SUCCESSFUL ACTIONS TO A SUSTAINABLE FUTURE DEPEND ON THE STRATEGY - DIVA
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Bachelor thesis
Successful actions to a sustainable
future depend on the strategy
-An exploratory study of MNEs Corporate Social
Responsibility in the Fast Fashion Industry
Author: Amanda Pfante & Victoria Rosso
Supervisor: Selcen Öztükcan
Examiner: Helén Anderson
Term: VT20
Subject: International Business
Level: Degree of Bachelor
Course code: 2FE51EAbstract Corporate social responsibility is a well-discussed phenomenon where existing researchers within the field of MNEs have found an increased interest in the CSR topic. Existing research between the two topics is still at an early stage where the main reason is the complexity of defining the CSR concept, as well as the MNEs cross-border operations in multiple contexts. Further, the fast fashion industry is generally characterized by frequent production and squeezed margins to maximize profit. CSR is significantly important for MNEs operating in the fast fashion industry due to their environmental and social impact, where they have to reconsider the impact of their actions. This thesis will examine two MNEs originated from Sweden and Spain to understand the differences and similarities of the selected MNEs strategic CSR focus and actions. Further, a qualitative research method has been conducted in order to fulfill the purpose of this thesis, where the empirical data has been conducted through secondary data. The common findings of this thesis indicate that both MNEs engage in multiple CSR activities, where the strategy mainly focus on environmental and social aspects. Further, the findings illustrated a clear connection to Carroll’s Pyramid of CSR where all responsibilities were included in the strategies. The outcome of the thesis indicates that both MNEs strategies involves actions to take responsibility for global and local issues. Key words Strategy, Focus, Actions, Corporate Social Responsibility (CSR), Fast fashion industry, Multinational Enterprises (MNEs), Sustainability
Acknowledgments We would like to express our gratitude to our supervisor Selcen Öztürkcan for the guidance and inspiration throughout the entire process of this thesis. We would also like to thank our examiner Helen Anderson and the opponents for providing their valuable point of view which has encourage us to further improve our thesis. Kalmar, May 27th, 2020 ____________________ ____________________ Amanda Pfante Victoria Rosso
Table of contents
1 Introduction 1
1.1 Background 1
1.2 Problem discussion 3
1.3 Research question 4
1.4 Purpose 5
1.5 Delimitations 5
2 Literature review 6
2.1 Fast fashion industry 6
2.2 Multinational enterprises 6
2.3 CSR 7
2.4 Carroll’s pyramid of CSR 8
2.4.1 Economical responsibility 9
2.4.2 Legal responsibility 10
2.4.3 Ethical responsibility 10
2.4.4 Philanthropic responsibility 10
2.5 The CSR positioning grid 11
2.6 Triple Bottom line 12
2.7 Stakeholder theory 13
2.8 Theoretical framework 15
3 Methodology 16
3.1 Research characteristics 16
3.2 Qualitative research 16
3.3 Selection of companies 17
3.4 Data collection 17
3.5 Data analysis 18
3.6 Research quality 19
3.6.1 Trustworthiness 19
3.6.2 Ethics 20
3.6.3 Methodology critics 21
3.7 Division of work 21
4 Empirical findings 22
4.1 Case 1 - H&M group 22
4.2 Case 2 - Inditex 22
4.3 Strategy 23
4.3.1 Ambitions 23
4.3.2 Achievements 28
4.4 Actions 33
4.4.1 H&M group 33
4.4.2 Inditex 33
5 Analysis 38
5.1 Carroll’s pyramid of CSR 38
5.1.1 H&M group 38
5.1.2 Inditex 40
5.2 The CSR positioning grid 42
5.2.1 H&M group 42
5.2.2 Inditex 43
5.3 Triple Bottom line 43
5.3.1 H&M group 43
5.3.2 Inditex 44
5.4 Stakeholder theory 455.4.1 H&M group 45
5.4.2 Inditex 46
5.5 Reflection of analysis 49
6 Conclusion 51
6.1 Theoretical implications 53
6.2 Managerial implications 55
6.3 Social and environmental implications 56
6.4 Limitations and future research 56
References 571 Introduction
This chapter provides an introduction of the topic Corporate social responsibilities along with
other relevant topics. Further, the problem discussion will be presented in order to identify the
relevance of the thesis. Finally, the purpose, research question and delimitation of the thesis
will be presented.
1.1 Background
Corporate social responsibility (CSR) is a growing phenomenon that has received increased
attention among corporations, along with the customers increased pressure regarding
company’s impact on environmental and social aspects. Jhunjhunwala (2014) describes the
importance of integrating CSR into the companies’ strategy in order to achieve long-term
success. Studies from the European Commission have presented a changing attitude of
customer interest in socially responsible manufactured products (European Commission, 2001).
This pressure the corporations to become more transparent, honest, and consider their
environmental footprint. Organizations have a large impact on the society and it is of great
importance that they perform their activities to minimize the negative aspects that affects the
environment, some organizations implement CSR because it is the right thing to do and not as
a strategic choice (McAlister & Ferrell, 2002). During the twenty-first century it became more
frequent for companies to produce a sustainable development report. In today’s society
companies that do not include a framework of sustainable development could face
consequences (Idowu & Lounche, 2011). On the other hand, some businesses implement
actions to appear as responsible, however, these actions are only temporary and presents the
company incorrectly (Lewis, 1999).
The phenomenon CSR has a broad meaning with various definitions in literature and Carroll
(1999, p. 289) defines CSR as ”the conduct of a business so that it is economically profitable,
law-abiding, ethical and socially supportive”, CSR also includes environmental
responsibilities. Further, Carroll was the first researcher who expressed the importance of the
CSR concept where the most important aspect of social responsibility was the economic
category (Carroll 1979). Today firms use these CSR actions to create social and organizational
benefits and the CSR activities create a competitive advantage and are therefore a tool for
strategic branding (Morsing, 2006). It is important to combine the organizational benefits with
the actions to be socially responsible (Carroll, 1999).
