Working Paper for New Business Model for Multinational Companies

Description
Arguably, the first multinational business organization is conjectured to be the Knights Templar, founded in 1120.

CSR: a new business model for multinational companies?
A study of the management systems used by the French CAC 40 companies to integrate CSR into their strategy
Diane-Laure Arjaliès1 ESSEC Business School – Department of Management Control & Ecole Polytechnique – Department of Economics Jean-Marie Péan MACIF Gestion – SRI Analysis & Research Department

Working Paper – October 2009 This is a working version only. Please do not quote without authors’ permission. Abstract Since they provide the tools that permit to choose, organize, deploy and monitor the strategy, management systems are said to be one of the necessary media for implementing and changing corporate strategies. Based on this assumption, the introduction of CSR into the companies’ management systems should: 1) give evidence of the ‘real’ will of companies to integrate CSR into their strategy and 2) provide the means for effectively changing the operational practices. With this in mind, this paper aims at exploring to what extent CSR changes the business model of multinational companies by studying whether and how these companies integrate CSR into their management systems. The distinction between diagnostic and interactive management systems introduced by Simons (1995) provides the conceptual framework of the paper. According to this typology, two types of management systems are essential for a strategy to be implemented (diagnostic systems) and changed (interactive systems). Empirical data are drawn from a comparative study of the CAC 40 companies – the 40 biggest French listed companies – based on a survey by questionnaire conducted between September and December 2008 (response rate: 87.8%) and documentary evidence. Based on the study, the paper argues that the gap which exists between the management systems used to integrate CSR into the companies’ operational practices and the targeted strategies could explain why CSR has not yet led to the emergence of a new business model for these multinational companies. Key-words: Business Model – CAC 40 – Corporate Social Responsibility (CSR) – Management Systems – Strategy

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Contact author: [email protected]

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1. Introduction At a time when the world is facing a financial, economic and social crisis of great amplitude, many question the validity of a business model that has, little by little, forgotten Man for the benefit of money. The Economic Nobel Prize Krugman declared: “The people who assured us that markets work; that the private pursuit of profit always leads to a good result have been rather massively wrong.” (Reuter News, 14/10/2008). As a result of this ongoing change, societies are now searching for a new balance. A balance which would reconcile short-term profitability and long-term durability: a new model of society known as ‘Sustainable Development’ (Bruntland, 1987). Since they are essential actors of the economic and social development of our societies, by their creation of wealth as well as by their role in society, Sustainable Development could not have been imagined without the participation of companies in this societal project. This companies’ commitment which has been developed over the past few years is known as ‘Corporate Social Responsibility’ (CSR). The concept of CSR requires companies to take into account social, environmental and economic considerations related to their activities and their interactions with their stakeholders on a voluntary basis (European Commision, 2001). The perceived importance of CSR has soared in recent years, as companies, investors, and regulators have grown increasingly aware that such policies could help manage risks and opportunities as well as build reputation and innovation. Facing this evolution, two approaches of CSR now face each other (Crifo & Ponssard, 2009): 1) a ‘niche’ strategy which would concern only few companies which have adopted a CSR positioning in the market (Vogel, 2005) and 2) a ‘mainstream’ approach of CSR according to which CSR would act as a lever for profound organizational and strategic change within companies (Acquier & Aggeri, 2006). With this in mind, this paper aims at shedding light on the following research question: “Does CSR lead to the emergence of a new business model for multinational companies?” In other words, this paper searches to explore whether and to what extent the core aspects of business of multinational companies, including strategies, organizational structures, and operational processes are affected by CSR; change which could permit us to argue in favor of a ‘mainstream’ approach of CSR. For this purpose, this paper studies a key dimension of the penetration of CSR into the business model of multinational companies: their management systems. The latter includes various elements of management control such as CSR budgeting and CSR indicators. Since management systems provide the tools that permit to choose, organize, deploy and monitor the strategy, it has been shown that managers use management systems to drive strategic renewal (Simons, 1995). Then, the introduction of CSR into the companies’ management systems should: 1) give evidence of the ‘real’ will of companies to integrate CSR into their strategy and 2) provide the means for effectively changing operational practices. Yet, it appears that although most executives agree on the strategic interest of CSR, none of them fully include CSR aspects when implementing business projects (McKinsey, 2009): the integration of CSR within management systems would remain weak. Moreover, despite the importance of management systems when integrating CSR into business, little research has been conducted on this topic (Adams, 2002; Berland & Essid, 2009; Norris & O'Dwyer, 2004). Lastly, most of the existing literature which explores the relationships between management systems and CSR relates to particular case studies of one or few companies. Useful as it is, this corporate focus prevents from providing an overview of how multinational companies integrate CSR into their management systems, and, therefore, into their strategy. Then, it remains difficult to know whether CSR has begun to penetrate into the multinational companies’ business model. This paper is in attempt to fill this gap. By interviewing the 40 biggest French listed companies – members of the CAC 40 – on the 2

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management systems they use to drive CSR policies, this paper aims to identify ‘trends’ regarding the strategic interest for CSR. France is particularly interesting on this point since it adopted the New Economic Regulations (NRE) act in 2001, which requires companies quoted on the French stock market to account for the social and environmental impacts of their activities. Thus, France is considered to be among the best countries worldwide regarding the integration of CSR into annual reports (KPMG, 2008). Then, the analysis of the CAC 40 companies should provide an overview of what can be considered to be part of the most advanced CSR policies among the world. Empirical data are drawn from a comparative study of the CAC 40 companies conducted between September and December 2008, based on open questionnaires and documentary evidence such as CSR reports and social agencies’ rating. In total, 36 companies responded to the survey (response rate: 87.8%): 19 answered in writing, 17 provided their answers during a telephone interview, representing more than 90% of the total capitalization of the CAC 40. This high response rate provides the study with an exhaustive view of the current practices of the biggest French companies regarding CSR. The typology of management systems developed by Simons (1995) is used as a theoretical device to make sense of the data. According to Simons (1995), management systems play a key role when conducting corporate strategy by helping companies to meet the two strategic demands. On the one hand, diagnostic systems act as a lever of control for implementing the intended strategy of a company; they encourage managers to focus on the strategic goals and priorities chosen by the company. This refers to a top-down approach of strategy in which management systems are used to motivate, control and reward specific goals. On the other hand, interactive systems enable managers to search for new opportunities; they encourage managers to innovate and propose new strategic orientations for the company. This refers to a bottom-up approach of strategy in which management systems are used to stimulate organizational learning and the emergence of new ideas and strategies. Therefore, the combined use of diagnostic and interactive management systems should permit a company to achieve a balance between the ‘intended’ (i.e. top-down) and the ‘emergent’ (i.e. bottom-up) strategy and, as a result, enable the survival of the company in the long-term (Mintzberg, 1989, 1993; Simons, 1995). With this in mind, the integration of CSR into the strategy of multinational companies should rely on both types of management systems to enable strategic change. However, the study shows that the use of diagnostic and interactive systems regarding CSR remains limited. Indeed, even if most companies have developed diagnostic systems to provide CSR reporting, this reporting is rarely utilized as a means to provide feedback on the implemented strategy for providing corrective actions or confirming the chosen ones. This leads to a partial use of diagnostic systems and to a consequent lack of control of the meet of CSR goals by managers. Moreover, when companies aim to develop interactive systems to favor the emergence of new opportunities regarding CSR, few of them have succeeded in making the most of the new ideas proposed by local managers. As a result, CSR is often not perceived by managers as being of major importance for their company. Given these limits, the paper shows that CSR has not yet been fully integrated into the strategy of the CAC 40 companies. This partial integration does not permit to argue in favor of a change of business model due to CSR. Nevertheless, the study shows that CSR is considered by the CAC 40 companies as being strategic for their survival in the long-term. The use – even partial – of management systems to drive CSR policies illustrates this claim. The CAC 40 companies no longer question the validity of Sustainable Development for their future: CSR will be a strategic aspect of their business model and they are readying themselves. Yet, the means they dedicate to it and the way they use them do not meet the challenges they face. Therefore, it cannot be said that CSR concerns only few companies which would use it as a ‘niche’ strategy (Vogel, 2005). However, it neither can be argued that CSR has become a 3

