*Extract* The construction industry: to what extent is corporate social responsibility a feature of strategic management plans?

Research extract (shortened version) of a Dissertation submitted to The University of Plymouth Business School

Submitted by Laura Budding, July 2012

 

 

 

The Construction Industry: to what extent is corporate social responsibility a feature of strategic management plans

Research Subject: Cbuild, a small building firm in Gloucestershire, England

 

Laura Budding

 

July 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acknowledgement

This paper could not have been possible without the contributions of the CEO of Cbuild – Mr Tim McGrath. Furthermore, the support of lecturers at Plymouth Business School has been invaluable. I would like to give thanks to Tim and the University of Plymouth.

 

  1. Methodology

The methodology will be structured in a way which aims to ensure validity and reliability by addressing the research philosophy, research approach and research strategy; as well as choosing an appropriate sample, data collection method and data analysis technique.

 

3.2 Research Philosophy

The methodology will be based on a phenomenological philosophy because of the nature of CSR as a concept; it is concerned with the opinions and perceptions of consumers and corporations.

 

3.3 Research Approach

Choosing the appropriate research method is vital in understanding the application and management of corporate social responsibility. The nature of the topic suggests the need for qualitative data collection; this is because it comprises of beliefs, feelings and values of both corporations and consumers. These are intangible aspects, and are therefore difficult to quantify and measure in certain terms.

Since the aim of this paper is to build on theory by making sense of qualitative data, the research method will be inductive. Traits associated with an inductive research approach include small samples and the study of human interaction with society and the environment, making this particular approach suitable and applicable to this investigation.

 

3.4 Research Strategy

The main research strategy is the use of case study material. ‘A case study focuses on the specific, relations and processes, holistic point of view, natural environments and it uses multiple sources when collecting data’ (Carlsson & Akertom, 2008). Robert K. Yin, a well-known case study researcher, defines the case study research method as an ‘empirical inquiry that investigates a contemporary phenomenon within its real-life context’ (Soy, 1997). He separates the case study research approach into three categories: exploratory, explanatory and descriptive.

This paper will use a combination of exploratory, explanatory and descriptive research. The purpose of exploratory research is to investigate a topic by collecting data in a particular research area, then to explore its relevance and meaning with regards to academic theory. This research method is one which provides a deeper understanding of the proposed topic, and thus forms a basis for future studies (Davidson and Patel, 2003). There will be an element of explanatory research since a connection exists between strategic management and CSR; it will therefore be necessary to scrutinise this relationship in order to understand whether there is a cause-effect component. Finally, descriptive research is mainly used to answer specific questions, and is usually focussed on examining fewer and smaller aspects within a large subject area; this is a fitting tool for aiding the process of developing the research questionnaire.

 

3.5 Sample Selection

The business chosen as the case study was Cbuild – a small construction company based in Gloucestershire, England.

 

3.6 Data Collection

Secondary information and data was collected in order to gain theoretical grounding around corporate social responsibility in the context of strategic management.

The primary data collection consisted primarily of interviews and observations. Open questions were presented to the CEO of Cbuild to invite qualitative, detailed and unbiased information.

 

3.7 Data Analysis

In terms of analysing the data collected, the most appropriate strategy is to use theoretical propositions. This means the findings will be analysed and discussed in the context of previous research. Yin (2003) suggested that this approach should be used when a considerable amount of research already exists within the chosen subject area.  In addition, he categorised case study analysis into two types: within case analysis and cross case analysis. Cross case analysis is a comparison of data from different cases and is therefore not applicable to this investigation. Therefore, within case analysis will be the method with which data will be analysed. This type of case study analysis facilitates the exploration of reality versus theory in that comparisons will be made between the case study and previous academic research.

 

 

  1. Findings

The findings will feature the significant and relevant data collected during the interview with Tim McGrath, CEO of Cbuild.

