Management control system for corporate social responsibility implementation – a stakeholder perspective

• Published date: 09 December 2020
• DOI: https://doi.org/10.1108/CG-06-2020-0247
• Date: 09 December 2020
• Pages: 410-432
• Subject Matter: Strategy,Corporate governance
• Author: Mohamed Adib,Xianzhi Zhang,Mohammad A.A.Zaid,Ahmad Sahyouni

Management control system for corporate

social responsibility implementation –a

stakeholder perspective

Mohamed Adib, Xianzhi Zhang, Mohammad A.A.Zaid and Ahmad Sahyouni

Abstract

Purpose –The purpose of this paper is to build a framework that intends to help organizationsdefine,

implement and control their corporate social responsibility (CSR) strategies. Based on the stakeholder

perspective,this paper proposes a sustainability management controlsystem (SMCS) specifically made

for the definition and implementation of CSR strategy, by linking the firm’s material topics to its key

stakeholders,thus, allowing our model to be dynamicto different business environments.

Design/methodology/approach –In this paper, theauthors constructed their model based on a review

of selective relevant studies about CSR and SMCSs. This paper also went through different practical

concepts from leadingsustainability guidelines and stakeholder’s engagementmanuals, discussing the

stakeholder identification and prioritization, to re-center the debate to the strategic importance of the

stakeholder perspective in defining and implementing CSR strategy, as well as its importance in how

organizationscan define proxies to assess the performanceof their CSR initiatives.

Findings –Adopting the stakeholder theory as a key lens to re-frame, organize and guide the debate

over the performance consequencesof CSR has the potential to overcome the simplistic and (eventual)

misleading conceptionsof CSR strategy implementation, thus fosteringthe move toward more effective

and efficientCSR strategies, by developing managementcontrol system (MCS) typical forCSR issues.

Social implications –The full process of the model outlined in this paper aims to provide a comprehensive

and forward-looking tool for CSR and sustainability strategy implementation and assessment. Our model

could help companies to gain an overview and an understanding of the relative importance of the material

topics of their business activities that should be addressedand how they are related to the key stakeholders,

thus, eventually leading to more equitable and sustainable social development by giving those who have a

right to be heard the opportunity to be considered in the sustainability decision-making and strategy

processes, in the aim of making valuablecontributions to social, economic and environmental spheres.

Originality/value –The paper answers thecall for research for developing novel theoretical foundations

to design MCSsfor CSR implementation. Therefore,the paper suggests an innovativemodel of SMCS for

CSR strategy definition, development and implementation and helping organizations to define and

develop key sustainabilityindicators specific to their business environment. The model also presentsan

opportunity to rethink and advance the understanding of how managers can prioritize competing

stakeholders’claims, which are constrained by the company’sbusiness activities impacts.

Keywords Strategy implementation, Corporate social responsibility, Stakeholder theory,

Management control system, Sustainability management control system

Paper type Research paper

1. Introduction

The bursting of the speculative bubble (Financial crisis-2008), the financial scandals

(Enron-2001; WorldCom-2002; Dexia-2011), the climate change problems and the current

sanitary crisis (COVID-19), all catalyzed, in a way or another, a deeper interest in corporate

social responsibility (CSR). In this regard, social responsibility practices became an

inevitable and contemporaryissue in the business world (Sekhon and Kathuria, 2019).

Mohamed Adib is based at

the School of Accounting,

Dongbei University of

Finance and Economics,

Dalian, China.

Xianzhi Zhang is based at

the School of Accounting,

Dongbei University of

Finance and Economics,

Dalian, China.

Mohammad A.A. Zaid is

based at the School of

Accounting, China Internal

Control Research Center,

Dongbei University of

Finance and Economics,

Dalian, China.

Ahmad Sahyouni is based

at the Higher Institute for

Administrative

Development, Damascus

University, Damascus,

Syria.

Received 19 June 2020

Revised 24 October 2020

4 November 2020

Accepted 6 November 2020

The authors would like to thank

the anonymous reviewers for

their constructive comments

and suggestions. The authors

are also thankful to the

Editor-in-Chief: Prof. Gabriel

Eweje, and the Guest Editor:

Dr. Aymen Sajjad, for the

attention they gave to the

paper.

