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Published Date:04-07-2017
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Corporate Social Responsibility and Innovation in Management Accounting Volume 9 Issue 1 Artie Ng Narisa Tianjing Dai Guliang Tang The Hong Kong Polytechnic University of International University of International University, Hong Kong Special Business and Economics, PRC Business and Economics, PRC Administrative Region, PRCKey findings: • This study develops a conceptual framework to illustrate how sustainability issues are embedded in the management control system to operationalise firms’ corporate social responsibility (CSR) objectives and strategies. • Categorising firms’ CSR activities into Responsive and Strategic CSR agendas (Porter and Kramer 2006), this framework emphasises that different uses of MCS must be adopted to effectively operationalise different CSR agendas. • Boundary systems and diagnostic uses of budgets and performance management systems are more pertinent to operationalising Responsive CSR agendas, whereas the belief system and interactive uses of MCS are more effective in facilitating the selection and implementation of Strategic CSR programmes. • This study provides empirical evidence on the different types of Responsive and Strategic CSR programmes in two Chinese State-owned Enterprises (SOEs). Our empirical data shed light on the role of MCS in implementing CSR strategies at these firms.effects of their value chain on society, whereas Strategic Introduction CSR extends beyond these practices and involves initiatives In recent years, there has been increased consensus that that both differentiate themselves from their competitors corporate social responsibility (CSR) is significant for the and are distinctly beneficial to society and the environment. sustainable development of companies and society as Drawing upon this categorisation of firms’ CSR agendas and a whole. CSR is increasingly incorporated into mission Simons’ levers of control (LOC) (1991, 1995) as a frame of statements and prioritised in strategic configurations of reference, we seek to explore how different uses of controls modern organisations (Mersereau and Mottis 2011; Bennett facilitate the management and operationalisation of both and James 1998). According to a 2009 survey conducted Responsive and Strategic CSR initiatives. It is argued that on Fortune 500 firms, CSR is becoming an increasingly the boundary system and diagnostic uses of MCS are more prominent and accepted part of the corporate strategy attuned to facilitating the implementation of Responsive CSR agenda. However, there is very little understanding of how agendas, whereas the belief system and interactive uses of different control mechanisms are adopted to operationalise MCS are more capable of enabling organisations to initiate strategic agendas related to CSR. Against this backdrop, and manage Strategic CSR programmes. The integration of this research examines the way in which companies embed different uses of formal MCS enables managers to embed CSR in their MCS in an attempt to align the behaviour concepts pertinent to CSR and sustainability in the mind-sets of organisational participants with strategic objectives of organisational participants and direct their behaviour to concerning sustainability in China. achieve firms’ CSR strategic agendas. In China, the concept of CSR is advocated by the Chinese We aim to provide knowledge on organisational practices government as part of its grand agenda of building a and lessons from the control and performance management harmonious socialist society. The leaders of the Communist of CSR programmes, which will guide management Party of China (CPC) have repeatedly asserted the accountants and companies to direct and manage their CSR 1 importance of CSR in the scientific development of society . efforts to achieve sustainable development in emerging Given the link between SOEs and the Chinese government, markets. We address the following research questions: SOEs are expected to serve as pioneers in the use of CSR to facilitate the development of a harmonious society and • How do different uses of MCS facilitate the 2 the continuance of China’s ‘economic miracle’ . Against the operationalisation of both Responsive and Strategic CSR backdrop of this increased attention to CSR at the strategic agendas in Chinese SOEs? level in Chinese SOEs, this study aims to explore the manner Specifically, we examine the following questions: in which firms manage and incentivise CSR activities. Our empirical inquiry concerns two case Chinese SOEs, one • What types of Responsive and Strategic CSR activities do for-profit conglomerate in Mainland China and one not- Chinese SOEs undertake? for-profit organisation in Hong Kong. By closely examining • What are the roles of MCS in the management of firms’ empirical materials collected from two case companies, we Responsive CSR agendas? contribute to the field of sustainable development and CSR by elaborating on the