Corporate social responsibility practices, ISO 26000

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E-mail: [email protected]my. Auni Fatin Nadia Chiek Desa, ... automotive industry to become more efficient and effective that can improve ... enhance corporate image and attract customers as well as employees in the company's operations.
Int. J. Managerial and Financial Accounting, Vol. 5, No. 3, 2013

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Corporate social responsibility practices, ISO 26000 efforts and CSR performance in Malaysian automotive industry Nursyazwani Mohd Fuzi* Departments of Accounting and Finance, Faculty of Management and Economics, Universiti Pendidikan Sultan Idris, 35900 Tanjung Malim, Perak, Malaysia E-mail: [email protected] *Corresponding author

Nurul Fadly Habidin Department of Management and Leadership, Faculty of Management and Economics, Universiti Pendidikan Sultan Idris, 35900 Tanjung Malim, Perak, Malaysia E-mail: [email protected]

Auni Fatin Nadia Chiek Desa, Farah Izzaida Mohd Zamri and Siti Norhafizan Hibadullah Departments of Accounting and Finance, Faculty of Management and Economics, Universiti Pendidikan Sultan Idris, 35900 Tanjung Malim, Perak, Malaysia E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] Abstract: CSR practices and ISO 26000 are important as drivers for the automotive industry to become more efficient and effective that can improve CSR performance. In order to meet CSR practices and CSR performance requirement, the automotive industry need to implement ISO 26000 efforts. The main purpose of this study is to review the structural relationship between CSR practices, ISO 26000 and CSR performance in Malaysian automotive industry. The structural equation modelling (SEM) has been proposed for conceptual model of this study. Based on the proposed conceptual model and review, research hypotheses were developed. The paper culminates with opportunities for future research work.

Copyright © 2013 Inderscience Enterprises Ltd.

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N.M. Fuzi et al. Keywords: CSR practices; ISO 26000; CSR performance; environmental performance; corporate governance; social performance; standards; social responsibility; structural equation modelling; SEM; automotive industry. Reference to this paper should be made as follows: Fuzi, N.M., Habidin, N.F., Desa, A.F.N.C., Zamri, F.I.M. and Hibadullah, S.N. (2013) ‘Corporate social responsibility practices, ISO 26000 efforts and CSR performance in Malaysian automotive industry’, Int. J. Managerial and Financial Accounting, Vol. 5, No. 3, pp.277–293. Biographical notes: Nursyazwani Mohd Fuzi is a full master’s student of Management Accounting at Universiti Pendidikan Sultan Idris. Her main research interest is corporate social responsibility in automotive industry. Nurul Fadly Habidin is a Lecturer at Universiti Pendidikan Sultan Idris, where he teaches industrial management, management accounting and business engineering. His main research interests are lean, Six Sigma, quality/business engineering and continuous/performance process improvement. Auni Fatin Nadia Chiek Desa is a full master’s student of Management Accounting at Universiti Pendidikan Sultan Idris. Her main interest is occupational safety and health in automotive industry. Farah Izzaida Mohd Zamri is a full master’s student of Accounting at Universiti Pendidikan Sultan Idris. Her main research interest is green lean Six Sigma in automotive industry. Siti Norhafizan Hibadullah is a full master’s student of Management Accounting at Universiti Pendidikan Sultan Idris. Her main research interest is lean manufacturing in automotive industry.

1

Introduction

Malaysian government promotes the Malaysian automotive industry to meet the government’s efforts to improve the country’s economy sector. Motor vehicle industry development is very important for implementation of the national car project in Malaysian automotive industry. Since 1998, the Malaysian national car dominance in ASEAN has become a key driver in the development of the automotive industry to grow over time (Mahidin and Kanageswary, 2004). Besides, the automotive industry is more focused on component manufacturers, vehicle assembly, learning institutions, and commercial automotive industry. This is supported by Khalifah et al. (2008) the automotive industry is a catalyst for national development by creating opportunities for the manufacturing of components and accessories. However, the automotive industry also facing challenges due to increased production of competitors from both local and foreign car in the Malaysian automotive industry (Habidin and Yusof, 2012). Thus, the automotive industry brings great opportunity for automotive manufacturers to increase production and distribution operations in the country.