 

4.1 Company Description

Cbuild, a young and innovative company based in Gloucestershire, focuses on providing affordable, energy efficient solutions for commercial and residential properties.  This private limited company, headed up by CEO Tim McGrath, was first established in 1995; its priority was, and continues to be, to run a business which creates sustainable buildings, using a mix of new technologies and traditional skills. This company has been the focus of the investigation into the strategic management of corporate social responsibility.

 

4.2 Engaging in Corporate Social Responsibility

Perhaps the most significant finding, and one which suggests that the information provided was authentic, is the admission that CSR efforts are led by consumer demand. However, this statement from Tim McGrath; “promoting energy efficiency in important to me personally” (appendix 1), suggests that demand is perhaps not the only driver for CSR within Cbuild. McGrath may be exercising sustainability practices within his company so that they are in line with his own code of ethics.

Another significant finding, and one which is relevant to CSR theory, is that from the perspective of the CEO of Cbuild, there is not “a consumer willingness to pay the significant cost” (appendix 1) of taking the energy efficiency rating of houses to 100. In Tim’s view, consumers underestimate the costs and effort involved with making changes to properties. Later on in the interview though, he does admit that “comfortably off people are often willing to pay a premium to feel good about their purchases, but the real challenge is sustainable practices in mass markets” (appendix 1).

Tim McGrath believes that sustainability needs to be considered in order to be innovative and remain competitive in the current market; for this reason, he endeavours to integrate sustainability into the functionality of Cbuild. However, he does question and even suggests that his competitors’ merely use sustainability as a marketing scheme in order to promote an ethical image, rather than actually applying CSR strategies to operations or end products. Despite this strong viewpoint, Tim believed that, in general, “UK businesses get positively portrayed [in the media]” (appendix 1).

 

 

 

4.3 Managing Corporate Social Responsibility

In terms of management strategy for CSR in Cbuild, there is a lack of any formal model or system, yet that does not necessarily mean that CSR is not being considered. Tim McGrath believes that the best way to manage CSR is to “be up to date with the latest innovations in sustainability, ecology and efficiency so consumer expectations are met” (appendix 1).

When asked if there was a long term strategy for improving sustainability, Tim replied by saying “not really, improvements are consumer led, although the Government has set a 2016 target that I think is likely to be watered down” (appendix 1).

 

  1. Discussion

This section will draw on the findings and consider their relevance to the theory outlined in the literature review.

 

5.1 Engaging in Corporate Social Responsibility

The case study findings supports the ideas put forward by Edward Freeman and Donaldson and Preston (1995) relating to stakeholder theory. Tim McGrath, CEO of Cbuild, was upfront about the fact that sustainable approaches in his business are led by consumer demand, and are consequently conducted business in the hope of achieving optimised financial gain. He is therefore aiming to satisfy two major stakeholder groups; consumers and shareholders. It could be argued that stakeholder theory, although connected with the triple bottom line theory, concentrates more on satisfying people rather than the planet, and therefore aligns with priorities of Cbuild.

Tim McGrath’s acknowledgment that CSR efforts are consumer led gives the impression that profits are paramount, which in turn means that Drucker’s theory is supported to some extent in the context of the case study. In saying this though, it is more likely that Carroll’s pyramid of CSR reflects the values of Cbuild. This assumption is based on the fact that Tim McGrath’s primary desire is company profitability as well as energy efficiency, as reflected in his admission that energy efficiency is of personal importance. It is difficult for a CEO and manager, with the power and control that the role brings, to separate personal and corporate objectives. Therefore it is likely that philanthropic and ethical objectives are a concern of the business, even if they are deemed to be of lesser importance than economic objectives.

Based on the information collected in the interview, the corporate social responsibility ambition level appears to fit in with the synergic and holistic descriptions set out in the table entitled ‘The interrelationship of CSR framework and Pyramid of Corporate Social Responsibility’ (Carlsson & Akertom, 2008). This is because the social and environmental responsibilities are strategically used to create a competitive advantage and meet the corporation’s economic responsibility, and yet Cbuild still strive to create a corporate culture where CSR is integrated.