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‘mainstream’ approach. Instead, CSR would act at a profound lever for organizational and strategic change among multinational companies, but this process would have just begun; the full integration of CSR into management systems would be still needed to achieve it. In demonstrating so, the contribution of the paper is twofold. Firstly, it expands the existing literature on CSR by analyzing how companies use management systems to integrate CSR into their strategy; a question which has not benefited from important research until now. Moreover, by offering an overview of the CAC 40 companies regarding this integration, this paper helps understand the role and the place of CSR in the business model of these multinational companies. Secondly, it provides practitioners with a better understanding of the importance of management systems when conducting CSR policies. This comprehension should contribute to the emergent body of knowledge regarding the penetration of CSR within the business models of multinational companies. The paper is structured as follows. The following section details the typology of management systems developed by Simons (1995) by explaining the differences between diagnostic and interactive systems. Then, the research methods used to conduct the study are described. The subsequent section presents the study findings. Drawing on these findings, the concluding section discusses the results and points to further research. 2. Theoretical background 2.1. The typology of management systems developed by Simons (1995) Over the past decades, many researchers have studied how management systems can influence the implementation and the control of corporate strategies. Among them, a particular focus has been made on the systems which enable the measure of strategic performance (Kaplan & Norton, 2004). However, despite this research, some problems remain when using management systems to conduct strategy (Kaplan & Norton, 1992). The main problem refers to the difficulty for managers to achieve a balance between implementing the intended strategy and making the most of emergent opportunities (Caldelli & Parmigiani, 2004; Zwetsloot, 2003). To overcome this tension, Simons (1995) has proposed a typology of four management systems whose combined use should permit the meet of both strategic demands. In accordance with Lawrence and Dyer (1983) who demonstrated that organizational adaptation requires high levels of efficiency and innovation, Simons (1995) argues that companies should use management systems to achieve a high level of both control and organizational learning. This argument refers to an adaptive view of organizations according to which companies must adapt their strategy to environmental change in order to survive. With this in mind, Simons (1995) has developed four types of management systems, which refer to the two main strategic approaches companies must combine to be successful: the ‘intended’ and the ‘emergent’ strategies. To serve the intended strategy, management systems must focus managers’ attention on the strategic goals pursued by their company. According to Simons (1995), two types of management systems must be used for this purpose. The first type of systems is known as ‘boundary systems’ and consists of showing managers what they are permitted to do and what is forbidden. These systems orientate the research of new opportunities conducted by managers on goals which relate to the strategy chosen for the company. This first type of systems is used as a media for the second type of systems known as ‘diagnostic systems’. Diagnostic systems aim to control the meet of strategic goals by managers. They refer to the traditional view of strategy as a top-down process according to which incentive and control systems must be implemented to ensure the internal and external cohesiveness of the intended strategy. Regarding the emergent strategy, 4

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other management systems must be favored (Simons, 1995): ‘interactive systems’ and ‘beliefs systems’. On the one hand, interactive systems aim to stimulate organizational learning by encouraging managers to search for new opportunities at the local level. Contrary to diagnostic systems, interactive systems relate to a bottom-up approach of strategy. According to this approach, a strategy is considered to be the result of local strategic opportunities which have emerged without being planned. On the other hand, beliefs systems are used as a means to inspire and guide the research of opportunities by providing managers with the purposes and the values of the company. The roles of beliefs and boundary systems are closed: they act as a media for implementing respectively the interactive and diagnostic systems. Regarding their mediating role, the choice has been made in the rest of the paper to include the boundary and beliefs systems within the diagnostic and interactive systems. Then, two types of management systems are used as theoretical device in the paper: diagnostic and interactive systems. According to Simons (1995), the joint use of diagnostic and interactive systems should permit managers to overcome the main tensions a company faces when conducting strategy. Those tensions can be described as follows: the tension between 1) the unlimited research for strategic opportunities versus the limited capacity of attention of managers, between 2) the intended strategy versus the emergent strategy, and between 3) the individual interests versus the collective contribution. To get a better understanding of how management systems can help overcome these tensions, the two following sections describe with further details each system. 2.2. Implementing the intended strategy: the use of diagnostic systems The diagnostic systems developed by Simons (1995) refer to what is known as contractualist approaches of companies (Charreaux, 2002a, b). These approaches argue that the economic performance of a company depends to a large extent on its control systems. According to these approaches, an analytical and rational vision of strategy must be favored (Mintzberg, 1989, 1993). With this in mind, conducting a strategy is described as a top-down process in which top management makes decision and other managers and employees implement the chosen decisions (i.e. the intended strategy). Then, management systems used for this purpose must focus the managers’ attention on the strategic goals of the company by controlling the organizational space made available for managers and employees (Roberts & Scapens, 1985). This research of coherence between decision making and strategy is a traditional role of management systems (Anthony, 1965). Simons (1995) described this role as a need for diagnostic systems to reduce the ‘opportunity space’ of managers and employees. An opportunity space refers to all the opportunities an organization can potentially identify or create at a given moment in time, regarding its resources and competences. For that purpose, diagnostic systems rely on boundary systems which stake out the territory of managers. Therefore, diagnostic systems are required to motivate, control and reward managers and employees to meet the strategic goals of the company. Diagnostic systems are likely to describe organizational processes in terms of inputs and outputs: they aim to standardize the outputs to minimize individual creativity. For this purpose, diagnostic systems rely on three main characteristics: 1. The capacity to measure the outputs of a process. 2. The existence of pre-determined standards with which the effective results can be compared. 3. The capacity to correct the eventual diversion with respect to these standards (expost control).

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Then, the main goal of diagnostic systems is to assess whether the intended strategy of the company is implemented and successful, using for example profit plans or scorecards. With this in mind, three elements are essential for a diagnostic system to be considered as being exhaustive. Firstly, a diagnostic system must use plans and resources to orientate managers toward the chosen strategy. Secondly, feedbacks are necessary to control managers’ actions. To meet these first two demands, incentive systems must be used to motivate managers. Lastly, it is important that the data made available in a diagnostic system be exhaustive and reliable. Therefore, internal control is necessary to maintain the integrity of diagnostic systems and detailed procedures to collect data are often required. For these purposes, managers must participate in diagnostic systems at three key moments: 1) when the goals are negotiated and implemented; 2) when feedback is provided and; 3) when the corrective actions are chosen. This participation combined with the accuracy of diagnostic systems’ measures should permit the identification, the pursuit and the assessment of the critical performance variables necessary for the intended strategy to succeed. 2.3. Changing the intended strategy: the use of interactive systems However, to adapt to its environment, a company must keep innovating and evolving. For this purpose, a company must make the most of new strategic opportunities made available at local levels. This refers to a cognitive approach of companies (Charreaux, 2002a, b) which differs radically from the conventional approaches of strategy described in the previous section. According to cognitive approaches, strategy should focus on the construction of competences and on the capacity of companies to innovate, create investment opportunities and change their environments. With this in mind, companies should encourage organizational learning (Argyris & Schon, 1978; Mintzberg, 1989) and local initiatives for generating emergent strategy. Then, management systems used for this purpose must favor organizational dialogue and debate. They emphasize the role of actors and aim to provide them with freedom to innovate. Therefore, in contrast with diagnostic systems, interactive systems do not aim to standardize outputs but to stimulate research and creativity. This should permit the emergence of new strategies, namely, through the organizational responses to opportunities and external threats. With this in mind, managers must help actors to act collectively and encourage them to innovate according to the values and goals of the company. This is obtained thanks to the beliefs systems whose purpose is to drive actors’ commitment to the grand purpose of the company by showing what the corporate values are. Drawing on beliefs systems, interactive systems focus on strategic uncertainties and contingent factors which could threat or contradict the intended strategy. Those uncertainties are often the result of a difference between the required information to realize a task and the effective information made available for it. In other words, interactive systems aim to extent and redefine the opportunity space of managers and employees. They are bottom-up systems in which local managers generate new information when implementing the intended strategy. These interactive systems can refer to systems which permit the generation of new information about environment or to systems which enable the identification of key competences among the organization. For an interactive system to provide a space for dialoguing and sharing information, it must meet the following five demands: 1. The information generated by the system should be addressed by top management and must be understood by other managers and employees. 2. All levels of management must be attentive in a permanent way to the information generated by the system. 3. Managers and employees must discuss the information generated by the system. This debate should concern the data, the hypothesis and the underlying action plans. 6