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Corporate social responsibility (CSR) practices are approach that is used in the company to view the society, environment, ethics, and policy to enhance competitiveness. Corporate social responsibility practices (CSRs) play an important role in the industry and affect the activities of CSR. In addition, CSR practices also encourage companies to undertake social responsibility from customers, employees, suppliers, investors, and shareholders. This is supported by Mittal et al. (2008), CSR practices focused more on the community and environment to enhance corporate responsibility. Besides, CSR practices are the management of all stakeholders for corporate responsibility by creating corporate benefit in the automotive industry. According to Vaaland and Heide (2008) and Alvarez et al. (2010), the role of CSR practices is to enhance corporate image and attract customers as well as employees in the company’s operations. This is supported the measure and improve the accountability of corporate responsibility in implementing CSR practices. Meanwhile, CSR practices reflect great success for the company to expand its products and technologies to be implemented in the automotive industry (Alvarez et al., 2010) such as improve production process, increase sales, reduce cost, enhance new technologies and competitive advantages. By considering CSR practices, the companies enable to sustain a good corporate image, and thus can improve the relationship between employees and stakeholders. The International Standard ISO 26000 is guidance on social responsibility that enables companies to comply with predetermined standards which promotes the implementation of social responsibility among the stakeholders. Based on Castka and Balzarova (2007), ISO 26000 executes quality management and environmental management standards to provide the management with standards of social responsibility. The authors highlight that ISO 26000 is important in the organisation to manage their standards related to social and environmental. Besides, Frost (2009) noted that ISO 26000 provides a social responsibility issues to be considered in an organisation. This indicates that ISO 26000 assists companies to perform well in its social obligation to the society. Meanwhile, a practice used in ISO 26000 efforts provides a great success to prevent negative activities such as environmental pollution, toxic waste and abusing worker rights. Moreover, ISO 26000 efforts also assist all the business to be responsible in managing the social and environmental aspects. The International Standard ISO 26000 (2010) emphasises two fundamental principles which are recognising social responsibility and stakeholder identification and engagement. It provides guidance on the relationship between the stakeholders, organisations and society and emphasises social responsibility issues in the organisation. CSR performance relates to the impact of CSR activities on the society. This is because CSR activities contribute to the social and environmental performance in order to improve company performance. Besides, Imam (2000) and Jones et al. (2007) examined that CSR performance emphasises the social and environmental aspects to discharge their social responsibility for the well being of society. This is because CSR can provide improvement on corporate accountability in social responsibility and can be beneficial to social and environmental performance in the automotive industry. Apart from that, CSR enables the company to obtain benefits in conducting good CSR such as prevents products of damage, improve environmental policies, reduce environmental risks, enhance social welfare, improve the health and safety and increase the company reputations (Thiele et al., 2008). Hence, CSR has a positive impact on the social and it enables companies to manage operational management (Wildes, 2008) such as donate to the community on the profits, emphasises the human rights and allocation of fund to

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society. Thereby, CSR performance affects social and environmental concern and it can improve the quality of life in the automotive industry. Thus, by implementing the CSR practices and ISO 26000 efforts are benefit towards automotive industries in order to improve CSR performance.

2

Literature review

2.1 CSR practices CSR practice is an obligation of the company for maximises the impact on employees, customers, community, and environment. CSR practice emphasises that social responsibilities is the core for the company and it is carried out in Malaysian automotive industry. Accordingly, CSR is an operated process by company to take action on social and environmental management throughout the product and services that involve all stakeholders (Lungu and Shikwe, 2006). It states that CSR practice is more concerned on social and environmental factors such as labour practices, safety and health at workplace, environmental regulations, and worker’s right. Other than that, Misani (2010) stated that some companies are using the CSR practices approach for conducted within the organisation to meet the needs of stakeholders. This is because CSR practices give benefits to stakeholders with value added advantage such as increasing the reputation of the company, enhancing employee motivation, and improve the competitive advantage. Next, Table 1 shows the benefit of CSR practices by different authors. Table 1

Benefits of CSR practices by different authors

Authors

Benefit of CSR practices

Barnard et al. (2004)

Enhance policy and labour standards, improve management of employee and employer at workplace, increase company’s reputation and reduce the risk of the company.

