the impact of corporate social responsibility (csr) on business performance

THE IMPACT OF CORPORATE SOCIAL RESPONSIBILITY (CSR) ON BUSINESS
PERFORMANCE



BY
LE MINH HOANG
E0700038





Graduation Project Submitted to the Department of Business Studies, HELP University
College, in Partial Fulfillment of the Requirements for the Degree of Bachelor of
Business (Accounting) Hons

OCTOBER 2011
1

DECLARATION OF ORIGINALITY AND WORD COUNT

I hereby declare that the graduation project is based on my original work except for quotations
and citations which have been duly acknowledged. I also declare that it has not been
previously or concurrently submitted for any other course/degree at Help University College
or other institutions. The word count is 12,718 words.

LE MINH HOANG
17
th
October 2011

2

ACKNOWLEDGEMENT

This project would not have been made possible without the assistance, support and
encouragement of many people. I wish to take this opportunity to thank all the people who
have helped me during the time of completing the dissertation.
Firstly, I would like to express my deep gratitude to my supervisor Dr. Le Van Lien,
International School, Vietnam National University Hanoi. He has kindly helped me and
supported me all the way through. For that, I am very grateful. I also would like to express my
thank to Ms. Sumathi and Ms. Shenba, Help University College, who initiated the project and
give so much instruction and support.
Additionally, I would like to thank the interview participants who took their precious time to
help me to conduct the interview. I also would like to extend my special thanks to my family,
my friends, and other people who have help me to carry out the survey. I want to thank them
for all their support, interest and valuable hints.
LE MINH HOANG
3

THE IMPACT OF CORPORATE SOCIAL RESPONSIBILITY (CSR)

ON BUSINESS PERFORMANCE

By
LE MINH HOANG
October 2011
Supervisor: Dr. Le Van Lien
ABSTRACT
CSR has become a burning issue in the world. As Vietnam is one of the world’s fastest-
growing economies, CSR has become even more important for the country to develop
sustainably. This paper aims to discover how the CSR impact on the business performance of
companies in Vietnam. It also give a view CSR and CSR reporting, whether CSR information
have any effect on the Vietnam customer behavior, and the attitude of Vietnamese employees
toward CSR reporting. The results of the study provide evidence that there is strong support
for CSR from managers and a growing awareness among consumers and employees.
However, there is expectation gap between how people perceive and how people act because
there are lack of adequate CSR disclosure from firm, and not-so-enthusiastic support actions
from consumers due to the barriers in living expenses, and low effective CSR communication
tools that companies use. However, with highly positive attitude toward the important of CSR
and the willingness to learn and gain more knowledge about this issue found from the survey
have drawing potential bright future for CSR in Vietnam.
4

TABLE OF CONTENTS
DECLARATION OF ORIGINALITY AND WORD COUNT 1
ACKNOWLEDGEMENT 2
ABSTRACT 3
CHAPTER 1: INTRODUCTION 9
1.1 Research background 9
1.2 CSR in Vietnam 10
1.2.1 Government actions and policies 10

1.2.2 CSR practices, opportunities, and challenges 11
1.3 Problem statement 12
1.4 Research objectives 14
1.5 Research methods 14
CHAPTER II: LITERATURE REVIEW 15
2.1 CSR definition 15
2.2 Research related studies and concepts 15
2.2.1 Model "pyramid" of Carroll 15
2.2.2 Triple Bottom Line 16
2.2.3 CSR and Sustainability investing 18
2.2.4 CSR and Business ethics 19
2.2.5 CSR Report 19
2.3 Hypothesis 20
2.3.1 CSR and the role of manager 20
2.3.2 CSR and the role of employees 21
2.3.3 CSR and the role of customers 22
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CHAPTER 3: RESEARCH METHODOLOGY 23
3.1 Research objectives 23
3.2 Research methodology 23
3.3 Data sources 23
3.3.1 Primary data 23
3.3.2 Secondary data 24
3.4 Research method 24
3.5 Research tool 24
3.5.1 Questionnaire 24
3.5.2 Personal interview 25
3.6 Sampling 25
3.6.1 Sampling population 25

