Tag Archives: corporate social responsibility

May 30, 2024 · 12:30 pm

Ethical considerations of service organizations in the information age

This is an excerpt from one of our latest contributions published through The Service Industries Journal. It features snippets from the ‘Introduction’, ‘Theoretical Implications’, ‘Practical Implications’ as well as from the ‘Limitations and Future Research Avenues’ sections.

Suggested Citation: Camilleri, M.A., Zhong, L., Rosenbaum, M.S. & Wirtz, J. (2024). Ethical considerations of service organizations in the information age, The Service Industries Journal, Forthcoming. https://www.tandfonline.com/doi/full/10.1080/02642069.2024.2353613

Introduction

Ethics is a broad field of study that refers to intellectual and moral philosophical inquiry concerned with value theory. It is clearly evidenced when individuals rely on their personal values, principles and norms to resolve questions about appropriate courses of action, as they attempt to distinguish between right and wrong, good and evil, virtue and vice, justice and crime, et cetera (Budolfson, 2019; Coeckelbergh, 2021; Ramboarisata & Gendron, 2019). Several researchers contend that ethics involves a set of concepts and principles that are meant to guide community members in specific social and environmental behaviors (De Bakker et al., 2019; Hermann, 2022). Very often, commentators argue that a persons’ ethical dispositions are influenced by their upbringing, social conventions, cultural backgrounds, religious beliefs, as well as by regulations (Vallaster et al., 2019).

Individuals, groups, institutions, non-government entities as well as businesses are bound to comply with the rule of law in their society (Groß & Vriens, 2019). As a matter of fact, the businesses’ organizational cultures and modus operandi are influenced by commercial legislation, regulations and taxation systems (Bridges, 2018). For-profit entities are required to adhere to the companies’ acts of the respective jurisdictions where they are running their commercial activities. They are also expected to follow informal codes of conduct and to observe certain ethical practices that are prevalent in the societies where they are based. This line of reasoning is synonymous with mainstream “business ethics” literature, that refer to a contemporary set of values and standards that are intended to govern the individuals’ actions and behaviors in how they manage and lead organizations (DeTienne et al., 2021).

Employers ought to ensure that they are managing their organization in a fair, transparent and responsible manner, by treating their employees with dignity and respect (Saks, 2022). They have to provide decent working environments and appropriate conditions of employment by offering equitable extrinsic rewards to their workers, that are commensurate with their knowledge, skills and competences (Gaur & Gupta, 2021). Moreover, it is in the employers’ interests to nurture their members of staff’s intrinsic motivations if they want them to align with their organizational values and corporate objectives (Camilleri et al., 2023). Notwithstanding, all businesses, including those operating in service industries have ethical as well as environmental, social and governance (ESG) responsibilities to bear towards other stakeholders in society (Aksoy et al., 2022).

This article raises awareness on a wide array of ethical considerations affecting service organizations in today’s information age. Specifically, its research objectives are threefold: (i) It presents the findings from a rigorous and trustworthy systematic review exercise, focused on “ethics” in “service(s)” and/or “ethical services”. This research involves a thorough scrutinization of the most-cited articles published in the last five (5) years; (ii) It utilizes a thematic analysis to determine which paradigms are being associated with service ethics. The rationale is to identify some of the most contemporary topics related to ethical leadership in service organizations. (iii) At the same time, it puts forward theoretical and practical implications that clarify how, why, where, when and to what extent service providers are operating in a legitimate and ethical manner.

A thorough review of the literature reveals that, for the time being, there are just a few colleagues who have devoted their attention to relevant theoretical underpinnings linked to the service ethics literature (Liu et al., 2023; Wirtz et al., 2023). For the time being, there is still limited research that has outlined popular research themes from the most cited articles published in the past five (5) years. It clearly differentiates itself from previous studies as this contribution’s rigorous and transparent systematic review approach clearly recognizes, appraises and describes the methodology that was used to capture and analyze data focused on the provision or lack thereof of ethical services. In addition, unlike other descriptive literature reviews, this paper synthesizes the findings from the latest contributions on this topic and provides a discursive argumentation on their implications. Hence, this article addresses a number of knowledge gaps in academic literature. In conclusion, it identifies the limitations of this review exercise, and outlines future research avenues to academia.

Theoretical implications

This contribution raises awareness of the underexplored notion of service ethics. A number of commentators are making reference to various theories and concepts to clarify how they can guide service organizations in their ethical leadership. In many cases, a number of theories indicate that decision makers ought to be just and fair with individuals or entities in their actions. Appendix A features a list of ethical theories and provides a short definition for them. For instance, the justice theory suggests that all individuals including service employees should have the same fundamental rights based on the values of equality, non-discrimination, inclusion, human dignity, freedom and democracy. Human rights as well as employee rights and values ought to be protected and reinforced by the respective jurisdictions’ rule of law, for the benefit of all subjects (Grégoire et al., 2019).

Business ethics literature indicates that just societies are characterized by fair, trustworthy, accountable and transparent institutions (and organizations). For instance, the fairness theory raises awareness on certain ethical norms and standards that can help policy makers as well as other organizations including businesses, to ensure that they are continuously providing equal opportunities to everyone. It posits that all individuals ought to be treated with dignity in a respectful and equitable manner (Wei et al., 2019).

This is in stark contrast with the favoritism theory that suggests that certain individuals including employees, can receive preferential treatment, to the detriment of others (Bramoullé & Goyal, 2016). This argumentation is synonymous with the nepotism theory. Like favoritism, nepotism is a phenomenon that is manifested when institutional and organizational leaders help and support specific persons because they are connected with them in a way or another (e.g. through familial ties, friendships, financial, or social factors). Arguably, such favoritisms clearly evidence their conflict(s) of interest, compromise or cloud their judgements, decisions and actions in workplace environments and/or in other social contexts. Many business ethics researchers contend that decision makers ought to be guided by the principle of beneficence (Brear & Gordon, 2021), as they should possess the competences and abilities to recognize between what is morally right and ethically wrong.

This research confirms that frequently, organizational leaders have to deal with difficult and challenging situations, where they are expected to make hard decisions (Islam et al., 2021a; Islam et al., 2021b; Latan et al., 2019; Naseer et al., 2020; Schwepker & Dimitriou, 2021). In such cases, the most reasonable ethical approach would be to follow courses of action that will result in the least possible harm to everyone (Heine et al., 2023). The service organizations’ members of staff are all expected to be collaborative, productive and efficient in their workplace environment. This line of reasoning is related to the attributional theory (Bourdeau et al., 2019) and/or to the consequentialism theory (Budolfson, 2019). Very often, the proponents of these two theories contend that while honest, righteous and virtuous behaviors may yield positive outcomes for colleagues, subordinates and other stakeholders, wrong behaviors can result in negative repercussions to them (Deci & Ryan, 1987; Francis & Keegan, 2020; Lee et al., 2020; Paramita et al., 2021)

Other researchers who contributed to the ethics literature related to the utilitarianism theory, suggest that people tend to make better decisions, when they focus on the consequences of their actions. Hence, they will be in a better position to identify laudable behaviors and codes of conduct that add value to their organization (Coeckelbergh, 2021; Michaelson & Tosti-Kharas, 2019; Ramboarisata & Gendron, 2019). Very often, they argue that there are still unresolved issues in social sciences including the unpredictability of events and incidents from happening (Du & Xie, 2021), and/or the difficulty in measuring the consequences when/if they occur. For example, this review indicated that various authors discussed about the challenges, risks and possible dangers of adopting various technologies including AI, big data, et cetera (Breidbach & Maglio, 2020; Chang et al., 2020; Flavián & Casaló, 2021; Rymarczyk, 2020). In many cases, they hinted that the best ethical choice is to identify which decisions and actions could lead to the greatest good, in terms of positive, righteous and virtuous outcomes (Budolfson, 2019; Gong et al., 2020; Paramita et al., 2021).

Various academic authors who contributed to the formulation of the virtues theory held that there are persons including organizational leaders, whose characters, traits and values drive them to continuously improve and to excel in their duties and responsibilities (Coeckelbergh, 2021; Fatma et al., 2020; Lee et al., 2020). They frequently noted that the persons’ affective feelings as well as their intellectual dispositions enable them to develop a positive mindset, to make the best decisions and to engage in the right behaviors (Gong et al., 2020; Huang & Liu, 2021; Yan et al., 2023). This is congruent with the theory of positivity too, as it explains how the individuals’ optimistic feelings may result in their happiness and wellbeing. Some commentators imply that such positive emotions can influence the individuals’ state of minds and can foster their resilience to engage in productive behaviors (Paramita et al., 2021).

This argumentation is in stark contrast with the emotional labor theory that is manifested when disciplined employees suppress their emotions by engaging in posturing behaviors in order to conform to the organizational culture (Mastracci, 2022). This phenomenon was evidenced in Naseer et al.’s (2020) contribution. In this case, the authors indicated how the employees’ overidentification with unethical organizations can have a negative impact on their engagement, thereby resulting in counterproductive work practices. In addition, Islam et al. (2021b) also suggested that abusive supervision led employees to undesirable outcomes like knowledge hiding behaviors and to low morale in workplace environments.

Several commentators who are focused on psychological issues argue that the individuals’ intrinsic motivations are closely related to their self-determination (Deci & Ryan, 1987). Very often, they contend that individuals should have the autonomy and freedom to make life choices, in order to improve their well-being in the future. The findings from this research reported that organizational leaders who delegated responsibilities to their members of staff, have instilled trust and commitment in their employees, and also improved their intrinsic motivations (Francis & Keegan, 2020; Lee et al., 2020; Schwepker & Dimitriou, 2021).

Hence, organizational leaders of service businesses ought to be aware that there is scope for them to empower their human resources, to help them make responsible choices and decisions relating to their work activities, in a discrete manner (Bourdeau et al., 2019; Islam et al., 2021a; Tanova & Bayighomog, 2022). The employees’ higher levels of autonomy and independence can influence their morale (Paramita et al., 2021; Ramboarisata & Gendron, 2019) and reduce stress levels (Schwepker & Dimitriou, 2021). Various researchers confirmed that employees would be more productive if they were empowered with duties and responsibilities (e.g. Nauman et al., 2023).

This argumentation is congruent with the conservation of resources theory, as business leaders are expected to look after their human resources’ cognitive and emotional wellbeing, if they want to foster their organizational commitment to achieve their corporate objectives. Indeed, their ethical leadership can lead to win-win outcomes, particularly if their employees replicate responsible and altruistic behaviors with one another, and if they strive in their endeavors to develop a caring environment in their organization (Parsons et al., 2021; Saks, 2022). This reasoning is closely related to the social cognition theory that presumes that individuals acquire emotional knowledge and skill sets such as intuition or empathy, among others, through social interactions, including when they are at work (Čaić et al., 2019; Campbell et al., 2020; Rauhaus et al., 2020).

Practical implications

The findings from this research confirm that various service organizations are becoming acquainted with ethical leadership and with social issues in management. Evidently, several listed businesses and large undertakings in service industries are increasingly proving their legitimacy and license to operate, by engaging in ethical behaviors that promote responsible human resources management. Very often, they are fostering an organizational climate that encourages ongoing dialogue, communication and collaboration among members of staff; they empower employees with duties and responsibilities to make important decisions; provide them with equitable compensation that is commensurate with qualifications and experience; and implementing work-life balance policies. Generally, these laudable measures are resulting in motivated, committed and productive employees.