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An interactive system must be considered by the company as a catalyst for continuous change. 5. An interactive system should address the strategic uncertainties of the company. Interactive systems are essential for a company to survive: “the right of an organization to keep existing is not perpetual but must be won” (Simons, 1995). However, according to Simons (1995), intended and emergent strategies are not mutually exclusive. On the contrary, they must be pursued simultaneously. Then, the joint use of diagnostic and interactive systems, with the help of the boundary and beliefs systems, should permit to overcome the tensions a company faces when conducting strategy, and, as a result guarantee its survival in the long-term. A summary of this process is provided in Figure 1.

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Figure 1: A dynamic relationship (From Simons (1995), Levers of Control, Harvard Business School Press, Boston) However, when studying management systems used to drive CSR strategies, previous research has demonstrated that diagnostic systems are often favored at the expense of interactive systems (Capron & Quairel-Lanoizelée, 2004, 2005; Durden, 2008; Ittner & Larcker, 2003; Quairel, 2004), with some exceptions (Berland & Essid, 2009; Caldelli & Parmigiani, 2004; Zingales & Hockerts, 2003). Indeed, according to the existing literature, CSR would not be perceived by companies as a potential lever for organizational learning but as a formality to meet (Durden, 2008). Therefore, the integration of CSR within management systems would mainly obey communication purposes (Capron & Quairel-Lanoizelée, 2005), and confine to diagnostic systems. In other words, companies would only use diagnostic 7

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systems in order to collect ‘CSR data’ to communicate them externally but would not elaborate on these data to nurture their strategy. As a result, few interactive systems would be used as well. Yet, it is essential for a company to support innovations and favor continuous improvement by using management systems which are not only focused on controlling behaviors (Norris & O'Dwyer, 2004; Zwetsloot, 2003). Then, it appears surprising that companies do not favor interactive systems when developing CSR policies. To get a better understanding of this phenomenon, the following sections analyze the management systems used by the French CAC 40 companies to drive their CSR policies. With this in mind, the subsequent section describes the research methods used to conduct the research. 3. Research methods 3.1. Research position This study is part of a three-year doctoral work (2006-2009) conducted within a French asset management company with an action research perspective. The goal of action research is “to resolve social or organizational issues in conjunction with those who are experiencing them, while simultaneously contributing to scientific knowledge” (McDermott, Coghlan, & Keating, 2008). There are different types of action research according to the level of commitment of the researcher within the organization. Among them, participative action research refers to a high level of integration of the researcher in the organization. The researcher is likely to participate in the project definition as well as in the actions’ implementation (Whyte, 1991). Then, participative action research implies a deep collaboration between researchers and practitioners committed to the research process. In other words, the theoretical accounts of empirical findings are the results of collective agreements co-produced within the research community committed to the research process (Dewey, 1938). With this in mind, this study is the result of a participative action research conducted within the SRI Analysis & Research Department of a French asset management company specialized in Socially Responsible Investment (SRI). As any action research, the decision of studying the management systems used by the CAC 40 companies obeyed first a practical problem which can be described as follows. The main task of the SRI Analysis & Research Department was to provide SRI assessment of companies to select the most socially responsible companies for the portfolios. For that purpose, the SRI analysts analyzed companies by relying mainly on the social ratings provided by social rating agencies. These ratings used to be organized around the main domains of CSR, to know: social, environmental, governmental and societal issues. According to this analytical framework, certain pieces of information were provided on the management systems used to drive CSR policies but the latter remained partial and marginal. Yet, when selecting the companies for the portfolios, the level and the form of integration of CSR into management systems were deemed to be key information in order to identify the companies which seemed to consider CSR as being part of their business. With this in mind, the SRI analysts decided to focus on the integration of CSR within management systems when analyzing the companies. However, as they were studying social ratings, CSR reports and financial analyses, they found that the information they obtained on management systems remained limited. Therefore, as they needed to know more about these aspects, they decided to conduct a study on the management systems used by the CAC 40 companies to drive CSR policies. As one of the SRI analysts was also conducting a Ph.D. thesis in management control within the asset management company, they decided to adopt a participative action-research.

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The choice to study the CAC 40 companies obeyed two reasons. The first reason related to the practical knowledge of the SRI analysts committed to the study. As belonging to a French asset management company, they were more knowledgeable about the French companies than other European companies. The second reason originated from the interest of these companies regarding CSR. Indeed, since the New Economic Regulations act in 2001, the French listed companies had been required to account for the social and environmental impacts of their activities. As a result, the French biggest listed companies – members of the CAC 40 – were judged by the SRI analysts and experts (KPMG, 2008) to be among the most advanced companies worldwide in terms of integration of CSR into their business. Moreover, the CAC 40 companies belonged to different activity sectors; this offered an exhaustive overview of economic activities which was deemed important to provide an overview of the current practices of French multinational companies. A list of the companies present in the CAC 40 is provided in Annex 1. Then, the CAC 40 companies were deemed to offer an interesting panel to assess whether and how CSR had became part of the business model of multinational companies. Three SRI analysts participated in the study. The first one used to work for a social rating agency for five years before working as an SRI analyst for the asset management company. It was one year since he began to work as an SRI analyst when conducting the study. The second SRI analyst had worked in the CSR Department of an insurance company for two years before working as an SRI Analyst. It was her third year as an SRI Analyst when the study began. At the same time, she was conducting a Ph.D. thesis in management control about SRI. This double profile permitted the choice for participative action research. Then, the goal of the study was twofold: 1) to get a better understanding of the integration of CSR within the business model of multinational companies by studying their management systems, in order to help the SRI Analysts when selecting companies for the portfolios; 2) to expand the existing literature on the relationships between management systems and CSR. This close collaboration between practitioners and a researcher was expected to permit the generation of new knowledge as well as the transformation of practices, which are the two main characteristics of participative action research (Dewey, 1938; Pastorelli, 2000). The third SRI analyst was a beginner hired by the company on a short-term contract to help conduct the study under the responsibility of the other two SRI Analysts. The research process began in July 2008 and finished one year later. The different stages of the research process are described in the following section. 3.2. Research process 3.2.1. Companies’ communication and existing literature’s analysis The first two months of research consisted of studying the CSR reports and the social ratings providing by the three social rating agencies the Department used to work with to identify all information regarding the use of management systems to drive CSR policies. As being SRI Analysts, we were used to analyze these companies but, contrary to our traditional framework based on environmental, social, governmental and societal issues, we decided to focus our analysis only on management systems. The goal of this preliminary analysis was twofold: 1) to be able to have an in-depth knowledge of the companies we would interview; 2) to begin to identify the different trends among the CAC 40 companies. With this in mind, two exploratory interviews were conducted at the same time. The first interview was conducted with the Head of Research of one of the biggest social rating agencies in France and the second one with a CSR Department of an insurance company. The purpose of these interviews was to help us identify what social rating agencies and CSR Departments assessed 9

