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Sustainable Development and Social Responsibility Practices in Spain

I.                  INTRODUCTION

Recently, an increasing interest in sustainable development and social responsibility practices has emerged. In 1987, CSR concept was for the first time defined in the Brundtland report. Since then, many voluntary actions have been taken by governmental and non-governmental organizations (UN, OECD, ILO, and European Commission, the global reporting initiative…) in order to ensure the right implementation of social principles, rules and  recommendations.

Undoubtedly, it is since the end of the 90’s that the arising of both ethical investors and responsible firms is growing. However, the exact origin of the CSR concept is difficult to pinpoint. What is clear is that the concept has been evolving over the time and even now it is not equally understood by everyone.

Currently, CSR is directly associated with three distinctive dimensions: social, ecological and economical responsibility. For firms, the result of the growing importance of and increased focus on the ethical aspects of business is the opportunity of being well-recognized. They can differentiate themselves from other competing companies.

The aim of this paper is to show the situation of socially responsible investments and corporate social responsibility, mainly in Spain, where our investigation has taken place.

With this goal in mind, we have compared many articles related to SRI with the purpose to investigate the market and identify those particular investors and companies with ethical values. In the first part, some relevant concepts will be defined to assure the common understanding of the main concepts. Then, we will word the position of different academics with regards to CSR. Finally, we will conclude with an experimental approach.



II.1. Definition of Key Concepts

According to the literature, there exists no common understanding of the concept and origin of CSR. Some academics ascribe the beginning of CSR to Sheldon in 1923 or even refer to the work of Robert Owen in 1771. Owen defended the positive relation between good labour conditions and efficiency. However, others like Carroll, one of the most recognized analysts of this discipline, claim that CSR originates in the 50´s, when the world of business was affected by public financial scandals. Bowen, in the paper: “Social responsibilities of the Businessmen” published in 1953, defends that firms should have the intention to follow common values and objectives of society and activities conducted should reflect those intents. Not only profits matters.

The 60’s were not a good period for CSR. Financial performance and ethical practices were considered mutually exclusive and managers declined their actions towards managerial efficiency excluding social voluntary activities. Friedman and Henderson were the fathers of this theory.

It is in the 70’s when interest in CSR re-emerged due to the efforts of Steiner and Carroll, but it took until the 90’s for CSR to be treated as something important. Moreover, firms began to associate their ethical behaviour with better financial results (Lee, 2008). Carroll, in 1991, proposed a four-layered pyramid of CSR. According to this model, CSR should meet economic, legal, ethical and philanthropic requirements.  In that sense, CSR implies the duty of being a good corporate citizen by making an economic profit while obeying the law and being ethically responsible. Many authors of this period supported this approach.

Figure 1: CSR Pyramide

Résultat d’images pour pyramid csr

Source: Carroll’s Pyramide (1991)

Currently, Corporate Social Responsibility is commonly defined as the company’s voluntary integration of societal and environmental concerns in their commercial activities and stakeholders’ relations. CSR implies seeking a balance between growth and competitiveness, while at the same time integrating social development and improvement of the environment. Furthermore, a) CSR is the strict compliance with the legal obligations in force; b) CSR is the voluntary integration in firm´s governance and management; c) CSR is in their strategy, policy and procedures d) CSR is social, labour, environmental concerns and the respect of human rights in the transparent relations with the stakeholders e) CSR is being responsible with the impact and consequences of corporate actions. (European Commission, 2001). Since the 90’s the CSR also has a strategic importance, as it is included in the mission, vision and values of companies.

One consequence of the CSR is the Social Responsible Investment, also known as Sustainable Investment, Ethical Investment or Green Investment. This concept dates from the nineteenth century and originates in the United States, although it is usually falsely understood to be an outcome of the last half century. The concept was first used by religious groups of people choosing to solely invest in companies whose values aligned with their own, thus rejecting shares from firms whose corporate behaviour conflicted with these values. We can define SRI as an intentional avoiding of investment in firms and funds as a result from negative criteria. Moreover, SRI is also considered as the investment in firms and funds that ensure compliance to shareholders’ individually positive social criteria. Overall, we can summarize the definition of SRI as a highly-personalized method of investment, based on an individual’s morals and values, encouraging good business practices and discouraging the ones that are not.

