Corporate Social Responsibility on the Performance and Sustainability of United Kingdom Banks - Report Example

?The Strategic connotations of Corporate Social Responsibility on the performance and sustainability of UK Banks: The Case of HSBC Table of Contents Introduction 3 Background of the Study 3 Research Objective 4 Literature Review 5 Role of banks in sustainability development 5 Banking and sustainability 6 Research Paradigm and Methods 9 Data Collection and Analysis 10 Validity and Reliability of the Study 11 References 12 Introduction Background of the Study One of the major driving forces in the present day society and the business world is the advancements made in the sustainability aspects and how business organizations work it out into initiatives pertaining to corporate social responsibility. The financial sector is considered to perform a crucial role in the overall economy of the world, and hence the active contribution and involvement of this sector is very vital. The financial services sector’s influence on the sustainability development is on the whole indirect by means of its impact on the activities and strategies of companies. Alternatively, in their role as an intermediary as well as stakeholders in high volume investment projects, the function of financial services sector can be very influential in impelling corporate sustainability. Corporate Social Responsibility has become an indispensable element amongst the current day business organizations. Over and above enhancing their operational and financial performances, it had become obligatory for the organizations to concentrate in the same way on social aspects such as, biodiversity, dearth of food and water, weather change, environmental safety, and poverty etc. This is owing to the fact that the various groups of stakeholders are keen to know how the business houses contribute to the overall society and lend a hand in the development of a sustainable planet, rather than concentrating merely on their business activities (PWC, 2010). Banks, amongst all the financial services organizations, have become increasingly proactive about corporate social responsibility activities owing to the pressures from the society as well as the government and other regulatory bodies. There are number of industry initiatives that endorse sustainable activities among banks, namely, Equator Principles, United Nations Environment Programme Finance Initiative, London Principles etc. These initiatives have been formulated to offer guiding principles and framework for banks to take up lending policies that are socially as well as environmentally sound. However, there are number of aspects that have been continuously discussed amongst researchers. These include, to what degree these initiatives have impacted the operations of the banks, what are the issues that impel the banks to pursue and take on these initiatives, whether these initiatives are only meant to guarantee long term success and improvement of brand name and do not have much to do with participation in sustainable development. Thus, this would be appealing to evaluate how the social responsibility issues and initiatives influence the CSR activities of banks and how do these initiatives contribute to the accomplishment of the bank’s strategic goals and above all to its overall sustainable development. Research Objective The chief objective of this research is to identify the aspects of reaction of the UK based Banks to matters pertaining to sustainability by endowing with a clear comprehension of the present activities of the banking industry in terms of sustainability. To be specific, this research study would attempt to illustrate the sustainability issues that the banking industry is UK is encountering, assess the condition of the sustainable banking plans at the banking industry or organization levels of UK. The study would also evaluate the function of different stakeholders and their impact on sustainable banking in addition to assessing the impelling factors as well as the difficulties of sustainable banking in the UK banking industry. The research study would comprehensively focus on all the aforementioned objectives and conclusively recommend policies and strategic directions to manoeuvre sustainable banking in the United States. In order to attain a better understanding of the sustainable initiatives in the UK banking industry and its impact on the banks’ performance, this study would focus on a case study analysis of HSBC Bank. Literature Review Role of banks in sustainability development Sustainability development means that the speed of technological as well as economical development should take into consideration the absorptive capability of the environmental system for the period of long term. This is because ecological degradation can deteriorate the overall economic growth. Since the last couple of decades there has been rise of globalisation and substantial growth of privatization, which has accentuated facets like corporate social responsibility as well as sustainability regulations of the banking sector. At the same time as there has been noteworthy development in context of holding corporate organizations accountable for their environmental performance, the progress in terms of human rights, scams, transparency, labour standards have been limited. Many of the financial services companies have incorporated CSR into their “code of conduct”, over and above operating closely with Non Government Organizations in creating a sustainable business environment. Akin to other corporate players across the world, the banking industry also abides by the UN initiatives such as the Global Compact and the Global Reporting Initiative (GRI) guidelines (Kercher, 2007). The GRI guidelines were formulated to improve the sustainability reporting norms of the business environment, at the same time as accomplishing comparability, dependability, suitability and conformability of published information by the participants in the banking industry. These guidelines have become increasingly approved throughout the globe and as a result have become an accepted system of balancing CSR reporting in the banking industry. Banks have more and more identified the