mechanisms by which MCS is used to • What are the roles of MCS in the management of firms’ render companies’ sustainable strategies operational. Strategic CSR agendas? Porter and Kramer (2006) propose a strategic approach to examining the relationship between companies and the society in which they operate. They categorise firms’ involvement in society as Responsive CSR and Strategic CSR based on the importance of certain social issues to society and to business. Responsive CSR involves companies acting as good citizens and actively mitigating the potentially harmful 1 For example, the importance of CSR to the development of China was strengthened in the sixth plenary session of the 16th CPC congress: ‘extensively carrying out activities to create a harmonious situation in which everyone promotes harmony, and focusing on enhancing a sense of social responsibility amongst citizens, enterprises and all kinds of organisations. We must continue to improve the incentive mechanism for enterprises; we should also focus on strengthening external constraints, guiding enterprises to improve management and fulfil their social responsibility’. 2 On 4 Jan. 2008, the State Council’s State-Owned Assets Supervision and Administration Council (SASAC) issued a publication for state-owned enterprises (SOEs), ‘Guidance for SOEs on their Social Responsibility Obligations’, whose purpose has been to raise awareness of Corporate Social Responsibility (CSR). 1 Corporate Social Responsibility and Innovation in Management Accountingformulating and operationalising firms’ CSR strategies and Theoretical Framework that different uses of MCS tend to facilitate the management Responsive CSR and Strategic CSR of different categories of CSR strategies. Since the 1990s, companies worldwide have begun to invest Controlling Responsive CSR in various CSR programmes to improve their relationships with society and the environment—not only because they Responsive CSR involves the identification and management want to be good corporate citizens but also because they of the evolving expectations of a company’s different believe doing so is good for business (Stone 1995; Mersereau stakeholders and its existing and potential social and and Mottis 2011). Porter and Kramer (2006) argue that environmental risks. Given that the dimensions of Responsive the lack of effective coordination and control of these CSR CSR are more explicit and standardised than those of programmes tends to diffuse companies’ impact on society, Strategic CSR, a checklist approach may be adopted to resulting in unrelated efforts and precluding a full range of manage Responsive CSR agendas. The boundary system and social benefits from these companies’ actions. The authors diagnostic uses of MCS play a critical role in this process. contend that companies’ social agendas must be responsive The boundary system of MCS in relation to CSR is an to stakeholders’ requirements (i.e. fulfilling Responsive CSR), explicit set of organisational boundaries that is expressed in but these agendas must also move beyond simply meeting negative or minimum terms and defines activities that are societal expectations. Companies must further engage in CSR considered detrimental to the interests of key stakeholders. activities that reinforce their strategies and leverage their The boundary system prevents employees from engaging capabilities to improve their competitive advantages (i.e. in actions that expose the firm to social and environmental developing Strategic CSR). risks. Responsive CSR involves acting as a good corporate citizen, The core areas of stakeholders’ requirements and a firm’s satisfying the evolving needs of stakeholders, and mitigating CSR risks may be translated into performance indicators. existing or potential adverse effects of organisational Targets for satisfactory performance in these areas may be activities. Strategic CSR moves beyond Responsive CSR and established and monitored. Key performance indicators, directs organisational resources and managerial attention to such as energy usage, carbon emissions, R&D expenditures, initiate and operationalise CSR agendas that are consistent employee satisfaction, and expenditures in training, may be with firms’ strategies and are able to differentiate themselves outlined in budgets. Actual performance is monitored and from their competitors, resulting in strengthened strategic compared against pre-set targets in these dimensions to positions. This study aims to extend the work of Porter and identify exceptions and deviations from plans through the Kramer (2006) by proposing a framework that illustrates the performance evaluation system (Abernethy and Lillis 1995; role of MCS in operationalising and managing Responsive Tuomela 2005). This diagnostic use of MCS in relation to and Strategic CSR agendas. Responsive CSR highlights the aspects critical to stakeholders and is intended to drive employees to perform and align When examining the role of MCS the implementation of their behaviour with stakeholders’ evolving expectations to firms’ strategies, Simons’ levers of control (LOC) framework promote good corporate citizenship and obtain the license to (1990, 1991, 1995) has served as a useful analytical operate. tool (Abernethy and Brownell 1999; Henri 2006). The LOC framework focuses on the tensions between the Controlling Strategic CSR organisational need for change and the organisational need Whereas Responsive CSR depends on being a good corporate for the achievement of predefined objectives. Simons (1991, citizen and addressing the social risks that a business faces, 1995) classifies MCS into four categories: belief systems, Strategic CSR is more selective and dynamic. A firm’s boundary systems, and diagnostic and interactive uses selection of appropriate Strategic CSR initiatives entails a of MCS. It is argued that MCS plays a significant role in Corporate Social Responsibility and Innovation in Management Accounting 2thorough understanding of its competitive position and an programmes. The key areas of CSR and the core competitive examination of its capacities to benefit society. Strategic advantages are communicated and strengthened among CSR initiatives must move beyond simply addressing a managers and employees. The bottom-up communication standardised checklist of stakeholder expectations and in this process presents executive managers with local social risks and must enable the firm to differentiate itself knowledge about the dynamic environment in which the and obtain a competitive advantage. The firm must initiate firm operates (Simons 1995; Bisbe and Otley 2004). The and manage focused, proactive and integrated Strategic CSR interactions among employees at different levels of the programmes based on constant analysis of the dynamic organisation enable innovation as well as the exploration competitive environment and the firm’s resources. Therefore, of potential opportunities to formulate CSR programmes the belief system and the interactive use of MCS play a that are aligned with the firm’s strategy and can confer critical role in formulating and operationalising Strategic competitive advantages. CSR programmes. The belief system clarifies to managers the Given the different dimensions of Responsive and Strategic organisation’s sustainability and CSR values that may not CSR, it is argued that the boundary system and diagnostic be reflected in routine MCS. This system has the capacity use of budgets and performance management system to sanction a departure from an organisation’s routines (PMS) are more pertinent to operationalising and managing and to encourage the exploration of new opportunities and Responsive CSR agendas, whereas the belief system and innovations that would both benefit society and strengthen interactive use of MCS are more effective in facilitating the the organisation’s competitive advantage. selection and implementation of Strategic CSR programmes. The interactive use of MCS is characterised by frequent The different uses of MCS enable the company to ensure communication between managers and employees at good corporate citizenship, effectively manage social and different levels of an organisation. These communications environmental risks, strengthen its competitive position bring together information and ideas regarding a firm’s and acquire new competitive advantages. The theoretical competitive position and inspire debate and discussion framework proposed in this research is summarised in Table 1 on the benefits and costs of potential strategic CSR and Figure 1. Table 1: The role of MCS in managing CSR strategies CSR strategies Appropriate Use of MCS Responsive CSR agendas Involves securing a good corporate Boundary system and diagnostic uses of citizenship and mitigating existing and budgets and PMS are more pertinent to potential harms of a firm’s operations. operationalising and managing Responsive CSR agendas. Strategic CSR agendas Initiatives that would both confer Belief system and interactive uses of competitive advantage and benefit society. MCS are more effective in facilitating the selection and implementation of Strategic CSR programmes. 3 Corporate Social Responsibility and Innovation in Management AccountingFigure 1: Controlling Responsive and Strategic CSR agendas Diagnostic system The key areas of CSR along are identified and characterised by performance indicators, which are then incorporated into budget and PMS to obtain a good corporate citizenship and Complement and Complement mitigates negative impacts of support the use and support corporate operations. of measures the use of measures Reinforce Reinforce rules and CSR values prohibitions Responsive CSR agendas Belief System Boundary System CSR is embedded in the The boundary system core values and combined identifies and monitors with firms’ strategies. social and environmental risks and draws boundaries for organisational partici- pants to secure firms’ license to operate. Strategic CSR agendas Reinforce Reinforce rules and CSR values prohibitions Defines the Defines