Although the main driver for Cbuild is consumer demand, the environmental impact of the work and materials used is still a consideration. As well as this, Tim McGrath states that “social housing has become a major part of the planning process” (appendix 1). This shows that both environmental and social factors influence the business, thus confirming that the triple bottom line theory has a place in business; however these influences could still be a result of demand. This is because consumers may not only be demanding energy efficient housing, but also want the construction process to be undamaging to the environment. Likewise, societal pressures for housing, due to factors such as increases in the population or high immigration, create a demand for housing in general.

Michael Porter’s differentiation strategy applies to Cbuild since the housing they provide is unique and different from others on the market. Furthermore, the environmental awareness in the construction phase adds to the individuality of the business. The two main risks associated with utilising a differentiation strategy is a change in consumer tastes and product or service imitation by competitors. Cbuild have entered a growing market and put tremendous effort into design, production and marketing, thus counteracting the possible risks. For this reason, as advocated by Porter’s theory, Cbuild should be benefiting from the differentiation strategy and so should be receiving a premium price for their products. In reality though, the houses are priced similarly to their identical Edwardian neighbours (energy efficiency rating 55), meaning that the energy efficiency rating of Cbuild homes holds no monetary value in the eyes of potential purchasers. Furthermore, it is worth noting that none of the four recent new builds produced by Cbuild have been sold.

Tim McGrath (2012) explains that, in his opinion, consumers are not willing to pay extra for energy efficient homes and do not appreciate the company costs incurred with regards to obtaining sustainable materials from suppliers or working in a way which limits adverse environmental impact. This is one explanation; however it is also important to consider the macro-economy when assessing purchasing habits. For example, during a recession, buying habits tend to alter so that people are less inclined to pay a premium for ethical products such as energy efficient houses. This theory would tie in with the statement made by Tim: “comfortably off people are often willing to pay a premium to feel good about their purchases” (appendix 1).

The news media tend to adopt a story if it has intrinsic audience interest and societal significance. Because of the nature of human intrigue, articles usually include corruption, poverty, health risks, human rights and security breaches; none of which a business would like to be associated with (ipsos MORI, 2007).Therefore, if a business is featured in the media, it is usually for an undesirable reason and results in close scrutiny of their policies and procedures. Companies claiming to be CSR conscious often get accused of using sustainability as a marketing ploy, rather than actually carrying out socially responsible practices.  Tim McGrath has a positive outlook with regards to the media, meaning his business is unlikely to have experienced any damaging reports. This may partly be due to the fact that the business is relatively new and modest in terms of turnover and employees, or alternatively Cbuild may not elicit any media attention or involvement because of the genuinely high standards it maintains. Regardless of the reasons, the media have not yet played a significant role in Cbuild’s decisions to engage in sustainable projects, nor has it been a factor in the continued management of CSR.

 

5.2 Managing Corporate Social Responsibility

The models and strategies for managing CSR, which were set out in the literature review, mainly acted as a management tool for identifying how CSR can be introduced to businesses, and whether there are resources available to maintain CSR efforts. This is perhaps why, in the case study interview, Tim McGrath stated that “there is no specific strategy or model used as a basis for managing CSR” (appendix 1), since Cbuild have already built a corporate culture around CSR and therefore have the means to maintain it without any negative financial impact.

Tim McGrath believes that the best way to manage CSR is to “be up to date with the latest innovations in sustainability, ecology and efficiency so consumer expectations are met” (appendix 1).   This indicates that sustainability and CSR in business is evolving and changing too rapidly for long term plans to be made.

When asked if there was a long term strategy for improving sustainability, Tim replied by saying “not really, improvements are consumer led, although the Government has set a 2016 target that I think is likely to be watered down” (appendix 1). This statement demonstrates that the management of CSR is not legally enforced, and that the business is already going beyond legislative requirements. This strengthens the earlier assumption that Cbuild is not engaging or managing CSR because they are compliance driven, but that they are a holistic and synergetic company.

