Introduction
Multinational Enterprises (MNEs) play an important role in development of the countries given their influence in both home and host countries. They face significant issues with the stakeholders including the institutional context, and the double role they play actor of the problem, but also the actor of the solution (Kolk & Tulder, 2010). The focus on developing countries Socially Responsible Practices (SRP) are actions, programs and projects that a company drives to increase the well-being of individuals, preserve or even restore the environment; in other way, solve social and environmental problems inside and out of the company, for those who feel responsible. SRP should be adapted in the different host country because of its economic, politic, and social needs may be different from the MNEs home country (Kolk, & Tulder, 2010; Hornstein & Zhao, 2011).
Given the previous statements, isomorphism and peer/partner pressure may explain how the adoption of CSR by MNEs is different in host countries (DiMaggio & Powell, 1983) to foster their social or environmental practices. According to Visser (2008, p. 474), some reasons explain why SRP in developing countries are different from SRP in developed countries:
Developing countries are where social and environmental crises are usually most intensely felt in the world.
Developing countries are where globalization, economic growth, investment, and business activity are likely to have the most dramatic social and environmental impacts (both positive and negative).
Developing countries present a distinctive set of CSR agenda challenges, which are collectively quite different to those, faced in the developed world.
Therefore, CSR in developing countries should be addressing the socio-economic challenges of the country, focusing on poverty, health-care, education and infrastructure; while CSR issues in developed countries are related to emission reduction, fair trade, green marketing, socially responsible investments and empowerment of marginalized groups (Visser, 2010).
Even though, those reasons explains why MNEs adaptor have different SRP in developing countries, there are several studies that demonstrate they are likely to be weak, do not have SRP or even MNEs change their ethical behavior, where the social cohesion is not strong enough to demand Social Responsibility (SR) from big corporations, and the consumers do not ask for human rights, labor practices, eco-friendly products, etc. (Williamson, 1986). In Colombia there are some evidences that MNEs have taken advantage of and participated in Colombia’s armed conflict, some examples are: Drummond Coal, Chiquita, and Coca-Cola (Maurer, 2009).
The purpose of the paper is to identify the differences of Socially Responsible Practices (SRP) between MNEs from developed countries and MNEs from developing countries in Colombia, through the analysis of three successful MNEs from each one operating in Colombia. First, we outline the basic CSR concepts and try to explain why companies engage in CSR. Second, we present a literature review about MNEs CSR in developing countries focusing on Colombia. Then, we compare SRP of MNEs from developed and developing countries doing business in Colombia and attempt to explain differences. The final section provides conclusions.
Corporate social responsibility
Since the second half of the twentieth century the issue of Corporate Social Responsibility (CSR) has been developed and became a strategic topic for organizations but has also been a research topic from different perspectives and disciplines.
In the 50’s appeared the first Social Responsibility academic work provided by Bowen (1953, p. 6), in which is defined as: “it refers to the obligations of businessmen to pursue those policies, to make those decisions, o to follow those lines of actions which are desirables in terms of the objectives and values of our society”. From then, there are multiple and abundant work around the issue, trying to define comprehensive and measurement frameworks, from different theoretical approaches. This has generated a proliferation of different terms related to the concept of CSR, corporate citizenship, sustainable development, shared value, among others.
All these concepts make it difficult to approach the subject from a universally applicable definition in this regard (Graafland et al, 2003; Donaldson & Fafaliou, 2004). This ultimately impacts the implementation of CSR, therefore, companies do CSR activities using their own criteria and following the prevailing trend in its operating area as well as available resources and the inclination of the groups of interest or stakeholders (Palazzi & Starcher, 2001).
However, there are some elements on which CSR concepts have achieved certain agreement, according to Sabogal (2008, p. 189):
CSR is going beyond legal compliance.
Voluntary.
Ethics and transparency in business.
Balance between economic, social, and environmental.
Consideration about the interest of stakeholders.