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to be key elements to study regarding our research question. As a result of this preliminary work, we had an analysis of each company of the CAC 40 regarding the management systems they used to drive CSR policies. Meanwhile, we conducted a literature review on the relationships between management systems and CSR. Thanks to this literature review, we identified the typology of management systems provided by Simons (1995) as a potential theoretical framework to support our research. 3.2.2. Questionnaires’ sending Regarding our preliminary research, we decided to conduct a study based on questionnaires. This choice was motivated by two main reasons. The first one was practical. Since we aimed to get an overview of the CAC 40 companies at a given moment in time, we thought that submitting questionnaires would permit us to obtain this ‘photography’. Indeed, meeting all companies would have taken much more time and was practically difficult. The second reason was motivated by the fact that CSR Departments were used to answer questionnaires. Contrary to interviews, they permitted companies to control their communication; a control which we knew to be compulsory for certain companies we wanted to study. Then, the questionnaires appeared to be the most convenient form of data collection for obtaining results. For the study to be reliable, it was necessary to obtain a high answer rate since we aimed to provide an overview of the CAC 40 companies. Yet, we knew that CSR Departments were overwhelmed with questionnaires and that presenting the study with an academic approach could be counter-productive. Then, we decided to make the most of our action research approach, by drawing on our investor’s position. We sent the questionnaire to the CSR Departments of the 40 companies joint with a letter signed by the CEO of the asset management company. The letter explained that we asked for this information as a shareholder of the company; the asset management company aimed to know more about the way the company managed CSR in their day-to-day practices for investment reasons. We thought that this financial request would be more considered by CSR Departments than academic research. Finally, to be sure that all companies would answer our questionnaire, we decided to adapt each questionnaire to the companies’ practices. Drawing on a common framework provided in Annex 2, we elaborated all questionnaires on our preliminary analysis to gather information we could not obtain when reading the CSR reports and the social ratings. For example, when we knew that there were CSR managers within the business units of a company, we asked further details about their role, their profile and the utilization of information they provided. If we did not know if there were CSR managers, we simply asked if there were some. This fitting showed companies that we knew about them and was a means to obtain information about their management systems we could not find elsewhere. In line with this approach, we also offered the possibility to CSR Departments to provide their answers during a telephone interview; which could be more convenient for them. 3.2.3. Data collection This action research approach proved to be successful. From September to December 2008, we collected the answers to the questionnaires. Thanks to our research methodology, we obtained a very high response rate since 87.5% of the CAC 40 companies responded to the survey1. This represented more than 90% of the capitalization of the CAC 40. This high rate
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Because the merger of GDF and SUEZ was still recent at the time of the study, the merger of the teams committed to CSR had not yet been effected. Therefore, it was decided, after discussion with GDF SUEZ, to include the responses corresponding to the two former entities, as well as the response of SUEZ ENVIRONNEMENT, new arrival in the CAC 40. This increased the number of studied companies to 41.

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response permitted the study to give a reliable overview of the current practices of the CAC 40 companies. In total, 36 companies participated in the study: 19 answered in writing, 17 during a telephone interview. The individual respondents belonged either to the CSR Department or its equivalent (75% of participants), to the Financial Communication and/or Investor Relations Department (sometimes SRI) (19.5% of participants), the remaining 5.5% of participants chose a joint answer between these two Departments. 3.2.4. Data analysis As we were receiving the questionnaires, we began to elaborate on the information we were obtaining. The objective of the study was not to rank the companies against each other, but to provide a ‘snapshot’ of the means expanded by the CAC 40 companies for their CSR policies. Since it was an exploratory study, we chose an open coding. Then, we analyzed each question of the questionnaires with the following procedure: 1. What are the major trends among the participating companies? 2. Are there unusual cases? 3. What are the reasons given by participants to justify their choices? In case of doubt of the comprehension of a given response and/or the inability to explain an unusual case, the company was called back. In this way, it was possible for most of the questions to shed light on the methods and reasons for the processes chosen. Each SRI Analyst coded all interviews; which provided three different coding. To achieve a consensus, the SRI Analysts confronted their point of view until they agreed on a common analysis. The typology of management systems provided by Simons (1995) was used as a theoretical device to make sense of the data. However, since the results of the study had first to be presented in a professional study, no theorization of the results was provided in the first report presented to the profession in March 2009; only the empirical findings were given (Arjaliès-de la Lande, Péan, & Tinel, 2009). Drawing on these findings, from April to June 2009, the SRI analysts developed new SRI criteria to focus more on the integration of CSR within management systems. Therefore, the first goal of the participative research action was met: a better practical understanding of the relationships between management systems and CSR was achieved. Nevertheless, the participative action-research was not yet finished. From now on, we needed to provide theoretical accounts of the empirical findings to expand the existing literature. 3.2.5. Theoretical accounts of empirical findings As a result, the last stage of the research consisted of analyzing a second time the empirical findings with the theoretical framework provided by Simons (1995), more particularly, the use of diagnostic and interactive systems. As this theoretical framework had been used as an analytical tool since the beginning of the study, it appeared to be a relevant device to give theoretical accounts of the empirical findings. This last stage was a common work between two of the three SRI Analysts: the SRI Analyst who previously worked in a social rating agency and the one who conducted a Ph.D. thesis, who, in the mean time, decided to dedicate full-time to research. As required by the participative action research, the analysis of the data was the result of a co-construction between the practitioner and the researcher. Hence, the theorization and the presentation of its findings in this paper achieved the process of participative action research: new knowledge was generated in order to contribute to scientific knowledge. These findings are presented in the following section.

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4. Study findings 4.1. CSR is increasingly perceived as being part of companies’ strategy 4.1.1. Internal motivations One of the most interesting findings of the study is that the importance of CSR for multinational companies does not seem to be questioned anymore. Indeed, all companies claim their interest to integrate CSR issues into their strategy. According to them, CSR has progressively become a strategic element to consider when making strategic decisions. With this in mind, we have noticed that all companies have created a CSR Department and most of them have decided to give the CSR Department a strategic place within the company. Thus, only 12%1 of them have chosen the Communication Department as a host Department. Instead, 55%1 of companies have subordinated the CSR Department to management or presiding authorities having a decision-making role at the group level. Different reasons are put forward to justify this claim: internal and external motivations. Regarding internal motivations, three types of reasons can be found. ? Source of innovation: CSR is said to be a means to permit the survival of companies in the long-term. Thus, although most companies still perceive CSR as being a source of cost – indeed, very few of them evoke CSR as being a direct source of revenues –, two-thirds of companies now see CSR as a necessary investment to guarantee the future success of business. ? Leverage for organizational learning: CSR is deemed to contribute to the improvement of the companies’ efficiency by playing a role of internal leverage for change. In other words, by analyzing the CSR dimensions of their activities, companies would get a better understanding of their environment and of themselves. Different examples have been given to illustrate this trend. From a general stance, companies think that CSR has permitted the generation of new innovations, a better communication within the group and the improvement of their management processes. Therefore, CSR is deemed to generate new strategic opportunities. ? Values’ conveyor: companies use CSR as a means to develop their corporate culture by federating their employees around shared values as well. This directly refers to the goal of beliefs systems described in the previous sections. 4.1.2. External motivations When explaining external motivations for the importance of CSR in their strategy, companies have also given three main reasons: ? Clients’ demands: companies see CSR as being increasingly a compulsory demand to meet to keep surviving in terms of business. This demand takes the form of legal requirements (e.g. New Economic Regulations act and carbon emissions) and clients’ demands, principally for the invitations to tender (e.g. ISO certifications). In other words, CSR would increasingly become a necessary ‘pre-requisite’ for companies to maintain their business. Then, by anticipating the future demand for CSR, companies would increase their competitiveness. ? Legitimacy concerns: CSR also appears to be an essential dimension of the relationships of companies with their environments. As the pressure of external
1

These percentages concern only 33 of the 36 interviewed companies.