On the other hand, unethical behaviors including abusive organizational practices and coercive leadership styles are generating bitterness and feelings of resentment among employees. The lack of ethical leadership can lead to demotivation, low morale, job stress and even to counterproductive behaviors including wrongdoings like knowledge hiding and abusive supervision in workplace environments. This research reported about irresponsible practices of service businesses operating in the sharing economy, as a number of hospitality companies are subcontracting their food delivery services to independent contractors, who are not safeguarding the rights of their employees. Very often, the workers of the gig economy are offered precarious jobs and unfavorable conditions of employment. Generally, they are not paid in a commensurate manner for their jobs, are not eligible for health or retirement benefits, and cannot affiliate themselves with trade unions.

This discursive review shed light on the service businesses’ dealings with employees and with other stakeholders. It also narrated about their relationships with customers as well as on their ethical and digital responsibilities towards them. For example, it indicated that many businesses are gathering and storing data of customers. Frequently, they are using their personal and transactional information to analyze and interpret shopping behaviors. They may do so to build consumer profiles and/or to retarget them with promotional content. The findings of this research imply that it is the responsibility of service businesses to inform new customers that they are capturing and retaining data from them, when and if they do so (even though in many cases, they are aware that many online users can quickly unsubscribe to marketing messages and/or are becoming adept in blocking advertisements from popping-up in their screens). The authors contend that service providers ought to explicitly ask their customers’ consent (through opt-in or opt-out choices) to ensure that the former can avail themselves of their consumers’ data.

Currently, certain jurisdictions are not in a position to protect consumers from entities that could use their personal information for different purposes as they did not enact substantive data protection legislation. The European Union’s General Data Protection Regulation (GDPR) or California Consumer Privacy Act (CCPA), are two examples of data regulations that are intended to safeguard the consumers’ interests in this regard. Online users ought to be educated and guided through regulations, policies and data literacy programs, to protect them from potentially unethical technological applications and practices of big data algorithms and advanced analytics. At the moment, various stakeholders including policy makers and academia, among others, are calling for responsible AI governance and for the formulation of (quasi) regulatory frameworks, in order to maximize the benefits of AI and to minimize its negative impacts to humanity.

This research raises awareness about the importance of disclosing corporate governance procedures, and of regularly reporting CSR/ESG credentials with regulatory stakeholders and with other interested parties. In many cases, the majority of service businesses are genuinely following ethical norms and principles that go beyond their commercial and legal obligations. They should bear in mind that their sustainability accounting, transparent ESG disclosures, as well as their audit and assurance mechanisms, can ultimately reduce information asymmetry among stakeholders, whilst enhancing their reputation and image with interested parties. Their ongoing corporate communications can ameliorate stakeholder relationships and could increase their organizational legitimacy in the long run.

Limitations and future research avenues

The notion of service ethics is gaining traction in academic circles. Indeed, it is considered as a contemporary and timely topic for service researchers specializing in business administration and/or business ethics. In fact, the findings from the bibliographic analysis demonstrate that there were more than eleven thousand (11,000) documents focused on service(s), ethics and ethical service(s), published in the last 5 years. This research adds value to the extant literature as it sheds light on the most cited articles focused on these topics. Yet, it differentiates itself from previous papers, as it identifies the themes of fifty (50) of the most cited papers in this promising area of research, describes the methodology that was employed to capture and analyze the data on this topic, and scrutinizes their content, before synthesizing the findings of this contribution.

This article presents the findings of a rigorous review and evaluation of the latest literature revolving on ethical leadership of service organizations. The authors are well aware that, in the past, other academic colleagues may have referred to synonymous keywords to service ethics or ethical services, including ethical business, business ethos, business ethics, business code of conduct, and even corporate social responsibilities of service businesses, among other paradigms. Therefore, future researchers may also consider using these keywords when they investigate ethical behaviors in services-based sectors. It is hoped that they will delve into the research themes, fields of studies and theoretical bases that were identified in this contribution including on the service organizations’ ethical leadership, as proposed in the following table. This research confirms that it is in the interest of service entities to foster a fair and just working environment, particularly for the benefit of their employees, as well as for other stakeholders including for regulatory institutions, creditors, shareholders and customers, among others.

A future agenda for service ethics research

(Developed by the authors)

Indeed, there is scope to investigate further the service organizations’ roles in today’s societies, as they are being urged by policy makers and other interested parties to communicate about their responsible organizational behaviors, in various contexts. Entities operating in service industries including small and medium-sized businesses as well as micro enterprises are increasingly acquainting themselves with sustainability accounting, non-financial reporting and ongoing assurance exercises, as comprehensive CSR/ESG disclosures can enable them to prove their legitimacy and license to operate with stakeholders. Moreover, prospective researchers are invited to continue raising more awareness about ethical leadership among service organizations, particularly when they are adopting disruptive innovations.

The full list of references are available from the open-access article (published through The Service Industries Journal) and via ResearchGate.

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Filed under Business, Corporate Social Responsibility, ESG Reporting, ethics

Tagged as AI, Analytics, artificial intelligence, Big Data, Business Ethics, Business Ethics Theories, Business Theories, corporate social responsibility, CSR, ethics, Generative AI, information age, Service Ethics, Service Organizations, services, SERVSIG, Social issues in management, Social Sciences Theories, Theories

January 30, 2024 · 7:08 pm

Stakeholder engagement disclosures in sustainability reports

This is an excerpt from one of my latest articles, published through Business Ethics, the Environment and Responsbility.

Suggested citation: Galeotti, R. M., Camilleri, M. A., Roberto, F., & Sepe, F. (2023). Stakeholder engagement disclosures in sustainability reports: Evidence from Italian food companies. Business Ethics, the Environment & Responsibility, Ahead-of-print, 1–20, https://doi.org/10.1111/beer.12642

Abstract

More businesses are embedding stakeholder engagement (SE) practices in their corporate disclosures. This article explores the extent to which SE practices are featured in the sustainability reports (SRs) of 48 Italian food and beverage businesses, following the latest Global Reporting Initiative (GRI) standards. The researchers analyze the content of their SRs dated 2020 and 2021. They utilize a panel regression technique to examine the relationship between stakeholder engagement disclosures (SED) and corporate financial performance (CFP), and to investigate the mediating role of SR assurance. The results show a positive and significant relationship between SED and CFP. They also confirm that there is a moderating effect from SR assurance on this causal path. However, the findings reveal that SED in SRs of Italian food companies is still moderate. This contribution builds on the logic behind the stakeholder theory. It implies that there is scope for food companies to forge relationships with stakeholders. It indicates that it is in their interest to disclose material information about their SE practices in their SR and to organize third party assurance assessments in order to improve their legitimacy with stakeholders.

1 INTRODUCTION

The sustainability agenda has gained significant attention within the global food sector (Rueda et al., 2017), and it is becoming a growing concern among stakeholders (Al Hawaj & Buallay, 2022). The food industry is heavily reliant on natural and technological resources such as water, energy, chemicals, and fossil fuels, and therefore, has a substantial impact on the environment and the society (Buallay, 2020; Camilleri, 2021; Ramos et al., 2020). The actions of food manufacturers and retailers can significantly affect the health of individuals. Their ability to choose, process, package, transport, and promote sustainable food could have an impact on what people consume and on their overall well-being. As they interact directly with consumers, they are subject to intense scrutiny and requests for transparency. Stakeholders, including governmental institutions, consumers, and the global community, have called upon food companies to adopt more sustainable practices and to pay more attention to food sustainability (Friedrich et al., 2012; Troise et al., 2021). Very often, they are raising awareness about value creation opportunities to persuade them to engage in responsible production and consumption behaviors (Attanasio et al., 2021), and to forge relationships with marketplace stakeholders (Camilleri, 2020).

The interactions between firms and their external environment constitute a vital characteristic of a sustainable business model, owing to the unique value stream that stakeholder engagement (SE) can offer. In this context, sustainability disclosures can act as a catalyst to foster trust, enhance procedures and systems, promote the firm’s vision and strategy, decrease compliance expenses, and generate competitive advantages (Cardoni et al., 2022). Companies operating in the food sector are principally challenged in their efforts to deliver Sustainability Reports (SRs) that provide useful information to both internal and external stakeholders (D’Adamo, 2022). Research examining the role of sustainability reporting in enhancing firm performance in this sector is limited. Some studies suggest a positive relationship between strong sustainability reporting and return on assets (ROA) (Al Hawaj & Buallay, 2022), increased sales (Sen & Bhattacharya, 2001) or reduced cost of capital (Garzón-Jiménez & Zorio-Grima, 2022).

Given the complexity of the food sector, which is a typical multistakeholder context (Al Hawaj & Buallay, 2022), it is particularly relevant for food companies to ensure that their SRs provide accurate and thorough disclosures of their SE practices. SE is a complex and distinct activity that has emerged in the preparation of SRs (Greenwood, 2007) and it is crucial to reflect on the way it is conducted (Petruzzelli & Badia, 2023). The reporting entities cannot ignore their stakeholders’ relationships from their corporate disclosures. If they conceal any material information on this matter from their SR, they risk damaging their reputation and image (Ardiana, 2019; De Micco et al., 2021; Manetti, 2011; Miles & Ringham, 2020).

Academic research on SE is an evolving area of investigation due to the increasing scientific and professional interest in sustainability reporting issues (Camilleri, 2015; Stocker et al., 2020). Prior studies have indicated that many companies fail to provide complete disclosures of SE processes (Moratis & Brandt, 2017), and show an inadequate level of SE procedures (Petruzzelli & Badia, 2023; Venturelli et al., 2018). However, despite the significance of this subject, the number of empirical academic contributions on SE remains limited, making it important to further explore this topic. In such a context, several scholars are calling for further studies that seek to investigate how, why, where, and when firms are engaging with stakeholders. In addition, they are encouraging them to explore whether they are disclosing the details about their stakeholder relationships in their SRs (Gagné et al., 2022; Gao & Zhang, 2006; Hörisch et al., 2015).

The purpose of this article is twofold. The first one is to investigate the extent to which SE is featured in the SRs of 48 Italian unlisted food companies (that were relying on GRI’s new standards in the period 2020–2021), with the objective to verify their focus on SE disclosures (SED) process. The authors examine their SR’s content, in terms of the report preparers’ motivations and methods. They also verify whether they indicated specific stakeholders in their disclosures. This paper raises awareness on the role of SE in the sustainability reporting of food companies. It clarifies how and to what extent food companies are communicating directly with stakeholders, gathering feedback from them, and how explicitly they are involving them in the SR process. To this aim, the researchers developed an SE index composed of 7 categories and 21 items derived from prior literature on the topic and adapted from the latest Global Reporting Initiative (GRI) standards. The proposed index provides a systematic approach to examining the SE practices and activities disclosed by sample firms. Content analysis (a binary coding system) of GRI SRs was carried out to calculate the overall SED score. The second goal of this contribution is to investigate the relationship between SED and corporate financial performance (CFP). In addition, this research analyzes the moderating effects of SR assurance on SED-CFP causal link. Hence, this contribution addresses the following research questions:

RQ1: What is the state and extent of SED in the SRs of food companies?
RQ2: Is there a relationship between SED in SRs and CFP in the food industry? If there is, how and to what extent, is this relationship mediated by SR assurance?