1(66)During the period 1995 to 1998 the numbers of business leaders expressed increased interest to
develop the businesses’ social responsibility (Lewis, 1999). The importance of CSR as a core
component of brands have increased from the previous focus on product features such as quality
and design, and the brand personality (Werther & Chandler, 2005). Companies’ CSR activities
are becoming more important in today’s society since 35% of the firm’s brand image is
influenced by CSR related activities (Idowu & Louche, 2011). Therefore, are the
implementation of CSR activities important in brand management and it is according to
Frankental (2001) not just a PR or marketing hype. Organization’s voluntary CSR activities
includes further responsibilities towards the society beyond rules and policies which has
become a part of the company’s brand position (Joshi & Yadav, 2013). Positioning strategy is
a way for companies to differentiate from its competitors, where the strategy is a concept based
on how the company will be perceived by the consumers, in comparison to the competitors. By
implementing CSR in the positioning strategy, the company can build a socially responsible
brand image, which can enhance the brand's value in the eyes of the customers (Joshi & Yadav,
2013).
Previous theory explains that Multinational enterprises (MNEs) implementing CSR actions
involve managing the supply chain in a responsible manner while including the social and
economic impact (Lam, 2009). Concerning the international trade activities, it has strengthened
the ties worldwide, resulting in benefits for home- and host countries, which emerges when
MNEs offers a competitive and attractive product or service. It is also important that MNEs
exploit their resources in a fair-minded and efficient way. On the contrary, supply chains with
an unequal implementation of CSR activities can lead to imbalance. Events that illustrate the
imbalance of CSR are Nike’s outsourcing to Asia, where child labor existed, and the H&M
scandal which revealed that they burned tons of unsold products (Napier & Sanguineti, 2018).
Issues regarding CSR actions are common for MNEs operating cross borders (Husted & Allen,
2006). MNEs CSR strategies are defined in two different ways, either by implementing global
CSR strategies where the CSR activities must be adjusted to all markets MNE are operating in.
The global strategy involves proactive CSR activities, however, this entails a lack of legitimacy
and ownership at a local level (Muller, 2006). The other approach is the local CSR strategy,
where CSR activities need to be adjusted in line with local standards of the community (Husted
& Allen, 2006) and is more responsive. Hence, a risk with a more decentralized local CSR
2(66)strategy, that is in line with the host-country's lower standards, is that it will differ from the
higher standard, expected in the home country (Muller, 2006).
1.2 Problem discussion
Globalization is an ongoing trend where consumers have the option to choose between local
and foreign brands, resulting in increased competition among companies (Hsieh, 2002). For
this reason, it is important for businesses to obtain a competitive advantage. Researchers that
study MNEs have found an increased interest in the CSR topic (Rodriguez, Siegel, Hillman &
Eden, 2006). However, Cruz and Boehe (2010) agrees that the research between the two topics
is at an early stage. The complexity of defining the CSR concept is the main reason for the lack
of research along with the MNEs cross border operations in multiple contexts (Rodriguez et al.,
2006) where Jamali (2010) observed the same complexities in the fields. MNEs face challenges
when developing CSR activities since they have to consider the social issues both domestically
and internationally and what to focus on (Aruthaud-Day, 2005). When implementing strategic
CSR, it is difficult to assess how the stakeholders should prioritize the issues. Polonsky and
Jevons (2009) suggested that petrochemical organizations operating in markets with different
characteristics should examine how CSR issues differ and develop a strategy that considers
both markets. Proactive organizations will eliminate the risk of criticism by implementing the
highest standards in all markets.
MNEs implementation of strategic CSR faces complexities which includes the issue,
organization, and communication. The discussion regarding how to communicate the CSR
activities are limited and the complexity of the CSR identity is great since the actions will be
interpreted differently by the stakeholders (Schlegelmilch & Pollach, 2005), the behavior will
also be affected by the communication (Morsing, 2006). It includes the issue complexity which
is explained by the different interpretations of responsibility as well as the social issues that are
influenced by different factors. It can also be understood differently by stakeholders depending
on the country (Guay, Doh & Sinclair 2004). CSR activities various sub-areas also vary in
importance depending on the location (Bhate, 2003). If an organization promotes its brand as
environmentally responsible, the actions can be perceived differently, and it will be difficult to
address all fronts within the area. Managing global CSR actions is therefore complex since it
will be difficult to satisfy the global stakeholders (Zyglidopoulos, 2002).
The measurement of CSR performance is also an issue (Goodpaster, 2003; Knox and Maklan,
2004). Firms that seek to integrate strategic CSR into their brand need to better understand how
3(66)other organizations strategically implement CSR into the corporate philosophies (Polonsky &
Scott, 2005). Companies face issues regarding how to communicate CSR activities in an ethical
and still effective manner. The uniform strategy is commonly used where some companies
implement the silent strategy, on the contrary some implement an unethical strategy where
companies subject consumers with descriptive CSR messages (TerraChoice, 2010) which has
increased the consumer skepticism towards the motives behind the company’s actions
(Leonidou & Skarmeas, 2017).
Previous theories regarding stakeholders have presented processes for the organization’s
engagement with stakeholders (Freeman, 1984). The theorists exclude the process of how the
organization should evaluate these priorities (Polonsky & Scott, 2005). For organizations that
seeks to implement strategic CSR to their brand and philosophies, it will be of importance to
understand the internal process. The fast fashion is based on the phenomenon that garment are
disposable which has been changed due to the cultural and social factors, along with the
technological development that has changed the buying behavior of consumers from different
socioeconomic backgrounds, mainly young women. Trends that are displayed on different
platforms provides information about new styles which is creating customer demand (Barnes
& Lea-Greenwood, 2006) due to social aspirations. The environment of new trends is rapidly
changing and affect the supply chain time efficiency. The outcome of this is poor quality and
the average garment can be washed maximum ten times (Joy, Sherry, Venkatesh & Chan, 2012)
meanwhile, it requires tons of water to produce cotton, where the average water consumption
for producing a t-shirt is 2700 liters (Naturvårdsverket, 2010).
