How should mining firms invest in the multidimensions of corporate social responsibility? Evidence from China

Resources Policy 65 (2020) 101576

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How should mining firms invest in the multidimensions of corporate social responsibility? Evidence from China Xinyuan Peng a, b, Pengcheng Tang a, b, c, *, Shuwang Yang a, b, c, Shuke Fu d a

Economics and Management College, China University of Geosciences, 430074, Wuhan, China Economics and Environment Research Center, China University of Geosciences, 430074, Wuhan, China c Key Laboratory of Strategic Studies, Ministry of Land and Resources, 430074, Wuhan, China d School of Law and Business, Wuhan Institute of Technology, 430205, Wuhan, China b

A R T I C L E I N F O

A B S T R A C T

Keywords: Corporate social responsibility Multidimensions Configurational perspective Mining firms China

Although it is widely accepted that mining firms should be involved in corporate social responsibility (CSR) activities, we do notice that CSR engagement is relatively high-cost, especially considering the fact that mineral products have suffered from an extended period of lower and volatile commodity prices. Therefore, we explore how mining firms “do well by doing good”. Using a sample of listed mining firms in China over the period covering 2008 to 2017 and fuzzy-set/qualitative comparative analysis, we explore which configurations of CSR dimensions result in different levels of return on equity (ROE). Our empirical results provide compelling evidence that 1) although 34% of listed mining firms have published CSR reports, their CSR level has more room for improvement; 2) mining firms do more in product dimensions than other CSR dimensions; 3) it is more likely to affect profitability by investing in the multidimensions of CSR in a combined way, and four patterns result in high ROE, while one pattern leads to not-high ROE; and 4) doing more in community and CSR governance is more likely to enhance profitability, while in diversity and products, it does the opposite.

1. Introduction Mining firms has an influential role in resource and material provi­ sion (Ma et al., 2019), but it also results in serious environmental damage (such as landscape destruction, groundwater contamination, carbon emissions and industrial waste), threatens employee health and safety (such as work-related accidents), and disrupts local communities (such as a disruption of traditional way of life and economic stability) (Han et al., 2019; Tuokuu et al., 2019; Wang et al., 2017). Given these outstanding environmental and social issues, the mining firms is always at the forefront of corporate social responsibility (CSR), which helps mining activities fit into a sustainable framework (Dashwood, 2007), mitigates their reputational risk, operational risk and regulatory risk (Frederiksen, 2018), and increases public acceptance of mines (Slack, 2012). Meanwhile, the cost of global mining has long continued to decrease, and it appears prices will remain low for a long time (EY, 2016). China also sees the same trend, as shown by Fig. 1, and its mining commodity price index has suffered a downtrend since 2012, which was slightly reversed in 2016. Similarly, the profit ratio has significantly dropped,

from 18% in 2011 to 4% in 2016 (Coal Mine News Net, 2017). There­ fore, mining firms are now under greater pressure to increase profit­ ability (EY, 2016; International Council on Mining and Metals, 2016). Though CSR norms have been widely accepted, engagement with CSR activities, deemed as a type of a “luxury good”, also consumes corporate disposable resources that were originally used for its core business (Trumpp and Guenther, 2017). Therefore, firms refuse to invest in CSR activities when they face higher capital constraints (Cheng et al., 2014). Wang et al. (2017) offered a suitable example of Kunyang Phosphate, who ignored the corporate-community relationship until the firm turned losses into gains in 2003. In view of the multiple dimensions of CSR (Carroll, 1991; Freeman, 1984), the specific research question addressed is this: How do the multidimensions of CSR affect corporate financial performance (CFP) among mining firms? By doing so, our research provides practical guidance for mining firms on how to invest in the multidimensions of CSR without causing damage to profitability: a win-win situation. Actually, the effect of CSR on CFP is an open and hot-button issue (Busch and Friede, 2018; Qian et al., 2016; Tang et al., 2019a). Although a significant number of studies have detected a positive association

* Corresponding author. No. 388 Lumo Road, Hongshan District, 430074, Wuhan, Hubei Province, China. E-mail addresses: [email protected], [email protected] (P. Tang). https://doi.org/10.1016/j.resourpol.2019.101576 Received 7 May 2019; Received in revised form 17 December 2019; Accepted 23 December 2019 Available online 20 January 2020 0301-4207/© 2019 Elsevier Ltd. All rights reserved.

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multidimensions of CSR affect firm profitability based on a large sample size. Different from previous studies which mainly concentrate on single aspect of CSR, we study how six dimensions of CSR work with each other to affect CFP. Meanwhile, by employing a relatively larger sample, our conclusions could be generalized to some extent, while case studies failed. Second, our study contributes to the classical CSR-CFP relation by focusing on the mining firms from a configurational perspective. As stated above, the aggregation of different CSR dimensions and ignorance of intra-industry traits result in the mixed results between CSR and CFP. Therefore, by focusing on the single industry, our paper is able to gain insights into how the multidimensions of CSR interact with each other, which is often left unstudied in research on other sectors. Third, we advance the understanding of stakeholder classification among mining firms. The most common categorization used for seg­ menting stakeholders is based on their weights, namely, primary stakeholders and secondary stakeholders (Clarkson, 1995). In general, primary stakeholders could directly affect firm operation via internal changes, including employees, consumers, and suppliers, while sec­ ondary stakeholders refer to another dimension that affects and is affected by the enterprise’s operation without direct engagement in economic transactions with the enterprises, such as the general public and the environment (Su and Tsang, 2015). However, when focusing on the mining firms, our empirical results show that not all primary stakeholders truly play leading roles in enhancing firm performance. For instance, most of our configurations show that the absence (presence) of the products dimension of CSR, which is linked to consumers and sup­ pliers, is associated with high (not-high) profitability, while the local community is more vital. The remainder of the paper is organized as follows: Section 2 outlines the theoretical framework, such as channels through which CSR affects CFP, the multidimensionality of CSR and complementarity and trade-off among these CSR dimensions; Section 3 outlines the current situation of mining firms’ CSR in China; in Section 4 and Section 5, we present the fs/QCA method and corresponding empirical results; and Section 6 summarizes the conclusions of this study and puts forward some managerial suggestions.