PAGE 378 jCORPORATE GOVERNANCE jVOL. 21 NO. 3 2021, pp. 378-396, ©Emerald Publishing Limited, ISSN 1472-0701 DOI 10.1108/CG-06-2020-0247

The literature about CSR illustrates the development and evolution of this notion, both in

terms of the conceptualization and the practical levels, which reflects the change of

concerns around this topic. This evolutionary concept was formed gradually, each period

has brought its own requirements while building on the achievements of previous

developments. The various approaches and advanced theoretical foundations also

demonstrate the complexity and multidimensionality of this concept. The history of CSR

thinking shows us that there is a lack of consensus, both in terms of the definition and the

functioning of this concept (Van Marrewijk, 2003;Dahlsrud, 2008). Common to the various

definitions, however, is the idea that organizations should show commitment and

engagement with their stakeholders(Lindgreen et al., 2009). In this respect, the evolution of

the concept of CSR marks the transition from a normative foundation to a ratherfunctionalist

and instrumentalist justification of the social practice (Gond and Igalens, 2008). Practically

in the field, we are witnessing the development of new social practices, including socially

responsible investment with its different forms, the development of new rules, especially

through the development of codes of conduct, standards, certifications and labels, all are

shaping the picture of CSR. Moreover, the intervention of international bodies such as the

United Nations, the appointment of the UK Government of the world’s first minister for CSR

in March 2000 (Harjoto and Wang, 2020), also lend some legitimacy to the concept and

confirm the growing importance of CSR not only in the business world but also in

international sociopolitical debates. In this context, the question of how firms’ CSR activities

and practices are shaped, what firms’ internal factors impact their CSR engagement level

and how far the adoption of a socially responsible attitude affects firms’ financial

performance, become essential and decisive for the future of companies and even for the

future of CSR concept itself.

Drawing from a results-based approach, Clarkson (1995) redefines CSR as the ability to

manage and satisfy mainly the firm’s different stakeholders’ demands. This definition refers

to the stakeholder theory that has enriched the debate around the development of the

concept of CSR (Freeman, 1984;Donaldson and Preston, 1995). Satisfying the

expectations of the various stakeholders helps companies to improve their image and

reputation and therefore allows them to ameliorate, with time-lag eventually, their CSR and

financial risk (Freeman, 1984;McGuire et al.,1988). According to Lee (2008), a tightening

of the links between the concept of CSR and the financial objectives has been observed in

the evolution of the theoretical perspectives. In the same vein, Carroll and Shabana (2010)

argued that this evolution highlightsa shift from ethic-orientation to performance-orientation,

where the effects of CSR on an organization’s objectives are analyzed more closely. In this

regard, several studies supported this view and argued that improving firms’ CSR allows

better resource allocation, increased productivity and new market opportunities (Freeman,

1984;Waddock and Graves, 1997;Tsoutsoura, 2004;Margolis et al., 2007). To improve the

thinking of sharing the value created by firms with society, Porter and Kramer (2006)

suggested that CSR should be integrated into companies’ strategies. However, the

implementation of CSR strategy and the evaluation of the performance of firms in this

direction were and still challenging tasks for managers. Therefore, some researchers

suggest that management controlsystems (MCSs) are needed to foster CSR in firms (Gond

et al.,2012

), allowing for the assessmentof CSR actions and the follow-up of their execution

and implementation.

MCSs represent the evolution of formal and informal controls, p rocesses and systems used by

organizations to convey their key objectives and control for the execution of t heir strategy

implementation through the planning, analysis, measurement and control, to assist in

improving financial and economic performance, therefore, fac ilitating organizational learning

and change (Ferreira and Otley, 2009). However, this traditional vie w of MCSs is seen as

being limited in their ability to incorporate the interests of a wider range of stakeholders, other

than shareholders, and address CSR issues and their interrelationsh ips with financial ones

(Bonacchi and Rinaldi, 2007;Schaltegger and Burritt, 2010;Laguir et al.,2019). In this

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