Porter and Kramer (2006)

Able to solve social problems of society, provide high competitiveness, enhance the manufacturing operations, improve the image and brand of the company and enhance the capital market.

Silberhorn and Warren (2007)

Increase social welfare, enhance the social behaviour of society, improve the relationship between employees and employers, reduce the probability of risk and preserve the reputation of the company.

Sweeney (2007)

Improve products and services, improving relationship between the company and stakeholders, to provide social programs and customer convenience.

Shen and Fleming (2008)

Create awareness of social responsibility, enhance the practice of social and environmental concerned, reduce the company’s risk management, improving policy and social responsibility standards, reduce the cost of company and raise company’s profits.

Stamoulakis and Bridwell (2009)

Improving environmental management, renewed new technology, enhances of innovation, improve production processes, enhance shareholder profits and increase the potential success of the company.

Mezher et al. (2010)

Enhance the competitiveness of company, improve cooperation with other companies, support the efforts of stakeholders and get information related to the customer feedback.

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CSR practice assists the company in improving its image and reputation. Consequently, CSR practices need to be implemented in order to facilitate the company to manage their production operation. Based on previous study (Ma, 2012), CSR practice measures employee involvement, customer focus, environment, corporate governance, community and society, and human right. A research finding of CSR practice is given in Table 2. Table 2

The research finding on CSR practices

Measure Employee involvement

Customer focus

Authors

Improve reputation of company, enhance employee satisfaction, promote employee training and increase employee commitment.

Kiran and Sharma (2011)

Encourage employee motivation, improve the culture in workplaces, protecting safety of employees, increase the productivity and provide a high skill of employees.

Mandhachitara and Poolthong (2011)

Enhance the image of the company, improve customer loyalty, influence the consumer’s decision making and assist customer awareness.

Schmeltz (2012)

Environment

Corporate governance

Community and society

Human right

Findings

Powell (2011)

Castello and Lozano (2009)

Influence customer purchase, attracting consumer behaviour, improve customer satisfaction, enhance customer beliefs and maximise profits. Reduce carbon dioxide; enhance environmental awareness and environmental regulations.

Husser et al. (2012)

Increase environmental management, reduces environmental pollution, cost reduction, sustaining environmental development and improve the company financial.

Riyanto and Toolsema (2007)

Increase the company’s policy, enhance corporate interests, reduce stakeholder conflict, easier for management decision making and provide high corporate efforts.

Khan (2010)

Comply with the standards set, enhance risk control, improve the relationship between employers and employees and increase auditors’ responsibilities.

White (2006)

Increase the company’s capital; assist qualified employee and sustaining the company’s success.

Tuodolo (2009)

Improve social welfare, provide community development, enhance social programmes and provide training and skills of employees.

Mayer (2009)

Enhance human rights law, defend of human rights fairness, improve freedom of expression and protect the corporate interests.

Patring (2012)

Defending human rights violations, enhance social justice, reduce the risk of human rights and improve human rights considerations.

2.2 ISO 26000 standards ISO 26000 is an international standard that provides guidance related to social responsibility in an organisation. Based on International Standard ISO 26000 (2010), it is the foundation of social responsibility to improve existing practices and meet the social responsibility into the organisation. ISO 26000 is intended to encourage companies to

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comply with the laws and regulations related to social responsibility. Besides, ISO 26000 also consider the aspects of the environment, society, culture and legal to be implemented in organisation, particularly in the automotive industry. By implementing ISO 26000 efforts, there are many benefits gained such as ensure the safety and health of community, protect the environment, increase the company’s policy, improve company’s reputation, enhance the legal and standards of company (Roberts, 2010). This is supported by Pojasek (2011), ISO 26000 emphasise to enhance employee commitment, improve company’s management and provide decision making and effective information. Further, Kosi and Harazin (2011) pointed out that ISO 26000 provides principles of social responsibility, two fundamental practices and guidance on social responsibility core subjects. However, this study only focuses on two fundamental practices which are recognising social responsibility and stakeholder identification and engagement. Table 3 shows the measurement of ISO 26000 efforts. Table 3

Measurement of ISO 26000 efforts

Dimension

Measurement

References

Recognising social responsibility

Identifying the relationship between organisation, stakeholders and society.