Fig. 1. Mining commodity price index trend. Source: China Commodity Price Index based on the weekly commodity price database of China’s Circulation Net.

between CSR and CFP (Platonova et al., 2018; Puncheva-Michelotti et al., 2018), some scholars state that CSR activities can be expensive, give rise to an administrative burden, and exaggerate agency conflicts (Barnea and Rubin, 2010; Choi et al., 2013), namely a negative associ­ ation between two. Besides, others argue that the association is contingent on firm innovation, differentiation (Hull and Rothenberg, 2008), competitive action (Kim et al., 2018), and other circumstances. Several reviews (e.g., Godfrey and Hatch, 2007) have pointed out that the use of multi-industry samples and the aggregation of different CSR dimensions contribute to these puzzling results, which informs us to focus on the multidimensions of CSR based on a single industry. Zooming into the mining firms offers us a suitable chance to exclude the effect of inter-industry characteristics on the relation between CSR and CFP, but prior studies mainly focus on certain dimensions of mining firms’ CSR. After reviewing 72 papers in this area, Rodrigues and Mendes (2018) found that dimensions of environment (e.g., Ruokonen and Temmes, 2019), local community (e.g., Tang-Lee, 2016) and employee (e.g., Han et al., 2019) have garnered more attention compared with other CSR dimensions. Actually, mining firms’ CSR is a multidimensional construct, and there exist complementarity and trade-off among them (as discussed below). Meanwhile, prior studies rely more on case studies, which prevents the generalization of the re­ sults obtained (Newenham-Kahindi, 2015). To solve these two issues, we implement a configurational perspec­ tive (Misangyi et al., 2017), with fuzzy set qualitative comparative analysis (fs/QCA), in an inductive,1 explorative approach, to unveil the configurations of CSR conditions that, when combined, explain why firms achieve different levels of firm profitability. In contrast to the correlation-based approaches in previous CSR-CFP research, QCA allows us to explore more complex interdependencies as well as different combinations of CSR conditions leading to the same outcome (equifin­ ality) (Ragin, 2009). We use the independent Chinese Corporate Social Responsibilities (CCSR) Database (Cheng and Liu, 2018), which mea­ sures CSR in terms of six dimensions (local community & general public, CSR governance, diversification, employee relations, environment, and products) for a sample of 616 firm-year listed mining firms in China from 2008 to 2017. Our results suggest four configurations being associated with high profitability, and one configuration with not-high profit­ ability, i.e., the negation of high profitability. The contribution of our paper is three-fold. First, we extend previous CSR research on mining firms by systematically investigating how the

2. Theoretical framework 2.1. Channels through which CSR affects CFP The core of CSR investment could enhance CFP lies in whether the income can be internalized to compensate for costs. From the perspec­ tive of income, CSR can form reputation capital through stakeholder’s perception so as to promote the realization of active trading (Hou, 2019). For example, the management of the relationship between em­ ployees, suppliers and customers can enhance the transaction reputation capital of enterprises, enhance employee loyalty (Lee et al., 2013) and promote the possibility of more active transactions with suppliers and customers (Luo and Bhattacharya, 2006). Meanwhile, good community management is mainly to cultivate enterprises’ moral capital. It often plays a kind of “insurance-like” role, especially when reducing the friction with stakeholders of other dimensions. This kind of “insur­ ance-like” mechanism can reduce the risk degree when negative events occur to enterprises (Godfrey et al., 2009). In addition, since the envi­ ronmental dimension lacks explicit objects and the environmental pro­ tection behaviors have very strong externality, the mechanism of this kind of reputation capital is often based on the price premium brought by the environment-friendly innovation (Porter and Van der Linde, 1995). The cost of CSR is mainly embodied in the consumption of corporate resources and the intensification of agency conflicts. The influence of resource consumption is mainly reflected in two aspects. On one hand, good stakeholder management conducted by the enterprise would make resources invested in core competitive business insufficient. For

1 While qualitative comparative analysis has also been used in hypotheticaldeductive research (e.g., Garcia-Castro and Francoeur, 2016), it is mostly used in inductive exploratory studies, as in our study.

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example, the technological innovation of environment-friendly products would squeeze out the innovation investment in enterprises’ core busi­ ness (Popp and Newell, 2012). Therefore, compared with those without stakeholder management, the competitive advantages will be obviously insufficient (Tang et al., 2019b). Meanwhile, though CSR may cause technological innovation, such as the technological innovation of environment-friendly products, it does not appear possible to econom­ ically internalize all of the benefits from environmental engagement at the company level (Trumpp and Guenther, 2017). Besides, CSR is likely to be regarded as a self-serving tool by management personnel (Barnea and Rubin, 2010). For example, management personnel raise personal reputation through charitable donations or provide the shelter for earnings operation, thus intensifying agency conflicts (Choi et al., 2013).

diversification and products are similar to those of other sectors. 2.3. Complementarity and trade-off among the multidimensions of CSR From a complementarity viewpoint, the marginal effect of one CSR element on firm profitability will be increased when accompanied by another CSR element. Therefore, firms must synergistically coordinate multiple CSR mechanisms to improve firm profitability. As Freeman (2011) noted, though CSR dimensions are multiple, they are consistent in enhancing one’s own welfare and corporate competitiveness, as well. More importantly, a firm’s increase in investment in one CSR dimension does not necessarily lower investment in another CSR dimension. Thus, the rational strategy is to invest in the multidimensions of CSR as a whole, instead of making independent investments. From a substitute viewpoint, one CSR characteristic could decrease the marginal effect of another CSR element in firm financial perfor­ mance, and these CSR mechanisms replace each other. For example, only a small number of CSR characteristics are needed to improve financial performance, and firms must make trade-offs among them depending on their own circumstances. The drivers of substitution are mainly considerations of cost and benefits (Aguilera et al., 2008). Due to the high cost of CSR, firms cannot invest in all CSR dimensions, espe­ cially when they face severe slack resource constraints (Xu et al., 2015). Meanwhile, there exists a threshold for stakeholders to perceive corpo­ rate responsible activities (Godfrey et al., 2009). Following this logic, it is easier to reach or exceed the perception threshold when adopting a more concentrated investment pattern. Fig. 2 lists the theoretical framework based on the above arguments. When mining firms design and implement CSR policies to improve CFP, they are first informed that corporate outcomes are dependent on the effectiveness of the bundle of CSR mechanisms. But which elements should be incorporated? Based on complementarity, more CSR elements result in superior firm performance, and therefore firms should adopt as many CSR elements as possible; doing so, however, incurs higher costs and diminishing marginal returns from the substitute viewpoint. Therefore, mining firms should combine their own circumstances to choose which CSR characteristics should be included to form related CSR patterns.