3.6.2 Sample frame 25
3.6.3 Sample size 25
3.7 Limitations 26
CHAPTER 4: FINDING AND ANALYSIS 27
4.1. Management 29
4.1.1. Finding from the questionnaire survey 29
4.1.2. Actual CSR disclosure by firms 34
4.1.3 Overall assessment of management’s responses 34
4.2. Employees 36
4.2.1. Finding from employee questionnaire survey 36
4.2.2. Overall evaluation of employee’s responses 40
4.3. Consumers 41
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4.3.1. Finding from consumer questionnaire survey 41
4.3.2: Overall evaluation of consumer’s responses 45
4.4 Overall discussion 46
CHAPTER V: CONCLUSION AND RECOMMENDATION 48
5.1 Conclusion 48
5.2 Recommendation 48
5.3 Limitation of study 49
5. 4 Suggestion for the future research 50
References 51
Appendix 55

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LIST OF FIGURES, DIAGRAM, AND IMAGES
Figure 2.1 The Carroll’s “Pyramid of CSR” 16
Figure 2.1 Triple Bottom Line 18

Figure 4.1: Respondents 27
Figure 4.2: Employee categories 28
Figure 4.3: Consumer categories 28
Figure 4.4 Distribution of responses from management survey 29
Figure 4.5. Distribution of responses from management survey (percentage) 33
Figure 4.6. Distribution of responses from employees' survey 36
Figure 4.7: Distribution of response from employee’s survey 39
Figure 4.8: Distribution of responses from consumer survey 41
Figure 4.9: Distribution of responses from consumer survey (percentage) 45











8

LIST OF ABBREVIATIONS

CSR Corporate Social Responsibility
CSP Corporate Social Performance
IAS International Accounting Standard
WTO world trade organization
APEC Asian pacific economic organization
ASIAN Association of southeast Asian nations

NGO Non-governmental Organization
PR Public Relation
TBL Triple Bottom Line
VSA Vietnamese Accounting Standard
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CHAPTER 1: INTRODUCTION
1.1 Research background
The concept of Corporate Social Responsibility (CSR) has issued in the early of the 1970s,
CSR has become very popular for the companies especially companies which are running
business in the developed countries. With the major relationship between business and society
reflected by CSR, nowadays, CSR is not only the current affairs of companies which are
running business in the developed countries, it also is the current affairs of companies which
are running business in the developing countries.
With the three major issues of CSR are labor, environment, and finance. Companies are
paying more attention on the CSR in the way performing well CSR activities to improve
competitive advantages and reputation in the market. The companies take care about their
internal stakeholders such as employees’ healthcare, working environment will raise their
loyalty, it will lead to increase productivity and may lead to increase profit for companies.
Nowadays, companies are influenced by many parties which are related to CSR. Especially,
international companies which are not running business in only one country, so they have to
follow law in control of CSR of each country they do business. More than that, they have to
follow the rules of World Trade Organization (WTO) or other organization such as Integrated
Reporting Committees (IRC), and World Council for Sustainable Development (WBCSD)
which are applied for over the world. By following the rules of the organization above, and
doing well CSR activities, companies can build their strong reputation and reliable in the view
of public, so they can make shareholders confident to invest, customers also prefer to buy
their products and services, and governments also have sympathy with them and may offer
more benefits to attract them to invest in that country.
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1.2 CSR in Vietnam
Vietnam is a developing country, so in the previous the government and companies are not
pay much attention on the CSR. However, with the globalization trend and especially after
joined World Trade Organization (WTO) on 11
th
January 2007, Vietnam’s economy is
entering more deeply into the world economy, so to capture the benefits in this case Vietnam
has to change the attitude of CSR to get the accept of goods and services distribution into
developed countries. However, Vietnam economy is still small and much lower development
to compare with the developed countries, even to compare with some countries in the ASIAN
such as Thailand, Singapore, and Malaysia. Therefore, the pressure of catching up these
economies lead the CSR is to be ignore sometimes and still is a new concept in Vietnam even
Vietnam has joined most of the economic and political organization and association in the
world such as WTO, ASEAN, ASEM, APEC, IMF, World Bank, and some General
Agreement on Tariff and Trade (GATT) with some countries, so companies in Vietnam will
try to reduce cost pay for CSR to maximize profit.