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stakeholders for CSR increases – mainly among NGOs and civil society –, companies aim to integrate CSR issues into their strategy to maintain their legitimacy. CSR is namely seen as a way to better manage risks, namely at the governance, security and reputational levels; which should permit a better economic performance in the long-term. Deeply concerned by the groundless criticism of certain external stakeholders, the majority of companies prefer now building a dialogue with key external stakeholders chosen for their competence and their willing attitude. Surprisingly, the pressure of shareholders, trade-unions, social rating agencies and SRI investors has not been described by companies as being a key element for implementing CSR into their strategy. Indeed, it seems that they do not perceive these stakeholders as threatening their license to operate. ? Brand policy: lastly, CSR has become an important means to attract young graduates. Then, investing in CSR would permit the selection of the most talented employees, which should contribute to the future economic performance of companies. These three external reasons clearly relate to the necessity for companies to adapt their strategy to their environments. More precisely, they refer to the strategic uncertainties companies must face to survive; strategic uncertainties that interactive systems should need to address. Therefore, CSR appears to be a key element of the CAC 40 companies’ strategy. According to them, the role played by CSR in business is twofold. On the one hand, it permits the survival of companies in the long-term by generating new strategic opportunities and improving the existing organizational processes. This leverage for change refers to the emergent aspects of strategy. On the other hand, CSR is increasingly perceived as being a compulsory demand that all companies must meet to maintain their business. Then, companies aim to control the CSR dimensions of their strategy to permanently adapt to their environment. This pursuit of CSR goals due to external requirements relates more to the intended strategy of companies. 4.2. But the integration of CSR in practice remains limited 4.2.1. At the intended strategy’s level Although all companies claim that CSR has become an important aspect of their strategy, CSR Departments themselves seem to acknowledge that the integration of CSR in practice remains limited. Thus, even if certain companies have integrated CSR into their strategic plans, most of the CSR Departments appear to face difficulties when implementing CSR policies into their group. Two main elements seem to explain these problems: ? CSR is perceived as being meaningless by managers and employees: the first reason relates to the difficulties for local managers and employees to implement the intended strategy regarding CSR. Indeed, as CSR policies are most often decided and formalized at the top management level, local managers and employees do not succeed in making sense of a strategy which seems to be imposed by the ‘top’. ? Lack of local adaptation: moreover, because of external pressures, the priorities, actions and indicators of CSR policies are often chosen in function of the most important external requirements companies need to meet in order to maintain their business. Yet, most often, this identification process of CSR issues obeys logic of external conformity to existing indicators such as the Global Report Initiative (GRI)’s ones (2006). Therefore, while CSR is first described as leverage for 13

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internal change, this external focus tends to neglect the intrinsic features of companies’ activities and local particularities. For example, 55% of companies have decided not to adapt their CSR policy to geographical particularities, namely cultural and local. Thus, CSR goals are generally identical in all countries. This external conformity prevents from local adaptation and appropriation of these issues by local managers and employees. As a result, CSR policies often do not make sense for local managers and employees, nearly a formality to meet. Therefore, the discrepancy between the external focus of the intended strategy regarding CSR and the operational practices of companies contributes to explain the limited integration of CSR in practice. 4.2.2. At the emergent strategy’s level The second dimension refers to the emergent strategy of companies regarding CSR. It can be described as a side-effect of the difficulties that many local managers and employees face when implementing the intended strategy. To comprehend this second problem requires getting a better understanding of the mechanisms through which a CSR policy is decided and implemented. This process is described below. ? Limited managers’ commitment: although many local managers difficulty integrate CSR into their practices as they often perceive CSR as not being of major importance for business, it does not mean that they do not participate in the decision and implementation process of CSR policies. Instead, mainly all CSR Departments aim to integrate local managers when defining the priorities of the intended strategy. However, this participation is often limited to the choice of the general CSR commitments for the company, which refers to the first phase of a CSR policy. Thus, when CSR policies are effectively developed, namely through the choice of prior actions and the creation of management systems, the CSR Departments and the top management remain the principal actors. Yet, surprisingly, whereas local managers have rarely participated in this second phase, they are required to play a key role in the third phase of the implementation of CSR policies. Among other demands, they are expected to communicate the CSR policy to their employees, to implement the prior actions decided by the CSR Department and the top management and to provide them with the required CSR reporting. However, the partial participation of local managers in the CSR policies’ decision and implementation process raises two major problems. On the one hand, the lack of participation of local managers in the selection of prior actions contributes to explain their reluctance to implement the intended strategy. Indeed, they are more likely to perceive CSR as a formality imposed by the ‘top’ than a lever for improving business. On the other hand, it prevents local managers from making the most of emergent strategic opportunities as they often judge CSR to be meaningless in terms of business. As a result, they are less likely to innovate in terms of CSR. ? Lack of feedback: feedbacks from local managers regarding the implementation of CSR at local levels are often informal, depending on the personal relationships between the local managers and the CSR Departments. This prevents from a systematic control of the implemented strategy, and, as a result, from the implementation of corrective actions. Therefore, when certain local managers innovate in terms of CSR, mainly for personal reasons, CSR Departments face difficulties to practically elaborate on these innovations usually known as ‘CSR 14

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best practices’. In other words, due to the current priority of the intended strategy regarding CSR, few companies have succeeded – mainly for time and practical reasons – to organize a feedback system within the whole company to effectively make the most of new strategic opportunities generated by CSR. Therefore, the ‘bottom-up’ aspect of strategy regarding CSR has not yet been systematized. Thus, even if local managers are recognized as playing a key role when implementing the intended strategy and generating the emergent strategy regarding CSR, their participation remains partial. This contributes to explain why the integration of CSR in practice is still limited. As the difficulties to implement the intended strategy and to generate the emergent one suggest it, most of problems namely originate from the lack of appropriate management systems. On the one hand, companies tend to focus on diagnostic systems at the expense of interactive systems. On the other hand, the existing systems remain partial in their elaboration and in their use. To get a better understanding of this phenomenon, the next sections describe the management systems used by companies to integrate CSR into their strategy. 4.3. The domination of diagnostic control systems: CSR as a top-down strategy 4.3.1. Diagnostic systems dominate First of all, the study has clearly demonstrated that companies are willingness to integrate CSR into their management systems. For this purpose, they have developed both diagnostic and interactive systems to drive their CSR policies. This dedication of significant means to CSR argues in favor of a strategic approach of CSR. However, due to the necessity for companies to meet the external demands of clients and stakeholders, diagnostic systems still dominate. Confirming what previous research has demonstrated (Capron & QuairelLanoizelée, 2004, 2005; Durden, 2008; Ittner & Larcker, 2003; Quairel, 2004), companies are likely to adopt a ‘compliance’ approach of CSR by adapting to their environment. In other words, they aim to provide stakeholders with a ‘CSR reporting’, to manage their risks and to give ‘evidence’ of their CSR behavior by complying with ‘CSR certifications’. These systems refer to a top-down approach of strategy which consists of implementing the decision chosen by the top management with the help of the CSR Department (i.e. intended strategy). Within this framework, diagnostic systems must reduce the opportunity space of managers and employees to control the coherence between the implemented strategy and decisions (Anthony, 1965; Simons, 1995). 4.3.2. Diagnostic systems’ examples To illustrate this trend, the three diagnostic systems which have been found the more often among companies are described in this section, to know: 1) a CSR reporting system; 2) a suppliers’ behaviors control system; and 3) the ISO 14001 certification. ? CSR Reporting System: the main diagnostic system used by companies to drive their CSR policy can be described as a ‘CSR reporting system’. Its goal is to provide the group with a relevant and consolidated CSR reporting. This objective has been identified as being one of the three main tasks of a CSR Department; the other two tasks consisting of maintaining the consistency of the CSR policy at the group level and diffusing within the group the CSR best practices identifying at local levels. To support CSR reporting, information systems are largely used. For that purpose, 63% of companies have chosen to develop a specific information 15