2.2. Multidimensionality of CSR among mining firms As the first to notice the multidimensionality of CSR, Carroll (1979, 1991, 1999) divides CSR into four dimensions: economic re­ sponsibilities, legal responsibilities, ethical responsibilities and philan­ thropic responsibilities. Examples include the promotion of local economy, vocational training, and environmentally beneficial products. Prior studies either employed an aggregated score of these activities or focused on a single dimension of CSR, e.g., the company-community relation among mining firms. In this paper, we employ the CCSR Database to proxy for the mul­ tidimensions of CSR for the following reasons. First, CCSR uses an evaluation system largely based on the widely accepted CSR database, namely, the Kinder, Lydenberg, and Domini (KLD) CSR Database (e.g., Flammer, 2018; Oh et al., 2017), and has also made some adjustments based on China’s setting. Second, CCSR widely overlaps with the con­ tents of current mining firms’ CSR guidelines in China. For example, the Guidelines for Social Responsibility in Outbound Mining Investment, issued by the China Chamber of Commerce of Metals, Minerals and Chemicals Importers & Exporters in October 2014, also include governance, em­ ployees, environment, local community, suppliers and other CSR di­ mensions (Tang-Lee, 2016). Third, as a third-party rating agency, CCSR evaluates the socially responsible performance of all listed firms that publish CSR reports, thus providing a relatively larger mining sample size with comparability. As shown in Table A1 of Appendix A, CCSR includes six dimensions of CSR. Among them, local community & general public denotes how mining firms contribute to the local community, for instance by educational support, the promotion of local economy and an increase in local jobs, and for the general public, via charitable donations and volunteer activities. If mining firms fail to solve negative externality problems, possible disturbances and protests can emerge (Franks et al., 2014), thus affecting firms’ operations (Kotilainen et al., 2015). There­ fore, mining firms must obtain a social license to operate (SLO) via CSR (Prno and Scott Slocombe, 2012; Symeou et al., 2018). In addition to the direct threat from the local community (Prno and Scott Slocombe, 2012), the general public could also threaten the SLO, as they care more about the broader benefits to the country and its society, and because the net effect of mines are generally negative (Symeou et al., 2018). Thus, mining firms could directly acquire an SLO by linking themselves to local communities, or indirectly obtain it by contributing to the general public. In addition to the community, mining activities also exert an important influence on employee health and safety (Han et al., 2019) and environment protection (Tuokuu et al., 2019). The employee dimension of CCSR mainly includes employee shareholding, a safety management system, safety production training, occupation safety cer­ tification, vocational training and communication channels. Meanwhile, the environmental dimension mainly includes environmentally benefi­ cial products, measures to reduce three wastes, circular economy, en­ ergy saving, green office, environmental certification, and environmental recognition. Besides, the dimensions of CSR governance,

2.4. Status quo of the mining firms’ CSR Though the Corporate Governance Standard for Listed Companies is­ sued by the China Securities Regulatory Commission, and the State Economic and Trade Commission in January 2002 having highlighted firms’ responsibility toward their stakeholders and the importance of corporate citizenship, CSR began relatively late in China compared to Western economies. For example, the first CSR report released by a local firm, the State Grid Corporation, was not published until 2006. Table B1 of Appendix B summarizes the prevailing national guidelines and reg­ ulations in chronological order. As denoted by Table B1, most guidelines are suitable for the general sector, rather than tailoring to mining firms. Among these non-generic policies, the green mines policy occupies an important position, as it encourages mining firms to establish a sound social responsibility system and fulfill their CSR. Meanwhile, the Min­ istry of Land and Resources also maintains the continuity of the green mines policy, and its recent version focuses on accelerating the con­ struction of green mines. Fig. 3 denotes the CSR disclosure status of listed firms. An average of 34% of listed mining firms published CSR reports from 2008 to 2016, while the disclosure ratio of listed non-mining firms and all listed firms is only 24% and 25%, respectively. A survey by KPMG (2017) also finds a similar phenomenon, that firms with a significant influence on the environment and society, such as the mining firms, typically have a high CSR reporting ratio. Though mining firms have a higher CSR disclosure ratio, this does not mean they also have higher CSR performance. As shown in Fig. 4, 3

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Fig. 2. Theoretical framework.

Fig. 3. CSR disclosure status of listed firms.

there is no significant difference between mining firms and non-mining firms in the dimensions of CSR governance, employee relations and environment. Meanwhile, except for the products dimension, nonmining firms behave in a more responsible way in the dimensions of local community & general public, and in diversity. To conclude, mining firms do not pay much attention to their own characteristics, namely, outstanding influence on environment and society, during the process of fulfilling CSR activities. One possible reason may be that most current CSR guidelines are designed for general firms, and mining firms lack specific guidance.

processing. We exclude 1) cross-listed corporations, given the special regulatory circumstances, 2) observations belonging to the IPO year, due to the IPO effect, 3) ST/PT corporations, due to abnormal financial conditions, and 4) observations with missing values. We ultimately obtained 616 firm-year observations for our analyses. 3.2. Qualitative comparative analysis We implement the fs/QCA technique to study the relationship be­ tween CSR and CFP, which was introduced by Ragin (2009). Whereas conventional correlation-based studies are designed to focus on inde­ pendent, additive, and symmetrical causality, QCA, in contrast, imple­ ments a configurational perspective and examines conjunctural, equifinal, and asymmetrical causal relations. Specifically, 1) conjunction means that outcomes rarely have a single cause but rather result from the interdependence of multiple conditions; 2) equifinality means that different combinations of initial conditions (e.g., CSR attributes) can result in the same outcome (CFP); and 3) asymmetry means that the causes of an outcome are not necessarily the inverse of the causes of its absence (Misangyi et al., 2017). As a set-theory method, fs/QCA uses set-subset connections rather than correlations to depict the relations between conditions. If set A is

3. Research design 3.1. Data and sample Our sample covers listed mining firms from 2008 to 2017, as 2008 is generally regarded as the starting point of CSR in China (Tang et al., 2018). Considering the possible lag effect of CSR on CFP, we follow Harjoto and Jo (2015) and employ a 1-year lag of CSR dimensions. In doing so, we could also address the potential problems of reverse cau­ sality and simultaneity. Based on Dong and Xu (2016) and Fan et al. (2017), mining firms include the mineral extractive sector and mineral 4