Respect for human dignity; and
Commitment to social development at local / regional level.
CSR involves a series of voluntary initiatives seeking to meet the economic, social and environmental expectations beyond the law; incorporating the interests of stakeholders in daily organizational activities, in order that actions, practices and programs become sustainable and long-lasting, likely to be enhanced, to expand its coverage and impact, and to be audited by stakeholders.
Why companies engage in CSR?
In the academic field CSR has been developed for more than fifty years, but business community have not been articulated with the concepts, as we mentioned before. The business community is interested in what CSR means for them in practice, so an instrumental question like: Why the companies need to engage in CSR? need to be answered before companies adopt CSR practices.
About the question of why companies engage in CSR, several studies suggest three general reasons related to: 1) economic benefits; 2) external pressures; and 3) conscious of their social and environmental impacts (Graafland & van de Ven, 2006; Valentine & Fleischman, 2008; Basu and Palazzo, 2008; Matten, 2006). Many companies use a CSR as a differentiation strategy, so they are based on economic reasons. The interests are oriented to improve the company reputation, achieve consumer loyalty, built, recover, or increase brand name recognition, among others. According to Gallego-Alvarez, et al. (2010, p. 2) “many corporations could well use CSR practices as a marketing tool or for Public Relations purposes”.
Other companies must involve in CSR because external pressures from socially and environmentally conscious customers, political actors, multilateral organizations, activist groups. Reinhardt and Stavins (2010, p. 168) affirm, “In some case firms engage in CSR only under pressure from market participants or other social forces”. While other companies, are more conscious of their impacts to society and environment, and strengthen relationships with their stakeholders (do Nascimiento, 2004).
Mnes and CSR in developing countries
Multinationals have been extensively studied from different theoretical approaches, namely agency theory, institutional theory, and transaction cost theory (Mudambi & Pedersen, 2007; Thite, et al, 2011). Even though, there is relatively little research about MNEs from developed and developing countries in emerging economies (Wright, et al., 2005). Consequently, there are little less taking about SRP in MNEs from developed and developing countries.
Nevertheless, there are some articles, especially, case studies that demonstrate important evidences about the ethical behavior and social responsibility of MNEs in emerging economies and the negative externalities generated to society and environment. Developing countries are characterized, in most of the cases, by corruption, economic inequality, weak institutions, lack of market’s regulation, etc. (Sarmiento, 2008). Bennett (2002, p.1) says, “Multinational corporations have both the power and the responsibility to foster good will among the people of the nations where they operate”.
Given the influence of MNEs they are able to contribute to a more sustainable development and a range of issues with their stakeholders and institutions, in both home and host countries (Kolk & Tulder, 2010; Bennett, 2002). Although, real facts demonstrate that some prominent corporations have been accused of fueling wars and violence through their business operations (Bennett, 2002).
CSR experiences of MNES in developing countries (Colombia)
Kenner et al. (1992) use the corporate social performance (CSP) framework to analyze the response scenarios or reactions of the American multinationals operating in Colombia, making a theoretical long run study. They describe three kind of company who are making his job in another country, an example happening in Colombia, where these three companies: Alpha, Beta and Gamma take part in the behavior of a company in a specific situation, which in this case is the violence.
The first one focuses on the safety of employees who are Colombian national, because they replace all American executives. The second one is Beta which does not make any contact or as less is possible with Colombian security. And Gamma they emphasize is the best one, because it works toward with Colombian forces for making solutions to social problems. The way in each one MNEs respond are presented in Table 1.
Watson and Weaver (2003) researched about how the degree of internationalization of a firm affects the way MNEs and their executives approach ethics. And they find two means by which companies can try to reduce the risks associated with the ethical variability attendant to a firm’s internationalization: First, formal ethical programs can be established in an effort to suggest the ethical behavior expected of employees at all levels of the MNEs. Second, for reducing ethical incongruence, top management can show its own concern to promote concern for ethics to other organization members (promote from their own behavior). The results indicate that top managers in greatly internationalized firms show more visible concern for ethical issues than do their counterparts at less internationalized firms.