1.2.1 Government actions and policies
Vietnam was running centralize economy until 1986, in this period Vietnam economy is
closed so companies is under the control of government, and they don’t have to face CSR
pressure from government, and the government also ignore CSR concept. However, from
1986 Vietnam is following the open door policy. With many competition advantages such as
low labor cost, plentiful resources, Vietnam has easy to attract a lot of investors to invest in
there and Vietnam has got very successful with the high economic growth. However,
Vietnamese government focuses too much on the economic growth and may be ignore the
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CSR activities, so it allow many companies to bring old technology into Vietnam, and the
foreign companies also take these advantages to maximize profit by ignore or maximize

reducing CSR cost. This is reason lead to many problems Vietnam has to face such as social
problem. Awareness of these problems, Vietnamese Government has created many
regulations such as Environment Protection Law, Labor Law, and Consumer Protection Law.
More than that, in the recent year Vietnam has established environment police department to
manage and punish companies which make pollution. In additional, Vietnam also offers more
benefits for companies with advanced technologies when invest in Vietnam, and avoid
companies with old technologies.

1.2.2 CSR practices, opportunities, and challenges
With the awareness of CSR and the traditional and culture of companies, many companies
when invest in Vietnam had practiced very well CSR activities such as set up charitable funds
and do many social activities of Coca-cola Vietnam, Honda Vietnam, Dutch lady. However,
some foreign companies are still tried to ignore CSR activities to maximize their profit and
they have made some scandal related to CSR such as Vedan Vietnam has made pollution in
Thi Vai river. The companies that ignore CSR may forgot that CSR also brings some
opportunities for them. For example, the European Union, Japan require products imported
must follow the ISO 9000 and14000 series (which focus on the environmental management
standards). So doing well CSR in this case will allow companies to export products to these
countries. Even realized that CSR may bring some opportunities for companies, but some of
them are still in a divided mind to pay more for CSR or not because CSR activities will cost
quite a lot of money and time. More than that, the awareness about CSR of customers in
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Vietnam is still limited, so companies which have strong CSR activities may face a challenges
when compete with companies do not apply CSR because these companies have to pay no or
less cost on CSR so their products and services may cheaper. Another challenge is lacking of
law enforcement in Vietnam. For example, companies do CSR activities sometimes may not
get tax deduction because laws relate to CSR are not perfect, so companies will be loss money
and the profit also reduce.

1.3 Problem statement
When companies export their products and services, they have to satisfy the demand of
customers, more than that, Vietnam has joined many economic and political organization and
association in the world such as WTO, ASEAN, ASEM, APEC, IMF, World Bank, and some
General Agreement on Tariff and Trade (GATT) so CSR become more and more popular and
sometimes is the necessary condition for companies do export their products and services.
More than that, the living standard of Vietnamese is much higher than in the year 1990s so
they also require not only high quality product, they also require companies have to protect
environment. The employees also have many choices when they apply for job, so if
companies want to attract high skill employees, they must offer more welfare for them and the
Government also has choice to select the investors, so investors will try the best to show their
CSR activities to get more support from Vietnamese Government.
Even the Vietnamese government and public in Vietnam are paying more for the CSR, there
are still many problems related to CSR made by both foreign and inland companies. Most of
the CSR problems related to the environment pollution. In the recent year, the hottest scandal
13