the bounds within bounds within Interactive system which discussions which discussions and actions induced Discussions and debates around and actions induced are encouraged the CSR programmes and firms’ are encouraged core competence are undertaken. Information on CSR activities and strategic capabilities is exchanged across the firm to enable the initiation and management of Strategic CSR programmes. Corporate Social Responsibility and Innovation in Management Accounting 4the CSR programme or the manner in which social and Findings environmental issues are embedded in the firm’s operations We examine the empirical data to explore different does not reinforce or transform its strategic competitiveness, CSR programmes initiated in two case companies. In we consider it Responsive CSR; otherwise, we consider it particular, we investigate the manner in which different Strategic CSR. Third, we closely examine how different uses uses of MCS operationalise and incentivise these CSR of MCS operationalise and facilitate these CSR programmes. programmes. Our empirical data analysis is conducted in We find that Responsive CSR agendas tend to be facilitated three steps. First, we identify different CSR programmes by boundary and diagnostic systems because they are conducted within each case company and the manner in explicit and coherent, whereas Strategic CSR programmes are which social and environmental issues are embedded in selected and controlled interactively. The detailed analysis decision-making and operations in different departments of different CSR programmes and the uses of controls in within C1 and C2. Second, we categorise these CSR facilitating these programmes are summarised in Tables 2 programmes into Responsive and Strategic CSR based on and 3. the framework proposed by Porter and Kramer (2006). If Table 2: Controlling Responsive and Strategic CSR agendas in C1 CSR programmes Controlling CSR programmes: Uses of MCS Diagnostic: Indicators of C1’s footprint on the environment are Reduction of waste and developed and incorporated into its budget and performance carbon emission management system. Diagnostic: Indicators of C1’s energy usage are developed and Energy saving incorporated into its budget and performance management system. Boundary: It is made clear across the organisation that any violation of the environment and safety code would be off-limits. Responsive CSR Environmental Safety Diagnostic: The number of safety accidents is monitored and used as a key performance indicator in its incentive system. Diagnostic: A budget for philanthropic activities is provided and Donation followed by subsidiaries. Diagnostic: Training expenses are set as a percentage of annual Training income. A plan is made at the headquarters level and executed by subordinates. Belief: C1’s strategy and core values are communicated to managers and employees in local subsidiaries. Participation in the Interactive: Frequent interactions inspire debate and discussion Strategic CSR local community in C1’s between headquarters and local subsidiaries on issues including overseas subsidiaries what and how CSR programmes may improve the strategic standing of local subsidiaries. 5 Corporate Social Responsibility and Innovation in Management AccountingTable 3: Controlling Responsive and Strategic CSR agendas in C2 CSR programmes Controlling CSR programmes: Uses of MCS Diagnostic: Quantitative measures have been developed to review 3R plus programme progress in the overall reduction of waste relative to prior reporting (reduce, reuse and recycle, periods. Budgeted measures regarding the carbon footprint of C2 are plus rethink) developed and compared with actual performance. Incentive programme on Diagnostic: C2 provides a 50-cent rebate each time an employee uses ‘Reusable Rice Box’ for his/her own lunch box to purchase a main dish. Responsive CSR internal staff Ocean Park Restaurant’s Diagnostic: Decisions regarding the initiation of these programmes are sustainable seafood menu made by the CFO and implemented according to plans. Staff contest & related sustainability quizzes Belief: C2 formulated its core values by concentrating on providing quality service to the community and caring about the environment and nature. This belief system facilitates senior managers’ understanding of CSR as a source of competitive advantage. Strategic CSR Education on sustainability Interactive: C2 adopts loose control mechanisms in an interactive manner to facilitate the implementation of its educational programmes. which indicates the value created for shareholders by C1, C1: Controlling Responsive and Strategic CSR number of safety accidents, which indicates its health and Responsive CSR environmental safety performance, employee training expenses, which indicates C1’s investment in employee C1 is a Fortune 500 international metals and mining development, donation, which indicates C1’s contribution to corporation with operations spanning 26 nations and world society, and change in emission of COD and comprehensive