The fast fashion industry has a significant impact on the environment, to illustrate an example
of the environmental impact the average carbon footprint of clothing consumers in Sweden is
approximately 330kg CO₂ equivalent (Sandin, Roos, Spak, Zamani & Peters, 2019). Further,
the garment workers are essential for the fast fashion industry’s existence where the workers
are the companies’ possibility to reduce costs and are thereby able to provide low-price products
to the customers (Ourgoodbrands, 2020).
1.3 Research question
RQ: What are the main differences and similarities of MNEs, which originated from Sweden
and Spain that operates in the fast fashion industry, regarding their strategic CSR focus?
4(66)1.4 Purpose
The purpose of the thesis is to obtain a deeper understanding of CSR and how MNEs in the fast
fashion industry implement CSR as a strategy. Furthermore, the CSR concept will be
investigated by comparing the MNEs CSR strategies by analyzing their actions and focus.
1.5 Delimitations
This thesis is focusing on MNEs operating in the fast fashion industry. The two companies’
origin from Sweden and Spain and possess a variety of fashion brands. The focus is on the
selected companies’ CSR strategies, along with the differences and similarities regarding CSR
actions and focus. The thesis focus on annual and sustainability reports, and the empirical
findings are therefore limited to the external process.
5(66)2 Literature review
This chapter provides a review of the key concepts by displaying existing literature in the field.
Further, existing theories within the field will be presented in order to provide a basis for the
analysis.
2.1 Fast fashion industry
The fast fashion industry is competitive which creates pressure on offering the lowest prices
and the newest trends (Christopher, Lowson & Peck, 2004). During the last 30 years, fast
fashion companies have outsourced their production to developing countries (MacCarthy &
Jayarathne, 2010), enabling the fast fashion industry to produce apparel for low prices due to
the competitive environment, where factory owners are competing against each other. Further,
the competition lead to social consequences which means harsh work conditions and low wages
(Davidson 2013). However, apparels are perceived as disposable and have a limited quality
which affects the environment since the purchase frequency is increasing. All activities in the
supply chain affect the MNEs brand reputation and CSR is essential in all the activities,
including the partners (Li, Zhao, Shi & Li, 2014). Further, consumers have a high expectation
of the fashion industry since they get more public attention due to the emerge of media
platforms (Caniato, 2012), and it is essential to implement sustainable strategies due to market-
sensitivity (Smith, 2003). Sustainability is also an important aspect considering the industries’
large production volumes and a continuous stream of apparel (Choi, 2013; Choi, Hui, Liu, Ng
& Yu, 2014). The implementation of sustainable strategies is essential for the fashion industry
where a re-design of the supply chain is conducted in order to balance the economic,
environmental, and social performance (Clarke & Clegg, 2000).
2.2 Multinational enterprises
MNEs are enterprises that engage in foreign direct investments and value-added activities in
more than one country market, where the company establishes a subsidiary or obtain controlling
interest in a company in a foreign country (Markusen, 1995). MNEs operate in complex cross-
border activities which makes them encounter several institutional forces. The diverse
environment affects the MNEs CSR activities. Further, the MNEs actions are influenced by the
institutional environment where laws and regulations are key components (Meyer & Rowan,
1977). The local institutions vary depending on the different markets and therefore are the
MNEs CSR actions generally country specific (Williams & Aguilera, 2008). MNEs face
challenges due to global and local issues and how to priorities their actions while balancing the
6(66)requirements and manage expectations (Surroca, Tribo & Zahra, 2013). Social and
environmental issues can be perceived as both opportunities and issues for MNEs due to the
absence of extended international regulations (Kolk & Tulder, 2010).
2.3 CSR
CSR is a comprehensive and well-discussed phenomenon and includes the debate regarding
whether what companies owe the society and (Davis, 1967) if companies can afford to ignore
their societal responsibilities (Davis, 1960). When social responsibility first became applicable
it was clearly connected to the economic input of the society. The first general school of
thoughts defines the company's responsibility to maximize profit with minimal ethical
constraints and without the restraints of the law (Friedman, 1970). When the CSR concept soon
began to develop, it became clear to presume that corporations did not only have economic and
legal obligations, but also responsibilities regarding the society which includes political,
education and welfare obligations, which is the second school. However, this development was
criticized since the social responsibility will eliminate the attention from gaining financial assets
which will harm the corporation’s success. The globalization has during the past years incised
the organizations, especially MNEs, interest toward global problems to contribute to sustainable
development. For instance, actions against climate change, human rights violations, and poverty
(Kolk & Tulder, 2010).
Professor Theodore Levitt explained that social welfare was the government's responsibility,
and not the companies due to the risk of losing the primary focus of making profit (Farcane &
Bureana, 2015). Archie Carroll (1979) was the first to venture the gap between the different
objectives. Further, the various definitions of CSR have created confusion among researchers
where the lack of a proper definition has made it difficult to develop a theory and compare the
outcomes of CSR studies (Rodriguez et al., 2006). In this thesis, CSR is defined as companies’
actions and strategies towards social and environmental responsibilities that goes beyond legal
compliance and the company’s own interest (McWillams & Siegel, 2001).
7(66)2.4 Carroll’s pyramid of CSR
“CSR involves leading the business in a way that is economically profitable, legally persistent,
ethical and socially helpful. Social responsibility means that profitability and perseverance in
law enforcement are prerequisites of the discussion about company ethics” (Caroll 1983, p.
604). Carroll's model presents four categories that helps characterizing the nature of business's
responsibilities.
Carroll’s Pyramid of CSR depicts the components of businesses’ responsibilities to society. The
components were incorporated into four steps in the Pyramid of CSR in 1991 (Figure 1).