Good business practices and CSR policies are not only encouraged by the increasing number of ethical investors but also by the stakeholders of a firm. The term “stakeholder” was defined for first time by R. Edward Freeman in his book: Strategic Management: A Stakeholder Approach, published in 1984.

Stakeholders are defined as any group of people, individual, institution or organization who may affect or be affected directly or indirectly by the activity of a company. These groups are negatively affected by unethical practices of a firm. Consequently, they are lobbying with corporate managers, or even owners, and are causing a change in the corporate social behaviour and actions (Clarkson, 1994: 5).

In these groups, we may include the employees, clients, suppliers, shareholders, investors, public bodies, non-governmental organizations, trade unions, civil organizations and society in general. These groups are essential elements that should be considered in the businesses strategical decisions.

Thus, the company´s success or failure affects or concerns not only their owner, but also their employees and family, suppliers, other competitors, as well as the surrounding social framework (among other groups).

According to our definition we will divide stakeholders into two categories:

  •                 Primary stakeholders, those stakeholders that are key factors for the company´s operation, that means, all those who have direct economic relations with the firm, such as the shareholders, clients or employees.
  •                 Secondary stakeholders, those who do not participate directly in the business activities, nevertheless they can be affected by them. We include in this category,  competitors or the society among others. (Clarkson, 1995; Freeman, 1984)

Sometimes, stakeholders are not the only parties affected by unethical practices carried out by a company. Owners, can be also affected by managerial actions. To understand this better, the agency theory should be addressed. In modern corporations, there is a distinction between the agent (head manager) and the owner. The agency problem arises when the agents are not pursuing common objectives but personal interests. Moreover, asymmetric information between them aggravates this problem. Managers can use their driving power to carry out opportunistic actions that not respect the owners’ values or goals. (Davidson III, Jiraporn, Kim and Nemec, 2004)

Before diving deeper into SRI and CSR’s subject, it is usefull to have a clear definition of the different types of investors and their strategies:

Carmen Valor and Marta de la Cuesta, in their article “Corporate social responsibility and environmental management”, divide the different investors into three groups: truly ethical investors, ethically aware investors and non-ethical or traditional investors:

Truly ethical are those who just make ethical investments. An investor of this type looks for maximum profitability but considers only ethical firms while doing so. Secondly, ethically aware investors, are those who care and consider the ethical criteria when investing but this is not their priority. They are aware of the possibility of investing socially, but they also include the best performing firms in their portfolio even though these firms might not behave ethically. Finally, the traditional investors are those who are solely interested in the financial return an investment gives.

Moreover, Cowton, in his investigation, makes a distinction between the different ethical investors’ strategies. Following his disctinction, we can identify two different types of behaviour: The most common strategy is the “avoidance strategy”, based on a negative approach: Individuals avoid investing in companies that are considered harmful for society or environment (tobacco, weapons, pornography…)

On the other hand, Cowton uses the term “supportive strategy” for the positive screening made by investors. They bolster investment in certain firms with optimal characteristics. Occasionally, applying these two strategies may result in conflicts.

Sometimes shareholders would base investment decisions on their positive criteria and invest in environmental, healthcare firms, while at the same time these companies may have activities one can judge as negative. The author uses the example of a supermarket, they may have good labour and environmental policies and bio products, but contradictorily, the same chain also sells high amounts of alcohol drinks. (Cowtown, 1999)

II.2. Summary of Articles

II.2.a. ANAND & COWTON: The Ethical Investor: Exploring Dimensions of Investment Behaviour

Most of the ethical investments are based on the discard of companies whose activities are considered negative or damaging, according to the criteria investors use to judge those activities. The authors publish in their paper the following list of these harmful activities:

  •    Advertising
  •    Alcohol
  •    Animals
  •    Financial Institutions
  •    Gambling
  •    Newspaper Production & Television
  •    Nuclear Power
  •    Proportion of Business Overseas
  •    Political Contributions
  •    Sales to Military Purchasers
  •    Size of the Company
  •    South Africa
  •    Spread of Overseas Interests
  •    Tobacco