regions. The company’s headquarters is in charge of the energy consumption in output units of 10,000 RMB, which development of its CSR agendas. indicates C1’s impact on the environment. C1 highlights The interview with the head of the corporate office shows existing and potential social and environmental risks through that C1 identifies its key stakeholders according to the the delineation of the above areas along its value chain. guidelines of Global Reporting Initiatives and Global Monitoring and controlling the potential harm that may arise 3 Compact . Areas of C1’s operations along its value chain from its operations in these areas helps to mitigate potential that would impact these stakeholders are outlined next. risks, safeguard its reputation and maintain its license to 4 Measures to evaluate C1’s impact are developed and used operate. These Responsive CSR activities are operationalised to monitor any potential harm that may arise from its via the use of a boundary and diagnostic system in C1. operations. These measures include economic value added, 3 C1 defines its CSR objectives as ‘building a responsible company and co-creating a bright future’. The corporate office of C1 identifies eight groups of stakeholders, including the government, the State-Owned Assets Supervision and Administration Commission (SASAC), employees, customers, business partners, investors and creditors, the community, the public, and NGOs. 4 These CSR activities, such as environmental protection, employee training and donation, may be combined with the firm’s core strategy and developed to strengthen its competitive position. However, C1 has not had this experience. For example, its donations are made individually by subsidiaries and SBUs and lack co-ordination and strategic impact at the headquarters level. Moreover, in many cases, training is organised in C1 to mitigate potential risks and responsibilities. When an accident occurs in any subsidiary, penalties from the headquarters and regulators are lower in cases where employees have been trained. Therefore, we categorise these activities as Responsive CSR. Corporate Social Responsibility and Innovation in Management Accounting 6Environmental and safety issues are strengthened at all future costs and jeopardise shareholder value. Few CSR levels of C1. It has been noted that any violations of the programmes have the capacity to enhance a firm’s strategic environmental and safety code are off-limits. The boundary position, with programmes aimed at increasing participation system related to environmental issues identifies the areas of in the local community for overseas subsidiaries representing acceptable behaviour for organisational participants. Within an exception. the bounds drawn by the boundary system, the diagnostic As a metals and mining corporation, C1 has operations use of MCS entails a periodic review of key performance in over 26 countries and global regions. These overseas indicators in relation to CSR strategies (Bisbe and Otley subsidiaries and business units have initiated programmes 2004; Tuomela 2005). Any deviations from the pre-set target to interact with local communities. These programmes would alarm the managers and induce corrective actions. take different forms, including building schools in remote, In this way, the behaviours of organisational participants underdeveloped areas, planting trees, interacting with are monitored and directed to enable the implementation local environmental NGOs, providing training to local of Responsive CSR agendas. Based on the delineation of employees and improving the environmental and safety- the areas that may affect its key stakeholders, performance related practices of acquired companies. These CSR activities 5 measures are developed and incorporated into C1’s budget improve the relationship of C1 with local communities, and performance management system in the headquarters lessen the local resistance of subsidiaries, increase the morale and subsidiaries. The results of our surveys with financial and loyalty of local employees, facilitate the expansion of mangers of different subsidiaries of C1 indicate that key operations and strengthen the firm’s competitive position CSR performance targets assigned to subsidiaries by the in these areas. Considering the variety of local contexts headquarters are then further developed by subsidiaries of different subsidiaries and their geographic distance and allocated to different business units. In this way, the from the headquarters, it is difficult to operationalise this diagnostic use of MCS pertinent to CSR renders the social Strategic CSR agenda with top-down, measure-based and environmental consequences of decisions and the 6 control mechanisms . In C1, the interactive use of MCS, actions of the headquarters, subsidiaries and business units characterised by frequent interactions between local units of C1 transparent, accountable and malleable and enables and headquarters and among local units, facilitates the the operationalisation of C1’s