Corporate Social Responsibility in the Swedish Financial Services Sector: Translating an Idea into Practice

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Corporate Social Responsibility in the Swedish Financial Services Sector

Translating an Idea into Practice

PAU LI N E G Ö TH B ERG

Doctoral Thesis in Business Studies

Stockholm, Sweden 2011

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Corporate Social Responsibility in the Swedish Financial Services Sector

Translating an Idea into Practice

Doctoral Thesis in the Built Environment and Society:

Management, Economics and Law

Pauline Göthberg Stockholm 2011

Corporate Social Responsibility in the Swedish Financial Services Sector

Translating an Idea into Practice

Corporate Social Responsibility in the Swedish Financial Services Sector

Translating an Idea into Practice

Corporate Social Responsibility in the Swedish Financial Services Sector

Translating an Idea into Practice

Doctoral Thesis in the Built Environment and Society: Management, Economics and Law

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Doctoral thesis for the degree of Doctor of Philosophy submitted with due permission of the Royal Institute of Technology (KTH) for public examination on June 10, 2011.

TRITA/KTH/ CEFIN-DT-04 ISSN: 1654-9376

ISBN: 978-91-978518-2-4 Royal Institute of Technology Centre for Banking and Finance

School of Architecture and the Built Environment

Printed by E-print AB, Stockholm Sweden

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Royal Institute of Technology Centre for Banking and Finance

School of Architecture and the Built Environment ABSTRACT

Pauline Göthberg: Corporate Social Responsibility in the Swedish Financial Services Sector – Translating an Idea into Practice

This thesis focuses on how popular ideas in society influence corporate behavior, as corporations adapt to normative ideas in society in order to achieve legitimacy.

However, we need more knowledge about how ideas influence organizations and what happens when ideas enter in an organizational context. Hence, this thesis deals with the following research question: „How do actors transform ideas on being socially and environmentally responsible into practice?‟ This question is studied empirically within corporations in the Swedish financial services sector. The thesis contributes to organizational institutional theory and to knowledge on the translation of ideas in organizational contexts.

Based on analyses of the empirical observations six translation processes are identified. Incorporation is used to incorporate already legitimate external CSR elements into the organization. Localizing is used to give an idea local character by inscribing the idea into the history of the organization. De-coupling is used to translate ideas simultaneously and over time by adjusting the presentation of the organization‟s business according to the relevant audience. Co-optation is used to incorporate external actors with know-how and legitimacy into internal processes. Organizing is used to gain internal acceptance for the idea. Blending is used to translate the idea into a modest adaptation to make it fit existing practice in the firm‟s core business.

Several of these translation processes are at work at the same time. As demonstrated in the study, new ways of presenting the organization as well as new activities appear as outcomes of translation. Translation processes that both influence presentation and practice are necessary for gaining legitimacy for the idea.

The adoption of CSR in the studied financial services corporations could only partly be strategically planned. Results from the study also point to unintended and unexpected consequences of integrating social and environmental responsibility.

Keyword: Corporate social responsibility, translation, organizational change, legitimacy, de-coupling, incorporation, localizing, co-optation, organizing, blending.

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ACKNOWLEDGMENTS

It was with some trepidation two and a half years ago that I accepted the offer from the Center for Banking and Finance to co-write a textbook for high school students, in addition to finishing my doctoral thesis. Today, I am greatly indebted to Inga-Lill Söderberg and Kent Eriksson for giving me this opportunity. I would also like to extend my thanks and gratitude to the following persons:

My supervisors, Professor Kent Eriksson and Professor Lars Hallén, for their constructive criticism and their generous and continuous support, all of which has continually encouraged me to improve the texts.

Karolina Windell and Maria Grafström for their combination of friendship, valuable comments, constructive criticism and never ceasing encouragement and enthusiasm. I look forward to collaborating together with both of you on future projects.

My colleagues and friends at the Center for Banking and Finance who made my aim considerably less difficult by giving generously of their time and knowledge. Eva Pettersson‟s administrative help has been invaluable.

My colleagues and friends at Södertörn University College: Bengt Jacobsson, Klara Tomson, Matilda Dahl, Jenny Svensson and Anders Nordström, who offered critical insights and suggestions for the improvement of the thesis and helped me clarify my ideas.