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system for CSR which gathers the social, environment and social aspects of reporting. In contrast, 29% have adapted an existing information system by adding CSR criteria to economic ones whereas 8% have developed separate systems for environment and social issues. The reasons for choosing between a new CSR specific tool and the integration of an existing system differ from one company to another. Certain companies advocate integration in order to place the CSR indicators at the centre of practice, same as the financial indicators. Others prefer using specific tools because they do not consider existing systems to be well adapted to CSR reporting. Nevertheless, all companies have such systems implemented, more or less detailed. The CSR Department is usually responsible for collecting the data and communicating the CSR reporting to the top management and to the stakeholders, namely through the CSR reports. Surprisingly, the development of a CSR reporting system is often one of the first actions carried out upon implementing a CSR policy. In other words, companies often aim to provide stakeholders with a CSR reporting before conducting strategic actions at operational levels. This choice can be explained by three factors. Firstly, companies have been required since the New Economic Regulation (NRE) act in 2001 to account for the environmental and social impacts of their activities. Then, CSR has first been perceived as being an external requirement to meet. Secondly, when developing a CSR policy, one of the first actions conducted by a company – after creating a CSR Department – is to ‘audit’ what has already been done to choose the prior actions to conduct. Moreover, the existence of data permits to make CSR issues ‘visible’ within the companies, following the idea that ‘you manage what you measure’. For example, pollution becomes more tangible as carbon emissions are measured. Then, implementing a CSR reporting system is a means to communicate to managers and employees the strategic importance of CSR for the company. By requiring their participation in the data collection, the CSR reporting system is also deemed to favor the commitment of managers and employees to the CSR policy. Lastly, regarding the novelty of CSR for companies, CSR Departments have been more likely to draw on existing indicators to create their policy. Indeed, for a company which has just launched a CSR reflection, organizing CSR reporting is not an easy task. However, several standards have been a precious help for this purpose such as the Global Compact Principles (United Nations - Global Compact, 2009), the NRE act and the GRI guidelines (2006). Thus, 61% of companies use such standards when starting to identify the CSR priorities for their companies. Therefore, the implementation of the CSR reporting system has a structuring impact on the company. It provides it with the first standards and goals of the group’s CSR policy and aims to control that the intended strategy of company is well implemented at local levels. This refers to the classic role of management systems (Anthony, 1965). ? Suppliers’ behaviors control system: this system aims to assess the CSR aspects of the companies’ suppliers. It has first been developed with a risk approach. Indeed, regarding the increasing pressure of stakeholders and the potential impacts of CSR ‘scandals’ such as the non respect of human rights by suppliers, companies have aimed to prevent from CSR problems among their supply chain. For example, 57% of companies carry out a systematic assessment of their suppliers via questionnaires and/or specific questions on CSR issues and/or criteria in invitations to tender (rarely exclusive) and/or voluntary or contractual commitments. 25% of companies complete this examination by supplier audits that they conduct alone or in partnership with other companies using the same 16

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suppliers, or via an independent organization. Through this system, companies require suppliers to conform to their CSR requirements and to give evidence of their compliance. These goals directly relate to the three characteristics of a diagnostic system: measuring the outputs of a process, comparing them with existing standards and conducting correcting actions. However, many companies question the efficiency of such a control system since some suppliers do not succeed in meeting the requirements. Moreover, the cost of audits compared with their usefulness is questioned as well. Facing these problems, certain companies are now shifting from a diagnostic approach to an interactive one. On the one hand, an increasingly number of companies perceives this management system as a means improve the existing practices through the reduction of costs (e.g. decrease in energy consumption). On the other hand, companies are more likely to use this system as a means to build long-term relationships with their suppliers, which should improve management processes. For example, the visit of factories organized when conducting audits are increasingly perceived as a means to share knowledge and best practices. Therefore, whereas the control system of suppliers was originally developed with a diagnostic approach, it seems now to act as leverage for organizational change. The interactive aspects of systems become more important than the strict control of suppliers. ? The ISO 14001 Certification (International Organization for Standardization, 2004): adopted by 60% of companies, the ISO 14001 standard was launched in 1996 and prescribes the requirements relative to an Environmental Management Systems (EMS). This system differs from the two previous ones as it is dedicated to only one aspect of CSR: environment and consists of complying with existing standards. This certification process is described by companies as a means to give evidence of their good CSR behavior regarding environment. This certification is namely encouraged by clients through invitations to tender. This external requirement explains why 100% of companies which belong to the industrial sector are certified. Then, the development of such a diagnostic system is motivated by compliance motivations. This contributes to explain why 40% of companies do not want to develop an ISO certification. On the one hand, they do not want to implement a costly system if clients do not demand it formally, as it is often the case for service companies. On the other hand, they prefer developing their own system instead of adopting one which has not been explicitly framed on their characteristics. The last explanation refers to the necessity for companies to adapt their diagnostic systems to their intrinsic features. 4.3.3. Diagnostic systems’ side-effect These three examples of diagnostic systems provide interesting insights to get a better understanding of the problems described in the previous sections when implementing CSR policies. First of all, they illustrate the importance for companies to meet the external requirements of clients and stakeholders. Namely, the focus on CSR reporting contributes to explain why CSR can be perceived as being first a matter of communication; companies aim to demonstrate that they have adopted a CSR policy. The side-effect of this external motivation is the lack of adaptation of diagnostic systems to operational practices. Indeed, the use of existing standards such as the GRI guidelines and the ISO certification nurtures the discrepancy between the CSR policies’ goals and the practical issues. Moreover, the focus of companies on the management of risks contributes to drive the attention of managers on control aspects instead of encouraging local innovations. In other words, by developing such 17

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diagnostic systems, companies are more likely to adopt a compliance approach of CSR at the expense of leverage for organizational change, which contributes to prevent from improving existing practices. Therefore, the focus on diagnostic systems at the expense of interactive systems is contradictory with the will of companies to use CSR as means to favor organizational learning. This participates to explain why CSR has not yet been integrated in practice whereas it is deemed to be a strategic element for the long-term survival of companies. 4.3.4. Diagnostics systems’ limits Moreover, the diagnostic systems implemented by companies remain partial and their efficiency limited. As the current questioning of the control of suppliers illustrates it, the diagnostic systems used to drive CSR policies face a number of problems: ? Lack of relevance and exhaustiveness: on the one hand, companies encounter difficulties to provide clear, exhaustive, reliable and relevant indicators of CSR; some characteristics a diagnostic system must have to be considered as being efficient (Simons, 1995). These problems are principally due to the novelty of CSR issues and to the difficulties to measure such intangible assets. Moreover, CSR Departments have difficulties to implement a clear reporting protocol explaining guidelines and representing a helping tool for people in charge of providing data. Yet, although reporting protocol are reviewed by external auditors and information systems are used, reporting processes are not enough explicit. Data cannot therefore be considered as reliable, which prevents from good feedback process (cf. infra). ? Lack of alignment with companies’ strategic goals: a diagnostic system should force managers to focus on the strategic objectives of the intended strategy. Therefore, it has to be mapped out in accordance with these objectives. However, in contrast with the diagnostic systems developed only for economic purposes, CSR diagnostic systems are often created in a separate way, as the lack of participation of local managers in the CSR policy illustrates it. Thus, the upward flow of CSR data is carried out, most often, separately from the financial data and is driven by the CSR Departments. This separation between the strategic goals of companies and their CSR goals is namely illustrated by the lack of incentive systems. Whereas incentive systems are deemed to be essential to motivate managers, more than 63% of companies have not developed financial incentives in relation with the achievement of CSR goals. For the companies which have developed such systems, incentives remain weak and usually concern CSR criteria which are deemed to directly impact – namely, financially speaking – the activities of companies such as energy consumption. The absence of a specific budget dedicated to CSR actions (more than 49% of companies do not have a budget dedicated to CSR as such) also explains why managers can be reluctant to implement such actions. Indeed, they are often required to pay for CSR actions on their own budget. This reluctance is also a consequence of the lack of participation of managers in the selection process of CSR actions and the resulting feeling that CSR is a ‘costly’ formality to meet, useless for business. ? Lack of feedback: lastly, very few companies have systematized the feedback aspects of their diagnostic systems. Yet, the capacity to identify the diversion compared with the intended strategy and the implementation of corrective actions is one of the main tasks of a diagnostic system. However, although a control of the CSR reporting system exists among 87% of companies, CSR Departments 18