Responsive CSR strategies. initiation of this programme. Responsive CSR measures are also incorporated in the firm’s investment appraisals, highlighting potential social and The interactive use of MCS in relation to this Strategic CSR environmental risks of alternatives to ensure that investment programme takes various forms, such as social performance decisions based on financial analysis are consistent with the review meetings, organisational conferences on local CSR firm’s Responsive CSR agendas. programmes, and local stakeholder receptions, which engage various groups of stakeholders. Interactive processes Strategic CSR stimulate debate and discussion between headquarters and In C1, CSR is primarily conceptualised in a defensive manner, local subsidiaries on issues including which CSR programmes where managers participate in CSR programmes to mitigate may improve the strategic standing of local subsidiaries existing and potential risks, defend the firm’s reputation and and how they may do so. In important overseas markets, maintain the legitimacy endowed by its key stakeholders local stakeholder receptions are held to gain a deeper in response to the increased attention on the social and understanding of the expectations of the local community environmental impacts of the firm’s behaviour. Managers and the social context in which the overseas subsidiary refer to the creation of shareholder value as the main operates. Information obtained in these meetings is then objective of the organisation. According to this rationale, transferred upwards from subsidiaries to the headquarters managers contend that all CSR activities bear financial costs, during their interactions. Local knowledge is combined and these activities may be justified only if the lack of such with headquarters’ strategic considerations to inform the CSR endeavours would endanger the firm’s reputation, incur evaluation of individual Strategic CSR programmes. Moreover, 5 In the comprehensive budget of C1, the amount of donation is set at 60million RMB per year, whereas training is set as a percentage of annual income. Targets for energy saving and waste reduction are also provided in the company’s annual plan. 6 Examples of these measures include energy saving, waste reduction, donation, and safety training. 7 Corporate Social Responsibility and Innovation in Management Accounting9 C1 organises periodic seminars for local subsidiaries to regulatory issues . More importantly, the performance of exchange experiences in designing and implementing their management and staff are evaluated with due consideration local CSR programmes. Such local CSR programmes, once of any objectives for health, safety and environmental 10 they are demonstrated to be successful, are compiled as case issues . This particular aspect of performance evaluation studies to train overseas subsidiaries. enables the alignment of Responsive CSR objectives and the behaviour of organisational participants within C2. C2: Controlling Responsive and Strategic CSR Strategic CSR Responsive CSR Compared with C1, C2, as a not-for-profit organisation, In C2, several Responsive CSR programmes are developed perceives CSR in a more positive and proactive manner. to ensure good corporate citizenship and mitigate potential As one of the most popular amusement parks in China, social and environmental risks. For example, its 3R-plus C2 formulated its core values with a focus on providing programme (reduce, reuse, recycle, plus ‘rethink’) aims to quality service to the community and consideration of the increase the environmental awareness of employees and environment and nature. This belief system facilitates senior visitors and to encourage employees to submit proposals on managers’ understanding of CSR as a source of competitive effective mechanisms to reduce waste. The firm’s incentive advantage. Educating and entertaining the community ‘Reusable Rice Box’ programme for the internal staff aims to while preserving the environment and nature is C2’s primary encourage staff to bring their own lunch boxes and reduce operating objective. the use of disposable containers. It provides a 50-cent Guided by this core value, C2 developed educational rebate each time an employee uses his/her own lunch box programmes for park visitors and students. It provides over to purchase a main dish. C2 also provides a sustainable 7 36 different educational programmes to students at all levels, seafood menu at its restaurants and organises staff 8 from pre-school to college. These programmes advocate contests and quizzes on sustainability . These programmes 11 for animal conservation and a sustainable lifestyle . increase C2’s contribution to environmental protection These interactive educational programmes attract visitors, and improve employees’ loyalty and morale. However, encourage exploration of the plants and animals at the these programmes do not have a significant impact on C2’s amusement park, and increase brand awareness among strategic competitiveness or on the