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Introduction
The aim of this thesis is the investigation of Corporate Social Responsibility practices in
the Financial Industry with a specific focus on the Supply Chain and Procurement
function of them and their impact on the Firm’s value.
To do this three approaches have been followed:
• Literature review and analysis
• Survey
• Quantitative model
The structure of the thesis follows an inductive approach, from the broad concept of
Corporate Social Responsibility to the concept of sustainable supply chain management
and procurement focused on the studied industry.
The first four chapter are all about the review of the existent literature on the relevant
topics: CSR development, CSR advantages, CSR and Firm Value, Supply Chain and
Sustainable Supply Chain Management.
Particularly, Chapter 1 is focused on the development of the concept of CSR from an
academic and institutional point of view, with several recall to the existence literature
about the above mentioned topic.
The academic debate is mainly directed to the analysis of concept as Stakeholders’
theory, Shareholders’ theory, Carrol’s Pyramid, Social value chain and Triple Bottom
Line with all the related implications.
A section is thus dedicated to the Environmental, Social and Governance scores, used in
the development of the quantitative model.
Chapter 2 is connected with the discussion about the main advantages of the CSR
policies within the companies, identifying the 10 main advantages of “being” socially
responsible according to the existent literature and analysing all the related aspects, with
a deeper and dedicated investigation. Furthermore in Chapter 2 there is a brief part on
Corporate Social Sustainability Standards and organisations, with an explanation of the
most common standards used by companies in order to comply and demonstrate their
compliance with CSR standards.
Chapter 3 is about the possible and existent relationship between CSR and Firm Value,
analysing the different concepts of Firm Value, the related CSR investments, the
concepts of Corporate Financial and Social Performance and Shared Value.
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All those concepts are then analysed and studied according to the Financial industry, to
find and determine the relevant financial indicators to study in order to find any possible
impact of the sustainable procurement practices on the value of the companies of this
particular industry.
Chapter 4 is dedicated to the literature review of the Supply Chain Management and
then of the Sustainable Supply Chain Management, focusing again on the financial
industry and the impact of this function on the Value of the firm showing a sort of
interchangeability between the concept of Procurement and Supply Chain, at least for
the financial industry where relationships are more likely to be dyadic.
Chapter 5, differently from the others, presents a qualitative and quantitative overture
for the topic.
Along with “Acquisti&Sostenibilità
1
”, a not for profit Italian organization, an industry
focused survey has been developed, with the aim to give a definition of Supply Chain
for the financial industry and to study the behavior of the Procurement and CSR
managers towards themes as CSR and sustainability.
Chapter 5 presents the results of the survey with all the related figures regarding the
four sections of the survey: Company details, CSR approach, Supply Chain and
Procurement and Outcome and metrics.
Given the impossibility through the survey, to reach conclusions about the possible
relationship between Financial Performance and Sustainable Procurement practices,
even a quantitative model has been developed, analyzing the relationship between the
four selected financial performance indicators (ROA/ROE/ROIC and TOBIN’S Q
Ratio) and Sustainable Supply Chain Management scores obtained from Thomson
Reuters’ ASSET4 Database.
1
Acquisti&Sostenibilità is an italian non-profit organization, founded in 2007 with the aim of creating
social, ethical, economic and environmental value informing, connecting, supporting and leading private
and public companies of any market sector, and non-profit organizations, in the development of their
sustainability initiatives along the extended supply chain (supplier-customer) and supports the needs of
businesses and people who want to propose and implement sustainability throughout the supply chain,
through production of research and studies, the availability of data and information up to date at the
international level, identifying best existing business practices, the programming of educational activities,
the creation and implementation of projects and ad-hoc initiatives. (http://www.acquistiesostenibilita.org)
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1. CORPORATE SOCIAL RESPONSIBILITY
AN OVERVIEW
1.1) Brief History
1.1.1. Introduction
To understand what is CSR we should start analysing the three words contained in the
phrase Corporate Social Responsibility.
Indeed, CSR is about the relationship between corporations and the societies with which
they interact.
Society is defined in its widest sense, including all stakeholder and groups with all
possible kinds of interests in the organization’s operations.
When we use the word “stakeholder”, we should bear in mind that we are speaking
about groups that range from clearly defined consumers, employees, suppliers,
creditors, regulating authorities to other constituents such as local communities and the
environment.
The trade-off that companies must make is among these competing interests, that are, by
definition, different.
The history of CSR and the academic debate around it has started in the middle of the
XXth Century, remaining still a hot and evolving topic
1.1.2. The Beginning
CSR concept begins to appear in the more advanced economic realities, especially in
the West countries, since the fifties, even if we can track back to the twenties the first
signal of what we now call CSR.
Indeed, with the Wall Street crash of 1929 to some managers comes the desire of
addressing the negative consequences of the crisis.
The idea was that the company is not just a solely profit-driven entity but something
inseparably immersed in a particular social and economic context in which they
influence each other.
In this period begins to spread the idea that the company should not be accountable
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solely to the shareholders and banks but also to employees, customers and in general to
the whole society in which it is immersed.
It was in 1947 that Johnson and Johnson wrote its first “code of ethics” (Alaimo, 2007).