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acknowledge that it remains difficult to control the effective practices. Indeed, the CSR reporting’s control usually focuses on the process of reporting and not on the collected data. The weaker commitment of top management during the follow-up of CSR policies also explain why CSR Departments are less focused on corrective actions. Nevertheless, to overcome these problems, certain companies are now conducting audits with the help of social rating agencies. Finally, this lack of feedback is also explained by the fact that the implementation of CSR policies is a recent phenomenon. Indeed, more than 90% of companies have created a CSR Department as such after 2000. As a result, companies have not had enough time to assess their CSR policies. In other words, the feedback loop of diagnostic systems has not yet occurred. Thus, companies have been more likely to use diagnostic systems in order to meet the external requirements regarding CSR. However, these systems remain partial and limited, which contributes to explain why companies face difficulties when integrating CSR in practice. Moreover, these diagnostic systems have often been developed at the expense of interactive systems. Yet, interactive systems are necessary to permit CSR to favor organizational learning. However, this focus on diagnostic systems does not mean there is no interactive system at all. Indeed, as the example of the control of suppliers shows it, when being used, diagnostic systems can transform into interactive systems. In other words, it is not because a system is thought with a diagnostic approach (i.e. to reduce the opportunity space of managers and employees), that it cannot be used as a means to learn and improve the existing practices. This interactive use depends on the will and ability of local managers and employees to make sense of the CSR diagnostic systems. However, as it has been previously shown, this commitment remains limited, which explains why the interactive use of diagnostic systems remains also limited, with some exceptions such as the control of suppliers and the reduction of energy consumption. Nevertheless, companies can also develop interactive systems as such. With this in mind, the following section analyses the actions conducted by companies to transform CSR in a lever for change as they aim to do it for strategic purposes. 4.4. The limits of interactive control systems: the difficulties of CSR at the bottom 4.4.1. Interactive systems’ goals and examples Interactive systems aim to favor organizational learning and to generate strategic opportunities by providing managers and employees with a space for dialoguing and sharing information. Such systems must favor a bottom-up approach of strategy by permitting local managers to react when adapting the intended strategy to their practices. For this purpose, companies have developed different interactive systems. ? Working groups: among other interactive systems, the use of working groups is the most used. A working group is usually created to discuss a particular topic which concerns CSR, for example, the development of green products or the reduction of carbon emissions. Sometimes, some working groups aim to generate new ideas, which imply brainstorming sessions on various topics. With this in mind, 23% of companies call on a regular panel of external stakeholders; which permits them to ensure that they meet their demands. This type of consultation is usually considered as being an interesting means to identify CSR issues and/or to ‘validate’ them. Local managers aim to make the most of these working groups to share their difficulties and to learn from the experience of others. This process 19

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refers to what is known as the exchange of the ‘best CSR practices’. These working groups also permit to expand the knowledge of companies by interviewing experts of CSR. Different internal and external stakeholders usually participate in the working groups. External stakeholders are chosen for their legitimacy with respect to the activities of the company and their ability to work in a collaborative way. Among the stakeholders, NGOs are the organization preferred (55% of companies), because of their expertise and of the legitimacy they bring. However, four companies complain about the lack of relevant NGOs regarding their activities. The other stakeholders identified by companies are social rating agencies (10%), members of the civil society (7%) and auditors (5%). The form taken by these working groups differs according to companies: formalization of these consultations through official partnerships (25%), organization of regular meetings without listing it as an official partnership (25%), occasional consultation (43%), and relationships with stakeholders in a decentralized way (7%). Whatever their form, these consultations are always perceived as being a sign of transparency and openness from companies. Moreover, they participate in developing the organizational knowledge of companies. ? Intranet information systems: also widely in-use, the purpose of these systems is twofold. On the one hand, they aim to provide feedback on existing practices, an aspect which is too weak among the diagnostic systems in use. On the other hand, they must permit the sharing of knowledge and good practices. In other words, they aim to provide a space for dialoguing and sharing information to generate organizational learning. For that purpose, 72% of companies have developed formal interactive systems such as electronic intranet systems where managers and employees can exchange their experiences. Among them, a few companies have developed intranet systems dedicated only to the purchasers who face specific problems regarding the control of suppliers as the previous section shows it. Companies also use informal exchange systems, namely through regular meetings with the CSR Correspondents responsible for giving feedback. The implementation of such systems demonstrates that companies do not consider CSR only as a matter of communication purposes. In contrast with previous research, it shows that companies aim also to use CSR as leverage for organizational change. This argues in favor of a strategic approach of CSR. 4.4.2. Interactive systems’ limits Nevertheless, as for the implemented diagnostic systems, certain limits exist: ? Lack of resources: first of all, these systems are limited in comparison with the time and money allocated to the diagnostic systems. For example, the CSR Correspondents usually have another job at the same time, which limits the time and the power they have to integrate CSR in practice. As a result, CSR remains perceived as being something which adds to business as usual, and, therefore, as not being of strategic importance at local levels. ? Lack of cross-functional approach: the separation between CSR issues and economic aspect of business is also nurtured by the focus of the working groups on certain CSR issues. In practice, companies have difficulties to conduct CSR projects which imply different Departments. As a result, it remains difficult to develop CSR policies which cross over the whole group whereas CSR issues often required such a global approach as the management of carbon emissions illustrates 20

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it for example. Moreover, only few managers and employees participate in the systems. This namely contributes to weakening the potential impact for change of such systems. ? Lack of managers’ commitment: first of all, top management does not give a lot of attention to the information generated by such debates. Yet, for an interactive system to be efficient, it is a major importance that all managers be attentive to the proposed ideas in a permanent way. This refers to the limited commitment of the top management in the feedback process of CSR policies. Thus, even if 44% of the CSR Departments give a formal feedback to their management on a regular basis, the use of the information provided is unclear. Indeed, it does not seem that corrective actions are taken regarding the feedback. Lastly, as previously shown, managers and employees have difficulties to make sense of the CSR policy in practice. This limited comprehension prevents them for participating in the debates. In the same vein, the lack of incentive systems does not encourage them to spend time on such considerations. As a result, local managers and employees are likely to consider CSR as a personal commitment separated from their job. Because of these limits, the use of interactive systems is partial and limited, which also contributes to explain why CSR has not yet led to profound organizational change. Therefore, companies have developed interactive systems to permit CSR to act as a lever for organizational change, which illustrates their will to integrate CSR into their strategy. Nevertheless, the means they dedicate to interactive systems are limited in comparison with diagnostic systems. Moreover, the limited commitment of the top management and local managers combined with a lack of feedback weaken the force of such systems to drive strategic renewal. As a result, although companies describe CSR as being of major strategic importance for their survival in the long-term, the lack of appropriate management systems seems to prevent them from integrating CSR in operational practices. This limitation does not permit us to argue in favor of a change of business model as the following section explains it. 5. Discussion and conclusions To argue in favor of a change of business model of the CAC 40 companies would have required us to find evidence of significant change due to CSR among the core aspects of their business, including strategies, organizational structures, and operational practices. With this in mind, we believe that the analysis of the management systems of the CAC 40 companies has provided an interesting means to assess whether and to what extent CSR has penetrated into business. Indeed, since management systems are necessary to drive strategic renewal (Simons, 1995), they are deemed to witness the will and the commitment of companies to integrate CSR into their strategy. However, despite the fact that companies claim that CSR is a strategic element for maintaining their business, our study of their management systems cannot demonstrate that CSR has led to profound organizational change in practice. This conclusion results from different observations. Firstly, CSR remains an issue separated from business as usual. On the one hand, most of management systems used to drive CSR policies is not integrated within the existing management systems dedicated to economic purposes. On the other hand, the majority of managers and employees continue to perceive CSR as being something different from business, a formality to meet for legitimacy purposes. This impression is namely due to the discrepancy between the management systems in-use and the operational preoccupations of local managers. The lack of incentive systems also contributes to this feeling. As a result, the integration of CSR in practice remains limited. Secondly, 21