environment. Therefore, young people. In addition to strengthening C2’s competitive we consider these programmes examples of Responsive CSR. advantage, these programmes profoundly benefit society Our empirical data suggest that measures related to the by raising awareness among the young generation input or outcomes of these programmes are developed and about environmental protection and fostering a deeper monitored in a diagnostic manner. understanding of the relationship between humans and the For its 3R programme (reduce-reuse-recycle), quantitative environment. measures have been developed to review progress in the C2 adopts loose control mechanisms in an interactive overall reduction of waste relative to prior reporting periods. manner to facilitate the implementation of these Budgeted measures regarding the carbon footprint of C2 programmes. Frequent interactions between managers and are developed and compared with actual performance. programme tutors communicate the firm’s core value and These indicators are reviewed by inter-departmental strategy to tutors and encourage consistent behaviour. Inter- committees as well as the senior management team. departmental meetings are held periodically to discuss the Moreover, C2 has major plans for expansion that require design of these programmes and to review their outcomes. sizable capital expenditures. Prior to making decisions for The performance of these programmes is evaluated along these capital projects, a multi-disciplinary team is formed to key dimensions on a subjective basis instead of through perform feasibility studies involving detailed environmental quantitative measures and is discussed by managers and assessments on potential adverse impacts and related 7 Sustainable seafood is seafood that is either caught or farmed in ways that consider the long-term vitality of harvested species and the well-being of the oceans. 8 A quiz on safety and environmental issues is conducted annually to increase employees’ awareness of Responsive CSR issues. 9 Life Cycle Cost measurement is implemented to fully incorporate the social and environmental costs of C2’s capital investments. 10 Measures such as the number of safety accidents and the departmental reduction of waste are included in the performance evaluation. 11 These programmes have considerable coverage. For example, in the 2010/2011 academic year, C2 reached over 54,000 programme participants. Corporate Social Responsibility and Innovation in Management Accounting 8tutors. Experiences are shared across different training teams. Abernethy, M. A., and A. M. Lillis. 1995. The impact of This interactive process encourages debate and discussion manufacturing flexibility on management control system on the potential expansion and improvement of these design. Accounting, Organizations and Society 20 (4):241- educational programmes. The local knowledge of tutors 258. about the responses of programme participants is shared Ahrens, T., and C. S. Chapman. 2006. Doing qualitative field with managers and informs their decisions regarding resource research in management accounting: Positioning data to allocation. contribute to theory. Accounting, Organizations and Society Overall, levers of control associated with CSR are used to 31 (8):819-841. facilitate the implementation of Responsive and Strategic Bennett, M., and P. James, eds. 1998. The Green Bottom CSR agendas. The boundary system communicates the Line: Environmental Accounting for Management. Sheffield: message to organisational participants that the pursuit of Greenleaf Publishers. short-term profits at the expense of the firms’ sustainable development is off-limits. The diagnostic use of budget Bisbe, J., and D. Otley. 2004. The effects of the interactive and performance management systems provides periodic use of management control systems on product innovation. monitoring of firms’ social performance, mitigates risks Accounting, Organizations and Society 29 (8):709-737. and detects any deviation from pre-set CSR targets. Henri, J.-F. 2006. Management control systems and strategy: Together, with the boundary system, it encourages different A resource-based perspective. Accounting, Organizations and divisions to achieve their key CSR targets and to facilitate Society 31 (6):529-558. the implementation of Responsive CSR agendas. Training on CSR across different levels of the firm instils the core Mersereau, A., and N. Mottis. 2011. Corporate social value of sustainability and social responsibility in managers responsibility and management control: ESSEC Working and directly influences their decisions. The interactive use Paper. of MCS related to CSR focuses on the communication between different levels of organisational actors, which Porter, M. E., and M. R. Kramer. 