Dramatically opposite, Maurer, (2009) explicate the Chiquita’s history in Colombia, and compares with formal firm’s commitment to corporate responsibility. She demonstrates that major corporate activities diverged dramatically from the core values of the firm. Chiquita´s in Cincinnati by 2002, according to Maurer (p. 596) “It had made demonstrable progress in reducing accidents, improving worker safety and health, improving industrial relations, reducing the use of pesticides, recycling plastics, planting trees, and according comprehensive attention to sustainable production and distribution practices”. But, from 1989 to 2004, it provided financial support and cocaine for weapons exchange to guerilla and paramilitary organizations in Colombia (Maurer, 2009).
On the other hand, Sarmiento (2008) researched about the motivations of multinational corporations in adopting Social Responsibility policies in developing countries and compares the case of Drummond and Carbones del Cerrejón in Colombia. The study showed that these companies respond in different ways to the institutional restrictions and pressure and that therefore their initiatives in social responsibility depend on institutional contexts. It concludes that the motivations that both multinationals must adopt social responsibility policies are alienated in two categories: internal and external.
A current case that confirms the fact that “MNEs initiatives in CSR depend on social and institutional pressure” is Pacific Rubiales (Canadian Oil Company) in Colombia. In july and august of 2011, employees and community led a large protest that stops oil production (losses amounted to 70 million dollars). The employees were demanding better working conditions, while the locals demanded investment in health care, education, housing, and roads. After that, Pacific Rubiales (PR) announced that in 2012, PR would invest 25 million dollars in social and development activities (Portafolio, october 4th 2011). An Asian study by Chapple and Moon (2005) found that ‘multinational companies are more likely to adopt CSR than those operating solely”. In the absence of strong governmental controls over the social, ethical, and environmental performance of companies in developing countries, MNEs will keep taking advantage and becoming bigger. Visser (2010) affirms that CSR in developing countries tends to be less formalized or institutionalized in terms of the CSR benchmarks, commonly used in developed countries, and multinational that practiced formal CSR in developing countries are those with recognized international brands or those aspiring to global status. Additionally, for MNE´s CSR increases the potential cost of opportunistic behavior and thus signals quality or reliability (Fisman et al., 2006; Elfenbein et al., 2010)
CSR experiences of MNES from developing countries
Vives (2006) surveyed over 1,300 small and medium-sized enterprises in Latin America; he found that the region’s religious beliefs are one of the major motivations for CSR. Similarly, Nelson (2003) shows how Buddhist traditions in Asia are aligned with CSR.
About 1997 in Latin America raised some CSR initiatives, and most of them are supported by The Inter-American Development Bank. Those initiatives are organizations such as Peru 2021, Ethos Institute in Brazil, RSE in Chile, Costa Rica’s Asociación de Empresarios para el Desarrollo and Red Puentes, CompormeteRSE program in Colombia, etc. They are all looking for a contribution to the development of their own society and closer work with stakeholders (Casanova and Dumas, 2010).
Brazilian companies are one of the most active in the region. According to Casanova and Dumas (2010 p. 4) “Brazil has become a hotspot for social entrepreneurs, and more than half of all Brazilian companies have embraced social policies according to the Ethos Institute. Entrepreneurs and executives alike are leaving traditional businesses and embarking in entrepreneurial projects with a social development priority”.
Latin American companies (and companies from emerging markets in general) operate in a severe economic and social context. Despite these conditions, many Latin American firms have succeeded globally with strong leadership, agility in decisionmaking and flexibility in action. Casanova and Dumas (2010, p. 4) affirms that: “most of these emerging market multinationals have a social dimension as part of their DNA and engage with employees and local communities to improve their social life (by providing housing, education and special health benefits)”.
