this essay was provided by the European Commission under the 7th Framework Programme in the context of the GLOBAL VALUE project (contract number: 613295).  TRANSNATIONAL CORPORATIONS – Volume 24, Number 3 34 We understand CSR as an approach that simultaneously strives to satisfy environmental, economic and social standards (Montiel, 2008). This encompasses several key ideas: First, CSR is the obligation of a business to act in accordance with the overarching goals of society, thus directly linking the concept to sustainable development (Martinuzzi and Krumay, 2013). Second, CSR reaches beyond the borders of the corporation to include systemic linkages and interdependencies with stakeholders along the value chain (Seuring and Gold, 2013) and with the biophysical environment in which businesses are embedded (Searcy, 2014; Starik and Kanashiro, 2013). Third, CSR may be implemented in different ways or phases, gradually building up to improving the social, environmental and economic performance of a business (Keijzers, 2005). These phases include compliance and due diligence (to optimize operations and avoid negative impacts); optimization and control (involving the application of quality and sustainability management systems), and, finally, integration of environmental and social issues into the business model and value creation (Keijzers, 2005; Porter and Kramer, 2011; Martinuzzi and Krumay, 2013). Many TNCs have taken strides toward implementing CSR in their internal business operations through sustainability management systems (Martinuzzi and Krumay, 2013). Adherence to international accountability standards and sustainability reporting has become a common practice, enhancing disclosure and transparency related to these activities (Perego and Kolk, 2012). For instance, 323 of the Fortune 500 companies have set sustainability-related management targets on which they report regularly (Pivot Goals, 2017). However, the assumption that CSR engagement equals a corporate contribution to sustainable development is currently being challenged. For instance, Milne and Gray (2013), argue that current corporate CSR practice hardly ever addresses systemwide sustainability challenges, such as ecosystem degradation, poverty and social justice. Instead, “businesses and their associations have limited their ideas to issues about themselves” (p. 24). Because trust in the private sector’s ability to self-regulate and drive positive social change is waning, TNCs need to find new ways to demonstrate how they are engaging in CSR in a way that contributes to sustainable development (Giannarakis and Theotokas, 2011); just doing good is no longer enough. Many TNCs still struggle to demonstrate what they achieve through their CSR activities across the value chain and the value they create for both the broader society and the environment, i.e. their impacts on sustainable development (Searcy, 2014). In the same vein, management research has so far not produced coherent theoretical frameworks to engage with CSR in a way that captures systemic linkages and interdependencies along the value chain (Searcy, 2014; Starik and Kanashiro, 2013), leading some scholars to question whether CSR contributes to sustainable development at all (Banerjee, 2003; Milne and Gray, 2013).  The purpose of this paper is to explore whether and how the Sustainable Development Goals (SDGs) can be a reference framework that may help TNCs better link core  Exploring the Interface of CSR and the Sustainable Development Goals 35 business operations and CSR engagement with sustainable development. We therefore review some of the scholarship that has provided new impetus into the discussion on CSR and juxtapose it with the evolving discourse on the contribution of businesses to the SDGs. We specifically highlight the importance of measuring the corporate contribution to sustainable development as a prerequisite for strategically engaging with the SDGs and outline avenues for future research that may inform both scholarly discourse and managerial practice. 2. Exploring expectations towards TNCs in the post-crisis business landscape Doing well, in the sense of maintaining economic and financial performance, has become harder for many TNCs. Since the global economic, financial and social crises of 2008–2009, a new business landscape has emerged that is much more prone to uncertainty than ever before (Szalavetz, 2016). It has become increasingly clear that the ongoing restructuring of the economic order has particularly affected  TNCs (The Economist, 2017). TNCs operate in the context of global value chains that encompass hundreds of locations for various corporate activities. In addition, many  TNCs had moved or were moving towards globally integrated structures before the crises (The Economist, 2017). But the notion that the constituent parts of the value chain can be unbundled and distributed almost anywhere at will has been challenged by economic volatility, and changing political sentiments regarding borders and trade. The post-crisis economy seems to have entered a new equilibrium, which is characterized by higher risk, low growth and diminished capital flows (El-Erian, 2016). For instance, capital flows between countries and trade in goods and services have retreated significantly (Sharma, 2016). Foreign direct investment has fallen from its pre-crisis high of over $3 trillion to about $2 trillion in 2015 (World Bank, 2017). Concurrently, trust in the private sector’s ability to self-regulate and drive positive social change has been waning. Negative consequences of trade and globalization, including rising inequality and stagnant wage levels, have increased opposition to  TNCs, in particular, and globalization, more generally (Gardels and Berggruen, 2017). In response, governments, market regulators and stock exchanges have increasingly adopted regulations or listing requirements mandating CSR disclosures (Hörisch et al., 2014; Schneider, 2015), including the European Union’s Non-Financial Disclosure Directive (EC, 2017). According to the Global Reporting Initiative’s (GRI) Sustainability Disclosure Database, the total number of instruments requiring or encouraging CSR disclosures reached 400 across 71 countries in 2016, up from 180 instruments across 44 countries in 2014 (Bartels and Fogelberg, 2016). This indicates an emerging consensus that