Implementation of Corporate Social Responsibility in the Strategic Management of Pharmaceutical Firms

Implementing corporate social responsibility in a strategic management of pharmaceutical firms The pharmaceutical industry is specific for several reasons. On one hand, it is admired for contributing to the improvement of human health, but on the other hand, it is very often criticized (Nussbaum, 2009), for several reasons. Its unfair practices, promoting people in the excessive use of medications, and similar issues are frequently pointed out. Compared to other industrial sectors, in terms of its dynamics, it ranks among the fastest developing fields overall. We can estimate the value of global pharmaceutical production at USD 300 billion (World Health Organization, 2016). Compared to other areas of the national economy, it is clear that there are a number of differences that make it unique.

The concept of corporate social responsibility is among the older concepts, with its modern era of development beginning in the 1950s. Despite this, the pharmaceutical industry has only recently started to consider implementing the principles of responsibility into its management. However, their number is constantly growing, with companies focusing mainly on the areas of responsibility and sustainability reporting (Esteban, 2008). Compared to other sectors, the pharmaceutical industry is often stigmatized due to the nature of its business and production. The role of appropriately applied CSR is to ensure legitimacy and broader support from important stakeholder groups (Hillenbrand, Money, Ghobadian, 2013). Together with other similarly stigmatized sectors, they fall into the group of so-called Sinners, even though their production directly contributes to improving people's health (Grougiou, Dedoulis, Leventis, 2016). It is also often called a sensitive sector (Kašparová, Kunz, 2013), or a stigmatized sector (Vegne, 2012). There are several reasons why some sectors are perceived a priori as irresponsible. It is often the conflict between what companies declare they do and reality. It is a discrepancy between intent and reality. Such activities are subsequently evaluated as insincere, which is often the aim of conducted research (Countess of Frederiksborg, Fort, 2014; Nussbaum, 2009). In addition to ethics, research also focuses on the analysis of consumer perception and the analysis of consumer attitudes toward responsible activities of pharmaceutical firms (Wang, 2011). The declared degree of sincerity is, however, questionable as companies work with CSR as an active tool for influencing their good reputation (Cheah, Chan, Chieng, 2007; Stone, Grantham, Vieira, 2009; Leisinger, 2005). Undoubtedly, if the implementation of CSR is carried out in accordance with the long-term direction of the company, it can contribute to the creation of a sustainable competitive advantage, even in the sensitive pharmaceutical industry (Droppert, Bennett, 2015). On the other hand, failure to manage communication can lead to serious problems, which manifest in a loss of trust and reputation of the company (Countess of Frederiksborg, Fort, 2014).

The biggest problem of the entire CSR concept is the inability of academics and practitioners to articulate a generally valid definition. In the literature, we can encounter a number of definitions whose validity is limited in time, space, or depends to a large extent on which stakeholder group formulates it (Džupina, 2013). Several authors have attempted to analyze the currently valid characteristics of CSR. From available scientific articles, we know that there are at least 37 valid definitions describing the relevant dimensions of responsibility (Dahlsrud, 2008). The reason is that there are various forms and tools of responsible corporate behavior that influence current business models. The modern era of CSR dates back to the 1950s (Carroll, 1999), when H. R. Bowen offered the first, still valid definition of corporate social responsibility and speaks of it as the obligation of the businessman to "pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society" (Bowen, 2013, p. 6). Later, in the twentieth century, Carroll (1979) defined CSR as economic, legal, ethical, and discretionary expectations that society has of organizations at a given time, and formulated a four-part model of corporate social responsibility. These types of responsibility are typical directly for managers who carry out activities in enterprises (Wood, 1991). Managers themselves, or entrepreneurs, are in a figurative sense the bearers of corporate responsibility because they are the ones who shape and later influence corporate values. From the previous definitions, it emerged that organizations and firms have an obligation to the needs and goals of society that go beyond economic needs and goals (Waldman et al., 2006).

During the subsequent period of development of the CSR concept, new terms were formulated. Sethi (1975) began to distinguish between several terms. In his work, he dealt with corporate behavior, which he called social obligation, social responsibility, and social responsiveness. In 1984, Freeman (1984) presented his new stakeholder theory, which brought a completely new perspective to the entire system of corporate governance, as well as to the CSR system. Stakeholder groups (Freeman, 1984) create a new dimension of CSR because members of stakeholder groups actively intervene in the implementation of CSR in companies. Current concepts have added a new dimension of sustainability to CSR, which is often referred to as the three pillars (of sustainability) (Elkington, 1999). The basic dimensions of CSR thus became voluntariness, obligation, economic, social and environmental responsibility (Džupina, 2012; Džupina, Mišún, 2014). A comprehensive definition was offered by Vogel (2005, p. 2), who defines CSR as "practices that improve working conditions and benefits for the whole society beyond what the company is legally obliged to do."

Strategic corporate social responsibility

Not all activities that companies undertake in the area of corporate social responsibility ultimately have a real positive effect on company performance. To a large extent, this depends on how these activities are perceived and evaluated by target recipients.