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Fig. 4. Performance of each CSR dimension.

contained in set B, then A is the sufficient condition for B. In contrast, B is a necessary condition for A. In the extreme case, the two variables are totally uncorrelated and still have better set-subset connections. To compute the empirical strength of the necessary and sufficient condi­ tions, we rely on consistency and coverage measures in the following two equations. P P Consistency (X � Y) ¼ min (xi, yi) / xi (1) P P Coverage (X � Y) ¼ min (xi, yi) / yi (2)

3.3. Variable definitions and calibrations Outcome. Along with the multidimensions of CSR, CFP is also measured from two aspects, i.e., with an accounting-based variable and a market-based variable. In view of China’s imperfect stock market, the latter was unable to capture the prediction of firms in the long run; therefore, we follow Garcia-Castro and Francoeur (2016) and choose return on equity (ROE) to represent CFP. Conditions. Based on the CCSR evaluation system in Table A1 of Appendix A, we obtain each CSR dimension by summing the difference in the number of strengths and the number of concerns. The maximum score of local community & general public, CSR governance, diversifi­ cation, employee relations, environment, and products is 8, 9, 5, 8, 8 and 11, respectively. Since fs/QCA could not handle panel data and mitigate the concerns of control variables, we follow Walker et al. (2015) to employ a two-step procedure: first, we separately regress the ROE and each CSR dimension on a series of control variables, including firm size (natural log of total assets), leverage (total liabilities/total assets), first controlling shareholder (shareholding of the largest shareholder), institutional shareholder (shareholding of the institutional shareholders), independent directors (ratio of independent directors on the board) and CEO duality (1 for duality of CEO and chair of the board, 0 otherwise), as well as firm-fixed effect and year-fixed effect, as suggested by previous studies (e.g., Dal Maso et al., 2018; Tang et al., 2018). Next, we use the unexplained re­ sidual of each regression as the new conditions and outcome. Following Garcia-Castro and Francoeur (2016) and Misangyi et al. (2017), we employed an empirical calibration as the anchors, since there are no theoretical criteria for China’s CSR performance (Miska et al., 2016).

Among them, Xi is the degree of membership of individual i in configuration X, and Yi is its degree of membership in outcome Y. Calibration is a transformational process from raw numerical data to set membership scores, herein from 0 to 1, based on a certain number of qualitative anchors (discussed in the calibration part of Section 4.3). Consistency indicates how closely the QCA solution approximates a perfect subset relationship. For instance, a consistency score of 1 in­ dicates that X is completely contained in Y. We generally accept a consistency value higher than 0.8 (Fiss, 2011). Consistency scores are roughly similar to significance scores in a regression analysis. Coverage, in contrast, evaluates the degree to which a causal combination leads to a particular outcome. It is roughly akin to R-square in regression anal­ ysis, and benchmark values are not used to evaluate coverage scores. In line with Ragin (2017), the frequency threshold is set to 6; thus, the patterns selected should capture at least 75–80% of all cases. The sets are logically reduced by applying the Quine-McCluskey algorithm based on fsQCA 3.0 software.

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Table 1 Definition, descriptive statistics and calibrations. Conditions & outcome name

Definition

Mean

S.D.

Calibrations

Local community & general public CSR governance Diversity Employee relations Environment Products ROE N

See Table A1 of Appendix A

2.200

1.541

2.867 0.627 4.019 2.646 5.526 0.024

1.300 1.003 1.408 1.535 1.922 0.215

Full membership, crossover point and full non-membership are chosen based on the 75th percentiles, 50th percentiles and 25th percentiles of regression residuals for each condition and outcome

Return on equity 616

Notes: We have added a constant of 0.001 to avoid observations with a precise 0.5 membership score being dropped by the software (Fiss, 2011). Following Miska et al. (2016), Misangyi et al. (2017:263) and Garcia-Castro and Francoeur (2016), we implemented distribution-based calibration approaches, since China-specific theo­ retical or regulatory criteria are currently unavailable. We use the direct method based on the fuzzy package provided by Longest and Vaisey (2008) in Stata to complete the calibrations (detailed Stata output is available upon request from the authors).

addition, the significant positive effect (p < 0.1) of local community & general public denotes that mining firms could acquire an SLO via either linking themselves to local communities or contribute to the general public, thus benefiting their operations. Table 3 shows the necessity and sufficiency matrix to demonstrate whether each CSR dimension constitutes a sufficient condition or a necessary condition for superior financial performance, which is similar to the correlation matrix in the regression analysis. Both necessity scores and sufficiency scores range from 0 to 1, and the benchmark value is also 0.8 here. For instance, if we employ CFP as the outcome, the sufficiency score of local community & general public is 0.603, denoting that the local community & general public is not a sufficient condition for su­ perior CFP – namely, lower than the benchmark value of 0.8. Similar explanations can be found for other CSR dimensions. It is also no sur­ prise that none of these CSR dimensions can lead to high CSR in isola­ tion, which is similar to earlier results based on regression analysis. Taken together, the two tables suggest the need to study the effect of CSR practices on CFP from a configurational perspective.

Table 2 Effect of each CSR dimension on ROE. Local community & general public CSR governance Diversity Employee relations Environment Products Control variables R2_a N

(1)

(2)

(3)

0.009* (1.689) 0.008 (0.602) 0.010 (0.561) 0.008 (-1.128) 0.005 (0.838) 0.007 (1.083) No 0.074 616

0.009* (1.680) 0.012 (0.912) 0.001 (-0.082) 0.006 (-0.992) 0.007 (1.403) 0.005 (0.894) Yes 0.171 616

0.012** (2.329) 0.012 (1.131) 0.002 (0.148) 0.002 (-0.348) 0.006 (1.465) 0.007 (1.088) Yes 0.182 616

Notes: The table denotes the regression results of the influence of multidimen­ sional CSR on ROE. In column 1, we employ the fixed-effect model without control variables. Meanwhile, we add the control variables and employ the fixed-effect model and random-effect model in the last two columns, respec­ tively. Control variables include firm size, leverage, first controlling shareholder, institutional shareholder, independent directors and CEO duality. See Table 1 for definitions of CSR dimensions. T values are presented in parentheses and have been adjusted by Huber/White/Sandwich estimation. ***, **, and * are statis­ tically significant at the 1%, 5%, and 10% levels, respectively.

