University of Vaasa - Vaasan yliopisto

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community pressure, and environmental organisations are significantly important for
companies to pollute less. Thus this paper focuses on government and NGOs as the
most relevant stakeholders and keeps argument about others at a minimum.
Core of the Relationship Between Companies and
Stakeholders
Most important but most difficult is to evaluate the level of CSR development. When
can we say CSR has developed? One way is to look at the environmental
performance of voluntary programs. But this cannot explain the tendency of CSR
development because the performance strongly depends on the characteristics of a
program. International CSR ranking and rating are a good way to know who are good
and who are bad, as this paper described about the NCRI at the beginning. But this
does not explain reasons why CSR has developed. These examples focus on outcome
of CSR activities, but a phenomenon I want to explain is input of CSR development.
This paper describes the relationship between companies and government or
companies and NGOs, focusing on information exchange within these relationships.
Lyon and Maxwell (2008) presumed that business has become savvier about the
workings of the political system, taking proactive steps to avert political conflict (e.g.,
regulatory threats, enforcement pressures, boycott threats from NGOs) rather than
reacting to public pressure after the fact. This motivation of CSR promotion can be
explained through information costs. Information cost is an important idea of
transaction costs. The transaction cost gives us some important assumptions. The
bounded rationality and the opportunistic actions are examples of this. The bounded
rationality explores that human beings’ rationale action is restricted due to his limited
ability of information acquisition, processing and distribution. This is called
information costs. The opportunistic actions emphasise “self-interest seeking with
guile” which is ineffective choice based on the bounded rationality (Williamson
1979).
Government usually takes monitoring costs and legislative costs as information costs
in order to influence corporate decision making. On the other hand NGOS take
information collection and distribution costs and negotiation cost in an influence
game on a legislative stage 5 . Since actors have an incentive to realise their
requirements with minimum costs, they try to minimise these information costs. If
the transaction costs is enough high for government or NGOs, they give up to take an
action to guide companies in the direction which they want. This should be
diminished through construction of formal and/or informal institutions which
regulates actors’ behaviour. The increasing number of CSR report 6 is an evidence of
this. The German ministry for the environment, Nature Conservation and Nuclear
Safety (BMU) issued ‘Umweltwirtschaftsbericht 2009’, which took one subsection
for reporting on CSR. The World Bank also issued that government use an
information policy in order to promote CSR (Fox, Ward, and Howard 2002). ISO
5 However strategies NGOs use has been drastically changed in the last years. This is explained later.
6 There are various names of report which discloses information of a company. Environmental report,
sustainability report are example of this.