Based on this list, Anand and Cowton, in their paper, make a distinction between these activities, grouping them by categories of factors in accordance with the nature of investors’ concern:

  • “Post-industrial”, based on the beliefs from middle-aged investors whose values were formed in the 60s and 80s. This criterion boils fundamentally down to nuclear energy, animal protection rights, sales to military purchases, political contributions and financial institutions.
  • “Sin stock” factor (Miller, 1991): represents tobacco, alcohol and gambling.
  • Factor related with the internalization and advertising. This factor represents the extend of interests and abroad investments, as well as the “correct” advertising practices. The authors understand that in many occasions multinational firms are responsible of taping domestic economies taking advantage of their international scope.
  • Factor related with “undue influences”. This factor represents the size of the business regarding the existence of monopolies and media. This factor is considered the least harmful.
  • “Peaceful” factor. This factor comprises the most critical activities from the list. These are related with sales to military purchase and the human rights in South Africa

II.2.b MUÑOZ FERNÁNDEZ: Socially responsible investment

In his study, Muñoz Fernandez described the PRI Initiative taken by UN (UN Global Compact) and UNEP. More than 1,400 financial firms signed these principles by the middle of 2016.

There is a total of six principles which revolve around the recognition of the essential nature of environmental, social and governance (ESG) issues on investment decisions. The author summarizes these principles as follows:

  • Analyse and incorporate ESG in the decision-making: choice of companies with good behaviour, to discard non-respectful firms, etc.
  • Be active in companies that invest or participate, vote or make proposals related with the ESG, etc.
  •  Ensure that investors are investing in transparent companies and in firms that publicize their behaviour in relation with the ESG.
  • To promote the acceptance and incorporation of these principles among other financial firms.
  • To cooperate in order to improve the effectiveness of incorporating the principles.
  • Publish the proceedings and self-advance on the implementation of these principles.

The signatories build up an international network of investors with the aim of working together to put these principles into practice. The objective of this initiative is to understand the effect on the investors´ sustainability and encourage the signatories to incorporate these issues in the investment decision-making and in their ownership practices.

The aim of the PRI Initiative is that, when incorporating the principles, signatories contribute to the development of a more sustainable global financial system.

According to its operating, a remarkable characteristic of these principles and their actions is their voluntary nature. Moreover, there is a wide range of actions that companies can voluntarily incorporate to this initiative. At the same time, this initiative allows to demonstrate publicly the SRI commitment, as well as collaborate and learn with other entities about the implication after incorporating the principles into their praxis.

II.2.c. Moral or Economics. Invest preferences for social corporate responsibility

Henry L.Petersen and Harrie Vredenburg, in their paper “Morals or Economics? study the real reason behind the ethical investments.

Currently, the amount of social investments is growing. It seems that, investors prefer socially aligned companies, but is it more about economics or morals?  Aiming to answer to this question, they invite nine managers and nine investor analysts to participate in a particular research. All of them consider themselves to be socially responsible despite their participation in the oil and gas Canadian Industry.

They were immersed in a two-phase test: First, they were submitted to an interview of almost one hour and then they were asked to complete a survey.

All of them agree (in both phases) that CSR policies add value to the firms. In fact, some companies like Starbucks are using CSR practices as an instrument to differentiate themselves from the other companies of the industry. The real question is: What is the link between CSR and financial return? Participants highlight four main aspects: Risk mitigation, quality management, market opportunities and capital markets.

In accordance to their answers, they consider CSR practices as an insurance that reduces the exposure to the risk and which adds value to the firm. Moreover, they feel that CSR oriented decisions are made by good managers, that is, according to the respondents’ view, managers engaging in CSR are more transparent and consequently of high quality. However, results concerning capital markets are not as clear as the previous ones. Some investors perceive the CSR as a manner to attract a diversity of investors and to reduce price volatility consequently encouraging long-term investments. On the other hand, others questioned the positive aspect of the price stability.

Finally, there are two arguments underlining the benefits of CSR for market opportunities. First, CSR practices open ethical markets opportunities and second, workers prefer to work in ethical companies, so ethical firms can select staff from a wider array of candidates and consequently, create a more prepared, better performing staff.