TNCs can and ought to contribute to sustainable development by enhancing positive impacts (e.g. on livelihoods, health and education) and reducing  TRANSNATIONAL CORPORATIONS – Volume 24, Number 3 36 negative ones (e.g. resource consumption, pollution, human rights violations) (Milne and Gray, 2013; Scherer et al., 2014; Vigneau et al., 2015). This also means that doing good, in the sense of giving back to society some of the proceeds of commercial activity and engaging in voluntary, philanthropic activities, is increasingly considered insufficient by stakeholders, including governments, consumers and civil society (see Martinuzzi and Krumay, 2013). Consequently, expectations are rising for TNCs to address societal needs in everyday business and to effect positive impacts for local communities (Edelman, 2017). For example, the Edelman Trust Barometer, a global online survey investigating trust in institutions across 28 countries, found that more than half of the over 33,000 respondents did not consider business a trustworthy institution and that only 37% considered global business leaders to be trustworthy individuals. Concurrently, 75% of respondents agreed that a company can and ought to take specific actions that both increase profits and improve the economic and social conditions in the community where it operates (Edelman, 2017).  The way in which trust from citizens, investors and policymakers can positively affect the performance of TNCs that credibly engage with CSR has become manifest in the context of the financial and economic crises in 2008–2009. Empirical research finds that TNCs with high CSR intensity had higher stock returns and performed better in terms of profitability, growth, and sales than their peers during the crisis (Lins et al., 2016). Firms that were viewed to perform well on CSR also enjoyed greater trust from bondholders during the financial crisis, which was mirrored in better initial credit ratings (Amiraslani et al. 2017). Evidence also suggests that TNCs that have managed to established relationships of trust within the communities in which they operate are more likely to successfully engage in public policy deliberations (Liedong et al., 2014). These developments have inspired changing notions of CSR, which we explore in the following section. 3. Edging closer to sustainable development – the evolution of CSR Until the turn of the millennium, CSR was mainly understood to be a voluntary type of social engagement of corporations, built on principles of charity and stewardship (Van Marrewijk, 2003). One of the most widely accepted conceptualizations remains Carroll’s Pyramid of Corporate Social Responsibility (Carroll, 1991), which views philanthropy as the pinnacle of a pyramid of economic, legal and ethical responsibilities. We perceive four significant expansions on this srcinal idea of CSR that have gained prominence over the last decade and jive with the context of a changed post-crisis business landscape presented above.  Exploring the Interface of CSR and the Sustainable Development Goals 37 First, Porter and Kramer (2011) have posited that focusing on the generation of shared value for shareholders as well as broader societal groups may result in both long-term success and the creation of a tangible contribution to sustainable development. In stressing the integration of core business concerns with the creation of wider societal value, the concept thus emphasizes the mutual interdependence between business and society. More specifically, Porter and Kramer (2011) argue that corporations may enhance both societal impact and competitiveness by (a) reconceiving products and markets to meet unmet societal needs; (b) focusing on the productivity of the whole value chain to eliminate inefficiencies and mitigate risks; and (c) focusing on developing mutually beneficial relationships, for instance by developing the skills of suppliers. Although the concept still focuses on what companies do, rather than on what they achieve in terms of sustainable development, the shared value approach has drawn renewed attention to a fundamental debate on the purpose of corporations in society that goes beyond philanthropic or ethical considerations and considers impacts on others outside the boundaries of the corporation. This discourse has also been significantly shaped by Freeman’s stakeholder theory (Arjaliès et al., 2013). Both Porter and Kramer (2011) and Freeman (in Hörisch et al., 2014) stress that an orientation towards stakeholders and shared-value creation is to be seen as an expansion of the purpose of corporations rather than an alternative to creating shareholder value. The responsibility of corporations in this view is thus to carefully negotiate relationships with broader stakeholder groups, including shareholders. Second, this view is complemented by the planetary boundaries framework of Whiteman et al. (2013). Whiteman and colleagues argue that CSR need not only consider impacts on societal groups but in addition “link business processes to macro ecological processes and boundary conditions” (p. 2). The authors identify looking beyond the boundaries of the corporation towards its role in the larger ecological system as one of the main challenges for future management research on CSR (also see Montiel and Delgado-Ceballos, 2014). Increasingly, this view is adopted in management research and has spawned attempts to better anchor linkages between business and the environment in management theory. However, these attempts are still in their infancy. Starik and Kanashiro (2013), for instance, note that “most organization/management theories that have been used in sustainability research do not either explicitly or implicitly recognize the obvious (or near-obvious) fact that all human organizations are embedded within the natural environment.” (2013, p. 9). However, this seems to be a necessary precondition for truly capturing the contribution of TNCs to sustainable development.  Third, a recent review of the international business literature (Kolk, 2016) notes that research in this field “has tended to mostly focus on economic issues, often spillovers, in relation to foreign direct investment” (p.30) at the expense of other issues relevant to sustainable development. A broadening of sustainable development issues
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