Corporate Social Responsibility in a Developing Country

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This entry is adapted from the peer-reviewed paper 10.3390/admsci13080186

Corporate social responsibility (CSR) is a strategy to realize sustainability. CSR needs to be understood based on a priority scale and objectives to build a solid organizational structure and ensure sustainable CSR implementation. In this regard, CSR implementation at the micro and macro levels needs further explanation.

internal CSR external CSR micro foundation performance

1. Introduction

CSR has evolved and become a strategy for sustainability (Huang et al. 2022; Sánchez-Teba et al. 2021; Strand et al. 2015; Wu and Jin 2022), including in developing countries (Dobers and Halme 2009; Sorour et al. 2020; Stanislavská et al. 2020). CSR as a way of reducing carbon emissions (Ali et al. 2020) faces social challenges (Grabner-Kräuter et al. 2023).

However, Mostepaniuk et al. (2022) stated a straightforward implementation of the CSR framework. Barbu et al. (2022) demonstrated the framework in sports institutions; Siddique et al. (2023) demonstrated it in the banking industry. CSR needs to be better planned, according to Shayan et al. (2022), and CSR reporting systems need to be more robust (Jahid et al. 2023). CSR is a complex process (Khojastehpour and Jamali 2020). The failure of rearview and practice standards is tricky, and low continuity and dedicated efforts cause CSR to be not optimal (Ali et al. 2020). Several problems in the implementation of CSR in developing countries hinder the functionalization of CSR (Gulema and Roba 2021; Ullah and Sun 2021). In addition to a vague understanding of CSR, different views of and interests in CSR still widely exist in developing countries (Yunis et al. 2018). The legal framework of CSR still needs to be improved (Lauwo et al. 2016) whereas, at the international level, companies still need formal responsibilities related to CSR (Buhmann 2006). Judging by the process and results, CSR is less encouraging. The sustainability of CSR’s objectives makes it less representative of the process, and the effectiveness of CSR is still being debated (Arora et al. 2020). A previous study reported that CSR in developing countries entails pragmatic implementation, ineffective mechanisms, and poor achievements and social outcomes (Jain et al. 2021). CSR is organized based on a narrow view that focuses on what to do with profit rather than how to create profit (Sharma and Singh 2022). Different European practices focus more on internal aspects to ensure the sustainability of CSR implementation (Macassa et al. 2021), which shows a long-term orientation. There are different needs for understanding CSR in developing countries (Nguyen et al. 2021).

In Indonesia, CSR practices are carried out through policies such as those realized by state-owned enterprises. SOEs’ roles include providing guidance and assistance to entrepreneurs from economically vulnerable groups, cooperatives, and the community through corporate social responsibility (CSR) following prevailing laws and regulations (Ramdhan et al. 2022). The legal approach for CSR is a “coercive and binding” effort to solve educational, health, and environmental issues in developing countries like Indonesia. The regulations as standard guidelines on mandatory CSR are contained within a vacuum and are confusing (Sefriani and Wartini 2017). Companies are more concerned with avoiding legal consequences than guaranteeing balance, as suggested by Carroll (2017). But various parties have interest in CSR rather than it containing neutral essential wisdom (Juwana 2005). Van Marrewijk (2003) asserted that bias in CSR causes other biases due to specific interests. This situation indicates a conflict of legal and economic interest of CSR implementation. There has been a long-term feud between legal and economic approaches in CSR implementation (Windsor 2006). CSR implementation still needs to be integrated into community norms and practices such as local beliefs (religion) and government systems despite the cultural challenges (Ooi et al. 2021). CSR recontextualization is a vital need (Ibrahim et al. 2023). Furthermore, CSR practices focus more on corporate image, a lack of consistency and limitations, and the selection of CSR activities that need to pay attention to stakeholders’ interests.

In addition to regulatory issues, the results of previous studies show that CSR implementation focuses more on the macro and ignores the micro (Yu et al. 2021). However, as Kim and Kim (2021) argued, the effect of CSR on the internal stakeholder, such as employees, who ultimately determine a company’s performance, still needs to be researched. CSR pays little attention to employees’ interests (Jung and Kim 2016). Deng et al. (2020) discussed the negative impact of CSR on employees. Currently, CSR function needs to be understood as an effort to strengthen the company’s performance structure while upholding ethical responsibility (Farooq et al. 2021; Silva et al. 2023). Although other studies have reported a positive relationship between CSR and employees (Verčič and Ćorić 2018; Sheel and Vohra 2016), there is inconsistency in the findings of the effect of CSR implementation on employees. Internal CSR is considered more effective for employees (Ng et al. 2019). Internal CSR can increase employee satisfaction, which is likely to increase employee performance (Obeidat et al. 2018; Golob and Podnar 2021; Chatzopoulou et al. 2022). Another contradiction is that CSR does not always provide positive results such as performance and engagement (Rupp et al. 2018).