Carroll's model is widely utilized by researchers and theorists (for example, Wartick &
Cochran, 1985) and the pyramid was suggested to become the leading paradigm within the field
(Wood & Jones, 1996). The model suggests a hierarchical sequence of the components where
the economic domain is the top priority and the responsibilities in the philanthropy category are
the least important (Carroll, 1991). The ranking of the categories was based on a survey where
Aupperle (1984) investigated the weights and value of the four categories. The research was
proven to be valid and useful (Edmondson & Carroll, 1999). Carroll (1993) declared the debility
with the pyramid regarding the difficulty of capture the overlapping nature of the CSR domains.
The dotted lines in the pyramid that separates the domains; economic, ethical, legal, and
philanthropic do not capture the tension between economic and the philanthropic and ethical
domains. However, Elkington (1994; 1997) along with Visser and Sunter (2002) argues that the
social, environmental and economic aspects are excluded from the pyramid of CSR. The
philanthropic part CSR forms a conceptual framework that includes the expectation that society
“places on business at a given point of time” (Carroll, 2016).
8(66)Figure 1: Carroll pyramid of Corporate Social Responsibility (Carroll 1991, p. 42)
2.4.1 Economical responsibility
Companies have societal economic responsibilities that enable corporations to evolve without
interference. The only way for companies to evolve is to become profitable and capture the
stakeholder interest and thereby have enough investments and resources to proceed with their
operations. The economic expectations are thereby a societal responsibility, and business profit
is required for reinvestments and for business growth (Baden, 2016). Investors and owners are
expected to be rewarded which makes the profit a key component in order to satisfy the actors.
The business profits are crucial to the world’s economic system and societies. Businesses
implement a variety of actions to become more profitable. The competition has increased along
with the increased awareness of becoming sustainable due to globalization. Economic
responsibility is essential in order to maintain a competitive advantage (Carroll, 2016).
However, the economic values are based on economic aspects rather than sincere social and
environmental values which have led to discussions regarding the economic values of the
pyramid that emerged from Blowfield (2005) statement. Further, the economic aspect of CSR
9(66)restricts the social and environmental aspects as it can be counterproductive, for instance where
voluntary CSR actions are promoted as an option to effectual regulations (Blowfield 2005;
Frynas 2005; Reich 2008).
2.4.2 Legal responsibility
Companies are expected to operate under the society’s established ground rules involving laws
and regulations which is the “codified ethics”, the regulations are confirmed by the lawmakers.
While companies are obligated to encounter the legal requirements of a federal, local- and state
level, they are beside presumed to perform as law-abiding citizens themselves. The companies
are also required to follow the legal obligations regarding their goods and services along with
the fulfillment of the societal stakeholders (Carroll, 2016). However, the legal responsibility
will not be investigated in-depth since it is not relating to the purpose of this thesis.
2.4.3 Ethical responsibility
Besides the legal responsibilities the society expects companies to operate with an ethical
approach, which consists of the responsibilities that are expected beyond the law. Companies
are expected to operate with an objective and fair approach, thus there is no guidance from laws
and regulations. The aim is for the company to be responsible towards all stakeholders in order
to protect their moral rights and take responsibility for all actions. Society’s legal expectations
are based on the ethical whereas the ethical further completes the expectations, this makes the
distinctions between the responsibilities complex. Companies are encountering expectations
beyond their ethical responsibilities where new ethical norms or norms under involvement must
be respected, where the same applies to moral norms. The company is as well expected to not
compromise these norms to attain the business goals. Additionally, companies are expected to
perform according to the ethical expectations of corporate citizens (Carroll, 2016).
2.4.4 Philanthropic responsibility
The philanthropic of a company represents all shapes of a business giving, it comprises the
voluntary and discretionary activities of a company. The philanthropic expectation from society
has increased where companies are expected to engage in voluntary and discretionary actions,
that are not required by the government. However, several companies have ethical motivations
which means that they will encounter society's expectation of “giving back”. Although
companies engage in these actions to promote their good citizenship and to enhance the
reputation of the company. Companies and individuals have the same obligations in the eyes of
the population and are expected to be equally good corporate citizens. To meet the philanthropic
expectations companies are committing in a variety of actions to contribute to society, for
10(66)instance; voluntary work, donations, and community development. Over the decades the
philanthropy has been and still is the most important element of CSR (Carroll, 2016).
2.5 The CSR positioning grid
When building or developing a brand, the CSR brand positioning grid is useful as it facilitates
the process by identifying the right balance. The framework is presented in relation to other
brands based on the decision on how explicit or implicit CSR should be demonstrated (Figure
2). Moreover, companies can differentiate their products from competitors by implementing
CSR positioning strategies. The value proposition and positioning of a brand should be explicit
before the developing process of the brand, for instance; the best product, customer intimacy,
lowest price, and sustainability should be identified. In this way, the level of CSR is identified
in the business strategy. Regarding the value proposition, CSR is provided inside that based on
different motives. The defensive motives are when stakeholders demand CSR and companies
avert the uncertainty. On the other hand, the offensive motive strengthening the business
strategy as CSR has its definition in the identity of the brand. In this way, companies can
position themselves in the market by intensifying the brand (Brüggenwirth, 2006).
To discover the underlying factors of customer purchasing option of a product, the chain
contains several factors including attributes which focuses on product features or physical
factors, as well as capability or systems. Another factor is benefits or issues, mainly focuses on
resolving product offers. Further, there are end values including individuals’ lifestyles and lastly
inspiration and vision (Brüggenwirth, 2006). In brand positioning the main obstacle is to find
the focal point, since the CSR positioning grid is essential when understanding a products
opportunities or strengths. Considering each section in the model, the relevant opportunities
should be investigated. Thereafter a selection of the brand positioning is made based on all
preferences from each section, as part of the trade-off procedure. The end result is based on
several basis, for instance allure for the target audience and peculiarity from rivalry as well as
the legitimacy and reliability of the case. The outcome of a trade-off procedure could be for
instance to encourage CSR or sustainability relating factors as a key component of brand
positioning (Brüggenwirth, 2006).