This research explores the above-mentioned questions and provides insights on the SE processes of Italian Food companies. It builds on the Stakeholder Theory (ST; Freeman, 1984), as it seeks to explain whether SE processes are integrated in their SRs. The authors anticipate that the exploratory content analysis on the sample firms’ SRs indicate that the average level of SE is not significantly high in food companies in Italy, however, there is an increasing pattern of SED during the study period. While SE seems common practice, many firms are failing to provide the details on their stakeholder relationships in their SRs. The findings suggest that most of the engagement modes disclosed are unidirectional (level 1—Inform) with minimal emphasis on deep involvement strategies (level 3—Involve). Furthermore, only 32% of the sample seek assurance on the information disclosed.

Results from the panel data analysis provide evidence that there is a significant positive association between SED and CFP. Findings also show that SR assurance by accounting firms accentuates this effect. An extensive literature review suggests that this study, to the best of the authors’ knowledge, is the first to use food companies’ SRs to investigate the impact of SED on CFP introducing the interactive variable of SR third-party assurance, which adds new knowledge to SE and sustainability reporting literature from a specific industry in an advanced economy. Considering the maturity of Italian sustainability reporting and assurance practices (KPMG, 2022; Larrinaga et al., 2020) the Italian context is particularly relevant in explaining the interest of food companies into properly communicating SE activities in SRs. In these terms, this study contributes to a deeper understanding of the underexplored area of SE in a specific industry, highlighting the strategies used by Italian food companies to manage the SE communication process. Specifically, it provides insights to improve the framing of SED and gives evidence of the value relevance of SED and SR assurance for companies operating in the food sector. Therefore, this research sheds light on the advancement and enhancement of food company–stakeholder relations, particularly from the perspective of value co-creation. The findings will help managers identify key focus areas where they can improve the SED process aiming at creating shared value and foster mutually beneficial relationships with stakeholders.

The remainder of this study is structured as follows. The next section deals with the paper’s conceptual framework and hypotheses development. This is followed by the research design and methodology. Finally, the results, discussion, including recommendations, limitations, and hints for future research are presented.

Read further (this publication is available in its entirety, as it is an open-access article).

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Filed under Corporate Social Responsibility, Corporate Sustainability and Responsibility, CSR, ESG Reporting, Stakeholder Engagement, Sustainability

Tagged as corporate social responsibility, ESG Reporting, ESG reporting in Italy, Global Reporting, GRI, GRI standards, Italian business, Negozi Italiani, stakeholder engagement, Sustainability Reporting

July 31, 2023 · 10:02 am

An artificial intelligence governance framework

This is an excerpt from my latest contribution on responsible artificial intelligence (AI).

_{Suggested citation: Camilleri, M. A. (2023). Artificial intelligence governance: Ethical considerations and implications for socialresponsibility. Expert Systems, e13406. https://doi.org/10.1111/exsy.13406}

The term “artificial intelligence governance” or “AI governance” integrates the notions of “AI” and “corporate governance”. AI governance is based on formal rules (including legislative acts and binding regulations) as well as on voluntary principles that are intended to guide practitioners in their research, development and maintenance of AI systems (Butcher & Beridze, 2019; Gonzalez et al., 2020). Essentially, it represents a regulatory framework that can support AI practitioners in their strategy formulation and in day-to-day operations (Erdélyi & Goldsmith, 2022; Mullins et al., 2021; Schneider et al., 2022). The rationale behind responsible AI governance is to ensure that automated systems including ML/DL technologies, are supporting individuals and organizations in achieving their long terms objectives, whist safeguarding the interests of all stakeholders (Corea et al., 2023; Hickok et al., 2022).

AI governance requires that the organizational leaders comply with relevant legislation, hard laws and regulations (Mäntymäki et al., 2022). Moreover, they are expected to follow ethical norms, values and standards (Koniakou, 2023). Practitioners ought to be trustworthy, diligent and accountable in how they handle their intellectual capital and other resources including their information technologies, finances as well as members of staff, in order to overcome challenges, minimize uncertainties, risks and any negative repercussions (E.g. decreased human oversight in decision making, among others) (Agbese et al., 2023; Smuha, 2019).

Procedural governance mechanisms ought to be in place to ensure that AI technologies and ML/DL models are operating in a responsible manner. Figure 1 features some of the key elements that are required for the responsible governance of artificial intelligence. The following principles are aimed to provide guidelines for the modus operandi of AI practitioners (including ML/DL developers).

Figure 1. A Responsible Artificial Intelligence Governance Framework

Accountability and transparency

“Accountability” refers to the stakeholders’ expectations about the proper functioning of AI systems, in all stages, including in the design, creation, testing or deployment, in accordance with relevant regulatory frameworks. It is imperative that AI developers are held accountable for the smooth operation of AI systems throughout their lifecycle (Raji et al., 2020). Stakeholders expect them to be accountable by keeping a track record of their AI development processes (Mäntymäki et al., 2022).

The transparency notion refers to the extent to which end-users could be in a position to understand how AI systems work (Andrada et al., 2020; Hollanek, 2020). AI transparency is associated with the degree of comprehension about algorithmic models in terms of “simulatability” (an understanding of AI functioning), “decomposability” (related to how individual components work), and algorithmic transparency (this is associated to the algorithms’ visibility).

In reality, it is difficult to understand how AI systems, including deep learning models and their neural networks are learning (as they acquire, process and store data) during training phases. They are often considered as black box models. It may prove hard to algorithmically translate derived concepts into human-understandable terms, even though developers may use certain jargon to explain their models’ attributes and features. Many legislators are striving in their endeavors to pressurize AI actors to describe the algorithms they use in automated decision-making, yet the publication of algorithms is useless if outsiders cannot access the data of the AI model.

Explainability and interpretability

Explainability is the concept that sheds light on how AI models work, in a way that is comprehensible to a human being. Arguably, the explainabilty of AI systems could improve their transparency, trustworthiness and accountability. At the same time, it can reduce bias and unfairness. The explainability of artificial intelligence systems could clarify how they reached their decisions (Arya et al., 2019; Keller & Drake, 2021). For instance, AI could explain how and why autonomous cars decide to stop or to slow down when there are pedestrians or other vehicles in front of them.

Explainable AI systems might improve consumer trust and may enable engineers to develop other AI models, as they are in a position to track provenance of every process, to ensure reproducibility, and to enable checks and balances (Schneider et al., 2022). Similarly, interpretability refers to the level of accuracy of machine learning programs in terms of linking the causes to the effects (John-Mathews, 2022).

Fairness and inclusiveness

The responsible AI’s fairness dimension refers to the practitioners’ attempts to correct algorithmic biases that may possibly (voluntarily or involuntarily) be included in their automation processes (Bellamy et al., 2019; Mäntymäki, et al., 2022). AI systems can be affected by their developers’ biases that could include preferences or antipathies toward specific demographic variables like genders, age groups and ethnicities, among others (Madaio et al., 2020). Currently, there is no universal definition on AI fairness.

However, recently many multinational corporations have developed instruments that are intended to detect bias and to reduce it as much as possible (John-Mathews et al., 2022). In many cases, AI systems are learning from the data that is fed to them. If the data are skewed and/or if they comprise implicit bias into them, they may result in inappropriate outputs.

Fair AI systems rely on unbiased data (Wu et al., 2020). For this reason, many companies including Facebook, Google, IBM and Microsoft, among others are striving in their endeavors to involve members of staff hailing from diverse backgrounds. These technology conglomerates are trying to become as inclusive and as culturally aware as possible in order to minimize bias from affecting their AI processes. Previous research reported that AI’s bias may result in inequality, discrimination and in the loss of jobs (Butcher & Beridze, 2019).

Privacy and safety for consumers

Consumers are increasingly concerned about the privacy of their data. They have a right to control who has access to their personal information. The data that is collected or used by third parties, without the authorization or voluntary consent of individuals, would result in the violations of their privacy (Zhu et al., 2020; Wu et al., 2022).

AI-enabled products, including dialogue systems like chatbots and virtual assistants, as well as digital assistants (e.g. like Siri, Alexa or Cortana), and/or wearable technologies such as smart watches and sensorial smart socks, among others, are increasingly capturing and storing large quantities of consumer information. The benefits that are delivering these interactive technologies may be offset by a number of challenges. The technology businesses who developed these products are responsible to protect their consumers’ personal data (Rodríguez-Barroso et al., 2020). Their devices are capable of holding a wide variety of information on their users. They are continuously gathering textual, visual, audio, verbal, and other sensory data from consumers. In many cases, the customers are not aware that they are sharing personal information to them.

For example, facial recognition technologies are increasingly being used in different contexts. They may be used by individuals to access websites and social media, in a secure manner and to even authorize their payments through banking and financial services applications. Employers may rely on such systems to track and monitor their employees’ attendance. Marketers can utilize such technologies to target digital advertisements to specific customers. Police and security departments may use them for their surveillance systems and to investigate criminal cases. The adoption of these technologies has often raised concerns about privacy and security issues. According to several data privacy laws that have been enacted in different jurisdictions, organizations are bound to inform users that they are gathering and storing their biometric data. The businesses that employ such technologies are not authorized to use their consumers’ data without their consent.

Companies are expected to communicate about their data privacy policies with their target audiences (Wong, 2020). They have to reassure consumers that the consented data they collect from them is protected and are bound to inform them that they may use their information to improve their customized services to them. The technology giants can reward their consumers to share sensitive information. They could offer them improved personalized services among other incentives, in return for their data. In addition, consumers may be allowed to access their own information and could be provided with more control (or other reasonable options) on how to manage their personal details.

The security and robustness of AI systems

AI algorithms are vulnerable to cyberattacks by malicious actors. Therefore, it is in the interest of AI developers to secure their automated systems and to ensure that they are robust enough against any risks and attempts to hack them (Gehr et al., 2018; Li et al., 2020).

The accessibility to AI models ought to be continuously monitored at all times during their development and deployment (Bertino et al., 2021). There may be instances when AI models could encounter incidental adversities, leading to the corruption of data. Alternatively, they might encounter intentional adversities when they experience sabotage from hackers. In both cases, the AI model will be compromised and can result in system malfunctions (Papagiannidis et al., 2023).

AI models have to prevent such contingent issues from happening. Their developers’ responsibilities are to improve the robustness of their automated systems, and to make them as secure of possible, to reduce the chances of threats, including by inadvertent irregularities, information leakages, as well as by privacy violations like data breaches, contamination and poisoning by malicious actors (Agbese et al., 2023; Hamon et al., 2020).

AI developers should have preventive policies and measures related to the monitoring and control of their data. They ought to invest in security technologies including authentication and/or access systems with encryption software as well as firewalls for their protection against cyberattacks. Routine testing can increase data protection, improve security levels and minimize the risks of incidents.

Conclusions

This review indicates that more academics as well as practitioners, are increasingly devoting their attention to AI as they elaborate about its potential uses, as well as on its opportunities and threats. It reported that its proponents are raising awareness on the benefits of AI systems for individuals as well as for organizations. At the same time, it suggests that a number of scholars and other stakeholders including policy makers, are raising their concerns about its possible perils (e.g. Berente et al., 2021; Gonzalez et al., 2020; Zhang & Lu, 2021).

Many researchers identified some of the risks of AI (Li et al., 2021; Magas & Kiritsis, 2022). In many cases, they warned that AI could disseminate misinformation, foster prejudice, bias and discrimination, raise privacy concerns, and could lead to the loss of jobs (Butcher & Beridze, 2019). A few commentators argue about the “singularity” or the moment where machine learning technologies could even surpass human intelligence (Huang & Rust, 2022). They predict that a critical shift could occur if humans are no longer in a position to control AI anymore.

