Financial Services Institutions and Corporate Social Responsibility: on taking a broad versus a narrow view

Thien, George
Kearins, Kate
Tregidga, Helen
Hooper, Keith
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Doctor of Philosophy
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Auckland University of Technology

The aim of this thesis is to examine understandings of corporate social responsibility (CSR), motivations for CSR reporting, and the nature of stakeholder engagement in relation to CSR reporting by financial services institutions. Specifically, the thesis investigates how particular New Zealand financial services institutions (NZFSIs) have interpreted the concept of CSR, and whether their motivations for voluntary CSR reporting and related stakeholder engagement hinges on a broad or narrow view of CSR.

Three distinct sources of data formed the basis of this research. The first is literature relating to the concept of CSR, common motivations for CSR reporting, and stakeholder engagement in relation to CSR reporting. Institutional theory, legitimacy theory, and stakeholder theory were also examined. Literature was reviewed and relevant theories/concepts later integrated with the findings from the second and third data sources: annual stand-alone CSR reports and interviews. These second and third data sources are related to three participating NZFSIs, two major banks and a major insurance company.

Content analysis on the three NZFSIs’ annual stand-alone CSR reports from 2004 to 2009 (16 reports in total) proceeded through line-by-line analysis and coding according to inductively generated categories. Two rounds of interviews were conducted with key decision-makers involved in CSR reporting from within each of the three NZFSIs. The two rounds of interviews were conducted on either side of the 2008/9 global financial crisis. Interviews were also conducted with expert stakeholders who were conversant with CSR in the NZFSI context. Again, the interviews were conducted before and after the 2008/9 global financial crisis. Each of the resulting 15 interviews were transcribed and analysed to identify salient themes.

Unsurprisingly, content analysis revealed a narrow and corporate-centric representation of CSR in the NZFSI reports. Reports mainly focused on the impacts of the NZFSI’s office operations, suppliers, customers and non-core business activities as philanthropy. There were minimal disclosures on economic, social and environmental impacts caused by the core business products and services, and on stakeholder engagement activities for CSR reporting.

Interestingly, the interviews showed key decision-makers involved with CSR reporting in those same institutions to espouse a broad view of CSR, but they professed a rather narrower view as applicable to practice such as CSR reporting in the financial services industry context. The interviews revealed the decision-makers’ understandings of CSR extending to consideration of the impacts of financial services institutions’ clients’ activities, particularly those clients accessing core business products and services. Admittedly these impacts were less reported on. The main reason for such practice was cited as cost-related. It was also cited that CSR reporting was motivated by a business-case rationale. As a result, stakeholder engagement in relation to CSR reporting was selectively done, instead of a more comprehensive approach, or one that was specific to that purpose.

The 2008/9 global financial crisis did not appear to spark significant change in espoused understandings of CSR or motivations for reporting. There seemed to be little evolution in terms of how CSR was understood in the context of the financial services industry in New Zealand. CSR reporting remained very much voluntary with the expressed motivations for doing it still mostly business-case related. The focus of reporting content remained selective and narrow. The post 2008/9 global financial crisis interviews raised some concerns on the part of NZFSIs about clients who were economically affected, but nothing beyond. Responses from the two expert stakeholders over the two rounds of interviews remained steady in their concern that NZFSIs need to exhibit more responsibility for the social and environmental impacts of their core business products and services.

The hesitation of NZFSIs in reporting the impacts of their core business products and services, as reflected by the results from content analysis of their stand-alone New Zealand CSR reports and as raised by interview respondents, deviates from the latter group’s espoused understandings of CSR being a broad concept extending to responsibility for an array of impacts. The difference between how NZFSI respondents understood CSR in their industry context and how they deviated in their CSR reporting sheds further light on their organisations’ motivations for CSR reporting. Being relatively powerful organisations, but not normally associated with detrimental social and environmental impacts, NZFSIs have experienced little pressure to produce CSR reports or to report more broadly. It seems that the NZFSIs studied are leading and thus attempting to influence the scope of what they should be assessed upon in terms of CSR. Unlike much research using legitimacy theory and institutional theory, where stakeholders appear highly influential in setting CSR expectations, it appears that these NZFSIs are managing, meeting and even surpassing the expectations of majority of stakeholders in relation to CSR in the NZFSI context.

Arguably, financial services institutions can influence their clients’ social and environmental impacts by imposing appropriate conditions to qualify for core business products and services, such as loans, investments and underwriting. Without strong encouragement, however, financial services institutions may not expand their reporting to cover impacts of their core business products and services. Reporting such impacts in their CSR reports would be one basis for financial services institutions to demonstrate a broad view of CSR. Encouragement to move beyond the business-case may logically come from regulatory sources, non-governmental organisations, a changed moral stance on the part of those leading or influencing financial services institutions, or some combination of the aforementioned sources, but currently seems unlikely. The extensiveness of financial services institutions’ clientele networks and the impacts of their client operations – if addressed by lending, investing and underwriting criteria and duly reported upon – offer the possibility of huge benefits to society and environment compared with other industry-specific efforts.

CSR , Sustainability , Reporting , Motivations , Indirect , Social , Environmental , Stakeholders , Content analysis
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