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CSR practices in Sri Lanka

In document Empirical evidence from Sri Lanka (Page 68-74)

Literature Review

2.5. A review of extant literature on CSR practices

2.5.4. CSR practices in Sri Lanka

A review of extant literature on CSR practices


Despite the fact that the firms which are not affiliated with SBN, NZBCSD or CIMA are reducing their uptake of CSR practices, it was observed that the number of companies marketing themselves by claiming to be part of “clean green New Zealand” continuously increased from 17 per cent in 2003 to 30 per cent in 2010.

Collins et al. (2010) warned that this practice could damage New Zealand’s national branding and current competitive edge. A very few companies (7 per cent) modified their accounting system to integrate the cost and savings from social and environmental initiatives, suggesting that most of the corporate accountants and managers are not concerned about setting up an accounting information system that provides vital information for CSR reporting.

A review of extant literature on CSR practices


and Abeygunasekera (2008) investigated the motives, benefits, and barriers of CSR reporting in Sri Lanka by employing the case study approach together with a content analysis method. The annual report data and interview data were collected from three listed companies. The study concluded that two of the three companies engaged in CSR reporting, because the “stakeholders want them to be transparent about their activities” (Rajapakse & Abeygunasekera, 2008, p. 54). However, they have not revealed what kind of stakeholders; consequently, it is not possible to check whether this finding is only relevant to economically powerful stakeholders.

Rajapakse and Abeygunasekera identified the third case company’s CSR reporting motive by means of legitimacy theory, as the company tries to conform to the norms of society (Rajapakse & Abeygunasekera, 2008).

Senaratne (2009), through another study, investigated CSR disclosure practices in Sri Lanka, and found that, although it is not mandatory, there is strong evidence that companies tend to engage in CSR reporting. However, she found a significant variation between companies with regard to the level of such reporting. Collecting data from listed companies through a questionnaire survey, Sheham and Jahfer (2011) tried to examine the relationship between CSR activities and financial performance in Sri Lanka. They found significant positive correlations only in employee relations and customer/supplier relations, when these were compared between companies’ financial performance. However, they did not make any differentiation between local and foreign customers/supplier relations. If they had done so, they could have produced further important information.

Fernando and Pandey (2012) carried out a survey by collecting data, through corporate reports of Sri Lankan listed companies and from a questionnaire survey, in order to investigate the nature of CSR practices using the content analysis method. The authors collected both quantitative and qualitative data from 232 listed companies representing 20 business sectors. These companies all divided into either CSR reporting companies – adopters, or CSR nonreporting companies

A review of extant literature on CSR practices


– nonadopters. Through analysis, they found that only 34 per cent (78 companies) of the 232 companies had adopted CSR reporting practice. Surprisingly, they found that all the companies operating in “Constructions and engineering”, “Information technology”, “Oil palms”, “Services”, and “Stores and supplies” were nonadopters.

Further, they found that the CSR reporting that was done was often unsatisfactory with regard to the quantity and quality of company CSR reporting and, in agreement with the findings of Senaratne (2009), the level of disclosure varied significantly among reporting companies. It was found that only 12 companies had followed GRI G3 guidelines for CSR reporting. Finally, the authors emphasised the current low level of reporting in Sri Lanka and raised a question as to why companies are not interested in engaging in CSR reporting in Sri Lanka, and called for further research on this aspect (Fernando & Pandey, 2012).

Moving away from CSR disclosure, Rathnasiri tried to explore the state of CSR understanding, commitment, and practices of Sri Lankan companies which covered different industry sectors (Rathnasiri, 2003). Using a questionnaire survey as the main research instrument, he used company management, employees, and civil society to identify various perspectives in exploring the level of CSR engagement.

Rathnasiri (2003) concluded that CSR was still a novel concept in Sri Lanka and the most common perspective was centred on philanthropic activities. He found that “most people are ignorant of the broader objectives of CSR . . . In addition, Sri Lankan civil society including employees of organizations is also not aware of the true [normative] meaning of CSR” (Rathnasiri, 2003, p. 223).

In agreement with the literature, the findings suggest that different people perceive the CSR phenomenon in different ways. Examining another perspective, the study revealed that most of the respondent firms have created vision/mission statements, but with minimal engagement with their stakeholders. Using the Sri Lankan research evidence, Rathnasiri (2003) argues that the survival of most of the companies depends on the level of relationship they maintain with the existing

A review of extant literature on CSR practices


government, because “the corporate sector in many ways has been subjected to political manoeuvring which has affected society” (Rathnasiri, 2003, p. 224). He further indicated that companies which flourished under one regime struggled under another, especially large companies engaged in supplying products and services to the Sri Lankan government, thus, “funding politicians and political parties has become an accepted norm, but in turn has become the bane of society, which is riddled with bribery and corruption” (Rathnasiri, 2003, p. 224). He noted that the respondents were reluctant to comment on such matters as they were sensitive concerning their companies’ survival. Although the researcher (Rathnasiri, 2003) did not consider mainstream CSR theories in analysing the data, these results support the managerial perspective of stakeholder theory which gives prominence only to powerful stakeholders, in this case the government. As a part of a process of understanding and encouraging corporate responsibility in South Asia, the abstract version of the above study has been published in another article which draws on a different perspective (Kumar et al., 2004).