pressure from across its investors and all other stakeholders to conduct their business in a principled and conscientious manner. It has been affirmed that taking up environmentally unfriendly ventures have a negative influence on the share price as well as the brand value of the banks (Cowe, 2002). As a result, it is crucial to discover how the UK banking industry is acting in response to the issues pertaining to sustainability advancement and corporate social responsibility. Banking and sustainability The following figure represents the sustainability framework in the banking industry: Fig: Analytical framework of CSR/sustainability in the banking sector This framework is similar to any other industry, where the government bodies, investors, and other stake holders pressure the industry to focus on the social responsibility issues, which would impel the participants in the industry to take up suitable initiatives in response of the pressure, resulting in an organization that is sustainable and competitive in the industry. The sustainability issues in the UK banking sector are represented by the figure below: (Source: Kostyuk& et al, n.d.) In view of the banks’ intermediary function in the global economy, they hold an exclusive position in terms of sustainable development. Banks foster sustainability by means of their proficient credit approval systems and other ethical investment products. In the present day world, there is elevated environmental and sustainability concern amongst the financial services company. Financial stability plays a significant function in the financial services industry, particularly the banking industry and the sustainable development of the industry is reliant on the stability of the industry. The second half of 2008 had experienced rapid weakening of the global economy taken as a whole and also made it apparent that no part in the globe is inaccessible from turmoil in the global financial markets. Despite the fact that at first the crisis was considered to be one of solidity, upsetting only a small percentage of organizations, it had grown to be a more widespread crisis requiring state involvement. The financial crisis went on to have an effect on the banks as well as other financial services companies across the globe. In the United States, approximately 25 banks were not successful to take themselves out of the negative influence of recession in 2008. In spite of a major decline in the central bank interest rates throughout the globe, the interbank lending rates persisted to be continuously high. This illustrated that the banks did not have assurance in each others’ financial security. This led to a painstaking plunge in both personal and corporate credit along with a rapid recession in the housing and construction markets. In the United Kingdom, as a result of the financial crisis, the Bradford and Bingley Building Society was nationalised during the conclusion of 2008 and then partially put up for sale to the Spanish Group Santander Bank. During the identical period, the UK Government partially nationalised the weak Royal Bank of Scotland (RBS). During the beginning, the government secured a 58% stake of the RBS Group, however in due course by the end of 2009; it increased its stakes to around 84%. The Governments all over the globe had to take initiatives to save a number of illiquid and undercapitalised banks. The UK Government also capably helped the Halifax Bank of Scotland (HBOS), which was facing rigorous financial problem. The HBOS, a major mortgage lender in the UK, was merged with the Lloyds TSB group in the year 2009.The UK Government secured an ownership of approximately 43.4% in this joint venture (Jefferys, 2010). Banks like the Barclays and the HSBC, which had their headquarters in the United Kingdom, did not have to be nationalised. Nevertheless, they had to raise capital by issuing new shares, in order to preserve their capital ratios. It has been widely opined that in order to obtain a sustainable and stable business environment, banks will have to seriously focus on their sustainability and social responsibility issues (University of Liverpool, n.d.). Doing so is likely to strengthen the overall position of the bank, enabling to encounter uncertain and instable circumstances in a better manner. This study examines the impact of the corporate social responsibility initiatives on the HSBC bank in a comprehensive manner, attempting to assess the influence on the overall performance and sustainability of the bank. Research Paradigm and Methods Any research study comprises of normally three chief stages, namely, the recognition of the topic of study, setting up of the research study, and ultimately the carrying out of the research study. The key phase in the primary stage of a research study is the preparation of the research questions to be investigated in the study. Alternatively, the second stage of a research study consists of the formation of the research design, recognition of the suitable data collection processes, and sample selection etc. Consequent to this, the chosen data collection methods are utilised to gather the requisite data, which are after that evaluated and analysed to find out answers of the research questions that have been formulated at the beginning of the research study (Kumar, 2010). The two research methods commonly used to investigate or conduct any study is the quantitative and the qualitative approach. The quantitative technique consists of evaluation of any numerical relationship between two or more variables. This technique is normally associated with wide-ranging research studies where the goals and the blue print of the research study in addition to the sample group and the questions asked to the sample group are predetermined (Shank, 2002). Qualitative approach of research, on the other hand, is unstructured and includes all the facets of a study and therefore is advantageous as it endows complicated documented description of the understanding on a specific research aspect. Additionally, it is more agile and allows advanced spontaneity as well as possibility of adjustment on the base of the topic of the research. Qualitative techniques are hence suitable for explanatory researches