The first publication about SR can be traced back in 1953 with the title: “Social
Responsibilities of the Businessman” by Bowen, in which he states that: “a company
should not be evaluated only on the economic results but even for the social impact that
arises from its activities”(Mangion, 2006).
Bowen analysis underlines even that should be necessary to consider, in addition to
economic ends, the effects that the company has on society and the territory in which it
is located (Bressan, 2008). His work proceeded from the belief that several hundred
largest businesses were vital centres of power and decision-making and that the action
of these firms touched the lives of citizens at many points.
Among the many questions rose by Bowen the most important seems to be: “What
responsibilities to society may businessmen reasonably be expected to assume?”.
Social Responsibility refers “to the obligations of businessmen to pursue those policies,
to make those decisions, or to follow those lines of action which are desirable in terms
of the objectives and values of our society” (Fortune’s survey, 1946).
1.1.3. Fordism, scandals and the beginning of a new-era
Due to the productivity boost of Fordism
2
and to the little socio-cultural attention
regarding those topics, aspects other than profits were not really considered by the
enterprises and politics in the first half of the XXth Century. During the sixties and the
seventies with the collapse of Fordism and the fall of profits of several companies lots
of them were forced to relocate many production sites in order to recover losses and
market share. Relocations, and consequentially globalization, were synonymous with
“developing world” where lower labour costs, low level of control and regulation of
productive activities were perfect ingredients for increase profits in crisis time.
2
System of organization and industrial policy, implemented since 1913 by H. Ford in his automobile
factory. Based on the principles of Taylorism, aimed at increasing production efficiency through a strict
schedule of individual operations and production phases, the general use of the assembly line and a set of
incentives for workers. (Treccani,2016)
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In the same years, the mentioned above strategies were accompanied by stock market
speculation and financial corruption to obtain and retain businesses.
In the 70’s the some scandals erupted in the US, showing illegal relations between the
economic-financial world and various foreign governments and ascertained that several
large corporation (1/3 of 900 most influential companies of the time) created slush
funds and rigged financial statements.
Those scandals led, in 1977, to the approval of the Foreign Corrupt Practices Act,
considered the forerunner law of the process that brought to the creation of the Anti-
Bribery Convention in 1997 from the Organization for Economic Co-operation and
Development (OECD)
3
.
During those weary years the public opinion and the mass media became aware of the
offenses committed by the “white collars” and several companies started to approach
the CSR aspects.
It’s during the seventies indeed that more and more Code of Ethics and Social Reports
make their appearance particularly on the American scene, followed then by Europe.
1.2) The Academic debate
1.2.1. Friedman and the Shareholder Theory
Meanwhile, in the academic world was boosting the interest in topics like “business
ethics”, starting to be the subject of several university courses, research, and discussions
(Nobili, 2003).
The contributions offered by E.R. Freeman (Stakeholder Theory), AB Carroll (Carroll’s
pyramid) and M. Porter (Social Value Chain) determined the decisive step towards a
systematization of the concept of CSR, beyond the paradigms of liberal thought of
3
The mission of the Organisation for Economic Co-operation and Development (OECD) is to promote
policies that will improve the economic and social well-being of people around the world. The OECD
provides a forum in which governments can work together to share experiences and seek solutions to
common problems. They work with governments to understand what drives economic, social and
environmental change. They measure productivity and global flows of trade and investment. We analyse
and compare data to predict future trends and they set international standards on a wide range of things,
from agriculture and tax to the safety of chemicals. (www.oecd.org)
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Adam Smith and the Shareholder Theory of Friedman.
In the second half of the Eighteenth century, Adam Smith, pioneer of political economy
and considered the father of modern economics, stated that individual utility
maximization represents the fundamental principle of the economic and social progress
of the peoples insofar does not violate the laws of justice.
The only goal of an economically viable business was maximizing the individual profit
and no mention about stakeholders was made.
Smith is known as the creator of the famous myth of the "Invisible Hand" and the
defender of laissez-faire.
His thinking is based on the concept that all operators, to make an exchange with others,
are motivated by personal gain; that is driven by the desire to maximize their utility.
In his major work, "The Wealth of Nations” (1776), is contained one of his most famous
statements:
“It is not from the benevolence of the butcher, the brewer, or the baker that we expect
our dinner, but from their regard to their own interest”(Adam Smith, 1776).
In agreement with that, Milton Friedman, passionate liberalist and main figure of the
Chicago School
4
, two centuries late stated that the only responsibility of companies and
managers has to be the production of profits while the use of shareholder’s resources to
solve social problems is likened to do charity activities with other people’s money
without their permission.
He states: “In [a free society] there is one and only one social responsibility of
business―to use its resources and engage in activities designed to increase its profits
so long as it stays within the rules of the game” (Friedman, 1970).
4
Academic school of thought developed at the University of Chicago. Founded in 1890 by J. D.
Rockefeller, it became over time one of the leading research centers in the world, boasting, until now, 87
Nobel Prize winners, including 28 in economy. The Chicago school term is used with different meanings
in various research fields as well as in economics, including sociology, literary criticism, architecture,
psychology and political science. The origin of the influence of the Chicago School dates back to the
work of F. Knight and Jacob Viner in the 20's. Knight, in particular, has had a great influence on the
development of the school, through its students M. Friedman, J. Buchanan and G. Stigler, especially in
the skeptical and critical approach of each predominant theory.
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