Thoradeniya, Lee, Tan, and Ferreira (2012) surveyed a relatively different aspect of CSR reporting in Sri Lanka. They employed the theory of planned behaviour in order to examine the influence of managers’ attitudes and other psychological factors on CSR reporting behaviour from the perspective of Sri Lanka as a developing country. Collecting 233 usable questionnaires by achieving a nearly 25 per cent response rate, they tested the hypothesis using the partial least square model. The findings indicate that the managers’ attitudes and other psychological factors influence managers’ intentions to engage in CSR reporting. However, they found that in most of the companies this intention is not translating to the actual practice of CSR reporting mainly because of the managers’ lack of a sufficient degree of control over the CSR reporting process. Normatively, the authors suggest that by considering the role of psychological variables in the CSR process, the companies need to invent more effective corporate strategies in order to promote CSR reporting in Sri Lanka.

A review of extant literature on CSR practices


The majority of the Sri Lankan CSR studies are related to CSR disclosure practices and have used a quantitative/positivistic approach. Almost all of these studies are discussed above and it is evident that none of these studies considered Sri Lankan cultural impacts on CSR practices. A few studies which contribute to bridging this gap can be found in the literature (Fernando, 2007, 2010a, 2010b; Fernando &

Almeida, 2012). Most of these studies employed case study approach and focused especially on examining Sri Lankan corporate sector CSR behavioural practices after the Boxing Day 2004 Indonesian tsunami. For example, collecting data through 21 interviews with business leaders, civil society leaders, and donors and victims of the 2004 Indonesian tsunami, Fernando (2007) investigated how Sri Lankan corporate managers engaged in CSR initiatives during 11 months just after the 2004 tsunami. Employing two large Sri Lankan private sector companies as case studies, this study further addressed “decision-making challenges in shaping the intent and extent of the CSR initiatives in a community with a long history of charitable giving” (Fernando, 2007, p. 1). After analysing in-depth, face-to-face interviews the paper proposed a conceptual model and explained “virtuousness as a necessary attribute of genuineness in tsunami- related CSR initiatives” (Fernando, 2007, p. 1). He compared two case companies and identified some implications.

From the findings he concluded that during the earlier stages of a natural disaster with a high magnitude of human tragedy, firms’ CSR initiatives are “more likely to be shaped by ‘management strategies’ that generate a high level of genuineness”

(Fernando, 2007, p. 1).

This 2007 study was extended in a later study (Fernando, 2010a) which considered the period of 35 months after the 2004 tsunami. In this extended study, he examined what influences the passage of time – after a high magnitude of natural disaster – has on the organisational virtuousness using CSR initiatives of the same two case companies. Finally, the study explained “how genuine intentions of engaging in CSR activities could generate outcomes such as enhanced reputation that improve

A review of extant literature on CSR practices


the profitability of the firms” and at the same time it explained how these outcomes are most likely to raise doubts about moral intentions of CSR initiatives (Fernando, 2010a, p. 68). In another single case study, Fernando and Almeida (2012) examined the organisational virtuousness of strategic CSR initiatives in one of the largest Sri Lankan apparel companies. The findings of the study explained how this company’s

“strategic CSR initiatives could be virtuous due to positive contributions to the community” with regard to three dimensions: moral goodness, human impact, and unconditional societal betterment, regardless of generating profits by improving publicity and reputation (Fernando & Almeida, 2012).

All three case companies discussed in the above three case studies (Fernando, 2007, 2010a; Fernando & Almeida, 2012) have significant international influences through the international supply chain process and/or as a parent company. However, these three studies have not discussed the behaviour of local indigenous companies.

Overall, a small number of CSR studies make up the CSR literature in Sri Lanka, and these are highly concentrated on CSR disclosure practices. Methodologically, most of these studies use secondary data; most employed the content analysis method, and applied a quantitative positivistic approach. None of these studies extensively used mainstream CSR theories such as legitimacy theory, stakeholder theory, and institutional theory, in analysing and explaining their collected evidence. Even exceptions to the majority of the studies noted above used the case study method and concentrated on a specific incident such as the 2004 tsunami. Although rich data were collected through interviews, in these studies too local indigenous companies were ignored. In responding to these gaps in the CSR literature this thesis explores a number of underresearched areas: 1) it considers both local companies and companies with international links; 2) it relies mainly on primary data collected through questionnaire survey and interviews; 3) it focuses on both operational and disclosure practices of CSR; 4) it utilises both a quantitative positivistic approach and qualitative nonpositivistic (mixed method) approach; 5) it employs mainstream

Theoretical perspectives underpinning CSR


CSR theories to construct a theoretical framework to use in analysing and explaining collected evidence; and, 6) most of all, this thesis considers the influences of the unique Sri Lankan historical, cultural and customary traditions on the country’s corporate CSR practices.

In document Empirical evidence from Sri Lanka (Page 68-74)