4.2. Main results Table 4 presents the configurations of CSR dimensions sufficient for high and not-high ROE. Specifically, we find four patterns for high ROE. The total consistency is 0.821, and the related consistency value for these four patterns is 0.844, 0.828, 0.825 and 0.821, respectively. All of them are above the given benchmark value of 0.8; these results are also accepted. The total coverage is 0.279, meaning that 28% of the total variance in high CFP can be explained by the four patterns. Similarly, only one pattern obtains for not-high ROE, with a consistency of 0.851 and coverage of 10%. C1 points to what may be labeled company-community relations with better CSR governance. Specifically, the presence of local community & general public as the core condition helps firms obtain the SLO, which is vital to their mining operations (Symeou et al., 2018). At the same time, the presence of CSR governance as a core condition denotes that these cases focus on transmitting reliable CSR information to stakeholders, thus helping them acquire positive images (Lin-Hi and Blumberg, 2018). The absence of diversity, employees and products again highlights that C1 cares more about the prominent company-community relation. Tongling Nonferrous Metals Group Hldg Co., Ltd. (stock code: 000630), belonging to the nonferrous metal smelting and rolling processing in­ dustry, is a typical example in 2012. The degrees of membership of this case in each core CSR attribute (local community & general public, CSR governance, diversity and employee relations) are 0.987, 0.943, 0.001 and 0.042, respectively, which results in a degree of membership in high ROE of 0.981. C2, in contrast, focuses on another important dimension of mining

Table 1 summarizes the descriptive statistics of our conditions and outcome. On average, mining firms’ local community & general public performance is 2.2, which is only 27% of the maximum value in this dimension; similarly, the other five dimensions of CSR are each 32%, 13%, 50%, 33% and 50% of the maximum value. Hence, China’s mining firms care more about employees and products, and the overall CSR performance among mining firms has more room for improvement. In addition, the average ROE is only 2%, highlighting that it is more urgent for mining firms to increase profitability. 4. Empirical results 4.1. Pretest results Prior to determining related CSR configurations, we began by per­ forming the regression analysis to study the independent effect of each CSR dimension on CFP, and related results are listed in Table 2. Whether or not we control for firm size, leverage, first controlling shareholder, institutional shareholder, independent directors and CEO duality, no sig­ nificant individual effect is found for the majority of six CSR dimensions, which highlights the importance of studying the conjunctural effects. In 6

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Table 3 Sufficiency and necessity matrix. (1) (2) (3) (4) (5) (6) (7)

ROE Local community & general public CSR governance Diversity Employee relations Environment Products

(1)

(2)

(3)

(4)

(5)

(6)

(7)

1.000 0.603 0.612 0.472 0.590 0.587 0.546

0.632 1.000 0.643 0.574 0.618 0.629 0.553

0.579 0.580 1.000 0.496 0.605 0.612 0.562

0.469 0.544 0.521 1.000 0.500 0.566 0.540

0.574 0.574 0.623 0.490 1.000 0.605 0.628

0.577 0.590 0.636 0.560 0.611 1.000 0.616

0.545 0.526 0.593 0.542 0.643 0.625 1.000

Notes: The table denotes the sufficiency and necessity matrix. The necessity scores are displayed in the upper right corner, and the sufficiency scores are in the lower left corner. See Table 1 for definitions.

firms, namely, employees, and therefore, it may be labeled companyemployee relations with better CSR governance. As stated above, mining operations would significantly affect employee health and safety, and thus mining firms should improve safety performance and health development, for instance, by establishing a safety management system and via safety training. Similarly, employee shareholding and vocational training could promote employees’ favorable attitudes and work effi­ ciency (Kim and Patel, 2017), thus benefiting mining firms. At the same time, C2 also stresses that firms should convey their CSR information to the public, although the dimensions of diversity, environment and products are absent in this pattern. Hebei Iron and Steel Co., Ltd. (stock code: 000709), belonging to the ferrous metal smelting and rolling processing industry, is a typical example in 2009. The degrees of membership of this case in each core CSR attribute (CSR governance,

diversity, employee relations, environment and products) are 0.981, 0.047, 0.968, 0.003 and 0.043, respectively, which results in a degree of membership in high ROE of 0.977. C3 highlights another important dimension of mining firms, namely, the environment, as a core condition, and therefore it may be labeled company-environment relations. Though the dimensions of CSR gover­ nance, diversity and products also act as core conditions, they are absent in this configuration. Therefore, mining firms should concentrate on environmental protection. Meanwhile, two other important dimensions are also present as peripheral conditions, suggesting that these cases still care about community and employees. Tongling Nonferrous Metals Group Hldg Co., Ltd. (stock code: 000630), belonging to the nonferrous metal smelting and rolling processing industry, is a typical example in 2010. The degrees of membership in this case in each core CSR attribute

Table 4 CSR configurations sufficient for high and not-high ROE.

Notes: The table denotes CSR patterns sufficient for high and not-high ROE outcomes. ● indicates the presence of a condition, and � indicates the absence of a condition. Large circles indicate core conditions; small ones, peripheral conditions. A blank space indicates “does not matter for the outcome”. See Table 1 for definitions. 7

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Table 5 Robustness tests.

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Notes: The table denotes robust tests for high and not-high CFP outcomes. ● indicates the presence of a condition, and � indicates the absence of a condition. Large circles indicate core conditions; small ones, peripheral conditions. A blank space indicates “does not matter for the outcome”. See Table 1 for definitions.

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CSR governance, which is akin to C1. Similarly, C21 is analogous to C2 in the presence of employee and CSR governance as core conditions, while C22 also selects the environment dimension as a core condition, so does C3. Besides, C23 is similar to C5 that the presence of diversity and products matters for the not-high CFP. All in all, our main results that the presence of community, em­ ployees and environment works as core conditions in high CFP patterns, while the presence of diversity and products as core conditions results in not-high CFP, always hold, even though we employ alternative outcome variable, select different calibrations and include more control variables.