In this light, this article sought to explore the governance of AI. It sheds light on substantive regulations, as well as on reflexive principles and guidelines, that are intended at practitioners who are researching, testing, developing and implementing AI models. It clearly explains how institutions, non-governmental organizations and technology conglomerates are introducing protocols (including self-regulations) to prevent contingencies from even happening due to inappropriate AI governance.

Debatably, the voluntary or involuntary mishandling of automated systems can expose practitioners to operational disruptions and to significant risks including to their corporate image and reputation (Watts & Adriano, 2021). The nature of AI requires practitioners to develop guardrails to ensure that their algorithms work as they should (Bauer, 2022). It is imperative that businesses comply with relevant legislations and to follow ethical practices (Buhmann & Fieseler, 2023). Ultimately, it is in their interest to operate their company in a responsible manner, and to implement AI governance procedures. This way they can minimize unnecessary risks and safeguard the well-being of all stakeholders.

This contribution has addressed its underlying research objectives. Firstly, it raised awareness on AI governance frameworks that were developed by policy makers and other organizations, including by the businesses themselves. Secondly, it scrutinized the extant academic literature focused on AI governance and on the intersection of AI and CSR. Thirdly, it discussed about essential elements for the promotion of socially responsible behaviors and ethical dispositions of AI developers. In conclusion it put forward an AI governance conceptual model for practitioners.

This research made reference to regulatory instruments that are intended to govern AI expert systems. It reported that, at the moment there are a few jurisdictions that have formalized their AI policies and governance frameworks. Hence, this article urges laggard governments to plan, organize, design and implement regulatory instruments that ensure that individuals and entities are safe when they utilize AI systems for personal benefit, educational and/or for commercial purposes.

Arguably, one has to bear in mind that, in many cases, policy makers have to face a “pacing problem” as the proliferation of innovation is much quicker than legislation. As a result, governments tend to be reactive in the implementation of regulatory interventions relating to innovations. They may be unwilling to hold back the development of disruptive technologies from their societies. Notwithstanding, they may face criticism by a wide array of stakeholders in this regard, as they may have conflicting objectives and expectations.

The governments’ policy is to regulate business and industry to establish technical, safety and quality standards as well as to monitor their compliance. Yet, they may consider introducing different forms of regulation other than the traditional “command and control” mechanisms. They may opt for performance-based and/or market-based incentive approaches, co-regulation and self-regulation schemes, among others (Hepburn, 2009), in order to foster technological innovations.

This research has shown that a number of technology giants, including IBM and Microsoft, among others, are anticipating the regulatory interventions of different governments where they operate their businesses. It reported that they are communicating about their responsible AI governance initiatives as they share information on their policies and practices that are meant to certify, explain and audit their AI developments. Evidently, these companies, among others, are voluntarily self-regulating themselves as they promote accountability, fairness, privacy and robust AI systems. These two organizations, in particular, are raising awareness about their AI governance frameworks to increase their CSR credentials with stakeholders.

Likewise, AI developers who work for other businesses, are expected to forge relationships with external stakeholders including with policy makers as well as with actors including individuals and organizations who share similar interests in AI. Innovative clusters and network developments may result in better AI systems and can also decrease the chances of possible risks. Indeed, practitioners can be in better position if they cooperate with stakeholders for the development of trustworthy AI and if they increase their human capacity to improve the quality of their intellectual properties (Camilleri et al., 2023). This way, they can enhance their competitiveness and growth prospects (Troise & Camilleri, 2021). Arguably, it is in their interest to continuously engage with internal stakeholders (and employees), and to educate them about AI governance dimensions, that are intended to promote accountable, transparent, explainable interpretable reproducible, fair, inclusive and secure AI solutions. Hence, they could maximize AI benefits, minimize their risks as well as associated costs.

Future research directions

Academic colleagues are invited to raise more awareness on AI governance mechanisms as well as on verification and monitoring instruments. They can investigate what, how, when and where protocols could be used to protect and safeguard individuals and entities from possible risks and dangers of AI.

The “what” question involves the identification of AI research and development processes that require regulatory or quasi regulatory instruments (in the absence of relevant legislation) and/or necessitate revisions in existing statutory frameworks.

The “how” question is related to the substance and form of AI regulations, in terms of their completeness, relevance, and accuracy. This argumentation is synonymous with the true and fair view concept applied in the accounting standards of financial statements.

The “when” question is concerned with the timeliness of the regulatory intervention. Policy makers ought to ensure that stringent rules do not hinder or delay the advancement of technological innovations.

The “where” question is meant to identify the context where mandatory regulations or the introduction of soft laws, including non-legally binding principles and guidelines are/are not required.

Future researchers are expected to investigate further these four questions in more depth and breadth. This research indicated that most contributions on AI governance were discursive in nature and/or involved literature reviews. Hence, there is scope for academic colleagues to conduct primary research activities and to utilize different research designs, methodologies and sampling frames to better understand the implications of planning, organizing, implementing and monitoring AI governance frameworks, in diverse contexts.

The full article is also available here: https://www.researchgate.net/publication/372412209_Artificial_intelligence_governance_Ethical_considerations_and_implications_for_social_responsibility

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Filed under artificial intelligence, chatbots, Corporate Social Responsibility, internet technologies, internet technologies and society

Tagged as Accountability, AI, AI Explainability, AI fairness, AI governance, AI inclusiveness, AI interpretability, AI privacy, AI robustness, AI safety, AI security, AI transparency, artificial intelligence, Artificial Intelligence Governance, corporate social responsibility, Explainability, Fairness, Inclusiveness, Interpretability, Privacy, Responsible AI, Robustness, Safety, Security, Transparency

March 29, 2023 · 1:07 pm

Creating shared value through open innovation approaches

This is an excerpt from one of my latest articles that was published through Business Strategy and the Environment.

Big businesses are breaking down traditional silos among their internal departments to improve knowledge flows within their organizations and/or when they welcome external ideas and competences from external organizations (Aakhus & Bzdak, 2015; Chesbrough, 2003; Chesbrough & Bogers, 2014). Open innovation is related to the degree of trust and openness with a variety of stakeholders (Chesbrough, 2020; Leonidou et al., 2020; Zhu et al., 2019). Debately, this concept clearly differentiates itself from closed innovation approaches that are associated with traditional, secretive business models that would primarily rely on the firms’ internal competences and resources. In the latter case, the companies would withhold knowledge about their generation of novel ideas, including incremental and radical innovations within their research and development (R&D) department. They would be wary of leaking information to external parties. This is in stark contract with open innovation.

Open innovation is rooted in the belief that the dissemination of knowledge and collaboration with stakeholders would lead to win-win outcomes for all parties. Chesbrough (2003) argued that companies can maximize the potential of their disruptive innovations if they work in tandem with internal as well as with external stakeholders (rather than on their own) in order to improve products and service delivery. His open innovation model suggests that corporations ought to benefit from diverse pools of knowledge that are distributed among companies, customers, suppliers, universities, research center industry consortia, and startup firms.

Chesbrough (2020) distinguished between different types of insider information that could or could not be leaked to interested parties. He cautioned that sensitive information (he referred to as the “Crown Jewels”) ought to be protected and can never be revealed to external stakeholders. Nevertheless, he argued that an organization can selectively share specific communications with a “Middle Group” comprising key customers, suppliers, and/or partners in order to forge closer relationships with them. The companies’ internal R&D departments can avail themselves from their consumers’ insights as well as from external competences, capabilities, and resources, to cocreate value to their business and to society at large.

Chesbrough (2020) went on to suggest that a company should open-up their “long tail of intellectual property to everyone.” He contended that organizations may do so to save on their patent renewal fees. During the coronavirus (COVID-19) pandemic, many businesses joined forces and adopted such an intercompany open innovation approach to mass produce medical equipment. For instance, Ford Motor Co. sent its teams of engineers to consult with counterparts at 3M and General Electric to produce respirators, ventilators, and new 3-D-printed face shields, for the benefit of healthcare employees and COVID-19 patients (Washington Post, 2020).

Corporations are increasingly collaborating with experts hailing from diverse industry sectors to innovate themselves and to search for new sources of competitive advantage (Porter & Kramer, 2011; Roszkowska-Menkes, 2018). They may usually resort to open innovation approaches when they engage with talented individuals who work on a freelance basis or for other organizations, to benefit from their support. There is scope for companies to forge fruitful relationships with external stakeholders, who may be specialized in specific fields, to help them identify trends, penetrate into new markets, to develop new products, or to diversify their business model, to establish new revenue streams for their firm (Camilleri & Bresciani, 2022; Centobelli, Cerchione, Chiaroni, et al., 2020; Su et al., 2022). These stakeholders can add value to host organizations in their planning, organization, and implementation of social and environmentally sustainable innovations (Camilleri, 2019a; Sajjad et al., 2020).

Open innovation holds great potential to create shared value opportunities for business and society (Aakhus & Bzdak, 2015; Alberti & Varon Garrido, 2017; Roszkowska-Menkes, 2018). This argumentation is closely related to the strategic approach to corporate social responsibility (CSR) and to the discourse about corporate sustainability (Camilleri, 2022a; Eweje, 2020). Previous literature confirmed that open innovation processes can have a significant effect on the companies’ triple bottom line in terms of their economic performance as well as on their social and environmental credentials (Gong et al., 2020; Grunwald et al., 2021; Mendes et al., 2021; Testa et al., 2018).

The businesses’ ongoing engagement with their valued employees may result in a boost in their intrinsic motivations, morale, job satisfaction, and low turnover levels and could increase their productivity levels (Camilleri, 2021; Chang, 2020; Kumar & Srivastava, 2020; Schmidt-Keilich & Schrader, 2019). Their collaboration with external (expert) stakeholders may lead to positive outcomes including to knowledge acquisition, operational efficiencies, cost savings, and to creating new revenue streams from the development of innovative projects, among others (Ghodbane, 2019; Huizingh, 2011). Open innovation agreements are clearly evidenced when businesses forge strong relationships with internal and external stakeholders to help them plan, develop, promote, and distribute products (Bresciani, 2017; Camilleri, 2019b; Chesbrough & Bogers, 2014; Greco et al., 2022; Loučanová et al., 2022; Troise et al., 2021). They may do so to be in a better position to align corporate objectives (including to increase their bottom lines) with their social and environmental performance (Alberti & Varon Garrido, 2017; Herrera & de las Heras-Rosas, 2020; Mendes et al., 2021).

This paper provides a clear definition of the most popular paradigms relating to the intersection of open innovation approaches and corporate sustainability, as reported in Table 1.

Table 1. A list of the most popular paradigms relating to the intersection of open innovation approaches and corporate sustainability

“The following section synthesizes the content that was reported in past contributions. The researchers deliberate about open innovation opportunities and challenges for host organizations as well as for their collaborators”.