Apart from that, it is important to place a remark: they recognize do not incur in ethical practices if non-profit will be made.

To sum up, they state that there is a positive relation between financial return and CSR practices and this experiment suggest that investors are making decisions based not predominantly on morals but more on how CSR add economic value to the firm.

II.2.d. BEAL, GOYEN & PHILLIPS: Why Do We Invest Ethically?

Beal, Goyen and Phillips hypothesize the SRI to be a Fair Game. According their view, they describe an “unfair game” as shares whose risk-return profiles differ from profiles of ordinary funds.  After their review of the literature (summarized below), they conclude that SRI can be considered as a fair game:

  • On the one hand, Oelizkt, Schhmidt and Reynes (2004) determine, after an analysis of fifty-two studies, that firms with ethical values have better financial results than others.
  • On the other hand, Ali and Gold (2002) analyse the performance of portfolios that apply a negative screening for investment. They conclude that an Australian portfolio including so-called “sin stocks”, such as alcohol or gambling, it would have yielded better results during the last years of twentieth century.
  • Bauer, Otten and Tourani-Rad (2004), based on Australian funds data over ten years, did not observe significant differences between the profits from ordinary and ethical portfolios.

Afterwards, the authors analyse the outcome of ethical investment and try to find an answer to the question: Has it any benefits for society? In general, studies illustrate that SRI does not have an impact on business activities or the behaviour of firms. Due to the lack of evidence supporting the hypothesis that ethical investment is a driving force behind social change the authors conclude that SRI might just be a result of individuals choosing to behave morally correct, and not a practice that has a positive effect on the world.

II.2.e. The Effect of Green Investments on Corporate Behaviour

Robert Heinkel, Alan Kraus and Josef Zechner discuss the impact of green investments in corporate behaviour. In their article “The effect of green investments on corporate behaviour”  they prove that not only corporate behaviour influences the investors’ decisions but also vice versa, investors’ decisions have an impact on corporate behaviour.

An increasing number of truly ethical investors boycotts unethical firms with polluting technologies. The boycott has a negative effect on stock market prices. As a response, unethical firms, aiming to maximise their share prices, reform their technology and promote policies that consider the social aspect as well. That is how ethical investors achieve to have an impact on companies’ behaviour. This reform is costly, but large firms are willing to bear these costs as their main objective is a high stock market price.

II.2.f. Ethical Investments Processes and Outcomes

Grant Michelson, Nick Wailes, Sandra Lee van der Laan and Geoff Frost describe in their paper “Ethical investment Processes and Outcomes” a good method to choose in which firms, ethical investor may invest in. Moreover, they also discuss the profitability of social investments.

Before continuing, it is important to define the reasons behind investing socially first. Of course, the main purpose of investing is to have a financial return, that is, to earn money. A well-performing ethical funds attracts not only ethical investors but also conventional ones. “There is nothing wrong with making money, but it is how you make the money that counts” (Murray, 2003). Ethical investors are not only interested in making money, but also want their investment to be aligned with their moral values (physical income) and try to promote a social change. This is the main difference between ethical and non-ethical investors. Furthermore, recent studies define the profile of a typical ethical investor. Gender and education both influence a person´s choice to invest ethically. Schueth states that ethical investors tend to be young women with a high education level.

Now that the investor and its motivations have been defined, it is time to analyse the process. This paper defends the screening as a good criterion to group the companies ethically accepted. The screening process can be defined as applying negative and positive filters to exclude or include some firms from your ethical investment portfolio.

Firstly, by applying the negative screening you can rule out firms that are directly prejudicial to the environment or human health, that is, tobacco, alcohol, gambling, armament… Using this filter paves the way for a discussion about the degree of involvement. Some industries or companies do not directly affect the environment or human health but they have an indirect effect. For instance, we do not invest in arms manufacturers (as they are considered unethical) but we might invest in steel or electronic companies that participate in the process of producing arms. So, should secondary involvement be excluded with the negative filter application as well? That is a big question depending on the moral and intention of each investor.

The debate now is: How to judge the companies and rank them accordingly. Dunfee states that to judge company performance and practices, investors should take three relevant aspects into consideration: accounting principles; financial reports and auditing reports.