Current CSR implementation should be related to profit, the structure of the corporation’s performance, and the ability to implement CSR principles, as stated by Elkington (1998)—namely, the triple bottom line. The results of previous studies show that the implementation and concept of CSR need to be clarified with existing problems so that CSR can be optimized. The first gap is the need for clarity in CSR construction included in formulated policies to reduce the function of CSR. Problems with the implementation of CSR begin with the understanding of CSR internally and externally (Ramdhan et al. 2022; Zhong et al. 2022). The second gap is that CSR implementation is more external. Focusing on internal CSR has not been a priority, even though it is needed to support the foundation of companies, which still needs to be improved (Ramdhan et al. 2022). Although internal CSR studies are evolving and previous studies have shown a positive relationship between individual psychological aspects and reduced adverse work outcomes, the studies still need to be clarified (Chen and Liu 2023). There are calls for CSR research that multiplies specific issues at the individual level.

Therefore, it is necessary to study CSR based on several propositions in the micro foundation theory. In this regard, Chomvilailuk and Butcher (2023), Farooq et al. (2021), Golob and Podnar (2021), and Song and Tao (2022) showed the positive impact of internal CSR on employees, deepening the understanding of internal CSR as a future research agenda (Onkila and Sarna 2022). This study supports the understanding of CSR at the micro level, which is considered still lacking (Bu and Chen 2023; Carlini and Grace 2021; Giang and Dung 2022; Liu et al. 2023; Yu et al. 2021).

2. Corporate Social Responsibility (CSR)

CSR is a set of obligations a community expects a company to perform (Carroll 2017). The concept of CSR is constantly evolving. CSR could be considered a voluntary and extra-legal obligation (Amin-Chaudhry 2016). It relates to business ethics, stakeholder management, organizational citizenship behavior, value creation, and social goals (Carroll and Brown 2018). The concept of CSR has similarities with sustainability (Barbu et al. 2022; Elkington 1998; Mostepaniuk et al. 2022; Sánchez-Teba et al. 2021; Strand et al. 2015; Wu and Jin 2022). CSR and sustainability are different (Zhao et al. 2023). CSR construction is at the company level as a strategy (Fatima and Elbanna 2023). CSR is a long-term maintenance system consistent with economic, social, and environmental considerations (Alhosani and Nobanee 2023).

CSR includes ethical responsibility towards stakeholders and integrating economic, environmental, social, and ethical aspects into company operations, decision-making, and creating shared value for stakeholders (Hussain et al. 2023; Siddique et al. 2023). While both internal and external CSR shows the corporation’s ethical responsibility, their only difference lies in the state of whether or not the constituent is being directly affected by CSR (Bolton 2020).

External CSR is conceived based on the orientation of CSR allocations outside of the corporate realm, such as external audiences, customers, suppliers, community, and governments (Bolton 2020; Ibrahim et al. 2023; Kholaif and Ming 2022; Silva et al. 2023; Wang et al. 2022).

Internal CSR, as an accountable condition of the corporation ethically and legally, is used to carry out duties and care for the corporate’s internal affairs (Chomvilailuk and Butcher 2023; Manzoor et al. 2019; Kholaif and Ming 2022). The responsibility toward employees (Bouraoui et al. 2019; Silva et al. 2023; Jamali et al. 2020) is to develop the corporation’s human resources and expand the offering of opportunities for employees in increasing personal benefits for the corporation. Adu-Gyamfi et al. (2021) added that CSR initiatives are intended to satisfy stakeholders, especially employees (leading internal).

Internal and external CSR have different constructions based on the goals and interests viewed from the company’s point of view. Internal CSR is an organization’s policies and practices for psychological and physiological well-being, including individual development and an inclusive and equitable work environment (Hameed et al. 2016); developing organizational capabilities and meeting employee expectations are critical resources for organizations (Hawn and Ioannou 2016). Internal CSR focuses on organizational practices to support employees’ mental and physical well-being (Hur et al. 2021), while external CSR, according to Hameed et al. (2016), focuses on outside the company, including voluntary, corporate philanthropy, and environmental protection. External CSR is corporate behavior to protect or promote social welfare outside the direct interests of the company and stakeholders outside the company (Jia et al. 2019). Waldman et al. (2006) and Farooq et al. (2021) emphasized the concept of external CSR based on the focus on community interests and consumers. Both are connected with the idea that financial benefits, social benefits, and attention to the environment are due to business activities and sustainability orientation as a whole.