Open innovation opportunities

In the main, many commentators noted that open innovation approaches have brought positive outcomes for host organizations and their collaborators. The research questions of the extracted contributions (that are reported in Table 2) indicated that in many cases, companies are striving in their endeavors to build productive relationships with different stakeholders (Mtapuri et al., 2022; Peña-Miranda et al., 2022; Shaikh & Randhawa, 2022), to create value to their businesses as well as to society (Döll et al., 2022; Ghodbane, 2019; Roszkowska-Menkes, 2018). Very often, they confirmed that open innovation practitioners are promoting organizational governance (Aakhus & Bzdak, 2015; Sánchez-Teba et al., 2021), fair labor practices (Chang, 2020; Herrera & de las Heras-Rosas, 2020; Kumar & Srivastava, 2020; Schmidt-Keilich & Schrader, 2019), environmentally responsible investments (Aakhus & Bzdak, 2015; Cigir, 2018; Mendes et al., 2021; van Lieshout et al., 2021; Yang & Roh, 2019), and consumer-related issues (Greco et al., 2022; Loučanová et al., 2022; Wu & Zhu, 2021; Yang & Roh, 2019), among other laudable behaviors.

Many researchers raised awareness on the corporate sustainability paradigm (van Marrewijk, 2003) as they reported about the businesses’ value creating activities that are synonymous with the triple bottom line discourse, in terms of their organizations’ social, environment, and economic performance (Chang, 2020; Döll et al., 2022; Su et al., 2022; van Lieshout et al., 2021; Yang & Roh, 2019).

Other authors identified strategic CSR (Fontana, 2017; Porter & Kramer, 2006) practices and discussed about shared value perspectives (Abdulkader et al., 2020; Porter & Kramer, 2011) that are intended to improve corporate financial performance while enhancing their social and environmental responsibility credentials among stakeholders (Ghodbane, 2019; Roszkowska-Menkes, 2018; Sánchez-Teba et al., 2021).

Mendes et al. (2021) argued that strategic CSR was evidenced through collaborative approaches involving employees and external stakeholders. They maintained that there is scope for businesses to reconceive their communication designs with a wide array of stakeholders. Similarly, Aakhus and Bzdak (2015) contended that stakeholder engagement and open innovation processes led to improved decision making, particularly when host organizations consider investing in resources and infrastructures to be in a better position to address the social, cultural, and environmental concerns.

Firms could implement open innovation approaches to benefit from outsiders’ capabilities and competences (of other organizations, including funders, partners, and beneficiaries, among others) (Alberti & Varon Garrido, 2017). They may benefit from the external stakeholders’ support to diversify their business and/or to develop innovative products and services. Their involvement could help them augment their financial performance in terms of their margins and return on assets (Ben Hassen & Talbi, 2022).

Ongoing investments in open and technological innovations in terms of process and product development can result in virtuous circles and positive multiplier effects for the businesses as well as to society. Practitioners can forge cooperative agreements with social entrepreneurs, for-profit organizations, or with non-profit entities. Many companies are increasingly recruiting consultants who are specialized in sustainable innovations. Alternatively, they engage corporate reporting experts to help them improve their ESG credentials with stakeholders (Holmes & Smart, 2009).

Such open innovation approaches are intrinsically related to key theoretical underpinnings related to CSR including the stakeholder theory, institutional theory, signaling theory, and to the legitimacy theory, among others (Authors; Freudenreich et al., 2020). Firms have a responsibility to bear toward societies where they operate their business (in addition to their economic responsibility to increase profits). Their collaborative stance with knowledgeable professionals may provide an essential impetus for them to improve their corporate reputation and image with customers and prospects.

The open innovation paradigm suggests that it is in the businesses’ interest to engage with stakeholders through outside-in (to benefit from external knowledge and expertise), inside-out (to avail themselves of their extant competences and capabilities), and coupled (cocreation) processes with internal and external stakeholders (Enkel et al., 2009; Roszkowska-Menkes, 2018). Its theorists claim that outside-in processes are intended to enhance the company’s knowledge as they source external information from marketplace stakeholders including suppliers, intermediaries, customers, and even competitors, among others.

Many researchers emphasize that there are a number of benefits resulting from coopetition among cooperative competitors. Their inside-out collaborative processes stimulate innovations, lead to improvements in extant technologies, and provide complementary resources, resulting in new markets and products. Competing businesses can exchange their ideas and innovations with trustworthy stakeholders, outside of their organizations’ boundaries in order to improve their socio-emotional wealth (Herrera & de las Heras-Rosas, 2020). The proponents of open innovation advocate that businesses ought to foster an organizational culture that promotes knowledge transfer, ongoing innovations, and internationalization strategies.

Michelino et al. (2019) held that organizations ought to engage in ambidextrous approaches. These authors commended that practitioners should distinguish between exploratory and traditional units of their business model. They posited that it would be better for them if they segregated the former from the latter ones, especially if they want to develop new processes, products, and technologies in mature markets. The organizations’ exploratory units could be in a better position to flexibly respond to ongoing changes in their marketing environment.

Other researchers noted that it would be better if the businesses’ R&D activities are attuned with the practitioners’ expertise and/or with their stakeholders who are involved in their open innovation knowledge sharing strategies (Talab et al., 2018). Companies can generate new sources of revenue streams, even in areas that are associated with social issues and/or with green economies, if they reach new customers in different markets (Centobelli, Cerchione, & Esposito, 2020; Chang, 2020; Su et al., 2022; Yang & Roh, 2019). They may partner with other organizations to commercialize their (incremental or radical) innovations through licensing fees, franchises, joint ventures, mergers and acquisitions, spinoffs, and so forth.

Many commentators made reference to coupled processes involving a combination of outside-in and inside-out open innovation processes (Roszkowska-Menkes, 2018). The businesses’ transversal alliances involving horizontal and vertical collaborative approaches with external stakeholders can help them co-create ideas to foster innovations (Greco et al., 2022; Rupo et al., 2018). Several open innovation theorists are increasingly raising awareness on how collaborative relationships with stakeholders including consumers, lead users, organizations who may or may not be related to the company per se, universities as well as research institutions, among others, are supporting various businesses in their R&D stages and/or in the design of products (Khan et al., 2022; Naruetharadhol et al., 2022). Very often, their research confirmed that such cocreation processes are utilized in different contexts, for the manufacturing of a wide range of technologies.

The findings from this review reported that, for the time being, just a few researchers are integrating open innovation’s cocreation approaches with corporate sustainability outcomes. A number of contributing authors insisted that there are many advantages for socially and environmentally responsible companies to embrace open innovation approaches (Carayannis et al., 2021; Cigir, 2018; Mendes et al., 2021; Yang & Roh, 2019). In many cases, they argued that the practitioners’ intentions are to broaden their search activities and to avail themselves from talented employees and external experts in exchange for enhanced social legitimacy, thereby availing themselves of innovation capital for future enterprising activities (Greco et al., 2022; Holmes & Smart, 2009).

Hence, businesses may benefit from the competences and capabilities of individual consultants and organizations (from outside their company) to tap into the power of co-creation, to source ideas for social and green innovations (van Lieshout et al., 2021). These alliances are meant to support laudable causes, address the deficits in society, and/or to minimize the businesses’ impact on the natural environment (Altuna et al., 2015; Khan et al., 2022). For-profit organizations can resort to open innovation approaches to avail themselves of resources and infrastructures that are not currently available within their firm. This way they can reduce their costs, risks, and timescales when diversifying into sustainable business ventures, including those related to social entrepreneurship projects (Peredo & McLean, 2006; Shapovalov et al., 2019). They may do so to leverage their business, to gain a competitive advantage over their rivals.

Open innovation challenges

Open innovations could expose the businesses to significant risks and uncertainties associated with enmeshed, permeable relationships with potential collaborators (Gomes et al., 2021; Madanaguli et al., 2023). Various authors contended that practitioners should create an organizational culture that is conducive to open innovation (Herrera & de las Heras-Rosas, 2020; Mohelska & Sokolova, 2017). Generally, they argued that host organizations should communicate and liaise with employees as well as with external partners, during the generation of ideas and in different stages of their R&D projects. Some researchers noted that open innovation practitioners tend to rely on their external stakeholders’ valuable support to diversify their business models, products, or services (Chalvatzis et al., 2019; Park & Tangpong, 2021; Su et al., 2022).

A number of academic commentators argued that practitioners have to set clear, specific, measurable, attainable, relevant, and timely goals to them before they even start working on a project together (Alberti & Varon Garrido, 2017). In many cases, they maintained that host organizations are expected to foster a strong relationship with collaborators. At the same time, they should ensure that the latter ones comply with their modus operandi (Dahlander & Wallin, 2020). In reality, it may prove difficult for the business leaders to trust the new partners. Unlike their employees, the external parties are not subject to the companies’ codes of conduct, rules, and regulations (Chesbrough, 2020; Shamah & Elssawabi, 2015). A few authors indicated that senior management may utilize extrinsic and intrinsic incentives to empower and motivate internal as well as external stakeholders to pursue their organization’s open innovation objectives (Chang, 2020; Greco et al., 2022; Holmes & Smart, 2009; Roszkowska-Menkes, 2018; Schmidt-Keilich & Schrader, 2019).

Some researchers identified possible threats during and after the implementation of joint projects. Very often, they contended that host organizations risk losing their locus of control to external stakeholders who are experts in their respective fields (Madanaguli et al., 2023). The latter ones may possess unique skills and competences that are not readily available within the organization. A few authors cautioned that the practitioners as well as their collaborators are entrusted to safeguard each other’s intangible assets. A number of researchers warned and cautioned that they may risk revealing insider information about sensitive commercial details relating to their intellectual capital (Gomes et al., 2021). As a result, companies may decide to collaborate on a few peripheral tasks as they may be wary of losing their return on investments if they share trade secrets with their new partners, who could easily become their competitors. Their proprietary knowledge concerns are of course real and vital for their future prospects. Therefore, their relationships with internal and external stakeholders should be based on mutual trust and understanding in order to increase the confidence in the projects’ outcomes (Ferraris et al., 2020; Sánchez-Teba et al., 2021).

CONCLUSIONS

The companies’ ongoing engagement with internal and external stakeholders as well as their strategic CSR initiatives and environmentally sustainable innovations can generate economic value, in the long run. This review confirms that for-profit organizations are increasingly using open innovation approaches. At the same time, they are following ethical practices, adopting responsible human resources management policies, and investing in green technologies to gain institutional legitimacy and to create competitive advantages for their business. Many authors reported that their corporate sustainability behaviors can enhance their organizations’ reputation and image among customers as well as with marketplace stakeholders. At the same time, their laudable practices may even improve their corporate financial performance.

During COVID-19, many businesses turned to open innovation’s collaborative approaches. Various stakeholders joined forces and worked with other organizations, including with competitors, on social projects that benefit the communities where they operate their companies. In many cases, practitioners have realized that such partnerships with certain stakeholders (like researchers, knowledgeable experts, creative businesses, and non-governmental institutions, among others) enable their organizations to find new ways to solve pressing problems and at the same time helped them build a positive reputation. Indeed, open innovation approaches can serve as a foundation for future win-win alliances, in line with sociological research demonstrating that trust develops when partners voluntarily go the extra mile, to create value to their business and to society at large.

Yet, this research revealed that there is still a gap in the academic literature that links CSR/corporate sustainability with open collaborative approaches. At the time of writing, this paper, there were only 45 contributions on the intersection of these notions.