related to CSR is the case of Vedan Vietnam which is Taiwan international company. Vedan
has made pollution in Thi Vai river, which affected many people live and doing business
around Thi Vai river. This problem lead to the result that customer in Vietnam reject the
products of Vedan.
Another problem related to CSR is the unsafe products. Many companies in Vietnam have
problem with unsafe product such as products over date usually be renew to cheat customers.
Food and drink also is the main field that related to unsafe product that make many people got
food poison, more than that, in Vietnam also discovery the milk with melamine. This is
serious problem because it affect direct to the health of customers. Chemical also is the field
that involved in the unsafe products with many case find out the 3-MCPD in the products.
More than that, many medicines in Vietnam is the fake medicines, so it is not useful in cure
for customers, and sometimes these medicines contain poison for the patients.
Working condition of employees also is the problem relate to CSR in Vietnam. The research

show that in Vietnam in 2009 there were 6200 working accidents (increased 7, 09 %). The
causes of these accidents are mainly from the human (employers’ mistakes are 75%, the
employees' mistakes are 18, 5%). Total damage to property is more than 42 billion and more
than 450,000 working days. In the whole country, 26,700 workers have had occupational
diseases. Even the labor law has issued in Vietnam, some companies are still ignore the safety
of employees because they want to reduce cost or to meet the progress of the project as in the
case of Keangnam group. More than that, some companies do not take care about the working
condition and have too much overtime working with no higher salary was lead to many strike
such as in Binh Duong, Hai Duong.

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1.4 Research objectives
This research will focus on summarize the CSR concepts and its definitions. Evaluate the
awareness of both inland and foreign companies in Vietnam about CSR concept, practices, its
importance and benefits. This research also gives the recommend some solution for
companies in Vietnam to raise the CSR activities.

1.5 Research methods
Besides using the second data, in this research will distribute the questionnaire and conducts
the study of managers, employees, and customers in Hanoi. Interview also can be use in this
research by interviewing each individual from managers, employees, customers for the
survey.




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CHAPTER II: LITERATURE REVIEW

2.1 CSR definition
The concept of CSR has been used widely since 1960s, from 1960s to 2011 is very long
period, so with the development of economic, social, the definition of CSR also changes to
meet the requirement of the fact. Nowadays, there are many definition of CSR introduced by
many researchers and organizations. According to the World Business Council for
Sustainable Development in it publication “Making good business sense” by Lord Holme and
Richard Watts, the definithion of CSR is “The continuing commitment by business to behave
ethically and contribute to economic development while improving the quality of life of the
workforce and their families as well as of the local community and society at large” [1].
Because CSR is affect direct or indirect to the company’s performance, employees’
motivation, customers’ loyalty and company’s reputation, so each company will choose the
way to do CSR to meet the requirement of customers, employees, and society.

2.2 Research related studies and concepts
2.2.1 Model "pyramid" of Carroll
Together with the development of economic, the concept of CSR also develop very fast so we
can easy to find out many different view of CSR each view may suitable for a certain
country, industry, or company. However, the pyramid of A.Carroll (1999) is comprehensive
and acknowledged over the world. In this model CSR included economic, legal, ethical and
charitable. All of these components will response to maximize economic benefits, competitive
advantages, efficiency and growth. With the motto “a good company – a great corporate
16

citizen”, CSR is the necessary condition for business get success and strong CSR also is the
profit of company owners. More than that, company is a part of society, so any activity of
company will affect on the society depend on the size of company.