Stakeholder identification and engagement

Emphasise the identification and engagement of stakeholder to meet the social responsibility.

International Standard ISO 26000 (2010), Kosi and Harazin (2011) and Nisipeanu et al. (2011)

Recognising social responsibility refers to the relationship between an organisation, its stakeholder and society. International Standard ISO 26000 (2010) stated that organisation need to relate the relationships in recognising social responsibility. Thus, for relationship between organisations, organisations emphasise results and activities on the environment and society. Meanwhile, relationship between stakeholders are influences the decision of stakeholders in the organisation’s activities. Organisations also need to understand the relationship between societies that affect the stakeholders such as interest of society. Hence, recognising the social responsibility gives effect to the decision and activities of the organisation. Study by Weinestedt (2009), stakeholder refers to any groups or individuals that affect the achievement of organisational objectives. It affects the decisions and activities of the organisation to determine the stakeholders. In addition, stakeholders also closely related to social responsibility and provide benefits to society. Hence, identification of stakeholder is responsible for compliance with the law, operations and financial so that it can assist the social responsibility of company. The engagement of stakeholder involves one or more of the stakeholders for implementing organisational demands and make decisions to improve performance. Engaging with stakeholders is to meet the needs and goals of stakeholders. Furthermore, Canada (2012) noted that the importance of stakeholder engagement is to share the information with stakeholders in improving the company’s performance. It means that stakeholder engagement assists companies for make improvement in terms of environmental, social, and company policies. Moreover, International Standard ISO 26000 (2010) also pointed out that stakeholder engagement can be used to make decisions for the organisation, assist organisations to improve performance and to overcome conflict interests between organisation and stakeholders. Thus, companies need

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to emphasise stakeholder engagement in order to provide substantial benefits in decision making.

2.3 CSR performance CSR performance is defined as emphasises a company’s responsibility to improve the company’s performance such as social and environmental aspects. Based on Chen and Delmas (2010), CSR performance measures social and environmental performance is to increase the profitability of company’s operations. It indicates that CSR performance affects environmental management, labour right, and social welfare. Therefore, CSR performance assists the company to improve the social welfare, potential of health and safety in the automotive industry.

2.3.1 Social performance Social performance is closely related to social responsibility in terms of processes, programs, and social of company. According to Jones et al. (2010), CSR performance has positive impact on the society to improve the company’s management. This is because company needs to focus on social aspects in order to increase the competitiveness and social welfare. At the same time, social performance plays an important role to ensure that the company complies with the laws and regulations set such as social policy, labour right, and employment conditions. Besides, the company is emphasising the social performance of business to achieve goals (Afonso et al., 2012). This study indicates that by implementing social performance, it enables the organisations to increase the sustainable development, enhance society’s well-being, maximise profit, and improve social value. In addition, many companies emphasise social performance within their organisations because of concerned on ethical behaviour in social responsibility such as company reputation and social image (Norris and Innes, 2005). It means that social performance assists the company to reduce social cost and enhance the quality of society. By adopting social performance in automotive industry, companies are able to identify the social impact and thus can improve management decision.

2.3.2 Environmental performance Environmental performance provides environmental performance reporting to make decisions on the production process that involves environmental pollution, reduce waste and waste disposal. According to Jonall (2008), companies are concerned about the production that affects reuse or recycling in order to preserve the environment. For environmental performance, companies need to emphasise the external costs that can have an impact on environmental legislation, environmental awareness and reducing materials. This is also supported by Abiola and Ashamu (2012), environmental performance can be adopted by the company for cost savings in order to reduce environmental cost and maximise profit of company. Besides, environmental performance provides the benefits to increase the business and sustain a competitive advantage in the automotive industry. Study by Chang and Deegan (2010), environmental management is one of the interest in the company to enhance the environmental performance such as adopting energy reduction, managing the

