DAX-Firms and Human Rights: Understanding Institutional and Stakeholder Pressures along the Value Chain

241 Pages·2018·6.15 MB·English

by  Carlo Manuel Drauth (auth.)

Carlo Manuel Drauth
DAX-Firms
and Human Rights
Understanding Institutional
and Stakeholder Pressures
along the Value Chain
DAX-Firms and Human Rights
Carlo Manuel Drauth
DAX-Firms
and Human Rights
Understanding Institutional
and Stakeholder Pressures
along the Value Chain
Carlo Manuel Drauth
Berlin, Germany
Dissertation Hertie School of Governance, Berlin, Germany, 2017
ISBN 978-3-658-19882-4 ISBN 978-3-658-19883-1 (eBook)
https://doi.org/10.1007/978-3-658-19883-1
Library of Congress Control Number: 2017955537
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Acknowledgements
Research and writing is often a solitary endeavour, but this dissertation would
not have been possible without the encouragement and support of many people.
First, I would like to express my sincere appreciation and gratitude to my ad-
visors Prof. Dr. Anke Hassel and Prof. Dr. Andreas Rasche for their excellent
guidance during this project. You always found the time to give me valuable
feedback and advice when I needed it.
In addition, Prof. Dr. Sarah Jastram and Dr. Nicole Helmerich deserve special
thanks, as my thesis committee members and advisors. So do friends and col-
leagues like Fabian, Thomas, Dennis, Ingo and Steffi for reading and comment-
ing on chapter drafts.
Thanks also goes to the Hertie School of Governance and the many people I
have come to know there since I first set foot on campus as a young master stu-
dent in 2007.
I am very grateful to Fabian and Udo who I consider family: Fabian for un-
derstanding me best not only as a fellow PhD, but more importantly as my best
friend from whom I have learned so much. Udo for being an essential part of our
family life for so many years already, showing us what true friendship means.
My deepest gratitude goes to Belén for her daily support during these past
three years. You have been the best partner anyone can ask for, helping me get
through the at times difficult research and writing, be it with your continual en-
couragement, your intelligent advice, your unique sense of humour – or simply
with your love. Words cannot describe what you mean to me.
Finally, my greatest gratitude to my mother, my father, and my brother for
their unconditional love, help and support. In fact, this dissertation is the work of
all of us, of our entire family, which did not start in 2013, but in 1983. The feel-
ing that I cannot fall deeper than into your arms has provided me with the
strength to, amongst others, start and finish this dissertation. Mama, Papa,
Marco: Thank you, you are everything to me.

Carlo Manuel Drauth
Abstract
Under which conditions do multinational enterprises systematically manage hu-
man rights risks with a view to preventing human rights abuses across their oper-
ations?
Using a multi-method research design combining qualitative comparative
analysis (QCA) and process tracing case studies (PT-CS), this study of the 30
largest German companies finds that it is neither institutional forces nor stake-
holder pressures alone, but their combined effect that leads to a systematic hu-
man rights management at the firm-level: That is, stakeholders (e.g. NGOs) as
more proximate actors act on and transmit existing institutional pressures (e.g.
social expectations) to firms, while institutions provide stakeholders with the le-
gitimacy necessary to successfully influence corporate behaviour. This conjunc-
tional effect implies that a systematic approach to human rights is more likely to
be found among firms with consumer proximity. Why? It is a firm’s position in
the value chain that determines the concrete configuration of institutional and
stakeholder pressures for a company: Downstream the value chain in the B2C
business, where institutional and stakeholder pressures are generally high due to
greater public exposure, most companies systematically address human rights is-
sues: These B2C firms are exposed to an institutional environment, where firms
are not only socialised into newly-emerging CSR-topics like human rights
through institutional learning in CSR initiatives like the UNGC, but also con-
stantly monitored by civil society actors like NGOs whether they walk the talk
(i.e. 1st path to a systematic human rights management). Upstream the value
chain in the B2B business, where institutional and stakeholder pressures are gen-
erally low due to no or limited public exposure, most companies do not system-
atically address human rights issues or, at the most, only symbolically. Having
said that, there is a smaller subset of B2B firms with concrete human rights risks
working in B2C-dominated value chains that systematically address human
rights issues: These B2B firms are passed on pressure from business clients via
the supply chain and, thereby, enter a similar institutional environment, where
firms are also socialised into newly-emerging CSR-topics like human rights
through institutional learning in CSR initiatives like the UNGC, while the moni-
toring here is not done by civil society actors like NGOs, but by their own busi-
ness clients eager not to be involved in reputation-damaging human rights scan-
dals (2nd path to a systematic human rights management).
VIII Abstract