In the interview, Tim McGrath admitted that sustainability reports are not produced. This may show a lack of dedication to the management of CSR. On the other hand, the size of Cbuild, with its limited shareholders and moderate turnover, indicates that the organisational structure is flat; therefore annual sustainability reports may be rendered unnecessary. The effort and cost involved with producing CSR records may outweigh the potential benefits.

For a company that prides itself on its energy efficiency and commitment to environmental sustainability, the absence of a consciously formulated CSR management strategy seems unusual. If the sales hinge on sustainability differentiation as a unique selling point, then logic would suggest that it is necessary to protect and maintain CSR quality by utilising a stringent and well-thought-out management technique. The most rational and realistic conclusion for this anomaly is that sustainability is depicted as being of the upmost importance to the company – they convey this message through publications and the interview process – but that the financial aspects are more crucial in actuality. Thus, dedicating time to the management of profits is more common practice. This conclusion is supported by the fact that Tim McGrath prepares profit and loss statements, but not sustainability reports.

 

  1. Conclusion

The conclusion will summarise the research and its implications. In addition, the data collection methods will be critically evaluated.

 

6.1 Corporate Social Responsibility

By studying the literature it is possible to grasp the concept of Corporate Social Responsibility and understand its various definitions and branches. Models and diagrams have been useful in illustrating the important elements of CSR. The triple bottom line is the main basis for corporate social responsibility, and so the visual representation of the triple bottom line theory helps to comprehend the CSR concept as a whole.

 

6.2 Engaging in Corporate Social Responsibility

The literature uncovered realistic reasons why companies engage in CSR; the main reason is the desire to be profitable through meeting consumer demand. However, organisations are founded and managed by people who have their own set of values, which may be rooted in social responsibility.  Therefore, there is a CSR caring ambition level, which integrates sustainability into the corporate culture and works in conjunction with profit driven ambitions.

Achieving the financial benefits associated with Porter’s differentiation strategy is a motive for engaging in CSR; however the case study has proven that differentiation strategy may not always result in increased profits. This could be because there is a lack of demand for socially responsible corporations. Though, it is more likely that external factors such as the recession have affected demand. This leads to the next finding – there is an obvious trade-off between the desire of a consumer to purchase sustainable products and the desire to obtain a similar product at a lower price. This decision rests on human behaviour and individual preference; to measure or deduce it in order to reach conclusions is difficult.

 

6.3 Managing Corporate Social Responsibility

Both the literature and the case study data suggested that specific, formal strategic management models are rare. The academic theory set out in the literature review related mainly to business management in general, with some integrated CSR elements. The cause for the lack of detailed information is likely due to the nature of the topic; there is an absence of a clear definition and the concept is constantly evolving. Furthermore, if CSR is not the primary concern for companies, managers may not require the use of CSR management plans. Therefore, if CSR management is of little interest to businesses, it will be of little interest to academics seeking to explore and research business management.

Tim McGrath seemed unconcerned with the fact that his company failed to employ a formal CSR strategic management strategy. If it is being considered on a daily basis and adapted as perspectives of CSR change and demand fluctuates, then it is perhaps not necessary to have a long term CSR management plan. The literature does however uncover ways in which companies can initially identify whether a commitment in CSR efforts is feasible in terms of resources and external factors. Models such as the SWOT analysis and Balanced Scorecard are effective in this process.

 

6.5 Implications for Future Research

This dissertation has provided a snapshot of CSR management within the construction industry in 2012; it would be interesting to conduct research in the future that can examine the evolution of the topic and study further changes in corporate management strategy.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7. Bibliography

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Bowman, C., & Asch, D. (1987). Strategic Management. Hong Kong: Macmillan Education Ltd.

Carlsson, J., & Akertom, R. (2008). Corporate Social Responsibility. Lulea : Lulea University of Technology .

Carroll, A. (2012). Corporate Social Responsibility: Evolution of a Definitional Construct. Business and Society, 268-295.

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Drucker, P. (2001). The essential drucker. New York: Harper Business.

Elkington, J. (1999). Cannibals with Forks: Triple Bottom Line of 21st Century Business. London: Capstone.