Finally, this paper highlights one of the biggest discussions about CSR: is it profitable or not? On this subject, we find two different arguments: “doing well by doing good” and “doing poorly by doing good”.

On the one hand, advocates of the theory “doing well by doing good” defend that ethical investments are profitable, even more than the normal ones. In fact, according to Mallin, in the UK, ethical funds outperformed non-ethical funds over the period of 1986-1993.

On the other hand, other investors state that it is less profitable to invest ethically. They argue that by diversification, they can reduce risk while maintaining, or even increasing, financial return. Investors applying negative screening are excluding some firms, so they are reducing their possibilities of diversification. However, a conventional investor can invest in both, ethical and unethical firms, so they have a wider array of possibilities to diversify and therefore have an investment portfolio that is less exposed to risk.

II.2.g. HOFMANN, MAIER-PRESTI& KIRCHLER: The Decision Process for Ethical Investment

According to this article: there is a distinction of two different types of investors: Traditional and Ethical.

The behaviour of traditional investors, resemble the style of a standard neoclassical economist, acting purely rational. The main criteria for the investor are the risk and the expected return to investment. As we know, an investor’s willingness to take risk (under rational circumstances) depends directly on the expected benefits. In accordance with thisphilosophymoral standards would decrease the efficiency of the investment, limiting the possibilities to build an investment portfolio. One can conclude that, in order to meet their own moral standards, ethical investors are willing to sacrifice the expected benefit.

The authors base their analysis on the “issue-contingent model of ethical decision making in organizations” (Jones T.M., 1991) According to this sequential model, the investor first identifies the moral questions, then makes a judgement based on them and ensures that moral purposes are clear. Finally, the moral agent commits and consequently behaves in an ethical manner.  Jones reveals in his research that all these components are influenced by the organization´s moral intensity.


In this paper, we have incorporated secondary data collected from external sources. Our literature review is based on professional articles of experts in the field of ethical investment.

We gathered data by using articles that are readily available on academic web pages such as “Scholar Google” or “Research Gate¨. In some cases, by making use of the information presented on the website “Research Gate”, we contacted the authors of certain papers directly and asked for their approval on reading their work, as well as using it for academic purposes.

To find correct data we applied general research criteria. We searched for broad terms related with the topic, such as RSI or CRS, and then we went through the texts we found most interesting. The articles we collected first helped us expanding our study by using the papers these articles referred to as well. Other papers related to the topic at hand can be found in the reference list of an academic article.

In addition, to explore and learn more about the situation and possibilities of ethical investments, we ordered a survey at Lineex. Lineex is a laboratory for research in behavioural experimental economics and is part of the university of Valencia (The university where we are studying). It explores the real behaviour and identifies the variables affecting the decision-making process. The survey is based in Spain, as it is our home country and this fact allowed us to go further on this research.

A survey consisting of eight multiple choice questions was sent to the managers of 100 management companies of existing mutual funds. The survey was intended to analyse three relevant factors of the ethical investment situation in Spain:

  1. Socially responsible investment awareness and feasibility
  2. The role of the different industries from an ethical and ecological point of view
  3. Economic factors encouraging the SRI deployment


IV. 1. Results Obtained

Captura de pantalla 2017-06-11 a las 13.07.28.pngCaptura de pantalla 2017-06-11 a las 13.07.28.pngFrom the 100 management companies surveyed, 27 replies were considered valid, which represents a 27% of the total.  The content of the survey and its main responses are displayed below.

Captura de pantalla 2017-06-11 a las 13.07.37.png

Looking at the results it is noticeable that:

– 85% (23 answer) of the managers knew, to some extent, about the existence of the Ethics or Environmental Investment Funds

-The assessment of these investment funds is in general positive (8%) or very positive (between the 64% and the 76%)

  • -Nevertheless, in portfolios there is little (22%) or no presence (33%) of ethical or green shares.
  • The most common securities are:
    • Healthcare, clean energies, and the waste recycling (37% – 63% of the respondents indicated that these securities should have a high or very high level of protection).
  • The most rejected securities are:
    • Polluting industries, production and trading of toxic and unhealthy goods, racial or sexual discrimination and the abuse of labour practices. (22% – 74% of the survey respondents consider that the level of rejection of these aspects should be high or very high)
  • Managers would incorporate mostly (78% – 85%% of total positive answers) these selection criteria of companies in which they invest their resources since the funds clientele would welcome favourably them with an adequate return (33% -48%), with a good promotion campaign (15% – 19%), at middle and long term (15%- 19%).
  • Therefore, managers consider that the financial feasibility is limited in the present, and, in any event, this one would be linked to higher expected returns (15%), or average returns (81% – 85%).