Susanna Alexius for her valuable comments at the final seminar.

Maury Saslaff, who improved and clarified my English.

Hans G. Svensson and Peter Nygårds, who helped me set up important interviews and read earlier drafts of the final paper.

The last acknowledgement I have saved for my caring family, and this book is dedicated to Johan, Charlotte and Jacob. I love you!

ACKNOWLEDGMENTS

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CONTENTS

SUMMARY OF THESIS

PAPER 1

Göthberg, P. (2007). Varför projekt överlever – en studie av Skandias Idéer för livet (Why projects survive – a study of Skandia‟s Ideas for Life). Thesis for the degree of licentiate, Uppsala University, Department of Business Studies.

PAPER 2

Göthberg, P. (2007). Lost in Translation: The Case of Skandia‟s “Ideas for Life,”

published in Managing Corporate Social Responsibility in Action: Talking, Doing and Measuring, F. den Hond, F., F. G. A. de Bakker, & P. Neergaard (Eds.), Ashgate Publishing Group (UK), London.

PAPER 3

Göthberg, P. (2011). The Swedish financial services sector‟s response to CSR (submitted for publication).

CONTENTS

PAPER 1

PAPER 2

PAPER 3

CONTENTS

PAPER 1

PAPER 2

PAPER 3

CONTENTS

PAPER 1

PAPER 2

PAPER 3

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1

Summary of Thesis

Pauline Göthberg

1

Summary of Thesis

Pauline Göthberg

1

Summary of Thesis

Pauline Göthberg

1

Summary of Thesis

Pauline Göthberg

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2

TABLE OF CONTENTS SUMMARY OF THE THESIS

INTRODUCTION ... 3

Outline ... 5

THE EMPIRICAL SETTING ... 6

CSR as a Corrective to Corporate Misconduct ... 6

CSR in a National Context ... 9

CSR Emerging in the Swedish Financial Services Sector ... 10

THE THEORETICAL PLATFORM ... 13

Legitimacy – a Motive to Change ... 13

Translating Ideas into Practice ... 15

What Do We Know and Where Do we Go from Here ... 17

METHODOLOCIAL CONSIDERATIONS ... 20

Qualitative and Multi Method Studies ... 21

Longitudinal Case-Studies ... 21

A Multi Method Study ... 22

Data ... 24

PRESENTATION OF PAPERS ... 26

FINAL REFLECTIONS AND FURTHER RESEARCH ... 34

Words and Deeds ... 39

Managerial implications ... 40

Suggestions for future research ... 41

REFERENCES ... 43

2

TABLE OF CONTENTS SUMMARY OF THE THESIS

INTRODUCTION ... 3

Outline ... 5

Data ... 24

REFERENCES ... 43

2

TABLE OF CONTENTS SUMMARY OF THE THESIS

INTRODUCTION ... 3

Outline ... 5

Data ... 24

REFERENCES ... 43

2

TABLE OF CONTENTS SUMMARY OF THE THESIS

INTRODUCTION ... 3

Outline ... 5

Data ... 24

REFERENCES ... 43

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3

Introduction

Transnational corporations increasingly take on new environmental and social responsibilities. In fact, much of the world‟s environmental and social problems are attributed to the negative effect of corporations on society. As a result, a multitude of corporate initiatives have emerged in response to increased criticism and demands for corporate social responsibility.

Nevertheless, we only know a little about how these demands are adopted within corporations and who are involved in these processes of change.

In this thesis, the empirical focus is on how corporations within the financial services sector in Sweden adopt the idea to take increased environmental and social responsibility. This idea is commonly framed as Corporate Social Responsibility (CSR) and is a label for a multitude of voluntary rules directed at corporations such as human rights, labor rights, environmental responsibility, anti-corruption, social inclusion, equality and diversity. The often rather vague idea leaves a lot of room for corporations‟ own interpretations. Since the millennium, CSR has spread rapidly across corporations. Although the label of CSR directs attention towards the responsibilities of corporations, CSR is a global trend that incorporates organizations such as states, intergovernmental organizations, consumers, non- governmental organizations and business schools, all of which participate in its development. The cases in which corporations take on the idea of being socially and environmentally responsible constitute an interesting setting for