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Fairtrade Foundation. (2011). Facts and Figures on Fairtrade. Retrieved June 2, 2012, from Fairtrade Foundation: http://www.fairtrade.org.uk/what_is_fairtrade/facts_and_figures.aspx

Freeman, R. E. (1984). Strategic Management: A stakeholder Approach . Boston: Pitman .

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Greater Horizons . (2010, August 12). Pyramid of Corporate Social Responsibility. Retrieved June 1, 2012, from Greater Horizons : http://www.givingbetter.org/giving-blog/pyramid-corporate-social-responsibility

Grigsby, D., & Stahl, M. (1997). Strategic Management Total Quality and Global Competition. Oxford: Blackwell Business.

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Appendix 1: Interview Record

Is sustainability a core company objective?

Promoting energy efficiency is important to me personally, but my company has to be led by consumer demand. So far, I have seen little evidence that buyers understand the complex subject. There is lots of change required to meet the 2016 target that was set in a house building boom and I don’t think there is a consumer willingness to pay the significant cost to take houses from say 85 achievable now at little cost to 100, and I am not sure it is the best use of finite resources, when the efficiency of existing housing stock averages 55.

Do you believe that sustainability needs to be considered in order to remain competitive and innovative in the modern day business market?

It needs to be considered, but many companies see it only  as a marketing necessity, not a objective

How does the concept of sustainability influence the management of operations?

In the small sphere I have control over I like to hope that sub contractors and employees also take away and remember my  on site ideas of reducing waste and recycling and efficiency. The concept led me to try building in Stroud, that has a green reputation instead of Cheltenham or Cirencester.

To what extent to you believe that, in business, sustainable practices influence consumer purchasing?

Comfortably off people are often willing to pay a premium to feel good about their purchases. But the real challenge is sustainable practices into mass markets.

In terms of ethical practices – does the company you are connected with consider the economy, society and environment?  And which, if any, is the main focus?

The economy influences what I am able to finance. I would rather build quality houses I can take pride in. The environmental impact of the work and materials I use is a consideration. Social hosing has become a major part of the planning process. I find it hard to decide what is the best solution to mixing affordable housing and market value stock you need to sell.

Do you (or your company as a whole) devise and provide annual sustainability reports for stakeholders? (Also, please list your stakeholders).

No, its all in my head, my wife is the only other shareholder.

Do you have an accounting system?

I keep a record of the companies’ profits and losses. I also budget before undertaking any project.

 

Do the media provide an accurate and fair representation of UK business in relation to sustainable practices and attitudes? In addition, do you believe (as a generalisation) that businesses are portrayed favourably in publications relating to this issue?

Yes I think UK business  gets a positive portrayal  and consumers feel we have good safety checks and standards compared to foreign imports.

Is there pressure from shareholders to pay dividends, as opposed to investing in new sustainable projects?

Yes, for me to build a business and to keep me motivated, it has to be profitable. If I chose to re invest that profit to grow my business is a different question.

Does your personal views regarding the importance of sustainability match with those of the company you work for?

Yes

Does your business have a strategy for managing CSR?

There is no specific strategy or model used as a basis for managing CSR. Usually the most effective method is to be up to date with the latest innovations in sustainability, ecology and efficiency so consumer expectations are met.

Does your business have a long term strategic plan for improving sustainability?

Not really, improvement are consumer led, although the Government has set a 2016 target that I think is likely to be watered down.

 

Extra Comments? Please include any progress reports relating to sustainability. 

I think there is a lack of definition of sustainability, ecology and efficiency. Barrat describe their houses as eco friendly as they have gas condensing boilers. The NHBC has undertaken research about customers opinions on new technology like heat pumps, solar thermal, MVHR, I am happy to send you a copy if you are interested. It’s the reason I chose to focus on the words “Energy Efficient” and use a defined target like the EPC. 10 years ago concrete had a poor reputation in the Ecology movement, it now gets a very good rating in the Code For Sustainable Homes. Is concrete sustainable ?

 

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