11(66)Added associations of beliefs
Inspiration/vision Emotional values / lifestyle
Corporate
Identity based Social Market based
(what do we offer) Responsibility (what’s in it for me)
Attributes Benefits
Intrinsic elements
Figure 2: The CSR brand position grid (Brüggenwirth 2006, p. 140)
2.6 Triple Bottom line
John Elkington was the first to coin triple bottom line as a phrase in 1994 with the argument
that companies should prepare a foundation for three bottom lines which includes the planet,
people, and profit. Simply, the triple bottom line focuses, except the traditional economic value,
on the social and environmental value of corporations (Elkington, 2013). The bottom line,
people, concerns how much the company gives back to societies whereas the bottom line,
planet, involves the reduction of companies’ environmental footprint. Further, reporting of the
triple bottom line is essential for companies to measure the environmental and social
dimensions and evaluate the performance of the three dimensions. The measurement attempts
to include the values, processes, and issues as a whole in order to generate a positive and
balanced impact from their activities (Elkington, 1999). Thus, measuring the activities is
complex due to the subjective view (Sridhar, 2012). According to Hart (1997) the social and
political aspects was the basis for the sustainability crisis in the world, thus the corporations are
the only ones with the resources and capability to obtain sustainability. Looking at the world's
economy the corporations represents over half of the largest economies (Anderson & Cavangah,
1996). The importance of reporting ethical, social, and sustainability has increased in the new
millennium. The demand for triple bottom line has increased due to the factors such as
sustainable investment. The Dow Jones Sustainability index is one of the several different
indexes that measure competing company’s sustainability (Henriques & Richardson, 2013).
12(66)The Dow Jones Sustainability says that “it offers investors corporate sustainability assessments
creating long-term shareholder value based on upon corporate sustainability criteria and
weightings that assess opportunities and risks relating to sustainable factors” (Henriques &
Richardson 2013, p. 19).
2.7 Stakeholder theory
The stakeholder theory is argued to create value and explains how to handle the business in an
effective manner (Freeman, Wicks & Parmar 2004). Further, Freeman describes stakeholders
as “any group or individual who can affect or is affected by the achievement of the
organization’s objectives” (Freeman 1984, p. 46). Freeman’s (1984) work encourage
companies to consider an extension of the traditional stakeholders (customers, shareholder,
employees, and suppliers) (Jonker & Foster, 2002) and manage the responsibilities including
the silent stakeholder’s interest (local communities and environments) (Simmons, 2004).
However, in this thesis the stakeholders will be considered in accordance with Freeman’s
extended definition, excluding the shareholders. The stakeholder theory assumes that values are
an essential part of the business process, the theory involves managers to answer what their
sense is regarding the value creation along with what makes the stakeholders unify (Freeman,
Wicks & Parmar, 2004). However, Jones (1980) argues that it is more than just the end-result
of the process, the CSR paradigm must therefore be implemented in the decision making in
order to be evaluated and measured. Further, it requires managers to have distinct objectives on
how to conduct the business activities, as well as creating the right kind of relationship with the
stakeholders in order to achieve their purpose (Freeman, Wicks & Parmar, 2004). CSR is seen
as strategic orientation, which is implemented by companies with capabilities such as capital
and access to innovation, meanwhile maintaining regular activities. The non-financial reports
are instrument for the companies that outline strategies in relation to the stakeholders (Dunfee,
1991; Hasnas, 1998)
According to Foster and Jonker (2005) the stakeholder theory provides updated ways about
companies’ responsibilities. The stakeholders need to be considered in order to please the
shareholders, which brought attention to aspects beyond optimized profit. Wood (1991) argues
that the stakeholder approach is favored by multiple authors when examining CSR. Consumers
are one type of stakeholder that puts pressure on companies and especially if they perceive that
the company act in a responsive way. Information about companies’ operations has become
even more accessible for consumers due to open sources that provide instant and free
13(66)information (Lindgreen, Swan, & Johnson, 2009). If MNEs does not operate in accordance with
the consumers ethical preferences, they have a wide selection of competing companies to turn
to, which implies a risk for MNEs. Therefore, MNEs need to respond to the consumers’ pressure
and respond with socially responsible CSR strategies and with a more responsible attitude
towards CSR. MNEs tend to address the society's desired and preferred values in order to
maintain and attract consumers in the different markets they operate in (Yang & Rivers, 2009).
According to O’Shaughnessy, Gedajlovic and Reinmoeller (2007) CSR is driven by factors that
is the result of managerial decisions that includes; strategies, company goals, and allocation of
resources. Considering MNEs that operates in new markets, the CSR activities often improves
the reputation and narrate the company’s image which is favorable for the operations in the new
market.
CSR activities are also fueled by other stakeholders beyond the consumers (Udayasankar,
2008). Companies, including MNEs undertake actions to maximize profit while gaining
stakeholder wealth. To achieve this companies need to involve opinions regarding ethical issues
from other interest groups and consider actions to fulfill social responsibilities that goes beyond
the company's economic- and legal obligations (Singh, Sanchez & Bosque 2007).
14(66)2.8 Theoretical framework
FAST
MNEs FASHION
INDUSTRY
Sweden and Spain
CSR
STRATEGY
Stakeholder Pyramid Triple CSR brand
theory of CSR bottom line positioning
grid
Figure 3: Illustration of Theoretical framework (Authors, 2020).