Some examples, are the cosmetics company Natura from Brazil is based on an environmental concept, in which its products are created through the sustainable use of natural products sourced from the Amazon rainforest from poor indigenous communities; and the Peruvian chain of restaurants Astrid and Gastón, they want Peruvians to rediscover the value of their unique local agricultural products and through them improve the image of Peru.
Drayton and Budinich (2010) affirm that the union between big business and the average citizen could create great benefits for both, generation of employment, reduction of costs and taxes, increased profit. They find a specific example in Colombia with the union between Colcerámica and Kairos Company. Colcerámica (a Colombian subsidiary of Corona) wanted to acquire more about the low-income market for ceramics and home products. Kairos sent Haidy Duque, one of the company’s executives to train unemployed women in the manufacture of the product (tile). According to these authors “Colcerámica provided the product it’s Iberica tile line-and the technical and business know-how” (p.41).
Some results of that model were the generation of income for previously unemployed women and impulse the product to potential customers. Drayton and Budinich (p. 42) sustain that “it reduced Colceramica’s distribution costs by third, so the company could afford to pay a percentage of its profits to the women sales promoters and community partners”.
In sum, we can say that MNEs face in different ways CSR; some demonstrate good examples about the practices across countries. In the other hand, there are many empirical studies that reveal how big companies (from developed countries) change their ethical behavior in host countries, especially if they are in developing countries.
Multinationals experiences facing CSR in Colombia
Many multinational corporations have an annual income greater than the GDP of several small-tomedium sized countries, so it gives them power and political influence in this context. Neither governmental institutions, nor society request about the social and environmental impact from these MNEs, they are only interested about the economic benefits or quantification of the Foreign Direct Investing (FDI). MNEs in developed have strong social and environmental commitment; this statement is demonstrated in several empirical studies. In this section, we want to compare CSR practices implemented by MNEs from developed and developing countries in a developing country (Colombia), to identify differences in their practices.
Methodology
The methodology of this paper is a review of literature to find theoretical and empirical arguments that support it. In this article, we used multiple information sources. We collected and analyzed several scientific articles from different databases. We also analyzed information related to CSR in Web sites of the companies mentioned in this article. We selected some MNEs that have specified CSR information for Colombia in their web sites, because some MNEs present CSR global report but they do not give specific details.
MNEs Table 2 and Table 3 selected operating in Colombia are:
Socially responsible practices of selected MNES from developed countries in Colombia
Pfizer, Carrefour, and Nestlé are MNEs from different developed countries operating in Colombia since a considerable time. All three companies work in different sectors and regions at the country.
These MNEs have been recognized in different stages for its social contributions. Pfizer won in the category of Social Responsibility of “Portafolio Award” in 2009, this award is given by one of the most prestigious economic newspaper in Colombia. In the other hand, Nestlé is number one in the ranking of most reputable company in Colombia announced by Reputation Institute and Good Will Communications in 2011.
Nestlé and Carrefour were among 10 finalists for the “Undertaken Peace Prize 2011”. Such recognition is aimed at micro, small, medium, and large companies, as well as unions, to develop business initiatives that contribute to the building of peace in Colombia. This award has the support of the Ministry of Trade, Industry, and Tourism of Colombia, the German Development Cooperation (GIZ), the Konrad Adenauer Social Foundation, among others. Nestlé was nominated for the “Centre of Coexistence, Peace, and Reconciliation”, the purpose of this initiative is to generate spaces of forgiveness, reconciliation and peace in areas where the company operates, in order to build social weave, improve the quality of life of communities and social change around the peace. Carrefour received nomination for the Microfinance Project for the undertaking of vulnerable women in the district of Aguablanca in Cali.
In table 4, we present the Socially Responsible Practices that these companies develop with employees, suppliers, customers, environment, and community. We realize that CSR information in Colombian corporate Website is not beautifully detailed, so CSR disclosure to stakeholders in Colombia by this media are not well developed. Even, global corporate Website has extensive CSR information, it does not specify by country.