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process of environment and environmental accountability. Further, the company needs to manage the environmental performance to improve the environmental activities that were adopted in the automotive industry. In addition, environmental performance assists the company make decisions to fulfil their goals such as reduce the environmental pollution, reduction of risk and increase the environmental green of company (Fuzi et al., 2012). Based on Staniskis and Stasiskiene (2003), environmental regulations that are complied by the company have a significant impact on the organisation in providing environmental protection, monitoring and regulatory requirements. By emphasising environmental factors, it can prevent environmental management, environmental expenditures and reduce costs. Thus, an effective environmental performance assists the company to create environmental awareness in order to increase the profit and enhance the quality of production in automotive industry. A research finding of CSR performance is given in Table 4. Table 4

The research finding on CSR performance

Measurement

Findings

Social performance

Provide social accountability, reduce social risk, maximise of social wealth (Moir, 2001); improve the quality of workforce, enhance social welfare, reduce social cost (Wildes, 2008); increase sales, enhance company image and maximise profit (Yang et al., 2010).

Environmental performance

Reduce environmental cost, improve green products, increase the value of the company environmental (Lyon and Maxwell, 2008); promote the environmental processes, improve community ethics and green funds, reduce environmental risks (Iamandi and Filip, 2008); encourage the environmental conservation, enhance environmental protection and provide environmental management (Reinhardt and Stavins, 2010).

3

Research hypotheses

CSR practices and ISO 26000 efforts is affecting the management of the company in terms of social and environmental aspects to increase profitability and reduce costs. To more understand the relationship between CSR practices, ISO 26000 efforts, and CSR performance in Malaysian automotive industry, the following hypotheses be used and tested. Thus, these hypotheses have been developed based on the proposed conceptual model and previous studies.

3.1 The relationship between CSR practices and CSR performance CSR practices play an important role in contributing towards the development of employees, communities and customers to improve the quality of life in the automotive industry. For instance, Ward (2004) stated that CSR practices give positive contributions on social performance, mainly in the society to achieve corporate goals. This is because CSR practices assist the company to achieve maximum profits and the welfare of society. Besides, CSR practices focus on accountability and transparency that influence the CSR performance (Khan and Beddewela, 2008). It indicates that by implementation of CSR

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practices, it can improve the management level of the company such as enhance codes of conduct, provide decision making, and management of stakeholder. Figure 1

A proposed conceptual model 1

e1

EI

1 e2

e12

CF

1

1 e3

EN

1 e4

CG

1 e5

E H4

H2

CS

e11

e9

HR

RS

SIE

1

1

e7

e10

1

H3

ISO 26000

1 e6

CSRP

H1

CSRP

1

SP

e8

Notes: CSRP = CSR practices, IS0 26000 = ISO 26000 efforts, CSRP = CSR performance, EI = employee involvement, CF = customer focus, EN = environment, CG = corporate governance, CS = community and society, HR = human right, RSR = recognising social responsibility, SIE = stakeholder identification and engagement, SP = social performance, EP = environmental performance.

According to Chapagain (2010), CSR practices emphasise more on social and environment aspects in order to improve company performance. The findings of this study show that CSR practices is encouraging companies to implement CSR performance such as social obligations and environmental management. Similarly, CSR practices that exist within the company provide a positive approach on the CSR performance (Kumar and Balakrishnan, 2011). The authors mentioned that CSR practices provide maximum benefit on society and the environment such as society well-being and environmental pollution reduction. Hence, the efficiency of implementation the CSR practices can assist the company to determine the measurement of social and environmental performance. Furthermore, Bayoud et al. (2012) mentioned that CSR practices has significant relationship with environmental aspects in order to reduce environmental cost, increase environmentally friendly products and improve environmental protection. In relation to that, Khanifar et al. (2012) explains that CSR practice affects the CSR performance to fulfil company objectives in maximising profits. By implementing CSR practices and CSR performance in automotive industry, the company can increase the cost saving, improve the social value and reduce environmental issues. Thus, based on previous studies, H1 was proposed: H1

There is a positive and direct significant relationship between CSR practices and CSR performance in Malaysian automotive industry.