The theoretical framework concludes the literature review and aims to demonstrate and connect
the concepts linked to the research question and the problem of this thesis (Figure 3). The CSR
phenomenon is at the center of the research where MNEs operates in several cross-border
activities and encounter diverse environments. In general, the manufacturing process takes
place in developing countries to reduce costs. This has increased attention towards their ethical
considerations, these doubts are as well common in the fast fashion industry where the
production frequency is high. Therefore, it is interesting to investigate the two concepts in
relation to CSR that is the foundation of this thesis. In general, MNEs possesses the resources
to implement CSR strategies meanwhile maintaining their regular activities. CSR activities are
implemented to accomplish long-term success, which is connected to pressure from various
stakeholders and increased environmental awareness. The CSR positioning grid implies
decisions regarding how implicit and explicit the CSR activities should be demonstrated, and
the process identifies the right balance. The strategy is a tool to differentiate their product from
competitors. Each of the theories describes how companies implement strategic CSR.
15(66)3 Methodology
This chapter presents the methodology of the thesis and reflects on research characteristics,
grounded theory, coding, credibility, trustworthiness, and limitations. The purpose of this
chapter is to provide how the study has been conducted in detail.
3.1 Research characteristics
The thesis research is designed with an exploratory purpose in order to identify patterns within
MNEs strategic CSR focus and actions. The exploratory study is valuable to identify new
insight on ‘what is happening’ (Saunders, Lewis & Thornhill 2003). The objective of
conducting an exploratory research is to determine the nature of the problem and obtain a better
understanding of the problem (Saunders, Lewis & Thornhill 2012). The thesis is designed with
an inductive approach based on secondary data collected from annual and sustainability reports,
where theories are developed from the empirical findings. This approach will lead to a deeper
understanding based on the data collection where the identification of patterns will lead to the
selection of theories (Saunders, Lewis & Thornhill 2012) which is in line with the objective of
the thesis. However, the nature of the study is inductive where the purpose is to collect data, to
obtain new insights of CSR actions and strategies of MNEs operating in the fast fashion
industry. The Interpretative grounded theory is embedded in the inductive research approach
and links the interstice between the theory and research. The concept of the theory is that the
researchers is engaged and interprets the data proactively. The literature review is processed
simultaneously together with the data collection where comparisons and observations are made
(Glaser & Strauss, 1967).
3.2 Qualitative research
The thesis is based on a qualitative approach where the data collection is based on non-numeric
data. The qualitative approach enables a wider understanding of reality and firmly information
in comparison with reliable data from a quantitative approach (Bryman & Bell, 2017). The
empirical data has been coded in order to categories the text and define a framework of thematic
ideas, which is expressed as qualitative coding according to Gibbs (2007). Further, the coding
is combining the data to the research of this thesis, the approach is data-driven coding where
the text is processed without any previous formulation. A coding scheme has been created based
on observations regarding recurring categories (Table 2).
16(66)3.3 Selection of companies
The thesis selected groups are H&M group that originated from Sweden and Inditex that
originated from Spain. These groups are MNEs that consists of a wide range of brands operating
in the fast fashion industry. H&M group includes eight brands; H&M, Afound, H&M Home,
Arket, COS, Weekday, & other stories, and Monki (H&M group, 2018). Inditex consists of
eight brands including Zara, Oysho, Massimo Dutti, Pull & Bear, Zara Home, Uterqüe, and
Bershka (Inditex, 2020). The selection of groups was made to explore the two different MNEs
and their CSR strategies’ main focus and actions. For in-depth information regarding the
companies see chapter 4.
3.4 Data collection
The initial data collection was conducted based on the research questions for the thesis.
According to Bryman & Bell (2017) several large enterprises publish annual reports on their
websites, therefore was the groups company name along with the word annual report were
entered in the search monitor in order to locate the latest report (Table 1). Initially the coding
was conducted early in the process in order to obtain a deeper understanding of the data and
contribute to the literature review, this approach goes in line with Bryman & Bell (2017)
recommendation. The common themes were noted after the second reading of the annual and
sustainability report, thereafter in the third reading, keywords were noted. The keywords were
then implemented in a coding-scheme that contributes to the interpretation of the method on
the basis of data. Thereafter a critical inspection was implemented where common words was
transcribed to conceptions and categories from existing literature. The keywords that could not
be linked to literature was named with a general word which describes a common phenomenon.
This was the foundation to locate connections to existing literature. Additional data was
conducted from the companies’ websites in order to supplement the information.
Selection of secondary data Company References
Sustainability report H&M Group H&M group, 2018
Annual report Inditex Inditex, 2018
Table 1: Summary of secondary data (Authors, 2020)
17(66)3.5 Data analysis
Theoretical sampling
Based on concept for representativeness
and consistency
Data collection Open coding Axial coding Selective coding
-Gather secondary data -Conceptual labeling -Finding relationship -Selection of a
-Visual material review -Categorizing between categories core category
Constant comparison
Between incidents, data and theory
for precision and consistency to avoid bias
Figure 4: Data analysis procedure of grounded theory method (Cho & Lee 2014, p. 9)
The analysis of data is including a four-step approach (Figure 4) where the first step is to keep
in mind the importance of those involved in the encoded material, in this case the selected
companies. The second step focuses on the linkage between the coding, and the third step
includes that the analysis reflects the general significance of the results for the original research
questions and the selected literature review. According to Bryman & Bell (2017) this is essential
regardless of the data analysis method. Initially, open-coding was conducted in order to “break
down” the data as well as create codes and concepts (DeCuir-Gunby, Marshall & McCulloch
2011). When the codes have been created, the process of analyzing the codes through the axial
coding is essential and allows the researcher to identify patterns among the existing codes
(DeCuir-Gunby, Marshall & McCulloch 2011) in order to develop categories (Flick, von
Kardoff & Steinke 2004). The categories are developed by the surrounding network of
relationships with the category located in the center. Further, selective coding was introduced
as a process of selecting one or more core categories in order to connect the categories (Table
2) (Corbin & Strauss, 1990).