A full version of this open-access paper can be accessed through publisher: https://onlinelibrary.wiley.com/doi/full/10.1002/bse.3377

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Filed under academia, Business, Corporate Social Responsibility, Corporate Sustainability and Responsibility, environment, Open Innovation, Shared Value

Tagged as architectural innovation, Business, corporate social responsibility, corporate sustainability, Corporate Sustainability and Responsibility, creating shared value, CSR, green economy, incremental innovation, Open Innovation, open innovation approaches, organizational ambidexterity, radical innovation, social entrepreneurship, Sustainability

April 14, 2022 · 7:42 pm

Walking the talk about Corporate Social Responsibility Communications

_{This is an excerpt from one of my latest articles that was accepted for publication by Wiley’s Business Ethics, the Environment and Responsibility (formerly known as Business Ethics: A European Review).}

^{Suggested citation: Camilleri, M.A. (2022). Walking the talk about corporate social responsibility communication: An Elaboration Likelihood Model perspective, Business Ethics, the Environment & Responsibility, https://onlinelibrary.wiley.com/doi/full/10.1111/beer.12427}

Theoretical implications

This contribution validated the Elaboration Likelihood Model’s (ELM’s) measures and key constructs relating to the Information Adoption Model (IAM). Specifically, this research identified the effects of information relevance, information accuracy, information accuracy, source trustworthiness and source expertise on the individual’ attitudes toward online CSR communications.

The results confirmed that both central as well as peripheral factors (to a lower extent) were having a significant effect on the targeted audiences’ changing attitudes toward corporate communications. In sum, this study indicated that online users appreciated relevant and timely CSR content from trusted sources – that were curated by experts. This finding is conspicuous with relevant theoretical underpinnings on ELM. For instance, Chen and Chang (2018) and even Rawlins (2008) contended that individuals are usually captivated by current, relevant, complete, accurate, reliable, comparable and clear communications.

Relevant academic literature reported that individuals may choose to pursue ELM’s central route, whenever they evaluate the quality of the arguments/information that is communicated to them (Petty & Cacioppo, 1986). Alternatively, if they are not interested or motivated on the content, they may usually rely on the sources’ credibility to form their attitudes and opinions on their messages. Previous research often utilized ‘source expertise’ and ‘source trustworthiness’ constructs to measure the respondents’ perceptions about the credibility of sources of information.

In this case, this study found that the research participants were more influenced by ELM’s central route processing as information timeliness and information relevance were having nuanced effect on attitudes when compared to the peripheral factors including source expertise. Evidently, the respondents reflected and thought on CSR communications they accessed through the Internet and via social media. This finding implies that the businesses’ elaborated, high-quality content was changing their stakeholders’ attitudes toward CSR information.

Nevertheless, the research model indicated that the participants were somehow affected by peripheral issues, particularly by the source expertise of content curators. Previous literature reported that the recipients of information can still be influenced by the peripheral route’s subjective cues and/or by heuristic inferences (i.e. low elaboration issues). For instance, many individuals are continuously exposed to corporate communications from businesses who have excellent credentials among their followers (Camilleri, 2021a).

The findings from this study revealed that source trustworthiness was the weakest antecedent of the individuals’ attitudes toward CSR communications. This result is similar to previous findings from other studies, where the researchers reported that there were lower effects from peripheral factors like source credibility/source trustworthiness (than from central factors) on information usefulness/attitudes toward information.

This research demonstrated that external stakeholders were mainly processing information relating to the businesses’ CSR activities through the central route, as they considered their communications as elaborate, timely and relevant. However, it also showed that they held positive perceptions about the expertise of content curators who were disseminating information on their CSR credentials via digital media

Managerial implications

This contribution has investigated the online users’ attitudes about CSR communications and revealed their perceptions about the sources’ credibility. It implies that businesses can improve their credentials if they publish quality CSR content that is appreciated by their stakeholders. This research suggests that external stakeholders expected businesses to publish relevant information that is accurate and timely. This finding suggests that there is scope for the businesses to regularly update their CSR webpages with the latest developments. For instance, they can publish certain information and newsfeeds about non-financial matters including on their immediate responses to COVID-19 like sanitization and hygienic measures in their workplace environments. They may disseminate health and safety information through social media sites or via online video sharing platforms. They can use different digital media to promote their businesses’ responsible behaviors toward their employees and the community at large, during different waves of the pandemic.

Ultimately, it is in the companies’ interest to communicate about appropriate ESG matters with different stakeholders (Camilleri, 2021b). Businesses ought to use corporate websites to disseminate information on commercial aspects, corporate governance policies, CSR and/or environmental sustainability initiatives as well as on COVID-19. In this day and age, they should also utilize social media networks (SNSs) on a regular basis, to raise awareness about their website, and to interact on different issues with their followers, in real time. They can publish appealing content including images and videos about their CSR activities to entice the curiosity of stakeholders. They may also share excerpts from their CSR disclosures and could feature forward-looking statements that shed light on their trajectories for a post COVID-19 era.

Limitations and directions for future research

This study is not without limitations. The measures that were used to capture the data were drawn from ELM and from its related IAM. These theoretical models were mostly referenced in previous studies that were mostly focused on the co-creation of content, including online reviews and electronic word of mouth publicity. Therefore, the survey items were adapted for a study that sought to explore the online users’ attitudes toward CSR communications. In this case, the results confirmed the reliability and validity of the constructs. Hence, prospective researchers are encouraged to replicate this study in other contexts.

Future studies may consider different constructs that may be drawn from other theoretical frameworks, to shed more light on the individuals’ attitudes toward online communications, information adoption and/or intentional behaviors. Researchers may adopt other constructs to evaluate different aspects of online content. They may investigate perceptions about information access, information understandability, data richness, interactivity and customization capabilities or information completeness, among others. Alternatively, they could determine whether the information is rhetoric, difficult to understand, confusing, ineffective or even useless for online users. Furthermore, alternative research methods and sampling frames can be used to capture and analyze the data. Interpretative studies can explore other stakeholders’ in-depth opinions and beliefs on CSR communications and delve deeper into their content. Inductive studies may reveal other important issues on how to improve the quality and credibility of CSR disclosures in the digital age.

References

Camilleri, M. A. (2021a). Strategic dialogic communication through digital media during COVID-19. In M. A. Camilleri (Ed.), Strategic Corporate Communication in the Digital Age. Bingley: Emerald, pp. 1-18. https://www.researchgate.net/publication/343294285_Strategic_Dialogic_Communication_Through_Digital_Media_During_COVID-19_Crisis

Camilleri, M.A. (2021b). Strategic attributions of corporate social responsibility and environmental management: The business case for doing well by doing good! Sustainable Development, https://onlinelibrary.wiley.com/doi/full/10.1002/sd.2256

Chen, C. C., & Chang, Y. C. (2018). What drives purchase intention on Airbnb? Perspectives of consumer reviews, information quality, and media richness. Telematics and Informatics, 35(5), 1512-1523.

Petty, R. E., & Cacioppo, J. T. (1986). The elaboration likelihood model of persuasion. In Communication and persuasion (pp. 1-24). Springer, New York, NY.

Rawlins, B. (2008). Give the emperor a mirror: Toward developing a stakeholder measurement of organizational transparency. Journal of Public Relations Research, 21(1), 71-99.

This excerpt was adapted for a blog. The full paper can be downloaded through: https://www.researchgate.net/publication/359186812_Walking_the_talk_about_corporate_social_responsibility_communication_An_Elaboration_Likelihood_Model_perspective

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Filed under corporate communication, Corporate Social Responsibility, Corporate Sustainability and Responsibility, CSR, digital media, ESG Reporting

Tagged as corporate social responsibility, CSR, csr communication, digital media, Elaboration Likelihood Model, Information Adoption Model, social media

March 7, 2022 · 7:35 pm

How can we combat climate change?

This is an excerpt from one of my latest contributions.

_{Suggested citation: Camilleri, M.A. (2022). The rationale for ISO 14001 certification: A systematic review and a cost-benefit analysis, Corporate Social Responsibility and Environmental Management, https://doi.org/10.1002/csr.2254}

During the Paris Climate Conference (COP 21), one hundred ninety-six (196) countries pledged their commitment to implement environmental performance measures to reduce the effects of climate change. This conference has led to the development of the ‘Paris Agreement’ where signatories became legally bound to limit global warming to below 2°C, and possibly 1.5°C (Palea & Drogo, 2020; Secinaro, Brescia, Calandra & Saiti, 2020). They recognized the importance of averting and minimizing the environmental impact that is caused by climate change, by scaling up their efforts and support initiatives to reduce emissions, by building resilience among parties, and by promoting cooperation (Birindelli & Chiappini, 2021; Gatto, 2020).

In the aftermath of COP 21, many countries submitted their plans for climate action (these plans are also known as nationally determined contributions – NDCs), where they communicated about their tangible actions that were aimed to reduce their greenhouse gas emissions and the impacts of rising temperatures (Fatica & Panzica, 2021; Gerged, Matthews & Elheddad, 2021). Consequentially, intergovernmental organizations including the European Union (EU), among others, are increasingly establishing ambitious carbon neutrality goals and zero-carbon solutions to tackle climate change issues (Benz, Paulus, Scherer, Syryca & Trück, 2021).

Many countries are incentivizing businesses across different economic sectors, to reduce their emissions. For example, the EU member states are expected to reduce their greenhouse gas emissions by 40% before 2030, and by 60% prior to 2050 (EU, 2019). These targets would require the commitment of stakeholders from various sectors including those operating within the energy and transportation industries, among others.

The latest climate change conference (COP26) suggested that progress has been made on the signatories’ mitigation measures that were aimed to reduce emissions, on their adaptation efforts to deal with climate change impacts, on the mobilization of finance, and on the increased collaboration among countries to reach 2030 emissions targets. However, more concerted efforts are required to deliver on these four pledges (UNFCC, 2021).

This contribution raises awareness on the use of environmental management standards that are intended to support organizations of different types and sizes, including private entities, not-for-profits as well as governmental agencies, to improve their environmental performance credentials. A thorough review of the relevant literature suggests that, over the years many practitioners have utilized the International Standards Organization’s ISO 14001 environment management systems standard to assist them in their environmental management issues (Baek, 2018; Delmas & Toffel, 2008; Erauskin‐Tolosa, Zubeltzu‐Jaka, Heras‐Saizarbitoria & Boiral, 2020; Melnyk, Sroufe & Calantone, 2003).

Many academic commentators noted that several practitioners operating in different industry sectors, in various contexts, are implementing ISO 14001 requirements to obtain this standard’s certification (Boiral, Guillaumie, Heras‐Saizarbitoria & Tayo Tene, 2018; Para‐González & Mascaraque‐Ramírez, 2019; Riaz, & Saeed, 2020). Whilst several researchers contended about the benefits of abiding by voluntary principles and guidelines (Camilleri, 2018), others discussed about the main obstacles to obtaining impartial audits, assurances and certifications from independent standard setters (Hillary, 2004; Ma, Liu, Appolloni & Liu, 2021; Robèrt, Schmidt-Bleek, Aloisi De Larderel … & Wackernagel, 2002; Teng & Wu, 2018).

Hence, this research examines identifies the rationale for ISO 14001 certification (Carvalho, Santos & Gonçalves, 2020; Eltayeb, Zailani & Ramayah, 2011; Lee, Noh, Choi & Rha, 2017; Potoski & Prakash, 2005) that is supposedly intended to improve the organizations’ environmental performance and to enhance their credentials. Specifically, this contribution’s objectives are threefold. Firstly, it provides a generic background on voluntary instruments, policies and guidelines that are intended to promote corporate environmentally responsible behaviors. Secondly, it presents the results from a systematic review of academic articles that were focused on ISO 14001 – environment management systems. Thirdly, it synthesizes the findings from high impact papers and discusses about the benefits and costs of using this standard. In conclusion, it elaborates on the implications of this research, it identifies its limitations and points out future research avenues.

