Corporate Social Responsibility in the Bank Value Chain

This chapter investigates how corporate social responsibility (CSR) may connect to the value chain in the banking industry. Banks have a small direct impact on sustainable development because of the low resource intensity of their production processes. ¹ However, their indirect impact is substantial as banks facilitate economic activity. ² Wood argues that CSR can be regarded as a set of structural categories integrated in an open-systems model of a firm. ³ An open system takes in resources from and emits outputs into its larger environment. As such, CSR connects with the harms and benefits that result from a corporation’s interactions with its larger environment, including the social, cultural, political, economic, legal, and natural dimensions. ⁴ Dyllick and Hockerts discuss how social, environmental, and ethical issues can be integrated at the business level and why it is crucial for the development of a corporation to account for these issues. ⁵ Hart et al., Van Tulder et al. and Mefford ⁶ further theorize on the economic rationale for a sustainable supply chain based on production, finance, and marketing theories. ⁷ Babiak and Trendafilova find that both strategic and legitimacy motives play a role in the adoption of environmental management practices, with strategic motives dominating the more institutional pressures. ⁸ Roth and Jackson provide a framework to analyze strategic determinants of service quality and performance in the banking industry. ⁹ They find that generic operations capabilities affect quality and performance, that quality and innovations can be directly observed and imitated, that investments in people are critical to success, that market conduct influences the generic capabilities of banks more than performance, and that total factor productivity tends to be negatively correlated with service quality. However, they do not account for environmental, ethical, and social conduct and performance.