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On the drivers of corporate social responsibility in banks: evidence from an ethical rating model

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Abstract

The purpose of our paper is the construction of a multidimensional ethical rating model, based on many items that represent the most significant Corporate Social Responsibility drivers of the banks. The items considered have been drawn from literature and from corporate reporting and websites of banks and then subjected to content analysis. The model, applied to a sample of European banks, was divided into four areas of analysis (Disclosure; Organization and Management; Offer of Socially Responsible Instruments; International Agreements, Certifications and Indexes) to identify the most frequent ethical conducts and the ones that require improvement measures. Our research highlights that banks pay more attention to the offer of socially responsible instruments and organization and management issues. On the contrary, the banks examined could enhance their socially responsible approach by reinforcing disclosure on Corporate Social Responsibility. In particular, there is a modest orientation towards disclosure on the basis of the triple bottom-line approach. Finally, as for international agreements, certifications and indexes, improvement actions are still needed: there are still many international principles which have not yet been adhered to and an increase in requests for more ethical/quality certifications and inclusion in reputational ratings would be desirable.

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Notes

  1. In fact, while some studies represent the socially responsible behavior of the banks by means of the attention paid to the financing of local economies (as in the case of CRA ratings used by both Simpson and Kohers 2002 and Vitaliano and Stella 2006), other investigations focus on the compliance with major international standards such as the Equator Principles (Scholtens 2006; Scholtens and Dam 2007), or choose to rely on assessments by rating ethics agencies (as Ethibel, SAM, Axia, see Soana 2011, or KLD, see El Ghoul et al. 2011). In other papers, however, a bank’s CSR level is measured by the amount of financial resources assigned to the development of such strategies (Callado-Muñoz and Utrero-Gonzalez 2011).

  2. Other important ethical rating agencies are: Vigeo, IW Financial, Calvert, Jantzi Research Inc., RiskMetrics-MSCI, Accountability Rating, ASSET4 of Thomson Reuters.

  3. Although they do not concern exclusively the banking sector, other studies that build independent CSR indicators are those of Brammer et al. (2006), Mahoney and Thorne (2005), Moore (2001), Sotorrío and Sánchez (2008).

  4. On the basis of the other Chi square test hypothesis (H1), the score of the item influences the ethical rank, admitting the presence of association between the scores of the items and the classification of the banks into the classes “low”, “medium” and “high”.

  5. As regards the items 28 and 47, all banks in the “low” rating class are no ethical: they do not offer migrant banking services and are absent in international reputational rankings.

  6. The Carbon Disclosure Project is an independent not-for-profit organization working to promote reduced greenhouse gas emissions and sustainable water use in businesses and cities (Carbon Disclosure Project 2011). The Equator Principles, however, are a voluntary set of standards in 76 financial institutions which set out how to conduct, assess and manage social and environmental risks in project financing (Scholtens 2006).

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Author information

Authors and Affiliations

  1. Dipartimento di Economia Aziendale, University “G. d’Annunzio” of Chieti-Pescara, Pescara, Italy

    Giuliana Birindelli

  2. Dipartimento di Economia e Management, University of Pisa, Pisa, Italy

    Paola Ferretti

  3. Dipartimento di Studi aziendali e giusprivatistici, University of Bari “Aldo Moro”, Bari, Italy

    Mariantonietta Intonti

  4. Dipartimento di Scienze giuridiche, storiche, economiche e sociali, University “Magna Graecia” of Catanzaro, Catanzaro, Italy

    Antonia Patrizia Iannuzzi

Authors
  1. Giuliana Birindelli
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  2. Paola Ferretti
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  3. Mariantonietta Intonti
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  4. Antonia Patrizia Iannuzzi
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Corresponding author

Correspondence to Mariantonietta Intonti.

Additional information

Even if the study reflects a common view, Giuliana Birindelli mainly contributed to Sects. 3.2 and 4.2, Paola Ferretti to Sects. 1, 4.1 and 5, Mariantonietta Intonti to Sects. 3.1 and 4.3, Antonia Patrizia Iannuzzi to Sects. 2 and 4.4.