In sum, this contribution differentiates itself from previous articles, particularly those that sought to investigate the introduction and implementation of environment management systems in specific entities. This research involves a two-stage systematic analysis. It appraises a number of empirical investigations, theoretical articles, reviews, case studies, discursive/opinion papers, from 1995-2021. Afterwards, it scrutinizes their content to shed more light on the pros and cons of using ISO 14001 as a vehicle to improve corporate environmental performance.

This paper can be downloaded, in its entirety, through ResearchGate: https://www.researchgate.net/publication/358557458_The_rationale_for_ISO_14001_certification_A_systematic_review_and_a_cost-benefit_analysis

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Filed under Business, Circular Economy, corporate citizenship, Corporate Social Responsibility, Corporate Sustainability and Responsibility, CSR, environment, Sustainability, sustainable development

Tagged as Climate Change, corporate social responsibility, corporate social responsibility and environmental management, CSR, environment, Environmental Responsibility, environmental standards, externalities, green house gases, ISO 14001, ISO environmental standards, pollution, Sustainability

January 11, 2022 · 11:00 am

The European Union’s corporate sustainability reporting directive (CSRD)

The European Union (EU)’s non-financial reporting directive (NFRD) law requires that large undertakings including corporations, listed businesses and government entities, among others, to disclose information on the way they operate and manage social and environmental challenges. This helps investors, civil society organisations, consumers, policy makers and other stakeholders to be in a better position to evaluate their non-financial performance (Camilleri, 2015; Camilleri, 2018; EU, 2014).

Recently, the EU (2021) put forward its proposal for a Corporate Sustainability Reporting Directive (CSRD), which would amend the existing reporting requirements of the NFRD. In sum, the proposal extends the audit requirement to large companies and listed businesses in regulated markets (except listed micro-enterprises). They will be expected to introduce more detailed reporting requirements, according to mandatory EU sustainability reporting standards. At the time of writing this contribution, it is envisaged that the first set of standards would be adopted by October 2022 (EU, 2021).

References:

Camilleri, M.A. (2015). Environmental, social and governance disclosures in Europe. Sustainability Accounting, Management and Policy Journal, 6(2), 224-242. https://www.emerald.com/insight/content/doi/10.1108/SAMPJ-10-2014-0065/full/html

Camilleri, M.A. (2018). Theoretical insights on integrated reporting: The inclusion of non-financial capitals in corporate disclosures, Corporate Communications: An International Journal, 23(4), 567-581. https://www.emerald.com/insight/content/doi/10.1108/CCIJ-01-2018-0016/full/html

EU (2014). Directive 2014/95/EU of the European Parliament and of the Council of 22 October 2014 amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups. European Commission, Brussels, Belgium. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32014L0095

EU (2021). EU Taxonomy, Corporate Sustainability Reporting, Sustainability Preferences and Fiduciary Duties: Directing finance towards the European Green Deal COM/2021/188 final https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX:52021DC0188

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Filed under Corporate Social Responsibility, Corporate Sustainability and Responsibility, CSR, ESG Reporting, Integrated Reporting

Tagged as corporate social responsibility, Corporate Sustainability and Responsibility, CSR Reporting, ESG, ESG Disclosures, ESG Reporting, EU, Europe, Non Financial Reporting

December 31, 2021 · 3:42 pm

Advancing community-based tourism approaches for sustainable destinations

This is an excerpt from one of my latest papers on sustainable tourism.

Suggested citation: Mtapuri, O., Camilleri, M.A. & Dłużewska, A. (2021). Advancing community-based tourism approaches for the sustainable development of destinations. Sustainable Development,

https://onlinelibrary.wiley.com/doi/10.1002/sd.2257

_{^{Image adapted from TravelDailyNews}}.

Whilst mass tourism service providers, such as foreign owned properties including international hotel chains are associated with economic leakages (Garrigós et al., 2015), locally-owned, smaller businesses, are usually aligned to economic linkages.

Destinations can use community-based tourism (CBT) approaches to increase linkages by attracting high yield, affluent tourists to locally-owned companies (Butler, 2020; Prasiasa, et al., 2020). From a community-based perspective, the limitation of tourism figures can improve the destinations’ sustainability, whilst limiting the impacts on the natural environment (Saarinen, 2006:1129). Tourism businesses can contribute to reduce their impact on the environment by limiting the number of tourists. They can improve the quality of their services to appeal to high-end segments.

To be successful, the proponents of CBT ought to ensure that they retain specific principles and characteristics. Thus, CBT practitioners could differentiate themselves from other business models by offering authentic, local experiences to their guests. CBT can establish itself as a niche tourism product that appeals to lucrative market segments. Therefore, service providers are expected to deliver on their promises. They have to meet and exceed their customers’ expectations without lowering their standards of service.

CBT operators rely on their community’s local resources including environment/natural resources, heritage, culture as well as on knowledgeable human resources. Their employees should possess customer service skills, and ought to be trained about their local tourism products. Local businesses may usually engage native employees to improve their consumers’ experiences with their CBT product.

However, there may be instances where CBT operators may not find local employees in the labor market. In this case, they have to train their imported employees about local cultures and traditions in order to continue delivering authentic CBT experiences. The following figure presents a model for sustainable CBT that relies on the destinations’ effective management of their carrying capacities.

An ongoing evaluation of the destinations’ infrastructures as well as on their human and natural resources, particularly during their high season, is required to ensure that they do not exceed their specific carrying capacities. While each specific context will have its own specific performance indicators, this contribution suggests that destination marketers ought to consider the following issues:

• The participation of local businesses and individual in CBT.
• Local procurement of products (for accommodation establishments, hotels, restaurants, and to other tourism businesses).

It is in the interest of CBT operators to think locally and act globally (Hofstede, 1998). They should consider sourcing their requirements from their local communities, where possible. Hence, tourism planners could utilize local resources to reduce leakages from their economy.

Governments can encourage tourism businesses to support local enterprises, for example, by purchasing local products, and by supporting the local communities. They may also incentivize businesses through financial instruments to pursue laudable activities. They can also provide support to tourism businesses, including small hotels and B&Bs to upgrade their services to attract lucrative tourists in their communities. At the same time, they have to maintain their destinations’ infrastructure and should offer suitable amenities to visitors.

These strategies are meant to foster an environment that promotes sustainable CBT approaches that are intended to increase economic linkages, whilst improving societal and the environmental outcomes in local communities. The following figure clarifies how tourism businesses can optimize the utilization of local resources through sustainable CBT strategies in order to improve their destination’s carrying capacity whilst reducing leakages from their economy.

The effectiveness of this proposed model for sustainable community-based tourism relies on a regular evaluation of the marketing environment. Tourism practitioners are expected to examine and re-examine their CBT strategies to ensure that they are still creating value to their business, to the local community and to the environment at large.

Sustainable CBT approaches can support the local economic development of destinations, however leakages can jeopardize the destinations’ competitiveness and growth prospects. While the degree and types of leakages may vary, according to specific characteristics of certain countries, it can be argued that the proper utilization of local resources can improve the national economies and the quality of life of different communities, including those from emerging economies.

The type of tourism planning and development that is adopted by certain destinations is another factor that can have an effect on their economic leakages or linkages. Based on the above, this contribution puts forward a theoretical model that is intended to address the limitations of the carrying capacities of various destinations. In sum, it suggests that sustainable CBT approaches that rely on the optimal utilization of local resources (including human and natural) may result in economic growth as well as in positive outcomes to local communities and their natural environments. This model is aimed at rebalancing leakages with linkages in the economy, whilst responding to challenges relating to the supply chains of different tourism businesses.

Indeed, there is scope for destinations to maximize the use of resources at their disposal (both human and natural). In a similar vein, companies should avail themselves of local resources, competences and capabilities. It is also in their interest to engage in strategic CSR and sustainable tourism practices to support local stakeholders and to safeguard their natural environment.

A sustainable CBT model would require tourism businesses to forge relationships with different stakeholders including with the government and its policymakers, suppliers, creditors, employees and customers, among others. The advancement of CBT would also necessitate that destination marketers and hospitality businesses work together, in tandem to improve their tourism product. Local stakeholders are expected to safeguard their natural environment, culture and traditions for the benefit of their communities, and for their valued tourists and visitors who would probably appreciate authentic destinations that offer unique experiences to them.

The full paper and the reference list is available here: https://www.researchgate.net/publication/355446004_Advancing_community-based_tourism_approaches_for_the_sustainable_development_of_destinations

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Tagged as carrying capacity, CBT, community-based tourism, corporate social responsibility, CSR, economic leakages, economic linkages, sustainable tourism, Tourism, tourism economics

November 28, 2021 · 2:40 pm

Why should hospitality businesses care about their stakeholders?

_{The following text was adapted from one of my latest articles that was published in Wiley’s Sustainable Development (Journal).}

^S^{uggested Citation: Camilleri, M.A. (2021). Strategic attributions of corporate social responsibility and environmental management: The business case for doing well by doing. good! Sustainable Development. https://onlinelibrary.wiley.com/doi/full/10.1002/sd.2256}

Introduction

The corporate social responsibility (CSR) notion became popularized during the latter part of 20th the century (Carroll, 2021; 1999; Moon, 2007). At the time, businesses were becoming more concerned on how their activities affected legitimate stakeholders and the development of society at large (Phillips, 2003; Freeman & Reed, 1983). Hence, various authors posited that CSR is a fertile ground for theory development and empirical analysis (McWilliams, Siegel & Wright, 2006).

Without doubt, the clarification of the meaning of CSR is a significant strand in the research agenda (Owen, 2005). CSR has developed as a rather vague concept of moral good or normative behaviors (Frederick, 1986). This construct was described as a relativistic measure of ‘the economic, legal, ethical and discretionary expectations that society had of organizations at a given point of time’ (Carroll, 1979). CSR tackled ‘social problem(s)’ to engender positive ‘economic benefit(s)’ to ensure ‘well paid jobs, and … wealth’ (Drucker, 1984).

CSR has continuously been challenged by those who expected businesses to engage in socially responsible behaviors with stakeholders, to adhere to ethical norms in society, and to protect the natural environment (Camilleri, 2015; Lindgreen & Swaen, 2010; Burke & Logsdon, 1996). Previous research reported that CSR practices can result in improved relationships with different stakeholders (Camilleri, 2017a; Moon, 2007; Sen, Bhattacharya & Korschun, 2006).

Various commentators contended that it is in the businesses’ interest to engage in responsible behaviors to forge closer ties with internal and external stakeholders (Ewan & Freeman, 1993; Freeman, 1984). In addition, many researchers reported that there is a causal relationship between the firms’ stakeholder engagement and their financial performance (Henisz, Dorobantu & Nartey, 2014 Pava & Krausz, 1996). This relationship also holds in the tourism and hospitality industry context (Rhou, Singal & Koh, 2016; Camilleri, 2012; Inoue, & Lee, 2011).

Various hotels and restaurants are increasingly communicating about their responsible activities that are having an effect on their stakeholders, including their employees, patrons, guests, suppliers, local communities, the environment, regulatory authorities and the community at large (Camilleri, 2020a). Like other businesses, tourism and hospitality enterprises are always expected to provide decent employment to locals and migrant workers, health and safety in their workplace environments, adequate compensation and recognition of all employees, ongoing training and development opportunities, work-life balance, and the like.