2006. Strategy and Society: further strengthens the core values of CSR across different The Link Between Competitive Advantage and Corporate organisational levels. The belief and interactive systems Social Responsibility. Harvard Business Review 84 (12):78-93. induces necessary revisions of CSR strategies and render the Simons, R. 1991. Strategic orientation and top management Strategic CSR programmes operationable. attention to control systems. Strategic Management Journal 12 (1):49-62. Implications for practical applications ———. 1995. Levers of control: how managers use innovative • Develop both Responsive and Strategic CSR agendas to control systems to drive strategic renewal. Boston, MA: mitigate social and environmental risks and address social Harvard Business School Press. issues that strengthen competitive advantage. • Adopt diagnostic uses of budget and performance Stone, D. 1995. No longer at the end of the pipe but still management systems to monitor and facilitate a long way from sustainability: a look at management Responsive CSR agendas. accounting for the environment and sustainable • Instil a core value of sustainability within the company development in the United States. Accounting Forum 19 (2- and apply MCS in an interactive manner to inspire and 3):95-110. operationalise Strategic CSR agendas. Tuomela, T.-S. 2005. The interplay of different levers of • Balance economic short-term interests and long-term control: A case study of introducing a new performance sustainability as an on-going, dynamic management measurement system. Management Accounting Research 16 process. (3):293-320. Appendix 1: References Yin, R. K. 2009. Case Study Research: Design and Methods. Fourth Edition. California: SAGE Publications. Abernethy, M. A., and P. Brownell. 1999. The role of budgets in organizations facing strategic change: an exploratory study. Accounting, Organizations and Society 24 (3):189-204. 9 Corporate Social Responsibility and Innovation in Management Accounting• Two open-ended interviews were conducted with the Appendix 2: Methodology chief financial officer/deputy executive director and the This study adopts a multi-case qualitative field study corporate services director of C2 to explore how CSR approach (Ahrens and Chapman 2006; Yin 2009). The purpose programmes at C2 are selected and managed. Interviews of this study is to examine how CSR strategy is implemented were recorded and transcribed. at the firm level with the different uses of MCS in emerging • Two focus groups were conducted with senior managers markets. The two case companies are described in the responsible for financial control, health, environment and following. safety as well as managers responsible for the day-to-day operations of C2 to examine how CSR agendas affect the Case company 1 (C1): operations and decision-making of these managers. Based in Beijing, C1 was founded in 1950 as a major SOE • Relevant internal policy, operational procedures, and has long played an important role as a major import communication materials and reports in relation to health, and export channel for metals and minerals in China. C1, a the environment and safety as well as social-community Fortune 500 company, is now a multinational corporation activities were collected for both C1 and C2. involved in businesses such as exploration, mining, smelting, processing and trading in metals and minerals and is engaged in finance, real estate, mining and metallurgic technology, with operations spanning 26 countries and world regions. Case company 2 (C2): C2 is a statutory not-for-profit organisation based in Hong Kong that aims to provide elements of entertainment, education and conservation at an affordable price. It owns one of the largest educational theme parks in Hong Kong, which covers more than 870,000 square metres of land and features a diverse selection of marine attractions. It was ranked among the ‘10 Most Popular Amusement Parks in the World’ in 2006 and the ‘50 Most Visited Tourist Attractions in the world’ in 2007 by Forbes. Empirical data are collected from these two case companies to inform the analysis of our theoretical framework. • Five open-ended interviews were conducted with a 12 corporate office manager and the Departmental Managers of the Department of Finance, Investment, Human Resource, and Risk Management at the headquarters of C1. All of the interviews were recorded and transcribed. • Fifty-three survey questionnaires on the integration of CSR in MCS were collected from the financial managers of over 20 subsidiaries of C1 to examine the extent to which CSR is incorporated in the operations of subsidiaries of C1. Questions in the survey were directed towards the manner in which CSR agendas are embedded in operations in subsidiaries of C1. • Cases on the integration of CSR in MCS developed by C1 were collected from C1’s internal newsletters. 12 A division in charge of formulating CSR strategy and implementing CSR programmes. Corporate Social Responsibility and Innovation in Management Accounting 10ISSN 1744-7038 (online) Chartered Institute of Management Accountants 26 Chapter Street London SW1P 4NP United Kingdom T. +44 (0)20 7663 5441 E. © February 2013, Chartered Institute of Management Accountants

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