Figure 2.1 The Carroll’s “Pyramid of CSR”

2.2.2 Triple Bottom Line
Triple Bottom Line was first mention in 1981 by Freer Spreckley, there are three bottom lines
are economic line, social line and environmental line. In the previous, the managers are
mostly followed the profit objective. However, if they forget the environment and society, so
how long can they make profit, remain profit. So they should also take care about the
environment and social line to make profit in the durable way.
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A company has bad relationship with employees or local community may difficult to
develop, even exist. If company and employees are not in good relationship, the employees
will not try hard to work, so the productivity will be less, the high skill employees may not
prefer to work anymore, and more than that, it may lead to the strikes which make company
cannot running. All of the activities about result to the performance of company become less
effective and the profit also decrease. If company has good relationship with employees, they
can motivate them to work more effective and efficient, so it will make the profit increase. To
do that company should improve working condition, set up a good welfare policies, have
policy to award employees when they are working with the effective and efficient, and also
should take care about employees’ family such as offer healthcare insurance for their wife or
children. Besides having good relationship with the employees, companies also should have
good relationship with the local community because people living in the local community
may be is the major customers or the employees are also living there. To have good
relationship with local community, companies should do volunteer and communicate with
local people by support the fees for the local community activities, motivate employees to join
these activities to make close to them. Even these actions are useful for companies, but
companies also should consider about the cost to ensure that it is not affect on the profit of
company.
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Figure 2.2 Triple Bottom Line

Another factor that company should consider is environment. Most of companies realize that
negative impact on environment will make the falling in reputation of company, and
customers also tend to avoid products and services of company. However, if company takes
care about environment and protects it, the public will have more sympathy about company
and this may become an advantage of company. To do this, company can choose many ways
such as saving raw materials, reduce waste or recycle it. However, to protect environment,
company may have to pay a lot of money for new technology, and other costs. Therefore,
company should consider the way to protect environment to make it become an advantage of
company, not a cost burden for company.

2.2.3 CSR and Sustainability investing
Sustainability investing mention the clearly recognition that economic, social, environmental
and ethical are the factors that directly affect business strategy. In some case, company wants
19

to protect environment by invest for new technology. However, it cost too much money and
company has to face falling in profit for this environment protection. So company may change
its strategy to apply the technology which may cost less but also protect environment less.
More than that, in some case it is responsible investing, so company has to consider how to
invest to make the balance between ethical and sustainable investing. If they have no ability to
invest in one time, company should divide it into various processes to get on the sustainability
investment and protect environment.

2.2.4 CSR and Business ethics
“Business ethics is expressed as the standards and principles are social as well as the business
world recognizes, as the rules of behavior, the professional relationship between managers
with one another, or between managers value to society in the process of conducting business
activities, allowing managers to behave honestly and responsibility to the community and

with each other. Business ethics is a manifestation of the balance between the interests of
managers in implementing the business objectives with the interests of the employees work
for managers, customer benefits, the partners and the interests of the community in general”.
So when doing more CSR activities, company will raise their business ethics but it also put
them into the situation of choosing between profit and business ethics which one is more
important and necessary at that time.

2.2.5 CSR Report
Nowadays, both internal and external are not only pays attention on the financial report of
20

company, they also interest on the CSR report of company. The CSR report is very important
for stakeholders such as for customers who have the trend of supporting for environment will
choose products and services of company which is investing more money for CSR. Because
CSR can build up the reputation of company and attract customers so investors also prefer to
invest in company which is performing well CSR. CSR report also helps government and
other organization to monitor, control, and evaluate CSR activities to make decision such as
allow company which is well CSR performing to expand its activity, and close down
company that are not paying for CSR activity. Even the CSR report has been an annual report
as same as annual financial report in the world, but in Vietnam the CSR report is not get
enough interest of company. There are still many companies did not make CSR report, some
companies makes annual CSR report but these reports are not made for business purposes.