3. Work Engagement

Work engagement was developed by Kahn (1990) in the Job Demand-Resources model (Parkinson 2023; Schaufeli and Bakker 2004; Tomietto et al. 2019). Work engagement is a condition in which a person has a positive mind to express himself physically, cognitively, and physically in the work place (Andrulli and Gerards 2023; Aldabbas et al. 2021; Lee et al. 2023; Oberländer and Bipp 2022; Schaufeli and Bakker 2004; Kossyva et al. 2023). Work engagement is a situation related to work that is positive, satisfying, motivated, and effectively prosperous (Bakker and Leiter 2010). It is reinforced that work-related positive states of mind are characterized by passion, dedication, and absorption (Albrecht and Andreetta 2011; Han et al. 2021; Lee and Eissenstat 2018; Zhu and Liu 2020; Schaufeli et al. 2017; Shi and Gordon 2020; Wu et al. 2022). Fu et al. (2022) and Wojtczuk-Turek (2022) put forward constructions that were mostly accepted according to JD-R. Employees’ positive or negative emotional attachment to work, colleagues, and organizations greatly influences their willingness to learn and perform in workplaces (Sandhya and Sulphey 2020). The generally accepted construction of WE comes from the perspective of JD-R.

Work engagement is a trigger for proactive work cycles and for the optimization of work demands (Bakker et al. 2023; Bakker and de Vries 2021). It assumes a balance of positive (resource) and opposing (job demands) (Bauer et al. 2014; Juyumaya and Torres 2023; Nagai et al. 2023). Work engagement is the result of various socio-psychological processes (Bakker 2022) including environmental influences (Mäkikangas et al. 2022).

4. Job Satisfaction

Satisfaction is an individuals’ affective responses to their environment, including value achievement at work (Ali et al. 2023; Çamlı et al. 2022) and enjoyment of work (Abolnasser et al. 2023; Pang et al. 2023). It also includes satisfaction as quality of work (Erro-Garcés et al. 2022). Employee satisfaction or dissatisfaction reflects their responses to the perceived degree of conformity between expectations and the actual condition in the workplace. However, satisfaction and dissatisfaction differ (Dorta-Afonso et al. 2023). Intrinsic and extrinsic factors influence positive or negative judgments, emotional reactions, and attitudes toward work (Abu-Tineh et al. 2023; Hilton et al. 2023; Scanlan and Still 2019). It is an emotional response to work that may generate pleasure, comfort, self-confidence, appreciation, personal growth, and various positive opportunities, including upward mobility, recognition, and assessments carried out in a pattern of achievement with monetary value as compensation (Robbins and Judge 2015). Albalá-Genol et al. (2023) and Skaalvik (2023) explain the perspective of JD-R, job satisfaction is the worker’s emotional response, given by context and mediated by the personal resources available to the person. Various definitions show that job satisfaction is multidimensional and subjective (Brendel et al. 2023).

Satisfaction is considered one of the indicators of mental health in the workplace (Adamopoulos et al. 2023; Caputo et al. 2023; Martí-González et al. 2023). Therefore, along with the importance of an individual’s position in the workplace and the positive output of job satisfaction, the construction in this study is that the papacy is an indicator of mental health which is a positive or negative value, emotional reaction, and attitude towards work.

5. Job Performance

Job performance is a multidimensional variable comprising job and non-job-related components. Performance consists of task performance and extra roles (Chaudhary 2018). Manzoor et al. (2019) describe performance as employees’ actions and behaviors relevant to the organization’s goals. The concept of performance is, among others, related to the ability to adapt to unexpected conditions or situations (adaptive performance) and work activities directly related to the corporate’s technical core (Campbell 1999; Ramdhan et al. 2022). Miao et al. (2018) define task performance as an organizational citizenship behavior. Adaptability is related to discrepancies, discontinuity, and emerging trends. Meanwhile, Park et al. (2020) define job performance as the ability of employees to adjust their behavior to satisfy work demands. Lee and Lee (2020) stated that it meets a job’s formal requirements and adequately completes assigned duties. Ali et al. (2020) put forward the concept of performance based on Janssen and Van Yperen (2004) namely on innovation. Alghamdi (2018) defines it as the ability to generate and implement new and valuable ideas. Davidescu et al. (2020) added that the more dynamic the work demands, the higher the flexibility demands that employees face. Job performance is growing along with changes in the environment and orientation of the institution. Kosec et al. (2022) added about performance appraisals that they are overall work skills and behaviors related to colleagues and customers.

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