To sum up, in medium and long term, managers expect that the role of ethical shares will become more important and thus shares’ success. Managers find the key of success of the the SRI on theprofitability and taxation of companies that incorporate it in their practices, and with an accurate information and promotion campaign of themselves.

IV. 2. Opinion

IV.2.a. Opinion on the survey obtained results

To analyse the situation in Spain and the ethical investment acceptance, we decided to conduct a survey on the viewpoints of managers of one hundred management companies. The summary of the results of the investigation indicates that, even if the managers of the Investment Funds in Spain recognize the importance of the ethical and environmental factors, they encounter some practical difficulties in incorporating these factors into their investment decisions. In a medium/long term, nevertheless, managers think that their role will increase and that successfully applying an ethical way of investing depends mainly on the potential profits it brings to firms that are willing to incorporate them (including beneficial taxation). An adequate information campaign and promotion of ethical investment might help in changing the behaviour of firms.

In comparison to Spain, other countries with bigger historical tradition and whose participants in collective investment are more sensitive with these problems, conduct their investment more to those funds which, to a large extent, allocate their resources to the businesses and societies, that have a concern for topics such as health, environment or social policy.

Nevertheless, currently in Spain the socially responsible stocks are considered as an immature product (not developed enough in the market) for the demand of investors in Spain. This criterion is shared for the most part of professional who are dedicated to the management of Investment Fund and which are waiting that the product is more mature, to incorporate them to their portfolios. The situation of these kind of funds in Spain is on “learning mode”, so can be expected the progressive acceptance at short term by the funds. Nevertheless, the forecast for the ethical investment funds is positive at long term.

IV.2.b Investors’ motivations for SRI

After our literary review, in order to find a real explanation why investors invest ethically we create two scenarios. The first to take in consideration for these scenarios is that we conclude that there is no evidence that ethical investment over-perform (in comparison with other “sin stocks”).

In our assumptions, we can consider investing in the Johannesburg stock market (very profitable) or to invest in a different stock market with a positive approach, specifically on ethical stocks. If we apply our knowledge learnt with the theoretical financial literacy, we could say that every investor would prefer a stock with more profit for the same level of risk or a less risky investment for the same expected return indeed. This concept is related with the classical investor concept.

Nevertheless, if we raise the hypothesis to invest in stocks related with South Africa issue to ethical investors, they would prefer to accept less expected return by investing in SRI rather than sin stocks (if not, they would not meet their moral values investing, thus they would not be considered as ethical investors). This fact explains that investment motivations for social shareholders are more focused on moral values than in benefits.

However, if the shareholders are interested on the SRI only for monetary issues, this group cannot be considered ethical investors. They are classical/ traditional investors, that find a monetary interest on the ethical market. We may say that, if the amount of ethical investor is vast, they may influence on the price of ethical stocks, raising them and making them more profitable. In this case, ethical shareholders would meet their moral values while they would attract more people to meet the ethical investors’ values (even if there is no social reason behind their behaviour).  In this manner, ethical investment could influence on the behaviour of traditional investors, by turning them in ethical aware investors.

This behaviour can be reflected on the market sentiment of all kind of investors: There is an undeniable fact on the stock market, that when there is a company scandal due to business bad practices (social or environmental scandal for example), shares’ price drop drastically as a response of the market. Related with this issue, is for instance the Volkswagen scandal (environmental) on 2015.

After US EPA released that Volkswagen installed, intentionally, different diesel models in order to avoid gas emission limits over six years, shares of the Company felt severely. Even if only Volkswagen was involved on the scandal, the incident affected to the whole automotive sector and, not only to the Frankfurt stock market but also to different stock markets worldwide.