2.3 Hypothesis
2.3.1 CSR and the role of manager
Nowadays, the managers act an important role in company such as making decision,
strategies, or even setting up the vision for company. Therefore, manager’s decision will
affect directly on the company’s performance, so each company will have its own
performance result depend on the manager. So company will do more CSR activities if the

manager has awareness of CSR to response for society, customers, employees, and
environment. CSR brings many advantage for company, so managers usually use CSR as a
tool to make up their company’s reputation, building strong relationship with customers,
employees, society, and also improve the effective and efficient to increase profit.
21

Nevertheless, CSR was enter into Vietnam quite late so a lot of managers in Vietnam don’t
have enough knowledge about CSR so only a few companies in Vietnam involve in CSR
activities. More than that, the foreign companies in Vietnam are mostly well CSR
performance in other countries but when they doing business in Vietnam they did not perform
CSR well. This problem may result from the lacking of laws related to CSR in Vietnam, so
managers with the important role in decision making have decided to reduce CSR activities to
maximize profit. More than that, some managers decide their company to show up CSR only
in words and media but not in their action.
: Managers’ attitude toward CSR and CSR reporting is positive.

2.3.2 CSR and the role of employees
As we know that the role of managers of company in CSR is very important, however, in
company we should consider another force that also very important in performing CSR that
are employees especially accountants. Accountants with the important role in the company
will be involved in the introduction of CSR information on products pricing and financial
reporting, accountants will evaluate and give advises for managers to make decision about
CSR. The employees of company also act a certain role in the CSR performance of company.
They are the people that will receive the benefits of CSR performances but they also are
people perform CSR, so they will know everything perform by company, and they also act as
a good channel to let public know about CSR activities of company.
: Employees’ attitude toward CSR reporting is moderate

22

2.3.3 CSR and the role of customers
The role of customers also very important, most of customers evaluate CSR through the
product of company, so if product meets the requirement of customers such as quality and
price will make a good image of company in the mind of customers. The most important that
is customers are the people that will consume the products and services of company, so doing
well CSR will increase company’s reputation, it is useful for company to attract more
customers, so the revenue of company also increase.
: Consumers’ attitude toward CSR reporting is moderate



23

CHAPTER 3: RESEARCH METHODOLOGY

3.1 Research objectives
The purpose of this project is to give the definition of CSR and its concepts and studies.
Through this definition of CSR and its concepts and studies, we will have a view of CSR in
the world and in Vietnam. More than that, this project will find out how managers, employees
especially accountants, and customers understand, attend, and react to the CSR. So we can
find out the impact of CSR on the company’s performance. Finally, through research we can
understand more about the fact of CSR in Vietnam, so we can make some advises for
company to make the best decision about CSR.

3.2 Research methodology
in this research we will use both qualitative and quantitative method, we also use
questionnaire survey manager, employees, customers. The interview also be use, but the
second data will mostly be used.

3.3 Data sources

3.3.1 Primary data
Primary data is the data observed or collected directly from first-hand experience [2].
Nowadays, we have many ways to collect primary data such as interviews, questionnaires,
case studies, observation. Primary own the strength of assessment based on the fact and we
can avoid bias from data but we also have to spend quite a lot of time to collect and assess the
data, so in this project will be most base on the questionnaires and interview.
24

3.3.2 Secondary data
Secondary data is the data that have been already collected by and readily available from
other sources. Such data are cheaper and more quickly obtainable than the primary data and
also may be available when primary data cannot be obtained at all [3]. With the information
technology today we can easy to collect the secondary data and it also much cheaper and save
a lot of money to compare to collect primary data. The most useful tool to collect secondary
data today is internet, it can help us save a lot of time and money. Besides that we also can
used the traditional tools such as books, news papers, magazines.

3.4 Research method
There are many way to collect both primary and secondary data. The survey research will be
used widely and considered as the best-suited approach. To collect the primary data the
survey method will be used, which includes questionnaire and personal interview from
managers, customers and employees about awareness and the impact of CSR on business
performance of companies in Vietnam. Besides that, the research will also gather the
secondary information from its annual reports, news paper websites.


3.5 Research tool
3.5.1 Questionnaire
The questionnaires of survey will be divided into three pattern for three different objectives of
survey that are managers, employees, and customers. The questions aim to evaluate the