Appendix

Appendix

1.1 The ethical rating model

 

Score

Disclosure

 

1

Sustainability Report

0 Non-published

1 Published

2

Compliance with GRI standards

0 Non-compliance

0.5 Partial compliance (level B–C)

1 Full compliance (level A)

3

External audit

0 Non-audited

1 Audited

4

Environmental Report

0 Non-published

0.5 Published non-specific report

1 Published specific report

5

CSR information in the Annual Report

0 No

1 Yes

6

Stakeholder Engagement Report

0 Non-published

0.5 Published non-specific report

1 Published specific report

7

Economic value created

0 Absence of information

1 Presence of information

8

Economic value distributed to community and environment

0 Absence of information

1 Presence of information

9

Access to CSR section on the website

0 (5 clicks or more)

0.5 (2–4 clicks)

1 (1 click—home page)

10

Information on conflicts of interest

0 Non-published

0.5 Published non-specific report

1 Published specific report

11

Information on remuneration policies

0 Non-published

0.5 Published non-specific report

1 Published specific report

12

Disclosure on remuneration—Pillar 3 (voluntary)

0 No

1 Yes

Organization and management

 

13

Ethics/conduct code

0 Absence

1 Presence

14

Function dedicated to CSR issues

0 Absence

1 Presence

15

Procedures for reporting breaches of ethical code

0 Absence

1 Presence

16

Independent directors

0 < 50 %

0.5 = 50 %

1 > 50 %

17

Training programme in favour of employees on CSR issues

0 Absence

1 Presence

18

Measurement of employee satisfaction

0 Absence

1 Presence

19

Programme to promote diversity and equality

0 Absence

1 Presence

20

Programme to promote financial education/literacy

0 Absence

1 Presence

21

Stakeholder engagement

0 Absence

1 Presence

22

Measurement of customer satisfaction

0 Absence

1 Presence

23

ESG variables within credit risk management

0 Absence

1 Presence

24

ESG variables within remuneration policy

0 Absence

1 Presence

25

Assessment of sustainability performance of suppliers

0 Absence

1 Presence

Offer of socially responsible instruments

 

26

Ethical funds offer

0 Absence

1 Presence

27

Microcredit offer

0 Absence

1 Presence

28

Migrant banking services offer

0 Absence

1 Presence

29

Funding initiatives for the non-profit sector

0 Absence

1 Presence

30

Financial instruments/initiatives to support women, youth and children

0 Absence

1 Presence

31

Other instruments of financial inclusion (e.g., disabled people)

0 Absence

1 Presence

32

Offer of products complying with reputational risk policies (e.g., weapons)

0 Absence

1 Presence

33

Financial instruments designed to provide environmental benefits

0 Absence

1 Presence

International agreements, certifications and indexes

 

34

Adoption of UNEP FI

0 Absence

1 Presence

35

Membership or adoption of UN Global Compact Principles

0 Absence

1 Presence

36

Support for Carbon Disclosure Project

0 Absence

1 Presence

37

Member/signatory of Wolfsberg Group

0 Absence

1 Presence

38

Adoption of Equator Principles

0 Absence

1 Presence

39

Adoption of PRI Principles

0 Absence

1 Presence

40

Adoption of Women’s Empowerment Principles

0 Absence

1 Presence

41

Adoption of Climate Principles

0 Absence

1 Presence

42

Adoption of UN Universal Declaration of Human Rights

0 Absence

1 Presence

43

Partnership with the UNI Global Union

0 Absence

1 Presence

44

Collaboration with Unicef and/or WWF

0 Absence

1 Presence

45

Ethical or quality certifications

0 Absence

0.5 One certification

1 More certifications

46

Inclusion into indexes or ethical ratings

0 Non-adoption

0.5 Inclusion in one index or ethical rating

1 Inclusion in more indexes or ethical ratings

47

Inclusion in international reputational ranking of Reputation Institute (Global RepTrak Pulse 2011) and/or of Fortune (World Most Admired Companies)

0 Non-inclusion

1 Presence

48

Awards and/or recognitions

0 Absence

1 Presence

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Birindelli, G., Ferretti, P., Intonti, M. et al. On the drivers of corporate social responsibility in banks: evidence from an ethical rating model. J Manag Gov 19, 303–340 (2015). https://doi.org/10.1007/s10997-013-9262-9

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