As it can be considered that SRI reduces the inequality gap under capitalism regime (SRI encourage the stock related with social activities), is an opportunity for companies’ marketing strategy to enhance their investment. Even if some studies denied the power of ethical investment to change business practices and to affect to the overall society. In case of a vast number of stockholders with moral values start investing on ethical companies exclusively, they will affect to the stock market, and consequently to the business behaviour.

Is possible we find an interest conflict when we are trying to define the ethical criteria for investments. Moral values are subjective and differ depending on the perspective. In case of multinational companies, for instance, sometimes they face different ethical standards on countries where they produce and others on countries where their shareholders are.

Although the concept of ethical investment seems to be well accepted, we cannot deny in our analysis that the “The social responsibility of business is to increase its profit”. (Friedman, 1970) The Nobel-prize winning economist states that this social trend is hostile to the principles of capitalism. On his point of view, the fact that companies give money to charities is a kind of shareholders stealing.

Nevertheless, this philosophy will doom the companies to the failure in the long term. Even if one of the main objectives of a business is the creation of stockholders’ value, there is also the need of meet the stakeholders’ obligations.

In conclusion, the main reason of the ethical investors is not the expected return, but it is to be in accordance with their ethical values. However, as they are investing (not making a symbolic donation in stock market) green investments have a purpose of positive profit.

IV.2.c. Firms’ motivations for CSR

According to the grounds for supporting CSR we can identify economic and noneconomic reasons: Altruism, some CEOs consider that the social, labour and environmental concerns are simultaneously corporate responsibilities; Manager may also have, personal or professional reasons to strength the CSR presence in their firms. Social responsibilities dismiss other negative effects such as company bad reputation (for instance, as a consequence of a scandal) or dissatisfied employees.

The alignment with the stakeholders’ policies is compatible with company’s financial interests. For example, most of the employees are attracted by firms whose labour policies are more favourable. On the long-term perspective, these companies will have the power to retain the best qualified employees, so it will increase the business effectiveness, thus, the company financial benefit. Further examples related with the profit are the tax credits, the reduction of regulatory and/or litigation costs or the attractiveness to customers. The implementation of CSR encourages the long-term opportunities because the company’ organisation and production is linked to the nature and humankind.

In our analysis of the CSR we conclude that the most part of the enterprises which are socially responsible are large firms. This positive relation between large firms and CSR practices is partially explained by the earning management theory (Healy and Wahlen, 1999: 368):

Some managers of large firms (listed firms) manipulate the final financial reports in order to mislead stakeholders and shareholders about the real financial performance of the company. As a response, stakeholder, who are negatively affected by the manager’s intervention on the financial reports, can use their power to punish managers through lobbying, boycotts, media campaigns…

To avoid the “activism” from stakeholders damaging their image, firms initiate ethical practices to catch lobbying organisations’ attention, to compensate their unethical practices and to satisfy stakeholders.

Companies can be also attracted by CSR policies due to the added value. The implementation of CSR policies allow firms to themselves from competitors. A recent study made by Henry L.Petersen and Harrie Vredenburg reveals that the major part of investors consider that CSR add economic value to the firms through a) risk mitigation, b) stock market price stability, c) best qualified staff and d) wider market opportunities. Socially responsible firms can attract both, ethical and traditional investors while non-ethical business are limited to traditional ones.

The opportunities the social responsibility is given are every time more notorious and advantageous, reason why CSR and SRI are fastly growing. Whatever the real intention behind the CSR practices, currently firms considers the ethical practices as a part of their activity, if not, they can be hardly punished by stakeholders (mainly social media)  and ethical investors.

IV.3. Analysis of the CSR on Different Firms:

IV.3.a. Monsanto Case

Occasionally, there are companies which have bad reputation due to bad ethical practices and their lack of ethical values. For example, the multinational Monsanto (among others).

Monsanto is one of the multinational firms into the food industry. This company uses a series of transgenic seeds for its crops, and cover the world pesticide market. The firm has also been criticised due to the limitation of the seeds variety, thus the crops in the market.