18(66)Codes Category Theme
Sustainability
Circularity
Equality Ambition
Environmental footprint
Strategy
Health & Safety
Sustainability
Transparency Achivements
Philanthropic
Human welfare
Ethical Commitments/focus Actions
Environmental
Table 2: Coding scheme (Authors, 2020)
3.6 Research quality
Researchers have argued whether validity and reliability are relevant in qualitative research
(Bryman & Bell, 2017). Mason (1996) among other researchers suggests that the definitions
should be adjusted in the qualitative method where the focus should be on questions that do not
refer to measurements. Lincoln and Guba (1985) are two other critical researchers that are
uncertain about the direct application of the approach, due to the researcher’s skeptical view of
realism. Guba and Lincoln (1994) suggest two alternative criteria, trustworthiness and
authenticity. Hence, the trustworthiness will be analyzed in this thesis.
3.6.1 Trustworthiness
Within trustworthiness, there are four sub-criteria to consider; credibility, transferability,
dependability, and confirmability. The credibility considers that the research is in accordance
with the rules and that the results can be reconnected with the respondents in order to validate
the researcher’s interpretation, mainly used in interviews (Bryman & Bell, 2017). In this case,
this is not applicable due to the secondary data.
Transferability considers whether the result will have the same outcome in a different context,
time or situation (Lincoln & Guba, 1985). The qualitative research mainly focuses on the
profoundness of the research and the result tends to focus on the context and meaning of the
aspects of the social reality. Further, Geertz (1973) suggests that a thick description is necessary
to give an in-depth illustration to provide people with detailed information to decide whether
19(66)or not the results is transmittable to different environments (Bochner, 2000). The transferability
of this thesis is accomplished through transparency that is applicable in all chapters.
Lincoln and Guba (1985) describe the term dependability which means that the researchers
adapt auditing, as a part of the examining approach, and by this approach ensuring the
statements of the entire process. This validity technique is rarely used for the qualitative method
due to that it generates large quantities of data, the same applies in this research. To increase
the dependability in this research, the secondary data from the sustainability and annual reports
has been processed three times before conducting a coding scheme. The secondary data has
been presented in order to increase the dependability by display the origin of the materials in
this case the annual and sustainability reports. The open sources make the process replicable.
Lastly, confirmability according to Lincoln and Guba (1985) expresses the importance of the
researchers act in accordance with good faith due to the improbability of the researcher’s
objectivity. To ensure high confirmability in the thesis, personal values have not influenced the
execution and results of the thesis. In order to avoid research bias the data and interpretation
will be analyzed three times to minimize that the findings will be affected by the personal
presumptions (Table 3).
Step:
1. Initiated the search process for secondary data
2. Read through the selected secondary data (three times)
3. Gathered keywords in the reports and located codes, catagories and themes
4. Developed the coding scheme
5. Read through the secondary data again
6. Initiated the collection of empirical data in relation to the research question
Table 3: Flow sketch of data collection (Authors, 2020).
3.6.2 Ethics
The secondary data is collected through open sources and therefore the ethical considerations
are not applicable. According to Bryman and Bell (2017) ethics is linked to the execution of
interviews and how to manage the information in an ethical manner, therefore no ethical
violations can occur in this thesis.
20(66)3.6.3 Methodology critics
The empirical data in a qualitative study is commonly collected through interviews. The
empirical findings of this thesis will be based on secondary data from open sources as a
consequence of the Covid-19 pandemic. The current pandemic has increased the pressure on
companies where their current focus is to manage the situation. However, the secondary data is
conducted from the companies’ website where the information and reports are produced to
highlight the advantageous actions taken by the selected companies. However, the reports
contain detailed information which has led to profound empirical findings. Therefore, the
empirical data can be affected by the reports biased information.
3.7 Division of work
The authors have created all parts of the thesis together, this to include both authors
perspectives and increase consensus on all parts of the thesis.
21(66)4 Empirical findings
This chapter provides information about the selected MNEs and the empirical findings from the
secondary data will be presented case-by-case. The outline will be in accordance with the
coding scheme presented in the methodology chapter.
4.1 Case 1 - H&M group
H&M was founded in Sweden with the concept of democratic fashion that involves fashion for
a great price for each individual, not only for the privileged. Today H&M group objectives are
to take the lead in developing more sustainable fashion and take social and environmental
responsibility in order to encounter the challenges. The CEO of H&M group Karl-Johan
Persson state “according to the UN, climate change and poverty are two of the most significant
challenges of our time and will affect many generations to come” (H&M group 2018, p. 4).
Therefore, sustainability is coordinated in the whole business strategy rather than take action
subsequently.
Today H&M have multiple physical stores available in 74 markets and have online operations
in 51 markets (H&M group, 2020). In the group there are eight subsidiaries with their own
unique brand concept- Arket, Afound, COS, H&M, H&M home, Monki, Weekday, and &
Other stories (H&M, 2018).
4.2 Case 2 - Inditex
Inditex was founded in Spain with its first brand Zara, today Inditex operates cross-borders and
offers fashion products to affordable prices (Inditex, 2020). The chairman of Inditex explains
that it is their technology and logistic innovations that differentiate the company from their
competitors. All Inditex physical stores are located on the street with high visit frequency. The
online traffic has increased due to their adaption to the digitalization, where around 3 billion in
the year 2018 visited their online platforms (Inditex, 2018). The chairman of Inditex states
“Quality, traceability and sustainability are our model's keywords. We have placed our supply
chain workers in the centre to foster initiatives that promote social progress” (Inditex 2018, p.
6). In order to create social, economic, and environmental value, Inditex have used United
Nations 2030 Agenda as a framework where the most essential Sustainable Development Goals
(SDG) in Inditex value chain have been delivered (Inditex, 2018).
22(66)In Inditex group there are eight subsidiaries with their own unique brand concept- Zara,
Pull&Bear, Massimo Dutti, Beshka, Stradivarius, Oysho, Zara Home, and Uterqüe, the brands
are available in 202 markets online and 96 markets with multiple physical stores (Inditex, 2020).
