Research Rationale

It is important to critically evaluate how the corporate social responsibility performance of the UK based Oil and Gas firms, UK Oil and Gas plc (UKOG) and Cuadrilla Resources companies affects and relates to the firm’s’ financial responsibilities.   The Capstone project focuses on analysis of the strategic management of the firms’ scarce resources to allocation in the social expectations of the firm such as environmental; conservation and protection of human biodiversity. Corporate social responsibilities is a private business self-regulation directed towards business sustainability and corporate citizenship. This responsibility is considered by the firms as their business policy. The corporate social responsibility is therefore aligned with the firm’s business model to sustain their financial performance while maintaining a sustainable business environment in the business social setting. This study objectively will critically analyze the associations between the corporate financial performance and corporate social responsibilities with a direct focus on evaluating the advantages of implementing a corporate responsibility program within the firm’s business model and how the specified CSR program influences the sales and profit margins of the business in the long-term.

In the recent years, there has been a rising trend with the implementation of the CSR programs within business models across the entire business community such as hotel and tourism, real estate, transport sector and health care. This case study therefore will have implications to the beneficiaries of the corporate social responsibility program such as managers, company executives and the community in the Oil and Gas firms in the UK with benefits such as greater profit margins, environmental conservation, minimization of health risks and corporate governance with the proper framework of practices, guidelines and rules that ensure fairness, transparency and accountability in the relationship with the stakeholders.

Contrasting with the financial theory, the true definition and purpose of the CSR programs in business models is not clear to objectively increase the firms’ shareholders’ wealth. However, since the corporation’s financial performance is impacted upon by the stakeholder’s interests such as the company’s responsibilities into environmental conservation, community development and social skills, such non-monetary interests affect the business model and create a need for the executives to create a business model with a fully functional CSR program. Therefore, for the aims of this case study, the CSR is defined as the non-monetary actions required by written or social law that guides the UKOG and Cuadrilla Resources Oil and Gas firms in the UK to further their interests beyond financial performance for the social good. The CSR, as per the definition, increase the requirements of the firms to not only abide by the laws but also implementation of policies that impact positively to the society through the stakeholders such as employees, consumers and community in which the business firm is located.

In this case-study, the relationship between the financial performances of the two (UKOG and Cuadrilla) Oil and Gas firms in the UK with stakeholders’ frustration and dissatisfaction are critically reviewed and evaluated with comparison to the companies’ corporate social responsibility performance following implemented CSR programs. The research will incorporate solutions and innovative approaches targeted towards systems change.  

Research Question

The research question is: To critically analyze the relationship between Corporate Social Responsibilities and Financial Performance of Oil and Gas firms in the UK with a focus on the UK Oil and Gas plc and Cuadrilla Resources plc?

To critically evaluate the non-monetary interests of the UKOG and Cuadrilla Resources firms’ stakeholders in the company’s business Corporate Social Responsibility program.

To analytically describe the relationship between the Corporate Social Responsibility performance and Financial Performance of the UKOG and Cuadrilla Resources Oil and Gas companies.

To critically review the business model for the UKOG and Cuadrilla Resources Oil and Gas firms offering stakeholders satisfaction through an elaborate CSR program.

The Corporate Social Responsibility performance is directly proportional to an Oil and Gas Firm’s Financial Performance in the UK leading to fulfillment of the financial theory and stakeholder satisfaction.

Literature Review

There is a direct link between the financial performance of a firm and its corporate social responsibilities performance program.  Therefore, forces the company’s top management to make tough decisions on the allocation of the scarce corporate resources. This is in order to fulfill the financial theory and increase the shareholders’ wealth or allocate the resources towards fulfillment of the stakeholders non-monetary interests and increase the CSR performance. Pressures associated with social issues and demands, Robert Ackerman (1974) in management complicates the decision making process of the executives hence forcing the managers to drop the traditional components of strategic management that conform to the financial theory. As described by Waddock & Graves (1998), corporate social performance is positively related to the financial performance. This leads to theory that resource availability and CSP are directly related, John Wiley & Sons (1997) supporting the concept that good management and CSR performance are related and positively impact on the future Financial performance.  

Brought up by D’Arcimoles & Trebucq (2002), the authors argue that the corporate social responsibility is a marketing strategy and thus is increasing gaining more recognition in the marketing literature. The authors de-link the CSR performance as a direct association to the firm’s financial performance. The research paper argues that there is a positive, negative or neutral association between the social performance and financial performance. The study further describes the need for the development of control models in research and development investments.

According to Garriga & Mele (2004), the CSR field tries to explain theories of corporate management through mapping the territories of the CSR performances and trying to associate them with the different theories of business management. The CSR theories try to explain four dimensions of strategic business management in terms of profits, social demands, political performance and ethical values. The authors suggest the development of a new theory that links and associates the Corporate Social Responsibility performance and the Financial Performance as a business and society theory that integrates the four dimensions of the CSR and Financial Performance.  The theories outlines, the instrumental theory that explains the firm as an instrument for wealth creation, political theory that explain the power of the corporations, integrative theory that focuses on the satisfaction of social demands and the ethical theory that is based on the ethic responsibilities of the corporations to the society.  