(CSR governance, diversity, environment and products) are 0.008, 0.001, 0.971, and 0.022, respectively, which results in a degree of membership in high ROE of 0.998. Different from C3, C4 selects four CSR dimensions as present con­ ditions and, therefore, could be labeled a balanced CSR pattern. Similar to C1, the presence of community and CSR governance is key. Meanwhile, the presence of products as another core condition denotes that these firms also value customers and suppliers who are considered primary stakeholders in the general sector (Charan and Murty, 2018). Yunnan Aluminium Co., Ltd. (stock code: 000807), belonging to the nonferrous metal smelting and rolling processing industry, is a typical example in 2014. The degrees of membership of this case in each core CSR attribute (local community & general public, CSR governance, diversity and products) are 0.994, 0.953, 0.044, and 0.999, respectively, which results in a degree of membership in high ROE of 0.998. C5 denotes the single pattern leading to not-high ROE. It selects the presence of diversity and products as core conditions, together with the absence of community, CSR governance and employees as core condi­ tions. Therefore, it could be labeled a CSR pattern ignoring mining firms’ characteristics. Though the products dimension is vital in the general sector, the influence of mining operations on the community, the envi­ ronment and on employees draws more attention, thus increasing public debate on mines’ acceptability both in China and globally (International Council on Mining and Metals, 2016). Against this backdrop, it is more urgent for mining firms to manage negative externalities in these as­ pects. Beijing Cisri-Gaona Materials & Technology Co., Ltd. (stock code: 300034), belonging to the nonferrous metal smelting and rolling pro­ cessing industry, is a typical example in 2011. The degrees of mem­ bership of this case in each core CSR attribute (local community & general public, CSR governance, diversity, employee relations and products) are 0.001, 0.058, 0.958, 0.034, and 0.949, respectively, which results in a degree of membership in not-high ROE of 0.999.

5. Conclusions and implications Though it is widely acknowledged that mining firms should engage in CSR activities, especially aspects such as community, environment and employees, how to balance stakeholders’ interests and firm profit­ ability among mining firms remains unclear. Given that mineral prod­ ucts have long continued to decrease, and prices will apparently remain low for a long time, it is more urgent than ever for mining firms to “do well by doing good”, thus guiding their CSR practice. Specifically, we focus on how the multidimensions of CSR interact with each other to affect firm profitability (ROE). Based on a sample of 616 firm-year observations from 2008 to 2017, we implement a configurational perspective, using the fs/QCA method and an inductive, explorative approach, to unveil the configurations of CSR conditions that, when combined, explain why firms achieve different levels of profitability. We find that: 1) though 34% of listed mining firms have published CSR reports, their CSR level has more room for improvement; 2) compared with non-mining firms, mining firms do more in the products dimension, while there is no significant difference among them in the dimensions of CSR governance, employee relations and environ­ ment; 3) firm profitability is more likely to be affected by investing in the multidimensions of CSR in a combined way, rather than in an inde­ pendent way; and 4) four patterns result in high ROE, namely, companycommunity relations with better CSR governance, company-employee re­ lations with better CSR governance, company-environment relations, and balanced CSR pattern, while one pattern leads to not-high ROE, i.e., CSR pattern ignoring mining firms’ characteristics. Our research contributes to the understanding of CSR among mining firms by focusing on the multidimensions of CSR from a configurational perspective. Previous studies mainly focus on a single aspect of CSR, especially the company-community relationship. Meanwhile, as denoted by C1, investment in the community should be combined with CSR governance, thus leading to high ROE. Moreover, prior studies rely more on case studies, which prevents the generalization of the results obtained. In addition, our research contributes to the classical CSR-CFP rela­ tion by highlighting that combinations of CSR dimensions, rather than a single or aggregated CSR, lead to CFP. Of course by focusing on the mining firms, we found that community and CSR governance are more important in enhancing ROE, while the products dimension is not as valuable as expected in other sectors. In addition to its theoretical contributions, our research also provides guidance on how to invest in the multidimensions of CSR to improve profitability. For a focal mining firm, its decision makers should first be aware that they cannot increase financial performance through only a single CSR dimension, as the key lies in how these CSR dimensions work together. On one hand, decision makers can employ a set of CSR ele­ ments to enjoy the advantages through mutual enhancement, but they should also face the high costs and diminishing marginal returns by including more CSR dimensions. Therefore, decision makers should perform a cost-benefit analysis among these CSR structures, depending on their own circumstance, to enhance financial performance. In this way, a certain CSR pattern may only fit those firms with certain simi­ larities, instead of all kinds of firms. However, we do notice some

4.3. Robust tests We conduct a series of robustness tests to check whether our results still hold, and the related results are listed in Table 5. Firstly, in addition to ROE, we employ another often used performance metric in the CSRCFP relation: return on assets (ROA) (Garcia-Castro and Francoeur, 2016). As shown in the panel A of Table 5, C6 is same as C1, while C7 and C8 are very similar to C3 in the presence of environment as a core condition. For C9, it selects the presence of community, governance and products as core conditions, which is the main content of C4. We also notice that the presence of diversity matters most for not-high ROA in C10, similar to C5. Taken together, when we change the proxy for the outcome variable, the core conditions remain relatively stable, while we also notice that the presence of community and environment matters more for high ROA. Secondly, we follow Meuer (2017) to vary the crossover point by þ/ 5 percentiles, thus examining whether our results are sensitive to different calibrations of the sets. Related results are listed in the panel B and panel C of Table 5. Employing the 5 percentiles as an illustration, we can see that C16a and C16b share the common core conditions, especially in the presence of community and CSR governance, which is akin to C1. Similarly, C17 is analogous to C2 in the presence of employee and CSR governance as core conditions, while C18 also selects the environment dimension as a core condition, so does C3. Not surpris­ ingly, C19 is similar to C5 that the presence of diversity and products matters for the not-high CFP. To sum up, when we vary the crossover points, the core conditions remain unchanged. Lastly, we include more variables to exclude their effects on ROE. Herein, we follow Dal Maso et al. (2018) to include the lagged ROE and board size into the first-stage regression model, and then we use the unexplained residual as our concerned outcome. Related results are listed in the panel D of Table 5. We can see that C20a and C20b share the common core conditions, especially in the presence of community and 10