According to the information found, these MNEs develop their principal work with the environment and community. The challenge of environmental responsibility is principally related to: reducing greenhouse gas emissions, increasing energy efficiency, decreasing water use and waste, and increasing recycling; while issues with community are focused in: productive development, education, and promotion or sponsorship of social campaigns. Social programs are strongly associated to the Colombian conflict, therefore, promoting of substitution of illicit crops, supporting social projects for vulnerable population and children affected by displacement or victims of violence, are issues faced by this companies. Even companies mention the importance of their employees, just one of them reports practices in this aspect.
There is another reflection about the disclosure of social responsibility information and is associated to the quantification of impacts of each program generated to their stakeholders; for example, how many children have the schools that Carrefour supports, and what is the academic performance of this institutions; or how many new ventures have generated the volunteer program of Pfizer; more than how much money they have invested, the real question is: what are the real impacts of their social programs in developing countries?
Social responsible practices of selected mnes from developing countries in Colombia
Bimbo, Belcorp and Natura are MNEs from different developing countries of Latin America. These are well recognized in Colombia, Bimbo has four factories distributed at the four largest cities in Colombia; Belcorp has one factory with 4.131 employees in 2011, and Belcorp Colombia has been ranked at the top 15h since 2003, as one of the best MNEs company to work for in Latin America, by Great Place to Work Institute (Belcorp, 2011). Natura does not have factories in Colombia, it has just distributions center with more than sales consultants 5.000.
Social responsible practices are diverse between these three companies. On the one hand, Bimbo has a social program (the only one known) of volunteering for advising to state and privates’ schools, to promote the improvement of educational processes. Belcorp, by the type of its business, has decided to focus on development of woman (personal, educational, and occupational levels).
Although, Natura works in the same sector of Belcorp, SRP of Natura seek to prevent violence at schools, but its hard work is in the environmental aspect. Natura environmental challenges are taken from the supply chain to distribution product, it means that they appropriate environmental responsibility, across the company and promote responsible consumption to its customers. In these three companies we did not found information about employees and suppliers in their Colombian corporate Websites. (Table 5).
We considered that a large corporation as Bimbo is not committed to the social and environmental problems with the country; it does not report SRP related directly with the socio-economic and political conditions of Colombia. Bimbo do not develop the same SRP that it has in home country (Mexico), neither they adapt or adjust their strategies. In such cases is where government and society play an important role generating pressure. Society expects from MNEs an important social and environmental investment, Schmidheiny (2006) in Visser (2008, p. 479) sustains that “CSR is seen by many Latin Americans as the hope for positive change in the face of persistent poverty, environmental degradation, corruption, and economic stagnation”.
We realize that MNEs studied from developing countries do not publish social responsibility information in Colombia. They publish social reports in their home country but in host country is less informed, for example, Natura reports in Brazil extensive information about its actuation in economic, social, and environmental level.
Conclusions
The results suggest that Multinationals from developing countries focus their practices on community mainly in education programs while Multinationals from developed countries try to work with all stakeholders and involve particularly aspects related with their business in the programs they develop. We realize that MNEs from developing countries, more than MNEs from developed, countries do not report detailed information about host country, in this case Colombia. It is possible because MNEs from developed countries use better divulgation mechanisms. SRP less mentioned in both cases are related to employees.
The government must play a more important role in this ground establishing minimum standards for MNEs, which want to operate in developing country. And some education programs to sensitize society to a responsible consumption, in order to generate social pressure, too.
MNEs take advantage of resources, economic and political context, and markets; and we found that MNEs as Bimbo does not really contribute to social and economic inclusion in Colombia, according to the information found about CSR. Commitment with ethical responsibilities, promote greater economic and social inclusion should be the goals for MNEs in developing countries.