Not all activities are evaluated equally. Philanthropy and volunteerism in any form are not always perceived positively but rather create doubts about whether such activities are meant sincerely (Countess of Frederiksborg & Fort, 2014) and truthfully. Companies should therefore focus on forms of responsibility that require a higher degree of managerial involvement, a higher degree of know-how, or managerial effort. CSR in this form should acquire a strategic nature by incorporating the principles of responsibility directly into the vision, mission, and corporate values, which create an adequate precondition for their transfer to higher and lower corporate goals (Slávik, 2005). In the same year that Carroll published his first CSR model, I. Ansoff (1979) analyzed the social dimension of strategic management, proposing that corporate strategy should align with the external environment of the company in order to create a kind of implicit business legitimacy, or as it was later called by Porter and Kramer (2002, 2006), the license to operate. In this form, CSR is very close to corporate philosophy because it represents a set of principles by which the company is managed and which also govern activities within the company. In this regard, we are currently witnessing that companies in the entire management process must consider their impact on societal goals (Hillman, Keim, 2001; Halme, Roome, Dobers, 2009), which leads to active engagement in CSR. Business entities are no longer passive recipients of what the environment expects of them, but on the contrary, they themselves seek opportunities to engage in addressing societal challenges. Vision and mission precisely articulate the basic corporate direction and the reasons for the company's existence, thereby completing the foundation of corporate philosophy (Volberda et al., 2011). In addition, they contain basic corporate values and thus positively influence formulated corporate goals and corporate strategies (David, 2011). Therefore, if the vision and mission contain indications of CSR, it is a precondition for applying the principles of responsibility throughout corporate governance, which will be reflected in the real activities of the company.

Sample and Methods

The basic sample was created from the list of pharmaceutical companies registered in Slovakia. For the most part, these were branches of foreign multinational companies, as we assumed a high probability that these companies would have functional websites where we would be able to identify basic strategic documents and subsequently subject them to a thorough analysis. We included all 101 companies in the sample, thereby covering the entire pharmaceutical sector in the Slovak Republic. The methods used in the research will consist of several steps. The first step is based on our previous research, in which we identified several definitions related to CSR from the 1950s to the present (Džupina, 2012). The literature review and the resulting definitions came mainly from journal sources of professional and scientific studies registered in the WoS, Scopus, or ScienceDirect databases. Together, we analyzed more than 50 valid definitions related not only to the concept of corporate social responsibility itself but also to close and related terms (corporate social performance, corporate social responsiveness, sustainable development, etc.). The definitions reflected the current knowledge in the field and thus came mainly from the American, European, and Asian environments, where corporate social responsibility continues to receive adequate attention. Subsequently, we were able to identify in the definitions the basic pillars of corporate social responsibility, as shown in Table 1.

In the future, we plan to collect all corporate missions, visions, or corporate values directly from the websites or from available annual reports of the research sample. Subsequently, we will attempt to formulate partial problems, such as whether the analyzed pharmaceutical companies compile, in addition to annual reports, increasingly popular responsibility or sustainability reports. The next step is the application of content analysis with an open coding scheme (Table 2), through which we can easily identify predetermined pillars and dimensions of responsibility in corporate missions, visions, or corporate values. A similar procedure was used by several authors (Rafaeli, Sudweeks, 1997; Bartkus, Glassman, McAfee, 2004), who inspired us in our research. In terms of our research problem, the use of content analysis is a suitable method because it is a method focused precisely on the analysis and evaluation of written text (Weber, 1990).

Table 1: Pillars and Dimensions of Corporate Social Responsibility

Source: Džupina, 2012

5. Results and Discussion

We are aware that the presented procedure does not represent the final form of the proposed research and will need to be modified depending on the specific research problem. Nevertheless, we can already name at least the basic limitations that may affect our results in the future. The first problem is the fact that the information contained in corporate visions, missions, corporate values, or strategic intentions may be mere words far removed from actual activities. To increase the explanatory value of the research results, it will be necessary to supplement the described dimensions with weights based on different stakeholder views of their importance. The presented research proposal only considers three stakeholder groups, which could be expanded in the future to include others depending on the nature of the given sector and their importance to it. Even though the direct incorporation of the principles of responsible behavior into key areas of corporate governance (vision, mission, etc.) means genuine engagement in addressing societal challenges, it may still be only a feigned or false interest, which cannot be completely eliminated. We assume that through the presented coding table (Table 2) we will be able to categorize various manifestations of responsibility contained in visions, missions, etc. into the respective groups we have created. In this way, we will subsequently identify all dimensions that appear in the visions, missions, or corporate values of individual pharmaceutical firms. Subsequently, we can subject the identified dimensions to further, more detailed research, in which we will be able, for example, to determine the attitudes of relevant stakeholder groups toward these activities.

Table 2: Dimensions of Corporate Social Responsibility

Source: Džupina, 2012 Conclusion

The pharmaceutical industry is in a unique situation because it fulfills specific roles in society related to the production and distribution of medicines. Its core business is often subjected to very sharp criticism from some stakeholder groups. We often encounter opinions that the only responsibility of pharmaceutical companies is to ensure affordable medicines and increase their availability in the treatment of various diseases. This assumption, however, stems only from the basic principle of responsibility, which is voluntariness. If only a company that goes beyond its basic activities (research, distribution, registration, and availability of drugs and medicines) in its activities can be considered responsible, then it should also involve other activities that create value for all interested stakeholder groups. Access to medicines represents a so-called shared responsibility of several entities that enter into this entire process (Lee, Hunt, 2012). If companies relied only on their narrowed perception of responsibility, they would expose themselves to possible negative pressure from non-governmental organizations, customer organizations, or negative publicity (Nussbaum, 2009). Even though CSR tools can differ substantially across sectors, the proposed procedure has universal applicability. Previous research has shown that, especially in the case of industrial sectors, companies tend to select CSR activities that are in line with their core business, thus ensuring a longer-term orientation toward specific areas of responsibility. In the article, we pointed out the possible limitations of such research design, but we assume that some of them can be, if not completely eliminated, at least minimized in their impact on the validity of the results.

Authors: Doc, Ing. Milan, Džupina, PhD. Mgr. Györgyi Janková, PhD. References

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