as they concentrate on open-ended queries that allow the interviewee to answer in an unrestricted and more expressive manner, instead of having to choose amongst preset responses. A blend of the ordered or quantitative along with the unstructured or qualitative research approach is best suited this research study. This is because this study deals with determining the investment opportunities and the risks involved in the stock markets of the developed as well as the developing countries. A blended approach of both qualitative as well as quantitative methods, also referred to as ‘triangulation’ investigates an incident by means of assorted outlooks and point of views and in a way leads to advanced precise results. The results found by the appliance of the two approaches offer a more comprehensive coverage of a research problem (Goddard & Melville, 2004). Data Collection and Analysis In view of the fact that the approach employed in this research study would be based on the case study analysis of HSBC Bank, relevant data would be gathered from a number of sources such as historical researches, journals and articles, declarations and statements made by HSBC bank, financial statements of the bank, CSR and annual sustainability reports, documents, and participant observation among others. To put it in other words, the data collection methods utilised in this research would comprise of literature review, data review, observation, and case study analysis of HSBC bank. An important aspect of the data collection used in this research study would be the utilization of number of data sources to enable triangulation during the process of data study. This justifies the use of several methods while data collection (University of North Carolina Wilmington, n.d.). However, it should be noted that observation would be the most imperative element of this research on the implication of CSR activities on the performance and sustainability of HSBC bank, though they would be improved and supported by other facts and data. Validity and Reliability of the Study Reliability of the research refers to the constancy as well as the repeatability of the outcome of the research. On the other hand, validity implies whether the researcher has been able to assess the incident or event he/she intended to evaluate (McKinnon 1988). Golden-Biddle & Locke (1993) stated that in a research that is qualitative in nature, validity as well as reliability is associated to sense of belief such as plausibility and dependability. McKinnon (1988) had stated that there are certain attributes that could jeopardize the aspects of reliability and validity of the study. The attributes mentioned by McKinnon (1988) were observer prejudice; observer caused hazard, restrictions and intricacies of the human mind and in conclusion the restrictions related to data accessibility. On the contrary, Chapman & Ahrens (2006) claimed that checking the reliability and validity of the research was not sufficient and that emphasis should be given to the aspect of plausibility as well. In order to address the discussed aspects, the research study would be executed on the basis of review of prior studies on the connotation of corporate social responsibility initiatives on the performance of the banking industry. To maintain the validity and reliability of the study, the qualitative research was based on the analysis of the strategic connotation of CSR and sustainability initiatives on the banking system of UK in general and HSBC bank in particular. A case study approach would be pursued, so as to enable a complete assessment of Barclays Bank and the magnitude of the impact that the corporate social responsibility measures had on the Bank. The major challenge in the preparation of this research proposal was that it was completely based on secondary research which was executed by reviewing books, journals and related articles. If there was no restriction of time and if one had access to the business managers for a large number of banks, personal interviews could have been carried out. Such kind of a research would have revealed the practical differences and similarities between the various banks in terms of corporate social responsibility initiatives and its impact on their performance. References Ahrens, T. & Chapman, C. S., 2006. Doing qualitative Weld research in management accounting: Positioning data to contribute to theory. Accounting, Organizations and Society, Vol. 31 pp: 819–841. Cowe, R., 2002, CSR in Finance: Forging a new way, Financial World. Goddard, W., & Melville, S. 2004. Research Methodology: An Introduction. USA: Juta and Company Ltd. Golden-Biddle, K. & Locke, K, 1993, Appealing Work: An Investigation of How Ethnographic Jefferys, S., 2010. Financial Crisis and Social Dialogue in the UK Banking Sector. WLRI Working Paper 10. Kercher, K., 2007. Corporate Social Responsibility: Impact of globalisation and international business. Corporate Governance e-Journal. Kostyuk, A. N., & et al, No Date. Corporate Social Responsibility in Banks: An International Overview.[Pdf] Available at: http://virtusinterpress.org/IMG/pdf/CORPORATE_SOCIAL_RESPONSIBILITY_IN_BANKS_AN_INTERNATIONAL_OVERVIEW.pdf [Accessed on December 6, 2012]. Kumar, R. 2010. Research Methodology: A Step-by-Step Guide for Beginners. UK: SAGE Publications Ltd. McKinnon, J. (1988). Reliability and Validity in Field Research: Some Strategies and Tactics, Accounting, Auditing & Accountability Journal, Vol. 1 Iss: 1, pp.34 – 54. PWC, 2010. CSR Trends 2010. [Pdf] Available at: http://www.pwc.com/ca/en/sustainability/publications/csr-trends-2010-09.pdf [Accessed on December 5, 2012]. Texts Convince, Organization Science (4), pp. 595-616. University of Liverpool, No Date. The financial crisis of 2007/2008 and its impact on the UK and other economies. [Online] Available at: http://www.learnhigher.ac.uk/resources/files/business%20comm%20awareness/The%20Financial%20Crisis%20and%20its%20Impact%20on%20the%20UK%20and%20other%20Economies.pdf [Accessed on December 6, 2012]. University of North Carolina Wilmington, No Date. Overview of Research Methods. [Pdf] Available at: http://people.uncw.edu/pricej/teaching/methods/intro.pdf [Accessed on December 6, 2012]. Read More