What follows from the above is that the 1st path and 2nd path to a systematic
human rights management are not independent from each other, but firms in the
former can (directly or indirectly) influence the behaviour of the latter. That is to
say: B2C firms under institutional and stakeholder pressure (i.e. 1st path) pass on
their pressure to B2B firms (i.e. 2nd path) via the supply chain, but not to all of
them, just to the ones with concrete human rights risks in B2C-dominated value
chains. This implies that the source of pressure to act on human rights changes as
you move along the value chain: Civil society actors like NGOs are powerful
downstream in the B2C world, whereas business clients can be powerful up-
stream in the B2B world. However, since pressure to act on human rights is not
passed on in every (industry) supply chain, a significant subset of firms in the of-
ten risk-prone B2B business is under no or only limited pressure and thus often
inactive in terms of human rights.
This blend of institutional and stakeholder theory while taking an explicit
value chain perspective constitutes a new approach to the study of CSR in gen-
eral and human rights in particular, which reflects the varying realities B2C and
B2B companies are subject to in practice.
Table of Contents
List of Abbreviations ........................................................................................ XI
List of Tables .................................................................................................. XIII
List of Figures .................................................................................................. XV
1. Introduction ................................................................................................... 1
2. Introduction to Topic and Research Question ........................................... 11
2.1. Global Reach of MNEs and Human Rights Abuses ..............................11
2.2. Global Governance Gaps and Multifaceted Governance
Response ............................................................................................... 20
2.3. Research Question and its Relevance ................................................... 27
3. Literature Review ........................................................................................ 31
3.1. Literature on Business and Human Rights ............................................ 32
3.2. Literature on CSR ................................................................................. 36
3.3. Research Gap ........................................................................................ 47
4. Theoretical Framework .............................................................................. 49
4.1. Institutional Theory .............................................................................. 49
4.2. Stakeholder Theory ............................................................................... 54
4.3. Synthesis of Theories ............................................................................ 57
4.4. Theoretical Framework ......................................................................... 62
4.5. Hypotheses............................................................................................ 71
5. Methods ........................................................................................................ 75
5.1. Multi-Method Research ........................................................................ 75
5.2. QCA ...................................................................................................... 76
5.2.1 Delineation of the Population of Cases ..................................... 79
5.2.2 Choice of all Relevant Conditions to Explain Outcome ............ 79
5.2.3 Calibration of Conditions and Outcome .................................... 80
5.2.4 The Analytical Moment of the QCA ......................................... 82
5.2.5 Consistency and Coverage Measures ........................................ 87
5.2.6 Discussion of QCA Results ....................................................... 88
X Table of Contents

5.3. Process Tracing Case Studies ............................................................... 88
5.4. Strengths of Proposed Research Design ............................................... 91
6. QCA Analysis on DAX 30 ........................................................................... 93
6.1. Delineation of Population ..................................................................... 93
6.2. Choice of Conditions and Outcome ...................................................... 95
6.3. Calibration of Conditions and Outcome ............................................... 99
6.4. QCA Analysis ......................................................................................114
6.5. Results ................................................................................................ 139
7. Case Studies ............................................................................................... 141
7.1. Methods of Data Collection and Analysis .......................................... 141
7.2. Case Study I: 1st Path to a Systematic
Human Rights Management ............................................................... 146
7.3. Case Study II: 2nd Path to a Systematic
Human Rights Management ............................................................... 178
8. Findings and Discussion ........................................................................... 203
8.1. Results ................................................................................................ 203
8.2. Main Argument ................................................................................... 204
8.3. Contributions ...................................................................................... 207
8.4. Further Research ................................................................................. 215
References ........................................................................................................ 217
List of Abbreviations
B2B Business-to-Business
B2C Business-to-Consumer
CEO Chief Executive Officer
CR Corporate Responsibility
CSR Corporate Social Responsibility
DAX Deutscher Aktienindex (German Stock Index)
DGCN Deutsches Global Compact Netzwerk (German Global
Compact Network)
ESG Environment, Social and Governance
EU European Union
FDI Foreign Direct Investment
fs fuzzy set
FTSE 100 Financial Times Stock Exchange 100
GBP Great Britain Pound
GeSI Global e-Sustainability Initiative
GRI Global Reporting Initiative
ICT Information and Communications Techonolgy
ILO International Labour Organization
ILO CLS ILO Core Labour Standards
MNE Multinational Enterprise
NAP Nationaler Aktionsplan Wirtschaft und Menschenrech-
te (National Action Plan on Business and Human
Rights)
NGO Non-Governmental Organisation
OECD Organisation for Economic Cooperation and Devel-
opment
PT-CS Process Tracing Case Studies
QCA Qualitative Comparative Analysis
SA 8000 Social Accountability 8000
TfS Together for Sustainability Initiative
UDHR Universal Declaration of Human Rights
UN United Nations