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common factors among these configurations, namely, paying attention to the traits of mining firms, especially for the community, and providing reliable CSR information to the public. Of course, our results and propositions are subject to some limita­ tions. First, our sample only covers listed mining firms, since their in­ formation is public and more reliable, but we should carefully expand such explanations to non-listed firms. Second, fs/QCA only informs us about which CSR dimensions are more important but fails to tell us whether there exists a boundary when investing in these dimensions. Similarly, fs/QCA could not conduct empirical mechanism analysis, thus failing to tell which channels mediate the relationship between our obtained CSR configurations and CFP. Lastly, there may exist complex contingencies moderating the effect of CSR configurations on CFP, and therefore, we should focus on these contingencies, such as macro insti­ tutional environment, micro firm growth stage, etc., in future research.

does not contain any studies with human participants or animals per­ formed by any of the authors. CRediT authorship contribution statement Xinyuan Peng: Conceptualization, Data curation, Formal analysis, Writing - original draft. Pengcheng Tang: Methodology, Visualization, Writing - review & editing. Shuwang Yang: Funding acquisition, Proj­ ect administration, Resources. Shuke Fu: Funding acquisition. Acknowledgement This research is supported by Ministry of Education Projects [Grant No. 18YJCZH029], the Open Fund of Hubei Ecological Civilization Research Centre [Grant No. SWSZK2015Z11], and a scholarship from the China Scholarship Council (CSC) [Grant No. 201706410031].

Declaration of competing interest Authors declare that they have no conflict of interest, and this article

Appendix A

Table A1 CCSR evaluation system Dimension

Category

Item

Code

Local community & general public

Strength

Charitable donation Education support Charity support Volunteer activity International assistance Increase employment Promotion of local economy Other advantages Financing dispute CSR report comprehensives

Total number of donations (10000 RMB) 1 if the firm supports education, including setting up schools, donations to the Hope project; 0 otherwise 1 if the firm supports charities, including setting up a charity fund, 0 otherwise 1 if the firm has outstanding volunteer activities, 0 otherwise 1 if the firm assists foreign countries, 0 otherwise 1 if the firm has policies or measures to promote employment, 0 otherwise 1 if the firm takes measures to promote local communities, 0 otherwise 1 if the firm makes contributions to society not covered by the above indicators, 0 otherwise 1 if the firm has disputes over borrowing or investments, 0 otherwise 1 if the firm’s social responsibility report covers the shareholders, creditors, employees, customers, communities and the environment; 0 otherwise The pages of the CSR report 1 if the firm sets up the CSR column on its homepage, 0 otherwise 1 if the firm has established a CSR lead agency or has a clear CSR authority, 0 otherwise 1 if the firm has a responsible concept and vision for the economy and society, 0 otherwise 1 if the firm has conducted CSR training, 0 otherwise Social contribution per share 1 if the firm’s CSR report has a reliability guarantee, 0 otherwise 1 if the firm has advantages in corporate governance not covered by the above indicators, 0 otherwise 1 if the firm has accounting violations, 0 otherwise 1 if the firm has members of the Communist Party as directors and senior executives, 0 otherwise 1 if the firm’s CEO or chairman is a woman, 0 otherwise 1 if the firm’s women executives occupy board seats greater than or equal to 4, 0 otherwise 1 if the firm has innovative human resources projects for people with disabilities/re-education through labor or has a good reputation in hiring people with disabilities; 0 otherwise 1 if the firm has other advantages in diversification not covered by the above indicators, 0 otherwise 1 if the firm has no women as directors, supervisors and executives; 0 otherwise 1 if the firm motivates employees through share participation, 0 otherwise 1 if the firm has better retirement and other welfare programs, 0 otherwise 1 if the firm has adopted a safety production management system, 0 otherwise 1 if the firm has conducted training in safety production, 0 otherwise 1 if the firm has carried out occupational safety certification, 0 otherwise

CSR Governance

Concern Strength

Diversification

Concern Strength

Employee relations

Concern Strength

Concern Environment

Strength

CSR report pages CSR column CSR leadership CSR vision CSR training Social contribution Reliability guarantee Other advantages Accounting violation Party member Female executives Female director seat Innovative human resources Other advantages No female executives Employee shareholding Employee benefits Safety management system Safety production training Occupation safety certification Vocational training Communication channel Other advantages Employee security dispute Layoffs Environmentally beneficial products Measures to reduce three wastes Circular economy Energy saving

1 if the firm has conducted vocational training for employees, 0 otherwise 1 if the firm has a better communication channel for employees to give their opinions, 0 otherwise 1 if the firm has advantages in employee relations not covered by the above indicators, 0 otherwise 1 if the firm has paid a mass of fines for violating employee safety guidelines, 0 otherwise 1 if the firm has carried out a large number of layoffs in recent years, 0 otherwise 1 if the firm has developed or applied innovative products, equipment or technologies that are beneficial to the environment; 0 otherwise 1 if the firm has a policy to reduce emissions of waste gas, waste water, waste residues and greenhouse gases, and policy measures or technology; 0 otherwise 1 if the firm has been using renewable energy or adopting circular economy policies, 0 otherwise 1 if the firm takes measures to conserve energy, 0 otherwise (continued on next page)

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Table A1 (continued ) Dimension

Category

Concern Products

Strength

Concern

Item

Code

Green office Environmental certification Environmental recognition Other advantages Environmental punishment Pollutant emissions Quality system After-sales service Customer satisfaction survey Quality honor Number of patents R&D spending R&D personnel ratio Anti-corruption measures Strategic sharing Integrity management concept Other advantages Product disputes

1 if the 1 if the 1 if the 1 if the 1 if the 1 if the 1 if the 1 if the 1 if the

firm adopts a green office policy, 0 otherwise firm obtains ISO14001 certification, 0 otherwise firm has received environmental recognition or other positive comments, 0 otherwise firm has other advantages in the environment not covered by the above indicators, 0 otherwise firm has been punished for environmental issues, 0 otherwise firm has pollutant emissions, 0 otherwise firm has a quality system, 0 otherwise firm continues to improve its after-sales service, 0 otherwise firm has conducted a customer satisfaction survey, 0 otherwise

1 if the firm has obtained certification and distinction for product quality, 0 otherwise The total number of patents that the company independently and jointly acquired during the current year The firm’s R&D spending (10000RMB) The firm’s R&D personnel ratio (%) 1 if the firm has anti-commercial bribery measures or anti-corruption measures, 0 otherwise 1 if the firm has established strategic sharing mechanisms and platforms with partners, 0 otherwise 1 if the firm has a fair competition idea and a system safeguard, 0 otherwise 1 if the firm has other advantages in products not covered by the above indicators, 0 otherwise 1 if the firm has paid a mass of fines for violating product safety guidelines, 0 otherwise