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although all companies have decided to dedicate significant management systems to CSR issues, the means they have committed to it do not meet the challenges they face. The CSR Departments are too small to drive CSR policies among multinational companies which count hundreds of thousands of salaries. The little time that local managers can dedicate to CSR and the lack of specific budget for this purpose also explain the limited impact of CSR on organizational practices. Thus, even if it cannot be longer argued that CSR is only a matter of communication or a ‘niche’ strategy (Vogel, 2005), it seems that companies have not yet allocated the necessary resources for transforming it into a strategic goal. Thirdly, when management systems are implemented to integrate CSR into strategy, companies focus on diagnostic systems at the expense of interactive systems, which prevents from organizational change and generating innovations. Moreover, the systems in-use are partial and incomplete, namely at the feedback level. Yet, without feedback process, it appears difficult to improve the existing practices. As a result, it can be imagined that the existence of inappropriate management systems contribute to explain why CSR has not yet led to a change of business model. Lastly, CSR is still emerging and companies face many difficulties to integrate it into their business. Then, due to their lack of experience regarding these issues, companies still lack from relevant management processes and indicators to drive CSR policies. Moreover, the perspective of CSR as being a strategic element for the survival of companies is still a hypothesis for the future which has not yet been borne out by the evidence. Therefore, multinational companies no longer question the fact that CSR will be a strategic aspect of their future business model but this change is still ongoing and has not yet led to a change of business model. Regarding the relationships between management systems and CSR, this study permits the expansion of the existing literature by offering a better understanding of how companies use management systems to drive their policies. Firstly, the study has shown that despite belonging to different sectors, the CAC 40 companies present important similarities when conducting their CSR policies. Thus, whereas CSR issues are usually developed with a sector approach, it seems that the management systems used by companies depend also on their size and country; some findings which enrich existing research on the factors which influence CSR reporting (Adams, 2002). Secondly, this study has permitted us to show that management systems are necessary media for integrating CSR in practice. Without appropriate diagnostic and interactive systems, companies are unlikely to meet their external requirements, manage their risks and elaborate on strategic opportunities generate by CSR. This should encourage further research on the role of management systems when implementing CSR policies. Lastly, it has demonstrated that companies do not only use diagnostic systems to drive their CSR policies. In other words, even if providing a CSR reporting is of major importance of companies, they also aim to transform their practices according to CSR concerns. The interactive use of diagnostic systems and the implementation of interactive systems as such argue in that sense. Companies do not perceive CSR only as a formality to meet and try to integrate CSR into their strategies. This finding nuanced previous research on the integration of CSR within management system which described CSR as being quite exclusively a matter of communication (Capron & Quairel-Lanoizelée, 2005; Quairel, 2004). However, as previously explains, the management systems in-use still need some refinement to effectively permit this strategic renewal. Among others, there is a need for more interactive systems to encourage innovations and permit a continuous improvement. More feedback must be favored as well. This conclusion confirms previous research on the importance to use both types of management systems (i.e. diagnostic and interactive) to drive CSR policies (Adams, 2002; Durden, 2008; Zwetsloot, 2003). These findings should encourage practitioners to elaborate more on the management systems they use to drive CSR policies. Indeed, the study has demonstrated that management 22

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systems have structural impacts on organizational practices, and reciprocally. Not only do management systems provide the means for transforming practices, but they are also transformed by practices. With this in mind, much thought should be given to the management systems used to integrate CSR into practice. However, this observation should not make think that a perfect management system exists, and that companies should utilize it. Instead, the study illustrates that management systems must be adapted to the intrinsic features of companies for all managers and employees to make sense of it. This could not be obtained without the commitment of local managers to their realization. The acknowledgment of companies of the limits of their management systems and their aim to improve them in the future are elements which could make think that they are aware of the necessity to focus more on these aspects. Therefore, this study has aimed to contribute to the emerging body of knowledge about the penetration of CSR into the business model of multinational companies. The analysis of management systems has provided an interesting means to explore this question. However, due to the choice of questionnaires, the study did not permit us to directly access companies’ practices. Nevertheless, regarding the important amount of information we have obtained to conduct the analysis, we believe that the study has provided us with the current trends among the CAC 40 companies regarding the use of management systems to drive CSR policies. However, since our goal was to give an overview of this set of companies, we have not elaborated in the paper on the particular cases we have found. It could be interesting to understand why some companies differ from the current trends and whether this choice impacts their practices. Nevertheless, we think that this study has proved to complement current research conducted on the use of management systems in particular case studies by providing an overview of the dominant practices among one set of companies. Although one must be careful in generalizing from such a focused sample, this study has allowed some tentative conclusions with regards French multinational companies. With this in mind, it would be interesting to conduct the same type of study in different countries, different sectors and among different companies such as small and medium enterprises. This should permit a a better understanding of what influences management systems regarding CSR and whether CSR acts as a lever for change of business model.

Acknowledgments We gratefully acknowledge Rémi Tinel for his precious help when conducting the study, Macif Gestion for permitting us to use the study findings for academic purposes and the Sustainable Finance and Responsible Finance Chair of Ecole Polytechnique for its partial financial support.

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ANNEX 1 – LIST OF COMPANIES BELONGING TO THE CAC 40 COMPANY ACCOR AIR FRANCE -KLM AIR LIQUIDE ALCATEL-LUCENT ALSTOM ARCELORMITTAL AXA BNP PARIBAS ACT.A BOUYGUES CAP GEMINI CARREFOUR CREDIT AGRICOLE DANONE DEXIA EADS EDF ESSILOR INTERNATIONAL. FRANCE TELECOM GDF SUEZ L'OREAL LAFARGE LAGARDERE S.C.A. LVMH MICHELIN PERNOD RICARD PEUGEOT PPR RENAULT SAINT GOBAIN SANOFI-AVENTIS SCHNEIDER ELECTRIC SOCIETE GENERALE STMICROELECTRONICS SUEZ ENVIRONNEMENT TOTAL UNIBAIL-RODAMCO VALLOUREC VEOLIA ENVIRONNEMENT VINCI VIVENDI ACTIVITY SECTOR Hotels Airlines Commodity Chemicals Telecommunications Equipment Industrial Machinery Iron & Steel Full Line Insurance Banks Heavy Construction Computer Services Food Retailers & Wholesalers Banks Food Products Banks Aerospace Conventional Electricity Medical Supplies Fixed Line Telecommunications Multiutilities Personal Products Building Materials & Fixtures Publishing Clothing & Accessories Tires Distillers & Vintners Automobiles Broadline Retailers Automobiles Building Materials & Fixtures Pharmaceuticals Electrical Components & Equipment Banks Semiconductors Waste & Disposal Services Integrated Oil & Gas Retails Industrial Machinery Water Heavy Construction Broadcasting & Entertainment

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ANNEX 2 - QUESTIONNAIRE’S FRAMEWORK CHOOSING A CSR POLICY Trigger for the implementation of a CSR policy Originating authority Subordination of Sustainable Development Departments Identification process of CSR issues Integration of Operational Departments in the definition of CSR commitments Involved external parties consulted for the definitions of CSR commitments Type of external consultation ORGANIZING THE CSR POLICY Suggestion and orientation of the CSR policy Validation of the group CSR policy Choice of CSR reporting indicators Focus : ISO 14001 certification CSR budgeting Communication of the CSR policy to Managers Financial incentives for Managers DEPLOYING THE CSR POLICY Methods of deployment Local adaptation Feedback procedure of good practices MONITORING THE CSR POLICY Tools for relaying CSR data Focus : internal studies on the social climate Perimeter of CSR reporting Control of CSR reporting Integration of CSR indicators in management charts Upward flow of CSR data to General Management Focus : follow-up of suppliers Frequency of reevaluation of CSR commitments

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