4.3 Strategy
4.3.1 Ambitions
4.3.1.1 H&M group
H&M group’s vision is to take the lead towards a renewable and circular fashion industry, it is
also important to act with fairness and be equal. This vision is important from a business
perspective including the social and environmental aspects. Opportunities in the long-term
perspective will enable H&M group to remain at the forefront of the industry, this will be
possible due to the sustainability investments. The sustainability ambitions are evolving on the
ground of stakeholder relationships and science-based industry experts where roadmaps and
goals is included to drive positive change. This vision and strategic strategy are implemented
in all H&M groups’ brands. The levels of natural resources and population growth are two
driving forces in sustainability work. At H&M group there are three key ambitions; 100%
Leading the change, 100% Circular and renewable, and 100% Fair and equal (H&M group,
2018).
The 100% leading the change involves the “commitment to catalyze change across the entire
fashion industry and improve the way our products are designed and made” (H&M group 2018,
p. 21).
To achieve the ambition “100% leading the change H&M group are focusing on scale
innovation, drive transparency, and reward sustainable actions. Innovation fosters opportunities
from digital systems to new energy-saving solutions. H&M group’s scale can contribute to the
global fashion industries necessary transformation. The H&M group approaches innovation by
promoting internal and external commitments through new ways of working and thinking. The
first step is to consider the stakeholders’ interests while including the micro and macro trends.
On the other hand, building trustworthiness and provide stakeholders with information to make
sensible choices is possible through transparency. Transparency also drives enhanced
performance and an increased impact across the value chain. However, in order to drive
transparency and provide customers with information regarding how sustainable the garments
are, a common measurement in the industry must be implemented. H&M group is members of
23(66)an industry-wide alliance that are developing the Higg-Index, thus, there is a remaining
challenge of bringing actors together due to the lack of alignment (H&M group, 2018).
The ambition is to become 100% Circular and renewable by 2040, the achieved result in each
target is presented in table 4 where the progress is displayed.
KPI 2015 2016 2017 2018 Goal
% of recycled or other sustanable sourced materials of total material
20% 26% 35% 57% 100% by 2030
use (commercial goods)
% of recycled or other sustainably sourced cotton (certified organic,
34% 43% 59% 95% 100% by 2020
recycled or Better Cotton)
Tonnes of garments collected through garment collection intiative 12,341t 15,888t 17,771t 20,649t 25,000t/year by 2020
% of stores with recycling systems for main types of store waste 61% 71% 64% 63% 100%
% of facilitities in own operations with whater-efficient equipment 37% 51% 51% 64% 100% by 2020
% supplier factories in compliance with ZDHC wastewater standard
75% 82% 84% 87% 100%
for conventional parameter
% renewable electricity in own operations 78% 96% 95% 96% 100%
% change in CO2 emmisions from own operations (scope 1+2)
-56% -47% -21% -11% Climate positive by 2040
compared with previus year
% change in electricity intensity (kwh/sqm per opening hours
n/a n/a -2,70% -8,20% (')-25% by 2030
compared with 2017)
Table 4: Circular & Renewable (H&M group 2018, p. 32).
The disposal of natural resources has increased pressure on the industry to change from a linear
business model into a circular. In the circular approach the objectives are for the resources to
have a long-life cycle to reduce waste before being reconstructed into new products. The
circularity is implemented in the whole value chain, which will have a net positive effect by
2040. The own operations will also be powered by renewable electricity to achieve a circular
business model. The same applies for the packaging strategy where H&M group focuses on
circular packing model in order to reduce the environmental impact. By 2025 the ambition is
for all packaging to be recyclable, compostable or reusable. H&M group is focusing on five
main steps in the value chain in order to become 100% circular. The five main steps are: design,
material choice, production processes, product use and product reuse and recycling. Design is
the first step in the value-chain where sustainability can be implemented. This step aims to
expand the products lifecycle to enable recycling, reuse and secondhand. The circular design is
also applied to the Non-Commercial Goods (packaging and stores) (H&M group, 2018).
The material choice focuses on providing sustainable or recycled materials. H&M group is
using recycled materials though the ambition is to reach 100%. However, the sustainable
production step includes reduction of chemicals and water in the production. The ambition is
to a obtain a safe and toxic-free production process. H&M group states in the report “Our vision
24(66)is to have a positive impact on water in our value chain by stewardship actions” (H&M group
2018, p. 45) which includes focus areas such as quantity, quality, circularity, collective actions,
and communications. However, the step product use aims to provide long-lasting products
where H&M group along with the customers are striving to keep the products in use for as long
as possible. The initiation so far is H&M’s Take Care concept, where advices regarding how to
take care of the garment and prolong their life is provided along with repair service. According
to the manager of H&M take care group, many customers want to take care of their clothes, but
do not know how (H&M group, 2018).
The last step is product reuse and recycling where used garment and textiles are collected from
customers. H&M group have implemented “10% off your next purchase” vouchers for
customers when recycling unwanted products at the stores. Another initiative made by H&M
group is the investment in Sellpy, which is a secondhand website where then unsold products
are given to charity. H&M group are striving to become climate positive and reduce their
environmental footprint by 2040. This is an initiative based on the Paris Climate agreement
where the planet needs to stay below the 2°C global warming limit. Yet, there is deficiency of
solutions to achieve this goal though H&M group are working on solutions to “removing more
emissions from the atmosphere than the value chain emits” (H&M group 2018, p. 53).
H&M group together with WWF Climate Savers and Scientific organizations have located
priorities for actions which are:
• Priority 1 focuses on leadership in energy efficiency to enable us to use as little energy as
possible.
• Priority 2 tackles our 100% renewable energy goal, which will help us to ensure the
energy sourced by H&M group and our supply chain is renewable.
• Priority 3 targets climate resilience and carbon sinks to address unavoidable emissions and
emissions beyond what our value chain is responsible for. These three priorities relate to
both our own operations and those across our value chain (H&M group 2018, p. 53)
For more than ten years H&M group have constantly improved their water reduction work. In
2011 they initiated a partnership with WWF where they developed a five-step water
stewardship strategy to be at the forefront of leading water steward (Figure 5). To find solutions
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