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Introduction

In this thesis, the empirical focus is on how corporations within the financial services sector in Sweden adopt the idea to take increased environmental and social responsibility. This idea is commonly framed as Corporate Social Responsibility (CSR) and is a label for a multitude of voluntary rules directed at corporations such as human rights, labor rights, environmental responsibility, anti-corruption, social inclusion, equality and diversity. The often rather vague idea leaves a lot of room for corporations‟ own interpretations. Since the millennium, CSR has spread rapidly across corporations. Although the label of CSR directs attention towards the responsibilities of corporations, CSR is a global trend that incorporates organizations such as states, intergovernmental organizations, consumers, non- governmental organizations and business schools, all of which participate in its development. The cases in which corporations take on the idea of being socially and environmentally responsible constitute an interesting setting for 3

Introduction

3

Introduction

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4 studying organizational change and how an idea is adopted and transformed into organizational practice.

The theoretical point of departure is organizational institutional theory. This strand of theory has developed into one of the major approaches for studying how organizational concepts travel within organizational fields. It has been noted that organizations tend to implement the same changes at about the same time (DiMaggio & Powell, 1991). Traditional institutional theory has provided valuable insights into how organizations respond to institutional pressure by becoming more similar, in addition to focusing on how institutions create stability and organizational homogeneity. However, institutional theory has been criticized for its lack of active agency, and for being weak in explaining change and what happens when an idea enters into an organizational context (Campbell, 2004). Consequently, institutional theory increasingly focuses on exploring how changes in the institutional environment affect organizations (Lounsbury, 2008; Boch Waldorff, 2010).

To understand how actors transform ideas into organizational practice I draw upon Scandinavian organizational institutionalism and the concept of translation. This thread of institutional theory has contributed to our understanding that organizations actively translate ideas to fit local contexts.

Combining this theoretical framework with the empirical area of CSR enables me to explore the following research question:

How do actors transform ideas on being socially and environmentally responsible into practice?

I conduct three studies that seek to answer this question, in which the word actors refers to both corporations and individuals. In the licentiate thesis, the

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5 question in focus is how the idea of taking increased social responsibility is transformed into organizational practice and how it was made appropriate to its local setting. Since change processes take time, a longitudinal study was conducted on how the Swedish insurance company Skandia carried out their social responsibilities over a period of 17 years. In the second paper, I further explore how the social initiative of Skandia was presented as the exemplification of new ideas, of which CSR is the latest. This study shows that a new idea does not necessarily generate new practices, but that an existing practice can be translated to fit new ideas. In addition to single longitudinal case studies we also need broader comparative studies, so Paper 3 consists of a complete study of the Swedish financial services sector to detect to what extent companies in the sector has adopted the idea of CSR. Paper 3 also contains an interview and document study that investigates how eight corporations have adopted CSR and made it appropriate for their respective organizations in order to detect both the similarities and differences.

Outline

In the next section I introduce the empirical context. Then I present the theoretical framework. After that the methodological considerations are discussed and the three papers are introduced and how they contribute to the overall purpose of this thesis. Finally some final reflections and suggestions for future research are presented.

Outline

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6

The Empirical Setting

CSR as a Corrective to Corporate Misconduct

For decades, fighting global problems such as poverty, famine, human rights violations, greenhouse gas emissions, forest devastation, gender inequality and loss of biodiversity has been the focus for many governments and international bodies such as the UN and NGOs. But during the 1990s, the realization was that these problems were not going to be solved by these actors alone, and the corporate world was urged to participate (Annan 2000, Margolis & Walsh, 2003; Bruno & Karliner, 2002; Windell, 2006; Ruggie, 2008). On January 31, 1999, Kofi Annan, the former Secretary General of the United Nations, addressed the World Economic Forum in Davos and challenged business leaders to join the UN and initiate a global compact on shared values including human rights, labor and environmental standards. Annan urged corporate leaders to take action, not primarily through the international policy arena, but by incorporating those values directly into the corporations‟ sphere of influence as producers, employers and not least, as investors (UN Press Release, 1999).