Appendix B

Table B1 CSR policies development for Chinese mining firms Regulatory agencies or other organizations

Time

Name of standards or guidelines

Description

China Securities Regulatory Commission, State Economic and Trade Commission

Jan. 2002

Corporate Governance Standard for Listed Companies

Shenzhen Stock Exchange

Sep. 2006 Oct. 2007

CSR Guidelines for Companies listed on Shenzhen Stock Exchange Notice on Strengthening the Environmental Monitoring of Export Enterprises

China Banking Regulatory Commission

Dec. 2007

Opinions on Strengthening the Social Responsibility of Banking and Financial Institutions

State-owned Assets Supervision and Administration Commission of the State Council China Environmental Protection Administration

Jan. 2008

Guidelines for Central Enterprises to fulfill Social Responsibilities

Call on corporations to respect stakeholders’ interests and to provide related channels for stakeholders to ask for compensation and provide suggestions Encourage companies listed on the Shenzhen Stock Exchange to enhance social performance and to publish CSR reports Regulation and supervision of enhanced environmental protection levels for export firms, especially “highly polluting, high-energy-consuming and natural resource-dependent” enterprises Supervise and urge financial institutions to infuse social performance into daily operations, and ask major financial institutions to publish CSR reports Set up and deepen CSR awareness, establish and implement CSR mechanisms and CSR information reporting systems

Feb. 2008

Guidance on Strengthening Environmental Protection Supervision and Administration of Listed Companies

11 industrial associations, such as the China Federation of Industrial Economics and the China Mining Association

Apr. 2008

China Industrial Enterprises and Industry Association Social Responsibility Guide

Shanghai Stock Exchange

May. 2008 May. 2008 Jun. 2009

Notice of Strengthening Listed Companies’ Assumption of Social Responsibilities Shanghai Stock Exchange Guidelines for the Disclosure of Environmental Information General Rules of Grading Enterprise Quality Credit

Jul. 2010

Notice for Standardized Operations of Companies Listed on the Small and Medium-Sized Enterprise Board Guidelines on the Implementation of the National Mineral Resources Planning for the Development of Green Mining and the Construction of Green Mines Environmental Information Disclosure Guidelines for Listed Companies

Ministry of Commerce, State Environmental Protection Administration

Shanghai Stock Exchange General Administration of Quality Supervision, Standardization Administration of the People’s Republic of China Shenzhen Stock Exchange Ministry of Land and Resources

Aug. 2010

Environmental Protection Agency

Sep. 2010

Sep. 2011

Specific provisions shall be made for the verification of environmental protection on the application for listing or refinancing of production and business companies in heavy polluting industries Establish an industrial association social responsibility system, including social responsibility work organization, responsibility and management system, and form an organizational management system that fulfills its social responsibilities and promotes the coordination of corporate social responsibility. Encourage companies listed on the Shanghai Stock Exchange to fulfill employment standards, and publish CSR reports Requires firms listed on the Shanghai Stock Exchange to disclose their environmental information and CSR strategies Corporations with better social performance to have higher credit ratings Actively fulfill responsible standards and voluntarily publish CSR reports Carry out social responsibilities, encourage mining enterprises to establish a sound social responsibility system and fulfill their social responsibilities Listed companies in 16 heavily polluting industries, including steel, cement, electrolytic aluminum, coal, metallurgy, chemicals, petrochemicals, building materials and mining, were required to issue annual environmental reports, and the contents of these reports were clarified for the first time Provide more details for central enterprises’ honest, faithful, green and responsible development (continued on next page)

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Table B1 (continued ) Regulatory agencies or other organizations State–owned Assets Supervision and Administration Commission of the State Council China Banking Regulatory Commission

Time

Description

Implementation Outline for Central Enterprises’ Harmonious Development during the Twelfth FiveYear Plan Period Guidelines on Green Credit

Ministry of Commerce, Ministry of Environmental Protection Chemical Mining Association

Feb. 2013 Feb. 2013

China Mining Association

Nov. 2013

Chinese Enterprises Standing Committee of the National People’s Congress

Mar. 2014

Company Law of the People’s Republic of China

Ministry of Commerce

Sep. 2014

Measures for Overseas Investment Management

China Chamber of Commerce of Metals, Minerals and Chemicals Importers & Exporters

Oct. 2014

Guidelines for Social Responsibility in Outbound Mining Investment

Ministry of Commerce, State Environmental Protection Administration, Ministry of Industry and Information Ministry of Environmental Protection

Dec. 2014

Enterprise Green Procurement Guideline (Trial)

Set forth the requirements for banks and financial institutions to effectively develop green credit Requires Chinese firms that carry out overseas projects to enhance quality, safety, employee development, supply chain management, fair competition, environmental protection and community development, among others. Requires Chinese multinational enterprises to actively protect the environment in host nations Carry out pilot projects to create resource-conserving, safe and environment-friendly mines and harmonious mines in the phosphate industry Standardize corporate behavior, fulfill social responsibilities, promote green mining, and build a resource-saving and environment-friendly society Requires corporations to accept supervision by the government and public and to protect stakeholder interests (e.g., product safety) Requires corporations abroad to comply with laws and regulations of investment destination countries and to conduct CSR Determine the mandatory and voluntary principles and requirements for responsible foreign mining investment, including eight aspects: organizational governance, human rights, labor practices, health and development, environment, fair operation practices, supply chain management, and community participation Call on corporations to conduct green procurement

Dec. 2014 May. 2017

Measures for the Disclosure of Environmental Information by Enterprises and Public Institutions Implementation Opinions on Accelerating the Construction of Green Mines

Combining principles of compulsory publicity and voluntary publicity for environmental information Emphasis on increasing the development and protection of mining enterprises, improving social responsibility

Ministry of Commerce

Ministry of Land and Resources, and other ministries

Feb. 2012 Sep. 2012

Name of standards or guidelines

Guide on Social Responsibility for Chinese International Contractors Guideline of Environment Protection for Overseas Investment and Cooperation Evaluation Criteria for Resource-conserving, Safe and Environment-friendly, and Ore-harmonious Mine Construction (Phosphate Mine) (Pilot) China Mining Association Green Mines Convention

Notes: This table only includes policy measures relevant for the period covered by our study. Source: websites of the regulatory agencies mentioned in the first column.

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