Objectives

Depicted as a key ingredient in the financial development of a company, influencing the profit making growth of firm, CSR is considered instrumental in the business success, Servaes & Tamayo (2013). The researchers sought to find out the connection between the CSR and the business values of a company from a group of conscious consumers. From their set of results in the different studies conducted, the poor social responsibility negatively influenced a company’s success.  

Attempting to provide a senior and business oriented relationship between CSR and firm financial performance, Kwang-Ho, MinChung & Cuili use a competitive-action perspective to table their argument. The authors determined that competition in business is an important element that determined the effects and influence of the CSR on the financial performance of the business.  Using data from a public software companies, the researchers concluded that in a very competitive environment, the financial performance of the company was enhanced by a positive CSR relationship. In their research, Kwang-Ho, MinChung & Cuili(2015) determined that in a very low competitive market, socially irresponsible and unethical activities of a firm resulted in a negative CSR that enhanced financial performance of the company in question.

Contrasting with the financial theory, the true definition and purpose of the CSR programs in business models is not clear to objectively increase the firms’ shareholders’ wealth, Brammer (2012). However, since the corporation’s financial performance is impacted upon by the stakeholder’s interests such as the company’s responsibilities into environmental conservation, community development and social skills, such non-monetary interests affect the business model and create a need for the executives to create a business model with a fully functional CSR program, Barik (2017). Therefore, for the purpose of the study, the CSR is defined as the non-monetary actions required by written or social law that guides the Oil and Gas firms in the UK to further their interests beyond financial performance for the social good. The CSR, as per the definition of Herzig, 2010, increase the requirements of the firms to not only abide by the laws but also implementation of policies that impact positively to the society through the stakeholders such as employees, consumers and community in which the business firm is located.

One of the more seasoned inquiries in the discussion about Corporate Social Responsibility (CSR) is whether it is advantageous for associations to focus on societal expectations. This discussion has always been inwardly, normatively, and ideologically stacked being a vital trigger for experimental research in CSR. This evident indecision and mal-information in CSR relationship with financial performance warranted this research to illuminate the discussion and consider the making of determinations. The consequences of the researches performed uncover that there is undoubtedly clear experimental confirmation for a positive connection between corporate social and money related interests. Voices that express the inverse allude to outdated material. Since the beginnings of the CSR banter, social orders have changed. We can along these lines plainly express that, for the present Western culture, “Great Ethics is Good Business”, Beurden & Gossling, (2018).

Hypothesis

Research Methodology

Data collection will involve a mail survey protocol with structured questionnaires. The data will be collected from UKOG and Cuadrilla Resources Oil and Gas companies in the United Kingdom.

The oil companies were selected using two different criteria:  majorly, the firms had been in operation in the UK for at least 8 years, secondly, the firm’s organizational size were big enough with at least ten thousand employees, serving a large geographical area and having registered a minimum of 1 billion Euros in revenues.

The criteria used will base on the assumption that the UKOG and Cuadrilla Resources companies have been in the market long enough to understand and have adopted reliable and efficacious CSR and financial performances (Pagell et al, 2004).  By selection of UKOG and Cuadrilla, firms inclined towards social sustainability, the research would be more appropriate. From the firms, key data sources would be primary data from previous researches, articles and journals with informants from the community around the exploration sites.

The aim of the research is to critically analyze how the adoption of the CSR program in UKOG and Cuadrilla in the UK as listed on the oil and gas UK government portal affects the financial performance of these companies (Gjolberg, 2009). In the sampling method, the assumption made will be that CSR leads to higher financial performance.

In order to determine the relationship, this research will employ a case study approach regarding a statistical approach to the companies. Hence, secondary sources of data will be analyzed regarding the financial performance and corporate social responsibilities from online journals, research papers, articles and books. In the research, according to Hyde, 2000, a deductive approach study will be conducted in order to compare results with the previous data.  

The CSR will be defined as the social responsibility of the firms to the environment, community and stakeholders. However, due to the absence of a baseline framework (Rapti & Medda,2012), the research will utilize the reputation index and the content analysis, developed by (Fasanya & Onakoy, 2013). The research will analyze content relating to the firms from their web pages, code of ethics and annual reports. As a multidimensional aspect, the CSR data will also be collected from the stakeholders of the firms through structured questionnaires.

The most important benefit of CSR is the financial success of the company. The financial performance will be analyzed through examination of the financial records for information about growth, earnings, expenditure, investments and costs (Walsh, 2006). The data collected from the financial records will be categorized into market-based and accounting-based (Van Horne & Wachowicz, 2012). The ultimate measure of the companies will through analysis of the profit books in relation to sells and investments, the return on assets and return on equity profitability ratios.

The data finding of the research will be analyzed, processed and presented in this section. Primarily, to meet the objective of the study, a simple linear regression ad factor analysis method will be used to determine the dependence between the financial indicators of financial performance and CSR performance.   To generate a regression analysis, the Statistica tool will be applied to determine the dependence.

Conclusion:

The objective of this research will be to evaluate and critically appraise the relationship between the corporate social responsibility and financial performance of the UKOG and Cuadrilla Oil and Gas companies in the UK. Moreover, the research will also estimate the four dimensions, ethics, finance, power and social demands correlation with the financial performance.

References:

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