Since the UN initiative, the idea that corporations should take responsibility for the welfare of society, and not just towards its principals (Friedman, 1970), has spread rapidly across transnational corporations and initiated major changes (Warhurst & Franklin, 2001; Vogel, 2005; Grafström et al., 2008; Idowu, 2009). In 2009, 95% of Europe‟s largest corporations communicated their CSR

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The Empirical Setting

Since the UN initiative, the idea that corporations should take responsibility for the welfare of society, and not just towards its principals (Friedman, 1970), has spread rapidly across transnational corporations and initiated major changes (Warhurst & Franklin, 2001; Vogel, 2005; Grafström et al., 2008; Idowu, 2009). In 2009, 95% of Europe‟s largest corporations communicated their CSR 6

The Empirical Setting

6

The Empirical Setting

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7 work on their websites (CSR Spotlight Report, 2010), while 92% of the world`s largest corporations have adopted CSR reporting (KPMGs International Survey, 2008).

The fact that transnational corporations are taking responsibility is obviously a positive thing, though this development should be seen in light of the growing critique directed at transnational corporations by several organizations (Segerlund, 2005; Windell, 2006; Borglund, 2009). In 1992, the UN‟s Centre on Transnational Corporations reported that transnational corporations emitted more than half the greenhouse gases produced by the industrial sector (Climate Change and Transnational Corporations Analysis and Trends, 1992), dominated the production of toxic chemicals and owned global fishing fleets that were depleting the oceans of fish, not least outside the shores of Canada (The State of the World`s Fisheries and Aquaculture, 1995). Criticism was also directed towards specific transnational corporations for misconduct such as the persecution of indigenous people, child labor and poor working conditions in low-income countries (Fagerfjäll et al., 2001; Ählström & Egels Zandén, 2008).

The media played an important role in spreading the news about corporate misconduct in various parts of the world, thereby increasing public knowledge and demand for corporate responsibility (Grafström et al., 2008; Boström &

Garsten, 2008). The result was a loss in confidence by the general public that transnational corporations and the market would protect the public interest and public good. Even though production and trade were generally seen as a positive in society, the power of corporations, the inequalities of wealth distribution and the exploitation that were seen as a consequence of self- interest and excessive profit making caused a lot of criticism to be directed at

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8 transnational corporations, as they were seen as the root of many of the world‟s problems in their pursuit of profit (Bruno & Karliner, 2002; Windell, 2006).

In an increasingly globalized world, trans-national corporations have been described as “outside the effective control of national states” (Meyer et al., 2010: 3) and efforts have therefore been made by several organizations to control and socialize them (Windell, 2006; Tamm Hallström & Boström, 2010;

Meyer et al., 2010). The developing field of CSR includes organizations such as states, intergovernmental organizations, consumers, non-governmental organizations, business schools, trade unions, standardization agencies, audit firms, consultancies and law firms. Also trans-national corporations with business oriented interests have pursued the idea. Windell (2006) shows that CSR was also driven by corporations themselves as the idea took on the guise of a management idea. CSR was presented as a solution not only to societal problems, but also to corporate problems such as how to improve business operations, how to be competitive, how to increase brand value and, how to become an attractive employer “ultimately leading to increased efficiency and profits” (Windell, 2006:197). Obviously, ideas that are portrayed as contributing to efficiency and effectiveness travel more easily within corporations than ideas based on other values such as solving world problems (Meyer, 1996). However, there is still no empirical evidence that CSR leads to increased profits or efficiency (Margolis & Walsh, 2003, Shedding Light on Responsible Investments, 2009).

Although the CSR debate intensified around the turn of the century and corporations are expected to hold views on issues that were previously primarily dealt with by states and NGOs, the idea that corporations have a responsibility for solving societal problems is not new. Discussions on this topic have been reoccurring ever since the beginning of industrialization, and

Although the CSR debate intensified around the turn of the century and corporations are expected to hold views on issues that were previously primarily dealt with by states and NGOs, the idea that corporations have a responsibility for solving societal problems is not new. Discussions on this topic have been reoccurring ever since the beginning of industrialization, and 8 transnational corporations, as they were seen as the root of many of the world‟s problems in their pursuit of profit (Bruno & Karliner, 2002; Windell, 2006).