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3.2 The relationship between CSR practices and ISO 26000 efforts CSR practices and ISO 26000 efforts are closely related to enhance social responsibility in the automotive industry. Study by Huijstee and Glasbergen (2008), CSR practice affect the stakeholder engagement in assisting the company to identify stakeholders. It means that as companies engage with their stakeholders can reduce the risk and increase competitive advantage. This study was supported by Peloza and Papania (2008), CSR practices are significant to stakeholder engagement for identifying shareholders in order to increase company profits. This is because CSR practices are responsible for stakeholder engagement to reduce the conflicts of decision making. In addition, Roberts (2010) mentioned that CSR practices and ISO 26000 is an organisation requirement to achieve the goals and objectives of the company. As long as there are initiatives of CSR practices, it has the potential to make a positive contribution towards ISO 26000 efforts. In relation to that, CSR practices and ISO 26000 provide long-term approach to ensure that the company complies with the standards and laws. Besides, with the implementation of CSR practices and ISO 26000 in the company, it can strengthen the company’s position on social responsibility (Hoivik, 2011). It indicates that the company is able to review management practices and operations to coordinate guidance and policies in order to achieve transparency and accountability. Meanwhile, Sitnikov and Bocean (2012) found that CSR practices and ISO 26000 assists the company to improve the quality of management. They found that by adopting CSR practices and ISO 26000, it increases employee motivation, training and skills, providing customer satisfaction, and manage the environment. Furthermore, CSR practices and ISO 26000 required to increase the competitive advantage and improve the financial position in automotive industry (Vazquez and White, 2012). However, less research related to CSR practices and ISO 26000 in automotive industry. Hence, the implementation of CSR practices and ISO 26000 in automotive industry is required to improve the quality management and manage the risks of company. Therefore, based on previous studies, H2 was proposed: H2

There is a positive and direct significant relationship between CSR practices and ISO 26000 efforts in Malaysian automotive industry.

3.3 The relationship between ISO 26000 efforts and CSR performance ISO 26000 provides the impact on social and environmental aspects in order to enhance corporate profitability. Besides, Epstein and Roy (2001) indicate that stakeholder engagement emphasises social and environmental performance in order to improve environmental management and social welfare. Further, managers can make effective decisions in terms of profitability, costs, product and process carried out in the company operations. Besides, stakeholder engagement plays an important role on social performance to reduce the social costs (Greenwood, 2004). This is because stakeholder engagement assists companies to achieve social management goals. Based on Castka and Balzarova (2008), ISO 26000 focused more on the social and environmental aspects as it provides guidance to the company to reinforce the legal of social and environmental. Furthermore, to ensure that an organisation achieves CSR performance, ISO 26000 needs to be implemented in the automotive industry to enhance the quality of its operations. Research by Perera (2009), ISO 26000 is beneficial to the company to

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achieve its social and environmental performance, including the company’s reputation, cost savings and increase profits. This finding shows that ISO 26000 has significant impact on the improvement of the social and environmental in terms of management effectiveness of the company. This is supported by Jieyi and Hui (2009), there is relationship between ISO 26000 with the social and environmental performance. In accordance with the ISO 26000 and CSR performance, companies can consider social and environmental performance such as enhance community development, optimise the use of resources and increase operational management efficiency. Moreover, the influence of stakeholder engagement has a significant impact on the company to reduce environmental costs and improve company financial (Dincer, 2011). This is because the engagement of stakeholders is to maximise environmental performance in order to improve company reputation. For instance, Virtanen (2013) indicates that ISO 26000 provides environmental and social benefits to assist companies in accordance with environmental standards especially on safety and health of the society. By adopting ISO 26000 efforts and CSR performance in the automotive industry, company have potential to increase competitive advantage and thus can assist companies to improve the quality of company management. Based on previous studies, many studies show that ISO 26000 has positive impact on CSR performance. Thus, H3 was proposed: H3

There is a positive and direct significant relationship between ISO 26000 efforts and CSR performance in Malaysian automotive industry.