Various studies suggest that, in normal circumstances, when businesses engage in responsible human resources management (HRM), they will boost their employees’ morale, enhance their job satisfaction and reduce the staff turnover (Asimah, 2018). However, an unprecedented COVID-19 and its preventative measures have surely led to a significant reduction in their business activities.

The pandemic has had a devastating effect on the companies’ social metrics, including on their employees’ conditions of employment, financial remuneration and job security, among other issues (Kramer & Kramer, 2020). It has inevitably led to mass redundancies or resulted in the workers’ reduced wages and salaries. On the other hand, this situation has led to a decrease in the companies’ environmental impacts, such as their greenhouse gas emissions and other unwanted externalities.

Several businesses, including hospitality enterprises are becoming more concerned about their impact on the environment (Kim, Lee & Fairhurst, 2017; Elkington, 1998). In many cases, hotels and restaurants strive to reduce their environmental footprint by offering local, fresh, and sustainable food to their patrons. Very often, they are implementing sustainable models including circular economy systems to use and reuse resources, and to minimize their waste, where possible (Camilleri, 2020b). Alternatively, they are decreasing their electricity and water consumption in their properties, by investing in green technologies and renewable energy sources.

These sustainability initiatives could result in operational efficiencies and cost savings, higher quality, innovation and competitiveness, in the long term. As a matter of fact, many studies confirmed that there is a business case for CSR, as corporations engage in socially responsible and environmentally sound behaviors, to pursue profit-making activities (Porter & Kramer, 2011; 2019; Camilleri, 2012; Carroll & Shabana, 2010; Weber, 2008). Notwithstanding, CSR and sustainable practices can help businesses to improve their reputation, to enhance their image among external stakeholders and could lead to a favorable climate of trust and cooperation with internal stakeholders (Camilleri, 2019a).

In this light, this research builds on previous theoretical underpinnings that are focused on the CSR agenda and on its related stakeholder theory. However, it differentiates itself from other contributions as it clarifies that stakeholder attributions, as well as the corporations’ ethical responsibility, responsible human resources management and environmental responsibility will add value to society and to the businesses themselves.

This contribution addresses a knowledge gap in academia. For the time being, there is no other study that effects of stakeholders’ attributions on the companies’ strategic attributions, as depicted in Figure 1. In sum, this study clarifies that there is scope for businesses to forge strong relationships with different stakeholders. It clearly indicated that their engagement with stakeholders and their responsible behaviors were leading to strategic outcomes for their business and to society at large.

Figure 1. A research model that sheds light on the factors leading to strategic outcomes of corporate responsible behaviors

Implications to academia

This research model suggests that the businesses’ socially and environmentally responsible behaviors are triggered by different stakeholders. The findings evidenced that stakeholder-driven attributions were encouraging tourism and hospitality companies to engage in responsible behaviors, particularly toward their employees. The results confirmed that stakeholders were expecting these businesses to implement environmentally friendly initiatives, like recycling practices, water and energy conservation, et cetera. The findings revealed that there was a significant relationship between stakeholder attributions and the businesses’ strategic attributions to undertake responsible and sustainable initiatives.

This contribution proves that there is scope for tourism and hospitality firms to forge relationships with various stakeholders. By doing so, they will add value to their businesses, to society and the environment. The respondents clearly indicated that CSR initiatives were having an effect on marketplace stakeholders, by retaining customers and attracting new ones, thereby increasing their companies’ bottom lines.

Previous research has yielded mixed findings on the relationships between corporate social performance and their financial performance (Inoue & Lee, 2011; Kang et al., 2010; Orlitzky, Schmidt, & Rynes, 2003; McWilliams and Siegel 2001). Many contributions reported that companies did well by doing good (Camilleri, 2020a; Falck & Heblich, 2007; Porter & Kramer, 2011). The businesses’ laudable activities can help them build a positive brand image and reputation (Rhou et al., 2016). Hence, there is scope for the businesses to communicate about their CSR behaviors to their stakeholders. Their financial performance relies on the stakeholders’ awareness of their social and environmental responsibility (Camilleri, 2019a).

Arguably, the traditional schools of thought relating to CSR, including the stakeholder theory or even the legitimacy theory had primarily focused on the businesses’ stewardship principles and on their ethical or social responsibilities toward stakeholders in society (Carroll, 1999; Evan & Freeman, 1993; Freeman, 1986). In this case, this study is congruent with more recent contributions that are promoting the business case for CSR and environmentally-sound behaviors (e.g. Dmytriyev et al., 2021; Carroll, 2021; Camilleri, 2012; Carroll & Shabana 2010; Falck & Heblich, 2007).

This latter perspective is synonymous with value-based approaches, including ‘The Virtuous Circles’ (Pava & Krausz 1996), ‘The Triple Bottom Line Approach’ (Elkington 1998), ‘The Supply and Demand Theory of the Firm’ (McWilliams & Siegel 2001), ‘the Win-Win Perspective for CSR practices’ (Falck & Heblich, 2007), ‘Creating Shared Value’ (Porter & Kramer 2011), ‘Value in Business’ (Lindgreen et al., 2012), ‘The Stakeholder Approach to Maximizing Business and Social Value’ (Bhattacharya et al., 2012), ‘Value Creation through Social Strategy’ (Husted et al., 2015) and ‘Corporate Responsibility and Sustainability’ (Camilleri, 2018), among others.

In sum, the proponents of these value-based theories sustain that there is a connection between the businesses’ laudable behaviors and their growth prospects. Currently, there are still a few contributions, albeit a few exceptions, that have focused their attention on the effects of stakeholder attributions on CSR and responsible environmental practices in the tourism and hospitality context.

This research confirmed that the CSR initiatives that are directed at internal stakeholders, like human resources, and/or environmentally friendly behaviors that can affect external stakeholders, including local communities are ultimately creating new markets, improving the companies’ profitability and strengthening their competitive positioning. Therefore, today’s businesses are encouraged to engage with a wide array of stakeholders to identify their demands and expectations. This way, they will be in a position to add value to their business, to society and the environment.

Managerial Implications

The strategic attributions of responsible corporate behaviors focus on exploiting opportunities that reconcile differing stakeholder demands. This study demonstrated that tourism and hospitality employers were connecting with multiple stakeholders. The respondents confirmed that they felt that their employers’ CSR and environmentally responsible practices were resulting in shared value opportunities for society and for the businesses themselves, as they led to an increased financial performance, in the long run.

In the past, CSR was associated with corporate philanthropy, contributions-in-kind toward social and environmental causes, environmental protection, employees’ engagement in community works, volunteerism and pro-bono service among other responsible initiatives. However, in this day and age, many companies are increasingly recognizing that there is a business case for CSR. Although, discretionary spending in CSR is usually driven by different stakeholders, businesses are realizing that there are strategic attributions, in addition to stakeholder attributions, to invest in CSR and environmental management practices (Camilleri, 2017a).

This contribution confirmed that stakeholder pressures were having direct and indirect effects on the businesses’ strategic outcomes. This research clearly indicated that both internal and external stakeholders were encouraging the tourism business to invest in environmentally friendly initiatives. This finding is consistent with other theoretical underpinnings (He, He & Xu, 2018; Graci & Dodds, 2008).

Recently, more hotels and restaurants are stepping in with their commitment for sustainability issues as they comply with non-governmental organizations’ regulatory tools such as process and performance-oriented standards relating to environmental protection, corporate governance, and the like (Camilleri, 2015).

Many governments are reinforcing their rules of law and directing businesses to follow their regulations as well as ethical principles of intergovernmental institutions. Yet, certain hospitality enterprises are still not always offering appropriate conditions of employment to their workers (Camilleri, 2021; Asimah, 2018; Janta et al., 2011; Poultson, 2009). The tourism industry is characterized by its seasonality issues and its low entry, insecure jobs.

Several hotels and restaurants would usually offer short-term employment prospects to newcomers to the labor market, including school leavers, individuals with poor qualifications and immigrants, among others (Harkinson et al., 2011). Typically, they recruit employees on a part-time basis and in temporary positions to economize on their wages. Very often, their low-level workers are not affiliated with trade unions. Therefore, they are not covered by collective agreements. As a result, hotel employees may be vulnerable to modern slavery conditions, as they are expected to work for longer than usual, in unsocial hours, during late evenings, night shifts, and in the weekends.

In this case, this research proved that tourism and hospitality employees appreciated their employers’ responsible HRM initiatives including the provision of training and development opportunities, the promotion of equal opportunities when hiring and promoting employees and suitable arrangements for their health and safety. Their employers’ responsible behaviors was having a significant effect on the strategic attributions to their business.

Hence, there is more to CSR than ‘doing well by doing good’. The respondents believed that businesses could increase their profits by engaging in responsible HRM and in ethical behaviors. They indicated that their employer was successful in attracting and retaining customers. This finding suggests that the company they worked for, had high credentials among their employees. The firms’ engagement with different stakeholders can result in an improved reputation and image. They will be in a better position to create economic value for their business if they meet and exceed their stakeholders’ expectations.

In sum, the objectives of this research were threefold. Firstly, the literature review has given an insight into mainstream responsible HRM initiatives, ethical principles and environmentally friendly investments. Secondly, its empirical research has contributed to knowledge by adding a tourism industry perspective in the existing theoretical underpinnings that are focused on strategic attributions and outcomes of corporate responsibility behaviors. Thirdly, it has outlined a model which clearly evidences how different stakeholder demands and expectations are having an effect on the businesses’ responsible activities.

On a lighter note, it suggests that Adam Smith’s ‘invisible hand’ is triggering businesses to create value to society whilst pursuing their own interest. Hence, corporate social and environmental practices can generate a virtuous circle of positive multiplier effects.

Therefore, there is scope for the businesses, including tourism and hospitality enterprises to communicate about their CSR and environmental initiatives through different marketing communications channels via traditional and interactive media. Ultimately, it is in their interest to promote their responsible behaviors through relevant messages that are clearly understood by different stakeholders.

Limitations and future research

This contribution raises awareness about the strategic attributions of CSR in the tourism and hospitality industry sectors. It clarified that CSR behaviors including ethical responsibility, responsible human resources management and environmental responsibility resulted in substantial benefits to a wide array of stakeholders and to the firm itself. Therefore, there is scope for other researchers to replicate this study in different contexts.

Future studies can incorporate other measures relating to the stakeholder theory. Alternatively, they can utilize other measures that may be drawn from the resource-based view theory, legitimacy theory or institutional theory, among others. Perhaps, further research may use qualitative research methods to delve into the individuals’ opinions and beliefs on strategic attributions of CSR and on environmentally-sound investments, including circular economy systems and renewable technologies.

A free-prepublication version of this paper is available (in its entirety) through ResearchGate.

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Tagged as business case for CSR, corporate social responsibility, CSR, Environmental Responsibility, ethical responsibility, hotels, HRM, human resources management, partial least squares, PLS, SEM-pls, stakeholder attributions, stakeholder engagement, Stakeholder Theory, stakeholders, strategic attributions, strategic CSR

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Abstract

1 INTRODUCTION

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“The following section synthesizes the content that was reported in past contributions. The researchers deliberate about open innovation opportunities and challenges for host organizations as well as for their collaborators”.

Open innovation opportunities

Open innovation challenges

CONCLUSIONS

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Corporate Sustainability, Social Responsibility and Environmental Management: An Introduction to Theory and Practice with Case Studies