Nevertheless, if we analyse their web page: Monsanto try to attract ethical investors and to please stakeholders by publishing its sustainability report and their commitments. For our analysis, an extraction of some of these commitments according the CSR values has been made:

“Sustainable Agriculture” – More production: Develop improved seeds which help to farmers to double the corn, soy, cotton and the rape productions by the year 2030 (compared with the 2000 levels)

“Sustainable Agriculture” – More conservation:

  • Develop seeds which use one-third less of key resources per unit of production.
  • Work on the reduction of the loss of habitat.
  •  Better water quality.

“Sustainable Agriculture” – Improve the quality of life: Help to improve the life of farmers and people who depend on them.

“Human Rights”: The Monsanto’s Employee Guide includes nine elements concerning human rights. These elements are related with:

  • Child labour
  • Bonded labour
  • Remuneration
  • Working hours
  • Harassment and Violence
  • Discrimination
  • Safety
  • Trade-union freedom
  • Compliance with the law

This information has been extracted from the commitment which may be found on Monsanto official web site. This information allows to conclude that Monsanto is one of the companies which uses CSR as a marketing technique and to be beneficiated from it:

  • In its basic definition, CSR means economic growth at the same time than preservation of environmental and societal issues. When Monsanto sets the objectives of reducing consumption of water and resources. The company not only beneficiate the natural resources preservation, but also itself. The company save money as a consequence of resources reduction (consumption decrease)
  •  The company defends the use of genetically modified organisms in his “More Production” Commitment. Thus, Monsanto use as pretext the benefit of the farmers for a practice that activists clearly repudiate.
  • Monsanto supports the respect for Human Rights. Although this is a remarkable positive feature we should not forget that those nine elements included in the Employee Guide are in accordance with the Human Rights included in the law frame of countries and the NU. That is to say, that even the company’s goodwill of the respect of the human rights, Monsanto is only acting under the authority.

IV.3.b. Starbucks Case

In the opposite corner, as an example of recognized socially responsible companies, there are listed firm such as Colgate, Microsoft or Starbucks. Starbucks, particularly, uses a strong CSR campaign on its website:

Starbucks is the biggest coffee chain in the world (listed in NASDAQ) and it is considered worldwide for being one of the more socially responsible firms. Starbucks’ vision is the promotion of a positive social change; to ensure the ethical sourcing and the high quality of its coffees. Additionally, Starbucks assures the total contribution to the improvement of the communities it serves.

Starbucks is engaged in many social practices: refugees hiring, opportunities for youth, voluntary programmes for community services (Starbucks plans to contribute around one million volunteer-hours to the communities they are engaged in), food sharing, veteran and military spouses hiring, diversity and inclusion, jobs creation…

Starbucks has been supporting its communities is through eight-years partnership with RED.orf. All donations generated through (STARBUCKS)RED campaigns have gone to the Global Fund to promote education and/or  to finance HIV/AIDS prevention.

Moreover, the firm has created the Starbucks’ foundation to carry out social activities. Starbucks’ foundation provide access to clean water, promotes the child education in China, helps  to rebuild the gulf coast of Mexico and supports the tea, coffee and cocoa growing communities.

According to environmental issues, Starbucks is also committed to ecological practices: recycling and reducing waste (greener cups and other packaging), conserving the energy and water, purchasing renewable energy credits (to reduce footprint) and creating greener stores (meeting the LEED® building standards). The company pursues strategies to mitigate the impact of climate change on their farms.

Finally, it also cares about different issues such as human rights, labour conditions or animal welfare.

Capture 2.PNGAs we can see, Starbucks is an example of a company who combines the attention on its social image and a high financial performance. Hereunder, some graphics showing the past and expected financial performance of Starbucks:


Source: Market Realist and NYSE (2017)

The first graphic shows the performance of Starbucks (SBUX) in the stock market and its Peers (A peer group is a group of individuals or entities who share similar characteristics and interests. In this case, the Peer groups are direct competitors: Dunkin’ Brands; Domino’s Pizza and McDonald’s…). As we can see, there is not price volatility and it is a secure value (two of the main characteristics of ethical funds). However, professional analysts expect an increase on the financial returns in 2017 (second graphic). So, Starbucks might be a good choice for ethical investors, due to the respect for ethical principle and its expected financial performance improvement.

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