3.4 The relationship between CSR practices, ISO 26000 efforts and CSR performance Many studies shown that the CSR practices influence organisational performance mainly on CSR performance (Ebeid, 2010; Han, 2010; Ghoul et al., 2011; Oladele, 2012). By improving CSR practices and CSR performance, companies need to implement ISO 26000 as the benchmark for social responsibility. According to Ecologia (2011), ISO 26000 provides a positive impact on social and environmental aspects. It means that by adopting ISO 26000 and CSR performance, companies can reduce the environmental and social threat that could bring challenge in the marketplace. For example, reduction of disposal, lower environmental pollution, good workplace culture and protection of rights of workers and the community. Besides, companies need to implement CSR practice in accordance with ISO 26000 to enhance the company’s performance. This is because CSR practices are viewed towards ISO 26000 to enhance social responsibility such as managing employee development, social justice and environmental protection. Furthermore, Moonsamy and Singh (2012) indicate that ISO 26000 provides a positive impact on company performance in relation to the social and environmental issues in order to enhance effective management. However, in Malaysian automotive industry, very hard to found previous studies have been conducted on the implementation of CSR practices, ISO 26000 efforts and CSR performance. Hence, in order to succeed and sustain CSR practices and CSR performance, the company need to implement ISO 26000 efforts in Malaysian automotive industry. Based on this statement, H4 was proposed: H4

The impact of CSR practices on CSR performance increases with a mediating of ISO 26000 efforts in Malaysian automotive industry.

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Methodology

The automotive industry is one of the most important in the production of vehicles. Researcher was chosen automotive industry as a population of this study because the automotive industry encourages manufacturing operations to implement production of vehicles to increase operational efficiency and competitive advantage (Hibadullah et al., 2013). The population of this study comprised in Malaysian automotive industry. In this study, the Malaysian automotive suppliers were selected as the population and data was obtained from Proton Vendor Association (PVA) and Kelab Vendor Perodua (KVP). Then, structured questionnaire was used as a sampling method. Thus, questionnaires were distributed to respondents from the list obtained from Malaysian Automotive Component Parts Association (MACPMA), PROTON and PERODUA automotive suppliers. To analyse the data, one statistical technique was adopted. Habidin and Yusof (2013) mentioned that structural equation modelling (SEM) is a method of data analysis that is increasingly used in empirical studies. SEM using AMOS 6.0 is used to test the measurement model. SEM techniques were utilised to perform the required statistical analysis of the data from the survey. Exploratory factor analysis, reliability analysis and confirmatory factor analysis are used to test for construct validity, reliability and the measurements loading were performed. The Statistical Package for the Social Sciences (SPSS) version 17 was used to analyse the preliminary data and provide descriptive analyses about thesis sample such as means, standard deviations and frequencies.

5

Conclusions

CSR practices and ISO 26000 are important for the company to improve the CSR performance. In this study, CSR practices play important role in social responsibility in accordance with ISO 26000 efforts. Besides, ISO 26000 make a positive contribution for company in order to increase the competitive advantage, productivity, reduce costs and improve management of social and environmental. Indirectly, ISO 26000 affects CSR performance, including cost savings, reduce social, and environmental risks. However, it is very hard to found previous studies to investigate the relationship between CSR practices, ISO 26000 and CSR performance, especially amongst Malaysian automotive industry. Therefore, CSR practices, ISO 26000 efforts, and CSR performance have become more important in order to achieve the success and sustaining in quality improvement that involve local car manufacturers and automotive suppliers in order to enhance the company profitability and reputation. Based on proposed model and previous study, research hypotheses were developed. A conceptual model has been proposed to examine the relationships between CSR practices, ISO 26000 efforts, and CSR performance in Malaysian automotive industry. The next step of this study is to design a questionnaire, which will be used for pilot study data collection in Malaysian automotive industry. This study is expected to provide valid and reliable for instrument and structural relationship model for CSR practices and ISO 26000 efforts and CSR performance measures.

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Acknowledgements The researches would like to acknowledge the Ministry of Higher Education (MOHE) for the financial funding of this research thought Fundamental Research Grant Scheme (FRGS), and Research Management Centre (RMC), UPSI for Research University Grant (RUG).

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