Management control systems and corporate social responsibility: perspectives from a Japanese small company

• Date: 05 February 2018
• DOI: https://doi.org/10.1108/CG-05-2017-0105
• Pages: 68-80
• Published date: 05 February 2018
• Author: Masahiro Hosoda
• Subject Matter: Strategy,Corporate governance

Management control systems and

corporate social responsibility:

perspectives from a Japanese

small company

Masahiro Hosoda

Abstract

Purpose –Corporate social responsibility (CSR) has become part of daily business for small- and

medium-sized enterprises (SMEs) in Japan. The purpose of this study is to explore how management

control systems (MCSs)can support the translation of activities into CSR actionsusing a case study of a

SME in Japan.

Design/methodology/approach –The case is basedon an interview with a CEO of a SME in Japan.The

paper contributesto the discussion on CSR and MCSs and investigates the integrationof CSR activities

in SMEs in Japanthrough MCSs.

Findings –The case company’s formal control systems incorporate environmental and social aspects

that are reflectedin its top-down, stakeholder-centeredapproach into CSR through a formal CSR policy.

An informal control system is evidentand reflected in the CEO’s emphasis on creating shared value by

implementing CSR. An interactive control system, a type of formal control system, is useful in the

interactions between CEOs and employees and in translating the opinions of stakeholders into CSR

actions. Formal control systems can be supported by informal control systems in the implementationof

CSR activities.

Originality/value –This research contributesto the management accounting literature by showing that

formal and informal control systems can support the motivation of employees and the integration of

stakeholders’ opinionson the implementation of SMEs CSR activities in Japan. The MCS approach also

contributesto SMEs in Japan that seek to address the demographicand economic challenges.

Keywords Corporate social responsibility, Management control systems, Japanese company,

Small- and medium-sized enterprises

Paper type Research paper

1. Introduction

Increasingly, corporations are expected to be socially and environmentally responsible

within their communities (Eweje, 2006). An increase in awareness and sensitivity toward

social and environmental issues is exacerbating the situation, and demands from various

stakeholders are pressuring corporations to do more for the society (Eweje and Sakaki,

2015;Dobele et al., 2014). Corporate social responsibility (CSR) is “a concept whereby

companies integrate social and environmental concerns in their business operations and

their interaction with stakeholders on a voluntary basis” (Commission of the European

Communities, 2001, p. 6). This studyviews CSR as an essential element of an organization’s

core business and not just as a strategy to gain legitimacy or manage reputation (Arjalie

`s

and Mundy, 2013). This approach advocates that CSR embeds socially and

environmentally responsibleactions throughout the organization to enhance long-termvalue

Masahiro Hosoda is

Associate Professor at the

School of Business

Administration, Sakushin

Gakuin University,

Utsunomiya, Japan.

Received 28 May 2017

Revised 15 July 2017

18 July 2017

Accepted 19 July 2017

PAGE 68 jCORPORATE GOVERNANCE jVOL. 18 NO. 1, 2018, pp. 68-80, © Emerald Publishing Limited, ISSN 1472-0701 DOI 10.1108/CG-05-2017-0105